CHANGE IN CONTROL/SEVERANCE AGREEMENT
EXHIBIT 10.11
THIS AGREEMENT, dated [___], 2007, is made by and between Guaranty Financial Group
Inc., a Delaware corporation (the “Company”), Temple-Inland Inc., a Delaware corporation
(“Temple-Inland”), and «First_Name» «Last_Name» (the “Executive”).
WHEREAS, the Executive currently is employed by and a party to a Change in Control Agreement
(the “Existing CIC Agreement”) with Temple-Inland;
WHEREAS, Temple-Inland has determined that it is appropriate, desirable and in the best
interests of Temple-Inland and its stockholders to effect (i) a spinoff to the Temple-Inland
stockholders of the stock of the Company, (ii) a spinoff to the Temple-Inland stockholders of a
subsidiary holding Temple-Inland’s real estate operations, and (iii) a sale of Temple-Inland’s
timberland holdings to an unrelated third party;
WHEREAS, the Company considers it essential to the best interests of its stockholders to
xxxxxx the continued employment of key management personnel following the effective time of the
spinoff of the Company (the “Separation”);
WHEREAS, effective as of the Separation, the parties intend for the Existing CIC Agreement to
cease to be of any force or effect;
WHEREAS, the Board recognizes that, as is the case with many publicly held corporations, the
possibility of a Change in Control exists and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or distraction of
management personnel to the detriment of the Company and its stockholders; and
WHEREAS, the Board has determined that appropriate steps should be taken (i) to ensure that
the Executive receive the protections afforded under the Existing CIC Agreement for the two-year
period beginning on the date of the Separation and (ii) thereafter to reinforce and encourage the
continued attention and dedication of members of the Company’s management, including the Executive,
to their assigned duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control following such two-year period;
NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained,
the Company, Temple-Inland (solely for purposes of Section 6.1(C) hereof and the last sentence of
Section 2 hereof) and the Executive hereby agree as follows:
1. Defined Terms. The definitions of capitalized terms used in this Agreement are provided in
the last Section hereof.
2. Term of Agreement. The Term of this Agreement shall commence on the date of the Separation
(the “Effective Date”) and shall continue in effect through the second anniversary of the Effective
Date (such two-year period, the “Initial Term”); provided, however, that commencing on the first
anniversary of the Effective Date, and on each anniversary of the
Effective Date thereafter, the Term shall automatically be extended for one additional year unless,
not later than 90 days prior to each such date, the Company or the Executive shall have given
notice not to extend the Term; and provided, further, that if a Change in Control shall have
occurred during the Term, the Term shall expire no earlier than 24 months beyond the month in which
such Change in Control occurred. Effective as of the Effective Date, the Existing CIC Agreement
shall terminate and shall cease to be of any further force or effect and the Executive waives all
rights that may have accrued thereunder.
3. Company’s Covenants Summarized. In order to induce the Executive to remain in the employ of
the Company and in consideration of the Executive’s covenants set forth in Section 4 hereof, the
Company agrees, under the conditions described herein, to pay the Executive the Severance Payments
and the other payments and benefits described herein. No Severance Payments shall be payable under
this Agreement unless there shall have been a termination of the Executive’s employment during the
Initial Term by the Company without Cause or by the Executive with Good Reason or unless there
shall have been (or, under the terms of the second sentence of Section 6.1 hereof, there shall be
deemed to have been) a termination of the Executive’s employment with the Company following and
within two years after a Change in Control and during the Term. This Agreement shall not be
construed as creating an express or implied contract of employment and, except as otherwise agreed
in writing between the Executive and the Company, the Executive shall not have any right to be
retained in the employ of the Company.
4. The Executive’s Covenants. The Executive agrees that, subject to the terms and conditions
of this Agreement, in the event of a Potential Change in Control during the Term, the Executive
will remain in the employ of the Company until the earliest of (i) a date which is six months from
the date of such Potential Change of Control, (ii) the date of a Change in Control, (iii) the date
of termination by the Executive of the Executive’s employment for Good Reason or by reason of
death, Disability or Retirement, or (iv) the termination by the Company of the Executive’s
employment for any reason.
5. Compensation Other Than Severance Payments.
5.1 During the Initial Term or otherwise following a Change in Control and during the Term,
during any period that the Executive fails to perform the Executive’s full-time duties with the
Company as a result of incapacity due to physical or mental illness, the Company shall pay the
Executive’s full salary to the Executive at the rate in effect at the commencement of any such
period, together with all compensation and benefits payable to the Executive under the terms of any
compensation or benefit plan, program or arrangement maintained by the Company during such period
(other than any disability plan), until the Executive’s employment is terminated by the Company for
Disability.
5.2 If the Executive’s employment shall be terminated for any reason during the Initial Term
or otherwise following a Change in Control and during the Term, the Company shall pay the
Executive’s full salary to the Executive through the Date of Termination at the Executive’s then
current salary (determined without regard to any reduction constituting Good Reason) together with
all compensation and benefits payable to the Executive through the Date of Termination
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under the terms of the Company’s compensation and benefit plans, programs or arrangements as in
effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in
effect immediately prior to the first occurrence of an event or circumstance constituting Good
Reason.
5.3 If the Executive’s employment shall be terminated for any reason during the Initial Term
and otherwise following a Change in Control and during the Term, the Company shall pay to the
Executive the Executive’s normal post-termination compensation and benefits as such payments become
due. Such post-termination compensation and benefits shall be determined under, and paid in
accordance with, the Company’s retirement, insurance and other compensation or benefit plans,
programs and arrangements as in effect immediately prior to the Date of Termination or, if more
favorable to the Executive, as in effect immediately prior to the occurrence of the first event or
circumstance constituting Good Reason.
