1 Exhibit 10(k)
TERMINATION BENEFITS AGREEMENT
THIS AGREEMENT, dated as of the ____ day of ___________,
199___, is by and between XxXxxxxxx Xxxxxxx Corporation, a Maryland
corporation (hereinafter referred to as the "Company"), and
________________ (hereinafter the "Executive").
RECITALS:
A. The Board of Directors of the Company (the "Board")
considers it essential to the best interests of the Company and its
shareholders that its key management personnel be encouraged to remain
with the Company and its subsidiaries and to continue to devote full
attention to the Company's business in the event that any third person
expresses its intention to complete a possible business combination with
the Company, or in taking any other action which could result in a change
in control of the Company. In this connection, the Board recognizes that
the possibility of a change in control and the uncertainty and questions
which it may raise among management may result in the departure or
distraction of key management personnel to the detriment of the Company
and its shareholders. The Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of key members of the Company's management to their assigned
duties without distraction in the face of the potentially disturbing
circumstances arising from the possibility of a change in control of the
Company.
B. The Executive currently serves as a key executive of the
Company and his or her services and knowledge are valuable to the Company
in connection with the management of one or more of the Company's
principal operating facilities, divisions, subsidiaries or functions.
C. The Board believes the Executive has made and is expected
to continue to make valuable contributions to the productivity and
profitability of the Company and its subsidiaries.
D. Should the Company receive any proposal from a third
person concerning a possible business combination or any other action
which could result in a change in control of the Company, the Board
believes it imperative that the Company and the Board be able to rely
upon the Executive to continue in his or her position, and that the
Company and the Board be able to receive and rely upon his or her advice,
if so requested, as to the best interests of the Company and its
shareholders without concern that he or she might be distracted by the
personal uncertainties and risks created by such a proposal, and to
encourage Executive's full attention and dedication to the Company.
E. Should the Company receive any such proposal, in addition
to the Executive's regular duties, the Executive may be called upon to
assist in the assessment of such proposal, advise management and the
Board as to whether such proposal would be in the best interests of the
Company and its shareholders, and to take such other actions as the Board
might determine to be necessary or appropriate.
2
TERMS AND CONDITIONS:
NOW, THEREFORE, to assure the Company and its subsidiaries that
it will have the continued, undivided attention, dedication and services
of the Executive and the availability of the Executive's advice and
counsel notwithstanding the possibility, threat or occurrence of a change
in control of the Company, and to induce the Executive to remain in the
employ of the Company and its subsidiaries, and for other good and
valuable consideration, the adequacy and sufficiency of which are hereby
acknowledged, the Company and the Executive agree as follows:
(1) Change in Control
-----------------
For purposes of this Agreement, a "Change in Control" of the
Company shall be deemed to have occurred upon (a) the acquisition at any
time by a "person" or "group" (as that term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) (excluding, for this purpose, the Company or any
subsidiary or any employee benefit plan of the Company or any subsidiary)
of beneficial ownership (as defined in Rule 13d-3 under the Exchange Act)
directly or indirectly, of securities representing 20% or more of the
combined voting power in the election of directors of the then-
outstanding securities of the Company or any successor of the Company;
(b) the termination of service as directors, for any reason other than
death, disability or retirement from the Board in accordance with
Resolution 706 of the Board, as it may be amended or superseded, during
any period of two consecutive years or less, of individuals who at the
beginning of such period constituted a majority of the Board, unless the
election of or nomination for election of each new director during such
period was approved by a vote of at least two-thirds of the directors
still in office who were directors at the beginning of the period; (c)
approval by the shareholders of the Company of liquidation of the Company
or any sale or disposition, or series of related sales or dispositions,
of 50% or more of the assets or earning power of the Company; or (d)
approval by the shareholders of the Company and consummation of any
merger or consolidation or statutory share exchange to which the Company
is a party as a result of which the persons who were shareholders of the
Company immediately prior to the effective date of the merger or
consolidation or statutory share exchange shall have beneficial ownership
of less than 50% of the combined voting power in the election of
directors of the surviving corporation following the effective date of
such merger or consolidation or statutory share exchange. A "Change in
Control" shall not include any reduction in ownership of an affiliate of
the Company so long as the entity continues to meet the definitions of
those terms as contained in this Section.
(2) Adjustment of Benefits upon Change in Control
---------------------------------------------
(a) The Company agrees that its Management Compensation and
Succession Committee or such other committee succeeding to such
committee's responsibilities with respect to executive compensation
(collectively, the "Compensation Committee") shall make such equitable
adjustments to any performance targets contained in any awards under the
3
Company's Performance Sharing Plan (the "PSP") or Senior Executive
Performance Sharing Plan (the "Senior Executive PSP") or any successor
plan in which the Executive is a participant, as may be required to
eliminate any negative effects from any transactions relating to a Change
in Control (such as costs or expenses associated with the transaction or
any related transaction, including, without limitation, any
reorganizations, divestitures, recapitalizations or borrowings, or
changes in targets or measures to reflect the disruption of the business,
etc.), in order to preserve reward opportunities and performance
objectives.
(b) The Company agrees that in the case of a Change in
Control, all restrictions and conditions applicable to any awards of
restricted stock or stock options or other awards granted to the
Executive under the Company's 1994 Performance and Equity Incentive Plan
shall be deemed to have been satisfied as of the date the Change in
Control occurs, and this Agreement shall be deemed to amend any
agreements evidencing such awards to reflect this provision.
