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Exhibit 10(b)
EXECUTIVE CHANGE-IN-CONTROL AGREEMENT
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This EXECUTIVE CHANGE-IN-CONTROL AGREEMENT ("Agreement"), dated as of
January 1, 2000, by and between The Xxxxxx & Sessions Co., an Ohio corporation
(the "Company"), and [INSERT NAME OF EXECUTIVE] (the "Executive");
WITNESSETH:
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WHEREAS, the Executive is a senior executive of the Company and has
made and is expected to continue to make major contributions to the
profitability, growth and financial strength of the Company;
WHEREAS, the Company recognizes that, as is the case for most publicly
held companies, the possibility of a Change in Control (as that term is
hereafter defined) exists;
WHEREAS, the Company desires to assure itself of both present and
future continuity of management in the event of a Change in Control and desires
to establish certain minimum compensation rights of its key senior executive
officers, including the Executive, applicable in the event of a Change in
Control;
WHEREAS, the Company wishes to ensure that its senior executives are
not practically disabled from discharging their duties upon a Change in Control;
WHEREAS, this Agreement is not intended to alter materially the
compensation and benefits which the Executive could reasonably expect to receive
from the Company absent a Change in Control and, accordingly, although effective
and binding as of the date hereof, this Agreement shall become operative only
upon the occurrence of a Change in Control;
WHEREAS, the Executive is willing to render services to the Company on
the terms and subject to the conditions set forth in this Agreement; and
WHEREAS, this Agreement amends and restates the Employment Agreement(s)
dated as of [DATE OF ORIGINAL AGREEMENT] (the "Prior Agreement(s)") between the
Company and the Executive, which Prior Agreements will, without further action,
be superseded as of the date first above written.
NOW, THEREFORE, the Company and the Executive agree as follows:
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1. OPERATION OF AGREEMENT:
(a) This Agreement shall be effective and binding immediately upon its
execution, but, anything in this Agreement to the contrary
notwithstanding, this Agreement shall not become operative unless and
until there shall have occurred a Change in Control. For purposes of
this Agreement, a "Change in Control" shall have occurred if at any
time during the Term (as that term is hereafter defined) any of the
following events shall occur:
(i) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities and
Exchange Act of 1934, as amended (the "Exchange Act") (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 15% or more of either: (A) the
then-outstanding shares of common stock of the Company (the "Company
Common Stock") or (B) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote
generally in the election of directors ("Voting Stock"); PROVIDED,
HOWEVER, that for purposes of this subsection (i), the following
acquisitions shall not constitute a Change in Control: (1) any
acquisition directly from the Company, (2) any acquisition by the
Company, (3) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any Subsidiary of
the Company, or (4) any acquisition by any Person pursuant to a
transaction which complies with clauses (A), (B) and (C) of
subsection (iii) of this Section 1(a); or
(ii) Individuals who, as of the date hereof, constitute the
Board of Directors of the Company, (the "Incumbent Board") cease for
any reason (other than death or disability) to constitute at least a
majority of the Board of Directors of the Company; PROVIDED, HOWEVER,
that any individual becoming a director subsequent to the date hereof
whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (either by a specific
vote or by approval of the proxy statement of the Company in which
such person is named as a nominee for director, without objection to
such nomination) shall be considered as though such individual were a
member of the Incumbent Board, but excluding for this purpose, any
such individual whose initial assumption of office occurs as a result
of an actual or threatened election contest (within the meaning of
Rule 14a-11 of the Exchange Act) with respect to the election or
removal of directors or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board
of Directors of the Company; or
(iii) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially
all of the assets of the Company (a "Business Combination"), in each
case, unless, following such Business Combination, (A) all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Company Common Stock and
Voting Stock immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of,
respectively, the then-outstanding shares of common stock and the
combined voting power of the then-outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the entity resulting from such Business Combination
(including, without limitation, an entity which as a result of such
transaction owns the Company or all or substantially all of the
Company's assets either directly or through
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one or more subsidiaries) in substantially the same proportions
relative to each other as their ownership, immediately prior to such
Business Combination, of the Company Common Stock and Voting Stock of
the Company, as the case may be, (B) no Person (excluding any entity
resulting from such Business Combination or any employee benefit plan
(or related trust) sponsored or maintained by the Company or such
entity resulting from such Business Combination) beneficially owns,
directly or indirectly, 15% or more of, respectively, the
then-outstanding shares of common stock of the entity resulting from
such Business Combination, or the combined voting power of the
then-outstanding voting securities of such corporation except to the
extent that such ownership existed prior to the Business Combination
and (C) at least a majority of the members of the board of directors
of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Board of Directors of the
Company, providing for such Business Combination; or
(iv) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
(b) Upon the occurrence of a Change in Control at any time during the
Term, this Agreement shall become immediately operative.
