EMPLOYMENT AGREEMENT DATED AS OF SEPTEMBER 8, 2006 BETWEEN ERNIE HERRMAN AND THE TJX COMPANIES, INC.
Exhibit 10.9
EMPLOYMENT AGREEMENT
DATED AS OF SEPTEMBER 8, 2006
BETWEEN XXXXX XXXXXXX AND THE TJX COMPANIES, INC.
DATED AS OF SEPTEMBER 8, 2006
BETWEEN XXXXX XXXXXXX AND THE TJX COMPANIES, INC.
INDEX
| PAGE | ||||||
1. |
EFFECTIVE DATE; TERM OF AGREEMENT | 1 | ||||
2. |
SCOPE OF EMPLOYMENT. | 1 | ||||
3. |
COMPENSATION AND BENEFITS. | 2 | ||||
4. |
TERMINATION OF EMPLOYMENT; IN GENERAL. | 2 | ||||
5. |
BENEFITS UPON NON-VOLUNTARY TERMINATION OF EMPLOYMENT OR UPON EXPIRATION OF THE AGREEMENT. | 3 | ||||
6. |
OTHER TERMINATION; VIOLATION OF CERTAIN AGREEMENTS. | 5 | ||||
7. |
BENEFITS UPON CHANGE IN CONTROL | 5 | ||||
8. |
AGREEMENT NOT TO SOLICIT OR COMPETE. | 5 | ||||
9. |
ASSIGNMENT | 7 | ||||
10. |
NOTICES | 7 | ||||
11. |
WITHHOLDING; CERTAIN TAX MATTERS | 7 | ||||
12. |
GOVERNING LAW | 7 | ||||
13. |
ARBITRATION | 7 | ||||
14. |
ENTIRE AGREEMENT | 8 | ||||
| EXHIBIT A Certain Definitions | A-1 | |||||
| EXHIBIT B Definition of “Change of Control” | B-1 | |||||
| EXHIBIT C Change of Control Benefits | C-1 | |||||
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XXXXX XXXXXXX
AGREEMENT dated as of September 8, 2006 between XXXXX XXXXXXX (“Executive”) and The TJX
Companies, Inc., a Delaware corporation whose principal office is in Xxxxxxxxxx, Xxxxxxxxxxxxx
00000(xxx “Company”).
RECITALS
The Company and Executive intend that the Executive shall be employed by the Company on the
terms set forth below and, to that end, deem it desirable and appropriate to enter into this
Agreement.
AGREEMENT
The parties hereto, in consideration of the mutual agreements hereinafter contained, agree as
follows:
1. EFFECTIVE DATE; TERM OF AGREEMENT. This Agreement shall become effective as of September
8, 2006 (the “Effective Date”). Executive’s employment hereunder shall continue on the terms
provided herein until September 8, 2009 (the “End Date”), subject to earlier termination as
provided herein (such period of employment hereinafter called the “Employment Period”).
2. SCOPE OF EMPLOYMENT.
(a) Nature of Services. Executive shall diligently perform such duties and assume
such responsibilities as shall from time to time be specified by the Company.
(b) Extent of Services. Except for illnesses and vacation periods, Executive shall
devote substantially all his working time and attention and his best efforts to the performance of
his duties and responsibilities under this Agreement. However, Executive may (i) make any passive
investments where he is not obligated or required to, and shall not in fact, devote any managerial
efforts, (ii) subject to approval by the Chief Executive Officer of the Company (which approval
shall not be unreasonably withheld or withdrawn), participate in charitable or community activities
or in trade or professional organizations, or (iii) subject to approval by the Chief Executive
Officer of the Company (which approval shall not be unreasonably withheld or withdrawn), hold
directorships in public companies, except only that the Chief Executive Officer shall have the
right to limit such services as a director or such participation in charitable or community
activities or in trade or professional organizations whenever the Chief Executive Officer shall
believe that the time spent on such activities infringes in any material respect upon the time
required by Executive for the performance of his duties under this Agreement or is otherwise
incompatible with those duties.
3. COMPENSATION AND BENEFITS.
(a) Base Salary. Executive shall be paid a base salary at the rate hereinafter
specified, such Base Salary to be paid in the same manner and at the same times as the Company
shall pay base salary to other executive employees. The rate at which Executive’s Base Salary
shall be paid shall be $700,000 per year or such other rate (not less than $700,000 per year) as
the Board may determine after Board review not less frequently than annually.
(b) Existing Awards. Reference is made to outstanding awards of stock options and of
performance-based restricted stock made prior to the Effective Date under the Company’s Stock
Incentive Plan (including any successor, the “Stock Incentive Plan”), to the award opportunity
granted to Executive for FYE 2005 under the Company’s Management Incentive Plan (“MIP”), and to
award opportunities granted to Executive under the Company’s Long Range Performance Incentive Plan
(“LRPIP”) for cycles beginning before the Effective Date and ending after the Effective Date. Each
of such awards shall continue for such period or periods and in accordance with such terms as are
set out in the grant and other governing documents relating to such awards and shall not be
affected by the terms of this Agreement except as otherwise expressly provided herein.
