TRW AUTOMOTIVE INC. EXECUTIVE OFFICER CASH INCENTIVE AWARD AGREEMENT
Exhibit 10.2
TRW AUTOMOTIVE INC.
EXECUTIVE OFFICER
This Cash Incentive Award Agreement (this “Agreement”), is entered into and made effective as
of February 26, 2009 (the “Effective Date”), by and between TRW Automotive Inc., a Delaware
corporation (the “Company”), and _________ (the “Executive”). This Award is granted by the
Compensation Committee of the Company’s Board of Directors (the “Committee”).
Section 1. Definitions.
(a) “Act” means the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder, or any successor statute thereto.
(b) “Affiliate” shall mean, with respect to any Person, any other Person directly or
indirectly controlling, controlled by or under common control with such Person or any other Person
designated by the Committee in which any Person has an interest.
(c) “Award” shall mean the cash incentive award granted pursuant to this Agreement and
calculated pursuant to Section 2(b).
(d) “Cause” shall have the meaning given to such term in the Closing Date Employment
Agreement or, if not defined therein or if there is no such agreement, “Cause” means (i) such
Executive’s continued failure substantially to perform such Executive’s duties (other than as a
result of total or partial incapacity due to physical or mental illness) for a period of 10 days
following written notice by the Company or any of its Subsidiaries or Affiliates to the Executive
of such failure, (ii) dishonesty in the performance of the Executive’s duties, (iii) such
Executive’s conviction of, or plea of nolo contendere to, a crime constituting (A) a felony under
the laws of the United States or any state thereof or (B) a misdemeanor involving moral turpitude,
(iv) such Executive’s willful malfeasance or willful misconduct in connection with such Executive’s
duties or any act or omission which is injurious to the financial condition or business reputation
of the Company or any of its Subsidiaries or Affiliates or (v) such Executive’s breach of any
non-competition, non-solicitation or confidentiality provisions to which the Executive is subject.
(e) “Change in Control” shall mean (A) the sale or disposition, in one or a series of
related transactions, of all or substantially all of the assets of Holdings or the Company to any
“person” or “group” (as such terms are defined in Sections 13(d)(3) and 14(d)(2) of the Act) other
than Automotive Investors L.L.C. (“AI”) or any of its Affiliates, (B) any person or group, other
than AI or any of its Affiliates, is or becomes the “beneficial owner” (as defined in Rules 13d-3
and 13d-5 under the Act), directly or indirectly, of more than 50% of the total voting power of the
voting stock of Holdings or the Company, including by way of merger, consolidation or otherwise and
AI or any of its Affiliates cease to control the Board of Directors
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of Holdings (the “Holdings Board”) or the Board of Directors of the Company, (C) any “person”
or “group” (as defined above) other than AI or its Affiliates acquires (or has acquired during the
12-month period ending on the date of the most recent acquisition of such person or group)
ownership of stock of Holdings or the Company possessing 30 percent or more of the total voting
power of the stock of Holdings or the Company, as applicable, or (D) a majority of the members of
the Holdings Board is replaced during any 12-month period by directors whose appointment or
election is not endorsed by a majority of the members of the Holdings Board, as it was constituted
at the beginning of such 12-month period.
(f) “Closing Date” shall mean February 28, 2003.
(g) “Closing Date Employment Agreement” shall mean a written employment agreement
between the Company or any of its Subsidiaries and the Executive which is or was entered into as of
or after the Closing Date (as the same may be amended, modified or supplemented in accordance with
the terms thereof).
(h) “Code” shall mean the Internal Revenue Code of 1986, as amended, or any successor
thereto.
(i) “Disability” shall have the meaning given such term in the Closing Date Employment
Agreement or, if not defined therein or if there shall be no such agreement, “disability” of the
Executive shall have the meaning ascribed to such term in the long-term disability plan or policy
maintained by the Company or one or more members of the Company’s controlled group of corporations
(as defined in Section 1563 of the Code), as in effect from time to time.