5.4 For the two-year period commencing immediately following a Change in Control and during
the Initial Term, the Company agrees (A) to provide the Executive with benefits substantially
similar to the material benefits provided to the Executive under any of the Company’s executive
compensation (including bonus, equity or incentive compensation), pension, savings, life insurance,
medical, health and accident, or disability plans in which the Executive was participating
immediately prior to the Change in Control (or, during the Initial Term, immediately after the
Separation), and to provide the Executive with a number of vacation days that would be no less
favorable to the Executive than the number determined in accordance with the vacation policy in
effect immediately prior to the Change in Control (or, during the Initial Term, immediately after
the Separation) on the basis of the Executive’s years of service with the Company, (B) to timely
pay to the Executive any portion of the Executive’s current compensation, or timely pay to the
Executive any material portion of an installment of deferred compensation under any deferred
compensation program of the Company, and (C) not to take any other action that would directly or
indirectly deprive the Executive of any material fringe benefit enjoyed by the Executive
immediately prior to the Change in Control (or, during the Initial Term, immediately after the
Separation), exclusive of any across the board reductions affecting all similarly situated
employees.
6. Severance Payments.
6.1 If the Executive’s employment is terminated either during the Initial Term or otherwise
following a Change in Control and within two (2) years after a Change in Control (provided that
such termination of employment constitutes a “separation from service” within the meaning of
Section 409A of the Code), in either event other than (A) by the Company for Cause, (B) by reason
of death or Disability, or (C) by the Executive without Good Reason, then the Company shall pay the
Executive the amounts, and provide the Executive the benefits, described in this Section 6.1
(“Severance Payments”) and Section 6.2, in addition to any payments and benefits to which the
Executive is entitled under Section 5 hereof. For purposes of this Agreement, the Executive’s
employment shall be deemed to have been terminated following a Change in Control by the Company
without Cause or by the Executive with Good Reason, if (i) the Executive’s employment is terminated
by the Company without Cause prior to a Change in Control (whether or not a Change in Control ever
occurs) and such termination was at the request or
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direction of a Person who has entered into an agreement with the Company the consummation of which
would constitute a Change in Control, or (ii) the Executive terminates his employment for Good
Reason prior to a Change in Control (whether or not a Change in Control ever occurs) and the
circumstance or event which constitutes Good Reason occurs at the request or direction of such
Person. For purposes of any determination regarding the applicability of the immediately preceding
sentence, any position taken by the Executive shall be presumed to be correct unless the Company
establishes to the Board by clear and convincing evidence that such position is not correct.
(A) In lieu of any further salary payments to the Executive for periods subsequent to
the Date of Termination, the Company shall pay to the Executive a lump sum severance
payment, in cash, equal to two (2) times the sum of (i) the Executive’s highest base salary
as in effect during the three-year period ending immediately prior to the Date of
Termination (including, if the Date of Termination occurs within three years after the
Effective Date, salary paid in respect of employment by Temple-Inland or its Affiliates
during such three-year period) and (ii) the Executive’s target annual bonus pursuant to any
annual bonus or incentive plan maintained by the Company in respect of the fiscal year in
which occurs the Date of Termination (or, if higher, the greatest actual annual bonus in
respect of any of the three preceding fiscal years (including as applicable, with respect to
years ending at or before the Effective Date, annual bonuses paid by Temple-Inland)).
(B) For the two-year period immediately following the Date of Termination, the Company
shall arrange to provide the Executive and his dependents life, accidental death and
dismemberment, medical and dental benefits substantially similar to those provided to the
Executive and his dependents immediately prior to the Date of Termination or, if more
favorable to the Executive, those provided to the Executive and his dependents immediately
prior to the first occurrence of an event or circumstance constituting Good Reason, at no
greater cost to the Executive than the cost to the Executive immediately prior to such date
or occurrence; provided, however, that such health and welfare benefits shall be provided
through an arrangement that satisfies the requirements of Sections 105 and 106 of the Code.
To the extent that health and welfare benefits of the same type are received by or made
available to the Executive during the two-year period following the Executive’s Date of
Termination (which such benefits received by or made available to the Executive shall be
reported by the Executive to the insurance company or other appropriate party in accordance
with any applicable coordination of benefits provisions), the benefits otherwise receivable
by the Executive pursuant to this Section 6.1(B) shall be made secondary to such benefits;
provided, however, that the Company shall reimburse the Executive for the excess, if any, of
the cost of such benefits to the Executive over such cost immediately prior to the Date of
Termination or, if more favorable to the Executive, the first occurrence of an event or
circumstance constituting Good Reason.
(C) Vesting shall accelerate and restrictions shall lapse on all unvested or restricted
equity or equity-based awards in respect of either the Company or Temple-Inland held by the
Executive as of the Date of Termination and each stock option to acquire common stock of the
Company or Temple-Inland and each stock appreciation right in respect of either the Company
or Temple-Inland held by the Executive as of the
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Date of Termination shall remain exercisable following the Date of Termination for the full
term of such option or stock appreciation right. The Company also shall cause the
subsidiary holding Temple-Inland’s real estate operations to provide that vesting shall
accelerate and restrictions shall lapse on all unvested or restricted equity or equity-based
awards in respect of such company held by the Executive as of the Date of Termination and
that each stock option to acquire common stock of such company and each stock appreciation
right in respect of such company held by the Executive as of the Date of Termination shall
remain exercisable following the Date of Termination for the full term of such option or
stock appreciation right.
(D) For purposes of determining the amount of any benefit payable to the Executive and
the Executive’s right to any benefit otherwise payable under a Pension Plan, and except to
the extent it would result in a duplication of benefits under Section 6.1(E) hereof, the
Executive shall be treated as if he had accumulated (after the Date of Termination)
twenty-four (24) additional months of service credit thereunder and had been credited during
such period with compensation at the highest rate in effect during the three-year period
ending immediately prior to the Date of Termination.
