MANAGEMENT CONTINUITY AGREEMENT (As Amended to Comply with Section 409A of the Internal Revenue Code)
Exhibit 10.23
(As Amended to Comply with Section 409A of the Internal Revenue Code)
THIS AGREEMENT, dated as of , 2009 is made by and between Xxxxxx Industries, Ltd.,
a Bermuda corporation (“Xxxxxx”), Xxxxxx US, Inc., a Delaware corporation (the “Company”), and (the “Executive”).
WHEREAS, the Company is a significant subsidiary of Xxxxxx and Executive is employed by the
Company in a key management position; and
WHEREAS, Xxxxxx considers it essential to the best interests of its shareholders to xxxxxx the
continued employment of key management personnel of the Company; and
WHEREAS, the Board recognizes that, as is the case with many publicly held corporations, the
possibility of a Change in Control exists and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or distraction of
management personnel to the detriment of the Company and its shareholders; and
WHEREAS, the Board has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Company’s management, including
the Executive, to their assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a Change in Control; and
WHEREAS, Xxxxxx will derive substantial direct and indirect benefit from this Agreement as the
Company’s parent and desires to guaranty the Company’s obligations hereunder in order to induce the
Executive to enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained,
Xxxxxx, the Company and the Executive hereby agree as follows:
1. Defined Terms. The definitions of capitalized terms used in this Agreement are
provided in Section 17 hereof.
2. Term of Agreement. The Term of this Agreement shall commence on the date hereof
and shall continue in effect through December 31, 2009; provided, however, that commencing on
January 1, 2010 and each January 1 thereafter, the Term shall automatically be extended for one
additional year unless, not later than September 30 of the preceding year, the Company or the
Executive shall have given notice not to extend the Term; and further provided, however, that if a
Change in Control shall have occurred during the Term, the Term shall expire no earlier than
twenty-four (24) months beyond the month in which such Change in Control occurred. Notwithstanding
any other provision hereof, (a) the Term shall expire upon any termination of the Executive’s
employment prior to a Potential Change in Control and (b) the Term shall expire (and for purposes
of the application of the provisions of the Agreement, shall be deemed to have expired) on the date
(or scheduled date, as the case may be) of the Executive’s Retirement.
3. Company’s Covenants Summarized. In order to induce the Executive to remain in the
employ of the Company and in consideration of the Executive’s covenants set forth in Section 4
hereof, the Company agrees, under the conditions described herein, to pay the
Executive the Severance Payments and the other payments and benefits described herein. Except as
provided in Section 9.1 hereof, no Severance Payments shall be payable under this Agreement unless
there has been (or, under the terms of the second sentence of Section 6.1 hereof, there shall be
deemed to have been) a termination of the Executive’s employment with the Company following a
Change in Control and during the Term. This Agreement shall not be construed as creating an
express or implied contract of employment and, except as otherwise agreed in writing between the
Executive and the Company, the Executive shall not have any right to be retained in the employ of
the Company.
4. The Executive’s Covenants. The Executive agrees that, subject to the terms and
conditions of this Agreement, in the event of a Potential Change in Control during the Term, the
Executive intends to remain in the employ of the Company until there occurs a Change in Control.
5. Compensation Other Than Severance Payments.
5.1 Following a Change in Control and during the Term, during any period that the Executive
fails to perform the Executive’s full-time duties with the Company as a result of incapacity due to
physical or mental illness, the Company shall pay the Executive’s full salary to the Executive at
the rate in effect at the commencement of any such period, together with all compensation and
benefits payable to the Executive under the terms of any compensation or benefit plan, program or
arrangement maintained by the Company during such period, until the Executive’s employment is
terminated by the Company for Disability.
5.2 If the Executive’s employment shall be terminated for any reason following a Change in
Control and during the Term, the Company shall pay the Executive’s full salary to the Executive
through the Date of Termination at the rate in effect immediately prior to the Date of Termination
(without giving effect to any reduction in base salary, which reduction constitutes an event of
Good Reason) or, if higher, the rate in effect immediately prior to the Change in Control, together
with all compensation and benefits payable to the Executive through the Date of Termination under
the terms of the Company’s compensation and benefit plans, programs or arrangements as in effect
immediately prior to the Date of Termination (without giving effect to any reduction in
compensation or benefits, which reduction constitutes an event of Good Reason) or, if more
favorable to the Executive, as in effect immediately prior to the Change in Control.
5.3 If the Executive’s employment shall be terminated for any reason following a Change in
Control and during the Term, the Company shall pay to the Executive the Executive’s normal
post-termination compensation and benefits as such payments become due. Such post-termination
compensation and benefits shall be determined under, and (except as otherwise provided herein) paid
in accordance with, the Company’s retirement, insurance, and other compensation or benefit plans,
programs and arrangements as in effect immediately prior to the Date of Termination (without giving
effect to any adverse change in such plans, program and arrangements, which adverse change
constitutes an event of Good Reason) or, if more favorable to the Executive, as in effect
immediately prior to the Change in Control. To the extent any such compensation or benefit is a
reimbursement or in-kind benefit plan described in Treasury Regulation 1.409A-3(i)(1)(iv), such
compensation or benefit may only be provided if (i) the plan under which such compensation or
benefit is provided sets forth an objectively determinable nondiscretionary definition of the
expenses eligible for reimbursement or of the in-kind benefit to be provided, (ii) the plan
provides for the reimbursement of expenses incurred or the provision
of the in-kind benefit during an objectively and specifically prescribed period (which may
include the lifetime of the Executive), (iii) the plan provides that the amount of expenses
eligible for reimbursement, or in-kind benefits provided, during a particular calendar year may not
affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other
taxable year, (iv) the reimbursement of any eligible expense is made on or before the last day of
the calendar year following the calendar year in which the expense was incurred, and (v) the right
to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.