(j) “Fair Market Value” of a Share on a given date shall mean the closing price of a
Share as reported on the NYSE composite tape on such date, or, if there is no such reported sale
price of a Share on the NYSE composite tape on such date, then the closing price of a Share as
reported on the NYSE composite tape on the last previous day on which sale price was reported on
the NYSE composite tape. If at any time the Shares are no longer listed or traded on the NYSE, the
Fair Market Value of a Share shall be determined by the Committee in its sole but reasonable
discretion from time to time.
(k) “Good Reason” shall have the meaning given to such term in the Closing Date
Employment Agreement.
(l) “Holdings” shall mean TRW Automotive Holdings Corp., a Delaware corporation.
(m) “NYSE” shall mean the New York Stock Exchange.
(n) “Person” shall mean any individual, firm, corporation, partnership, limited
liability company, trust, incorporated or unincorporated association, joint venture, joint stock
company, governmental body or other entity of any kind.
(o) “Retirement” shall mean the Executive’s voluntary Termination of Employment on or
after the date that such Executive becomes Retirement Eligible.
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(p) “Retirement Eligible” shall mean satisfaction of the requirements for early or
normal retirement under a defined benefit pension plan maintained by the Company or one or more
members of the Company’s controlled group of corporations (as defined by Section 1563 of the Code)
and receipt of pension benefits in accordance with such requirements as soon as administratively
practicable following the last date of active employment with the Company or its controlled group
of corporations.
(q) “Share Price” shall mean the average Fair Market Value of a Share during the
portion of the month of February immediately preceding the first, second, or third year anniversary
of the Effective Date, as applicable.
(r) “Shares” shall mean shares of the common stock, par value $0.01 per share, of
Holdings.
(s) “Subsidiary” shall mean a subsidiary corporation, as defined in Section 424(f) of
the Code.
(t) “Target Value” shall mean the initial value of the Award, as set forth in Section
2(a).
(u) “Target Value Adjustment” shall mean the percentage by which the Target Value is
increased or decreased under Section 2(b), based on the applicable Share Price pursuant to the
formula attached hereto as Exhibit A, provided that the percentage to be used for such adjustment
shall be the nearest tenth of a percentage determined pursuant to Exhibit A.
(v) “Termination of Employment” shall mean a separation from service from the Company
and all of its controlled group members (as defined by Section 1563 of the Code).
Section 2. Grant of Cash Incentive Award. The Company hereby grants to the Executive an Award
subject to the terms and conditions stated in this Agreement. The amount of the Award shall be
equal to the Target Value specified under Section 2(a) as adjusted pursuant to Section 2(b).
(a) Target Value. The Target Value of the Award is $ , which is subject
to the terms and conditions stated in this Agreement.
(b) Adjustment to the Target Value. The Target Value of the Award shall be increased
or decreased, as applicable, on the first, second, and third anniversary of the Effective Date by
multiplying one-third of the Target Value (referred to respectively as Tranche A, Tranche B, and
Tranche C) by the Target Value Adjustment percentage on each such anniversary date, as determined
under Exhibit A with reference to the calculated Share Price as of that date, to establish the
adjusted value of each such tranche (referred to respectively as Tranche A Adjusted Value, Tranche
B Adjusted Value, and Tranche C Adjusted Value), as follows:
(i) Tranche A. On the first anniversary of the Effective Date, $ (“Tranche
A”), shall be multiplied by the Target Value Adjustment percentage under Exhibit A, determined with
reference to the calculated Share Price on such anniversary date to establish the adjusted value of
Tranche A (“Tranche A Adjusted Value”); plus
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(ii) Tranche B. On the second anniversary of the Effective Date,
$ (“Tranche
B”) shall be multiplied by the Target Value Adjustment percentage under Exhibit A, determined with
reference to the calculated Share Price on such anniversary date to establish the adjusted value of
Tranche B (“Tranche B Adjusted Value”); plus
(iii) Tranche C. On the third anniversary of the Effective Date,
$ (“Tranche
C”) shall be multiplied by the Target Value Adjustment percentage under Exhibit A, determined with
reference to the calculated Share Price on such anniversary date to establish the adjusted value of
Tranche C (“Tranche C Adjusted Value”).
