EXHIBIT 10.7
REEBOK INTERNATIONAL LTD.
Change of Control Agreement
AGREEMENT, made this 29th day of May, 1997, by and between
Xxxxx Xxxxxx ("Executive") and Reebok International Ltd. (the
"Company"),
WITNESSETH
WHEREAS, the Board of Directors of the Company (the "Board")
has determined that it is in the best interests of the Company
and its shareholders for the Company to agree to provide benefits
under circumstances described below to Executive; and
WHEREAS, the Board recognizes that the possibility of a
change of control of the Company, followed by a termination of
the Executive's employment or a reduction in his responsibility
or compensation, is unsettling to the Executive and wishes to
make arrangements at this time to help assure his continuing
dedication to his duties to the Company and its shareholders,
notwithstanding any attempts by outside parties to gain control
of the Company; and
WHEREAS, the Board believes it important, should the Company
receive proposals from outside parties, to enable the Executive,
without being distracted by the uncertainties of his own
employment situation, to perform his regular duties,
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, the parties hereto agree as
follows:
1. In the event that any individual, corporation, partnership,
company, or other entity (a "Person"), which term shall include a
"group" (within the meaning of section 13(d) of the Securities
Exchange Act of 1934 (the "Act")), begins a tender or exchange
offer, circulates a proxy to the Company's shareholders, or takes
other steps to effect a "Change of Control" (as defined in
paragraph 3 below), Executive agrees that he will not voluntarily
leave the employ of the Company and will render the services
contemplated in the recitals to this Agreement until such Person
has terminated the efforts to effect a Change of Control or until
a Change of Control has occurred.
2. If, within 24 months following a Change of Control,
Executive's employment with the Company terminates other than as
a result of the death, total disability or retirement of the
Executive at or after his normal retirement date, (i) by the
Company other than for "Cause" (as defined in paragraph 4 below),
or (ii) by Executive for "Good Reason" (as defined in paragraph 4
below), then:
a. The Company will pay to Executive within 30 days of
such termination of employment a lump-sum cash payment
equal to 300% of the aggregate of (i) his then-current
annual base salary (or, if his base salary has been
reduced at any time after the Change of Control, his
base salary in effect prior to the reduction), (ii) his
target bonus for the then-current year or, if higher,
his bonus for the most recent calendar year ended
before the Change of Control, (iii) the amount of his
then-current annual automobile allowance and (iv) the
annual cost of life insurance then furnished to him by
the Company.
b. All of Executive's outstanding stock options,
restricted shares and other similar incentive interests
and rights will become immediately and fully vested and
exercisable.
c. Executive will be treated for purposes of the Company's
Supplemental Executive Retirement Plan (the "SERP") as
having three additional Years of Continuous Service.
The Company will, within 30 days of his termination,
pay to him, in a single lump-sum cash payment, the
present value of his benefit under the SERP. Present
value will be determined by applying the "applicable
mortality table" and "applicable interest rate" then in
effect for purposes of section 417(e)(3)(A) of the
Internal Revenue Code or any successor provision.
d. The Company will pay to Executive, in a single lump-sum
cash payment, an amount equal to the difference, if
any, between (i) the total distribution that he
receives following his termination under the Company's
Profit-Sharing and Retirement Plan and its Excess
Benefits Plan and (ii) the total distribution that he
would have received under such plans had he accumulated
three additional Years of Service for Vesting prior to
termination. The payment will be made at the same time
that he receives his distribution from those plans.
e. Executive, together with his dependents, will continue
following such termination of employment to participate
fully, with no contribution to the cost required of him
or them, in all accident and health plans maintained or
sponsored by the Company immediately prior to the
Change of Control, or receive substantially the
equivalent coverage (or the full value thereof in cash)
from the Company, until the third anniversary of such
termination.
f. The Company will promptly reimburse Executive for any
and all legal fees and expenses incurred by him as a
result of such termination of employment, including
without limitation all fees and expenses incurred in
connection with efforts to enforce the provisions of
this Agreement (provided such efforts result in
Executive's recovery of any sum from the Company,
whether through court award or settlement).
