EXHIBIT 10.2
SEVERANCE PROTECTION AGREEMENT
THIS AGREEMENT made as of July 9, 2001 by and between Xxxxxxx-Xxxxxx
Corporation (the "Company") and ________________________ (the "Executive").
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that the possibility of a Change in Control (as hereinafter defined)
exists and that the threat or the occurrence of a Change in Control can result
in significant distraction of the Company's key management personnel because of
the uncertainties inherent in such a situation;
WHEREAS, the Board has determined that it is essential and in the
best interest of the Company and its stockholders, for the Company to retain the
services of the Executive in the event of a threat or occurrence of a Change in
Control and to ensure the Executive's continued dedication and efforts in such
event without undue concern for the Executive's personal financial and
employment security; and
WHEREAS, in order to induce the Executive to remain in the employ of
the Company and/or one of its Affiliates (the entity or entities employing the
Executive, the "Employing Affiliate"), particularly in the event of a threat or
the occurrence of a Change in Control, the Company desires to enter into this
Agreement with the Executive to provide the Executive with certain benefits in
the event the Executive's employment is terminated as a result of, or in
connection with, a Change in Control.
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:
1. Term of Agreement. This Agreement shall commence as of
___________ 2001 (the "Effective Date"), and shall continue in effect until the
third anniversary of the Effective Date (the "Term"); provided, however, that on
January 1, 2002, and on each January 1 thereafter, the Term shall automatically
be extended for one (1) year unless either the Executive or the Company shall
have given written notice to the other at least ninety (90) days prior thereto
that the Term shall not be so extended; provided, further, however, that
following the occurrence of a Change in Control, the Term shall not expire prior
to the expiration of twenty-four (24) months after such occurrence (the
"Protected Period").
2. Termination of Employment.
(a) If, during the Protected Period, the Executive's employment
with the Company or an Employing Affiliate shall be terminated: (A) by the
Company for Cause, (B) by reason of the Executive's death, or (C) by the
Executive other than for Good Reason, the Company shall pay to the Executive his
Accrued Compensation.
(b) If, during the Protected Period, the Executive's employment
with the Company or an Employing Affiliate shall be terminated: (A) by the
Company for any reason other than Cause, or (B) by the Executive for Good
Reason, the Executive shall be entitled to the following:
(1) the Company shall pay the Executive all Accrued
Compensation and a Pro Rata Bonus;
(2) the Company shall pay the Executive as severance pay and
in lieu of any further compensation for periods subsequent to the Termination
Date, an amount equal to three times the sum of (A) the Executive's Base Amount
and (B) the Executive's Bonus Amount;
(3) for thirty-six (36) months following the Executive's
Termination Date (the "Continuation Period"), the Company shall continue on
behalf of the Executive and his eligible dependents and beneficiaries the life
insurance, disability, medical, dental, prescription drug and hospitalization
coverages and benefits (the "Welfare Benefits") provided to the Executive
immediately prior to the Change in Control or, if more favorable to the
Executive, the Welfare Benefits as in effect at any time thereafter to the
Company's employees who are similarly situated to the status of the Executive
immediately prior to the Change in Control. The Welfare Benefits (including
deductibles and costs to the Executive) provided in this Section 2(b)(3) during
the Continuation Period shall be no less favorable to the Executive and his
eligible dependents and beneficiaries than the most favorable Welfare Benefits
referred to above. This Section 2(b)(3) shall not be interpreted so as to limit
any benefits to which the Executive, his dependents or beneficiaries may be
entitled under any of the Company's employee benefit plans, programs or
practices following the Executive's termination of employment, including without
limitation, retiree medical and life insurance benefits or continuation or
conversion rights under any Welfare Benefits;
(4) in accordance with an amendment to the Company's pension
plans (within the meaning of Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("Company Pension Plans"), the Executive shall
be granted credit for service for all purposes (including vesting and benefit
accruals) for the thirty-six (36) month period following the Executive's
Termination Date under the Company's Pension Plans; notwithstanding anything to
the contrary, with respect to each twelve (12) month period of such thirty-six
(36) month period, the Executive shall be deemed, for purposes of such plans, to