3. Termination Following Change in Control
---------------------------------------
(a) If any of the events described in Section 1 hereof
constituting a Change in Control of the Company shall have occurred, the
Executive shall be entitled to the benefits set forth herein upon any
termination by the Company of the Executive's employment with the Company
and its subsidiaries within two years following a Change in Control for
any reason except any of the following:
(i) Termination by reason of the Executive's death,
provided the Executive has not previously given a "Notice of Termination"
pursuant to Section 4;
(ii) Termination by reason of the Executive's
"disability," provided the Executive has not previously given a "Notice
of Termination" pursuant to Section 4. For the purposes of this
Agreement, "disability" shall be defined as the Executive's inability by
reason of illness or other physical or mental disability to perform the
principal duties required by the position held by the Executive at the
inception of such illness or disability for any consecutive 180-day
period. A determination of "disability" shall be subject to the
certification of a qualified medical doctor agreed to by the Company and
the Executive or, in the Executive's incapacity to designate a doctor,
the Executive's legal representative. If the Company and the Executive
cannot agree on the designation of a doctor, each party shall nominate a
qualified medical doctor and the two doctors shall select a third doctor;
the third doctor shall make the determination as to "disability";
(iii) Termination by reason of retirement in accordance
with and under the Company's Employee Retirement Income Plan -- Salaried
Plan, or such of the Company's other salaried employee tax-qualified
retirement plans in which the Executive participates (or any plans in
substitution thereof) as in effect on the date of this Agreement
(collectively, the "Retirement Plan"), provided the Executive has not
previously given Notice of Termination pursuant to Section 4; or
4
(iv) Termination by the Company for "Cause". For
purposes of this Agreement, "Cause" shall mean (A) any act or acts by the
Executive constituting a felony under applicable law; (B) any act or acts
of gross dishonesty or gross misconduct on the Executive's part which
result or are intended to result directly or indirectly in gain or
personal enrichment at the expense of the Company or its subsidiaries to
which the Executive is not legally entitled; or (C) any material
violation by the Executive of his or her obligations under this Agreement
(other than any violation resulting from the Executive's incapacity due
to physical or mental illness), which violation is demonstrably willful
and deliberate on the Executive's part and which results in material
damage to the business or reputation of the Company or its subsidiaries.
Notwithstanding the foregoing, the employment of the Executive shall in
no event be deemed to have been terminated by the Company for "Cause" if
termination of his or her employment by the Company took place: (i) as
the result of bad judgment or negligence on the part of the Executive
other than gross negligence; (ii) because of an act or omission believed
by the Executive in good faith to have been in or not opposed to the
interests of the Company and its subsidiaries; (iii) for any act or
omission in respect of which a determination could properly be made that
the Executive met the applicable standard of conduct prescribed for
indemnification or reimbursement or payment of expenses under the charter
or bylaws of the Company or the laws of the state of incorporation of the
Company, in each case as in effect at the time of such act or omission;
(iv) as the result of an act or omission which occurred more than twelve
calendar months prior to the Executive's having been given Notice of
Termination (as defined below) for such act or omission unless the
commission of such act or omission could not at the time of such
commission or omission have been known to a member of the Board (other
than the Executive, if he or she is then a member of the Board), in which
case more than twelve calendar months from the date that the commission
of such act or such omission was or could reasonably have been so known;
or (v) as the result of a continuing course of action which commenced and
was or could reasonably have been known to a member of the Board (other
than the Executive) more than twelve calendar months prior to the
Executive having been given Notice of Termination.
(b) Notwithstanding any other provision of this Agreement,
if a Change in Control occurs and if the Executive's employment with the
Company and its subsidiaries is terminated by the Company less than six
months prior to the date on which the Change in Control occurs, and if it
is demonstrated by the Executive that such termination of employment by
the Company (i) was at the request of a third party which has taken steps
reasonably calculated to result in or effect the Change in Control or
(ii) otherwise arose in connection with or in anticipation of the Change
in Control, then for all purposes of this Agreement, such termination of
employment shall be deemed to have occurred within two years following
such Change in Control; provided, that the obligations contained in
Section 4 to deliver a Notice of Termination shall not apply.
5
(c) The Company shall also provide the Executive with the
benefits set forth herein upon any termination by the Executive of
employment with the Company and its subsidiaries for Good Reason within
two years after a Change in Control. Any failure by the Executive to
give such notice to receive such benefits shall not be deemed to
constitute a waiver or otherwise to affect adversely the rights of the
Executive hereunder, provided the Executive gives notice to receive such
benefits prior to the expiration of such two year period. For purposes
of this Agreement, "Good Reason" shall mean the occurrence of any one or
more of the following events:
(i) The assignment to the Executive of any duties
inconsistent in any material adverse respect with his or her position,
authority or responsibilities with the Company and its subsidiaries
immediately prior to the Change in Control, or any other material adverse
change in such position, including titles, authority, or
responsibilities, as compared with the Executive's position immediately
prior to the Change in Control;
(ii) A reduction by the Company in the amount of the
Executive's base salary or annual or long term incentive compensation
paid or payable as compared to that which was paid or made available to
Executive immediately prior to the Change in Control; or the failure of
the Company to increase Executive's compensation each year by an amount
which is substantially the same, on a percentage basis, as the average
annual percentage increase in the base salaries of other executives of
comparable status with the Company;
(iii) The failure by the Company to continue to provide
the Executive with substantially similar perquisites or benefits the
Executive in the aggregate enjoyed under the Company's benefit programs,
such as any of the Company's pension, savings, vacation, life insurance,
medical, health and accident, or disability plans in which he or she was
participating at the time of the Change in Control (or, alternatively, if
such plans are amended, modified or discontinued, substantially similar
equivalent benefits thereto in the aggregate); the taking of any action
by the Company which would directly or indirectly cause such benefits to
be no longer substantially equivalent in the aggregate to the benefits in
effect at the time of the Change in Control; provided, that any
amendment, modification or discontinuation of any plans or benefits
referred to in this Subsection (iii) that generally affect substantially
all domestic salaried employees of the Company shall not be deemed to
constitute Good Reason;
(iv) The Company's requiring the Executive to be based
at any office or location more than 35 miles from that location at which
he or she performed his or her services immediately prior to the Change
in Control, except for travel reasonably required in the performance of
the Executive's responsibilities to the extent substantially consistent
with the Executive's business travel obligations prior to the Change in
Control;
(v) Any failure of the Company to obtain the
assumption of the obligation to perform this Agreement by any successor
as contemplated in Section 11 herein; or
6
(vi) Any breach by the Company of any of the
provisions of this Agreement or any failure by the Company to carry out
any of its obligations hereunder, in either case, for a period of five
business days after receipt of written notice from the Executive and the
failure by the Company to cure such breach or failure during such five
business day period.
