FORM OF KEY EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENT
FORM
OF
THIS
AGREEMENT, made and entered into as of the _____day of ________, 2007,
by and between Regal-Beloit Corporation, a Wisconsin corporation (hereinafter
referred to as the “Company”), and [_______________] (hereinafter referred to as
the “Executive”).
WITNESSETH
WHEREAS,
the Executive is employed by the Company and/or a subsidiary of the Company
(hereinafter referred to collectively as the “Employer”) in a key executive
capacity and the Executive’s services are valuable to the conduct of the
business of the Company;
WHEREAS,
the Company desires to continue to attract and retain dedicated and
skilled management employees in a period of industry consolidation, consistent
with achieving the best possible value for its shareholders in any change in
control of the Company;
WHEREAS,
the Company recognizes that circumstances may arise in which a change in control
of the Company occurs, through acquisition or otherwise, thereby causing a
potential conflict of interest between the Company’s needs for the Executive to
remain focused on the Company’s business and for the necessary continuity in
management prior to and following a change in control, and the Executive’s
reasonable personal concerns regarding future employment with the Employer
and
economic protection in the event of loss of employment as a consequence of
a
change in control;
WHEREAS,
the Company and the Executive are desirous that any proposal for a change in
control or acquisition of the Company will be considered by the Executive
objectively and with reference only to the best interests of the Company and
its
shareholders;
WHEREAS,
the Executive will be in a better position to consider the Company’s best
interests if the Executive is afforded reasonable economic security, as provided
in this Agreement, against altered conditions of employment which could result
from any such change in control or acquisition;
WHEREAS,
the Executive possesses intimate knowledge of the business and affairs of the
Company and has acquired certain confidential information and data with respect
to the Company; and
WHEREAS,
the Company desires to insure, insofar as possible, that it will continue to
have the benefit of the Executive’s services and to protect its confidential
information and goodwill.
NOW,
THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, the parties hereto mutually
covenant and agree as follows:
1. Definitions.
(a) 409A
Affiliate. The term “409A Affiliate” means each entity that is
required to be included in the Company’s controlled group of corporations within
the meaning of Section 414(b) of the Code, or that is under common control
with
the Company within the meaning of Section 414(c) of the Code; provided,
however, that the phrase “at least 50 percent” shall be used in place of
the phrase “at least 80 percent” each place it appears therein or in the
regulations thereunder.
(b) Accrued
Benefits. The term “Accrued Benefits” shall include the following
amounts, payable as described herein: (i) all base salary for the time
period ending with the Termination Date; (ii) reimbursement for any and all
monies advanced in connection with the Executive’s employment for reasonable and
necessary expenses incurred by the Executive on behalf of the Employer for
the
time period ending with the Termination Date; (iii) any and all other cash
earned through the Termination Date and deferred at the election of the
Executive or pursuant to any deferred compensation plan then in effect;
(iv) notwithstanding any provision of any bonus or incentive compensation
plan applicable to the Executive, but subject to any deferral election then
in
effect, a lump sum amount, in cash, equal to the sum of (A) any bonus or
incentive compensation that has been allocated or awarded to the Executive
for a
fiscal year or other measuring period under the plan that ends prior to the
Termination Date but has not yet been paid (pursuant to Section 5(f)
or otherwise) and (B) a pro rata portion to the Termination Date of the
aggregate value of all contingent bonus or incentive compensation awards to
the
Executive for all uncompleted periods under the plan calculated as to each
such
award as if the Goals with respect to such bonus or incentive compensation
award
had been attained at the target level (reduced, but not below zero, by amounts
paid under all such contingent bonus or incentive compensation awards upon
the
Change in Control of the Company to the extent such amounts relate to the same
period of time); and (v) all other payments and benefits to which the
Executive (or in the event of the Executive’s death, the Executive’s surviving
spouse or other beneficiary) may be entitled on the Termination Date as
compensatory fringe benefits or under the terms of any benefit plan of the
Employer, excluding severance payments under any Employer severance policy,
practice or agreement in effect on the Termination Date. Payment of
Accrued Benefits shall be made promptly in accordance with the Company’s
prevailing practice with respect to clauses (i) and (ii) or,
with respect to clauses (iii), (iv) and (v), pursuant
to the terms of the benefit plan or practice establishing such benefits;
provided that payments pursuant to clause (iv)(B) shall be paid on the
first day of the seventh month following the month in which the Executive’s
Separation from Service occurs, unless the Executive’s Separation from Service
is due to death, in which event such payment shall be made within 90 days of
the
date of Executive’s death.
(c) Act. The
term “Act” means the Securities Exchange Act of 1934, as amended.
(d) Affiliate
and Associate. The terms “Affiliate” and “Associate” shall have
the respective meanings ascribed to such terms in Rule l2b-2 of the General
Rules and Regulations under the Act.
(e) Annual
Cash Compensation. The term “Annual Cash Compensation” shall mean
the sum of (i) the Executive’s Annual Base Salary (determined as of the
time of the Change in Control of the Company or, if higher, immediately prior
to
the date the Notice of Termination is given) plus (ii) an amount equal to
the greater of the Executive’s annual incentive target bonus for the fiscal year
in which the Termination Date occurs or the annual incentive bonus the Executive
received for the fiscal year prior to the Change in Control of the Company
plus
(iii) an amount equal to the greater of the Executive’s Fringe Benefits for the
fiscal year in which the Termination Date occurs or the annual amount of Fringe
Benefits the Executive received for the fiscal year prior to the Change in
Control of the Company (the aggregate amount set forth in
clause (i), clause (ii) and clause iii shall
hereafter be referred to as the “Annual Cash Compensation”).
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(f) Beneficial
Owner. A Person shall be deemed to be the “Beneficial Owner” of
any securities:
(i) which
such Person or any of such Person’s Affiliates or Associates has the right to
acquire (whether such right is exercisable immediately or only after the passage
of time) pursuant to any agreement, arrangement or understanding, or upon the
exercise of conversion rights, exchange rights, rights, warrants or options,
or
otherwise; provided, however, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, (A) securities tendered
pursuant to a tender or exchange offer made by or on behalf of such Person
or
any of such Person’s Affiliates or Associates until such tendered securities are
accepted for purchase, or (B) securities issuable upon exercise of Rights
issued pursuant to the terms of the Company’s Rights Agreement, dated as of
January 28, 2000, between the Company and Firstar Bank, N.A., as amended from
time to time (or any successor to such Rights Agreement), at any time before
the
issuance of such securities;
(ii) which
such Person or any of such Person’s Affiliates or Associates, directly or
indirectly, has the right to vote or dispose of or has “beneficial ownership” of
(as determined pursuant to Rule l3d-3 of the General Rules and Regulations
under the Act), including pursuant to any agreement, arrangement or
understanding; provided, however, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, any security under this clause
(ii) as a result of an agreement, arrangement or understanding to vote
such security if the agreement, arrangement or understanding: (A) arises
solely from a revocable proxy or consent given to such Person in response to
a
public proxy or consent solicitation made pursuant to, and in accordance with,
the applicable rules and regulations under the Act and (B) is not also then
reportable on a Schedule l3D under the Act (or any comparable or successor
report); or
(iii) which
are
beneficially owned, directly or indirectly, by any other Person with which
such
Person or any of such Person’s Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting
(except pursuant to a revocable proxy as described in clause (ii) above)
or disposing of any voting securities of the Company.