The adjusted values so determined shall accumulate (without interest) over the period ending on the
third anniversary of the Effective Date and shall be payable to the Executive in one cash payment
in accordance with Section 3, provided the vesting requirements under Section 4 have been satisfied
at that time.
Section 3. Payment of the Awards. Subject to the vesting requirements of Section 4 and
Section 5, the Award determined in accordance with Section 2(b) shall be payable to the Executive
in one cash payment as soon as administratively practicable on or after the third anniversary of
the Effective Date, but in no event later than 90 days thereafter.
Section 4. Service-Vesting Requirement. Except as otherwise provided in Section 5, the Award
amount determined under Section 2(b) shall become vested on the third anniversary of the Effective
Date, provided the Executive remains continuously employed with the Company or one of its
Subsidiaries or Affiliates through that date. Once this requirement has been satisfied the Award
shall thereafter be payable in accordance with Section 3.
Section 5. Vesting Upon Certain Events.
(a) Death. In the event of the Executive’s death prior to satisfying the vesting
requirements under Section 4, a pro rata portion of the Award, determined as set forth below, is
immediately vested and shall be paid as soon as administratively practicable following the date of
death, but in no event later than 90 days thereafter. All other amounts hereunder are immediately
forfeited and shall not be payable. The pro rata portion of the Award shall be determined as
follows:
(i) In the event of the Executive’s death prior to the first anniversary of the Effective
Date, the pro rata portion of the Award shall be equal to Tranche A, without regard to any
adjustment under Section 2(b)(i), multiplied by a fraction, the numerator of which is the number of
completed calendar months from the Effective Date to the date of death and the denominator of which
is 12.
(ii) In the event of the Executive’s death after the first anniversary of the Effective
Date,
but prior to the second anniversary of the Effective Date, the pro rata portion of the Award shall
be the sum of (1) and (2):
| (1) | Tranche A Adjusted Value, as determined by Section 2(b)(i); plus |
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| (2) | Tranche B, without regard to any adjustment under Section 2(b)(ii), multiplied by a fraction, the numerator of which is the number of completed calendar months from the first anniversary of the Effective Date to the date of death and the denominator of which is 12. |
(iii) In the event of the Executive’s death after the second anniversary of the Effective
Date, but prior to the third anniversary of the Effective Date, the pro rata portion of the Award
shall be the sum of (1), (2), and (3):
| (1) | Tranche A Adjusted Value, as determined by Section 2(b)(i); plus | ||
| (2) | Tranche B Adjusted Value, as determined by Section 2(b)(ii); plus | ||
| (3) | Tranche C, without regard to any adjustment under Section 2(b)(iii), multiplied by a fraction, the numerator of which is the number of completed calendar months from the second anniversary of the Effective Date to the date of death and the denominator of which is 12. |
(b) Disability. In the event of the Executive’s Termination of Employment due to
Disability prior to satisfying the vesting requirements under Section 4, a pro rata portion of the
Award, determined as set forth below, is immediately vested and shall be paid as soon as
administratively practicable following the date of Termination of Employment due to Disability,
but in no event later than 90 days thereafter. All other amounts hereunder are immediately
forfeited and shall not be payable. The pro rata portion of the Award shall be determined as
follows:
(i) In the event of the Executive’s Termination of Employment due to Disability prior to
the
first anniversary of the Effective Date, the pro rata portion of the Award shall be equal to
Tranche A, without regard to any adjustment under Section 2(b)(i), multiplied by a fraction, the
numerator of which is the number of completed calendar months from the Effective Date to the date
of Termination of Employment due to Disability and the denominator of which is 12.
