Xxxxx Xxxxxx, Inc.
000 Xxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
January 1, 2003
Dear _____________:
As you know, the Board of Directors of Xxxxx Xxxxxx, Inc. ("HSI" or the
"Company") awarded you certain Change in Control protection outlined in the
letter agreement dated July 1, 2001 (the "CIC Agreement"). The CIC Agreement
provided, generally, for two Change in Control benefits, i.e., a severance
benefit set forth in Section 3 of the CIC Agreement, and a cash bonus based on a
phantom share award set forth in Section 2 of the CIC Agreement. Under the CIC
Agreement, the severance benefit provisions would continue in full force and
effect indefinitely. The cash bonus provisions, by contrast, were to expire on
December 31, 2002.
Having concluded that the cash bonus provisions of the CIC Agreement should
be extended to December 31, 2004, the Board of Directors of the Company has
authorized this letter agreement which (1) carries forward, without alteration,
the severance benefit of the CIC Agreement, and (2) carries forward, under the
terms specified herein, the cash bonus benefit through December 31, 2004.
Accordingly, this letter agreement amends and restates in its entirety the CIC
Agreement and any and all other prior agreements between you and the Company
relating to the subject matter hereof.
1. Term of Agreement. The term of this Agreement shall commence on
January 1, 2003 (the "Effective Date") and continue in full force and effect
indefinitely; PROVIDED, HOWEVER, that the provisions of Section 2 hereof shall
be of no further force or effect after December 31, 2004, unless a Change in
Control has occurred on or prior to such date, in which event, the provisions of
Section 2 hereof shall continue in full force and effect with respect to such
Change in Control. The period from the Effective Date to December 31, 2004 or
such later date, if any, as the Company, in its sole discretion, may hereafter
extend the provisions of Section 2 hereof, is hereinafter referred to as the
Term.
2. Entitlement to Cash Bonus. Provided (a) you are then employed by the
Company or (b) you were employed by the Company until your employment was
terminated by the Company without Cause or by you for Good Reason, in either
case, (i) within ninety (90) days prior to the effective date of the Change in
Control, or (ii) after the first public announcement of the pendency of the
Change in Control, upon the effective date of the Change in Control you shall be
entitled to a cash payment equal to the Change in Control Price (as defined), as
determined as of such payment date, multiplied by _____, such payment to be paid
to you no
later than 10 days after the effective date of the Change in Control ("Bonus
Payment Date"). In the event that the Change in Control Price increases in the
50-day period after the Bonus Payment Date occurs, you shall be entitled to
receive an additional payment equal to the product of such increase in the
Change in Control Price multiplied by _____, such amount payable to you no later
than 60 days from the Bonus Payment Date.
3. Entitlement to Severance Benefits.
(a) Cash Severance Benefit. In the event your employment is
terminated (a "Termination") by the Company without Cause or by you for
Good Reason, in either case within two years following a Change in Control,
you shall be entitled to receive the sum of the following, payable in a
cash lump sum no later than 15 days after the Termination date: (i) Base
Salary through the Termination date; (ii) a pro rata annual incentive award
at target for the year in which the Termination occurs, and (iii) an amount
equal to 200% of the sum of your Base Salary plus your target annual cash
bonus. In addition, notwithstanding the foregoing, in the event your
employment is terminated by the Company without Cause or by you for Good
Reason, in either case (i) within ninety (90) days prior to the effective
date of a Change in Control, or (ii) after the first public announcement of
the pendency of the Change in Control, such termination shall, upon the
effective date of a Change in Control, be deemed to be a "Termination"
covered under the preceding sentence of this Section 3(a), and you shall be
entitled to the amounts provided for under the preceding sentence.
(b) Other Severance Benefits. In the event you are entitled to the
amounts provided for in Section 3(a) hereof, and notwithstanding anything
to the contrary contained in any stock option or restricted stock
agreement, you shall also be entitled to the following: (i) immediate
vesting of all outstanding stock options to the fullest extent permitted
under the applicable stock option plan; (ii) elimination of all
restrictions on any restricted or deferred stock awards outstanding at the
time of Termination, (iii) immediate vesting of all restricted or deferred
stock awards and non-qualified retirement benefits, (iv) settlement of all
deferred compensation arrangements in accordance with any then applicable
deferred compensation plan or election form (v) continued participation in
all HSI's welfare benefit plans (including, without limitation, health
coverage and other benefit plans and programs pursuant to which benefits
are provided to you as of the Termination Date) at the same benefit level
at which you were participating on the Termination date for a period of 24
months unless and until the date or dates you receive substantially
equivalent coverage from a subsequent employer.