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(g) Cause. “Cause”
for termination by the Employer of the Executive’s employment shall be limited
to any of the following: (i) the engaging by the Executive in intentional
conduct not taken in good faith that the Company establishes, by clear and
convincing evidence, has caused demonstrable and serious financial injury to
the
Employer, as evidenced by a determination in a binding and final judgment,
order
or decree of a court or administrative agency of competent jurisdiction, in
effect after exhaustion or lapse of all rights of appeal, in an action, suit
or
proceeding, whether civil, criminal, administrative or investigative;
(ii) conviction of a felony (as evidenced by binding and final judgment,
order or decree of a court of competent jurisdiction, in effect after exhaustion
of all rights of appeal), which substantially impairs the Executive’s ability to
perform his duties or responsibilities; or (iii) continuing willful and
unreasonable refusal by the Executive to perform the Executive’s duties or
responsibilities (unless significantly changed without the Executive’s
consent).
(h) Change
in Control of the Company. A “Change in Control of the Company” shall be
deemed to have occurred if an event set forth in any one of the following
paragraphs shall have occurred:
(i) any
Person (other than (A) the Company or any of its subsidiaries, (B) a trustee
or
other fiduciary holding securities under any employee benefit plan of the
Company or any of its subsidiaries, (C) an underwriter temporarily holding
securities pursuant to an offering of such securities or (D) a corporation
owned, directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of stock in the Company
(“Excluded Persons”)) is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not including in the securities
beneficially owned by such Person any securities acquired directly from the
Company or its Affiliates after ____________, 2007, pursuant to express
authorization by the Board that refers to this exception) representing 20%
or
more of either the then outstanding shares of common stock of the Company or
the
combined voting power of the Company’s then outstanding voting securities;
or
(ii) the
following individuals cease for any reason to constitute a majority of the
number of directors of the Company then serving: (A) individuals who,
on __________, 2007 constituted the Board and (B) 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 the Company) whose
appointment or election by the Board or nomination for election by the Company’s
shareholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors on _________, 2007,
or
whose appointment, election or nomination for election was previously so
approved (collectively the “Continuing Directors”); provided, however,
that individuals who are appointed to the Board pursuant to or in accordance
with the terms of an agreement relating to a merger, consolidation, or share
exchange involving the Company (or any direct or indirect subsidiary of the
Company) shall not be Continuing Directors for purposes of this Agreement until
after such individuals are first nominated for election by a vote of at least
two-thirds (2/3) of the then Continuing Directors and are thereafter elected
as
directors by the shareholders of the Company at a meeting of shareholders held
following consummation of such merger, consolidation, or share exchange;
and, provided further, that in the event the failure of any such
persons appointed to the Board to be Continuing Directors results in a Change
in
Control of the Company, the subsequent qualification of such persons as
Continuing Directors shall not alter the fact that a Change in Control of the
Company occurred; or
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(iii) the
shareholders of the Company approve a merger, consolidation or share exchange
of
the Company with any other corporation or approve the issuance of voting
securities of the Company in connection with a merger, consolidation or share
exchange of the Company (or any direct or indirect subsidiary of the Company)
pursuant to applicable stock exchange requirements, other than (A) a merger,
consolidation or share exchange which would result in the voting securities
of
the Company outstanding immediately prior to such merger, consolidation or
share
exchange continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or any parent thereof)
at least 50% of the combined voting power of the voting securities of the
Company or such surviving entity or any parent thereof outstanding immediately
after such merger, consolidation or share exchange, or (B) a merger,
consolidation or share exchange effected to implement a recapitalization of
the
Company (or similar transaction) in which no Person (other than an Excluded
Person) is or becomes the Beneficial Owner, directly or indirectly, of
securities of the Company (not including in the securities beneficially owned
by
such Person any securities acquired directly from the Company or its Affiliates
after __________, 2007, pursuant to express authorization by the Board that
refers to this exception) representing 20% or more of either the then
outstanding shares of common stock of the Company or the combined voting power
of the Company’s then outstanding voting securities; or
(iv) the
shareholders of the Company approve of a plan of complete liquidation or
dissolution of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company’s assets (in one transaction
or a series of related transactions within any period of 24 consecutive months),
other than a sale or disposition by the Company of all or substantially all
of
the Company’s assets to an entity at least 75% of the combined voting power of
the voting securities of which are owned by Persons in substantially the same
proportions as their ownership of the Company immediately prior to such
sale.
Notwithstanding
the foregoing, no “Change in Control of the Company” shall be deemed to have
occurred if there is consummated any transaction or series of integrated
transactions immediately following which the record holders of the common stock
of the Company immediately prior to such transaction or series of transactions
continue to own, directly or indirectly, in the same proportions as their
ownership in the Company, an entity that owns all or substantially all of the
assets or voting securities of the Company immediately following such
transaction or series of transactions.
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(i) Code. The
term “Code” means the Internal Revenue Code of 1986, including any amendments
thereto or successor tax codes thereof.
(j) Covered
Termination. Subject to Section 2(b), the term
“Covered Termination” means any Termination of Employment during the Employment
Period where the Termination Date, or the date Notice of Termination is
delivered, is any date prior to the end of the Employment Period.
(k) Employment
Period. Subject to Section 2(b), the term “Employment
Period” means a period commencing on the date of a Change in Control of the
Company, and ending at 11:59 p.m. Central Time on the earlier of the second
anniversary of such date or the Executive’s Normal Retirement Date.
(l) Fringe
Benefits. The term “Fringe Benefits” means the fair market value
of the fringe benefits payable to Executive by the Company (determined as of
the
time of the Change in Control of the Company or, if higher, immediately prior
to
the date the Notice of Termination is given). For these purposes,
Fringe Benefits include, but are not limited to club dues or automobile
reimbursement and do not include welfare benefits, such as medical coverage
(including prescription drug coverage), dental coverage, life insurance,
disability insurance and accidental death and dismemberment
benefits.
(m)
Good
Reason. The Executive shall have “Good Reason” for termination of
employment in the event of:
(i) any
breach of this Agreement by the Employer, including specifically any breach
by
the Employer of the agreements contained in Section 3(b),
Section 4, Section 5, or Section 6, other
than an isolated, insubstantial and inadvertent failure not occurring in bad
faith that the Employer remedies promptly after receipt of notice thereof given
by the Executive;
(ii) any
reduction in the Executive’s base salary, percentage of base salary available as
incentive compensation or bonus opportunity or benefits, in each case relative
to those most favorable to the Executive in effect at any time during the
180-day period prior to the Change in Control of the Company or, to the extent
more favorable to the Executive, those in effect at any time during the
Employment Period;
(iii) the
removal of the Executive from, or any failure to reelect or reappoint the
Executive to, any of the positions held with the Employer on the date of the
Change in Control of the Company or any other positions with the Employer to
which the Executive shall thereafter be elected, appointed or assigned, except
in the event that such removal or failure to reelect or reappoint relates to
the
termination by the Employer of the Executive’s employment for Cause or by reason
of disability pursuant to Section 12;
(iv) a
good
faith determination by the Executive that there has been a material adverse
change, without the Executive’s written consent, in the Executive’s working
conditions or status with the Employer relative to the most favorable working
conditions or status in effect during the 180-day period prior to the Change
in
Control of the Company, or, to the extent more favorable to the Executive,
those
in effect at any time during the Employment Period, including but not limited
to
(A) a significant change in the nature or scope of the Executive’s
authority, powers, functions, duties or responsibilities, or (B) a
significant reduction in the level of support services, staff, secretarial
and
other assistance, office space and accoutrements, but in each case excluding
for
this purpose an isolated, insubstantial and inadvertent event not occurring
in
bad faith that the Employer remedies within ten (10) days after receipt of
notice thereof given by the Executive;
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(v) the
relocation of the Executive’s principal place of employment to a location more
than 50 miles from the Executive’s principal place of employment on the date 180
days prior to the Change in Control of the Company;
(vi) the
Employer requires the Executive to travel on Employer business 20% in excess
of
the average number of days per month the Executive was required to travel during
the 180-day period prior to the Change in Control of the Company;
or
(vii) failure
by the Company to obtain the Agreement referred to in Section 17(a)
as provided therein.
