Exhibit 10(q)
CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT (the "Agreement") is made this 15/th/ day of October,
1998, by and between X.X. Xxxxxx Company, a Minnesota corporation (the
"Company") and Xxxxx Xxxxxxx (the "Executive").
W I T N E S S E T H:
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WHEREAS, the Company recognizes the valuable services that Executive has
rendered to the Company and/or its Affiliated Entities and desires to be assured
that the Executive will continue to actively participate in the business of the
Company; and
WHEREAS, the Executive is willing to continue to serve the Company but
desires assurance that in the event of any change in control of the Company, or
a change in status of the Affiliated Entity for which the Executive is employed,
the Executive will continue to have the responsibility and status that the
Executive has earned; and
WHEREAS, the Company's Board of Directors has determined that it is
appropriate 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 potentially disturbing circumstances arising from
the possibility of a change in control of the Company;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the Company and the Executive hereby agree as follows:
1. Term. The Term of this Agreement shall commence on the date hereof
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and shall terminate upon the earliest to occur of:
(a) The "Expiration Date;"
(b) the termination of the Executive's employment under circumstances
that do not entitle the Executive to benefits under paragraph 3 or
paragraph 4;
(c) the Executive's death;
(d) the date, prior to a Change in Control or a Change in Status, on
which the Executive ceases to be in pay grade 35 through 49;
(e) the third anniversary of the occurrence of a Change in Control,
if the Executive is still employed by the Company and/or an Affiliated
Entity on such date; or
(f) the first anniversary of the occurrence of a Change in Status,
unless the Executive is still employed by the Company and/or an Affiliated
Entity on such date; provided, that the expiration of the Term shall not
relieve the Company of its obligations to make any payments or provide any
benefits which are or become due to the Executive subsequent to the
expiration of the Term. For purposes of this paragraph, the "Expiration
Date" of this Agreement is the first anniversary of the date on which the
Term begins; provided, that on each day after the date on which the Term
begins the Expiration Date shall automatically extend for an additional
day, so that the remaining Term shall always be one year, unless the
Company gives written notice to the Executive that the Term shall not be so
extended, whereupon the Expiration Date shall be the date which is one year
after the date of such notice. Notwithstanding the foregoing, upon the
occurrence of a Change in Control during the Term of this Agreement, the
Expiration Date shall
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automatically be extended to the third anniversary of the date on which the
Change in Control occurs.
2. Employment. In the absence of a Change in Control or a Change in
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Status, the Executive agrees to remain in the employ of the Company and/or its
Affiliated Entities in a pay grade which is not less than the Executive's
existing pay grade, during the Term of this Agreement, unless the Executive's
employment is earlier terminated by the Company. It is understood and agreed
that this paragraph 2 does not impose any additional obligations on the Company
prior to the occurrence of a Change in Control or a Change in Status, nor does
it impair the Company's rights (if any) to terminate the Executive's employment,
or alter Executive's employment status, prior to a Change in Control or a Change
in Status, with or without Cause.
3. Change in Control Benefits. If, during the Term of this Agreement and
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upon or after the occurrence of a Change in Control, the Executive's employment
is terminated by the Company other than for Cause or Disability or by the
Executive for Good Reason, or if the Executive's employment is terminated by the
Executive for any reason during a period of 90 days following the first
anniversary of the occurrence of the Change in Control, the Executive shall be
entitled to the following payments and benefits:
(a) Severance Pay. The Executive shall be entitled to a lump sum
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payment in an amount equal to three times the Executive's Annual
Compensation, which payment shall be made to the Executive within ten days
after the Executive's termination of employment. Payments under this
paragraph (a) shall be reduced (but not below zero) by any salary, bonuses,
or incentive payments the Executive is entitled to receive upon termination
pursuant to the terms of that certain Managing Director Agreement between
Executive and X.X. Xxxxxx GmbH, and payments under this paragraph (a) shall
further be reduced (but not below zero) by any Post-Termination Non-Compete
Agreement payments the Executive is entitled to receive pursuant to the
terms of said Managing Director Agreement. If the Executive is also
entitled to severance payments which would be made in the absence of a
change in control under any plan or program of the Company, or under the
laws of any federal, state, local or foreign jurisdiction, the amount
payable to the Executive pursuant to this paragraph (a) shall be reduced
(but not below zero) by the Present Value of such other severance payments.