(c) The period during which this Agreement shall be in effect (the
"Term") shall commence as of the date hereof and shall expire as of the later of
(i) the close of business on December 31, 2004 or (ii) the expiration of the
Period of Employment (as that term is hereafter defined); PROVIDED, HOWEVER,
that (A) commencing on January 1, 2001 and each January 1 thereafter prior to
the occurrence of a Change in Control, the term of this Agreement shall
automatically be extended for an additional year unless, not later than December
30 of the immediately preceding year, the Company or the Executive shall have
given notice that it or he, as the case may be, does not wish to have the Term
extended, and (B) subject to Section 8 hereof, if, prior to a Change in Control,
the Executive ceases for any reason to be an officer of the Company, thereupon
the Term shall be deemed to have expired and this Agreement shall immediately
terminate and be of no further effect.
2. EMPLOYMENT; PERIOD OF EMPLOYMENT:
(a) Subject to the terms and conditions of this Agreement, upon the
occurrence of a Change in Control, the Company shall continue the Executive in
its employ and the Executive shall remain in the employ of the Company for the
period set forth in Section 2(b) hereof (the "Period of Employment"), in the
position and with substantially the same duties and responsibilities that he had
immediately prior to the Change in Control, or to which the Company and the
Executive may hereafter mutually agree in writing. Throughout the Period of
Employment, the Executive shall devote substantially all of his time during
normal business hours (subject to vacations, sick leave and other absences in
accordance with the policies of the Company as in effect for senior executives
immediately prior to the Change in Control) to the business and affairs of the
Company, but nothing in this Agreement shall preclude the Executive from
devoting reasonable periods of time during normal business hours to (i) serving
as a director, trustee or member of or participant in any organization or
business, (ii) engaging in charitable and community activities, or (iii)
managing his personal investments.
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(b) The Period of Employment shall commence on the date of an
occurrence of a Change in Control and, subject only to the provisions of Section
4 hereof, shall continue until the earlier of (i) the expiration of the third
anniversary of the occurrence of the Change in Control, (ii) the Executive's
death, or (iii) the Executive's attainment of age 65; PROVIDED, HOWEVER, that
commencing on each anniversary of the Change of Control, the expiration of the
Period of Employment provided for under clause (i) of this Section 2(b) shall
automatically be extended for an additional year unless, not later than 90
calendar days prior to such anniversary date, either the Company or the
Executive shall have given written notice to the other that the Period of
Employment shall not be so extended.
3. COMPENSATION DURING PERIOD OF EMPLOYMENT:
(a) Upon the occurrence of a Change in Control, the Executive shall
receive during the Period of Employment (i) annual base salary at a rate not
less than the Executive's annual fixed or base compensation (payable monthly or
otherwise as in effect for senior executives of the Company immediately prior to
the occurrence of a Change in Control) or such higher rate as may be determined
from time to time by the Board of Directors of the Company (the "Board") or the
Compensation Committee thereof (the "Committee") (which base salary at such rate
is herein referred to as "Base Pay") and (ii) an annual amount equal to not less
than the average of the aggregate annual bonus, incentive or other payments of
cash compensation in addition to the amounts referred to in clause (i) above
made or to be made in regard to services rendered in any calendar year during
the period of two calendar years immediately preceding the year in which the
Change in Control occurred pursuant to any bonus, incentive, profit sharing,
performance, discretionary pay or similar policy, plan, program or arrangement
of the Company or any successor thereto providing benefits at least as great as
the benefits payable thereunder prior to a Change in Control ("Incentive Pay");
PROVIDED, HOWEVER, that with the prior written consent of the Executive, nothing
herein shall preclude a change in the mix between Base Pay and Incentive Pay so
long as the aggregate cash compensation received by the Executive in any one
calendar year is not reduced in connection therewith or as a result thereof; and
PROVIDED FURTHER, HOWEVER, that in no event shall any increase in the
Executive's aggregate cash compensation or any portion thereof in any way
diminish any other obligation of the Company under this Agreement.