(n) Normal
Retirement Date. The term “Normal Retirement Date” means “Normal
Retirement Date” as defined in the primary qualified defined benefit pension
plan applicable to the Executive, or any successor plan, as in effect on the
date of the Change in Control of the Company.
(o) Person. The
term “Person” shall mean any individual, firm, partnership, corporation or other
entity, including any successor (by merger or otherwise) of such entity, or
a
group of any of the foregoing acting in concert.
(p) Separation
from Service. For purposes of this Agreement, the term
“Separation from Service” means an Executive’s Termination of Employment, or if
the Executive continues to provide services following his or her Termination
of
Employment, such later date as is considered a separation from service from
the
Company and its 409A Affiliates within the meaning of Code Section
409A. Specifically, if Executive continues to provide services
to the Company or a 409A Affiliate in a capacity other than as an employee,
such
shift in status is not automatically a Separation from Service.
(q) Termination
of Employment. For purposes of this Agreement, the Executive’s
termination of employment shall be presumed to occur when the Company and
Executive reasonably anticipate that no further services will be performed
by
the Executive for the Company and its 409A Affiliates or that the level of
bona
fide services the Executive will perform as an employee of the Company and
its
409A Affiliates will permanently decrease to no more than 20% of the average
level of bona fide services performed by the Executive (whether as an employee
or independent contractor) for the Company and its 409A Affiliates over the
immediately preceding 36-month period (or such lesser period of
services). The Executive’s termination of employment shall be
presumed not to occur where the level of bona fide services performed by the
Executive for the Company and its 409A Affiliates continues at a level that
is
50% or more of the average level of bona fide services performed by the
Executive (whether as an employee or independent contractor) for the Company
and
its 409A Affiliates over the immediately preceding 36-month period (or such
lesser period of service). No presumption applies to a decrease in
services that is more than 20% but less than 50%, and in such event, whether
the
Executive has had a Termination of Employment will be determined in good faith
by the Company based on the facts and circumstances in accordance with Code
Section 409A. Notwithstanding the foregoing, if Executive takes a
leave of absence for purposes of military leave, sick leave or other bona fide
leave of absence, the Executive will not be deemed to have incurred a Separation
from Service for the first 6 months of the leave of absence, or if longer,
for
so long as the Executive’s right to reemployment is provided either by statute
or by contract, including this Agreement; provided that if the leave of
absence is due to a medically determinable physical or mental impairment that
can be expected to result in death or last for a continuous period of not less
than six months, where such impairment causes the Executive to be unable to
perform the duties of his or her position of employment or any substantially
similar position of employment, the leave may be extended for up to 29 months
without causing a Termination of Employment.
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(r) Termination
Date. Except as otherwise provided in Section 2(b),
Section 10(b), and Section 17(a), the term “Termination
Date” means (i) if the Executive’s Termination of Employment is by the
Executive’s death, the date of death; (ii) if the Executive’s Termination
of Employment is by reason of voluntary early retirement, as agreed in writing
by the Employer and the Executive, the date of such early retirement which
is
set forth in such written agreement; (iii) if the Executive’s Termination
of Employment for purposes of this Agreement is by reason of disability pursuant
to Section 12, the earlier of thirty days after the Notice of
Termination is given or one day prior to the end of the Employment Period;
(iv) if the Executive’s Termination of Employment is by the Executive
voluntarily (other than for Good Reason), the date the Notice of Termination
is
given; and (v) if the Executive’s Termination of Employment is by the
Employer (other than by reason of disability pursuant to Section 12)
or by the Executive for Good Reason, the earlier of thirty days after the Notice
of Termination is given or one day prior to the end of the Employment
Period. Notwithstanding the foregoing,
(A) If
termination is for Cause pursuant to Section 1(f)(iii) and if the
Executive has cured the conduct constituting such Cause as described by the
Employer in its Notice of Termination within such thirty-day or shorter period,
then the Executive’s employment hereunder shall continue as if the Employer had
not delivered its Notice of Termination.
(B) If
the
Executive shall in good faith give a Notice of Termination for Good Reason
and
the Employer notifies the Executive that a dispute exists concerning the
termination within the fifteen-day period following receipt thereof, then the
Executive may elect to continue his or her employment during such dispute and
the Termination Date shall be determined under this paragraph. If the
Executive so elects and it is thereafter determined that Good Reason did exist,
the Termination Date shall be the earliest of (1) the date on which the
dispute is finally determined, either (x) by mutual written agreement of
the parties or (y) in accordance with Section 22, (2) the
date of the Executive’s death or (3) one day prior to the end of the
Employment Period. If the Executive so elects and it is thereafter
determined that Good Reason did not exist, then the employment of the Executive
hereunder shall continue after such determination as if the Executive had not
delivered the Notice of Termination asserting Good Reason and there shall be
no
Termination Date arising out of such Notice. In either case, this
Agreement continues, until the Termination Date, if any, as if the Executive
had
not delivered the Notice of Termination except that, if it is finally determined
that Good Reason did exist, the Executive shall in no case be denied the
benefits described in Section 9 (including a Termination Payment)
based on events occurring after the Executive delivered his Notice of
Termination.
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(C) Except
as
provided in Section 1(n)(B), if the party receiving the Notice of
Termination notifies the other party that a dispute exists concerning the
termination within the appropriate period following receipt thereof and it
is
finally determined that the reason asserted in such Notice of Termination did
not exist, then (1) if such Notice was delivered by the Executive, the
Executive will be deemed to have voluntarily terminated his employment and
the
Termination Date shall be the earlier of the date fifteen days after the Notice
of Termination is given or one day prior to the end of the Employment Period
and
(2) if delivered by the Company, the Company will be deemed to have
terminated the Executive other than by reason of death, disability or
Cause.
2. Termination
or Cancellation Prior to Change in Control.
(a) Subject
to Section 2(b), the Employer and the Executive shall each retain
the right to terminate the employment of the Executive at any time prior to
a
Change in Control of the Company. Subject to
Section 2(b), in the event the Executive’s employment is terminated
prior to a Change in Control of the Company, this Agreement shall be terminated
and cancelled and of no further force and effect, and any and all rights and
obligations of the parties hereunder shall cease.