(c) New Stock Awards. Consistent with the terms of the Stock Incentive Plan,
Executive will be entitled to stock-based awards under the Stock Incentive Plan at levels
commensurate with his position and responsibilities and subject to such terms as shall be
established by the Committee.
(d) LRPIP. During the Employment Period, Executive will be eligible to participate
in annual grants under LRPIP at a level commensurate with his position and responsibilities and
subject to such terms as shall be established by the Committee.
(e) MIP. During the Employment Period, Executive will be eligible to participate in
annual awards under MIP at a level commensurate with his position and responsibilities and subject
to such terms as shall be established by the Committee.
(f) Qualified Plans; Other Deferred Compensation Plans. Executive shall be entitled
during the Employment Period to participate in the Company’s tax-qualified retirement and
profit-sharing plans and in the GDCP and ESP, in each case in accordance with the terms of the
applicable plan.
(g) Policies and Fringe Benefits. Executive shall be subject to Company policies
applicable to its executives generally and shall be entitled to receive all such fringe benefits as
the Company shall from time to time make available to other executives generally (subject to the
terms of any applicable fringe benefit plan).
4. TERMINATION OF EMPLOYMENT; IN GENERAL.
(a) The Company shall have the right to end Executive’s employment at any time and for any
reason, with or without Cause.
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(b) The Employment Period shall terminate when Executive becomes Disabled. In addition, if
by reason of Incapacity Executive is unable to perform his duties for at least six continuous
months, upon written notice by the Company to Executive the Employment Period will be terminated
for Incapacity.
(c) Whenever the Employment Period shall terminate, Executive shall resign all offices or
other positions he shall hold with the Company and any affiliated corporations.
5. BENEFITS UPON NON-VOLUNTARY TERMINATION OF EMPLOYMENT OR UPON EXPIRATION OF THE AGREEMENT.
(a) Certain Terminations Prior to the End Date. If the Employment Period shall have
terminated prior to the End Date by reason of (i) death, Disability or Incapacity of Executive,
(ii) termination by the Company for any reason other than Cause or (iii) termination by Executive
in the event that Executive is relocated more than forty (40) miles from the current corporate
headquarters of the Company without his prior written consent (a “Constructive Termination”), then
all compensation and benefits for Executive shall be as follows:
(i) For a period of eighteen (18) months after the Date of Termination (the
“termination period”), the Company will pay to Executive or his legal representative,
continued Base Salary at the rate in effect at termination of employment; provided, that if
Executive is eligible for long-term disability compensation benefits under the Company’s
long-term disability plan, the amount payable under this clause shall be paid at a rate
equal to the excess of (a) the rate of Base Salary in effect at termination of employment,
over (b) the long-term disability compensation benefits for which Executive is eligible
under such plan.
(ii) If Executive elects so-called “COBRA” continuation of group health plan coverage
provided pursuant to Part 6 of Subtitle B of Title I of the Employee Retirement Income
Security Act of 1974, as amended, there shall be added to the amounts otherwise payable
under Section 5(a)(i) above an amount (grossed up for federal and state income taxes) equal
to the participant cost of such coverage for the termination period, except to the extent
that the Participant shall obtain no less favorable coverage from another employer or from
self-employment in which case such additional payments shall cease immediately.
(iii) The Company will pay to Executive or his legal representative, without offset
for compensation earned from other employment or self-employment, (A) any unpaid amounts to
which Executive is entitled under MIP for the fiscal year of the Company ended immediately
prior to Executive’s termination of employment, plus (B) any unpaid amounts owing with
respect to LRPIP cycles in which Executive participated and which were completed prior to
termination. These amounts will be paid at the same time as other awards for such prior
year or cycle are paid.
(iv) The Company will pay to Executive or his legal representative, without offset for
compensation earned from other employment or self-employment, an amount equal to the sum of
(A) Executive’s MIP Target Award, if any, for the year of
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termination, multiplied by a fraction, the numerator of which is three hundred and
sixty-five (365) plus the number of days during such year prior to termination, and the
denominator of which is seven hundred and thirty (730) (provided, however, that if the
Employment Period shall have terminated by reason of Executive’s death, Disability or
Incapacity, this clause (A) shall not apply and Executive instead shall be entitled to the
MIP benefit described in (vii) below), plus (B) with respect to each LRPIP cycle in which
Executive participated and which had not ended prior to termination of employment, 1/36 of
an amount equal to Executive’s LRPIP Target Award for such cycle multiplied by the number of
full months in such cycle completed prior to termination of employment. The amount described
in clause 5(a)(iv)(A) above, if any, will be paid not later than MIP awards for the year of
termination are paid. The amount described in clause 5(a)(iv)(B) above, to the extent
measured by the LRPIP Target Award for any cycle, will be paid not later than the date on
which LRPIP awards for such cycle are paid or would have been paid.
(v) In addition, Executive or his legal representative shall be entitled to the
benefits described in Section 3(b) (Existing Awards) and Section 3(c) (New Stock Awards), in
each case in accordance with and subject to the terms of the applicable arrangement, and to
payment of his vested benefits under the plans described in Section 3(f) (Qualified Plans;
Other Deferred Compensation Plans).