3. A Change of Control will occur for purposes of this
Agreement if (i) any Person who does not currently own directly
or indirectly 10% or more of the combined voting power of the
Company's outstanding securities becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Act) of securities of the
Company representing more than 30% (or, if higher, the aggregate
percentage of the combined voting power of the Company's then-
outstanding securities held by or for the benefit of Xxxx Xxxxxxx
and his family) of the combined voting power of the company's
then-outstanding securities, (ii) there is a change of control of
the Company of a kind which would be required to be reported
under Item 6(e) of Schedule 14A of Regulation 14A promulgated
under the Act (or a similar item in a similar schedule or form),
whether or not the Company is then subject to such reporting
requirement, (iii) the Company is a party to a merger,
consolidation, sale of assets or other reorganization, or a proxy
contest, as a consequence of which members of the Board in office
immediately prior to such transaction or event constitute less
than a majority of the Board thereafter, or (iv) individuals who,
at the date hereof, constitute the Board (the "Continuing
Directors") cease for any reason to constitute a majority
thereof, provided, however, that any director who is not in
office at the date hereof but whose election by the Board or
whose nomination for election by the Company's shareholders was
approved by a vote of at least two-thirds of the directors then
still in office who either were directors at the date hereof or
whose election or nomination for election was previously so
approved shall be deemed to be a Continuing Director for purposes
of this Agreement.
Notwithstanding the foregoing provisions of this paragraph
3, a "Change of Control" will not be deemed to have occurred
solely because of (i) the acquisition of securities of the
Company (or any reporting requirement under the Act relating
thereto) by an employment benefit plan maintained by the Company
for its employees or (ii) the occurrence of a leveraged buy-out
or recapitalization of the Company in which Executive
participates as an equity investor.
4. a. "Cause" means only: conviction of the Executive for
a felony or a crime involving moral turpitude.
b. "Good Reason" means any one or more of the
following:
(i) Failure by the Company to maintain Executive
in the positions, with the titles, that he held immediately prior
to the Change of Control or downgrading of his responsibilities
or authority. If, following the Change of Control, the Company
is part of a controlled group of entities, Executive's
responsibilities and authority will be deemed for this purpose to
have been reduced unless he is given and retains the same
responsibilities and authority with the entity that controls the
group as he held with the Company immediately prior to the Change
of Control.
(ii) Reduction of Executive's base salary or
failure in any year to pay to him a bonus at least equal to
his target bonus for the year in which the Change of Control
occurs.
(iii) Material reduction in the health,
disability or life insurance benefits that the Company was
providing Executive immediately prior to the Change of Control.
(iv) Failure by the Company to provide Executive
with the opportunity to participate in any executive compensation
or benefit plan or program that is then generally available to
other senior executives of the Company.
(v) Relocation of Executive's principal place of
business more than 30 miles from the its location immediately
prior to the Change of Control.
5. In the event that it is determined that any payment or
benefit provided by the Company to or for the benefit of
Executive, either under this Agreement or otherwise, will be
subject to the excise tax imposed by section 4999 of the Internal
Revenue Code or any successor provision ("section 4999"), the
Company will, prior to the date on which any amount of the excise
tax must be paid or withheld, make an additional lump-sum payment
(the "gross-up payment") to Executive. The gross-up payment will
be sufficient, after giving effect to all federal, state and
other taxes and charges (including interest and penalties, if
any) with respect to the gross-up payment, to make Executive
whole for all taxes (including withholding taxes) and any
associated interest and penalties, imposed under or as a result
of section 4999.
Determinations under this Section 5 will be made by
Ernst & Young unless Executive has reasonable objections to the
use of that firm, in which case the determinations will be made
by a comparable firm chosen by Executive after consultation with
the Company (the firm making the determinations to be referred to
as the "Firm"). The determinations of the Firm will be binding
upon the Company and Executive except as the determinations are
established in resolution (including by settlement) of a
controversy with the Internal Revenue Service to have been
incorrect. All fees and expenses of the Firm will be paid by the
Company.
If the Internal Revenue Service asserts a claim that, if
successful, would require the Company to make a gross-up payment
or an additional gross-up payment, the Company and Executive will
cooperate fully in resolving the controversy with the Internal
Revenue Service. The Company will make or advance such gross-up
payments as are necessary to prevent Executive from having to
bear the cost of payments made to the Internal Revenue Service in
the course of, or as a result of, the controversy. The Firm will
determine the amount of such gross-up payments or advances and
will determine after final resolution of the controversy whether
any advances must be returned by Executive to the Company. The
Company will bear all expenses of the controversy and will gross
Executive up for any additional taxes that may be imposed upon
Executive as a result of its payment of such expenses.