(b) Anything
in this Agreement to the contrary notwithstanding, if a Change in Control of
the
Company occurs and if the Executive’s employment with the Employer is terminated
(other than a termination due to the Executive’s death or as a result of the
Executive’s disability) during the period of 180 days prior to the date on
which the Change in Control of the Company occurs, and if it is reasonably
demonstrated by the Executive that such termination of employment (i) was
at the request of a third party who has taken steps reasonably calculated to
effect a Change in Control of the Company or (ii) was by the Executive for
Good Reason or was by the Employer for other than Cause and otherwise arose
in
connection with or in anticipation of a Change in Control of the Company, then
for all purposes of this Agreement such termination of employment shall be
deemed a “Covered Termination,” “Notice of Termination” shall be deemed to have
been given, and the “Employment Period” shall be deemed to have begun on the
date of such termination which shall be deemed to be the “Termination Date” and
the date of the Change of Control of the Company for purposes of this
Agreement.
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3. Employment
Period; Vesting of Certain Benefits.
(a) If
a
Change in Control of the Company occurs when the Executive is employed by the
Employer, the Employer will continue thereafter to employ the Executive during
the Employment Period, and the Executive will remain in the employ of the
Employer in accordance with and subject to the terms and provisions of this
Agreement. Any Termination of Employment during the Employment
Period, whether by the Company or the Employer, shall be deemed a termination
by
the Company for purposes of this Agreement.
(b) If
a
Change in Control of the Company occurs when the Executive is employed by the
Employer, (i) the Company shall cause all restrictions on restricted stock
awards made to the Executive prior to the Change in Control of the Company
to
lapse such that the Executive is fully and immediately vested in the Executive’s
restricted stock upon such a Change in Control of the Company; and (ii) the
Company shall cause all stock options granted to the Executive prior to the
Change in Control of the Company pursuant to the Company’s stock option plan(s)
to be fully and immediately vested upon such a Change in Control of the
Company.
4. Duties. During
the Employment Period, the Executive shall, in the same capacities and positions
held by the Executive at the time of the Change in Control of the Company or
in
such other capacities and positions as may be agreed to by the Employer and
the
Executive in writing, devote the Executive’s best efforts and all of the
Executive’s business time, attention and skill to the business and affairs of
the Employer, as such business and affairs now exist and as they may hereafter
be conducted.
5. Compensation. During
the Employment Period, the Executive shall be compensated as
follows:
(a) The
Executive shall receive, at reasonable intervals (but not less often than
monthly) and in accordance with such standard policies as may be in effect
immediately prior to the Change in Control of the Company, an annual base salary
in cash equivalent of not less than twelve times the Executive’s highest monthly
base salary for the twelve-month period immediately preceding the month in
which
the Change in Control of the Company occurs or, if higher, an annual base salary
at the rate in effect immediately prior to the Change in Control of the Company
(determined prior to any reduction for amounts deferred under
Section 401(k) of the Code or otherwise, or deducted pursuant to a
cafeteria plan under Section 125 of the Code), subject to adjustment as
hereinafter provided in Section 6 (such salary amount as adjusted
upward from time to time is hereafter referred to as the “Annual Base
Salary”).
(b) The
Executive shall receive Fringe Benefits at least equal in value to the highest
value of such benefits provided for the Executive at any time during the 180-day
period immediately prior to the Change in Control of the Company or, if more
favorable to the Executive, those provided generally at any time during the
Employment Period to any executives of the Employer of comparable status and
position to the Executive; and shall be reimbursed, at such intervals and in
accordance with such standard policies that are most favorable to the Executive
that were in effect at any time during the 180-day period immediately prior
to
the Change in Control of the Company, for any and all monies advanced in
connection with the Executive’s employment for reasonable and necessary expenses
incurred by the Executive on behalf of the Employer, including travel
expenses.
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(c) The
Executive and/or the Executive’s family, as the case may be, shall be included,
to the extent eligible thereunder (which eligibility shall not be conditioned
on
the Executive’s salary grade or on any other requirement which excludes persons
of comparable status to the Executive unless such exclusion was in effect for
such plan or an equivalent plan at any time during the 180-day period
immediately prior to the Change in Control of the Company), in any and all
plans
providing benefits for the Employer’s salaried employees in general, including
but not limited to group life insurance, hospitalization, medical (including
prescription drug coverage), dental, profit sharing and stock bonus plans;
provided, that, (i) in no event shall the aggregate level of benefits
under such plans in which the Executive is included be less than the aggregate
level of benefits under plans of the Employer of the type referred to in this
Section 5(c) in which the Executive was participating at any time
during the 180-day period immediately prior to the Change in Control of the
Company and (ii) in no event shall the aggregate level of benefits under such
plans be less than the aggregate level of benefits under plans of the type
referred to in this Section 5(c) provided at any time after the
Change in Control of the Company to any executive of the Employer of comparable
status and position to the Executive.
(d) The
Executive shall annually be entitled to not less than the amount of paid
vacation and not fewer than the highest number of paid holidays to which the
Executive was entitled annually at any time during the 180-day period
immediately prior to the Change in Control of the Company or such greater amount
of paid vacation and number of paid holidays as may be made available annually
to other executives of the Employer of comparable status and position to the
Executive at any time during the Employment Period.
(e) The
Executive shall be included in all plans providing additional benefits to
executives of the Employer of comparable status and position to the Executive,
including but not limited to deferred compensation, split-dollar life insurance,
supplemental retirement, stock option, stock appreciation, stock bonus and
similar or comparable plans; provided, that, (i) in no event shall the
aggregate level of benefits under such plans be less than the highest aggregate
level of benefits under plans of the Employer of the type referred to in this
Section 5(e) in which the Executive was participating at any time
during the 180-day period immediately prior to the Change in Control of the
Company; (ii) in no event shall the aggregate level of benefits under such
plans
be less than the aggregate levels of benefits under plans of the type referred
to in this Section 5(e) provided at any time after the Change in
Control of the Company to any executive of the Employer comparable in status
and
position to the Executive; and (iii) the Employer’s obligation to include the
Executive in bonus or incentive compensation plans shall be determined by
Section 5(f).
(f) To
assure
that the Executive will have an opportunity to earn incentive compensation
after
a Change in Control of the Company, the Executive shall be included in a bonus
plan of the Employer which shall satisfy the standards described below (such
plan, the “Bonus Plan”). Bonuses under the Bonus Plan shall be
payable with respect to achieving such financial or other goals reasonably
related to the business of the Employer as the Employer shall establish (the
“Goals”), all of which Goals shall be attainable, prior to the end of the
Employment Period, with approximately the same degree of probability as the
most
attainable goals under the Employer’s bonus plan or plans as in effect at any
time during the 180-day period immediately prior to the Change in Control of
the
Company (whether one or more, the “Company Bonus Plan”) and in view of the
Employer’s existing and projected financial and business circumstances
applicable at the time. The amount of the bonus (the “Bonus Amount”)
that the Executive is eligible to earn under the Bonus Plan shall be no less
than the amount of the Executive’s maximum award provided in such Company Bonus
Plan (such bonus amount herein referred to as the “Targeted Bonus”), and in the
event the Goals are not achieved such that the entire Targeted Bonus is not
payable, the Bonus Plan shall provide for a payment of a Bonus Amount equal
to a
portion of the Targeted Bonus reasonably related to that portion of the Goals
which were achieved. Payment of the Bonus Amount shall not be
affected by any circumstance occurring subsequent to the end of the Employment
Period, including termination of the Executive’s employment.
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11 -
6. Annual
Compensation Adjustments. During the Employment Period, the Board
of Directors of the Company (or an appropriate committee thereof) will consider
and appraise, at least annually, the contributions of the Executive to the
Company, and in accordance with the Company’s practice prior to the Change in
Control of the Company, due consideration shall be given to the upward
adjustment of the Executive’s Annual Base Salary, at least annually,
(a) commensurate with increases generally given to other executives of the
Company of comparable status and position to the Executive, and (b) as the
scope of the Company’s operations or the Executive’s duties expand.