(vi) If termination occurs by reason of Incapacity or Disability, Executive shall also
be entitled to such compensation, if any, as is payable pursuant to the Company’s long-term
disability plan. If for any period Executive receives long-term disability compensation
payments under a long-term disability plan of the Company as well as payments under 5(a)(i)
above, and if the sum of such payments (the “combined salary/disability benefit”) exceeds
the payment for such period to which Executive is entitled under 5(a)(i) above (determined
without regard to the proviso set forth therein), he shall promptly pay such excess in
reimbursement to the Company; provided, that in no event shall application of this sentence
result in reduction of Executive’s combined salary/disability benefit below the level of
long-term disability compensation payments to which Executive is entitled under the
long-term disability plan or plans of the Company.
(vii) If termination occurs by reason of death, Incapacity or Disability, Executive
shall also be entitled to an amount equal to Executive’s MIP Target Award for the year of
termination, without proration. This amount will be paid not later than MIP awards for the
year of termination are paid.
(viii) Except as expressly set forth above or as required by law, Executive shall not
be entitled to continue participation during the termination period in any employee benefit
or fringe benefit plans, except for continuation of any automobile allowance.
(b) Terminations on or after the End Date. Unless earlier terminated or except as
otherwise mutually agreed by Executive and the Company, Executive’s employment with the Company
shall terminate on the End Date. Unless the Company in connection with such termination shall
offer to Executive continued service in a position acceptable to Executive and upon mutually and
reasonably agreeable terms, Executive shall be treated as having terminated
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under Section 5(a) on the day immediately preceding the End Date and shall be entitled to the
pay and benefits described therein. If the Company in connection with such termination offers to
Executive continued service in a position acceptable to Executive and upon mutually and reasonably
agreeable terms, and Executive declines such service, he shall be treated for all purposes of this
Agreement as having terminated his employment voluntarily on the End Date and he shall be entitled
only to those benefits to which he would be entitled under Section 6(a) (“Voluntary termination of
employment”). For purposes of the two preceding sentences, “service in a position acceptable to
Executive” shall mean service in a position comparable to the position in which Executive was
serving immediately prior to the End Date, as reasonably determined by the Board.
6. OTHER TERMINATION; VIOLATION OF CERTAIN AGREEMENTS.
(a) Voluntary termination of employment. If Executive terminates his employment
voluntarily, Executive or his legal representative shall be entitled (in each case in accordance
with and subject to the terms of the applicable arrangement) to any Stock Incentive Plan benefits
described in Section 3(b) (Existing Awards) or Section 3(c) (New Stock Awards) and to any vested
benefits under the plans described in 3(f) (Qualified Plans; Other Deferred Compensation Plans).
In addition, the Company will pay to Executive or his legal representative any unpaid amounts to
which Executive is entitled under MIP for the fiscal year of the Company ended immediately prior to
Executive’s termination of employment, plus any unpaid amounts owing with respect to LRPIP cycles
in which Executive participated and which were completed prior to termination, in each case at the
same time as other awards for such prior year or cycle are paid. No other benefits shall be paid
under this Agreement upon a voluntary termination of employment.
(b) Termination for Cause; violation of certain agreements. If the Company should
end Executive’s employment for Cause, or, notwithstanding Section 5 and Section 6(a) above, if
Executive should engage in any activity that would violate the provisions of Section 8, all
compensation and benefits otherwise payable pursuant to this Agreement shall cease, other than (x)
such vested amounts as are credited to Executive’s account (but not received) under GDCP and ESP in
accordance with the terms of those programs; (y) any vested benefits to which the Executive is
entitled under the Company’s tax-qualified plans; and (z) Stock Incentive Plan Benefits, if any, to
which Executive may be entitled (in each case in accordance with and subject to the terms of the
applicable arrangement) under Section 3(b) (Existing Awards) and 3(c) (New Stock Awards). The
Company does not waive any rights it may have for damages or for injunctive relief.
7. BENEFITS UPON CHANGE IN CONTROL. Notwithstanding any other provision of this Agreement, in
the event of a Change of Control, the determination and payment of any benefits payable thereafter
with respect to Executive shall be governed exclusively by the provisions of Exhibit C.
8. AGREEMENT NOT TO SOLICIT OR COMPETE.
(a) Upon the termination of employment at any time, then for a period of two years after the
termination of the Employment Period, Executive shall not under any circumstances employ,
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solicit the employment of, or accept unsolicited the services of, any “protected person” or
recommend the employment of any “protected person” to any other business organization. A
“protected person” shall be a person known by Executive to be employed by the Company or its
Subsidiaries or to have been employed by Company or its Subsidiaries within six months prior to the
commencement of conversations with such person with respect to employment.
(b) As to (i) each “protected person” to whom the foregoing applies, (ii) each subcategory of
“protected person” as defined above, (iii) each limitation on (A) employment, (B) solicitation and
(C) unsolicited acceptance of services, of each “protected person” and (iv) each month of the
period during which the provisions of this subsection (b) apply to each of the foregoing, the
provisions set forth in this subsection (b) shall be deemed to be separate and independent
agreements and in the event of unenforceability of any such agreement, such unenforceable agreement
shall be deemed automatically deleted from the provisions hereof and such deletion shall not affect
the enforceability of any other provision of this subsection (b) or any other term of this
Agreement.