4. Notice of Termination
---------------------
Any termination of the Executive's employment by the Company as
contemplated by Subsection 3(a)(ii) or 3(a)(iv) or by the Executive as
contemplated by Subsection 3(c) shall be communicated by written "Notice
of Termination" to the other party hereto. Any "Notice of Termination"
shall set forth (a) the effective date of termination, which shall not be
less than 15 or more than 30 days after the date the Notice of
Termination is delivered (the "Termination Date"); (b) the specific
provision in this Agreement relied upon; and (c) in reasonable detail the
facts and circumstances claimed to provide a basis for such termination.
Notwithstanding the foregoing, if within fifteen (15) days after any
Notice of Termination is given, the party receiving such Notice of
Termination notifies the other party that a good faith dispute exists
concerning the termination, the "Date of Termination" shall be the date
on which the dispute is finally determined in accordance with the
provisions of Section 18 hereof. In the case of any good faith dispute
as to the Executive's entitlement to benefits under this Agreement
resulting from any termination by the Company for which the Company does
not deliver a Notice of Termination, the "Date of Termination" shall be
the date on which the dispute is finally determined in accordance with
the provisions of Section 18 hereof. Notwithstanding the pendency of any
such dispute referred to in the two preceding sentences, the Company
shall continue to pay the Executive his or her full compensation in
effect when the notice giving rise to the dispute was given and continue
the Executive as a participant in all compensation, benefits and
perquisites in which he or she was participating when the notice giving
rise to the dispute was given, until the dispute is finally resolved,
provided the Executive is willing to continue to provide full time
services to the Company and its subsidiaries in substantially the same
position, if so requested by the Company. Amounts paid under this
Section shall be in addition to all other amounts due under this
Agreement and shall not be offset against or reduce any other amounts due
under this Agreement. If a final determination by the Panel (as defined
in Section 18(c)(ii)) that Good Reason did not exist pursuant to Section
18(c)(v) is made in the case of a Notice of Termination by the Executive,
the Executive shall have the sole right to nullify and void his or her
Notice of Termination by delivering written notice of same to the Company
within three (3) business days of the date of such final determination,
unless the basis for the claim by the Executive of Good Reason is found
by the Panel to have been manifestly unreasonable. If the parties do not
dispute the Executive's entitlement to benefits hereunder, the "Date of
Termination" shall be the Termination Date.
7
5. Termination Benefits
--------------------
(a) Base Salary and Annual Incentive Compensation. Subject
to the conditions set forth in Sections 3, 4, 8 and 10(c) hereof, the
Company shall continue to pay the Executive (subject to any applicable
payroll or other taxes required to be withheld) for a period (the
"Continuation Period") terminating on the earlier of (x) [twenty-four
(24)/thirty-six (36)] months following the date of the Change in Control,
(y) the date on which the Executive reaches normal retirement age under
the Retirement Plan, or (z) such date on which any of the contingencies
under Section 10(c) shall occur, as follows:
(i) The base salary of the Executive at the greater of
the Executive's effective monthly base salary rate at the Termination
Date or the Executive's effective monthly base salary rate immediately
prior to the Change in Control, which amount shall be payable on a
monthly basis;
(ii) A monthly amount equal to (x) the greater of (1)
the Executive's annualized target incentive compensation award relating
to the monthly base salary in Section 5(a)(i) above or (2) the
Executive's annual target incentive compensation award for the year prior
to the Change in Control, multiplied by (y) the greater of the average
percentage of the Executive's earned incentive compensation award to the
Executive's annual target incentive compensation award for the three
complete years prior to either (1) the Change in Control or (2) the
Termination Date, in either case, under the Company's PSP or Senior
Executive PSP, or any successor plan, and divided by (z) twelve (12),
which amount shall be payable on a monthly basis; and
(b) "Short Year" Annual Incentive Compensation. Subject to
the conditions set forth in Sections 3, 4, 8 and 10(c) hereof, the
Company shall pay the Executive (subject to any applicable payroll or
other taxes required to be withheld) the product of (i) the amount
determined in accordance with Section 5(a)(ii)(x) above, multiplied by
(ii) the amount determined in accordance with Section 5(a)(ii)(y) above,
multiplied by (iii) the ratio of the number of days that elapsed in such
year prior to such Termination Date divided by 365; provided, that such
"short year" annual incentive compensation shall be paid in cash in a
lump sum on the Date of Termination.
6. Other Benefits
--------------
Subject to the conditions set forth in Sections 3, 4, 8 and
10(c) hereof, the following benefits (subject to any applicable payroll
or other taxes required to be withheld) shall be paid or provided to the
Executive:
(a) Health/Welfare Benefits
-----------------------
(i) During the Continuation Period, the Company shall
continue to keep in full force and effect all programs of medical,
dental, vision, accident, disability, life insurance, including optional
term life insurance, and other similar health or welfare programs with
8
respect to the Executive and his or her dependents with the same level of
coverage, upon the same terms and otherwise to the same extent as such
programs shall have been in effect immediately prior to the Termination
Date (or, if more favorable to the Executive, immediately prior to the
Change in Control), and the Company and the Executive shall share the
costs of the continuation of such insurance coverage in the same
proportion as such costs were shared immediately prior to the Termination
Date (or, if more favorable to the Executive, immediately prior to the
Change in Control) or, if the terms of such programs do not permit
continued participation by the Executive (or if the Company otherwise
determines it advisable to amend, modify or discontinue such programs for
employees generally), the Company shall otherwise provide benefits
substantially similar to and no less favorable to the Executive in terms
of cost or benefits ("Equivalent Benefits") than he or she was entitled
to receive at the end of the period of coverage, for the duration of the
Continuation Period.