(E) In addition to the benefits to which the Executive is entitled under any defined
contribution Pension Plan, the Company shall pay the Executive a lump sum amount, in cash,
equal to the sum of (i) the amount that would have been contributed thereto or credited
thereunder by the Company on the Executive’s behalf during the two (2) years immediately
following the Date of Termination (but not including as amounts that would have been
contributed or credited an amount equal to the amount of any reduction in base salary, bonus
or other compensation that would have occurred in connection with such contribution or
credit), determined (x) as if the Executive made the maximum permissible contributions
thereto or credits thereunder during such period, (y) as if the Executive earned
compensation during such period at a rate equal to the Executive’s highest rate of
compensation (as defined in the Pension Plan) during the three-year period ending
immediately prior to the Date of Termination, and (z) without regard to any amendment to the
Pension Plan made subsequent to the Effective Date and on or prior to the Date of
Termination, which amendment adversely affects in any manner the computation of benefits
thereunder, and (ii) the excess, if any, of (x) the Executive’s account balance under the
Pension Plan as of the Date of Termination over (y) the portion of such account balance that
is nonforfeitable under the terms of the Pension Plan.
(F) Notwithstanding any provision of any annual or long-term incentive plan (exclusive
of equity-based plans) to the contrary, the Company shall pay to the Executive a lump sum
amount, in cash, equal to the sum of (i) any unpaid incentive compensation which has been
allocated or awarded to the Executive for a completed bonus cycle preceding the Date of
Termination under any such plan and which, as of the Date of Termination, is contingent only
upon the continued employment of the Executive to a subsequent date, and (ii) the aggregate
value of all contingent incentive compensation awards to the Executive for the uncompleted
period under any such plan, calculated as to each such award by multiplying the award that
the Executive would have earned on the last day of the performance award period, assuming
the achievement, at the target level, of any
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individual and corporate performance goals established with respect to such award,
multiplied by the fraction obtained by dividing the number of full months and any fractional
portion of a month during such performance award period through the Date of Termination by
the total number of months contained in such performance award period (or if such fraction
is greater than 1/2, multiplied by one (1)).
(G) The Company shall reimburse the Executive for expenses incurred for outplacement
services suitable to the Executive’s position for a period of one (1) year following the
Date of Termination (or, if earlier, until the first acceptance by the Executive of an offer
of employment) in an amount not exceeding 15% of the sum of the Executive’s highest annual
base rate of salary as in effect during the three-year period ending immediately prior to
the Date of Termination (including, if the Date of Termination occurs within three years
after the Effective Date, salary paid in respect of employment by Temple-Inland or its
Affiliates during such three-year period), and the greatest target annual bonus pursuant to
any annual bonus or incentive plan maintained by the Company in respect of the fiscal year
in which occurs the Date of Termination (or, if higher, the highest actual annual bonus in
respect of any of the three preceding fiscal years (including as applicable, with respect to
years ending at or before the Effective Date, annual bonuses paid by Temple-Inland)), which
payment shall be made as soon as practicable but in any event within thirty (30) business
days following the date of request for reimbursement. Subject to the foregoing, in no event
shall any payment described in this Section 6.1(G) be made after the end of the calendar
year following the calendar year in which the expenses were incurred.
(H) For the two-year period immediately following the Date of Termination, the Company
shall provide the Executive with perquisites (such as any use of a Company provided
automobile, club membership fee reimbursements, income tax preparation and financial
advisory services) that were applicable immediately prior to the Date of Termination or, if
more favorable, immediately prior to the first occurrence of an event or circumstance
constituting Good Reason, provided that in no event shall the amount of perquisites to which
the Executive is entitled under this Section 6.1(H) for any taxable year of the Executive
affect the amount of perquisites to which the Executive is entitled under this Section
6.1(H) for any other taxable year.
6.2 Excise Tax Gross-Up.
(A) Whether or not the Executive becomes entitled to the Severance Payments, if any
payment or benefit received or to be received by the Executive in connection with a Change
in Control or the termination of the Executive’s employment (whether pursuant to the terms
of this Agreement or any other plan, arrangement or agreement with the Company, any Person
whose actions result in a Change in Control or any Person affiliated with the Company or
such Person) (all such payments and benefits, including the Severance Payments, being
hereinafter called “Total Payments”) will be subject (in whole or part) to the Excise Tax,
then, subject to the provisions of subsection (B) of this Section 6.2, the Company shall pay
to the Executive an additional amount (the “Gross-Up Payment”) such that the net amount
retained by the Executive, after deduction of any
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Excise Tax on the Total Payments and any federal, state and local income and employment
taxes and Excise Tax upon the Gross-Up Payment, shall be equal to the Total Payments.
(B) In the event that the amount of the Total Payments does not exceed 110% of the
largest amount that would result in no portion of the Total Payments being subject to the
Excise Tax (the “Safe Harbor”), then subsection (A) of this Section 6.2 shall not apply and
the noncash Severance Payments shall first be reduced (if necessary, to zero), and the cash
Severance Payments shall thereafter be reduced (if necessary, to zero) so that the amount of
the Total Payments is equal to the Safe Harbor; provided, however, that, to the extent
permitted by Section 409A of the Code, the Executive may elect to have the cash Severance
Payments reduced (or eliminated) prior to any reduction of the noncash Severance Payments.