Payments under this paragraph (a) shall not be considered in determining
the amount of the Executive's benefits under any pension, profit sharing,
stock bonus or other employee benefit plan of the Company or any Affiliated
Organization.
(b) Medical and Dental Coverage. The Executive shall be entitled to
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continued coverage under any medical or dental plan maintained by the
Company in which the Executive was participating at the time of the
Executive's termination of employment, for a period of three years
following the Executive's termination of employment. Rules comparable to
those governing the provision of continuation coverage under Section 602 of
ERISA shall apply to the coverage provided under this paragraph, except
that:
(i) the coverage may not be discontinued prior to the
expiration of the period specified in this paragraph (a), except for
the Executive's failure to make a required contribution;
(ii) the contributions required of the Executive for such
coverage may not exceed the contributions required for the same
coverage from a similarly situated active employee; and
(iii) if the Company discontinues the plan or plans in which the
Executive was participating prior to the expiration of such three year
period, the Company shall substitute
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equivalent coverage under one or more other plans or, if there are no
other plans, under one or more individual insurance policies.
It is the intent of the Company that neither the coverage provided pursuant
to this paragraph (b), nor the benefits received as a result of such
coverage, shall be subject to U.S. income taxation to the Executive.
Accordingly, if the Company determines that the coverage to be provided
under this paragraph (b) would cause a self-insured plan maintained by the
Company or an Affiliated Organization to be in violation of the
nondiscrimination requirements of section 105(h) of the Code, it shall
substitute insured coverage providing equivalent benefits, at no greater
cost to the Executive, to the extent necessary to avoid such
discrimination.
(c) Outplacement Services. The Company shall pay for any
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outplacement services provided to the Executive; provided, that the total
amount paid for such services shall not exceed $25,000. The Employer shall
pay (or, at its option, reimburse the Executive) for such services within
ten days after its receipt of a statement from the service provider.
(d) Company Car. The Company shall transfer to the Executive title
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to his or her Company car, if any, at no cost to the Executive.
4. Change in Status Benefits. If, during the term of This Agreement and upon
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the occurrence of a Change in Status, but before the first anniversary of the
occurrence of said Change in Status, the Executive's employment is terminated
other than for Cause or Disability or by the Executive for any reason, the
Executive shall, subject to the further provisions hereof, be entitled to
receive the same payments and benefits set forth in the preceding paragraphs
3(a),(b),(c), and (d).
In no event shall Executive be entitled to receive both the benefits under
paragraph 3 and paragraph 4 of this Agreement. Upon receipt of benefits under
either paragraph 3 or paragraph 4, the Executive's right to further benefits
hereunder shall be extinguished and this Agreement shall be terminated.
5. Limitation; Make Whole Payment.
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(a) If any payments or other benefits due to the Executive under this
Agreement and/or under any other plan or program of the Company or an
Affiliated Organization would be subject to the tax (the "Excise Tax")
imposed by section 4999 of the Code, and if the amount of the Executive's
"parachute payments" (as defined in section 280G(b)(2) of the Code) with
respect to such Change in Control does not exceed 330% of the Executive's
"base amount" (as defined in section 280G(b)(3) of the Code), then such
payments or other benefits shall be adjusted until the amount of the
parachute payments equals 299% of such base amount. The adjustments shall
be made in such manner, and to such payments or other benefits, as the
Executive and the Company shall mutually agree.