To the extent any compensation or benefit provided hereunder is not a reimbursement or in-kind
benefit, it shall only be provided to the extent, and at the times, permitted under Section 409A of
the Code. Company and Executive agree that (i) the provision of the disability, accident, and
health insurance benefits set forth in section 6.1(B) of this Agreement for the period ending
eighteen (18) months after the Executive’s Separation from Service and (ii) the provision of the
life insurance benefits set forth in Section 6.1(B) of this Agreement, to the extent the cost of
such life insurance does not exceed the applicable dollar amount set forth in Section 402(g)(1)(B)
of the Code, do not constitute a deferral of compensation under Section 409A pursuant to Treasury
Regulation section 1.409A-1(b)(9)(v)(B) and accordingly may be provided during the six-month period
following the Executive’s Separation from Service. However, with respect to (i) the cost of any
life insurance benefit that exceeds the applicable dollar amount set forth in Section 402(g)(1)(B)
of the Code or (ii) any other benefit set forth on Schedule A hereto that constitutes a deferral of
compensation for purposes of Section 409A, (A) such benefits will only be provided if the Executive
has incurred a Separation from Service, (B) such benefits will not be provided during the six-month
period following the Executive’s Separation from Service, and (C) to the extent such benefits are
not provided pursuant to clause (B) hereof, the benefits not provided during such six-month period
shall be provided to the Executive on the first day of the seventh month following such Separation
from Service.
6. Severance Payments.
6.1 Subject to Section 6.2 hereof, if (i) the Executive’s employment is terminated following
a Change in Control and during the Term, other than (A) by the Company for Cause, (B) by reason of
death, Disability or Retirement, or (C) by the Executive without Good Reason, then the Company
shall pay the Executive the amounts, and provide the Executive the benefits, described in this
Section 6.1 (“Severance Payments”) and Section 6.2, in addition to any payments and benefits to
which the Executive is entitled under Section 5 hereof. For purposes of this Agreement, the
Executive’s employment shall be deemed to have been terminated following a Change in Control by the
Company without Cause or by the Executive with Good Reason, if (i) the Executive’s employment is
terminated by the Company without Cause after the occurrence of a Potential Change in Control and
prior to a Change in Control (whether or not a Change in Control ever occurs) and such termination
was at the request or direction of a Person who has entered into an agreement with the Company the
consummation of which would constitute a Change in Control or (ii) the Executive terminates his
employment for Good Reason after the occurrence of a Potential Change in Control and prior to a
Change in Control (whether or not a Change in Control ever occurs) and the circumstance or event
which constitutes Good Reason occurs at the request or direction of such Person.
(A) In lieu of any further salary payments to the Executive for periods subsequent to the
Date of Termination and in lieu of any severance benefit otherwise payable to the Executive, the
Company shall pay to the Executive a lump sum severance payment, in cash,
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equal to [ ] (or, if less, the number of full and partial years between the
Date of Termination and the Executive’s scheduled date of Retirement) times the sum of (i) the
Executive’s base annual salary as in effect immediately prior to the Date of Termination (without
giving effect to any reduction in base annual salary, which reduction constitutes an event of Good
Reason) or, if higher, in effect immediately prior to the Change in Control, and (ii) the higher of
(A) the average annual bonus earned by the Executive pursuant to the annual bonus or incentive plan
maintained by the Company in respect of the three fiscal years ending immediately prior to the
fiscal year in which occurs the Date of Termination (without giving effect to any reduction in
bonus caused by an adverse change in the Executive’s bonus plan participation, which adverse
constitutes an event of Good Reason) or, if higher, immediately prior to the fiscal year in which
occurs the Change in Control or (B) the Executive’s target annual bonus for the fiscal year in
which occurs the Date of Termination (without giving effect to any reduction in bonus caused by an
adverse change in the Executive’s bonus plan participation, which adverse change constitutes an
event of Good Reason) or, if higher, the fiscal year in which occurs the Change in Control.
(B) For the [ ] month period (or, if less, the number of
months between the Date of Termination and the Executive’s scheduled date of Retirement)
immediately following the Date of Termination, the Company shall arrange to provide the Executive
and his dependents with life, disability, accident and health insurance benefits substantially
similar to those provided to the Executive and his dependents immediately prior to the Date of
Termination (without giving effect to any reduction in benefits, which reduction constitutes an
event of Good Reason) or, if more favorable to the Executive, those provided to the Executive and
his dependents immediately prior to the Change in Control, at no greater cost to the Executive than
the cost to the Executive immediately prior to such date; provided, however, that, unless the
Executive consents to a different method (after taking into account the effect of such method on
the calculation of “parachute payments” pursuant to Section 6.2 hereof), such health insurance
benefits shall be provided through a third-party insurer. Benefits otherwise receivable by the
Executive pursuant to this Section 6.1 (B) shall be reduced to the extent benefits of the same type
are received by or made available to the Executive during the [ ] (or,
if less, the number of months between the Date of Termination and the Executive’s scheduled date of
Retirement) month period following the Executive’s termination of employment (and any such benefits
received by or made available to the Executive shall be reported to the Company by the Executive);
provided, however, that the Company shall reimburse the Executive for the excess, if any, of the
cost of such benefits to the Executive over such cost immediately prior to the Date of Termination
or, if more favorable to the Executive, the date on which the Change in Control occurs. If the
Severance Payments shall be decreased pursuant to Section 6.2 hereof, and the Section 6.1(B)
benefits which remain payable after the application of Section 6.2 hereof are thereafter reduced
pursuant to the immediately preceding sentence, the Company shall, no later than five (5) business
days following such reduction, pay to the Executive the least of (a) the amount of the decrease
made in the Severance Payments pursuant to Section 6.2 hereof, (b) the amount of the subsequent
reduction in these Section 6.1(B) benefits, or (c) the maximum amount which can be paid to the
Executive without being, or causing any other payment to be, nondeductible by reason of section
280G of the Code.
