EXECUTIVE COMPENSATION AND BENEFITS AGREEMENT
Exhibit
10(iii)(A)
This Executive Compensation and
Benefits Agreement (this “Agreement”) is entered into on December 31, 2008
between Drew Industries Incorporated, a Delaware corporation (the “Company”) and
Xxxxx X. Xxxxxxx (the “Executive”).
WITNESSETH:
WHEREAS, the Executive has been
Chairman, Chief Executive Officer and President of Kinro, Inc. (“Kinro”), a
subsidiary of the Company, and has made substantial contributions to the
development and success of the Company in key managerial positions since 1980;
and
WHEREAS, the Executive is party to a
Restated Employment Agreement, dated February 17, 2005, with Kinro Texas Limited
Partnership, a subsidiary of Kinro (the “Employment Agreement”);
and
WHEREAS, the Company and the Executive
have agreed on certain compensation and benefits to be provided to the Executive
in connection with his retirement pursuant to the Company’s executive succession
plan; and
WHEREAS, the duties and obligations of
the Company to the Executive under this Agreement shall be in consideration for
the Executive’s past services to the Company, the Executive’s continued services
to the Company, and the restrictive covenants and release included in this
Agreement; and
WHEREAS, the terms and conditions of
this Agreement were reviewed and approved by the Board of Directors of the
Company and the Compensation Committee of the Board of
Directors,
NOW, THEREFORE, in consideration
of the mutual covenants contained herein, the Company and the Executive agree as
follows:
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1.
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Effective Date,
Retirement Date, and Term
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1.1 This
Agreement shall become effective as of the date hereof (“the Effective Date”)
and shall terminate on December 31, 2010 (the “Termination Date”).
1.2 The
Executive shall retire as a Director of the Company, effective December 31, 2008
(the “Retirement Date”).
1.3 The
Executive shall retire as Chairman, Chief Executive Officer and
a Director of Kinro, Inc., and of each of its direct and indirect
subsidiaries (collectively, the “Kinro Companies”) effective December 31,
2008.
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2.
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Definitions
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For
purposes of this Agreement, capitalized terms shall be defined as
follows:
“Affiliated
Companies” shall mean the Company and its subsidiaries and affiliates (as the
term “affiliate” is defined in the Federal securities laws).
“Base
Salary” shall mean the Executive’s annual salary, exclusive of benefits, stock
options, bonuses, and incentive compensation, in effect on the Effective
Date.
“Company”
shall mean Drew Industries Incorporated and its successors and assigns, and any
corporation or other entity which is the surviving or continuing entity
following a merger, consolidation, or sale of all or substantially all of the
Company’s assets or stock, or any other reorganization or recapitalization, and
any successor to the business conducted by the Affiliated Companies on the
Retirement Date.
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3.
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Compensation
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3.1 For
the balance of 2008, the Company will pay and provide to the Executive the Base
Salary, performance-based incentive compensation, benefits, and perquisites
which are being paid and provided to the Executive as of the Effective Date
pursuant to the Employment Agreement.
3.2 For
each of calendar years 2009 and 2010, the Company will pay to the Executive
salary of Seven Hundred Fifty Thousand ($750,000) Dollars, payable in accordance
with the Company’s customary payroll practices.
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4.
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Benefits
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4.1 Commencing
January 1, 2009 through December 31, 2010 (the “Benefits Period’), the Executive
will receive the following benefits and perquisites (“Benefits”):
4.1.1 To
the extent permitted by the Company’s group plan, medical and health insurance
group benefits for the Executive and his family;
4.1.2 Dental
coverage for the Executive and his family;
4.1.3 Automobile
and related expenses for fuel, insurance, maintenance and parking; provided,
however, that on or about December 31, 2010, the Company will convey title to
the automobile to the Executive for One ($1.00) Dollar.
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4.1.4 The
remaining three annual payments of premium for long-term care
insurance;
4.1.5 Long-term
disability insurance;
4.1.6 The
Executive has the option to terminate or assume the split-dollar life insurance
policies with National Life Insurance Company of Vermont (Policy Nos. 1885127
and 2007729) currently in effect, and in accordance with the
split-dollar life insurance agreement the Company shall receive an amount
equivalent to the premiums paid thereon, and the Executive shall receive the
remaining cash value if terminated, or death benefits if assumed.