(c) Section 280(G) Gross-Up Protection. In the event you become
entitled to payments, all or a portion of which become subject to tax
imposed under Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code") (or any other similar tax, but excluding any income tax of any
nature) ("Excise Tax"), HSI shall pay you an additional amount ("Gross-Up
Payment") such that the amount retained by you after reduction for any
Excise Tax (including penalties or interest thereon) equals the amount to
be paid to you by HSI hereunder prior to the imposition of such Excise Tax.
The amount of the Gross-Up Payment shall be calculated by HSI's independent
auditors. In the event that such Gross-Up Payment is finally determined to
be less than the amount
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necessary to provide that the amount to be retained by you after reduction
for any Excise Tax (including penalties or interest thereon) equals the
amount to be paid to you by HSI hereunder prior to the imposition of such
Excise Tax, HSI shall pay an additional amount to you in respect of such
deficiency (including any interest and penalties). In the event that such
Gross-Up Payment is finally determined to exceed the amount necessary to
provide that the amount to be retained by you after reduction for any
Excise Tax (including penalties or interest thereon) equals the amount to
be paid to you by HSI hereunder prior to the imposition of such Excise Tax,
you must promptly repay the entire amount of such excess Gross-Up Payment
to HSI.
(d) No Mitigation; No Offset. In the event of any Termination, you
shall be under no obligation to seek other employment and no amounts due to
you under this Agreement shall be subject to offset due to any remuneration
attributable to subsequent employment that you may obtain.
(e) Exclusivity of Severance Payments; Release. In the event you are
entitled to the amounts provided for in Section 3(a) hereof, you shall not
be entitled to any other severance payments or severance benefits from HSI
or any payments by HSI on account of any claim by you of wrongful
termination, including claims under any federal, state or local human and
civil rights or labor laws. Termination payments and benefits made to you
are conditioned upon your execution of a release agreement, in a form
reasonably satisfactory to HSI, releasing any and all claims arising out of
your employment (other than enforcement of this Agreement), any rights
under HSI's incentive compensation and employee benefit plans, and any
claim for any non-employment related tort for personal injury.
4. Definitions. For purposes of this Agreement, the following terms shall have
the meanings ascribed to them.
(a) "Base Salary" means the annualized rate of pay in effect on the
Termination date, provided that if a reduction in Base Salary is the basis
for a Termination for Good Reason, then "Base Salary" shall mean the rate
of pay in effect immediately prior to such reduction. As used herein, the
term "Base Salary" includes, without limitation, the annualized rate of any
automobile allowance in effect on the date of Termination, and the amount,
as applicable, of the Company's matching 401(k) contribution and/or
supplemental employment retirement plan contribution for the full year
preceding the date of the Change in Control.
(b) "Cause" shall exist if: (i) you are convicted of, or plead nolo
contendere to, any felony which materially and adversely impacts HSI's
financial condition or reputation, (ii) you engage in conduct that
constitutes willful gross neglect or willful gross misconduct in carrying
out your duties which materially and adversely impacts HSI's financial
condition or reputation, or (iii) you violate Section 5 of this Agreement.
(c) A "Change in Control" shall be deemed to occur upon any of the
following: (i) acquisition by any one "person" (as such term is defined
in ss.3(a)(9) of the Securities and Exchange Act of 1934,
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as amended, and used in ss.13(d) and 14(d) thereof, including "group" as
defined in ss.13(d) thereof) of 33% or more of the Company's voting shares
without the prior express approval of the Company's Board of Directors;
(ii) acquisition by any one "person" or "group" (as referred to in the
preceding sentence) of more than 50% of HSI's voting shares; (iii)
directors elected to the Board over any 24 month period not nominated by
the HSI Nominating & Corporate Governance Committee (or a committee of the
HSI Board of Directors performing functions substantially similar to a
nominating committee) represent 30% or more of the total number of
directors constituting the Board at the beginning of the period (or such
nomination results from an actual or threatened proxy contest); (iv) any
merger, consolidation or other corporate combination upon the completion of
which HSI shares do not represent more than 50% of the combined voting
power of the resulting entity; and (v) upon the sale of all or
substantially all of the consolidated assets of HSI, other than a
distribution to shareholders.
(d) "Change in Control Price" shall mean an amount in cash, not more
than $45, equal to the result obtained by subtracting $15 from the higher
of (i) the amount of cash and fair market value of property that is the
highest price per share paid (including extraordinary dividends) in any
transaction triggering the Change in Control or any liquidation of shares
following a sale of substantially all assets of the Company, or (ii) the
highest fair market value per share at any time during the 60-day period
preceding and 60-day period following the Change in Control.