(c) During the course of his employment, Executive will have learned many trade secrets of
the Company and its Subsidiaries and will have access to confidential information and business
plans for the Company and its Subsidiaries. Therefore, upon termination of the Employment Period
on the End Date or if Executive should end his employment voluntarily at any time, including by
reason of retirement or Disability, or if the Company should end Executive’s employment at any time
for Cause, then for a period of two years thereafter, Executive will not be a partner or investor
in, or be engaged in any employment, consulting, or fees-for-services arrangement with, any
business which is a competitor of the Company and its Subsidiaries, nor shall Executive undertake
any planning to engage in any such business. A business shall be deemed a competitor of the
Company and its Subsidiaries if it shall then be so regarded by retailers generally or if it shall
operate an off-price apparel, off-price footwear, off-price jewelry, off-price accessories,
off-price giftware, off-price toys and games, off-price home furnishings and/or off-price home
fashions business, including any such business that is store-based, catalogue-based, media-based or
an on-line, “e-commerce” or other off-price internet-based business. If, at any time, pursuant to
action of any court, administrative or governmental body or other arbitral tribunal, the operation
of any part of this paragraph shall be determined to be unlawful or otherwise unenforceable, then
the coverage of this paragraph shall be deemed to be restricted as to duration, geographical scope
or otherwise, as the case may be, to the extent, and only to the extent, necessary to make this
paragraph lawful and enforceable in the particular jurisdiction in which such determination is
made.
(d) Executive shall never use or disclose any confidential information other than as required
by applicable law or for the proper performance of Executive’s regular duties and responsibilities
to the Company and its Subsidiaries. This restriction shall continue to apply after Executive’s
employment terminates, regardless of the reason for such termination. All documents, records and
files, in any media, relating to the business, present or otherwise, of the Company and its
Subsidiaries and any copies (“Documents”), whether or not prepared by Executive, are the property
of the Company and its Subsidiaries. Executive must safeguard all Documents and must surrender to
the Company at such time or times as the Company may specify all Documents then in Executive’s
possession or control. In addition, upon termination of employment for any reason other than the
death of Executive, Executive shall immediately
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return all Documents and shall execute a certificate certifying that he or she has returned
all such Documents in her possession or under his or her control.
(e) If, following termination of the Employment Period at any time or for any reason and
while he is still entitled to benefits under Section 5 of this Agreement, Executive engages in any
activity that would be prohibited under this Section 8 following a voluntary termination of
employment, the Company’s obligation to pay benefits under Section 5 shall forthwith cease and
Executive shall be entitled only to (x) payment of such vested amounts as are credited to
Executive’s account (but not received) under GDCP and ESP in accordance with the terms of those
programs; (y) payment of any vested benefits to which the Executive is entitled under the Company’s
tax-qualified plans; and (z) Stock Incentive Plan Benefits, if any, to which Executive may be
entitled (in each case in accordance with and subject to the terms of the applicable arrangement)
under Section 3(b) (Existing Awards) and 3(c) (New Stock Awards). A Participant shall notify the
Company immediately upon securing employment or becoming self-employed during any period when any
benefits may be subject to termination as provided in this Section 8.
9. ASSIGNMENT. The rights and obligations of the Company shall enure to the benefit of and
shall be binding upon the successors and assigns of the Company. The rights and obligations of
Executive are not assignable except only that payments payable to him after his death shall be made
to his estate except as otherwise provided by the applicable plan or award documentation, if any.
10. NOTICES. All notices and other communications required hereunder shall be in writing and
shall be given by mailing the same by certified or registered mail, return receipt requested,
postage prepaid. If sent to the Company the same shall be mailed to the Company at 000 Xxxxxxxxxx
Xxxx, Xxxxxxxxxx, Xxxxxxxxxxxxx 00000, Attention: Chairman of the Executive Compensation
Committee, or other such address as the Company may hereafter designate by notice to Executive; and
if sent to the Executive, the same shall be mailed to Executive at his address as set forth in the
records of the Company or at such other address as Executive may hereafter designate by notice to
the Company.
11. WITHHOLDING; CERTAIN TAX MATTERS. Anything to the contrary notwithstanding, (a) all
payments required to be made by the Company hereunder to Executive shall be subject to the
withholding of such amounts, if any, relating to tax and other payroll deductions as the Company
may reasonably determine it should withhold pursuant to any applicable law or regulation, and (b)
to the extent any payment hereunder shall be required to be delayed until six months following
separation from service to comply with the “specified employee” rules of Section 409A it shall be
so delayed (but not more than is required to comply with such rules).
12. GOVERNING LAW. This Agreement and the rights and obligations of the parties hereunder
shall be governed by the laws of the Commonwealth of Massachusetts.