In the event the Executive receives health insurance benefits during the
[ ] month period following the Date of Termination pursuant to the foregoing provisions of
this Section 6.1(B), the Executive and his or her dependents shall continue to be
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eligible for health
insurance benefits for up to an additional sixty (60) months, provided however, that no
benefits will be provided (i) if health insurance benefits are available to the Executive through
another employer during such period, or (ii) after the insured individual reaches age 65. Such
health insurance benefits shall be substantially similar to, and have no greater cost to the
Executive than those in effect for the [ ] month period following the
Date of Termination.
Any benefits provided pursuant to this Section 6.1(B) in any one taxable year will not affect
the amount of benefits to be provided in any other taxable year and no such benefits may be
liquidated or exchanged for any other benefit. In the event any such benefits constitute
reimbursement for expenses, such reimbursement must be made before the end of the calendar year
following the calendar year in which the expense was incurred. In the event any such benefits
constitute a deferral of compensation under Section 409A of the Code, such benefits will only be
provided if the Executive has incurred a Separation from Service.
(C) Notwithstanding any provision of any annual incentive plan to the contrary, the Company
shall pay to the Executive a lump sum amount, in cash, equal to the product of (i) the target bonus
to which the Executive would have been entitled under the Company’s annual incentive plan in
respect of the year in which the Date of Termination occurs and (ii) a fraction, the numerator of
which shall be the number of months (including fractions thereof) from the first day of the fiscal
year during which the Date of Termination occurs to the Date of Termination, and the denominator of
which shall be twelve (12); provided, however, that if the Date of Termination occurs during the
same year as the Change in Control, the payment under this Section 6.1(C) shall be offset by any
payments received under the Company’s annual incentive plan in connection with such Change in
Control.
(D) In addition to the retirement benefits to which the Executive is entitled under each
Pension Plan or any successor plan thereto, the Company shall pay the Executive a lump sum amount,
in cash, equal to the sum of (i) the contributions that would have been made by the Company to the
Executive’s account in the Xxxxxx Retirement Savings and Stock Ownership Plan; and (ii) the
pay-related credits that would have been made to the Executive’s account in the Xxxxxx Supplemental
Executive Retirement Plan (the plans referred to in subsections (i) and (ii) hereof, “The Plans”),
in each case, during the [ ] month (or, if less, the number of
months between the Date of Termination and the Executive’s scheduled date of Retirement) period
immediately following the Executive’s Date of Termination based upon: (1) the terms and provisions
of The Plans as in effect immediately prior to the Change in Control; (2) the lump sum payment set
forth in Section 6.1(A) hereof, which lump sum shall be deemed to have been earned ratably over
such period; and (3) the assumption that the Executive was making the maximum allowable pre-tax
contributions under The Plans during such period.
(E) The Company shall provide the Executive with outplacement services suitable to the
Executive’s position for a period of one year or, if earlier, until the first acceptance by the
Executive of an offer of employment.
(F) Xxxxxx shall continue to maintain officers’ indemnification insurance for the Executive
for a period of five years following the Date of Termination, the terms and conditions of which
shall be no less favorable than the terms and conditions of the officers’ indemnification
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insurance
maintained by Xxxxxx for the Executive immediately prior to the date on which the Change in Control
occurs.
(G) No payment will be made pursuant to this Section 6.1 unless Executive has incurred a
Separation from Service, and the aggregate amount of payments payable pursuant to this Section 6.1
constituting a deferral of compensation (for purposes of Section 409A of the Code) that are
provided in the six-month period following such Separation from Service shall not exceed the amount
set forth in Treasury Regulation §1.409A-1(b)(9)(iii)(A). To the extent the aggregate amount of
such payments would exceed such amount, such excess shall be deferred until the first day of the
seventh month following such Separation from Service. If any payments (or portion thereof) are
required to be deferred pursuant to the preceding sentence, the order of deferred payments shall be
the payments specified in paragraphs (E), (D), (C), and (A) respectively.
6.2 (A) Whether or not the Executive becomes entitled to the Severance Payments, if any
payment or benefit received or to be received by the Executive in connection with a Change in
Control or the termination of the Executive’s employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any Person whose actions
result in a Change in Control or any Person affiliated with the Company or such Person) (all such
payments and benefits, including the Severance Payments, being hereinafter called “Total Payments”)
will be subject (in whole or part) to the Excise Tax, then, subject to the provisions of subsection
(B) of this Section 6.2, the Company shall pay to the Executive an additional amount (the “Gross-Up
Payment”) such that the net amount retained by the Executive, after deduction of any Excise Tax on
the Total Payments and any federal, state and local income and employment taxes and Excise Tax upon
the Gross-Up Payment, shall be equal to the Total Payments. For purposes of determining the amount
of the Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to
be made and state and local income taxes at the highest marginal rate of taxation in the state and
locality of the Executive’s residence on the Date of Termination (or if there is no Date of
Termination, then the date on which the Gross-Up Payment is calculated for purposes of this Section
6.2), net of the maximum reduction in federal income tax which could be obtained from deduction of
such state and local taxes.