4.2 All
stock options held by the Executive as of the Effective Date granted in November
2003 at $12.78 per share shall continue to vest during the Benefits Period in
accordance with the terms of the applicable Stock Option Plan and Stock Option
Agreement (including any successor plan and agreement) under which the stock
options were granted to the Executive. Grants of stock options in
November 2005 and November 2007 at $28.33 per share and $32.61 per share,
respectively, shall be cancelled as of the Effective Date.
4.3 In
the event that applicable laws or regulations prohibit the Company from
providing any of the foregoing Benefits, or result in penalties or excess tax
imposed on the Company, the Company may withhold any such Benefits and the
Company will pay the Executive an amount equal to the cost incurred by the
Executive to replace the Benefit or Benefits withheld.
4.4 The
Company’s obligation to provide, and the Executive’s right to receive, any of
the Benefits described in this Section 4 are conditioned on, and are in partial
consideration for, (i) the Executive’s release of any claims he may have against
the Company, the Kinro Companies and the Affiliated Companies, as set forth in
Section 7 hereof, in connection with his employment with the Company and the
Kinro Companies pursuant to the Employment Agreement or otherwise; and (ii) the
Executive’s continued compliance with any obligations he may have to the Company
under this Agreement, including but not limited to, the restrictive covenants
set forth in Section 6 hereof.
4.5 All
payments made by the Company to the Executive under this Agreement shall be net
of any applicable taxes (local, state, federal or otherwise) or other required
or voluntary withholding or deductions.
4.6 The
Executive shall not be required to mitigate the amount of any payment or Benefit
provided under this Agreement by seeking other employment or otherwise, nor
shall the amount of any payment or Benefit provided for under this Agreement be
reduced by any compensation earned by the Executive as a result of employment by
another employer or by any other benefits received by the Executive during the
term of this Agreement.
4.7 In
the event of the death of the Executive prior to the Termination Date, the
Company shall continue to pay to the beneficiary or heir of the Executive the
salary and Benefits which the Executive would have been entitled to receive
until the Termination Date. Unless superseded by notice to the
Company subsequent to the Effective Date, all such payments and Benefits shall
be made to the Executive’s spouse in the event of the Executive’s death or to
his estate in the event the Executive is predeceased by his spouse.
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4.8 This
Agreement is intended to comply with Section 409A of the Internal Revenue Code
of 1986, as amended (the ‘Code’), the final Treasury regulations and the
interpretative guidance thereunder, including the exceptions for short-term
deferrals, separation pay arrangements, reimbursements, and in-kind
distributions, and shall be construed, interpreted and administered
accordingly. If any provision of this Agreement needs to be revised
to satisfy the requirements of Section 409A, then such provision shall be
modified or restricted to the extent and in the manner necessary to be in
compliance with such requirements of the Code and any such modification will
attempt to maintain the same economic results as were intended under this
Agreement. The Company does not guarantee that the payments and
benefits that may be paid or provided pursuant to this Agreement will satisfy
all applicable provisions of Code Section 409A. Payments made to the
Executive under this Agreement in error shall be returned to the
Company.
4.8.1 Notwithstanding
anything herein to the contrary, if at the time of the Executive’s “Separation
From Service” (as hereinafter defined) the Executive shall be a “specified
employee” (within the meaning of Treasury Regulation 1.409A-1(i)), as determined
in a uniform manner by the Company, and the Company makes a good faith
determination that an amount payable hereunder constitutes deferred compensation
(within the meaning of Section 409A of the Code), such amount payable to the
Executive shall not be paid or commence until the first business day
after six months following the Executive’s “Separation From Service” or, if
earlier, the date of the Executive’s death (the “Six Month Delay
Rule”). The term “Separation From Service” shall mean the Executive’s
termination of active employment, whether voluntary or involuntary (other than
by death) with the Company or any of its affiliated companies within the meaning
of Treasury Regulation 1.409A-1(h). The Company will determine
whether the Executive has terminated active employment (and incurred a
Separation From Service) based upon facts and circumstances described in
Treasury Regulation 1.409A-1(h)(1)(ii). The Executive shall incur a
Separation From Service if the Company and the Executive reasonably anticipate
the Executive will not perform any additional services after a certain date or
that the level of bona fide services (as an employee or an independent
contractor) will permanently decrease to no more than twenty (20%) percent of
the average level of bona fide services performed over the immediately preceding
36-month period. The provisions of this Section 4.8.1 shall only
apply if, and to the minimum extent, necessary to comply with Section 409A of
the Code, to avoid the Executive’s incurrence of any additional taxes or
penalties under Section 409A.