7. Termination
For Cause or Without Good Reason. If there is a Covered
Termination for Cause or due to the Executive’s voluntarily terminating his or
her employment other than for Good Reason (any such terminations to be subject
to the procedures set forth in Section 13), then the Executive shall
be entitled to receive only Accrued Benefits.
8. Termination
Giving Rise to a Termination Payment. If there is a Covered
Termination by the Executive for Good Reason, or by the Company other than
by
reason of (i) death, (ii) disability pursuant to
Section 12, or (iii) Cause (any such terminations to be subject
to the procedures set forth in Section 13), then the Executive shall
be entitled to receive, and the Company shall promptly pay, Accrued Benefits
and, in lieu of further base salary for periods following the Termination Date,
as liquidated damages and additional severance pay and in consideration of
the
covenant of the Executive set forth in Section 14(a), the
Termination Payment pursuant to Section 9(a).
9. Payments
Upon Termination.
(a) Termination
Payment. The “Termination Payment” shall be an amount equal to the Annual
Cash Compensation times two (2). The Termination Payment shall be
paid to the Executive in cash equivalent on the first day of the seventh month
following the month in which the Executive’s Separation from Service occurs, and
the Termination Payment shall be accompanied by a payment of interest calculated
at the rate of interest announced by M&I Xxxxxxxx & Xxxxxx Bank
from time to time as its prime or base lending rate, such rate to be determined
on the Termination Date, compounded quarterly. Notwithstanding the
foregoing, in the event the Executive’s Termination Date is pursuant to Section
2(b), the Termination Payment shall be paid within ten (10) business days after
the date of the Change in Control of the Company (as defined without reference
to Section 2(b)), without interest. Such lump sum payment shall not
be reduced by any present value or similar factor, and the Executive shall
not
be required to mitigate the amount of the Termination Payment by securing other
employment or otherwise, nor will such Termination Payment be reduced by reason
of the Executive securing other employment or for any other
reason. The Termination Payment shall be in lieu of, and acceptance
by the Executive of the Termination Payment shall constitute the Executive’s
release of any rights of the Executive to, any other cash severance payments
under any Company severance policy, practice or agreement.
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(b) Certain
Additional Payments by the Company.
(i)
Notwithstanding any other provision of this Agreement, if any portion of the
Termination Payment or any other payment under this Agreement, or under any
other agreement with or plan of the Employer (in the aggregate, “Total
Payments”), would constitute an “excess parachute payment,” then the Company
shall pay the Executive an additional amount (the “Gross-Up Payment”) such that
the net amount retained by the Executive after deduction of any excise tax
imposed under Section 4999 of the Code (or any successor provision) and any
interest charges or penalties in respect of the imposition of such excise tax
(but not any federal, state or local income tax, or employment tax) on the
Total
Payments, and any federal, state and local income tax, employment tax, and
excise tax upon the payment provided for by this Section 9(b)(i),
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 tax and employment taxes at the highest marginal rate of federal income
and employment 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 domicile for income tax
purposes on the date the Gross-Up Payment is made, net of the maximum reduction
in federal income taxes that may be obtained from the deduction of such state
and local taxes.
(ii)
For purposes of this Agreement, the terms “excess parachute payment” and
“parachute payments” shall have the meanings assigned to them in
Section 280G of the Code (or any successor provision) and such “parachute
payments” shall be valued as provided therein. Present value for
purposes of this Agreement shall be calculated in accordance with
Section 1274(b)(2) of the Code (or any successor
provision). Promptly following a Covered Termination or notice by the
Company to the Executive of its belief that there is a payment or benefit due
the Executive which will result in an “excess parachute payment” as defined in
Section 280G of the Code (or any successor provision), the Executive and
the Company, at the Company’s expense, shall obtain the opinion (which need not
be unqualified) of nationally recognized tax counsel (“National Tax Counsel”)
selected by the Company’s independent auditors and reasonably acceptable to the
Executive (which may be regular outside counsel to the Company), which opinion
sets forth (A) the amount of the Base Period Income, (B) the amount and present
value of Total Payments, (C) the amount and present value of any excess
parachute payments, and (D) the amount of any Gross-Up Payment. As
used in this Agreement, the term “Base Period Income” means an amount equal to
the Executive’s “annualized includable compensation for the base period” as
defined in Section 280G(d)(1) of the Code. For purposes of such
opinion, the value of any noncash benefits or any deferred payment or benefit
shall be determined by the Company’s independent auditors in accordance with the
principles of Section 280G(d)(3) and (4) of the Code (or any successor
provisions), which determination shall be evidenced in a certificate of such
auditors addressed to the Company and the Executive. The opinion of
National Tax Counsel shall be addressed to the Company and the Executive and
shall be binding upon the Company and the Executive. If such National
Tax Counsel so requests in connection with the opinion required by this
Section 9(b), the Executive and the Company shall obtain, at the
Company’s expense, and the National Tax Counsel may rely on, the advice of a
firm of recognized executive compensation consultants as to the reasonableness
of any item of compensation to be received by the Executive solely with respect
to its status under Section 280G of the Code and the regulations
thereunder. The Company shall pay Executive the Gross-Up Payment, if
any, at the same time as the Termination Payment is paid; provided that if
prior
to such date the Executive is required to remit the excise tax under Section
4999 of the Code to the Internal Revenue Service, then upon written notice
by
the Executive to the Company, the Company shall promptly pay the Gross-Up
Payment (but based on Executive’s actual rate of taxation) to the
Executive.
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13 -
(iii)
In the event that upon any audit by the Internal Revenue Service, or by a
state
or local taxing authority, of the Total Payments or Gross-Up Payment, a change
is finally determined to be required in the amount of taxes paid by the
Executive, appropriate adjustments shall be made under this Agreement such
that
the net amount which is payable to the Executive after taking into account
the
provisions of Section 4999 of the Code (or any successor provision) shall
reflect the intent of the parties as expressed in this Section 9, in
the manner determined by the National Tax Counsel. If the Company is
required to make a payment to the Executive, such payment shall be paid
following the date of the final determination by a court or the Internal
Revenue
Service and within thirty (30) days after the date Executive provides the
Company a written request for reimbursement thereof (accompanied by proof
of
taxes paid), but in no event shall the reimbursement be made later than the
end
of the calendar year following the year in which the Executive remits the
excise
tax to the Internal Revenue Service.
(iv)
The
Company agrees to bear all costs associated with, and to indemnify and hold
harmless, the National Tax Counsel of and from any and all claims, damages,
and
expenses resulting from or relating to its determinations pursuant to this
Section 9(b), except for claims, damages or expenses resulting from
the gross negligence or willful misconduct of such firm.
(c) Additional
Benefits. If there is a Covered Termination and the Executive is
entitled to Accrued Benefits and the Termination Payment, then the Company
shall
provide to the Executive the following additional benefits:
(i) The
Executive shall receive until the end of the second calendar year following
the
calendar year in which the Executive’s Separation from Service occurs, at the
expense of the Company, outplacement services, on an individualized basis at
a
level of service commensurate with the Executive’s status with the Company
immediately prior to the date of the Change in Control of the Company (or,
if
higher, immediately prior to the Executive’s Termination of Employment),
provided by a nationally recognized executive placement firm selected by the
Company; provided that the cost to the Company of such services shall
not exceed 10% of the Executive’s Annual Base Salary.