(ii) In the event of the Executive’s Termination of Employment due to Disability after the
first anniversary of the Effective Date, but prior to the second anniversary of the Effective Date,
the pro rata portion of the Award shall be the sum of (1) and (2):
| (1) | Tranche A Adjusted Value, as determined by Section 2(b)(i); plus | ||
| (2) | Tranche B, without regard to any adjustment under Section 2(b)(ii), multiplied by a fraction, the numerator of which is the number of completed calendar months from the first anniversary of the Effective Date to the date of Termination of Employment due to Disability and the denominator of which is 12. |
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(iii) In the event of the Executive’s Termination of Employment due to Disability after
the
second anniversary of the Effective Date, but prior to the third anniversary of the Effective Date,
the pro rata portion of the Award shall be the sum of (1), (2), and (3):
| (1) | Tranche A Adjusted Value, as determined by Section 2(b)(i); plus | ||
| (2) | Tranche B Adjusted Value, as determined by Section 2(b)(ii); plus | ||
| (3) | Tranche C, without regard to any adjustment under Section 2(b)(iii), multiplied by a fraction, the numerator of which is the number of completed calendar months from the second anniversary of the Effective Date to the date of Termination of Employment due to Disability and the denominator of which is 12. |
(c) Involuntary Termination of Employment without Cause or Voluntary Termination of
Employment for Good Reason. In the event of the Executive’s involuntary Termination of
Employment without Cause or voluntary Termination of Employment for Good Reason, prior to
satisfying the vesting requirements under Section 4, a pro rata portion of the Award, determined as
set forth below, is immediately vested and shall be paid as soon as administratively practicable
following the date of such Termination of Employment, but in no event later than 90 days
thereafter. All other amounts hereunder are immediately forfeited and shall not be payable. The
pro rata portion of the Award shall be determined as follows:
(i) In the event such Termination of Employment occurs prior to the first anniversary of the
Effective Date, the pro rata portion of the Award shall be equal to Tranche A, without regard to
any adjustment under Section 2(b)(i).
(ii) In the event such Termination of Employment occurs after the first anniversary of the
Effective Date, but prior to the second anniversary of the Effective Date, the pro rata portion of
the Award shall be the sum of (1) and (2):
| (1) | Tranche A Adjusted Value, as determined by Section 2(b)(i); plus | ||
| (2) | Tranche B, without regard to any adjustment under Section 2(b)(ii). |
(iii) In the event such Termination of Employment occurs after the second anniversary of the
Effective Date, but prior to the third anniversary of the Effective Date, the pro rata portion of
the Award shall be the sum of (1), (2), and (3):
| (1) | Tranche A Adjusted Value, as determined by Section 2(b)(i); plus | ||
| (2) | Tranche B Adjusted Value, as determined by Section 2(b)(ii); plus | ||
| (3) | Tranche C, without regard to any adjustment under Section 2(b)(iii). |
(d) Retirement. In the event of the Executive’s Retirement, prior to satisfying the
vesting requirements under Section 4, a pro rata portion of the Award, determined as set forth
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below, is immediately vested and shall be paid as soon as administratively practicable
following the date of Retirement, but in no event later than 90 days thereafter. All other amounts
hereunder are immediately forfeited and shall not be payable. The pro rata portion of the Award
shall be determined as follows:
(i) In the event of the Executive’s Retirement prior to the first anniversary of the
Effective
Date, the pro rata portion of the Award shall be equal to Tranche A, without regard to any
adjustment under Section 2(b)(i), multiplied by a fraction, the numerator of which is the number of
completed calendar months from the Effective Date to the date of Retirement and the denominator of
which is 12.