6. If the Company is at any time before or after a Change
of Control merged or consolidated into or with any other
corporation or other entity (whether or not the Company is the
surviving entity), or if substantially all of the assets thereof
are transferred to another corporation or other entity, the
provisions of this Agreement will be binding upon and inure to
the benefit of the corporation or other entity resulting from
such merger or consolidation or the acquirer of such assets, and
this paragraph 6 will apply in the event of any subsequent merger
or consolidation or transfer of assets.
In the event of any merger, consolidation, or sale of
assets described above, nothing contained in this Agreement will
detract from or otherwise limit Executive's right to participate
or privilege of participation in any stock option or purchase
plan or any bonus, prof it sharing, pension, group insurance,
hospitalization, or other incentive or benefit plan or
arrangement which may be or become applicable to executives of
the corporation resulting from such merger or consolidation or
the corporation acquiring such assets of the Company.
In the event of any merger, consolidation or sale of
assets described above, references to the Company in this
Agreement shall unless the context suggests otherwise be deemed
to include the entity resulting from such merger or consolidation
or the acquirer of such assets of the Company.
7. All payments required to be made by the Company
hereunder to Executive or his dependents, beneficiaries, or
estate will be subject to the withholding of such amounts
relating to tax and/or other payroll deductions as may be
required by law.
8. There shall be no requirement on the part of the
Executive to seek other employment or otherwise mitigate damages
in order to be entitled to the full amount of any payments and
benefits to which Executive is entitled under this Agreement, and
the amount of such payments and benefits shall not be reduced by
any compensation or benefits received by Executive from other
employment.
9. Nothing contained in this Agreement shall be construed
as a contract of employment between the Company and the
Executive, or as a right of the Executive to continue in the
employ of the Company, or as a limitation of the right of the
Company to discharge the Executive with or without Cause; the
Executive may, subject to the terms and conditions of this
Agreement, have the right to receive upon termination of his
employment the payments and benefits provided in this Agreement
and shall not be deemed to have waived any rights he may have
either at law or in equity in respect of such discharge.
10. No amendment, change, or modification of this Agreement
may be made except in writing, signed by both parties.
Payments made by the Company pursuant to this Agreement
shall be in lieu of payments and other benefits, if any, to which
Executive may be entitled under any other severance agreement or
severance plan of the Company.
The provisions of this Agreement shall be binding upon
and shall inure to the benefit of Executive, his executors,
administrators, legal representatives and assigns, and the
Company and its successors.
The validity, interpretation, and effect of this
Agreement shall be governed by the laws of The Commonwealth of
Massachusetts.
The Company shall have no right of set-off or
counterclaims, in respect of any claim, debt, or obligation,
against any payments to Executive, his dependents, beneficiaries
or estate provided for in this Agreement.
The invalidity or unenforceability of any provisions of
this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full
force and effect.
No right or interest to or in any payments or benefits
hereunder shall be assignable by the Executive; provided,
however, that this provision shall not preclude him from
designating one or more beneficiaries to receive any amount that
may be payable after his death and shall not preclude the legal
representative of his estate from assigning any right hereunder
to the person or persons entitled thereto under his will or, in
the case of intestacy, to the person or persons entitled thereto
under the laws of intestacy applicable to his estate. The term
"beneficiaries" as used in this Agreement shall mean a
beneficiary or beneficiaries so designated to receive any such
amount, or if no beneficiary has been so designated, the legal
representative of the Executive's estate.
No right, benefit, or interest hereunder, shall be
subject to anticipation, alienation, sale, assignment,
encumbrance, charge, pledge, hypothecation, or set-off in respect
of any claim, debt, or obligation, or to execution, attachment,
levy, or similar process, or assignment by operation of law. Any
attempt, voluntary or involuntary, to effect any action specified
in the immediately preceding sentence shall, to the full extent
permitted by law, be null, void, and of no effect.
IN WITNESS WHEREOF, Reebok International Ltd. and
Executive have each caused this Agreement to be duly executed and
delivered as of the date set forth above.
REEBOK INTERNATIONAL LTD.
By: /s/ XXXX XXXXXXX
Agreed:
/s/ XXXXX XXXXXX
Xxxxx Xxxxxx