(b) If any payments or other benefits due to the Executive under this
Agreement and/or under any other plan or program of the Company or an
Affiliated Organization would be subject to the Excise Tax, and if the
amount of the Executive's parachute payments (as defined in paragraph (a))
exceeds 330% of the Executive's base amount (as defined in paragraph (a)),
the Company shall pay to the Executive an additional amount (the "Make
Whole Payment") so that the net amounts retained by the Executive, after
the deduction of the Excise Tax and any federal, state, local, and foreign
income taxes and Excise Taxes imposed upon the Make Whole Payment, shall be
equal to the payments and other benefits the Executive would have received
in the absence of the Excise Tax. The Make Whole Payment shall be paid to
the Executive within 30 days after the Executive's termination of
employment.
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(c) For purposes of determining the amount of the Make Whole Payment,
the Executive shall be deemed to pay federal income tax at the highest
marginal rate of federal income taxation in the calendar year(s) in which
the Make Whole Payment is to be made and state, local and foreign income
taxes at the highest marginal rates of taxation in the state and locality
or foreign jurisdiction of the Executive's residence, net of the reduction
in federal income taxes which could be obtained from any deduction or
credit attributable to the state, local or foreign taxes. If, after a Make
Whole Payment has been made, the Excise Tax is determined to be less than
the Make Whole Payment, the Executive shall repay to the Company at the
time that the amount of such reduction in Excise Tax is finally determined
the portion of the Make Whole Payment attributable to such reduction, plus
interest on the amount of such repayment at the rate provided in section
1274(b)(2)(B) of the Code. If, after a Make Whole Payment has been made,
the Excise Tax is determined to exceed the amount of the Make Whole Payment
(including by reason of any payment the existence or amount of which cannot
be determined at the time of the Make Whole Payment), the Company shall
make an additional Make Whole Payment in respect of such excess, plus
interest on the amount of such payment at the rate provided in section
1274(b)(2)(B) of the Code, at the time that the amount of such excess is
finally determined.
6. Definitions. For the purposes of this Agreement:
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(a) "Affiliated Entity" means any legal entity for which the Company
holds at least a 50% ownership interest.
(b) "Affiliated Organization" means any corporation that would be a
member of a controlled group of corporations (within the meaning of section
414(b) of the Code) that includes the Company, and any trade or business
(whether or not incorporated) that would be controlled (within the meaning
of section 414(c) of the Code) by the Company, if the phrase "at least 70%"
were substituted for the phrase "at least 80%" each place it appears in
section 1563(a)(1) of the Code and in regulations under section 414(c) of
the Code.
(c) "Annual Compensation" means the sum of:
(i) the Executive's annual base salary at the highest rate in
effect during the period commencing three months prior to the
occurrence of the Change in Control and ending on the date of the
Executive's termination of employment; plus
(ii) the largest bonus and/or incentive payments payable to the
Executive for any fiscal year of the Company during the period
commencing 36 months prior to the occurrence of the Change in Control
and ending on the date of the Executive's termination of employment.
(d) "Cause" means any act by the Executive that is materially
inimical to the best interests of the Company and that constitutes common
law fraud, a felony or other gross malfeasance of duty on the part of the
Executive. "Cause" specifically includes, but is not limited to, the
definition of "cause" set forth in Section 7 of that certain Managing
Director Agreement between Executive and X.X. Xxxxxx GmbH. The Executive
may only be terminated for Cause upon 90 days prior written notice to the
Executive, which notice shall specify the nature of the Cause for
termination, and then only if it is subsequently determined by the Board of
Directors of the Company that the Executive has failed to cure the stated
Cause prior to or during such 90-day period.
(e) "Disability" or "Disabled" means the Executive's inability, by
reason of any physical or mental impairment, to perform the duties of the
position the Executive then occupies for a period of not less than 180
consecutive days. The Executive may only be terminated for Disability upon
receipt by the Company of an opinion of one or more physicians jointly
selected by
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the Executive and the Company that the Executive has been Disabled for such
period, and then only if the Executive is eligible for immediate benefits
under the Company's long-term disability plan.