(ii) In the event of the Executive’s Retirement after the first anniversary of the
Effective
Date, but prior to the second anniversary of the Effective Date, the pro rata portion of the Award
shall be the sum of (1) and (2):
| (1) | Tranche A Adjusted Value, as determined by Section 2(b)(i); plus | ||
| (2) | Tranche B, without regard to any adjustment under Section 2(b)(ii), multiplied by a fraction, the numerator of which is the number of completed calendar months from the first anniversary of the Effective Date to the date of Retirement and the denominator of which is 12. |
(iii) In the event of the Executive’s Retirement after the second anniversary of the
Effective
Date, but prior to the third anniversary of the Effective Date, the pro rata portion of the Award
shall be the sum of (1), (2), and (3):
| (1) | Tranche A Adjusted Value, as determined by Section 2(b)(i); plus | ||
| (2) | Tranche B Adjusted Value, as determined by Section 2(b)(ii); plus | ||
| (3) | Tranche C, without regard to any adjustment under Section 2(b)(iii), multiplied by a fraction, the numerator of which is the number of completed calendar months from the second anniversary of the Effective Date to the date of Retirement and the denominator of which is 12. |
(e) Change in Control. In the event of a Change in Control , prior to the
satisfaction of the vesting requirements of Section 4, the Award shall be immediately 100 percent
vested and shall be paid as soon as administratively practicable following the date of the
completion of the Change in Control, but in no event later than 90 days thereafter. The amount of
the Award shall be determined as follows:
(i) In the event the Change in Control is completed prior to the first anniversary of the
Effective Date, the Award shall be the sum of (1), (2), and (3):
| (1) | Tranche A, without regard to any adjustment under Section 2(b)(i), plus |
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| (2) | Tranche B, without regard to any adjustment under Section 2(b)(ii), plus | ||
| (3) | Tranche C, without regard to any adjustment under Section 2(b)(iii). |
(ii) In the event the Change in Control is completed after the first anniversary of the
Effective Date, but prior to the second anniversary of the Effective Date, the Award shall be the
sum of (1), (2), and (3):
| (1) | Tranche A Adjusted Value, as determined by Section 2(b)(i); plus | ||
| (2) | Tranche B, without regard to any adjustment under Section 2(b)(ii); plus | ||
| (3) | Tranche C, without regard to any adjustment under Section 2(b)(iii). |
(iii) In the event the Change in Control is completed after the second anniversary of the
Effective Date, but prior to the third anniversary of the Effective Date, the Award shall be the
sum of (1), (2), and (3):
| (1) | Tranche A Adjusted Value, as determined by Section 2(b)(i); plus | ||
| (2) | Tranche B Adjusted Value, as determined by Section 2(b)(ii); plus | ||
| (3) | Tranche C, without regard to any adjustment under Section 2(b)(iii). |
(f) Other Termination of Employment. In the event of the Executive’s Termination of
Employment for any reason other than an event specified above, prior to satisfying the vesting
requirements of Section 4 or 5, the Award is immediately forfeited in its entirety and shall not be
payable.
(g) Rules of Construction. In the event that more than one event occurs under this
Section 5, the first event to occur shall be controlling and shall determine the timing and amount
of the Award payable. Under no circumstances shall any provision of this Agreement be construed so
as to require payment to the Executive in excess of the Award amount calculated under Section 2(b).
Section 6. Miscellaneous.
(a) Binding Agreement. This Agreement is binding on and enforceable by and against
the parties, their successors, legal representatives and assigns.
(b) Entire Agreement. This Agreement constitutes the whole agreement between the
parties relating to the subject matter hereof and supersedes any prior agreements or understandings
related to such subject matter.
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(c) Amendment of this Agreement. This Agreement may not be amended, modified, or
supplemented except by a written instrument executed by each of the parties hereto.
(d) Restrictions on Transfer. The Award may not be sold, assigned, transferred,
encumbered, hypothecated or pledged in any manner (whether by operation of law or otherwise) other
than by will or applicable laws of decent and distribution.
(e) No Right to Continued Employment. The Executive’s right, if any, to continue to
serve the Company or its Subsidiaries or Affiliates as an employee or otherwise will not be
enlarged or otherwise affected by this Agreement. This Agreement does not restrict the right of
the Company or its Subsidiaries or Affiliates to terminate the Executive’s employment at any time.
(f) Changes in Capitalization. In the event of any change in the outstanding Shares
by reason of any stock split, stock dividend, split-up, split-off, spin-off, recapitalization,
merger, consolidation, rights offering, reorganization, combination, subdivision or exchange of
shares, or any distribution to stockholders other than a normal cash dividend, the Committee shall
make an appropriate adjustment to the Share Price as may be determined in the sole but reasonable
discretion of the Committee, and such adjustments shall be final, conclusive and binding for all
purposes.