(b) For his service pursuant to Section 2(a) hereof, during the Period
of Employment the Executive shall be a full participant in, and shall be
entitled to the perquisites, benefits and service credit for benefits as
provided under, any and all employee retirement income and welfare benefit and
other fringe benefit policies, plans, programs or arrangements in which senior
executives of the Company participate, including without limitation any stock
option, stock purchase, stock appreciation, savings, pension, supplemental
executive retirement or/ other retirement income or welfare benefit (within the
meaning of Section 3(1) of the Employee Retirement Income Act of 1974, as
amended), deferred compensation, incentive compensation, group and/or executive
life, health, medical/hospital or other insurance (whether funded by actual
insurance or self-insured by the Company), disability, salary continuation,
expense reimbursement (including automobile allowances and reimbursement of club
dues and financial planning fees) and other employee benefit policies, plans,
programs or arrangements that may now exist or any equivalent successor
policies, plans, programs or arrangements that may be
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adopted hereafter by the Company providing perquisites, benefits and service
credit for benefits at least as great as are payable thereunder prior to a
Change in Control (collectively, "Employee Benefits"); PROVIDED, HOWEVER, that
the Executive's rights thereunder shall be governed by the terms thereof and
shall not be enlarged hereunder or otherwise affected hereby. Subject to the
proviso in the immediately preceding sentence, if and to the extent that the
Company determines, in the exercise of its reasonable judgment after
consultation with nationally recognized legal counsel, that any perquisite,
benefit or service credit for benefits is not or cannot be paid or provided
under any such policy, plan, program or arrangement as a result of the amendment
or termination thereof, then the Company shall itself pay or provide therefor.
Nothing in this Agreement shall preclude improvement or enhancement of any such
Employee Benefits, provided that no such improvement shall in any way diminish
any other obligation of the Company under this Agreement.
(c) The Company has determined that the amounts payable pursuant to
this Section 3 constitute reasonable compensation for services to be rendered
during the Period of Employment.
4. TERMINATION FOLLOWING A CHANGE IN CONTROL:
(a) In the event of the occurrence of a Change in Control, the
Executive's employment may be terminated by the Company during the Period of
Employment and the Executive shall not be entitled to the benefits provided by
Section 5 hereof only upon the occurrence of one or more of the following
events:
(i) The Executive's death;
(ii) If the Executive shall become permanently disabled within
the meaning of, and begins actually to receive disability benefits
pursuant to, the long-term disability plan in effect for senior
executives of the Company immediately prior to the Change in Control;
or
(iii) For "Cause", which for purposes of this Agreement shall
mean that, prior to any termination pursuant to Section 4(b) hereof,
the Executive shall have committed:
(A) an intentional act of fraud, embezzlement or
theft in connection with his duties or in the course of his
employment with the Company;
(B) intentional wrongful damage to property of the
Company; or
(C) intentional wrongful disclosure of secret
processes or confidential information of the Company;
and any such act shall have been materially harmful to the Company.
For purposes of this Agreement, no act, or failure to act, on the
part of the Executive shall be deemed "intentional" if it was due
primarily to an error in judgment or negligence, but shall be deemed
"intentional" only if done, or omitted to be done, by the Executive
not in good faith and without reasonable belief that his action or
omission was in the best interest of
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the Company. Notwithstanding the foregoing, the Executive shall not
be deemed to have been terminated for "Cause" hereunder unless and
until there shall have been delivered to the Executive a copy of a
resolution duly adopted by the affirmative vote of not less than
three-quarters of the Board then in office at a meeting of the Board
called and held for such purpose (after reasonable notice to the
Executive and an opportunity for the Executive, together with his
counsel, to be heard before the Board), finding that, in the good
faith opinion of the Board, the Executive had committed an act set
forth above in this Section 4(a)(iii) and specifying the particulars
thereof in detail. Nothing herein shall limit the right of the
Executive or his beneficiaries to contest the validity or propriety
of any such determination.
(b) In the event of the occurrence of a Change in Control, during the
Period of Employment, the Executive shall be entitled to the benefits as
provided in Section 5 hereof upon the occurrence of one or more of the following
events:
(i) Any termination by the Company of the employment of the
Executive prior to the date upon which the Executive shall have
attained age 65, which termination shall be for any reason other than
for Cause or as a result of the death of the Executive or by reason
of the Executive's disability and the actual receipt of disability
benefits in accordance with Section 4(a)(ii) hereof; or
(ii) Termination by the Executive of his employment with the
Company upon the occurrence of any of the following events:
(A) Failure to elect, re-elect or otherwise maintain
the Executive in the office or position in the Company which
the Executive held immediately prior to a Change in Control,
or the removal of the Executive as a Director of the Company
(or any successor thereto) if the Executive shall have been
a Director of the Company immediately prior to the Change in
Control;
(B) A significant adverse change in the nature or
scope of the authorities, powers, functions,
responsibilities or duties attached to the position with the
Company which the Executive held immediately prior to the
Change in Control, any reduction in the aggregate of the
Executive's Base Pay and Incentive Pay received from the
Company, or the termination of the Executive's rights to any
Employee Benefits to which he was entitled immediately prior
to the Change in Control or a reduction in scope or value
thereof without the prior written consent of the Executive,
any of which is not remedied within ten (10) calendar days
after receipt by the Company of written notice from the
Executive of such change, reduction or termination, as the
case may be;
(C) A determination by the Executive made in good
faith that as a result of a Change in Control and a change in
circumstances thereafter significantly affecting his position,
including without limitation a change in the scope of the
business or other activities for which he was responsible
immediately prior to the Change in Control, he has been
rendered substantially unable to carry out, has
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been substantially hindered in the performance of, or has
suffered a substantial reduction in, any of the authorities,
powers, functions, responsibilities or duties attached to the
position held by the Executive immediately prior to the Change
in Control, which situation is not remedied within ten (10)
calendar days after written notice to the Company from the
Executive of such determination;
(D) The liquidation, dissolution, merger,
consolidation or reorganization of the Company or transfer
of all or a significant portion of its business and/or
assets, unless the successor or successors (by liquidation,
merger, consolidation, reorganization or otherwise) to which
all or a significant portion of its business and/or assets
have been transferred (directly or by operation of law)
shall have assumed all duties and obligations of the Company
under this Agreement pursuant to Section 11 hereof;
(E) The Company shall relocate its principal
executive offices, or require the Executive to have his
principal location of work changed, to any location which is
in excess of fifty (50) miles from the location thereof
immediately prior to the Change of Control or the Company
shall require the Executive to travel away from his office
in the course of discharging his responsibilities or duties
hereunder significantly more (in terms of either consecutive
days or aggregate days in any calendar year) than was
required of him prior to the Change of Control without, in
either case, his prior written consent; or
(F) Without limiting the generality or effect of the
foregoing, any material breach of this Agreement by the
Company or any successor thereto.