(ii) If, at or prior to the end of the Continuation
Period, the Executive has attained the earliest age for retirement under
the Retirement Plan, without regard to any minimum period of service (the
"Eligible Age"), he or she shall be entitled to be enrolled at that time
or any time thereafter in the Company's retiree health program upon the
same terms and conditions as if the Executive had remained employed
during the Continuation Period, or if the terms of such program do not
permit such enrollment, the Company shall provide Equivalent Benefits
which include such retiree coverage. If, at or prior to the end of the
Continuation Period, the Executive shall not have attained the Eligible
Age, he or she shall be entitled to the foregoing benefits upon
attainment of the Eligible Age. If, at the end of the Continuation
Period, the Executive shall not have attained the Eligible Age, he or she
will be given the same rights to health care continuation as if the
health care continuation coverage rights under the Consolidated Omnibus
Reconciliation Act of 1985, as amended or replaced ("COBRA"), would apply
as of the end of such Continuation Period, such rights under COBRA to be
determined as if the end of such Continuation Period were an event
causing the Executive to lose coverage under the Company's health care
plan on account of a termination of employment.
(iii) All benefits which the Company is required by this
Section 6(a) to provide, which will not be provided by the Company's
programs described herein, shall be provided through the purchase of
insurance unless the Executive is uninsurable. If the Executive is
uninsurable, the Company will provide the benefits out of its general
assets.
(b) Retirement Benefits
-------------------
(i) Subject to Section 6(b)(v), the Executive shall be
deemed to be completely vested under the Company's Retirement Plan and
any and all supplemental non-qualified plans (or any successor plans), in
which Executive is a participant, which are in effect as of the date of
the Change in Control (collectively, the "Plans"), regardless of the
Executive's actual vesting service credit thereunder.
9
(ii) In addition, subject to Section 6(b)(v), he or she
shall be deemed to have earned an additional service credit for service
and benefit calculation purposes thereunder as if he or she had continued
in the employ of the Company for the duration of the Continuation Period,
and the rate of compensation which is used in the determination of the
payment to the Executive under Section 5 shall be the rate of
compensation used for benefit calculations with respect to such
additional period, with the effect that benefits based on Salary
Compensation and Average Monthly Salary (as such terms are defined in the
Retirement Plan and as may be amended or replaced), shall reflect such
additional years of service at such rates of compensation.
(iii) In addition, the Executive shall receive all other
benefits under the Plans that he or she would have received had he or she
continued in the employ of the Company for the duration of the
Continuation Period, including, without limitation, all ancillary
benefits, such as early retirement, survivor rights and all other
benefits at retirement.
(iv) If the Executive has attained the Eligible Age as
of the Termination Date, the Executive shall be entitled to elect
retirement in lieu of deferred vested status under the Retirement Plan.
If the Executive has not attained the Eligible Age as of the Termination
Date, the Executive shall be entitled to elect retirement in lieu of
deferred vested status under the Retirement Plan upon attainment of the
Eligible Age, and for purposes of determining the adjustment, if any, to
the Executive's accrued benefit under the eighty-five (85) point rule (if
otherwise eligible under such rule) under the Retirement Plan, the
Executive shall be credited with both age and years of service until the
date he or she reaches the Eligible Age.
(v) Any part of the foregoing retirement benefits
which are otherwise required to be paid by a tax-qualified Plan but which
cannot be paid through such Plan by reason of the laws and regulations
applicable to such Plan, shall be paid by one or more supplemental non-
qualified Plans or by the Company in accordance with such Plan or Plans.
(vi) The payments calculated hereunder which are not
actually paid by the Retirement Plan shall be paid thirty (30) days
following the Date of Termination in a single lump sum cash payment (of
equivalent actuarial value to the payment calculated hereunder using the
same actuarial assumptions as are used in calculating benefits under the
Retirement Plan but using the discount rate that would be used by the
Company on the Date of Termination to determine the actuarial present
value of projected benefit obligations).
(c) Savings Plan Benefits
---------------------
(i) Subject to Section 6(c)(iii), the Executive shall
be deemed to be completely vested under the Company's Employee Savings
Plan -- Salaried Plan and all excess or supplemental savings plans (or
any successor plans) in effect as of the date of the Change in Control
("the Savings Plans") regardless of his or her actual vesting service
credit on the Termination Date.
10
(ii) In addition, subject to Section 6(c)(iii), during
the Continuation Period, he or she shall be entitled to an amount equal
to the Company matching contributions (at the greater of the Company's
rates in effect at the Termination Date or the date of the Change in
Control) under the Savings Plans which would have accrued to the benefit
of the Executive had he or she continued his or her participation in, and
elected to continue to make the elective deferral or contributions under
such Savings Plans at the same rate at which he or she was electing to
make them at the time of the Termination Date.
(iii) Any part of such Savings Plans benefits which are
otherwise required to be paid by a tax-qualified Savings Plan but which
cannot be paid through such Savings Plan by reason of the laws and
regulations applicable to the Plan shall be paid by an excess or
supplemental Savings Plan or by the Company in a lump sum cash payment on
the Date of Termination.
(d) Financial Planning
------------------
During the Continuation Period, the Company shall reimburse the
Executive for costs associated with financial planning to the same extent
as was customarily provided by the Company to senior executives prior to
the Change in Control.
(e) Executive Outplacement Counseling
---------------------------------
During the Continuation Period, unless the Executive shall
reach normal retirement age during the Continuation Period, the Executive
may request in writing and the Company shall at its expense engage within
a reasonable time following such written request an outplacement
counseling service of national reputation to assist the Executive in
obtaining employment.
