Exhibit 10.1
TECUMSEH PRODUCTS COMPANY
CHANGE IN CONTROL AGREEMENT
This Change in Control Agreement dated as of _________, 2006 (the
"Agreement") is entered into by and between Tecumseh Products Company, a
Michigan corporation (the "Company"), and [__________], a resident of the State
of ______________ (the "Executive").
The Company and the Executive, intending to be legally bound hereby, agree
that upon a Change in Control (as hereinafter defined) and upon a subsequent
Separation From Service, the Company shall take the actions described in
Sections 4 and 5 below:
SECTION 1. CHANGE IN CONTROL.
As used in this Agreement, a "Change in Control" shall be deemed to have
occurred if any of the following events takes place:
(a) any person or group of persons (within the meaning of Section 13(d) of
the Securities Exchange Act of 1934 as amended (the "Act")), other than the
Company or a subsidiary of the Company or an employee benefit plan sponsored by
the Company or a subsidiary of the Company, the Xxxxxxx Foundation, or the
Xxxxxxx family trusts, acquires beneficial ownership (as defined in Section
13(d) (directly or indirectly) of (i) 50 percent or more of the outstanding
securities of the Company entitled to vote in the election of directors (or
securities or rights convertible into or exchangeable for such securities)
("Stock") of the Company, or (ii) Stock having a total number of votes that may
be cast and elect a majority of the directors of the Company;
(b) members of the "Incumbent Board" (as defined below) cease for any
reason to constitute a majority of the Board of Directors of the Company. For
this purpose, the "Incumbent Board" shall consist of the individuals who, as of
the date of this Agreement, constitute the entire Board of Directors of the
Company and any new director whose election by the Board or nomination for
election by the shareholders of the Company was approved by a vote of at least
2/3rds of the directors then still in office who either were directors on the
date of this Agreement or whose election or nomination for election was
previously so approved, but excluding for all purposes any director (i)
designated or nominated by, or affiliated with, a person who has entered into an
agreement with the Company to effect a transaction described in subsection (a)
above, or (ii) who initially assumed office as a result of either an actual or
threatened "Election Contest" (as described in Rule 14a-11 under the Act) or
other actual or threatened solicitation of proxies or contests by or on behalf
of a person other than the Board (a "Proxy Contest"), including by reason of any
agreement intended to avoid or settle any Election Contest or Proxy Context or
(iii) who was designated or renominated by any such person (or by any person
designated or renominated by any such person);
(c) any (i) consolidation, merger, or other reorganization of the Company
in which the Company is not the continuing or surviving corporation or pursuant
to which shares of Stock are converted into cash, securities, or other property,
other than a merger of the Company in which holders of Stock immediately prior
to the merger have either the same proportionate ownership of voting common
stock of the surviving corporation immediately after the merger as immediately
before or have more than 50 percent of the ownership of voting common stock of
the surviving corporation immediately after the merger, or (ii) sale, lease,
exchange, or other transfer in one transaction or a series of related
transactions of 50 percent or more of the assets of the Company; or
(d) there shall occur a liquidation or dissolution of the Company.
SECTION 2. TERM OF AGREEMENT; TERMINATION.
(a) Term. This Agreement shall commence on the date first set forth above
and shall remain in effect for three (3) years (the "Initial Term"). At the end
of the Initial Term, this Agreement shall thereafter be automatically renewed
for successive three (3) year periods (each a "Renewal Term"), unless the
Company shall have given Executive written notice of cancellation and
termination at least one (1) year prior to the end of the Initial Term or the
then in effect Renewal Term that the Agreement shall terminate at the end of
such Initial Term or Renewal Term.
(b) Termination.
(1) This Agreement may be terminated, at any time, by mutual agreement
of the parties.
(2) This Agreement shall be terminated in accordance with the
conditions described in Section 3 (c) of this Agreement.
(3) Notwithstanding anything herein to the contrary, except as
provided in Section 3 (a) hereof, this Agreement shall terminate and be of no
further force or effect in the event that prior to a Change in Control of the
Company, the Executive ceases to be an employee of the Company or any subsidiary
of the Company.
SECTION 3. SEPARATION FROM SERVICE
(a) Entitlement. The Executive shall be entitled to the payments and
benefits provided under Section 5 below if the Executive has a Separation From
Service (as determined under Code Section 409A(2)(A)(i)), with the Company or
its Successor (if after a Change in Control) for the following reasons:
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(1) Except as provided in subsection (b) below, the Company terminates
the Executive's employment during the six-month period prior to a Change in
Control or the one-year period following a Change in Control; or
(2) During the one-year period following a Change in Control, the
Executive terminates his or her employment after one or more of the following
events occurs without the Executive's express written consent.