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(ii) Until
the
earlier of the end of the Employment Period or such time as the Executive has
obtained new employment and is covered by benefits which in the aggregate are
at
least equal in value to the following benefits, the Executive shall continue
to
be covered, at the expense of the Company, by the same or equivalent life
insurance, hospitalization, medical and dental coverage as was required
hereunder with respect to the Executive immediately prior to the date the Notice
of Termination is given, subject to the following:
(A) If
applicable, following the end of the COBRA continuation period, if such
hospitalization, medical or dental coverage is provided under a health plan
that
is subject to Section 105(h) of the Code, benefits payable under such health
plan shall comply with the requirements of Treasury regulation section
1.409A-3(i)(1)(iv)(A) and (B) and, if necessary, the Company shall amend such
health plan to comply therewith.
(B) During
the first six months following the Executive’s Separation from Service, the
Executive shall pay the Company for any life insurance coverage that provides
a
benefit in excess of $50,000 under a group term life insurance
policy. After the end of such six month period, the Company shall
make a cash payment to the Executive equal to the aggregate premiums paid by
the
Executive for such coverage, and thereafter such coverage shall be provided
at
the expense of the Company for the remainder of the period.
If
the
Executive is entitled to the Termination Payment pursuant to Section 2(b),
within ten (10) days following the Change of Control, the Company shall
reimburse the Executive for any COBRA premiums the Executive paid for his or
her
hospitalization, medical and dental coverage under COBRA from the Executive’s
Termination Date through the date of the Change of Control.
(iii) The
Company shall bear up to $15,000 in the aggregate of fees and expenses of
consultants and/or legal or accounting advisors engaged by the Executive to
advise the Executive as to matters relating to the computation of benefits
due
and payable under this Section 9.
(iv) The
Company shall cause the Executive to be fully and immediately vested in his
accrued benefit under any supplemental executive retirement plan of the Employer
providing benefits for the Executive (the “SERP”) and in any nonqualified
defined contribution retirement plan of the Employer. In addition,
the Company shall cause the Executive to be deemed to have satisfied any minimum
years of service requirement under the SERP for subsidized early retirement
benefits regardless of the Executive’s age and service at the Termination Date;
provided, however, that SERP benefits will be based on service
to date with no additional credit for service or age beyond such Termination
Date.
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(v) On
the
Termination Date, for purposes of determining Executive’s eligibility for
post-retirement benefits under any welfare benefit plan (as defined in Section
3(1) of the Employee Retirement Security Act of 1974, as amended) maintained
by
the Company immediately prior to the Change in Control of the Company and
in
which Executive participated, immediately prior to the Change in Control
of the
Company, Executive shall be credited with the excess of two (2) years of
participation in the applicable medical plan and two (2) years of age over
the
actual years and fractional years of participation and age credited to Executive
as of the Change in Control of the Company. If the Executive is less
than 60 years of age, he shall be credited with a minimum age of 60
years. If after taking into account such participation and age,
Executive would have been eligible to receive such post-retirement benefits
had
Executive retired immediately prior to the Change in Control of the Company,
Executive shall receive, commencing on the Termination Date, post-retirement
benefits based on the terms and conditions of the applicable plans in effect
immediately prior to the Change in Control of the Company. If
applicable, following the end of the COBRA continuation period, if such
post-retirement welfare benefits are provided under a health plan that is
subject to Section 105(h) of the Code, benefits payable under such health
plan
shall comply with the requirements of Treasury regulation section
1.409A-3(i)(1)(iv)(A) and (B) and, if necessary, the Company shall amend
such
health plan to comply therewith.
(vi) At
the same time as the
Termination Payment is made, the Company shall pay the Executive an amount
equal
to the value of the retirement benefits under the various retirement benefits
plans of the Company (both qualified and non-qualified) that the Executive
is
participating in as of the Termination Date, and that would have accrued had
Executive been an active employee receiving his Annual Base Salary under such
plans for an additional period of two (2) years following the Termination
Date. For purposes of calculating this payment for any defined
benefit pension plan (whether qualified or nonqualified), if any, the value
shall be determined as a single sum present value, calculated assuming
that the benefits commence on the earliest date following termination on which
the Executive would be eligible to commence benefits under the such plan(s),
and
the actuarial factors used shall be the factors utilized in the qualified
defined benefit pension plan to determine lump sum payments as of the
Termination Date. For purposes of calculating this payment for any
defined contribution plan (whether qualified or nonqualified), if any, the
value
shall be determined as a single sum amount equal to the employer non-matching
and non-elective deferral contributions that would have been made for the
Executive, assuming that the contribution formulas are the same as in effect
on
the Termination Date, but determined without regard to any interest such amounts
would have earned.
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(vii) The
Company shall cause all performance plan awards granted to the Executive
pursuant to any long-term incentive plan maintained by the Company to be paid
out at target, as if all performance requirements had been satisfied, on a
pro
rata basis based on the completed portion of each award cycle, reduced, but
not
below zero, by the amount payable as an Accrued Benefit pursuant to
Section 1(b)(iv)(B) to the extent such Accrued Benefit amount relates to the
same performance plan award(s) and the same period of time as are described
in
this clause (vii).
(viii) The
Executive shall, after the Termination Date, retain all rights to
indemnification under applicable law or under the Company’s Certificate of
Incorporation or By-Laws, as they may be amended or restated from time to time,
to the extent any such amendment or restatement expands the Executive’s rights
to indemnification. In addition, the Company shall maintain
Director’s and Officer’s liability insurance on behalf of the Executive,
provided the Executive is eligible to be covered and has in fact been covered
by
such insurance, at the highest level in effect immediately prior to the date
of
the Change in Control of the Company (or, if higher, immediately prior to the
termination of the Executive’s employment) including any such insurance that was
reduced prior to a Change in Control of the Company at the request of the person
or entity acquiring control of the Company or reasonably shown to be related
to
the Change in Control of the Company, for the seven (7) year period following
the Termination Date.
10. Death.
(a) Except
as
provided in Section 10(b), in the event of a Covered Termination due
to the Executive’s death, the Executive’s estate, heirs and beneficiaries shall
receive all the Executive’s Accrued Benefits through the Termination
Date.
(b) In
the
event the Executive dies after a Notice of Termination is given (i) by the
Company or (ii) by the Executive for Good Reason, the Executive’s estate,
heirs and beneficiaries shall be entitled to the benefits described in
Section 10(a) and, subject to the provisions of this Agreement, to
such Termination Payment (and the additional benefits described in Section
9(c)) as the Executive would have been entitled to had the Executive lived,
except that the Termination Payment shall be paid within ninety (90) days
following the date of the Executive’s death, without interest
thereon. For purposes of this Section 10(b),
the Termination Date shall be the earlier of thirty days following the giving
of
the Notice of Termination, subject to extension pursuant to
Section 1(n), or one day prior to the end of the Employment
Period.
11. Retirement. If,
during the Employment Period, the Executive and the Employer shall execute
an
agreement providing for the early retirement of the Executive from the Employer,
or the Executive shall otherwise give notice that he is voluntarily choosing
to
retire early from the Employer, the Executive shall receive Accrued Benefits
through the Termination Date; provided, that if the Executive’s
employment is terminated by the Executive for Good Reason or by the Company
other than by reason of death, disability or Cause and the Executive also,
in
connection with such termination, elects voluntary early retirement, the
Executive shall also be entitled to receive a Termination Payment pursuant
to
Section 8.