4.8.2 During
the Six Month Delay, the Company will make payments to the Executive under the
Agreement only to the extent any of the exceptions to the Six Month Delay Rule
apply, determined in good faith by the Company, including the short-term
deferral rule, the separation pay exception, and the limited payments
exception.
4.8.3 The
Company’s ‘specified employee identification date’ will be December 31 of each
year, and the Company’s ‘specified employee effective date’ will be April 1 of
each succeeding year.
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4.8.4 Reimbursement
of fees, expenses, allowances, and in-kind benefits provided under this
Agreement shall be made (i) in accordance with the Company’s policies, and (ii)
within such time periods required by Code Section 409A to avoid being deemed
deferred compensation.
5. Executive’s
Services
5.1 On
request by the Company with reasonable notice to the Executive, the Executive
will render services to the Company consistent with his prior services regarding
Kinro’s operations, and will participate and represent the Company in
industry-related functions, not to exceed an aggregate of five (5) days per
month.
5.2 All
travel and other expenses incident to the rendering of services by the Executive
hereunder in accordance with travel policies of the Company will be paid by the
Company (including us of the existing airpass). If any such expenses
are paid in the first instance by the Executive, the Company will reimburse him
therefore on presentation of expense vouchers.
6. Non-Competition-Corporate
Property-Confidential Information
6.1 Commencing
on the Effective Date, and for a period of eighteen (18) months from the
Termination Date (the “Restricted Period”), the Executive will not, directly or
indirectly, undertake or perform services in or for, or render services to,
participate in, or have financial interest in, or engage in, any business
competitive to that of the business of the Affiliated Companies or solicit for
employment or employ any employee of the Affiliated Companies. For
purposes hereof, a business shall be deemed competitive if it is conducted in
any geographic or market area in which any of the Affiliated Companies are
engaged in business during the Restricted Period and involves the development,
design, manufacture, marketing, packaging, sale or distribution of any products
developed, designed, manufactured, sold or distributed, or the offering of any
services offered, by any of the Affiliated Companies during the Restricted
Period including, but not limited to, products for the manufactured housing
(including park and office models), modular housing, recreational vehicle, and
utility and other specialty trailer industries; and the Executive will be deemed
directly or indirectly to engage in such business if the Executive participates
in such business, or in any entity engaged in or which owns, such business, as
an officer, director, employee, consultant, partner, individual proprietor,
manager or as an investor who has made any loans, contributed to capital stock
or purchased any stock; the Executive will not, at any time, utilize any
tradenames or corporate names used by the Affiliated Companies, or any
derivatives of such names, in any business competitive to that of the business
of the Affiliated Companies, nor any patent, trademark, tradename, service xxxx,
logo, copyright or similar intellectual property, whether or not registered, of
any of the Affiliated Companies. The foregoing, however, shall not be
deemed to prevent the Executive from investing in securities if such class of
securities in which the investment is made is listed on a national securities
exchange or is of a Company registered under Section 12(g) of the Securities Act
of 1934 and, if the Company in which such investment is made competes with any
of the Affiliated Companies, such investment represents less than one (1%) per
cent of the outstanding securities of such class.
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6.2 The
Executive agrees that all products, packaging, inventions, patents, patent
applications, designs, creations, ideas, techniques, methods, or any portions
thereof, or any improvements or modifications thereon, or any know-how or
procedures related thereto, which relate to the business of the Affiliated
Companies, conceived, invented, discovered or executed by the Executive, whether
or not marketed or utilized by the Affiliated Companies, shall be sole and
exclusive property of the Affiliated Companies, without additional compensation
payable thereof; and by these presents the Executive hereby assigns to the
Company any and all right, title and interest he has, or may have,
therein.