(A) Executive's annual base salary and/or annual bonus is reduced
or any other material compensation or benefits arrangement for the
Executive is reduced, other than as a result of the operation of a plan or
changes in a plan applicable to all participants (and such reduction is
unrelated to Company or individual performance); or
(B) the Executive's duties or responsibilities are negatively,
and materially changed in a manner inconsistent with the Executive's
position (including status, offices, titles, and reporting requirements) or
authority;
(C) the Company or its Successor requires the Executive's work
location or residence to be relocated more than 25 miles from its location
on the date a Change in Control occurs; or
(D) the Company or its Successor fails to offer the Executive a
comparable position after the Change in Control.
(b) Separation From Service for Cause. Notwithstanding subsection (a)
above, the Executive shall not be entitled to the payments and benefits provided
under Section 5 below if the Executive Separates From Service with the Company
for one or more of the following reasons: (i) the willful and continued failure
of the Executive to perform substantially the Executive's duties owed to the
Company or its affiliates after a written demand for substantial performance is
delivered to the Executive specifically identifying the nature of such
unacceptable performance, or (ii) the conviction of the Executive for a felony.
(c) Separation From Service Due to Death or Disability. If the Executive
Separates From Service by reason of the Executive's death or Disability, during
either an Initial Term or a Renewal Term and prior to a Change in Control, this
Agreement shall terminate automatically on the date of death or the date of
determination by the Board that Disability of the Executive has occurred, as the
case may be. Disability is defined as any medically determinable physical or
mental impairment of any Executive: (i) who is unable to engage in any
substantial gainful activity by reason of which can be expected to result in
death or can be expected to last for a continuous period of not less than 12
months, or (ii) which can be expected to result in death or can be expected to
last for a continuous period of not less than 12 months, receiving income
replacement benefits for a period of not less
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than 3 months under an accident and health plan covering Employees of the
Company, provided that this definition shall be interpreted in accordance with
Code Section 409A(a)(2)(A)(v) and regulations and other guidance thereunder.
Notwithstanding (i) and (ii), an Executive shall be deemed to have a Disability
when determined to be totally disabled by the Social Security Administration.
(d) Notice of Termination. Any Separation From Service by the Company for
cause or Disability, or by the Executive for a reason described in Section
3(a)(2) above, shall be communicated by a notice to the other party given in
accordance with Section 9 below. The notice shall be in writing and shall (i)
state the specific provision in the Agreement relied upon, (ii) to the extent
applicable, set forth in reasonable detail the facts and circumstances claimed
to provide a basis for Separation From Service under such provision, and (iii)
specify the separation date (not more than 30 days after the giving of the
notice).
SECTION 4. OBLIGATIONS OF THE COMPANY UPON A CHANGE IN CONTROL.
Upon the occurrence of a Change in Control, all outstanding Management
Incentive Plan (the "MIP") awards previously granted to the Executive shall
become immediately vested and subject to payment in accordance with the MIP
change in control terms, notwithstanding the change in control provisions
defined in Section 1 herein, as soon as practicable after the Change in Control,
but in no event later than thirty (30) days following the Change in Control.
SECTION 5. OBLIGATIONS OF THE COMPANY UPON SEPARATION FROM SERVICE FOLLOWING A
CHANGE IN CONTROL.
Upon the Executive's Separation From Service subsequent to a Change in
Control, the Executive shall be entitled to receive, in addition to the payments
and benefits provided in Section 4 above, payments and benefits from the Company
as follows:
(a) Separation From Service Due to a Qualifying Event. If the Executive
Separates From Service with the Company as the result of an event described in
Section 3(a) above, the Executive shall be entitled to receive the following
payments and benefits from the Company:
(1) the Company shall pay the Executive in a single sum in cash,
within five business days after his or her separation date, the aggregate of the
following amounts:
(A) the sum of the Executive's currently effective annual base
salary through the separation date and any accrued vacation pay;
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(B) an amount equal to the sum of the Executive's annual base
salary plus an amount equal to the Executive's average bonus for the three
(3) years immediately preceding the separation date;
Notwithstanding the foregoing provisions of this Section 5(a)(1), a distribution
to a Specified Employee (as determined under Code Section 409A(a)(2)(B)(i))
shall be delayed until the first date of the seventh month following the date of
Separation From Service (or until death, if earlier).