(B) In the event that the amount of the Total Payments does not exceed 110% of the largest
amount that would result in no portion of the Total Payments being subject to the Excise Tax (the
“Safe Harbor”), then subsection (A) of this Section 6.2 shall not apply and the noncash Severance
Payments shall first be reduced (if necessary, to zero), and the cash Severance Benefits shall
thereafter be reduced (if necessary, to zero) so that the amount of the Total Payments is equal to
the Safe Harbor.
(C) For purposes of determining whether any of the Total Payments will be subject to the
Excise Tax and the amount of such Excise Tax, (i) all of the Total Payments shall be treated as
“parachute payments” within the meaning of section 280G(b)(2) of the Code, unless in the opinion of
tax counsel (“Tax Counsel”) reasonably acceptable to the Executive and selected by the accounting
firm which was, immediately prior to the Change in Control, Xxxxxx’x independent auditor (the
“Auditor”), such other payments or benefits (in whole or in part) do not constitute parachute
payments, including by reason of section 280G(b)(4)(A) of the Code, (ii) all
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“excess parachute
payments” within the meaning of section 280G(b)(l) of the Code shall be treated as subject to the
Excise Tax unless, in the opinion of Tax Counsel, such excess parachute
payments (in whole or in part) represent reasonable compensation for services actually
rendered, within the meaning of section 280G(b)(4)(B) of the Code, in excess of the Base Amount
allocable to such reasonable compensation, or are otherwise not subject to the Excise Tax, and
(iii) the value of any noncash benefits or any deferred payment or benefit shall be determined by
the Auditor in accordance with the principles of sections 280G(d)(3) and (4) of the Code. Prior to
the payment date set forth in Section 6.3 hereof, the Company shall provide the Executive with its
calculation of the amounts referred to in this Section 6.2(C) and such supporting materials as are
reasonably necessary for the Executive to evaluate the Company’s calculations. If the Executive
disputes the Company’s calculations (in whole or in part), the reasonable opinion of Tax Counsel
with respect to the matter in dispute shall prevail.
(D) In the event that (i) amounts are paid to the Executive pursuant to subsection (A) of
this Section 6.2, (ii) the Excise Tax is finally determined to be less than the amount taken into
account hereunder in calculating the Gross-Up Payment, and (iii) after giving effect to such
redetermination, the Severance Payments are to be reduced pursuant to subsection (B) of this
Section 6.2, the Executive shall repay to the Company, within five (5) business days following the
time that the amount of such reduction in Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment
attributable to the Excise Tax and federal, state and local income and employment taxes imposed on
the Gross-Up Payment being repaid by the Executive), to the extent that such repayment results in
(i) no portion of the Total Payments being subject to the Excise Tax and (ii) a dollar-for-dollar
reduction in the Executive’s taxable income and wages for purposes of federal, state and local
income and employment taxes) plus interest on the amount of such repayment at the rate provided in
section 1274(b)(2)(B) of the Code. In the event that (x) the Excise Tax is determined to exceed
the amount taken into account hereunder at the time of the termination of the Executive’s
employment (including by reason of any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment) and (y) after giving effect to such
redetermination, the Severance Payments should not have been reduced pursuant to subsection (B) of
this Section 6.2, the Company shall make an additional Gross-Up Payment in respect of such excess
and in respect of any portion of the Excise Tax with respect to which the Company had not
previously made a Gross-Up Payment (plus any interest, penalties or additions payable by the
Executive with respect to such excess and such portion) within five (5) business days following the
time that the amount of such excess is finally determined.
6.3 Except as provided in Section 6.1(G) to the contrary, the payments provided in
subsections (A), (C) and (D) of Section 6.1 hereof and in Section 6.2 hereof shall be made not
later than the fifth day following the Date of Termination; provided, however, that if the amounts
of such payments, and the limitations on such payments set forth in Section 6.2 hereof, cannot be
finally determined on or before such day, the Company shall pay to the Executive on such day an
estimate, as determined in good faith by the Executive or, in the case of payments under Section
6.2 hereof, in accordance with Section 6.2 hereof, of the minimum amount of such payments to which
the Executive is clearly entitled and shall pay the remainder of such payments (together with
interest on the unpaid remainder [or on all such payments to the extent the Company fails to make
such payments when due] at the rate provided in section 1274(b)(2)(B) of the Code) as soon as the
amount thereof can be determined but in no event later than the thirtieth (30th) day after the Date
of Termination. In the event that the amount of the estimated payments exceeds
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the amount
subsequently determined to have been due, such excess shall be
payable by the Executive on the fifth (5th) business day after demand by the Company
(together with interest at the rate provided in section 1274(b)(2)(B) of the Code). At the time
that payments are made under this Agreement, the Company shall provide the Executive with a written
statement setting forth the manner in which such payments were calculated and the basis for such
calculations including, without limitation, any opinions or other advice the Company has received
from Tax Counsel, the Auditor or other advisors or consultants (and any such opinions or advice
which are in writing shall be attached to the statement).