(C) For purposes of determining whether any of the Total Payments will be subject to
the Excise Tax and the amount of such Excise Tax, (i) all of the Total Payments shall be
treated as “parachute payments” within the meaning of Section 280G(b)(2) of the Code, unless
in the opinion of tax counsel (“Tax Counsel”) reasonably acceptable to the Executive and
selected by the accounting firm which was, immediately prior to the Change in Control, the
Company’s independent auditor (the “Auditor”), such other payments or benefits (in whole or
in part) do not constitute parachute payments, including by reason of Section 280G(b)(4)(A)
of the Code, (ii) all “excess parachute payments” within the meaning of Section 280G(b)(l)
of the Code shall be treated as subject to the Excise Tax unless, in the opinion of Tax
Counsel, such excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of
the Code, in excess of the Base Amount allocable to such reasonable compensation, or are
otherwise not subject to the Excise Tax, and (iii) the value of any noncash benefits or any
deferred payment or benefit shall be determined by the Auditor in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code. Prior to the payment date set forth
in Section 6.3 hereof, the Company shall provide the Executive with its calculation of the
amounts referred to in this Section 6.2(C) and such supporting materials as are reasonably
necessary for the Executive to evaluate the Company’s calculations. If the Executive
disputes the Company’s calculations (in whole or in part), the reasonable opinion of Tax
Counsel with respect to the matter in dispute shall prevail.
(D) (I) In the event that (1) amounts are paid to the Executive pursuant to Section
6.2(A), (2) there is a Final Determination that the Excise Tax is less than the
amount taken into account hereunder in calculating the Gross-Up Payment, and (3)
after giving effect to such Final Determination, the Severance Payments are to be
reduced pursuant to Section 6.2(B), the Executive shall repay to the Company, within
five (5) business days following the date of the Final Determination, the Gross-Up
Payment, the amount of the reduction in the Severance Payments, plus interest on the
amount of such repayments at 120% of the rate provided in Section 1274(b)(2)(B) of
the Code.
(II) In the event that (1) amounts are paid to the Executive pursuant to
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Section 6.2(A), (2) there is a Final Determination that the Excise Tax is less than
the amount taken into account hereunder in calculating the Gross-Up Payment, and (3)
after giving effect to such Final Determination, the Severance Payments are not to
be reduced pursuant to Section 6.2(B), the Executive shall repay to the Company,
within five (5) business days following the date of the Final Determination, the
portion of the Gross-Up Payment attributable to such reduction (plus that portion of
the Gross-Up Payment attributable to the Excise Tax and federal, state and local
income and employment taxes imposed on the Gross-Up Payment being repaid by the
Executive), to the extent that such repayment results in a reduction in the Excise
Tax and a dollar-for-dollar reduction in the Executive’s taxable income and wages
for purposes of federal, state and local income and employment taxes, plus interest
on the amount of such repayment at 120% of the rate provided in Section
1274(b)(2)(B) of the Code.
(III) Except as otherwise provided in clause (IV) below, in the event there is
a Final Determination that the Excise Tax exceeds the amount taken into account
hereunder in determining the Gross-Up Payment (including by reason of any payment
the existence or amount of which cannot be determined at the time of the Gross-Up
Payment), the Company shall pay to the Executive, within five (5) business days
following the date of the Final Determination, the sum of (1) a Gross-Up Payment in
respect of such excess and in respect of any portion of the Excise Tax with respect
to which the Company had not previously made a Gross-Up Payment, including a
Gross-Up Payment in respect of any Excise Tax attributable to amounts payable under
clauses (2) and (3) of this paragraph (III) (plus any interest, penalties or
additions payable by the Executive with respect to such excess and such portion),
(2) if Severance Payments were reduced pursuant to Section 6.2(B) but after giving
effect to such Final Determination, the Severance Payments should not have been
reduced pursuant to Section 6.2(B), the amount by which the Severance Payments were
reduced pursuant to Section 6.2(B), and (3) interest on such amounts at 120% of the
rate provided in Section 1274(b)(2)(B) of the Code.
(IV) In the event that (1) Severance Payments were reduced pursuant to Section
6.2(B) and (2) the aggregate value of Total Payments which are considered “parachute
payments” within the meaning of Section 280G(b)(2) of the Code is subsequently
redetermined in a Final Determination, but such redetermined value still does not
exceed 110% of the Safe Harbor, then, within five (5) business days following such
Final Determination, (x) the Company shall pay to the Executive the amount (if any)
by which the reduced Severance Payments (after taking the Final Determination into
account) exceeds the amount of the reduced Severance Payments actually paid to the
Executive, plus interest on the amount of such repayment at 120% of the rate
provided in Section 1274(b)(2)(B) of the Code, or (y) the Executive shall pay to the
Company the amount (if any) by which the reduced Severance Payments actually paid to
the Executive exceeds the amount of the reduced Severance Payments (after taking the
Final Determination into account), plus interest on the amount of such repayment at
120% of the rate provided in
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Section 1274(b)(2)(B) of the Code.
6.3 The payments provided in subsections (A), (E) and (F) of Section 6.1 hereof shall be made
as soon as practicable (but in any event not later than the fifth day) following the Date of
Termination; provided that, to the extent required to satisfy the provisions of Section
409A(a)(2)(B)(i) of the Code, such payments shall be made not earlier than but as soon as
practicable on or in any event within five days after (with interest at the 6-month certificate of
deposit rate published in The Wall Street Journal on the Date of Termination (or if not published
on that date, on the next following date when published) or, if less, the maximum rate that will
avoid, if applicable, the imposition of any additional excise taxes under Section 4999 of the Code
(the “409A Interest Rate”)) the date that is six (6) months after the Date of Termination (the
“409A Payment Date”)). The payments provided in Section 6.2 hereof shall be made on or as soon as
practicable following the day on which the Excise Tax is remitted (but not later than the end of
the taxable year following the year in which the Excise Tax is incurred). If the amounts of the
payments described in the preceding provisions of this Section 6.3 cannot be finally determined on
or before the date payment is to be made, the Company shall pay to the Executive (or shall cause
the grantor trust described in Section 6.5 to pay to the Executive) on such day an estimate, as
determined in good faith by the Executive or, in the case of payments under Section 6.2 hereof, in
accordance with Section 6.2 hereof, of the minimum amount of such payments to which the Executive
is clearly entitled and shall pay (or cause to be paid) the remainder of such payments (together
with interest on the unpaid remainder (or on all such payments to the extent the Company fails to
make such payments when due) at 120% of the rate provided in Section 1274(b)(2)(B) of the Code) as
soon as the amount thereof can be determined but in no event later than the 30th day after the date
payment is to be made. In the event that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall constitute a loan by the Company to the
Executive, payable on the fifth business day after demand by the Company (together with interest at
120% of the rate provided in Section 1274(b)(2)(B) of the Code). At the time that payments are made
under this Agreement, the Company shall provide the Executive with a written statement setting
forth the manner in which such payments were calculated and the basis for such calculations
including, without limitation, any opinions or other advice the Company has received from Tax
Counsel, the Auditor or other advisors or consultants (and any such opinions or advice which are in
writing shall be attached to the statement). To the extent the benefits to be made available under
subsections (B) and (H) of Section 6.1 hereof are not medical expenses within the meaning of Treas.