7. Payment of Certain Costs
------------------------
Except as otherwise provided in Section 18(c)(v), if a dispute
arises regarding a termination of the Executive or the interpretation or
enforcement of this Agreement, subsequent to a Change in Control, all of
the reasonable legal fees and expenses incurred by the Executive and all
Arbitration Costs (as hereafter defined) in contesting any such
termination or obtaining or enforcing all or part of any right or benefit
provided for in this Agreement or in otherwise pursuing all or part of
his or her claim will be paid by the Company, unless prohibited by law.
The Company further agrees to pay pre-judgment interest on any money
judgment obtained by the Executive calculated at the prime interest rate
reported in "The Wall Street Journal" in effect from time to time from
the date that payment to him or her should have been made under this
Agreement.
11
8. Excise Tax Payments.
-------------------
(a) Notwithstanding anything contained in this Agreement to
the contrary, in the event that any payment (within the meaning of
Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended or
replaced (the "Code")), or distribution to or for the benefit of the
Executive, whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise in connection with,
or arising out of, his or her employment with the Company (a "Payment" or
"Payments"), would be subject to the excise tax imposed by Section 4999
of the Code or any interest or penalties are incurred by the Executive
with respect to such excise tax (such excise tax, interest and penalties
collectively referred to as the "Excise Tax"), then the Executive shall
be entitled to receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Executive of all such taxes
(including any interest or penalties imposed with respect to such taxes),
including any Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed
upon the Payments; provided, that the Executive shall not be entitled to
receive any additional payment relating to any interest or penalties
attributable to any action or omission by the Executive in bad faith.
(b) An initial determination shall be made by an accounting
firm mutually agreeable to the Company and the Executive and, if not
agreed to within three days after the Date of Termination, a national
independent accounting firm selected by the Executive (the "Accounting
Firm"), as to whether a Gross-Up Payment is required pursuant to this
Section 8 and the amount of such Gross-Up Payment. To permit the
Accounting Firm to make the initial determination, the Company shall
furnish the Accounting Firm with all information reasonably required for
such firm to complete such determination as soon as practicable after the
Date of Termination, but in no event more than fifteen (15) days
thereafter. All fees, costs and expenses (including, but not limited to,
the cost of retaining experts) of the Accounting Firm shall be borne by
the Company and the Company shall pay such fees, costs and expenses as
they become due. The Accounting Firm shall provide detailed supporting
calculations, reasonably acceptable both to the Company and the Executive
within thirty (30) days of the Date of Termination, if applicable, or
such other time as requested by the Company or by the Executive (provided
the Executive reasonably believes that any of the Payments may be subject
to the Excise Tax). The Gross-Up Payment, if any, as determined pursuant
to this Section 8(b) shall be paid by the Company to the Executive within
five (5) business days of the receipt of the Accounting Firm's
determination. If the Accounting Firm determines that no Excise Tax is
payable by the Executive with respect to a Payment or Payments, it shall
furnish the Executive with an opinion reasonably satisfactory to the
Executive that no Excise Tax will be imposed with respect to any such
Payment or Payments. Any such initial determination by the Accounting
Firm of the Gross-Up Payment shall be binding upon the Company and the
Executive subject to the application of Section 8(c).
12
(c) As a result of the uncertainty in the application of
Sections 4999 and 280G of the Code, it is possible that a Gross-Up
Payment (or a portion thereof) will be paid which should not have been
paid (an "Overpayment') or a Gross-Up Payment (or a portion thereof)
which should have been paid will not have been paid (an "Underpayment").
An Underpayment shall be deemed to have occurred upon a "Final
Determination" (as hereinafter defined) that the tax liability of the
Executive (whether in respect of the then current taxable year of the
Executive or in respect of any prior taxable year of the Executive) will
be increased by reason of the imposition of the Excise Tax on a Payment
or Payments with respect to which the Company has failed to make a
sufficient Gross-Up Payment. An Overpayment shall be deemed to have
occurred upon a "Final Determination" (as hereinafter defined) that the
Excise Tax shall not be imposed (or shall be reduced) upon a Payment or
Payments with respect to which the Executive had previously received a
Gross-Up Payment. A Final Determination shall be deemed to have occurred
when (i) in the case of an Overpayment, the Executive has received from
the applicable governmental taxing authority a refund of taxes or other
reduction in his or her tax liability imposed as a result of a Payment
or, in the case of an Underpayment, the Executive receives notice from a
competent governmental authority that his or her tax liability imposed as
a result of a Payment will be increased, and (ii) in the case of an
Overpayment or an Underpayment, upon either (x) the date a determination
is made by, or an agreement is entered into with, the applicable
governmental taxing authority which finally and conclusively binds the
Executive and such taxing authority, or in the event that a claim is
brought before a court of competent jurisdiction, the date upon which a
final determination has been made by such court and either all appeals
have been taken and finally resolved or the time for all appeals has
expired or (y) the statute of limitations with respect to the Executive's
applicable tax return has expired. If an Underpayment occurs, the
Executive shall promptly notify the Company and the Company shall
promptly pay to the Executive an additional Gross-Up Payment equal to the
amount of the Underpayment plus any interest and penalties imposed on the
Underpayment (other than interest and penalties attributable to any
action or omission by the Executive in bad faith). If an Overpayment
occurs, the amount of the Overpayment shall be treated as a loan by the
Company to the Executive and the Executive shall, within ten (10)
business days of the occurrence of such Overpayment, pay the Company the
amount of the Overpayment, without interest.
(d) Notwithstanding anything contained in this Agreement to the
contrary, in the event it is determined that an Excise Tax will be
imposed on any Payment or Payments, the Company shall pay to the
applicable governmental taxing authorities as Excise Tax withholding, the
amount of the Excise Tax that the Company has actually withheld from the
Payment or Payments.
9. Mitigation
----------
The Executive is not required to seek other employment or
otherwise mitigate the amount of any payments to be made by the Company
pursuant to this Agreement, and employment by the Executive will not
reduce or otherwise affect any amounts or benefits due the Executive
pursuant to this Agreement, except as otherwise provided in Section
10(c).