(f) "Change in Control" means:
(i) a change in control of the Company of a nature that would
be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act, whether or not the
Company is then subject to such reporting requirement;
(ii) the public announcement (which, for purposes of this
definition, shall include, without limitation, a report filed pursuant
to Section 13(d) of the Exchange Act) by the Company or any "person"
(as such term is used in Sections 13(d) and 14(d) of the Exchange Act)
that such person has become the "beneficial owner" (as defined in Rule
13d-3 promulgated under the Exchange Act), directly or indirectly, of
securities of the Company representing 30% or more of the combined
voting power of the Company's then outstanding securities;
(iii) the Continuing Directors cease to constitute a majority of
the Company's Board of Directors;
(iv) the shareholders of the Company approve (A) any
consolidation, merger, or statutory share exchange of the Company with
any person in which the surviving entity would not have as its
directors at least 60% of the Continuing Directors and would not have
at least 60% of the combined voting power of its outstanding
securities held by persons who were shareholders of the Company
immediately prior to such consolidation, merger, or statutory share
exchange; (B) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or
substantially all of the assets of the Company; or (C) any plan of
liquidation or dissolution of the Company; or
(v) the majority of the Continuing Directors determine in
their sole and absolute discretion that there has been a change in
control of the Company.
The Company shall notify the Executive promptly of the occurrence of a
Change in Control.
(g) "Change in Status" means:
(i) a sale or transfer of the Affiliated Entity for which the
Executive is employed, except for a sale or transfer to another
Affiliated Entity;
(ii) a combining of the Affiliated Entity for which the
Executive is employed with another entity such that the resulting
entity is no longer an Affiliated Entity; or
(iii) a filing for bankruptcy protection by the Affiliated
Entity for which the Executive is employed.
(h) "Code" means the Internal Revenue Code of 1986, as amended. Any
reference to a specific provision of the Code will include a reference to
such provision as it may be amended from time to time and to any successor
provision.
(i) "Company" means the Company as hereinbefore defined and any
successor or assign to its business and/or assets which executes and
delivers the agreement provided for in paragraph 10 or which otherwise
becomes bound by all the terms and provisions of this
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Agreement by operation of law. If at any time during the term of this
Agreement the Executive is employed by an Affiliated Organization, the term
"Company" as used in this Agreement (other than in paragraphs 6(e) and
10(a) hereof) shall in addition include such Affiliated Organization. In
such event, the Company agrees that it shall pay or provide, or shall cause
such Affiliated Organization to pay or provide, any amounts or benefits due
the Executive pursuant to this Agreement.
(j) "Continuing Director" means any person who is a member of the
Board of Directors of the Company, while such person is a member of the
Board of Directors, who is not an Acquiring Person (as defined below) or an
Affiliate or Associate (as defined below) of an Acquiring Person, or a
representative of an Acquiring Person or any such Affiliate or Associate,
and who (i) was a member of the Board of Directors on August 1, 1997 or
(ii) subsequently becomes a member of the Board of Directors, if such
person's initial nomination for election or initial election to the Board
of Directors is recommended or approved by a majority of the Continuing
Directors. For purposes of this paragraph, "Acquiring Person" shall mean
any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) who or which, together with all Affiliates and Associates of
such person, is the "beneficial owner" (as defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of securities
of the Company representing 30% or more of the combined voting power of the
Company's then outstanding securities, but shall not include the Company,
any subsidiary of the Company, any employee benefit plan of the Company or
of any subsidiary of the Company or any entity holding shares of the
Company's common stock organized, appointed or established for, or pursuant
to the terms of, any such plan; and "Affiliate" and "Associate" shall have
the respective meanings ascribed to such terms in Rule 12b-2 promulgated
under the Exchange Act.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(l) "Good Reason" means:
(i) any change adverse to the Executive in the Executive's
position, reporting responsibilities, duties, compensation, benefits
or other terms or conditions of employment; or
(ii) any change in the Executive's principal place of employment,
if the new principal place of employment is more than 50 miles from
the previous principal place of employment.