Reg. § 1.409A-1(b)(9)(v)(B) and are not short-term deferrals within the meaning of Section 409A of
the Code, then to the extent the fair market value of such benefits during the first six months
following the Date of Termination exceeds two times the lesser of the Executive’s annualized
compensation based upon the Executive’s annual rate of pay for services during the taxable year of
the Executive preceding the year in which the Date of Termination occurs (adjusted for any increase
during that year that was expected to continue indefinitely had no separation from service
occurred) or the maximum amount that may be taken into account under a qualified plan pursuant to
Section 401(a)(17) of the Code for the year in which the Date of Termination occurs, the Executive
shall pay to the Company, at the time such benefits are provided, the fair market value of such
benefits, and the Company shall reimburse the Executive for any such payment not later than the
fifth day following the expiration of such six-month period; provided, however, that this
requirement for payment by the Executive and reimbursement by the Company shall apply solely to the
extent required by Section 409A(a)(2)(B)(i) of the Code.
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6.4 The Company also shall pay to the Executive all legal fees and expenses incurred by the
Executive in disputing in good faith any issue hereunder relating to the termination of the
Executive’s employment, in seeking in good faith to obtain or enforce any benefit or right provided
by this Agreement or in connection with any tax audit or proceeding to the extent attributable to
the application of Section 4999 of the Code to any payment or benefit provided hereunder. Such
payments shall be made within five business days after delivery of the Executive’s written requests
for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably
may require (but in no event shall any such payment be made after the end of the calendar year
following the calendar year in which the expenses were incurred), provided that no such payment
shall be made in respect of fees or expenses incurred by the Executive after the later of the tenth
anniversary of the Date of Termination or the Executive’s death, and provided further, that, upon
the Executive’s separation from service with the Company, in no event shall any additional such
payments be made prior to the date that is six months after the date of the Executive’s separation
from service to the extent such payment delay is required under Section 409A(a)(2)(B)(i) of the
Code.
6.5 To the extent that the payment of any amount due under subsections (A), (E) or (F) of
Section 6.1 hereof is delayed by reason of Section 409A(a)(2)(B)(i) of the Code, the Company shall,
on or as soon as practicable after the Date of Termination, contribute the amounts otherwise
payable pursuant to subsections (A), (E) and (F) of Section 6.1 hereof, together with six months
interest thereon at the 409A Interest Rate (as defined in Section 6.3 hereof), to a grantor
(“rabbi”) trust of which the Executive is the sole beneficiary (subject to the claims of the
Company’s creditors, as required pursuant to applicable Internal Revenue Service guidance to
prevent the imputation of income to the Executive prior to distribution from the trust), pursuant
to which the amounts payable pursuant to subsections (A), (E) and (F) of Section 6.1 hereof shall
be payable from the trust, together with the appropriate amount of interest at the 409A Interest
Rate (as defined in Section 6.3 hereof), on or as soon as practicable and in any event within five
days after the Section 409A Payment Date (as defined in Section 6.3 hereof), provided that to the
extent such amount is paid to the Executive by the Company, the trust shall pay such amount to the
Company.
7. Termination Procedures and Compensation During Dispute.
7.1. Notice of Termination. During the Initial Term and otherwise after a Change in Control
and during the Term, any purported termination of the Executive’s employment (other than by reason
of death) shall be communicated by written Notice of Termination from one party hereto to the other
party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a “Notice of
Termination” shall mean a notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive’s employment under the provision so indicated.
For purposes of this Agreement, any purported termination of the Executive’s employment shall be
presumed to be other than for Cause unless the Notice of Termination includes a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire
membership of the Board at a meeting of the Board which was called and held for the purpose of
considering such termination (after reasonable notice to the Executive and an opportunity for the
Executive, together with the Executive’s counsel, to be heard
10
before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of
conduct set forth in clause (i) or (ii) of the definition of Cause herein, and specifying the
particulars thereof in detail.
7.2 Date of Termination. “Date of Termination,” with respect to any purported termination of
the Executive’s employment during the Initial Term or after a Change in Control and during the
Term, shall mean (i) if the Executive’s employment is terminated for Disability, 30 days after
Notice of Termination is given (provided that the Executive shall not have returned to the
full-time performance of the Executive’s duties during such 30 day period), and (ii) if the
Executive’s employment is terminated for any other reason, the date specified in the Notice of
Termination (which, in the case of a termination by the Company, shall not be less than 30 days
(except in the case of a termination for Cause) and, in the case of a termination by the Executive,
shall not be less than 15 days nor more than 60 days, respectively, from the date such Notice of
Termination is given, provided that, in the case of a termination by the Executive, the Company may
require a Date of Termination earlier than that specified in the Notice of Termination upon payment
to the Executive of the full amount of base salary that would have been paid to the Executive had
the Executive continued employment between the actual Date of Termination and the Date of
Termination specified in the Notice of Termination).