13
10. Continuing Obligations
----------------------
(a) Acknowledgements by the Executive
----------------------------------
The Executive hereby recognizes and acknowledges the
following:
(i) The Company and its subsidiaries (collectively,
for purposes of this Section 10, the "Company") are engaged in, among
other things, the business of researching, designing, developing,
manufacturing, selling and distributing on a worldwide basis fighter and
military transport aircraft, commercial aircraft, helicopters, missiles,
satellite launch vehicles, and certain related and other businesses (the
"Business").
(ii) In connection with the Business, the Company has
expended a great deal of time, money and effort to develop and maintain
the secrecy and confidentiality of substantial proprietary trade secret
information and other confidential business information which, if misused
or disclosed, could be very harmful to the Business and could cause the
Company to lose its competitive edge in the marketplace.
(iii) The Executive desires to become entitled to receive
the benefits contemplated by this Agreement but which the Company would
not make available to the Executive but for the Executive's signing and
agreeing to abide by the terms of this Section 10.
(iv) The Executive's position with the Company provides
the Executive with access to certain of the Company's confidential and
proprietary trade secret information and other confidential business
information.
(v) The Company compensates its employees to, among
other things, develop and preserve goodwill with its customers on the
Company's behalf and business information for the Company's ownership and
use.
(vi) If the Executive were to leave the Company, the
Company in all fairness would need certain protection in order to ensure
that the Executive does not appropriate and misuse any confidential
information entrusted to the Executive during the course of the
Executive's employment with the Company, or take any other action which
could result in a loss of the Company's goodwill that was generated on
the Company's behalf and at its expense, and, more generally, to prevent
the Executive from having an unfair competitive advantage over the
Company.
14
(b) Confidential Information.
------------------------
(i) The Executive agrees to keep secret and
confidential, and not to use or disclose to any third parties, except as
directly required for the Executive to perform the Executive's employment
responsibilities for the Company, any of the Company's confidential and
proprietary trade secret information or other confidential business
information concerning the Business acquired by the Executive during the
course of, or in connection with, the Executive's employment with the
Company (and which was not known by the Executive prior to the
Executive's being hired by the Company). The Company considers and
treats as confidential (among other things) its engineering, design and
technical data, computer software and programs, component sourcing and
supply information, pricing policies, operational methods, strategic
plans, internal financial information, research and development plans and
activities, and business acquisition and expansion plans, and, except as
provided herein, the Executive agrees to treat such information as secret
and confidential so long as such information does not become generally
known to the public through no fault or wrongful act of the Executive.
(ii) The Executive acknowledges that any and all
notes, records, sketches, computer diskettes and other documents obtained
by or provided to the Executive, or otherwise made, produced or compiled
during the course of the Executive's employment with the Company, which
contain any such confidential Company information, regardless of the type
of medium in which it is preserved, are the sole and exclusive property
of the Company and shall be surrendered to the Company upon the
Executive's termination of employment and on demand at any time by the
Company.
(c) Post-Termination Restrictions.
-----------------------------
The Executive agrees that, at any time during the Continuation
Period, the Company shall be entitled to discontinue any further payment,
allocation, accrual or provision of any amounts or benefits required by
Sections 5(a), 6(a)(i), 6(b)(ii), 6(d) and 6(e) (provided, that any such
amounts or benefits theretofore allocated or accrued with respect to the
portion of the Continuation Period preceding the occurrence of any of the
contingencies set forth below shall be preserved), if the Executive on
the Executive's own behalf or on behalf of any other person, firm,
corporation or entity in the world:
(i) provides any services for any of the Company's
significant competitors, suppliers or customers or provides any general
business, technical or strategic consulting or planning with respect to
the Business for any such companies. The Executive recognizes that such
companies could benefit greatly if they were to obtain the Company's
confidential information. The Executive may request permission to
provide services to or consult with any company that may be included in
the category of the Company's significant competitors, suppliers or
customers. The written denial or grant of such a request by the
Company's President and CEO shall be conclusive and binding on the
parties hereto. The grant of such a request will not be unreasonably
withheld, and if this request is granted, the Executive will not be held
in violation of this Section 10(d) for providing services to or
consulting with such company in accordance with the terms of this
request.
15
(ii) knowingly solicits, entices, induces, hires,
employs or seeks to employ any salesperson, engineer, technician, manager
or executive-level employee of the Company, who was employed by the
Company during the Executive's last six (6) months of employment with the
Company, to provide any services with respect to the Business; or
(iii) materially breaches or violates Section 10(b) or
any Company policy regarding confidentiality.
(d) Acknowledgement Regarding Restrictions. The Executive
recognizes and agrees that the provisions of this Section 10 are
reasonable and enforceable because, among other things, (1) the Executive
is receiving compensation under this Agreement and (2) there are many
other areas in which, and companies for which, the Executive could work
in view of the Executive's background, and this Section 10 therefore does
not impose any undue hardship on the Executive. The Executive further
recognizes and agrees that the provisions of this Section 10 are
reasonable and enforceable in view of the Company's legitimate interests
in protecting its confidential information and customer goodwill and the
limitations contained therein on the duration and geographic scope of,
and activities covered by, such provisions.