6.4 The Company also shall pay to the Executive all legal fees and expenses incurred by the
Executive in disputing in good faith any issue hereunder relating to the termination of the
Executive’s employment, in seeking in good faith to obtain or enforce any benefit or right provided
by this Agreement or in connection with any tax audit or proceeding to the extent attributable to
the application of section 4999 of the Code to any payment or benefit provided hereunder. Such
payments shall be made within five (5) business days after delivery of the Executive’s written
request(s) for payment accompanied with such evidence of fees and expenses incurred as the Company
reasonably may require, provided, however that (i) the amount of such expenses eligible for
reimbursement in any taxable year shall not affect the expenses eligible for reimbursement in
another taxable year and (ii) any reimbursements of such expenses shall be made no later than the
end of the calendar year following the calendar year in which the related expenses were incurred.
7. Termination Procedures and Compensation During Dispute.
7.1 Notice of Termination. After a Change in Control and during the Term, any
purported termination of the Executive’s employment (other than by reason of death) shall be
communicated by written Notice of Termination from the Company to the Executive (or in the case of
a termination for Good Reason, from the Executive to the Company) in accordance with Section 10
hereof. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for termination of the
Executive’s employment under the provision so indicated. Further, a Notice of Termination for
Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters (3/4) of the entire membership of the Board at a meeting of the Board
which was called and held for the purpose of considering such termination (after reasonable notice
to the Executive and an opportunity for the Executive, together with the Executive’s counsel, to be
heard before the Board) finding that, in the good faith opinion of the Board, the Executive was
guilty of conduct set forth in clause (i) or (ii) of the definition of Cause herein, and specifying
the particulars thereof in detail.
7.2 Date of Termination. “Date of Termination,” with respect to any purported
termination of the Executive’s employment after a Change in Control and during the Term, shall mean
(i) if the Executive’s employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have returned to the full-time
performance of the Executive’s duties during such thirty (30) day period), and (ii) if the
Executive’s employment is terminated for any other reason, the date specified in the Notice of
Termination (which, in the case of a termination by the Company, shall not be less than thirty (30)
days (except in the case of a termination for Cause) and, in the case of a termination by the
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Executive, shall not be less than fifteen (15) days nor more than sixty (60) days, respectively,
from the date such Notice of Termination is given).
7.3 Dispute Concerning Termination. If within fifteen (15) days after any Notice of
Termination is given, or, if later, prior to the Date of Termination (as determined without regard
to this Section 7.3), the party receiving such Notice of Termination notifies the other party that
a dispute exists concerning the termination, the Date of Termination shall be extended until the
earlier of (i) the date on which the Term ends or (ii) the date on which the dispute is finally
resolved, either by mutual written agreement of the parties or by a final judgment, order or decree
of an arbitrator or a court of competent jurisdiction (which is not appealable or with respect to
which the time for appeal therefrom has expired and no appeal has been perfected); provided, that
the Date of Termination shall be extended by a notice of dispute given by the Executive only if
such notice is given in good faith and the Executive pursues the resolution of such dispute with
reasonable diligence.
7.4 Compensation During Dispute. If a purported termination occurs following a
Change in Control and during the Term and the Date of Termination is extended in accordance with
Section 7.3 hereof, the Company shall continue to pay the Executive the full compensation in effect
when the notice giving rise to the dispute was given (including, but not limited to, salary) and
continue the Executive as a participant in all compensation, benefit and insurance plans in which
the Executive was participating when the notice giving rise to the dispute was given, until the
Date of Termination, as determined in accordance with Section 7.3 hereof. Amounts paid under this
Section 7.4 are in addition to all other amounts due under this Agreement (other than those due
under Section 5.2 hereof) and shall not be offset against or reduce any other amounts due under
this Agreement.
8. No Mitigation. The Company agrees that, if the Executive’s employment with the
Company terminates during the Term, the Executive is not required to seek other employment or to
attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to
Section 6 hereof or Section 7.4 hereof. Further, the amount of any payment or benefit provided for
in this Agreement (other than Section 6.1(B) hereof) shall not be reduced by any compensation
earned by the Executive as the result of employment by another employer, by retirement benefits, by
offset against any amount claimed to be owed by the Executive to the Company, or otherwise.
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by law upon any successor to Xxxxxx or the
Company, Xxxxxx or the Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business and/or assets of
Xxxxxx or the Company, as the case may be, to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that Xxxxxx or the Company would be required to perform
it if no such succession had taken place. Failure of Xxxxxx or the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession shall be a breach of
this Agreement and shall entitle the Executive to compensation from the Company in the same amount
and on the same terms as the Executive would be entitled to hereunder if the Executive were to
terminate the Executive’s employment for Good Reason after a Change in
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Control, except that, for
purposes of implementing the foregoing, the date on which any such succession becomes effective
shall be deemed the Date of Termination.
9.2 This Agreement shall inure to the benefit of and be enforceable by the Executive’s
personal or legal representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive shall die while any amount would still be payable to the
Executive hereunder (other than amounts which, by their terms, terminate upon the death of the
Executive) if the Executive had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to the executors, personal
representatives or administrators of the Executive’s estate.
10. Notices. For the purpose of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed to have been duly given when
delivered or mailed by United States registered mail, return receipt requested, postage prepaid,
addressed, if to the Executive, to the address inserted below the Executive’s signature on the
final page hereof and, if to Xxxxxx or the Company, to the address set forth below, or to such
other address as either party may have furnished to the other in writing in accordance herewith,
except that notice of change of address shall be effective only upon actual receipt:
To the Company:
Xxxxxx US, Inc.
X.X. Xxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: Senior Vice President, Human Resources
Xxxxxx US, Inc.