(c) A termination by the Company pursuant to Section 4(a) hereof or by
the Executive pursuant to Section 4(b) hereof shall not affect any rights which
the Executive may have pursuant to any agreement, policy, plan, program or
arrangement of the Company providing Employee Benefits, which rights shall be
governed by the terms thereof. If this Agreement or the employment of the
Executive is terminated under circumstances in which the Executive is not
entitled to any payments under Sections 3 or 5 hereof, the Executive shall have
no further obligation or liability to the Company hereunder with respect to his
prior or any future employment by the Company.
5. SEVERANCE COMPENSATION:
(a) If, following the occurrence of a Change in Control, the Company
shall terminate the Executive's employment during the Period of Employment other
than pursuant to Section 4(a) hereof, or if the Executive shall terminate his
employment pursuant to Section 4(b) hereof, the Company shall pay to the
Executive the amounts specified in this Section 5(a) and, if required to be paid
in a lump sum, the Company shall pay such amounts within five (5) business days
after the date (the "Termination Date") that the Executive's employment is
terminated (the effective date of which shall be the date of termination or such
other date that may be specified by the Executive if the termination is pursuant
to Section 4(b) hereof):
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(i) In lieu of any further payments to the Executive for
periods subsequent to the Termination Date, the Company shall pay to
the Executive, a lump sum payment in an amount equal to the present
value (using a discount rate equal to the then-applicable interest
rate prescribed by the Pension Benefit Guarantee Corporation for
benefit valuations in connection with non-multiemployer pension plan
terminations assuming the immediate commencement of benefit payments
(the "Discount Rate")) of the sum of (A) the aggregate Base Pay (at
the greater of the highest rate in effect either immediately
preceding the occurrence of the Change in Control or during the
Period of Employment) for each remaining year or partial year of the
Period of Employment which the Executive would have received had such
termination or breach not occurred, plus (B) the aggregate Incentive
Pay (calculated in accordance with the provisions of Section 3(a)
hereof), which the Executive would have received pursuant to this
Agreement during the remainder of the Period of Employment had his
employment continued for the remainder of the Period of Employment.
(ii) For the remainder of the Period of Employment the Company
shall arrange to provide the Executive with Employee Benefits (other
than (A) the retirement income, supplemental executive retirement and
other benefits described in (iii) below, (B) the Company's matching
contributions under the 401(k) Plan described in (iv) below and (C)
stock option, stock purchase, stock appreciation and similar
compensatory benefits) substantially similar to those which the
Executive was receiving or entitled to receive immediately prior to
the Termination Date (and if and to the extent the Company determines
in the exercise of its reasonable judgment after consultation with
nationally recognized legal counsel, that such benefits shall not or
cannot be paid or provided under any policy, plan, program or
arrangement of the Company, then the Company shall itself pay or
provide for the payment to the Executive, his dependents and
beneficiaries, such Employee Benefits); PROVIDED, HOWEVER, that any
such payment by the Company that is less beneficial to the Executive
or the Executive's beneficiaries and dependents from a tax
perspective shall be increased appropriately to reflect the loss to
the Executive or the Executive's dependents and beneficiaries.
Without otherwise limiting the purposes or effect of Section 6
hereof, Employee Benefits payable to the Executive pursuant to this
Section 5(a)(ii) by reason of any "welfare benefit plan" of the
Company (as the term "welfare benefit plan" is defined in Section
3(1) of the Employee Retirement Income Act of 1974, as amended) shall
be reduced to the extent comparable welfare benefits are actually
received by the Executive from another employer during such period
following the Executive's Termination Date until the expiration of
the Period of Employment.