(e) Breach. In the event of a breach of Section 10(b) or
the occurrence of any of the contingencies under Section 10(c), the
Company's sole remedy shall be the discontinuation of the payment,
allocation, accrual or provision of any amounts or benefits as provided
in Section 10(c). The Executive recognizes and agrees, however, that it
is the intent of the parties that neither this Agreement nor any of its
provisions shall be construed to adversely affect any rights or remedies
that Company would have had, including, without limitation, the amount of
any damages for which it could have sought recovery, had this Agreement
not been entered into. Accordingly, the parties hereby agree that
nothing stated in this Section 10 shall limit or otherwise affect the
Company's right to seek legal or equitable remedies it may otherwise
have, or the amount of damages for which it may seek recovery, in
connection with matters covered by this Section 10 but which are not
based on breach or violation of this Section 10 (including, without
limitation, claims based on the breach of fiduciary or other duties of
the Executive or any obligations of the Executive arising under any other
contracts, agreements or understandings). Without limiting the
generality of the foregoing, nothing in this Section 10 or any other
provision of this Agreement shall limit or otherwise affect the Company's
right to seek legal or equitable remedies it may otherwise have, or the
amount of damages for which it may seek recovery, resulting from or
arising out of statutory or common law or any Company policies relating
to fiduciary duties, confidential information or trade secrets. Further,
the Executive acknowledges and agrees that the fact that Subsection 10(c)
is limited to the Continuation Period, and that the sole remedy of the
Company hereunder is the discontinuation of benefits, shall not reduce or
otherwise alter any other contractual or other legal obligations of the
Executive during any period or circumstance, and shall not be construed
as establishing a maximum limit on damages for which the Company may seek
recovery.
16
11. Successors
----------
(a) The Company shall 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, by
agreement to assume expressly and agree to perform this Agreement in the
same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. For purposes of this
Agreement, "Company" shall mean the Company as hereinbefore defined and
any successor to its business and/or assets as aforesaid.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
beneficiaries, devises and legatees. If the Executive should die while
any amounts are payable to him or her hereunder, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the Executive's devisee, legatee, beneficiary or other
designee or, if there be no such designee, to the Executive's estate.
12. Notices
-------
For the purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be
deemed to have been duly given (i) on the date of delivery if delivered
by hand, (ii) on the date of transmission, if delivered by confirmed
facsimile, (iii) on the first business day following the date of deposit
if delivered by guaranteed overnight delivery service, or (iv) on the
third business day following the date delivered or mailed by United
States registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
[To Be Provided]
If to the Company:
By Mail
--------
XxXxxxxxx Xxxxxxx Corporation
X.X. Xxx 000
Xx. Xxxxx, Xxxxxxxx 00000-0000
Attention: Chief Executive Officer
By Personal Delivery or Facsimile
---------------------------------
XxXxxxxxx Xxxxxxx Corporation
World Headquarters Building
Airport Road & XxXxxxxxx Blvd.
St. Louis, Missouri 63134
Attention: Chief Executive Officer
Facsimile: (000) 000-0000
17
with a copy to:
By Mail
--------
XxXxxxxxx Xxxxxxx Corporation
X.X. Xxx 000
Xx. Xxxxx, Xxxxxxxx 00000-0000
Attention: General Counsel
By Personal Delivery or Facsimile
---------------------------------
XxXxxxxxx Xxxxxxx Corporation
World Headquarters Building
Airport Road & XxXxxxxxx Blvd.
St. Louis, Missouri 63134
Attention: General Counsel
Facsimile: (000) 000-0000
or to such other address as either party may have furnished to the other
in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
13. Governing Law
-------------
The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of Missouri,
without regard to principles of conflicts of laws.
14. Miscellaneous
-------------
No provisions of this Agreement may be amended, modified,
waived or discharged unless such amendment, waiver, modification or
discharge is agreed to in writing signed by the Executive and the
Company. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement.
Section headings contained herein are for convenience of reference only
and shall not affect the interpretation of this Agreement.
15. Counterparts
------------
This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of which will
constitute one and the same instrument.
16. Non-Assignability
-----------------
This Agreement is personal in nature and neither of the parties
hereto shall, without the consent of the other, assign, or transfer this
Agreement or any rights or obligations hereunder, except as provided in
Section 11. Without limiting the foregoing, the Executive's right to
receive payments hereunder 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 trust or by the laws of descent or
distribution, and in the event of any attempted assignment or transfer
contrary to this paragraph the Company shall have no liability to pay any
amount so attempted to be assigned or transferred.
18
17. Term of Agreement
-----------------
This Agreement shall commence on the date hereof and shall
continue in effect through December 31 of 1998; provided, however, that
commencing on January 1 of 1998 and of each year thereafter, the term of
this Agreement shall automatically be extended for one additional year
unless, not later than September 30 of the preceding year, the Company or
the Executive shall have given notice to the other party that it does not
wish to extend this Agreement; provided further, if a Change in Control
of the Company shall have occurred during the original or any extended
term of this Agreement, this Agreement shall continue in effect for a
period of thirty-six (36) months beyond the month in which such Change in
Control occurred; and, provided further, that if the Company shall become
obligated to make any payments or provide any benefits pursuant to
Section 5 or 6 hereof, this Agreement shall continue in effect
indefinitely.
18. Arbitration
-----------
(a) Scope; Initiation. Resolution of any and all disputes
arising from or in connection with this Agreement, whether based on
contract, tort, statute or otherwise, including disputes over
arbitrability and disputes in connection with claims by third persons
("Disputes") shall be exclusively governed by and settled in accordance
with the provisions of this Section 18. Either party to this Agreement
(each a "Party" and together the "Parties") may commence proceedings
hereunder by delivery of written notice providing a reasonable
description of the Dispute to the other, including a reference to this
Section (the "Dispute Notice").
(b) Negotiations Between Parties. The Parties shall first
attempt in good faith to resolve promptly any Dispute by good faith
negotiations. Not later than three (3) business days after delivery of
the Dispute Notice, the Company shall appoint an executive to meet with
the Executive or his or her representative at a reasonably acceptable
time and place, and thereafter as such representatives deem reasonably
necessary. The Parties shall exchange relevant non-privileged
information and endeavor to resolve the Dispute. Prior to any such
meeting, each Party or representative shall advise the other as to any
other individuals who will attend such meeting. All negotiations
pursuant to this Section 18(b) shall be confidential and shall be treated
as compromise negotiations for purposes of Rule 408 of the Federal Rules
of Evidence and similarly under other federal and state rules of
evidence.
(c) Binding Arbitration. The Parties hereby agree to submit
all Disputes to arbitration under the following provisions, which
arbitration shall be final and binding upon the Parties, their successors
and assigns, and that the following provisions constitute a binding
arbitration clause under applicable law.