13. ARBITRATION. In the event that there is any claim or dispute arising out of or relating
to this Agreement, or the breach thereof, and the parties hereto shall not have resolved such claim
or dispute within sixty (60) days after written notice from one party to the other setting forth
the nature of such claim or dispute, then such claim or dispute shall be settled
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exclusively by binding arbitration in Boston, Massachusetts in accordance with the Rules
Governing Resolutions of Employment Disputes of the American Arbitration Association by an
arbitrator mutually agreed upon by the parties hereto or, in the absence of such agreement, by an
arbitrator selected according to such Rules. Notwithstanding the foregoing, if either the Company
or Executive shall request, such arbitration shall be conducted by a panel of three arbitrators,
one selected by the Company, one selected by Executive and the third selected by agreement of the
first two, or, in the absence of such agreement, in accordance with such Rules. Judgment upon the
award rendered by such arbitrator(s) shall be entered in any Court having jurisdiction thereof upon
the application of either party.
14. ENTIRE AGREEMENT. This Agreement, including Exhibits, represents the entire agreement
between the parties relating to the terms of Executive’s employment by the Company and supersedes
all prior written or oral agreements between them.
| /s/ Xxxxx Xxxxxxx | ||||||
| Executive | ||||||
| THE TJX COMPANIES, INC. | ||||||
| By: | /s/ Xxxxxxx Xxxxxxxxx | |||||
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EXHIBIT A
Certain Definitions
(a) “Base Salary” means, for any period, the amount described in Section 3(a).
(b) “Board” means the Board of Directors of the Company.
(c) “Committee” means the Executive Compensation Committee of the Board.
(d) “Cause” means dishonesty by Executive in the performance of his duties, conviction of a
felony (other than a conviction arising solely under a statutory provision imposing criminal
liability upon Executive on a per se basis due to the Company offices held by Executive, so long as
any act or omission of Executive with respect to such matter was not taken or omitted in
contravention of any applicable policy or directive of the Board), gross neglect of duties (other
than as a result of Incapacity, Disability or death), or conflict of interest which conflict shall
continue for thirty (30) days after the Company gives written notice to Executive requesting the
cessation of such conflict.
In respect of any termination during a Standstill Period, Executive shall not be deemed to
have been terminated for Cause until the later to occur of (i) the 30th day after notice of
termination is given and (ii) the delivery to Executive of a copy of a resolution duly adopted by
the affirmative vote of not less than a majority of the Company’s directors at a meeting called and
held for that purpose (after reasonable notice to Executive), and at which Executive together with
his counsel was given an opportunity to be heard, finding that the Executive was guilty of conduct
described in the definition of “Cause” above, and specifying the particulars thereof in detail;
provided, however, that the Company may suspend Executive and withhold payment of his Base Salary
from the date that notice of termination is given until the earliest to occur of (A) termination of
Executive for Cause effected in accordance with the foregoing procedures (in which case Executive
shall not be entitled to his Base Salary for such period), (B) a determination by a majority of the
Company’s directors that Executive was not guilty of the conduct described in the definition of
“Cause” effected in accordance with the foregoing procedures (in which case Executive shall be
reinstated and paid any of his previously unpaid Base Salary for such period), or (C) ninety (90)
days after notice of termination is given (in which case Executive shall then be reinstated and
paid any of his previously unpaid Base Salary for such period). If Base Salary is withheld and
then paid pursuant to clause (B) or (C) of the preceding sentence, the amount thereof shall be
accompanied by simple interest, calculated on a daily basis, at a rate per annum equal to the prime
or base lending rate, as in effect at the time, of the Company’s principal commercial bank.
(e) “Change of Control” has the meaning given it in Exhibit B.
(f) “Change of Control Termination” means the termination of Executive’s employment during a
Standstill Period (1) by the Company other than for Cause, or (2) by Executive for good reason, or
(3) by reason of death, Incapacity or Disability.
For purposes of this definition, termination for “good reason” shall mean the voluntary
termination by Executive of his employment (A) within one hundred and twenty (120) days after
A-1
the occurrence without Executive’s express written consent of any one of the events described
in clauses (I), (II), (III), (IV), (V) or (VI) below, provided, that Executive gives notice to the
Company at least thirty (30) days in advance requesting that the pertinent situation described
therein be remedied, and the situation remains unremedied upon expiration of such 30-day period;
(B) within one hundred and twenty (120) days after the occurrence without Executive’s express
written consent of the event described in clause (VII), provided, that Executive gives notice to
the Company at least thirty (30) days in advance of his intent to terminate his employment in
respect of such event; or (C) under the circumstances described in clause (VIII) below, provided,
that Executive gives notice to the Company at least thirty (30) days in advance:
| (I) | the assignment to him of any duties inconsistent with his positions, duties, responsibilities, and status with the Company immediately prior to the Change of Control, or any removal of Executive from or any failure to reelect him to such positions, except in connection with the termination of Executive’s employment by the Company for Cause or by Executive other than for good reason, or any other action by the Company which results in a diminishment in such position, authority, duties or responsibilities, other than an insubstantial and inadvertent action which is remedied by the Company promptly after receipt of notice thereof given by Executive; or | ||
| (II) | if Executive’s rate of Base Salary for any fiscal year is less than 100% of the rate of Base Salary paid to Executive in the completed fiscal year immediately preceding the Change of Control or if Executive’s total cash compensation opportunities, including salary and incentives, for any fiscal year are less than 100% of the total cash compensation opportunities made available to Executive in the completed fiscal year immediately preceding the Change of Control; or | ||
| (III) | the failure of the Company to continue in effect any benefits or perquisites, or any pension, life insurance, medical insurance or disability plan in which Executive was participating immediately prior to the Change of Control unless the Company provides Executive with a plan or plans that provide substantially similar benefits, or the taking of any action by the Company that would adversely affect Executive’s participation in or materially reduce Executive’s benefits under any of such plans or deprive Executive of any material fringe benefit enjoyed by Executive immediately prior to the Change of Control; or | ||
| (IV) | any purported termination of Executive’s employment by the Company for Cause during a Standstill Period which is not effected in compliance with paragraph (d) above; or | ||