(iii) In addition to the retirement income, supplemental
executive retirement, and other benefits to which the Executive is
entitled under the Company's Retirement Plans, the Executive will be
entitled to a lump sum payment in an amount equal to the actuarial
equivalent (using the Discount Rate and the applicable mortality
table under Section 417(e)(3) of the Internal Revenue Code of 1986,
as amended (the "Code")) of the excess of (A) the retirement pension
benefits that would be payable to the Executive under the Retirement
Plans if (x) the Executive continued to be employed through the end
of the Period of Employment given the Executive's Base Pay and
Incentive Pay
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(without regard to any amendment to the Retirement Plans made
subsequent to a Change in Control which adversely affects in any
manner the computation of retirement benefits thereunder) for the
calendar year in which the Executive's employment is terminated (or,
if higher, for the calendar year immediately prior to the Change in
Control) and (y) provided that the Executive is a party to an Amended
and Restated Supplemental Retirement Agreement (a "SERP"), the
fraction set forth in Section 2.2(a)(ii) of his SERP is equal to one,
over (B) the retirement pension benefits that the Executive is
entitled to receive (either immediately or on a deferred basis) under
the Retirement Plans. For purposes of this subsection (iii),
"Retirement Plans" means the pension, retirement income, supplemental
employee or executive retirement, excess benefits and life and
similar benefit plans in which the Executive participates at the time
of a Change in Control providing retirement perquisites, benefits and
service credit for benefits.
(iv) The Company shall pay to the Executive (A) the amount of
the matching contributions that would have been made to The Xxxxxx &
Sessions Co. Deferred Savings Plan (the "401(k) Plan") by the Company
and allocated to the Executive's account thereunder as of the end of
the Period of Employment if the Executive had continued to be
employed through the end of the Period of Employment given the
Executive's Base Pay and Incentive Pay for the calendar year in which
the Executive's employment is terminated (or, if higher, for the year
immediately prior to the Change in Control), and assuming the
Executive's salary deferral was at the maximum permissible level less
(B) the amount of the matching contributions made to the 401(k) Plan
by the Company and allocated to the Executive's account thereunder at
the Termination Date.
(b) There shall be no right of set-off or counterclaim in respect of
any claim, debt or obligation against any payment to or benefit for the
Executive provided for in this Agreement.
(c) Without limiting the rights of the Executive at law or in equity,
if the Company fails to make any payment required to be made hereunder on a
timely basis, the Company shall pay interest on the amount thereof at an
annualized rate of interest equal to the then-applicable Discount Rate.
6. NO MITIGATION OBLIGATION:
The Company hereby acknowledges that it will be difficult, and
may be impossible, for the Executive to find reasonably comparable
employment following the Termination Date. In addition, the Company
acknowledges that its severance pay plan applicable in general to its
salaried employees does not provide for mitigation, offset or reduction
of any severance payment received thereunder. Accordingly, the parties
hereto expressly agree that the payment of the severance compensation
by the Company to the Executive in accordance with the terms of this
Agreement will be liquidated damages, and that the Executive shall not
be required to mitigate the amount of any payment provided for in this
Agreement by seeking other employment or otherwise, nor shall any
profits, income, earnings or other benefits from any source whatsoever
create any mitigation, offset, reduction or any other obligation on the
part of the Executive hereunder or otherwise, except as expressly
provided in Section 5(a)(ii) hereof.
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7. LEGAL FEES AND EXPENSES:
(a) It is the intent of the Company that the Executive not be required
to incur the expenses associated with the enforcement of his rights under this
Agreement by litigation or other legal action because the cost and expense
thereof would substantially detract from the benefits intended to be extended to
the Executive hereunder. Accordingly, if it should appear to the Executive that
the Company has failed to comply with any of its obligations under this
Agreement or in the event that the Company or any other person takes any action
to declare this Agreement void or unenforceable, or institutes any litigation
designed to deny, or to recover from, the Executive the benefits intended to be
provided to the Executive hereunder, the Company irrevocably authorizes the
Executive from time to time to retain counsel of' his choice, at the expense of
the Company as hereafter provided, to represent the Executive in connection with
the initiation or defense of any litigation or other legal action, whether by or
against the Company or any Director, officer, stockholder or other person
affiliated with the Company, in any jurisdiction. Notwithstanding any existing
or prior attorney-client relationship between the Company and such counsel, the
Company irrevocably consents to the Executive's entering into an attorney-client
relationship with such counsel, and in that connection the Company and the
Executive agree that a confidential relationship shall exist between the
Executive and such counsel. The Company shall pay or cause to be paid and shall
be solely responsible for any and all attorneys' and related fees and expenses
incurred by the Executive as a result of the Company's failure to perform this
Agreement or any provision hereof or as a result of the Company or any person
contesting the validity or enforceability of this Agreement or any provision
hereof as aforesaid.