(i) Either Party may initiate arbitration of a Dispute
by delivery of a demand therefor (the "Arbitration Demand") to the other
Party not sooner than five (5) business days after the date of delivery
of the Dispute Notice but at any time thereafter.
19
(ii) The arbitration shall be conducted in the County
of St. Louis, Missouri, by three arbitrators (acting by majority vote,
the "Panel") selected by agreement of the Parties not later than 10 days
after delivery of the Arbitration Demand or, failing such agreement,
appointed pursuant to the Commercial Arbitration Rules of the American
Arbitration Association, as amended from time to time (the "AAA Rules").
If an arbitrator becomes unable to serve, his or her successor(s) shall
be similarly selected or appointed.
(iii) The arbitration shall be conducted pursuant to
the Federal Arbitration Act and the Missouri Uniform Arbitration Act,
such procedures as the Parties may agree or, in the absence of or failing
such agreement, pursuant to the AAA Rules. Notwithstanding the
foregoing: (w) each party shall be allowed to conduct discovery through
written requests for information, document requests, requests for
stipulations of fact, and depositions; (x) the nature and extent of such
discovery shall be determined by the Panel, taking into account the needs
of the Parties and the desirability of making discovery expeditious and
cost-effective; (y) the Panel may issue orders to protect the
confidentiality of information, to be disclosed in discovery; and (z) the
Panel's discovery rulings may be enforced in any court of competent
jurisdiction.
(iv) All hearings shall be conducted on an expedited
schedule, and all proceedings shall be confidential. Either Party may at
its expense make a stenographic record thereof.
(v) The Panel shall complete all hearings not later
than twenty (20) days after selection or appointment, and shall make a
final award not later than ten (10) days thereafter. The award shall be
in writing and shall specify the factual and legal bases for the award,
and shall include a determination as to whether any claim by the
Executive of Good Reason was manifestly unreasonable for purposes of the
second-to-last sentence of Section 4. Notwithstanding anything contained
in Section 7, in circumstances where a Dispute has been asserted by the
Executive or defended against by the Executive on grounds that the Panel
deems manifestly unreasonable (whether related to a claim of Good Reason
or otherwise), the Panel may assess all or part of the costs and expenses
of the arbitration, including the Panel's fees and expenses and fees and
expenses of experts and legal counsel ("Arbitration Costs"), against the
Executive and may include in the award the Executive's and the Company's
attorney's fees and expenses in connection with any and all proceedings
under this Section 18. Notwithstanding the foregoing, in no event may
the Panel award multiple, punitive or exemplary damages to either party.
(d) Confidentiality - Notice. Each Party shall notify the
other promptly, and in any event prior to disclosure to any third person,
if it receives any request for access to confidential information or
proceedings hereunder.
19. No Setoff
---------
The Company shall have no right of setoff or counterclaim in
respect of any claim, debt or obligation against any payment provided for
in this Agreement.
20
20. Non-Exclusivity of Rights
-------------------------
Nothing in this Agreement shall prevent or limit the
Executive's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Company or any of its
subsidiaries or successors and for which the Executive may qualify, nor
shall anything herein limit or reduce such rights as the Executive may
have under any other agreements with the Company or any of its
subsidiaries or successors. Amounts which are vested benefits or which
the Executive is otherwise entitled to receive under any plan or program
of the Company or any of its subsidiaries shall be payable in accordance
with such plan or program, except as explicitly modified by this
Agreement.
21. No Guaranteed Employment
------------------------
The Executive and the Company acknowledge that this Agreement
shall not confer upon the Executive any right to continued employment and
shall not interfere with the right of the Company to terminate the
employment of the Executive at any time.
22. Invalidity of Provisions
------------------------
In the event that any provision of this Agreement is
adjudicated to be invalid or unenforceable under applicable law in any
jurisdiction, the validity or enforceability of the remaining provisions
thereof shall be unaffected as to such jurisdiction and such adjudication
shall not affect the validity or enforceability of such provision in any
other jurisdiction. To the extent that any provision of this Agreement,
including, without limitation, Section 10 hereof, is adjudicated to be
invalid or unenforceable because it is overbroad, that provision shall
not be void but rather shall be limited to the extent required by
applicable law and enforced as so limited. The parties expressly
acknowledge and agree that this Section 22 is reasonable in view of the
parties' respective interests.
23. Non-Waiver of Rights
--------------------
The failure by the Company or the Executive to enforce at any
time any of the provisions of this Agreement or to require at any time
performance by the other party of any of the provisions hereof shall in
no way be construed to be a waiver of such provisions or to affect either
the validity of this Agreement, or any part hereof, or the right of the
Company or the Executive thereafter to enforce each and every provision
in accordance with the terms of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered as of the day and year first above set forth.
PLEASE NOTE: BY SIGNING THIS TERMINATION BENEFITS AGREEMENT, THE
EXECUTIVE IS HEREBY CERTIFYING THAT THE EXECUTIVE (A) HAS RECEIVED A COPY
OF THIS AGREEMENT FOR REVIEW AND STUDY BEFORE EXECUTING IT; (B) HAS READ
THIS AGREEMENT CAREFULLY BEFORE SIGNING IT; (C) HAS HAD SUFFICIENT
OPPORTUNITY BEFORE SIGNING THE AGREEMENT TO ASK ANY QUESTIONS THE
EXECUTIVE HAS ABOUT THE AGREEMENT AND HAS RECEIVED SATISFACTORY ANSWERS
TO ALL SUCH QUESTIONS; AND (D) UNDERSTANDS THE EXECUTIVE'S RIGHTS AND
OBLIGATIONS UNDER THE AGREEMENT.
21
THIS AGREEMENT IN SECTION 18 CONTAINS A BINDING ARBITRATION
PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.
XXXXXXXXX XXXXXXX CORPORATION
By:_________________________________
EXECUTIVE:
_______________________________________