X.X. Xxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: Senior Vice President, Human Resources
To Xxxxxx:
Xxxxxx Industries, Ltd.
X.X. Xxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: General Counsel
Xxxxxx Industries, Ltd.
X.X. Xxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: General Counsel
11. Miscellaneous. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing and signed by the
Executive and authorized officers of Xxxxxx and the Company. No waiver by any party hereto at any
time of any breach by another party hereto of, or of any lack of compliance with, any condition or
provision of this Agreement to be performed by any party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement
supersedes any other agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof which have been made by either party; provided, however, that
this Agreement shall supersede any agreement setting forth the terms and conditions of the
Executive’s employment with the Company only in the event that the Executive’s employment with the
Company is terminated on or following a Change in Control by the Company other than for Cause or by
the Executive for Good Reason. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Texas. All references to sections of the
Exchange Act or the Code shall be deemed also to refer to any successor provisions to such
sections. Any payments provided for hereunder shall be reduced to the extent necessary so that the
Company may satisfy any applicable
10
withholding required under federal, state or local law and any
additional withholding to which the Executive has agreed. The obligations of Xxxxxx, the Company
and the Executive under this Agreement which by their nature may require either partial or total
performance after the
expiration of the Term (including, without limitation, those under Sections 6 and 7 hereof)
shall survive such expiration.
12. Validity. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
13. Counterparts. This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original but all of which together will constitute one and the same
instrument.
14. Settlement of Disputes; Arbitration.
14.1 All claims by the Executive for benefits under this Agreement shall be directed to and
determined by the Board and shall be in writing. Any denial by the Board of a claim for benefits
under this Agreement shall be delivered to the Executive in writing and shall set forth the
specific reasons for the denial and the specific provisions of this Agreement relied upon. The
Board shall afford a reasonable opportunity to the Executive for a review of the decision denying a
claim and shall further allow the Executive to appeal to the Board a decision of the Board within
sixty (60) days after notification by the Board that the Executive’s claim has been denied.
14.2 Any further dispute or controversy arising under or in connection with this Agreement
shall be settled exclusively by arbitration in Houston, Texas in accordance with the rules of the
American Arbitration Association then in effect; provided, however, that the evidentiary standards
set forth in this Agreement shall apply. Judgment may be entered on the arbitrator’s award in any
court having jurisdiction. Notwithstanding any provision of this Agreement to the contrary, the
Executive shall be entitled to seek specific performance of the Executive’s right to be paid until
the Date of Termination during the pendency of any dispute or controversy arising under or in
connection with this Agreement.
14.3 The Company shall pay to the Executive all legal fees and expenses incurred by the
Executive in disputing in good faith any issue hereunder relating to the termination of Executive’s
employment, or in seeking in good faith to obtain or enforce any benefit or right provided by this
Agreement. Such payment shall be made within five (5) business days after delivery of the
Executive’s written request for payment, accompanied by such evidence or fees and expenses incurred
as the Company reasonably may require.
15. Termination of Prior Management Continuity Agreement. This Agreement supercedes
any Management Continuity Agreement previously executed by Xxxxxx Industries, Inc. and the
Executive and any such previous agreement is terminated effective as of the date hereof.
16. Guarantee by Xxxxxx. Xxxxxx, as direct obligor and not merely as a surety,
absolutely and unconditionally guarantees the punctual payment, performance and observance of
11
each
and every covenant, agreement, duty or any other obligation of the Company under or arising out of
this Agreement (collectively, the “Guaranteed Obligations”). This is an irrevocable and continuing
guarantee of payment and performance and not merely a guarantee of
collection and shall remain in full force and effect until the Guaranteed Obligations have
been satisfied, paid and performed in full. Xxxxxx waives any right to require that an Executive
proceed against any other person or entity or asset liable on or securing the Guaranteed
Obligations or pursue or exhaust any other remedy whatsoever. To the fullest extent permitted by
applicable law, Xxxxxx further waives any legal or equitable defense to the enforceability of its
obligations hereunder, and agrees that its obligations shall be absolute and unconditional and
shall not be affected or discharged by any circumstance, act or event whatsoever (including without
limitation the insolvency, voluntary or involuntary bankruptcy, liquidation, dissolution, winding
up, merger, consolidation or reorganization of the Company), except payment and performance in full
of the Guaranteed Obligations.
17. Definitions. For purposes of this Agreement, the following terms shall have the
meanings indicated below:
(A) “Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated under Section 12
of the Exchange Act.
(B) “Auditor” shall have the meaning set forth in Section 6.2 hereof.
(C) “Base Amount” shall have the meaning set forth in section 280G(b)(3) of the Code.
(D) “Beneficial Owner” shall have the meaning set forth in Rule 13d3 under the Exchange Act.
(E) “Board” shall mean the Board of Directors of Xxxxxx.
(F) “Cause” for termination by the Company of the Executive’s employment shall mean (i) the
willful and continued failure by the Executive to substantially perform the Executive’s duties with
the Company (other than any such failure resulting from the Executive’s incapacity due to physical
or mental illness or any such actual or anticipated failure after the issuance of a Notice of
Termination for Good Reason by the Executive pursuant to Section 7.1 hereof) after a written demand
for substantial performance is delivered to the Executive by the Board, which demand specifically
identifies the manner in which the Board believes that the Executive has not substantially
performed the Executive’s duties, or (ii) the willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise.