(g) Severability. If any provision of this Agreement shall be held unlawful or
otherwise invalid or unenforceable in whole or in part by a court of competent jurisdiction, such
provision shall (i) be deemed limited to the extent that such court of competent jurisdiction deems
it lawful, valid and/or enforceable and as so limited shall remain in full force and effect, and
(ii) not affect any other provision of this Agreement or part thereof, each of which shall remain
in full force and effect. If the making of any payment or the provision of any other benefit
required under this Agreement shall be held unlawful or otherwise invalid or unenforceable by a
court of competent jurisdiction, such unlawfulness, invalidity or unenforceability shall not
prevent any other payment or benefit from being made or provided under this Agreement, and if the
making of any payment in full or the provision of any other benefit required under this Agreement
in full would be unlawful or otherwise invalid or unenforceable, then such unlawfulness, invalidity
or unenforceability shall not prevent such payment or benefit from being made or provided in part,
to the extent that it would not be unlawful, invalid or unenforceable, and the maximum payment or
benefit that would not be unlawful, invalid or unenforceable shall be made or provided under this
Agreement.
(h) Waiver. Any party’s failure to insist on compliance with or enforcement of any
provision of this Agreement shall not affect its validity or enforceability or constitute a waiver
of future enforcement of that provision or of any other provision of this Agreement.
(i) General Rules of Construction. The headings given to the Sections of this
Agreement are solely as a convenience to facilitate reference, and are not intended to narrow,
limit or affect the substance or interpretation of the provisions contained herein. The reference
to any statute, regulation or other provision of law shall be construed to include any amendment
thereto or refer to any successor thereof.
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(j) Section 409A. To the extent required by law, this Agreement and the grant of the
Award hereunder are intended to comply with the requirements of Section 409A of the Code and the
Treasury Regulations promulgated and other official guidance issued thereunder (collectively,
“Section 409A”), and this Agreement and the Award shall be administered and interpreted in a manner
that is consistent with such intention. Notwithstanding the terms of Sections 3 and 5, to the
extent that payment to the Executive is required to be delayed by six months pursuant to Section
409A, such payment shall be made as soon as administratively practicable following the first day of
the seventh month following the Executive’s Termination of Employment, but in no event later than
90 days thereafter.
(k) Rabbi Trust. In the event of a delay in payment upon a Change in Control beyond
the date of completion of such Change in Control, amounts payable under Section 5(e) shall be
contributed by the Company to a grantor trust established by the Company with an independent
trustee immediately prior to the completion of the Change in Control giving rise to Executive’s
entitlement to such amounts. The costs and fees associated with establishing and maintaining such
grantor trust shall be borne by the Company. The amounts held in trust shall be invested in a
stable value fund or other similar investment vehicle, which seeks to preserve principal while
earning interest income. The investment vehicle shall be selected by an independent investment
manager appointed by the Company. The interest income realized shall be included in and paid to
Executive as and when Executive’s payment under this Section is made.
(l) Governing Law. This Agreement, to the extent not otherwise governed by the Code or
the laws of the United States, shall be governed by the laws of the State of New York, without
reference to principles of conflict of laws, and construed accordingly.
(m) Counterpart Execution. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which together shall be deemed
one and the same instrument.
| TRW AUTOMOTIVE INC. | |||||
| By: | |||||
| Name: | |||||
| Title: | |||||
| EXECUTIVE | |||||
|
|
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EXHIBIT A
No payout if Share Price is less than $1.00.
| Share Price | Target Value Adjustment* | |
Share Price less than $1.00 |
0.0% | |
Share Price less than Share Price on Effective Date, but at least $1.00 |
50.0% | |
Share Price equals Share Price on Effective Date [$2.50] |
100.0% | |
[$5.00] |
125.0% | |
[$12.50] or greater |
250.0% | |
| * | If the Share Price is between price levels set forth above, the Company shall use linear extrapolation to determine the resultant Target Value Adjustment. |