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17 -
12. Termination
for Disability. If, during the Employment Period, as a result of
the Executive’s disability due to physical or mental illness or injury
(regardless of whether such illness or injury is job-related), the Executive
shall have been absent from the Executive’s duties hereunder on a full-time
basis for a period of six consecutive months and, within thirty days after
the
Company notifies the Executive in writing that it intends to terminate the
Executive’s employment (which notice shall not constitute the Notice of
Termination contemplated below), the Executive shall not have returned to the
performance of the Executive’s duties hereunder on a full-time basis, the
Company may terminate the Executive’s employment for purposes of this Agreement
pursuant to a Notice of Termination given in accordance with
Section 13. If the Executive’s employment is terminated
on account of the Executive’s disability in accordance with this Section, the
Executive shall receive Accrued Benefits through the Termination Date and shall
remain eligible for all benefits provided by any long term disability programs
of the Company in effect at the time of such termination.
13. Termination
Notice and Procedure. Any Covered Termination by the Company or
the Executive (other than a termination of the Executive’s employment that is a
Covered Termination by virtue of Section 2(b)) shall be communicated
by a written notice of termination (“Notice of Termination”) to the Executive,
if such Notice is given by the Company, and to the Company, if such Notice
is
given by the Executive, all in accordance with the following procedures and
those set forth in Section 23:
(a) If
such
termination is for disability, Cause or Good Reason, the Notice of Termination
shall indicate in reasonable detail the facts and circumstances alleged to
provide a basis for such termination.
(b) Any
Notice of Termination by the Company shall have been approved, prior to the
giving thereof to the Executive, by a resolution duly adopted by a majority
of
the directors of the Company (or any successor corporation) then in
office.
(c) If
the
Notice is given by the Executive for Good Reason, the Executive may cease
performing his duties hereunder on or after the date fifteen days after the
delivery of Notice of Termination and shall in any event cease employment on
the
Termination Date. If the Notice is given by the Company, then the
Executive may cease performing his duties hereunder on the date of receipt
of
the Notice of Termination, subject to the Executive’s rights
hereunder.
(d) The
Executive shall have thirty days, or such longer period as the Company may
determine to be appropriate, to cure any conduct or act, if curable, alleged
to
provide grounds for termination of the Executive’s employment for Cause under
this Agreement pursuant to Section 1(f)(iii).
(e) The
recipient of any Notice of Termination shall personally deliver or mail in
accordance with Section 23 written notice of any dispute relating to
such Notice of Termination to the party giving such Notice within fifteen days
after receipt thereof; provided, however, that if the Executive’s
conduct or act alleged to provide grounds for termination by the Company for
Cause is curable, then such period shall be thirty days. After the
expiration of such period, the contents of the Notice of Termination shall
become final and not subject to dispute.
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14. Further
Obligations of the Executive.
(a) Competition. The
Executive agrees that, in the event of any Covered Termination where the
Executive is entitled to Accrued Benefits and the Termination Payment, the
Executive shall not, for a period expiring one year after the Termination Date,
without the prior written approval of the Company’s Board of Directors,
participate in the management of, be employed by or own any business enterprise
at a location within the United States that engages in substantial competition
with the Company or its subsidiaries, where such enterprise’s revenues from any
competitive activities amount to 10% or more of such enterprise’s net revenues
and sales for its most recently completed fiscal year; provided,
however, that nothing in this Section 14(a) shall prohibit the
Executive from owning stock or other securities of a competitor amounting to
less than five percent of the outstanding capital stock of such
competitor.
(b) Confidentiality. During
and following the Executive’s employment by the Company, the Executive shall
hold in confidence and not directly or indirectly disclose or use or copy or
make lists of any confidential information or proprietary data of the Company
(including that of the Employer), except to the extent authorized in writing
by
the Board of Directors of the Company or required by any court or administrative
agency, other than to an employee of the Company or a person to whom disclosure
is reasonably necessary or appropriate in connection with the performance by
the
Executive of duties as an executive of the Company. Confidential
information shall not include any information known generally to the public
or
any information of a type not otherwise considered confidential by persons
engaged in the same business or a business similar to that of the
Company. All records, files, documents and materials, or copies
thereof, relating to the business of the Company which the Executive shall
prepare, or use, or come into contact with, shall be and remain the sole
property of the Company and shall be promptly returned to the Company upon
termination of employment with the Company.
15. Expenses
and Interest. If, after a Change in Control of the Company,
(a) a dispute arises with respect to the enforcement of the Executive’s
rights under this Agreement or (b) any legal or arbitration proceeding
shall be brought to enforce or interpret any provision contained herein or
to
recover damages for breach hereof, in either case so long as the Executive
is
not acting in bad faith, then the Company shall reimburse the Executive for
any
reasonable attorneys’ fees and necessary costs and disbursements incurred as a
result of the dispute, legal or arbitration proceeding (“Expenses”), and
prejudgment interest on any money judgment or arbitration award obtained by
the
Executive calculated at the rate of interest announced by M&I Xxxxxxxx
& Xxxxxx Bank from time to time at its prime or base lending rate from the
date that payments to him or her should have been made under this
Agreement. Within ten days after the Executive’s written request
therefor (but in no event later than the end of the calendar year following
the
calendar year in which such Expense is incurred), the Company shall reimburse
the Executive, or such other person or entity as the Executive may designate
in
writing to the Company, the Executive’s reasonable Expenses.
16. Payment
Obligations Absolute. The Company’s obligation during and after
the Employment Period to pay the Executive the amounts and to make the benefit
and other arrangements provided herein shall be absolute and unconditional
and
shall not be affected by any circumstances, including, without limitation,
any
setoff, counterclaim, recoupment, defense or other right which the Company
may
have against him or anyone else, except as provided in Section
20. Executive shall not be required to mitigate damages or the
amount of any payment provided for under this Agreement by seeking other
employment or otherwise, and compensation earned from such employment or
otherwise shall not reduce the amounts otherwise payable under this
Agreement. Except as provided in Section 9(b) and
Section 15, all amounts payable by the Company hereunder shall be
paid without notice or demand. Each and every payment made hereunder by the
Company shall be final, and the Company will not seek to recover all or any
part
of such payment from the Executive, or from whomsoever may be entitled thereto,
for any reason whatsoever.
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17. Successors.
(a) If
the
Company sells, assigns or transfers all or substantially all of its business
and
assets to any Person or if the Company merges into or consolidates or otherwise
combines (where the Company does not survive such combination) with any Person
(any such event, a “Sale of Business”), then the Company shall assign all of its
right, title and interest in this Agreement as of the date of such event to
such
Person, and the Company shall cause such Person, by written agreement in form
and substance reasonably satisfactory to the Executive, to expressly assume
and
agree to perform from and after the date of such assignment all of the terms,
conditions and provisions imposed by this Agreement upon the
Company. Failure of the Company to obtain such agreement prior to the
effective date of such Sale of Business shall be a breach of this Agreement
constituting “Good Reason” hereunder, except that for purposes of implementing
the foregoing the date upon which such Sale of Business becomes effective shall
be deemed the Termination Date. In case of such assignment by the
Company and of assumption and agreement by such Person, as used in this
Agreement, “Company” shall thereafter mean such Person which executes and
delivers the agreement provided for in this Section 17 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law, and this Agreement shall inure to the benefit of, and be
enforceable by, such Person. The Executive shall, in his or her
discretion, be entitled to proceed against any or all of such Persons, any
Person which theretofore was such a successor to the Company and the Company
(as
so defined) in any action to enforce any rights of the Executive
hereunder. Except as provided in this Section 17(a), this
Agreement shall not be assignable by the Company. This Agreement
shall not be terminated by the voluntary or involuntary dissolution of the
Company.