(b) To ensure that the provisions of this Agreement can be enforced by
the Executive, the Company shall establish certain trust arrangements ("Trusts")
with an independent banking association as Trustee ("Trustee"). The Company
shall execute and deliver a Trust Agreement ("Trust Agreement") and a Trust
Agreement for Attorneys' Fees ("Trust Agreement for Attorneys' Fees") between
the Trustee and the Company, and when so executed and delivered each Trust
Agreement and Trust Agreement for Attorneys' Fees shall be deemed to be a part
of this Agreement and shall set forth the terms and conditions relating to
payment from the Trust under the Trust Agreement of compensation and other
benefits pursuant to Sections 3 and 5 hereof owed by the Company, and payment
from the Trust under the Trust Agreement for Attorneys' Fees of attorneys' and
related fees and expenses pursuant to Section 7(a) hereof owed by the Company.
The Executive shall first make demand on the Company for any payments due the
Executive pursuant to Section 7(a) hereof prior to making demand therefor on the
Trustee under the Trust Agreement for Attorneys' Fees. Payments by such Trustee
shall discharge the Company's liability under Section 7(a) hereof only to the
extent that trust assets are used to satisfy such liability.
(c) Upon the occurrence of a Change in Control, the Company shall
promptly, to the extent it has not previously done so, and in any event within
five (5) business days:
(i) transfer to the Trustee to be added to the principal of
the Trust under the Trust Agreement a sum equal to the present value on
the date of the Change in Control of the payments to be made to the
Executive under the provisions of Section 5 hereof; PROVIDED, HOWEVER,
that the Company shall not be required to transfer, in the aggregate,
to the Trust under the Trust Agreement a sum in excess of the maximum
amount
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authorized from time to time by its Directors. Any payments of
compensation, supplemental pension or other benefits by the Trustee
pursuant to the Trust Agreement shall, to the extent thereof, discharge
the Company's obligation to pay compensation, supplemental pension and
other benefits hereunder, it being the intent of the Company that
assets in such Trust be held as security for the Company's obligation
to pay compensation, supplemental pension and other benefits under this
Agreement; and
(ii) transfer to the Trustee to be added to the principal of
the Trust under the Trust Agreement for Attorneys' Fees the sum of TWO
HUNDRED FIFTY THOUSAND DOLLARS ($250,000), it being the intent of the
Company that assets in such Trust be held as security for the Company's
obligation under Section 7(a) hereof. The Executive understands and
acknowledges that the entire corpus of the Trust under the Trust
Agreement for Attorneys' Fees will be $250,000 and that said amount
will be available to discharge not only the obligations of the Company
to the Executive under Section 7(a) hereof, but also similar
obligations of the Company to other executives under similar
provisions.
8. EMPLOYMENT RIGHTS:
Nothing expressed or implied in this Agreement shall create any right
or duty on the part of the Company or the Executive to have the Executive remain
in the employment of the Company prior to any Change in Control; PROVIDED,
HOWEVER, that any termination of employment of the Executive or the removal of
the Executive from the office or position in the Company (as a result of a
pending Change in Control) following the commencement of any discussion with a
third person that ultimately results in a Change in Control shall be deemed to
be a termination or removal of the Executive after a Change in Control for
purposes of this Agreement.
9. WITHHOLDING OF TAXES:
The Company may withhold from any amounts payable under this Agreement
all federal, state, city or other taxes as shall be required pursuant to any law
or government regulation or ruling.
10. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY:
(a) Anything in this Agreement to the contrary notwithstanding, in the
event that this Agreement shall become operative and it shall be determined (as
hereafter provided) that any payment or distribution by the Company or any of
its affiliates 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 pursuant to or by reason of any other agreement, policy, plan, program
or arrangement, including without limitation any stock option, performance
share, performance unit, stock appreciation right or similar right, or the lapse
or termination of any restriction on or the vesting or exercisability of any of
the foregoing (a "Payment"), would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (or
any successor provision thereto) by reason of being considered "contingent on a
change in ownership or control" of the Company, within the meaning of Section
280G of the Code (or any
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successor provision thereto) or to any similar tax imposed by state or local
law, or any interest or penalties with respect to such tax (such tax or taxes,
together with any such interest and penalties, being hereafter collectively
referred to as the "Excise Tax"), then the Executive will be entitled to receive
an additional payment or payments (collectively, a "Gross-Up Payment");
PROVIDED, HOWEVER, that no Gross-Up Payment shall be made with respect to the
Excise Tax, if any, attributable to (i) any incentive stock option, as defined
by Section 422 of the Code ("ISO") granted prior to the execution of this
Agreement, or (ii) any stock appreciation or similar right, whether or not
limited, granted in tandem with any ISO described in clause (i). The Gross-Up
Payment will be in an amount such that, after payment by the Executive of all
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 on the
Payment.