| (V) | any relocation of Executive of more than forty (40) miles from the place where Executive was located at the time of the Change of Control; or | ||
| (VI) | any other breach by the Company of any provision of this Agreement; or |
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| (VII) | the Company sells or otherwise disposes of, in one transaction or a series of related transactions, assets or earning power aggregating more than 30% of the assets (taken at asset value as stated on the books of the Company determined in accordance with generally accepted accounting principles consistently applied) or earning power of the Company (on an individual basis) or the Company and its Subsidiaries (on a consolidated basis) to any other Person or Persons (as those terms are defined in Exhibit B); or | ||
| (VIII) | the voluntary termination by Executive of his employment at any time within one year after the Change of Control. Notwithstanding the foregoing, the Board may expressly waive the application of this clause (VIII) if it waives the applicability of substantially similar provisions with respect to all persons with whom the Company has a written severance agreement (or may condition its application on any additional requirements or employee agreements which the Board shall in its discretion deem appropriate in the circumstances). The determination of whether to waive or impose conditions on the application of this clause (VIII) shall be within the complete discretion of the Board but shall be made prior to the Change of Control. |
(g) “Code” means the Internal Revenue Code of 1986, as amended.
(h) “Date of Termination” means the date on which Executive’s employment terminates.
(i) “Disability” has the meaning given it in the Company’s long-term disability plan.
Executive’s employment shall be deemed to be terminated for Disability on the date on which
Executive is entitled to receive long-term disability compensation pursuant to such long-term
disability plan.
(j) “End Date” has the meaning set forth in Section 1 of the Agreement.
(k) “ESP” means the Company’s Executive Savings Plan.
(l) “GDCP” means the Company’s General Deferred Compensation Plan, or, if the General
Deferred Compensation Plan is no longer maintained by the Company, a nonqualified deferred
compensation plan (other than the ESP) or arrangement the terms of which are not less favorable to
Executive than the terms of the General Deferred Compensation Plan as in effect on the Effective
Date.
(m) “Incapacity” means a disability (other than Disability within the meaning of (i) above)
or other impairment of health that renders Executive unable to perform his duties to the reasonable
satisfaction of the Committee.
(n) “LRPIP” has the meaning set forth in Section 3(b) of the Agreement.
(o) “MIP” has the meaning set forth in Section 3(b) of the Agreement..
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(p) “Section 409A” means Section 409A of the Code.
(q) “Standstill Period” means the period commencing on the date of a Change of Control and
continuing until the close of business on the earlier of the day immediately preceding the End Date
or the last business day of the 24th calendar month following such Change of Control.
(r) “Stock” means the common stock, $1.00 par value, of the Company.
(s) “Stock Incentive Plan” has the meaning set forth in Section 3(b) of the Agreement.
(t) “Subsidiary” means any corporation in which the Company owns, directly or indirectly, 50% or
more of the total combined voting power of all classes of stock.
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EXHIBIT B
Definition of “Change of Control”
“Change of Control” shall mean the occurrence of any one of the following events:
(a) there occurs a change of control of the Company of a nature that would be required to be
reported in response to Item 1(a) of the Current Report on Form 8-K pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 (the “Exchange Act”) or in any other filing under the
Exchange Act; provided, however, that no transaction shall be deemed to be a Change of Control (i)
if the person or each member of a group of persons acquiring control is excluded from the
definition of the term “Person” hereunder or (ii) unless the Committee shall otherwise determine
prior to such occurrence, if Executive or an Executive Related Party is the Person or a member of a
group constituting the Person acquiring control; or
(b) any Person other than the Company, any wholly-owned subsidiary of the Company, or any
employee benefit plan of the Company or such a subsidiary becomes the owner of 20% or more of the
Company’s Common Stock and thereafter individuals who were not directors of the Company prior to
the date such Person became a 20% owner are elected as directors pursuant to an arrangement or
understanding with, or upon the request of or nomination by, such Person and constitute at least
1/4 of the Company’s Board of Directors; provided, however, that unless the Committee shall
otherwise determine prior to the acquisition of such 20% ownership, such acquisition of ownership
shall not constitute a Change of Control if Executive or an Executive Related Party is the Person
or a member of a group constituting the Person acquiring such ownership; or
(c) there occurs any solicitation or series of solicitations of proxies by or on behalf of
any Person other than the Company’s Board of Directors and thereafter individuals who were not
directors of the Company prior to the commencement of such solicitation or series of solicitations
are elected as directors pursuant to an arrangement or understanding with, or upon the request of
or nomination by, such Person and constitute at least 1/4 of the Company’s Board of Directors; or
(d) the Company executes an agreement of acquisition, merger or consolidation which
contemplates that (i) after the effective date provided for in the agreement, all or substantially
all of the business and/or assets of the Company shall be owned, leased or otherwise controlled by
another Person and (ii) individuals who are directors of the Company when such agreement is
executed shall not constitute a majority of the board of directors of the survivor or successor
entity immediately after the effective date provided for in such agreement; provided, however, that
unless otherwise determined by the Committee, no transaction shall constitute a Change of Control
if, immediately after such transaction, Executive or any Executive Related Party shall own equity
securities of any surviving corporation (“Surviving Entity”) having a fair value as a percentage of
the fair value of the equity securities of such Surviving Entity greater than 125% of the fair
value of the equity securities of the Company owned by Executive and any Executive Related Party
immediately prior to such transaction, expressed as a percentage of the fair value of all equity
securities of the Company immediately prior to such transaction (for purposes of this paragraph
ownership of equity securities shall be determined in the same manner as
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ownership of Common Stock); and provided, further, that, for purposes of this paragraph (d),
if such agreement requires as a condition precedent approval by the Company’s shareholders of the
agreement or transaction, a Change of Control shall not be deemed to have taken place unless and
until such approval is secured (but upon any such approval, a Change of Control shall be deemed to
have occurred on the date of execution of such agreement).