6.3 The
Executive acknowledges and agrees that during, and as a consequence of
employment with the Company, he has learned confidential, proprietary and trade
secret information of and about the Affiliated Companies, and has had access to
and has been involved in the development and utilization of the Affiliated
Company’s confidential and proprietary business information. “Confidential
Information” means information about the Affiliated Companies in whatever form
disclosed or known to the Executive as a consequence of his employment by the
Company which relates to the Affiliated Companies business, products, processes,
or services that gives them a competitive advantage in the marketplace,
including, but not limited to: (a) any information that would be considered a
trade secret within the meaning of applicable Federal or state law; (b)
information relating to any of the Affiliated Companies existing products or
services or products or services under development; (c) business information
relating to the Affiliated Companies’ dealings with customers or suppliers; (d)
confidential customer or prospective customer lists; (e) costs and profit
margins; (f) confidential marketing and advertising programs; (g) financial
information; (h) sales performance and strategies; (i) human resources
strategies; (j) merger and acquisition plans; and (k) proprietary software or
processes utilized by the Affiliated Companies. Confidential
Information does not include information that the Executive can prove was
generally known and readily available to the Affiliated Companies’ competitors
through legitimate means. The Executive agrees that he will not at
any time after the Effective Date, disclose to anyone (except as authorized by
the Company in furtherance of its business), publish, or use in competition with
the Affiliated Companies, any of their Confidential Information. The
Executive further agrees to abide by the Company’s rules or regulations it may
implement from time to time to further protect its Confidential
Information.
6.4 In
the event that the Executive desires to render services to, or have any interest
in, a supplier or customer of any of the Affiliated Companies, the Executive
shall furnish to the Company and the Board of Directors a detailed description
of the prospective employer’s business, including the business relationship with
any of the Affiliated Companies. Acceptance by the Executive of any
such relationship with a supplier or customer of any of the Affiliated Companies
is conditioned on the consent of the Company, which shall not be unreasonably
withheld or delayed.
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7. Release
7.1 Except
for the obligations of the Company set forth in this Agreement, the Executive
hereby releases, acquits and forever discharges the Company, the Kinro
Companies, the Affiliated Companies, their respective subsidiaries, and their
officers, directors, agents, servants, employees, shareholders, successors,
assigns and affiliates, of and from any and all claims, liabilities, demands
causes of action, costs, expenses, attorneys fees, damages, indemnities and
obligations of every kind and nature, in law, equity, or otherwise, known and
unknown, suspected and unsuspected, disclosed (other than any claim for
indemnification the Executive may have as a result of any third party action
based on his employment with the Company and the Kinro Companies), arising out
of or in any way related to agreements, events, acts, omissions or conduct at
any time prior to the Effective Date, including arising out of or in any way
connected with his employment with the Company and the Kinro Companies,
including but not limited to, claims of intentional and negligent infliction of
emotional distress, any and all tort claims for personal injury, claims or
demands related to salary, bonuses, commissions, stock, stock options, or any
other ownership interests in the Company, vacation pay, fringe benefits, expense
reimbursements, severance pay, or any other form of compensation; claims
pursuant to any federal, state or local law or cause of action including, but
not limited to, the federal Civil Rights Act of 1964, as amended; the federal
Age Discrimination in Employment Act of 1967, as amended (“ADEA”); the federal
Employee Retirement Income Security Act of 1974, as amended; the federal
Americans with Disabilities Act of 1990; tort law; contract law; statutory law;
common law; wrongful discharge; discrimination; fraud; defamation; emotional
distress; and breach of the implied covenant of good faith and fair dealing;
provided, however, that nothing in this Section 7.1 shall be construed in any
way to release the Company from its obligation to indemnify the Executive
pursuant to the Indemnification Agreement between the Executive and the Company,
and the Company’s indemnification obligations pursuant to the Company’s Restated
Certificate of Incorporation and By-laws, or applicable law, or applicable
directors and officers liability insurance maintained by the Company with
respect to the Executive’s services as a Director of the Company.
7.2 Other
than stock options referred to in Section 4.2 hereof, nothing in this Agreement
shall result in cancellation or termination of any rights of the Executive in
employee benefits which have vested on or prior to the date
hereof.
8. General
Provisions
8.1 This
Agreement does not constitute a contract of employment or impose on the Company
any obligation to retain the Executive as an employee or
consultant. In the event of any conflict between the provisions of
this Agreement and the provisions of any previously existing employment,
severance or other similar agreement or arrangement, the provisions of this
Agreement shall govern.