(b) Subject to the provisions of Section 10(f), all determinations
required to be made under this Section 10, including whether an Excise Tax is
payable by the Executive and the amount of such Excise Tax and whether a
Gross-Up Payment is required to be paid by the Company to the Executive and the
amount of such Gross-Up Payment, if any, will be made by a nationally recognized
accounting firm (the "Accounting Firm") selected by the Executive in his sole
discretion. The Executive will direct the Accounting Firm to submit its
determination and detailed supporting calculations to both the Company and the
Executive within thirty (30) calendar days after the Termination Date, if
applicable, and any such other time or times as may be requested by the Company
or the Executive. If the Accounting Firm determines that any Excise Tax is
payable by the Executive, the Company will pay the required Gross-Up Payment to
the Executive within five (5) business days after receipt of such determination
and calculations with respect to any Gross-Up Payment to the Executive. If the
Accounting Firm determines that no Excise Tax is payable by the Executive, it
will, at the same time as it makes such determination, furnish the Company and
the Executive an opinion that the Executive has substantial authority not to
report any Excise Tax on his federal, state or local income or other tax return.
As a result of the uncertainty in the application of Section 4999 of the Code
(or any successor provision thereto) and the possibility of similar uncertainty
regarding applicable state or local tax law at the time of any determination by
the Accounting Firm hereunder, it is possible that Gross-Up Payments which will
not have been made by the Company should have been made (an "Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts or fails to pursue its remedies pursuant to Section
10(f) and the Executive thereafter is required to make a payment of any Excise
Tax, the Executive will direct the Accounting Firm to determine the amount of
the Underpayment that has occurred and to submit its determination and detailed
supporting calculations to both the Company and the Executive as promptly as
possible. Any such Underpayment will be promptly paid by the Company to, or for
the benefit of, the Executive within five (5) business days after receipt of
such determination and calculations.
(c) The Company and the Executive will each provide the Accounting Firm
access to and copies of any books, records and documents in the possession of
the Company or the Executive, as the case may be, reasonably requested by the
Accounting Firm, and otherwise cooperate with the Accounting Firm in connection
with the preparation and issuance of the determinations and calculations
contemplated by Section 10(b). Any determination by the Accounting Firm as to
the amount of the Gross-Up Payment will be final and binding upon the Company
and the Executive.
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(d) The federal, state and local income or other tax returns filed by
the Executive will be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the Excise Tax payable by
the Executive. The Executive will make proper payment of the amount of any
Excise Payment, and at the request of the Company, provide to the Company true
and correct copies (with any amendments) of his federal income tax return as
filed with the Internal Revenue Service and corresponding state and local tax
returns, if relevant, as filed with the applicable taxing authority, and such
other documents reasonably requested by the Company, evidencing such payment. If
prior to the filing of the Executive's federal income tax return, or
corresponding state or local tax return, if relevant, the Accounting Firm
determines that the amount of the Gross-Up Payment should be reduced, the
Executive will within five (5) business days pay to the Company the amount of
such reduction.
(e) The fees and expenses of the Accounting Firm for its services in
connection with the determinations and calculations contemplated by Section
10(b) will be borne by the Company. If such fees and expenses are initially paid
by the Executive, the Company will reimburse the Executive the full amount of
such fees and expenses within five (5) business days after receipt from the
Executive of a statement therefor and reasonable evidence of his payment
thereof.
(f) The Executive will notify the Company in writing of any claim by
the Internal Revenue Service or any other taxing authority that, if successful,
would require the payment by the Company of a Gross-Up Payment. The Executive
will not pay such claim prior to the earlier of (i) the expiration of the
30-calendar-day period following the date on which he gives such notice to the
Company and (ii) the date that any payment of amount with respect to such claim
is due. If the Company notifies the Executive in writing prior to the expiration
of such period that it desires to contest such claim, the Executive will:
(i) provide the Company with any written records or documents
in his possession relating to such claim reasonably requested by the
Company;
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including without limitation accepting legal representation with
respect to such claim by an attorney competent in respect of the
subject matter and reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order
effectively to contest such claim; and
(iv) permit the Company to participate in any proceedings
relating to such claim;
PROVIDED, HOWEVER, that the Company will bear and pay directly all costs and
expenses (including interest and penalties) incurred in connection with such
contest and will indemnify and hold harmless the Executive, on an after-tax
basis, for and against any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limiting the foregoing provisions of this
Section
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10(f), the Company will control all proceedings taken in connection with the
contest of any claim contemplated by this Section 10(f) and, at its sole option,
may pursue or forego any and all administrative appeals, proceedings, hearings
and conferences with the taxing authority in respect of such claim (PROVIDED,
HOWEVER, that the Executive may participate therein at his own cost and expense)
and may, at its option, either direct the Executive to pay the tax claimed and
xxx for a refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; PROVIDED, HOWEVER, that if the
Company directs the Executive to pay the tax claimed and xxx for a refund, the
Company will advance the amount of such payment to the Executive on an
interest-free basis and will indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income or other tax, including interest
or penalties with respect thereto, imposed with respect to such advance; and
PROVIDED FURTHER, HOWEVER, that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Executive with respect
to which the contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of any such contested claim
will be limited to issues with respect to which a Gross-Up Payment would be
payable hereunder and the Executive will be entitled to settle or contest, as
the case may be, any other issue raised by the Internal Revenue Service or any
other taxing authority.