7.3 Dispute Concerning Termination. If within 15 days after any Notice of Termination is
given, or, if later, prior to the Date of Termination (as determined without regard to this Section
7.3), the party receiving such Notice of Termination notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be extended until the earlier of (i) the
date on which the Term ends or (ii) the date on which the dispute is finally resolved, either by
mutual written agreement of the parties or by a final judgment, order or decree of an arbitrator or
a court of competent jurisdiction (which is not appealable or with respect to which the time for
appeal therefrom has expired and no appeal has been perfected); provided, however, that the Date of
Termination shall be extended by a notice of dispute given by the Executive only if such notice is
given in good faith and the Executive pursues the resolution of such dispute with reasonable
diligence.
7.4 Compensation During Dispute. If a purported termination occurs during the Initial Term or
otherwise following a Change in Control and during the Term and the Date of Termination is extended
in accordance with Section 7.3 hereof, the Company shall continue to pay the Executive the full
compensation in effect when the notice giving rise to the dispute was given (including, but not
limited to, salary) and continue the Executive as a participant in all compensation, benefit and
insurance plans in which the Executive was participating when the notice giving rise to the dispute
was given, until the Date of Termination, as determined in accordance with Section 7.3 hereof.
Amounts paid under this Section 7.4 are in addition to all other amounts due under this Agreement
(other than those due under Section 5.2 hereof) and shall not be offset against or reduce any other
amounts due under this Agreement.
8. No Mitigation. The Company agrees that, if the Executive’s employment with the Company
terminates during the Term, the Executive is not required to seek other employment or to attempt in
any way to reduce any amounts payable to the Executive by the Company pursuant to Section 6 hereof
or Section 7.4 hereof. Further, the amount of any payment or benefit provided for
11
in this Agreement (other than Section 6.1(B) hereof) shall not be reduced by any compensation
earned by the Executive as the result of employment by another employer, by retirement benefits, by
offset against any amount claimed to be owed by the Executive to the Company, or otherwise.
9. Successors; Binding Agreement.
9.1 The Company will require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or assets of the
Company to be obligated to perform this Agreement (whether by reason of express assumption by the
successor or by operation of law) in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place.
9.2 This Agreement shall inure to the benefit of and be enforceable by the Executive’s
personal or legal representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive shall die while any amount would still be payable to the
Executive hereunder (other than amounts which, by their terms, terminate upon the death of the
Executive) if the Executive had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to the executors, personal
representatives or administrators of the Executive’s estate.
10. Notices. For the purpose of this Agreement, notices and all other communications provided
for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered
or mailed by United States registered mail, return receipt requested, postage prepaid, addressed,
if to the Executive, to the address of the Executive as maintained from time to time on the payroll
system of the Company and, if to the Company, to the address set forth below, or to such other
address as either party may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon actual receipt:
To the Company:
0000 Xxxxx Xxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: General Counsel
0000 Xxxxx Xxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: General Counsel
11. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is agreed to in writing and signed by the Executive and such
officer as may be specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or of any lack of compliance with, any condition
or provision of this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This
Agreement supersedes any other agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof which have been made by the Executive or the
Company (including without limitation the Existing CIC Agreement); provided, however, that this
Agreement shall supersede any agreement setting forth the terms and conditions of the Executive’s
employment with the Company only in the event that the Executive’s employment with the Company is
terminated during the Initial Term or otherwise following a Change in Control, in any case by the
Company other than for Cause or by the Executive for Good
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Reason. The validity, interpretation, construction and performance of this Agreement shall be
governed by the laws of the State of Texas without regard to its principles of conflicts of law.
All references to sections of the Exchange Act or the Code shall be deemed also to refer to any
successor provisions to such sections. Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law and any additional withholding to
which the Executive has agreed. The obligations of the Company and the Executive under this
Agreement which by their nature may require either partial or total performance after the
expiration of the Term (including, without limitation, those under Sections 6 and 7 hereof) shall
survive such expiration.
12. Validity.
12.1 Any payments made to the Executive pursuant to this Agreement, or otherwise, are subject
to and conditioned upon their compliance with 12 U.S.C. Section 1828(k) and FDIC Regulation 12
C.F.R. Part 359, Golden Parachute and Indemnification Payments.
12.2 The invalidity or unenforceability of any provision of this Agreement shall not affect
the validity or enforceability of any other provision of this Agreement, which shall remain in full
force and effect.
13. Counterparts. This Agreement may be executed in several counterparts, each of which shall
be deemed to be an original but all of which together will constitute one and the same instrument.
14. Settlement of Disputes. All claims by the Executive for benefits under this Agreement
shall be directed to and determined by the Board and shall be in writing. Any denial by the Board
of a claim for benefits under this Agreement shall be delivered to the Executive in writing and
shall set forth the specific reasons for the denial and the specific provisions of this Agreement
relied upon. The Board shall afford a reasonable opportunity to the Executive for a review of the
decision denying a claim and shall further allow the Executive to appeal to the Board a decision of
the Board within 60 days after notification by the Board that the Executive’s claim has been
denied.
15. Definitions. For purposes of this Agreement, the following terms shall have the meanings
indicated below:
(A) “Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of
the Exchange Act.
(B) “Auditor” shall have the meaning set forth in Section 6.2 hereof.
(C) “Base Amount” shall have the meaning set forth in Section 280G(b)(3) of the Code.
(D) “Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the Exchange Act.
13
(E) “Board” shall mean the Board of Directors of the Company.