For purposes of clauses (i) and (ii) of this definition, (x) no act, or failure to act, on the
Executive’s part shall be deemed “willful” unless done, or omitted to be done, by the Executive not
in good faith and without reasonable belief that the Executive’s act, or failure to act, was in the
best interest of the Company and (y) in the event of a dispute concerning the application of this
provision, no claim by the Company that Cause exists shall be given effect unless the Company
establishes to the Board by clear and convincing evidence that Cause exists.
12
(G) A “Change in Control” shall be deemed to have occurred if the event set forth in any one
of the following paragraphs shall have occurred:
(I) any Person is or becomes the Beneficial Owner, directly or indirectly, of
securities of Xxxxxx (not including in the securities beneficially owned by such
Person any securities acquired directly from Xxxxxx or its Affiliates) representing
25% or more of the combined voting power of Xxxxxx’x then outstanding securities
(other than Xxxxxx’x Class B Common Shares), excluding any Person who becomes such a
Beneficial Owner in connection with a transaction described in clause (i) of
paragraph (III) below; or
(II) the following individuals cease for any reason to constitute a majority of
the number of directors then serving on the Board: individuals who, on the date
hereof, constitute the Board and any new director (other than a director whose
initial assumption of office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation, relating to the
election of directors of Xxxxxx) whose appointment or election by the Board or
nomination for election by Xxxxxx’x shareholders was approved or recommended by a
vote of at least two-thirds (2/3) of the directors then still in office who either
were directors on the date hereof or whose appointment, election or nomination for
election was previously so approved or recommended; or
(III) there is consummated a merger or consolidation of Xxxxxx or any direct
or indirect subsidiary of Xxxxxx with any other corporation, other than (i) a merger
or consolidation which results in the directors of Xxxxxx immediately prior to such
merger or consolidation continuing to constitute at least a majority of the board of
directors of Xxxxxx, the surviving entity or any parent thereof, or (ii) a merger or
consolidation effected to implement a recapitalization of Xxxxxx (or similar
transaction) in which no Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of Xxxxxx (not including in the securities Beneficially
Owned by such Person any securities acquired directly from the Xxxxxx or its
Affiliates) representing 25% or more of the combined voting power of Xxxxxx’x then
outstanding securities (other than Xxxxxx’x Class B Common shares); or
(IV) the shareholders of Xxxxxx approve a plan of complete liquidation or
dissolution of Xxxxxx or there is consummated an agreement for the sale or
disposition by Xxxxxx of all or substantially all of Xxxxxx’x assets, other than a
sale or disposition by Xxxxxx of all or substantially all of Xxxxxx’x assets to an
entity, at least 60% of the combined voting power of the voting securities of which
are owned by shareholders of Xxxxxx in substantially the same proportions as their
ownership of Xxxxxx immediately prior to such sale.
(H) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.
13
(I) “Company” shall mean Xxxxxx US, Inc. and, shall include any successor to its business
and/or assets which assumes and agrees to perform this Agreement by operation of law or otherwise.
(J) “Xxxxxx” shall mean Xxxxxx Industries, Ltd., a Bermuda corporation and, except in
determining under Section 17(G) hereof whether any Change in Control has occurred, shall include
any successor to its business and/or assets which assumes and agrees to perform this Agreement by
operation of law or otherwise.
(K) “Date of Termination” shall have the meaning set forth in Section 7.2 hereof.
(L) “Disability” shall be deemed the reason for the termination by the Company of the
Executive’s employment, if, as a result of the Executive’s incapacity due to physical or mental
illness, the Executive shall have been absent from the full-time performance of the Executive’s
duties with the Company for a period of six (6) consecutive months, the Company shall have given
the Executive a Notice of Termination for Disability, and, within thirty (30) days after such
Notice of Termination is given, the Executive shall not have returned to the full-time performance
of the Executive’s duties.
(M) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to
time.
(N) “Excise Tax” shall mean any excise tax imposed under section 4999 of the Code.
(O) “Executive” shall mean the individual named in the first paragraph of this Agreement.