(g) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 10(f), the Executive receives any refund with
respect to such claim, the Executive will (subject to the Company's complying
with the requirements of Section 10(f)) promptly pay to the Company the amount
of such refund, less all out-of-pocket costs and expenses related thereto
(together with any interest paid or credited thereon after any taxes applicable
thereto). If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 10(f), a determination is made that the Executive
will not be entitled to any refund with respect to such claim and the Company
does not notify the Executive in writing of its intent to contest such denial or
refund prior to the expiration of thirty (30) calendar days after such
determination, then such advance will be forgiven and will not be required to be
repaid and the amount of any such advance will offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid by the Company to the
Executive pursuant to this Section 10.
11. SUCCESSORS AND BINDING AGREEMENT:
(a) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization or otherwise) to
all or substantially all of the business and/or assets of the Company, by
agreement in form and substance satisfactory to the Executive, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent the Company would be required to perform if no such succession had taken
place. This Agreement shall be binding upon and inure to the benefit of the
Company and any successor to the Company, including without limitation any
persons acquiring directly or indirectly all or substantially all of the
business and/or assets of the Company whether by purchase, merger,
consolidation, reorganization or otherwise (and such successor shall thereafter
be deemed the "Company" for the purposes of this Agreement), but shall not
otherwise be assignable, transferable or delegable by the Company.
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(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 and/or legatees.
(c) This Agreement is personal in nature and neither of the parties
hereto shall, without the consent of the other, assign, transfer or delegate
this Agreement or any rights or obligations hereunder except as expressly
provided in Section 11(a) hereof. Without limiting the generality of the
foregoing, the Executive's right to receive payments hereunder shall not be
assignable, transferable or delegable, whether by pledge, creation of a security
interest or otherwise, other than by a transfer by his will or by the laws of
descent and distribution and, in the event of any attempted assignment or
transfer contrary to this Section 11(c), the Company shall have no liability to
pay any amount so attempted to be assigned, transferred or delegated.
(d) The Company and the Executive recognize that each party will have
no adequate remedy at law for breach by the other of any of the agreements
contained herein and, in the event of any such breach, the Company and the
Executive hereby agree and consent that the other shall be entitled to a decree
of specific performance mandamus or other appropriate remedy to enforce
performance of this Agreement.
12. NOTICE:
For all purposes of this Agreement, all communications including
without limitation notices, consents, requests or approvals, provided for herein
shall be in writing and shall be deemed to have been duly given when delivered,
or five (5) business days after having been mailed by United States registered
or certified mail, return receipt requested, postage prepaid, addressed to the
Company (to the attention of the Secretary of the Company) at its principal
executive office and to the Executive at his principal residence, or to such
other address as any party may have furnished to the other in writing and 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 Ohio, without giving
effect to the principles of conflict of laws of such State.
14. VALIDITY:
If any provision of this Agreement or the application of any provision
hereof to any person or circumstances is held invalid, unenforceable or
otherwise illegal, the remainder of this Agreement and the application of such
provision to any other person or circumstances shall not be affected, and the
provision so held to be invalid, unenforceable or otherwise illegal shall be
reformed to the extent (and only to the extent) necessary to make it
enforceable, valid and legal.
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15. MISCELLANEOUS:
No provisions of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing signed by
the Executive and the Company. No waiver by either party hereto at any time of
any breach by the other party hereto or 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. No agreements or representations, oral or otherwise,
expressed or implied with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement.
16. 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 together will
constitute one and the same agreement.
17. PRIOR AGREEMENT:
This Agreement supersedes the Prior Agreement(s), which Prior
Agreement(s) shall, without further action, be terminated and superseded as of
the date hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
THE XXXXXX & SESSIONS CO.
By
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Senior Executive Officer
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[EXECUTIVE]
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