In addition, for purposes of this Exhibit B the following terms have the meanings set forth
below:
“Common Stock” shall mean the then outstanding Common Stock of the Company plus, for purposes
of determining the stock ownership of any Person, the number of unissued shares of Common Stock
which such Person has the right to acquire (whether such right is exercisable immediately or only
after the passage of time) upon the exercise of conversion rights, exchange rights, warrants or
options or otherwise. Notwithstanding the foregoing, the term Common Stock shall not include
shares of Preferred Stock or convertible debt or options or warrants to acquire shares of Common
Stock (including any shares of Common Stock issued or issuable upon the conversion or exercise
thereof) to the extent that the Board of Directors of the Company shall expressly so determine in
any future transaction or transactions.
A Person shall be deemed to be the “owner” of any Common Stock:
(i) of which such Person would be the “beneficial owner,” as such term is defined in
Rule 13d-3 promulgated by the Securities and Exchange Commission (the “Commission”) under
the Exchange Act, as in effect on March 1, 1989; or
(ii) of which such Person would be the “beneficial owner” for purposes of Section 16
of the Exchange Act and the rules of the Commission promulgated thereunder, as in effect on
March 1, 1989; or
(iii) which such Person or any of its affiliates or associates (as such terms are
defined in Rule 12b-2 promulgated by the Commission under the Exchange Act, as in effect on
March 1, 1989), has the right to acquire (whether such right is exercisable immediately or
only after the passage of time) pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights, warrants or options or otherwise.
“Person” shall have the meaning used in Section 13(d) of the Exchange Act, as in effect on
March 1, 1989.
An “Executive Related Party” shall mean any affiliate or associate of Executive other than the
Company or a majority-owned subsidiary of the Company. The terms “affiliate” and “associate” shall
have the meanings ascribed thereto in Rule 12b-2 under the Exchange Act (the term “registrant” in
the definition of “associate” meaning, in this case, the Company).
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EXHIBIT C
Change of Control Benefits
C.1. Benefits Upon a Change of Control Termination.
(a) The Company shall pay the following to Executive in a lump sum within thirty (30) days
following a Change of Control Termination an amount equal to (i) two times his Base Salary for one
year at the rate in effect immediately prior to the Date of Termination or the Change of Control,
whichever is higher, plus (ii) the accrued and unpaid portion of his Base Salary through the Date
of Termination, subject to the following. If Executive is eligible for long-term disability
compensation benefits under the Company’s long-term disability plan, the amount payable under (i)
shall be reduced by the annual long-term disability compensation benefit for which Executive is
eligible under such plan for the two-year period over which the amount payable under (i) is
measured. If for any period Executive receives long-term disability compensation payments under a
long-term disability plan of the Company as well as payments under the first sentence of this
subsection (a), and if the sum of such payments (the “combined Change of Control/disability
benefit”) exceeds the payment for such period to which Executive is entitled under the first
sentence of this subsection (a) (determined without regard to the second sentence of this
subsection (a)), he shall promptly pay such excess in reimbursement to the Company; provided, that
in no event shall application of this sentence result in reduction of Executive’s combined Change
of Control/disability benefit below the level of long-term disability compensation payments to
which Executive is entitled under the long-term disability plan or plans of the Company.
(b) Until the second anniversary of the Date of Termination, the Company shall maintain in
full force and effect for the continued benefit of Executive and his family all life insurance and
medical insurance plans and programs in which Executive was entitled to participate immediately
prior to the Change of Control, provided, that Executive’s continued participation is possible
under the general terms and provisions of such plans and programs. In the event that Executive is
ineligible to participate in such plans or programs, the Company shall arrange upon comparable
terms to provide Executive with benefits substantially similar to those which he is entitled to
receive under such plans and programs. Notwithstanding the foregoing, the Company’s obligations
hereunder with respect to life or medical coverage or benefits shall be deemed satisfied to the
extent (but only to the extent) of any such coverage or benefits provided by another employer.