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8.2 Whenever
possible, each provision of this Agreement will be interpreted in such manner as
to be effective and valid under applicable law. If any provision of
this Agreement is held to be invalid, illegal or unenforceable in any respect
under any applicable law or rule in any jurisdiction, such invalidity,
illegality or unenforceability will not affect any other provision, or any other
jurisdiction, but this Agreement will be reformed, construed and enforced in
such jurisdiction as if such invalid, illegal or unenforceable provisions had
never been contained herein.
8.3 The
waiver of any breach of any provision of this Agreement, shall not thereby be
deemed to have waived any preceding or succeeding breach of the same or any
other provision of this Agreement.
8.4 This
Agreement constitutes the entire agreement between the Executive and the Company
with regard to the subject matter hereof.
8.5 This
Agreement may be changed or terminated only upon the mutual written consent of
the Company and the Executive. The written consent of the Company to
a change or termination of this Agreement, other than changes for administrative
purposes, shall be signed by an executive officer of the Company after approval
by the Board of Directors.
8.6 This
Agreement may be executed in separate counterparts, any one of which need not
contain signatures of more than one party, but all of which taken together will
constitute one and the same Agreement.
8.7 The
headings of the Sections hereof are inserted for convenience only and shall not
be deemed to constitute a part therefore nor to affect the meaning
thereof.
8.8 This
Agreement is intended to bind and to inure to the benefit of and be enforceable
by the Executive, and the Company, and any surviving entity resulting from a
merger, acquisition, consolidation or other reorganization or recapitalization,
and any successor to the businesses formerly conducted by the Company, and their
respective successors, assigns, heirs, executors and administrators, without
regard to whether or not such entity or person actively assumes any rights or
duties hereunder; provided, however, that Executive may not assign any duties
hereunder and may not assign any rights hereunder without the written consent of
the Company, which consent shall not be unreasonably withheld.
8.9 All
notices provided for in this Agreement, and correspondence pertaining to this
Agreement, shall be considered as properly given when (a) mailed by U.S.
registered mail, return receipt requested, postage prepaid; (b) sent via
facsimile with a confirmed facsimile transmission receipt; (c) hand delivered to
the Executive or to the President of the Company; or (d) sent via overnight
delivery with a confirmed receipt of delivery; in each instance addressed, if to
the Executive or the Company, as the case may be, at the address noted below or
to such other address as either party may furnish to the other in writing in
accordance herewith, except that notice of a change of address shall be
effective only upon actual receipt.
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To the Company:
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To
the Executive:
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Drew Industries
Incorporated
000 Xxxxxxxxxx
Xxxxxx
Xxxxx Xxxxxx, Xxx Xxxx,
00000
Attention: President
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Xxxxx
X. Xxxxxxx
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8.10 In
any proceeding arising out of or involving a dispute or disagreement with
respect to this Agreement, the prevailing party (on the merits, by motion, or
otherwise) shall be entitled to be reimbursed by the other party for all legal
fees and expenses incurred in connection with such proceeding.
8.11 This
Agreement is made and entered into in the State of Texas, and the internal laws
of Texas shall govern its validity and interpretation in the performance by the
parties hereto of their respective duties and obligation hereunder, without
regard to Texas’ conflict of laws rules. Each party hereto
irrevocably submits to the exclusive jurisdiction of the United States District
Court located in Dallas, Texas over any suit, action or proceeding arising out
of or relating to this Agreement. Each party, hereby irrevocably
waives to the fullest extent permitted by law, (i) any objection that they may
now or hereafter have to the venue of any such suit, action or proceeding in
such court; or (ii) any claim that any such suit, action or proceeding has been
brought in an inconvenient forum. Final judgment in any suit, action
or proceeding brought in any such court shall be conclusive and binding upon
each party duly served with process therein and may be enforced in the courts of
the jurisdiction of which either party or any of their property is subject, by a
suit upon such judgment.
IN WITNESS WHEREOF, the parties have
executed this Agreement on the Effective Date written above.
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Xxxxx X. Xxxxxxx
DREW
INDUSTRIES INCORPORATED
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By:
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