(F) “Cause” for termination by the Company of the Executive’s employment shall mean (i) the
willful and continued failure by the Executive to substantially perform the Executive’s duties with
the Company (other than any such failure resulting from the Executive’s incapacity due to physical
or mental illness or any such actual or anticipated failure after the issuance of a Notice of
Termination for Good Reason by the Executive pursuant to Section 7.1 hereof) after a written demand
for substantial performance is delivered to the Executive by the Board, which demand specifically
identifies the manner in which the Board believes that the Executive has not substantially
performed the Executive’s duties, or (ii) the willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company, monetarily or otherwise. For purposes of
clauses (i) and (ii) of this definition, (x) no act, or failure to act, on the Executive’s part
shall be deemed “willful” unless done, or omitted to be done, by the Executive not in good faith
and without reasonable belief that the Executive’s act, or failure to act, was in the best interest
of the Company and (y) in the event of a dispute concerning the application of this provision, no
claim by the Company that Cause exists shall be given effect unless the Company establishes to the
Board by clear and convincing evidence that Cause exists.
(G) “Change in Control” shall be deemed to have occurred if the event set forth in any one of
the following paragraphs shall have occurred:
(I) any Person is or becomes the Beneficial Owner, directly or indirectly, of
securities of the Company (not including in the securities beneficially owned by such Person
any securities acquired directly from the Company or its Affiliates) representing 20% or
more of the combined voting power of the Company’s then outstanding securities, excluding
any Person who becomes such a Beneficial Owner in connection with a transaction described in
clauses (a), (b) or (c) of paragraph (III) below;
(II) within any twenty-four (24) month period, the following individuals cease for any
reason to constitute a majority of the number of directors then serving on the Board:
individuals who, on the Effective Date, constitute the Board and any new director (other
than a director whose initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a consent solicitation, relating
to the election of directors of the Company) whose appointment or election by the Board or
nomination for election by the Company’s shareholders was approved or recommended by a vote
of at least two-thirds (2/3) of the directors then still in office who either were directors
on the date hereof or whose appointment, election or nomination for election was previously
so approved or recommended;
(III) there is consummated a merger, consolidation of the Company or any direct or
indirect subsidiary of the Company with any other corporation or any recapitalization of the
Company (for purposes of this paragraph (III), a “Business Event”) unless, immediately
following such Business Event (a) the directors of the Company immediately prior to such
Business Event continue to constitute at least a majority of the board of directors of the
Company, the surviving entity or any parent thereof, (b) the voting securities of the
Company outstanding immediately prior to such Business Event continue to represent
14
(either by remaining outstanding or by being converted into voting securities of the
surviving entity or any parent thereof), in combination with the ownership of any trustee or
other fiduciary holding securities under an employee benefit plan of the Company or any
subsidiary of the Company, at least 60% of the combined voting power of the securities of
the Company or such surviving entity or any parent thereof outstanding immediately after
such Business Event, and (c) in the event of a recapitalization, no Person is or becomes the
Beneficial Owner, directly or indirectly, of securities of the Company or such surviving
entity or any parent thereof (not including in the securities Beneficially Owned by such
Person any securities acquired directly from the Company or its Affiliates) representing 20%
or more of the combined voting power of the then outstanding securities of the Company or
such surviving entity or any parent thereof (except to the extent such ownership existed
prior to the Business Event);
(IV) the shareholders of the Company approve a plan of complete liquidation or
dissolution of the Company;
(V) there is consummated an agreement for the sale, disposition or long-term lease by
the Company of substantially all of the Company’s assets, other than (a) such a sale,
disposition or lease to an entity, at least 50% of the combined voting power of the voting
securities of which are owned by shareholders of the Company in substantially the same
proportions as their ownership of the Company immediately prior to such sale or disposition
or (b) the distribution directly to the Company’s shareholders (in one distribution or a
series of related distributions) of all of the stock of one or more subsidiaries of the
Company that represent substantially all of the Company’s assets; or
(VI) any other event that the Board, in its sole discretion, determines to be a Change
in Control for purposes of this Agreement.
Notwithstanding the foregoing, a “Change in Control” under clauses (I) through (V) above shall not
be deemed to have occurred by virtue of the consummation of 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 have substantially the
same proportionate ownership in one or more entities which, singly or together, immediately
following such transaction or series of transactions, own all or substantially all of the assets of
the Company as constituted immediately prior to such transaction or series of transactions.
(H) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.
(I) “Company” shall mean Guaranty Financial Group Inc. and, except in determining under
Section 15(G) hereof whether or not any Change in Control of the Company has occurred, shall
include any successor to its business and/or assets which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
(J) “Date of Termination” shall have the meaning set forth in Section 7.2 hereof.
15
(K) “Disability” shall be deemed the reason for the termination by the Company of the
Executive’s employment, if, as a result of the Executive’s incapacity due to physical or mental
illness, the Executive shall have been absent from the full-time performance of the Executive’s
duties with the Company for a period of six consecutive months, the Company shall have given the
Executive a Notice of Termination for Disability, and, within 30 days after such Notice of
Termination is given, the Executive shall not have returned to the full-time performance of the
Executive’s duties.
(L) “Effective Date” shall have the meaning set forth in Section 2 hereof.
(M) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to
time.
(N) “Excise Tax” shall mean any excise tax imposed under Section 4999 of the Code.
(O) “Executive” shall mean the individual named in the first paragraph of this Agreement.
(P) “Existing CIC Agreement” shall have the meaning set forth in the recitals hereof.
(Q) “Final Determination” means a final determination by the Internal Revenue Service or, if
such determination is appealed, a final determination by any court of competent jurisdiction.