have compensation equal to the amount of compensation paid by the Company to the
Executive (1) during the twelve (12) month fiscal year ending immediately prior
to fiscal year which includes the Executive's Termination Date or, if greater,
(2) during the portion of the fiscal year which includes the Executive's
Termination Date and ending on the date immediately prior to his Termination
Date; notwithstanding anything to the contrary, if (A) granting the Executive
additional service credit under the Company's Pension Plans which are intended
to be tax-qualified under Section 401(a) of the Internal Revenue Code of 1986,
as amended (the "Tax-Qualified Retirement Plans") (x) is not permitted by
applicable law or could otherwise cause such plan, the trust maintained
therewith, the plan's participants or beneficiaries or the Company to suffer any
adverse and unintended tax consequences and (y) the Company's Pension Plans
cannot, for any reason whatsoever, be utilized to satisfy the Company's
obligation under the Tax-Qualified Retirement Plans to grant credit for service
for the thirty-six month period referred to in this paragraph or (B) the
Company's Pension Plans are not amended as noted in this paragraph or (C) if
such amendments are, for any reason whatsoever, null and void or otherwise
inapplicable to the Executive, then, the Company shall pay to the Executive in
cash in a lump sum an amount equal to the present value of the additional
benefit accruals which would otherwise have been provided under such
Tax-Qualified Retirement Plans for such thirty-six (36) month period, determined
using the actuarial assumptions used by such plan for calculating lump sum
distributions; and, provided, further, that the compensation considered under
this paragraph shall be limited to and subject to the terms and conditions of
the plans, including (but not limited to) definitions of compensation or
earnings.
(5) the Company shall permit the Executive to purchase at
its wholesale value the Company-provided automobile being provided to the
Executive on the Termination Date (if any);
(6) the Company shall provide the Executive during the
thirty-six (36) month period following a Change in Control with personal
financial planning or similar services in the same manner as provided prior to
the Executive's termination of employment following or in connection with a
Change in Control;
(7) the Company shall provide the Executive with
outplacement services (such as headhunter or executive search fees) during the
twelve (12) month period following a Change in Control in an effort to obtain
employment following the Executive's termination of employment following or in
connection with a Change in Control;
(8) with respect to performance units and performance shares
granted to the Executive under the Company's 1995 Long-Term Incentive Plan (or
any successor plan) relating to performance cycles which are incomplete as of
the Termination Date, upon the completion of each such performance cycle, the
Executive shall be entitled to payment of the performance units and performance
shares relating to such performance cycle based on the actual performance of the
Company or an Employing Affiliate, as appropriate, during such performance cycle
(with appropriate adjustments to the performance goals made in good faith by the
Company to reflect the transaction which constitutes the Change in Control and
any material transaction, financing, restructuring, reorganization or other
event following the Change in Control to ensure that comparable performance will
result in comparable awards in respect of the performance units and performance
shares) as if the Executive had been a participant under such plan for the
entirety of such performance cycle, multiplied by a fraction the numerator of
which shall be equal to the number of whole and partial months from the
commencement of such performance cycle through the Termination Date and the
denominator of which shall be the number of months in such performance cycle,
such payment to be made in a lump sum in cash within ten (10) days following the
completion of such performance cycle.
(c) The amounts provided for in Sections 2(a) and 2(b)(1) and
(2) shall be paid in a single lump sum cash payment within ten (10) days after
the Executive's Termination Date. The amounts provided for in Section (4) shall
be paid in a single lump sum cash payment as soon as practicable and in
accordance with any applicable law.
(d) The severance pay and benefits provided for in this
Section 2 shall be in lieu of any other severance pay to which the Executive may
be entitled under any severance agreement with the Company or any other plan,
agreement or arrangement of the Company or any other Affiliate of the Company.
The Executive's entitlement to any compensation or benefits other than as
provided herein shall be determined in accordance with the employee benefit
plans of the Company and any of its Affiliates and other applicable agreements,
programs and practices as in effect from time to time.