The Executive shall not be deemed to have terminated employment for Good
Reason unless the termination occurs within 180 days after the Executive is
notified by the Company of the event constituting Good Reason or, if later,
within 180 days after the occurrence of such event.
(m) "Present Value" shall be determined based on the following
actuarial assumptions:
(i) Interest: The interest rate on 30-year U.S. Treasury
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obligations as of the December 31 coinciding with or immediately
preceding the date as of which Present Value is determined.
(ii) Mortality: 1993 Group Annuity Mortality Table.
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7. Legal Expenses. If the Executive institutes or defends any legal
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action to enforce the Executive's rights under, or to defend the validity of,
this Agreement, the Executive shall be entitled to recover from the Company any
actual expenses for attorney's fees and disbursements incurred by the Executive.
Such fees and disbursements shall be paid or reimbursed by the Company on a
regular,
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periodic basis upon presentation of statements prepared by the Executive's
attorney in accordance with his or her customary practices. Any amounts paid to
the Executive pursuant to this paragraph 7 shall be refunded to the Company,
with interest at the rate provided in section 1274(b)(2)(B) of the Code, if the
claim or defense asserted by the Executive is dismissed under circumstances
resulting in the imposition of sanctions under Rule 11 of the Federal Rules of
Civil Procedure, or under any similar federal, state or foreign rule or statute.
8. No Mitigation. The Executive's benefits hereunder shall be in
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consideration of the Executive's past service and the Executive's continued
service from the date of this Agreement, and the Executive's entitlement thereto
shall not be governed by any duty to mitigate damages by seeking further
employment nor offset by any compensation which the Executive may receive from
future employment.
9. Other Benefits. The specific arrangements referred to in this
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Agreement are not intended to exclude Executive's participation in other
benefits available to executive personnel generally or to preclude other
compensation or benefits as may be authorized by the Company from time to time.
10. Successors.
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(a) The Company will require any successor or assign (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to the Executive, expressly, absolutely and
unconditionally to assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if no
such succession or assignment had taken place. Any failure of the Company to
obtain such agreement prior to the effectiveness of any such succession or
assignment shall be a material breach of this Agreement and shall entitle the
Executive to terminate the Executive's employment for Good Reason, whereupon the
Executive shall be entitled to receive the payments and other benefits described
in this Agreement as though such termination had occurred upon or after the
occurrence of a Change in Control.
(b) This Agreement shall inure to the benefit of and be enforceable
by the Executive's personal and legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive should die while any amounts are still payable to the Executive
hereunder, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the Executive's devisee, legatee,
or other designee or, if there be no such designee, to the Executive's estate.
11. Notice. For purposes of this Agreement, notices and all other
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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 (or its equivalent for overseas delivery), return receipt
requested, postage prepaid, and addressed as follows:
If to the Company:
X.X. Xxxxxx Company
X.X. Xxx 00000
Xx. Xxxx, XX 00000-0000
Attention: General Counsel
If to the Executive:
Xxxxx Xxxxxxx
Moerser Xxx. 000
00000 Xxxxxxxx
Xxxxxxx
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or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
12. Severability. If any provision of this Agreement is held by a court
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of competent jurisdiction to be prohibited by or invalid under applicable law,
such provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
13. Counterparts. This Agreement may be executed in one or more
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counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. Modifications; Waiver. No provision of this Agreement may be
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modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and the Company. No waiver by
either party hereto at any time of any breach by the other party of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
15. Applicable Law. This Agreement shall be governed by and construed in
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accordance with the laws of the State of Minnesota.
16. Status of Agreement. This Agreement is designated as a "Change in
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Control Agreement" for the purposes of Article XIII of the X.X. Xxxxxx Company
Group Benefit Plan and for the purposes of any successor or substitute provision
requiring such a designation.
* * * * *
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
X.X. XXXXXX COMPANY
By: /s/ Xxxxxx Xxxxxxxxx
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As its: President and CEO
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/s/ Xxxxx Xxxxxxx
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Xxxxx Xxxxxxx
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