(R) “Good Reason” for termination by the Executive of the Executive’s employment shall mean
the occurrence (without the Executive’s express written consent) during the Initial Term (treating
all references in paragraphs (I) through (IV) below to the period “immediately prior to the Change
in Control” as references to “immediately after the Separation”), after any Change in Control, or
prior to a Change in Control under the circumstances described in clauses (i) and (ii) of the
second sentence of Section 6.1 hereof (treating all references in paragraphs (I) through (IV) below
to a “Change in Control” as references to a “Potential Change in Control”), of any one of the
following acts by the Company, or failures by the Company to act, unless such act or failure to act
is corrected prior to the Date of Termination specified in the Notice of Termination given in
respect thereof:
(I) a material reduction in the Executive’s authority, duties or responsibilities,
which for purposes of this Agreement shall include only the assignment to the Executive of
any duties substantially inconsistent with the Executive’s status as a senior executive
officer of the Company or a material adverse alteration in the nature or status of the
Executive’s responsibilities from those in effect immediately prior to the Change in Control
(including, as applicable and without limitation, the Executive ceasing to be an executive
officer of a public company);
(II) a material diminution in base salary as in effect immediately prior to the Change
in Control;
16
(III) a material change in the geographic location at which the Executive must perform
services, which for purposes of this Agreement shall include only the relocation of the
Executive’s principal place of employment to a location more than fifty (50) miles distant
from the Company’s headquarters immediately prior to the Change in Control or the Company’s
requiring the Executive to be based anywhere other than such principal place of employment
(or permitted relocation thereof) except for reasonably required travel on the Company’s
business; or
(IV) any other action or inaction that constitutes a material breach of Section 5.4 or
9.1 of this Agreement.
The Executive’s right to terminate the Executive’s employment for Good Reason shall not be affected
by the Executive’s incapacity due to physical or mental illness. The Executive’s continued
employment shall not constitute consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder, provided that the Executive may not assert Good
Reason in respect of any act or failure to act otherwise constituting Good Reason hereunder unless
asserted in a Notice of Termination given in respect thereof within 90 days following the date of
the first occurrence of such act or failure to act. Notwithstanding the foregoing provisions of
this definition of “Good Reason,” the events described on Exhibit A hereto do not constitute “Good
Reason” for the termination of the Executive’s employment. For purposes of any determination
regarding the existence of Good Reason, any claim by the Executive that Good Reason exists shall be
presumed to be correct unless the Company establishes to the Board by clear and convincing evidence
that Good Reason does not exist.
(S) “Gross-Up Payment” shall have the meaning set forth in Section 6.2 hereof.
(T) “Initial Term” shall have the meaning set forth in Section 2 hereof.
(U) “Notice of Termination” shall have the meaning set forth in Section 7.1 hereof.
(V) “Pension Plan” shall mean any nonqualified, supplemental or excess benefit pension plan
maintained by the Company and any other plan or agreement entered into between the Executive and
the Company which is designed to provide the Executive with supplemental retirement benefits, and
any nonqualified, supplemental or excess defined contribution plan maintained by the Company and
any other defined contribution plan or agreement entered into between the Executive and the
Company.
(W) “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified
and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the
Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its Affiliates, (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a corporation owned,
directly or indirectly, by the stockholders of the Company in substantially the same proportions as
their ownership of stock of the Company.
(X) “Potential Change in Control” shall be deemed to have occurred if the event set
17
forth in any one of the following paragraphs shall have occurred:
(I) the Company enters into an agreement, the consummation of which would result in the
occurrence of a Change in Control;
(II) the Company or any Person publicly announces an intention to take or to consider
taking actions which, if consummated, would constitute a Change in Control;
(III) any Person becomes the Beneficial Owner, directly or indirectly, of securities of
the Company 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 securities
(not including in the securities beneficially owned by such Person any securities acquired
directly from the Company or its Affiliates); or
(IV) the Board adopts a resolution to the effect that, for purposes of this Agreement,
a Potential Change in Control has occurred.
(Y) “Retirement” shall be deemed the reason for the termination by the Executive of the
Executive’s employment if such employment is terminated in accordance with the Company’s retirement
policy, including early retirement, generally applicable to its salaried employees.
(Z) “Separation” shall have the meaning set forth in the recitals hereof.
(AA) “Severance Payments” shall have the meaning set forth in Section 6.1 hereof.
(BB) “Tax Counsel” shall have the meaning set forth in Section 6.2 hereof.
(CC) “Temple-Inland” has the meaning set forth in the introduction of this Agreement.
(DD) “Term” shall mean the period of time described in Section 2 hereof (including any
extension, continuation or termination described therein).
(EE) “Total Payments” shall mean those payments so described in Section 6.2 hereof.
18
IN WITNESS WHEREOF, the parties have duly executed this Agreement to be effective as of the
Effective Date.
| GUARANTY FINANCIAL GROUP INC. | ||||
| Title: President and CEO | ||||
| TEMPLE-INLAND INC. | ||||
| Title: Vice President and Secretary | ||||
| EXECUTIVE | ||||
19
EXHIBIT A
PERMITTED EVENTS
For the avoidance of doubt, Good Reason shall not include any direct or indirect consequence of the
establishment of any of the following compensation and benefit arrangements of the Company as of
the Separation (including by virtue of the fact that such compensation and benefit arrangements may
differ from those in effect at Temple-Inland before the Separation):
| 1. | Base salary | ||
| 2. | Annual bonus and other short-term incentive benefits | ||
| 3. | Savings plan (including 401(k) and supplemental plan benefits) | ||
| 4. | Retirement benefits (including supplemental plan benefits) | ||
| 5. | Health and other welfare benefits | ||
| 6. | Long-term incentive plan benefits |
For the avoidance of doubt, the Executive also may not assert Good Reason by reason of the nature
of the Executive’s position and duties at the time of the Separation (including any changes from
the Executive’s position and duties before the Separation). The Executive also may not assert Good
Reason by reason of any relocation of the Company’s headquarters within the Austin, Texas
metropolitan area during the Initial Term.
20