(2) the Company shall continue, for a period of twelve (12) months
from the separation date, (i) health insurance coverage for the Executive and
the Executive's eligible family members and life insurance coverage for the
Executive, in both cases at least equal to the coverage that would have been
provided to such person(s) under the Company's health and life insurance plans
if the Executive had not Separated From Service, and (ii) in the event that
Executive dies or incurs a Disability during the aforementioned twelve (12)
months from the separation date, the Company will continue to provide the health
insurance coverage for the Executive's eligible family members for the balance
of said twelve month period. In the event such health insurance coverage is
deemed to be taxable under any provisions of the Internal Revenue Code of 1986,
as amended (the "Code"), the Company shall pay to the Executive or to the
Executive's eligible family members, an amount equal to such tax obligation
incurred in association with the health insurance coverage provided by the
Company;
(3) the Company shall, at its sole expense as incurred, reimburse the
Executive up to $50,000 for expenses and costs related to outplacement services
that are actually incurred by the Executive and directly related to a Separation
from Service, the provider of which shall be selected by the Executive in his or
her sole discretion, provided that such reimbursements are paid by December 31
of the second calendar year following the calendar year in which the separation
occurs.
(4) if permitted by the plan document and applicable law, the
Executive shall receive credit for one additional year of full-time employment
under a qualified deferred benefit pension plan of the Company in which the
Executive participates, as though the Executive were still an employee of the
Company and received compensation equal to the annual compensation received
determined on the date immediately prior to the date of a Change in Control, but
if not so permitted, then the Company shall pay the Executive a cash lump sum
which is actuarially equivalent to such credit, reduced, however, by applicable
withholding taxes; and
(5) the Company shall pay or reimburse the Executive for legal fees
and expenses incurred as a result of any dispute resolution process entered into
by the Executive to enforce this Agreement.
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(b) Separation From Service Due to Death or Disability. If the Executive
Separates From Service by reason of the Executive's death or Disability during
either an Initial Term or a Renewal Term, this Agreement shall terminate without
further obligations to the Executive or to the Executive's legal representatives
under this Agreement other than for the timely payment of the Executive's
currently effective annual base salary through the separation date, any accrued
vacation pay, and any compensation that the Executive previously elected to
defer.
(c) Separation From Service For Cause or Without Good Reason. If the
Executive voluntarily Separates From Service (other than for a reason described
in Section 3(a)(2) above, or Separates From Service for a reason described in
Section 3(b) above, during either an Initial Term or a Renewal Term, this
Agreement shall terminate without further obligations to the Executive under
this Agreement other than for the timely payment to the Executive of his or her
currently effective annual base salary through the separation date and of any
compensation that the Executive previously elected to defer.
(d) Possible Reduction in Payments and Benefits. Following any Change in
Control, to the extent that any amount of pay or benefits provided to the
Executive under this Agreement would cause the Executive to be subject to excise
tax under Code sections 280G and 4999, and after taking into consideration all
other amounts payable to the Executive under other Company plans, programs,
policies, and arrangements, then the amount of pay and benefits provided under
this Agreement shall be reduced (first by any pay, and then, to the extent
necessary, by any benefits), to the extent necessary to avoid imposition of any
such excise taxes. However, if it shall be determined that the Executive would
not receive a net after-tax benefit (taking into account income, employment, and
any excise taxes) resulting from application of the reduction, then no reduction
shall be made with respect to pay or benefits due the Executive. All
determinations of the amount of the reduction shall be made by tax counsel
selected by the Company's independent auditors, and the cost of making such
determination shall be borne entirely by the Company.
SECTION 6. CONFIDENTIALITY AND NONDISCLOSURE
(a) Confidentiality and Nondisclosure Agreements. While this Agreement is
in effect, and before and after a Change in Control, the Executive shall be
subject to and abide by the terms of any confidentiality or nondisclosure
agreement between the Executive and Company or any of its subsidiaries.
(b) Nondisclosure. The Executive shall not (other than in the good faith
performance of his or her services to the Company before Separation From
Service) disclose or make known to anyone other than employees of the Company,
or use for the benefit of himself or herself or any other person, firm,
operation, or entity unrelated to the Company, any knowledge, information, or
materials, whether tangible or intangible, belonging to the Company, about the
products, services, trade secret, know-how, customers, business plans, or
financial, marketing, pricing, compensation, and other
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proprietary matter relating to the Company. On or before the Executive's
Separation From Service with the Company, the Executive shall deliver to the
Company any and all confidential information in his or her possession.
SECTION 7. SUCCESSORS.