(e) If the Executive's employment is terminated by the Company
or an Employing Affiliate without Cause prior to the date of a Change in Control
but the Executive reasonably demonstrates that such termination (1) was at the
request of a third party who has indicated an intention or taken steps
reasonably calculated to effect a Change in Control (a "Third Party") and who
effectuates a Change in Control or (2) otherwise arose in connection with, or in
anticipation of, a Change in Control which has been threatened or proposed and
which actually occurs, such termination shall be deemed to have occurred after a
Change in Control.
3. (a) Vesting of Certain Awards. Whether or not the Executive's
employment with the Company or an Employing Affiliate terminates during the
Term, and notwithstanding anything to the contrary in any other plan or
agreement, on the date of the occurrence of a Change in Control (the
"Acceleration Date") (1) all stock options and stock appreciation rights granted
to the Executive by the Company and outstanding on the Acceleration Date shall
become fully vested and exercisable and (2) all restrictions shall lapse on all
shares of restricted stock granted to the Executive by the Company and
outstanding on the Acceleration Date. In the event that the application of this
paragraph is determined by a court of competent jurisdiction to be in violation
of any of the Company's fiduciary or other obligations, the Company shall pay to
the Executive, in a lump sum cash payment, an amount equal to the difference
between the amount paid to the Executive upon exercising such stock options and
stock appreciation rights and the amount which would have been payable to the
Executive had the Executive exercised his options and rights on the Acceleration
Date, assuming such options and rights been fully vested on such date.
(b) (1) Gross-Up Payment. In the event it shall be determined
that any payment or distribution of any type to or for the benefit of the
Executive (other than the payment provided for in this Section 3(b)) directly or
indirectly by the Company, any Affiliate of the Company, any Person who acquires
ownership or effective control of the Company or ownership of a substantial
portion of the Company's assets (within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
thereunder) or any Affiliate of such Person, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (the "Total Payments"), is or will be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties with respect to
such excise tax (such excise tax, together with any such interest and penalties,
are collectively referred to as the "Excise Tax"), then the Executive shall be
entitled to receive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including any Excise Tax, imposed
upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Total Payments.
(2) Determination By Accountant. All mathematical
determinations, and all determinations as to whether any of the Total Payments
are "parachute payments" (within the meaning of Section 280G of the Code), that
are required to be made under this Section 3(b), including determinations as to
whether a Gross-Up Payment is required, the amount of such Gross-Up Payment and
amounts relevant to the last sentence of this Section 3(b)(2), shall be made by
an independent accounting firm selected by the Executive from among the five (5)
largest accounting firms in the United States (the "Accounting Firm"), which
shall provide its determination (the "Determination"), together with detailed
supporting calculations regarding the amount of any Gross-Up Payment and any
other relevant matter, both to the Company and the Executive by no later than
ten (10) days following the Termination Date, if applicable, or such other time
as is requested by the Company or the Executive (if the Executive reasonably
believes that any of the Total Payments may be subject to the Excise Tax or that
an Underpayment (as defined below) has occurred). If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall furnish the
Executive and the Company with a written statement that such Accounting Firm has
concluded that no Excise Tax is payable (including the reasons therefore) and
that the Executive has substantial authority for filing his federal income tax
return accordingly. If a Gross-Up Payment is determined to be payable, it shall
be paid to the Executive within twenty (20) days after the Determination (and
all accompanying calculations and other material supporting the Determination)
is delivered to the Company by the Accounting Firm. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive, absent
manifest error. As a result of uncertainty in the application of Section 4999 of
the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments not made by the Company should
have been made ("Underpayment"), or that Gross-Up Payments will have been made
by the Company which should not have been made ("Overpayments"). In either such
event, the Accounting Firm shall determine the amount of the Underpayment or
Overpayment that has occurred. In the case of an Underpayment, the amount of
such Underpayment (including any applicable interest and penalties) shall be
promptly paid by the Company to or for the benefit of the Executive. In the case
of an Overpayment, the Executive shall, at the direction and expense of the
Company, take such steps as are reasonably necessary (including the filing of
returns and claims for refund), follow reasonable instructions from, and
procedures established by, the Company, and otherwise reasonably cooperate with
the Company to correct such Overpayment, provided, however, that (i) the
Executive shall not in any event be obligated to return to the Company an amount
greater than the net after-tax portion of the Overpayment that he has retained
or has recovered as a refund from the applicable taxing authorities and
(ii) this provision shall be interpreted in a manner consistent with the intent
of Section 3(b)(1), which is to make the Executive whole, on an after-tax basis,
from the application of the Excise Tax, it being understood that the correction
of an Overpayment may result in the Executive repaying to the Company an amount
which is less than the Overpayment. The cost of all such determinations made
pursuant to this Section 3 shall be paid by the Company.