(b) This
Agreement and all rights of the Executive shall inure to the benefit of and
be
enforceable by the Executive’s personal or legal representatives, executors,
administrators, heirs and beneficiaries. All amounts payable to the
Executive under Sections 7, 8, 9, 10, 11, 12 and 15 if the Executive
had lived shall be paid, in the event of the Executive’s death, to the
Executive’s estate, heirs and representatives; provided, however, that
the foregoing shall not be construed to modify any terms of any benefit plan
of
the Employer, as such terms are in effect on the date of the Change in Control
of the Company, that expressly govern benefits under such plan in the event
of
the Executive’s death.
18. Severability. The
provisions of this Agreement shall be regarded as divisible, and if any of
said
provisions or any part hereof are declared invalid or unenforceable by a court
of competent jurisdiction, the validity and enforceability of the remainder
of
such provisions or parts hereof and the applicability thereof shall not be
affected thereby.
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19. Contents
of Agreement; Waiver of Rights; Amendment. This Agreement sets
forth the entire understanding between the parties hereto with respect to the
subject matter hereof and supercedes, and the Executive hereby waives all rights
under, any prior or other agreement or understanding between the parties with
respect to such subject matter. This Agreement may not be amended or
modified at any time except by written instrument executed by the Company and
the Executive.
20. Withholding. The
Company shall be entitled to withhold from amounts to be paid to the Executive
hereunder any federal, state or local withholding or other taxes or charges
which it is from time to time required to withhold; provided, that the
amount so withheld shall not exceed the minimum amount required to be withheld
by law. The Company shall be entitled to rely on an opinion of the
National Tax Counsel if any question as to the amount or requirement of any
such
withholding shall arise.
21. Certain
Rules of Construction. No party shall be considered as being
responsible for the drafting of this Agreement for the purpose of applying
any
rule construing ambiguities against the drafter or otherwise. No
draft of this Agreement shall be taken into account in construing this
Agreement. Any provision of this Agreement which requires an
agreement in writing shall be deemed to require that the writing in question
be
signed by the Executive and an authorized representative of the
Company.
22. Governing
Law; Resolution of Disputes. This Agreement and the rights and
obligations hereunder shall be governed by and construed in accordance with
the
laws of the State of Wisconsin. Any dispute arising out of this
Agreement shall, at the Executive’s election, be determined by arbitration under
the rules of the American Arbitration Association then in effect (in which
case
both parties shall be bound by the arbitration award) or by
litigation. Whether the dispute is to be settled by arbitration or
litigation, the venue for the arbitration or litigation shall be Milwaukee,
Wisconsin or, at the Executive’s election, if the Executive is not then residing
or working in the Milwaukee, Wisconsin metropolitan area, in the judicial
district encompassing the city in which the Executive resides; provided,
that, if the Executive is not then residing in the United States, the
election of the Executive with respect to such venue shall be either Milwaukee,
Wisconsin or in the judicial district encompassing that city in the United
States among the thirty cities having the largest population (as determined
by
the most recent United States Census data available at the Termination Date)
which is closest to the Executive’s residence. The parties consent to
personal jurisdiction in each trial court in the selected venue having subject
matter jurisdiction notwithstanding their residence or situs, and each party
irrevocably consents to service of process in the manner provided hereunder
for
the giving of notices.
23. Notice. Notices
given pursuant to this Agreement shall be in writing and, except as otherwise
provided by Section 13(d), shall be deemed given when actually
received by the Executive or actually received by the Company’s Secretary or any
officer of the Company other than the Executive. If mailed, such
notices shall be mailed by United States registered or certified mail, return
receipt requested, addressee only, postage prepaid, if to the Company, to
Regal-Beloit Corporation, Attention: Secretary (or President, if the Executive
is then Secretary), 000 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxx 00000-0000, or if to
the
Executive, at the address set forth below the Executive’s signature to this
Agreement, or to such other address as the party to be notified shall have
theretofore given to the other party in writing.
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24. Withholding. The
Company shall be entitled to withhold from amounts to be paid to the Executive
hereunder any federal, state or local withholding or other taxes or charges
which it is from time to time required to withhold; provided that the
amount so withheld shall not exceed the minimum amount required to be withheld
by law. In addition, if prior to the date of payment of the
Termination Payment hereunder, the Federal Insurance Contributions Act (FICA)
tax imposed under Sections 3101, 3121(a) and 3121(v)(2), where applicable,
becomes due with respect to any payment or benefit to be provided hereunder,
the
Company may provide for an immediate payment of the amount needed to pay the
Executive’s portion of such tax (plus an amount equal to the taxes that will be
due on such amount) and the Executive’s Termination Payment shall be reduced
accordingly. The Company shall be entitled to rely on an opinion of
the National Tax Counsel if any question as to the amount or requirement of
any
such withholding shall arise.
25. Additional
Section 409A Provisions. (a) If any payment amount or
the value of any benefit under this Agreement is required to be included in
an
Executive’s income prior to the date such amount is actually paid or the benefit
provided as a result of the failure of this Agreement (or any other arrangement
that is required to be aggregated with this Agreement under Code Section 409A)
to comply with Code Section 409A, then the Executive shall receive a
distribution, in a lump sum, within 90 days after the date it is finally
determined that the Agreement (or such other arrangement that is required to
be
aggregated with this Agreement) fails to meet the requirements of Section 409A
of the Code; such distribution shall equal the amount required to be included
in
the Executives income as a result of such failure and shall reduce the amount
of
payments or benefits otherwise due hereunder.
(b) The
Company and the Executive intend the terms of this Agreement to be in compliance
with Section 409A of the Code. The Company does not guarantee the tax
treatment or tax consequences associated with any payment or benefit, including
but not limited to consequences related to Section 409A of the
Code. To the maximum extent permissible, any ambiguous terms of this
Agreement shall be interpreted in a manner which avoids a violation of Section
409A of the Code.
(c) The
Executive acknowledges that to avoid an additional tax on payments that may
be
payable or benefits that may be provided under this Agreement and that
constitute deferred compensation that is not exempt from Section 409A of the
Code, the Executive must make a reasonable, good faith effort to collect any
payment or benefit to which the Executive believes the Executive is entitled
hereunder no later than 90 days after the latest date upon which the payment
could have been made or benefit provided under this Agreement, and if not paid
or provided, must take further enforcement measures within 180 days after such
latest date.
26. No
Waiver. No waiver by either party 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 the other party shall be deemed a waiver of similar
or dissimilar provisions or conditions at the same time or any prior or
subsequent time.
27. Headings. The
headings herein contained are for reference only and shall not affect the
meaning or interpretation of any provision of this Agreement.
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year
first above written.
| REGAL-BELOIT CORPORATION | |||
|
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By:
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||
| Name | |||
| Title | |||
|
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Attest:
|
||
| Name | |||
| Title | |||
| EXECUTIVE | |||
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|
(SEAL) | |
| Address: | |||
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