The Company shall require any successor (whether direct or indirect, by
purchase, merger, consolidation, or otherwise) to all or substantially all of
the business or assets of the Company ("Successsor"), by agreement in form and
substance satisfactory to the Executive, expressly to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform if no such succession had taken place.
Failure of the Company to obtain such assumption and agreement prior to the
effectiveness of any such succession will be a breach of this Agreement and
entitle the Executive to compensation from the Company in the same amount and on
the same terms as the Executive would be entitled to had the Company terminated
the Executive for any reason other than cause or incapacity on the succession
date (and assuming a Change in Control had occurred prior to such succession
date).
SECTION 8. NON-ASSIGNABILITY.
This Agreement is personal in nature and neither of the parties shall,
without the consent of the other, assign or transfer this Agreement or any
rights or obligations under it, except as provided in Section 7. Without
limiting the foregoing, the Executive's right to receive payments under this
Agreement shall not be assignable or transferable, whether by pledge, creation
of a security interest, or otherwise, other than a transfer by his or her will
or by the laws of descent or distribution, and, in the event of any attempted
assignment or transfer by the Executive contrary to this Section, the Company
shall have no liability to pay any amount so attempted to be assigned or
transferred.
SECTION 9. NOTICES.
For the purpose of this Agreement, notices and all other communications
provided for shall be in writing and shall be deemed to have been given when
delivered or mailed by United States registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to the Executive: [name]
[address]
If to the Company: Tecumseh Products Company
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: General Counsel
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or to such other address as either party may have furnished to the other in
writing. Notices of change of address shall be effective only upon receipt.
SECTION 10. GOVERNING LAW.
The validity, interpretation, construction, and performance of this
Agreement shall be governed by the laws of the State of Michigan without
reference to principles of conflict of laws.
SECTION 11. SETTLEMENT OF DISPUTES; ARBITRATION.
If there has been a Change in Control and any dispute arises between the
Executive and the Company as to the validity, enforceability, and/or
interpretation of any right or benefit afforded by this Agreement, at the
Executive's option, such dispute shall be resolved by binding arbitration
proceedings in accordance with the rules of the American Arbitration
Association. The arbitrators shall presume that the rights and/or benefits
afforded by this Agreement that are in dispute are valid and enforceable and
that the Executive is entitled to such rights and/or benefits. The Company shall
be precluded from asserting that such rights and/or benefits are not valid,
binding, and enforceable and shall stipulate before such arbitrators that the
Company is bound by all the provisions of this Agreement. The burden of
overcoming by clear and convincing evidence the presumption that the Executive
is entitled to such rights and/or benefits shall be on the Company. The
arbitrators shall have discretion to award punitive damages to the Executive if
it is found that the Company's actions or failures to act which led to the
Executive's submitting a dispute to arbitration and/or the Company's actions or
failures to act during the pendency of the arbitration proceeding make such an
award appropriate in the circumstances. The results of any arbitration shall be
conclusive on both parties and shall not be subject to judicial interference or
review on any ground whatsoever, including without limitation any claim that the
Company was wrongfully induced to enter into this Agreement to arbitrate such a
dispute.
SECTION 12. AT-WILL EMPLOYMENT
The Company and the Executive acknowledge that the Employee's employment is
and shall continue to be at-will, within the meaning of applicable law.
SECTION 13. NO OTHER PAYMENTS OR BENEFITS
The Company and the Executive acknowledge that in the event the Company
becomes obligated to the Executive under Section 4 and/or 5 of this Agreement,
the obligations of the Company under Section 4 and/or 5 shall be in lieu of and
not in addition to any other payments or benefits that may be payable to
Executive by the Company, subject to the Company's ongoing obligations to the
Executive (and, where applicable, to
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the Executive's spouse or eligible family members) under any Company-sponsored
pension, retirement and/or insurance plan(s) which provide for payments or
coverage after the Executive's separation from Company service (subject,
however, to the terms of such plan(s)).
SECTION 14. MISCELLANEOUS
(a) This Agreement contains the entire understanding with the Executive
with respect to its subject manner and supersedes any and all prior agreements
or understandings, written or oral, relating to the subject matter. No
provisions of this Agreement may be amended unless such amendment is agreed to
in writing signed by the Executive and the Company.
(b) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(c) This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same Agreement.
(d) The Company may withhold from any benefits payable under this Agreement
all Federal, state, local, or other taxes as shall be required pursuant to any
law or governmental regulation or ruling.
(e) The captions of this Agreement are not part of its provisions and shall
have no force or effect.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered as of the day and year first above set forth.
TECUMSEH PRODUCTS COMPANY
By:
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Its:
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EXECUTIVE:
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[name]
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