(P) “Good Reason” for termination by the Executive of the Executive’s employment shall mean
the occurrence (without the Executive’s express written consent) after any Change in Control, or
prior to a Change in Control under the circumstances described in clauses (ii) and (iii) of the
second sentence of Section 6.1 hereof (treating all references in paragraphs (I) through (VII)
below to a “Change in Control” as references to a “Potential Change in Control”), of any one of the
following acts by Xxxxxx or the Company, or failures by the Company to act, unless, in the case of
any act or failure to act described in paragraph (I), (V), (VI) or (VII) below, such act or failure
to act is corrected prior to the Date of Termination specified in the Notice of Termination given
in respect thereof:
(I) the assignment to the Executive of any duties inconsistent with the
Executive’s status as a senior executive officer of the Company or a substantial
adverse alteration in the nature or status of the Executive’s responsibilities or
reporting relationship from those in effect immediately prior to the Change in
Control;
(II) a material reduction by the Company in the Executive’s annual base salary
as in effect on the date hereof or as the same may be increased from time to time;
14
(III) the relocation of the Executive’s principal place of employment to a
location which increases the Executive’s one-way commuting distance by more than 50
miles or the Company’s requiring the Executive to be based anywhere other than the
Executive’s principal place of employment
immediately prior to the Change in Control (or permitted relocation thereof)
except for required travel on the Company’s business to an extent substantially
consistent with the Executive’s business travel obligations immediately prior to the
Change in Control;
(IV) the failure by the Company to pay to the Executive any portion of the
Executive’s current compensation, or to pay to the Executive any portion of an
installment of deferred compensation under any deferred compensation program of the
Company, within seven (7) days of the date such compensation is due, unless paid by
Xxxxxx pursuant to Section 16 of this Agreement;
(V) the failure by the Company to continue in effect any compensation plan in
which the Executive participates immediately prior to the Change in Control which is
material to the Executive’s total compensation, including but not limited to the
Stock Incentive Plan, the Amended and Restated Management Annual Incentive Plan and
the Management Incentive Compensation Deferral Plan or any substitute plans adopted
prior to the Change in Control, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect to such plan, or
the failure by the Company to continue the Executive’s participation therein (or in
such substitute or alternative plan) on a basis not materially less favorable, both
in terms of the amount or timing of payment of benefits provided and the level of
the Executive’s participation relative to other participants, as existed immediately
prior to the Change in Control;
(VI) the failure by the Company to continue to provide the Executive with
benefits substantially similar to those enjoyed by the Executive under any of the
Company’s pension, savings, life insurance, medical, health and accident, or
disability plans in which the Executive was participating immediately prior to the
Change in Control, the taking of any other action by the Company which would
directly or indirectly materially reduce any of such benefits or deprive the
Executive of any material fringe benefit enjoyed by the Executive at the time of the
Change in Control, or the failure by the Company to provide the Executive with the
number of paid vacation days to which the Executive is entitled on the basis of
years of service with the Company in accordance with the Company’s normal vacation
policy in effect at the time of the Change in Control;
(VII) any purported termination of the Executive’s employment which is not
effected pursuant to a Notice of Termination satisfying the requirements of Section
7.1 hereof; for purposes of this Agreement, no such purported termination shall be
effective. The Executive’s right to terminate the Executive’s employment for Good
Reason shall not be affected by the Executive’s incapacity due to physical or mental
illness. The Executive’s continued
15
employment shall not constitute consent to, or a
waiver of rights with respect to, any act or failure to act constituting Good Reason
hereunder; or
(VIII) any failure of Xxxxxx or the Company to obtain assumption of this
Agreements, as set forth in Section 9.1 hereof.
For purposes of any determination regarding the existence of Good Reason, any claim
by the Executive that Good Reason exists shall be presumed to be correct unless the
Company establishes to the Board by clear and convincing evidence that Good Reason
does not exist. Notwithstanding anything to the contrary stated above, the
Executive will only be treated as having Good Reason to terminate his employment if
(i) Executive has notified Company of the existence of such Good Reason within
ninety (90) days of the occurrence of one of the conditions set forth above in
clauses (I) through (VIII) and (ii) the Company has been given a period of at least
thirty (30) days during which it can remedy any such condition and, during such
period, the Company fails to remedy such condition
(Q) “Gross-Up Payment” shall have the meaning set forth in Section 6.2 hereof.
(R) “Notice of Termination” shall have the meaning set forth in Section 7.1 hereof.
(S) “Pension Plan” shall mean any tax-qualified, supplemental or excess benefit pension plan
maintained by the Company and any other plan or agreement entered into between the Executive and
the Company which is designed to provide the Executive with supplemental retirement benefits.
(T) “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified
and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) Xxxxxx or
any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee
benefit plan of the Company or any of its Affiliates, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or
indirectly, by the shareholders of Xxxxxx in substantially the same proportions as their ownership
of Xxxxxx stock or (v) any individual, entity or group whose ownership of Xxxxxx securities is
reported on Schedule 13G pursuant to Rule 13d-1 promulgated under the Exchange Act (but only for so
long as such ownership is so reported).
(U) “Potential Change in Control” shall be deemed to have occurred if the event set forth in
any one of the following paragraphs shall have occurred:
(I) Xxxxxx enters into an agreement, the consummation of which would result in
the occurrence of a Change in Control;
(II) Xxxxxx or any Person publicly announces an intention to take or to
consider taking actions which, if consummated, would constitute a Change in Control;
16
(III) any Person becomes the Beneficial Owner, directly or indirectly, of
securities of Xxxxxx representing 15% or more of either the then outstanding Class A
Common Shares of Xxxxxx or the combined voting power of Xxxxxx’x then outstanding
securities other than Xxxxxx’x Class B Common Shares
(not including in the securities beneficially owned by such Person any
securities acquired directly from Xxxxxx or its Affiliates); or
(IV) the Board adopts a resolution to the effect that, for purposes of this
Agreement, a Potential Change in Control has occurred.
(V) “Retirement” shall mean the termination of the Executive’s employment in accordance with
the Company’s mandatory retirement policy as in effect immediately prior to the Change in Control.
(W) “Separation from Service” shall mean a separation from service as such term is defined for
purposes of Section 409A(a)(2)(A)(i) of the Code and the regulations and rulings thereunder.
(X) “Severance Payments” shall have the meaning set forth in Section 6.1 hereof.
(Y) “Tax Counsel” shall have the meaning set forth in Section 6.2 hereof.
(Z) “Term” shall mean the period of time described in Section 2 hereof (including any
extension, continuation or termination described therein).
(AA) “Total Payments” shall mean those payments so described in Section 6.2 hereof.
| XXXXXX INDUSTRIES, LTD | XXXXXX US, INC. | |||||||||
By:
|
By: | |||||||||
Name:
|
Name: | |||||||||
Title:
|
Chairman, President and Chief | Title: | Senior Vice President, | |||||||
| Executive Officer | Human Resources | |||||||||
| EXECUTIVE | ||||||||||
| Address | ||||||||||
17