(c) For a period of two years after the Date of Termination, the Company shall continue to
provide to Executive an automobile allowance on the same basis as it was providing such allowance
immediately prior to the Change of Control.
C.2. Incentive Benefits Upon a Change of Control. Within thirty (30) days following
a Change of Control, whether or not Executive’s employment has terminated or been terminated, the
Company shall pay to the Executive, in a lump sum, the sum of (i) and (ii), where:
(i) is the sum of (A) the “Target Award” under the Company’s Management Incentive Plan
or any other annual incentive plan which is applicable to Executive for the
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fiscal year in which the Change of Control occurs, plus (B) an amount equal to such
Target Award prorated for the period of active employment during such fiscal year through
the Change of Control; and
(ii) the sum of (A) for Performance Cycles not completed prior to the Change of
Control, an amount with respect to each such cycle equal to the maximum Award under LRPIP
specified for Executive for such cycle, plus (B) any unpaid amounts owing with respect to
cycles completed prior to the Change of Control.
C.3. Gross-Up Payment. Payments under Section C.1. and Section C.2. of this Exhibit
shall be made without regard to whether the deductibility of such payments (or any other payments
or benefits to or for the benefit of Executive) would be limited or precluded by Section 280G of
the Code (“Section 280G”) and without regard to whether such payments (or any other payments or
benefits) would subject Executive to the federal excise tax levied on certain “excess parachute
payments” under Section 4999 of the Code (the “Excise Tax”). If any portion of the payments or
benefits to or for the benefit of Executive (including, but not limited to, payments and benefits
under this Agreement but determined without regard to this paragraph) constitutes an “excess
parachute payment” within the meaning of Section 280G (the aggregate of such payments being
hereinafter referred to as the “Excess Parachute Payments”), the Company shall promptly pay to
Executive an additional amount (the “gross-up payment”) that after reduction for all taxes
(including but not limited to the Excise Tax) with respect to such gross-up payment equals the
Excise Tax with respect to the Excess Parachute Payments; provided, that to the extent any gross-up
payment would be considered “deferred compensation” for purposes of Section 409A of the Code, the
manner and time of payment, and the provisions of this Section C.3, shall be adjusted to the extent
necessary (but only to the extent necessary) to comply with the requirements of Section 409A with
respect to such payment so that the payment does not give rise to the interest or additional tax
amounts described at Section 409A(a)(1)(B) or Section 409A(b)(4) of the Code (the “Section 409A
penalties”); and further provided, that if, notwithstanding the immediately preceding proviso, the
gross-up payment cannot be made to conform to the requirements of Section 409A of the Code, the
amount of the gross-up payment shall be determined without regard to any gross-up for the Section
409A penalties. The determination as to whether Executive’s payments and benefits include Excess
Parachute Payments and, if so, the amount of such payments, the amount of any Excise Tax owed with
respect thereto, and the amount of any gross-up payment shall be made at the Company’s expense by
PricewaterhouseCoopers LLP or by such other certified public accounting firm as the Committee may
designate prior to a Change of Control (the “accounting firm”). Notwithstanding the foregoing, if
the Internal Revenue Service shall assert an Excise Tax liability that is higher than the Excise
Tax (if any) determined by the accounting firm, the Company shall promptly augment the gross-up
payment to address such higher Excise Tax liability.
C.4. Other Benefits. In addition to the amounts described in Sections C.1. and C.2.,
and C.3., Executive or his legal representative shall be entitled to his Stock Incentive Plan
benefits, if any, under Section 3(b) (Existing Awards) and Section 3(c) (New Stock Awards), and to
the payment of his vested benefits under the plans described in 3(f) (Qualified Plans; Other
Deferred Compensation Plans).
C-2
C.5. Noncompetition; No Mitigation of Damages; etc.
(a) Noncompetition. Upon a Change of Control, any agreement by Executive not to
engage in competition with the Company subsequent to the termination of his employment, whether
contained in an employment contract or other agreement, shall no longer be effective.
(b) No Duty to Mitigate Damages. Executive’s benefits under this Exhibit C shall be
considered severance pay in consideration of his past service and his continued service from the
date of this Agreement, and his entitlement thereto shall neither be governed by any duty to
mitigate his damages by seeking further employment nor offset by any compensation which he may
receive from future employment.
(c) Legal Fees and Expenses. The Company shall pay all legal fees and expenses,
including but not limited to counsel fees, stenographer fees, printing costs, etc. reasonably
incurred by Executive in contesting or disputing that the termination of his employment during a
Standstill Period is for Cause or other than for good reason (as defined in the definition of
Change of Control Termination) or obtaining any right or benefit to which Executive is entitled
under this Agreement following a Change of Control. Any amount payable under this Agreement that
is not paid when due shall accrue interest at the prime rate as from time to time in effect at Bank
of America, or its successor, until paid in full.
(d) Notice of Termination. During a Standstill Period, Executive’s employment may be
terminated by the Company only upon thirty (30) days’ written notice to Executive.
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