(e) "Confidential Information" shall mean all information concerning
the business of HSI relating to any of their products, product development,
trade secrets, customers, suppliers, finances, and business plans and
strategies. Excluded from the definition of "Confidential Information" is
information (i) that is or becomes part of the public domain, other than
through your breach of this Agreement, or (ii) regarding HSI's business or
industry properly acquired by you in the course of your career as an
employee in HSI's industry and independent of your employment by HSI. For
this purpose, information known or available generally within the trade or
industry of HSI shall be deemed to be known or available to the public.
(f) "Good Reason" shall mean your termination of your employment based
upon one or more of the following events (except as a result of a prior
termination): (i) any change in your position or responsibilities or
assignment of duties materially inconsistent with your status prior to the
Change in Control; (ii) following a business combination related to a
Change in Control, a failure to offer you a position in the combined
business entity, having authority equivalent in scope to the authority in
the position held by you in the Company immediately prior to such business
combination; (iii) any decrease in your Base Salary, target annual
incentive or long-term incentive opportunity; (iv) any breach of the terms
of this Agreement by HSI after receipt of written notice from you and a
reasonable opportunity to cure such breach; (v) HSI fails to obtain any
successor entity's assumption of its obligations to you hereunder; or (vi)
the Company requiring you to perform your services as an employee on an
ongoing basis at a location more than 75 miles distant from the location at
which you perform your services as of the date immediately prior to the
Change in Control.
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5. Non-Disclosure; Non-Solicitation; Non-Disparagement.
(a) During the Term and thereafter, you shall not, without HSI's
prior written consent disclose to anyone (except in good faith in the
ordinary course of business) or make use of any Confidential Information
except in the performance of your duties hereunder or when required to do
so by law. In the event that you are so required by law, you shall give
prompt written notice to HSI sufficient to allow HSI the opportunity to
object to or otherwise resist such order.
(b) During the Term and for a period of 24 months thereafter, you
shall not, without HSI's prior written consent, solicit for employment,
whether directly or indirectly, any person who (i) at the time is employed
by HSI or any affiliate, or (ii) was employed by HSI or any affiliate
within three months prior to such solicitation.
(c) You agree that, during the Term and thereafter (including
following any Termination for any reason) you will not make statements or
representations, or otherwise communicate, directly or indirectly, in
writing, orally, or otherwise, or take any action which may, directly or
indirectly, disparage or be damaging to HSI or its respective officers,
directors, employees, advisors, businesses or reputations. Notwithstanding
the foregoing, nothing in this Agreement shall preclude you from making
truthful statements or disclosures that are required by applicable law,
regulation or legal process.
6. Resolution of Disputes. Any controversy or claim arising out of or
relating to this Agreement or any breach or asserted breach hereof shall be
resolved by binding arbitration, to be held at an office closest to HSI's
principal offices in accordance with the rules and procedures of the American
Arbitration Association. Judgment upon the award rendered by the arbitrator(s)
may be entered in any court of competent jurisdiction. Pending the resolution of
any arbitration or court proceeding, HSI shall continue payment of all amounts
and benefits due you hereunder. All reasonable costs and expenses of any
arbitration or court proceeding (including fees and disbursements of counsel)
shall be promptly paid on your behalf by HSI; provided, however, that no such
expense reimbursement shall be made if and to the extent the arbitrator(s)
determine(s) that any of your litigation assertions or defenses were in bad
faith or frivolous.
7. Effect of Agreement on Other Benefits. Except as specifically provided
in this Agreement, the existence of this Agreement shall not be interpreted to
prohibit or restrict your participation in any other employee benefit or other
plans or programs in which you currently participate.
8. Not an Employment Agreement. This Agreement is not a contract of
employment between you and HSI. HSI may terminate your employment at any time,
subject to the terms hereof or any other agreement that might exist between you
and HSI.
9. Assignability; Binding Nature. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors, heirs
(as applies to you) and permitted assigns. XXX agrees that in the event of a
sale or transfer of assets, it shall, as a
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condition of such sale, require such assignee or transferee to expressly assume
HSI's liabilities, obligations and duties hereunder.
10. Governing Law/Jurisdiction. This Agreement shall be governed by and
construed and interpreted in accordance with the laws of New York without
reference to principles of conflict of laws.
Please acknowledge your acceptance of the terms of this Agreement by
executing below and returning a copy to HSI.
XXXXX XXXXXX, INC.
By:
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Xxxxxxx X. Xxxxxxx
Chairman, President and CEO
Accepted:
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Print name:
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