4. Notice of Termination. Following a Change in Control, any
intended termination of the Executive's employment by the Company or an
Employing Affiliate shall be communicated by a Notice of Termination from the
Company to the Executive, and any intended termination of the Executive's
employment by the Executive for Good Reason shall be communicated by a Notice of
Termination from the Executive to the Company.
5. Fees and Expenses. The Company shall pay, as incurred, all legal
fees and related expenses (including the costs of experts, evidence and counsel)
that the Executive may incur following a Change in Control as a result of or in
connection with (a) the Executive's contesting, defending or disputing the basis
for the termination of the Executive's employment, (b) the Executive's hearing
before the Board of Directors of the Company as contemplated in Section 17.5 of
this Agreement or (c) the Executive seeking to obtain or enforce any right or
benefit provided by this Agreement or by any other plan or arrangement
maintained by the Company or one of its Affiliates under which the Executive is
or may be entitled to receive benefits.
6. Unauthorized Disclosure. The Executive agrees and understands
that in the Executive's position with the Company or an Employing Affiliate, the
Executive has been and will be exposed to and receive information relating to
the affairs of the Company considered by the Company to be confidential and in
the nature of trade secrets. The Executive agrees that during his employment
with the Company or an Employing Affiliate and thereafter, the Executive will
keep such information confidential and will not disclose such information,
either directly or indirectly, to any third person or entity without the prior
written consent of the Company; provided, however, that (i) the Executive shall
have no such obligation to the extent such information is or becomes publicly
known other than as a result of the Executive's breach of his obligations
hereunder and (ii) the Executive may, after giving prior notice to the Company
to the extent practicable under the circumstances, disclose such information to
the extent required by applicable laws or governmental regulations or judicial
or regulatory process.
7. Non-Disparagement. Each of the Company, its Affiliates and the
Executive agrees that it shall not, either during the Term or at anytime
thereafter, disparage the other parties hereto or any of their respective
affiliates, or any of the officers, directors, employees or shareholders of the
Company or any of its Affiliates. The obligations of parties under this Section
7 shall not apply to disclosures required by applicable laws, governmental
regulations or judicial or regulatory process.
8. Notice. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement (including any Notice of
Termination) shall be in writing, shall be signed by the Executive if to the
Company or by a duly authorized officer of the Company if to the Executive, and
shall be deemed to have been duly given when personally delivered or sent by
certified mail, return receipt requested, postage prepaid, addressed to the
respective addresses last given by each party to the other, provided that all
notices to the Company shall be directed to the attention of the Board with a
copy to the Secretary of the Company. All notices and communications shall be
deemed to have been received on the date of delivery thereof or on the third
business day after the mailing thereof (whichever is earlier), except that
notice of change of address shall be effective only upon receipt.
9. Non-Exclusivity of Rights. Except as provided in Section 2(d)
hereof, nothing in this Agreement shall prevent or limit the Executive's
continuing or future participation in any benefit, bonus, incentive or other
plan or program provided by the Company or any other Affiliate of the Company
and for which the Executive may qualify, nor shall anything herein limit or
reduce such rights as the Executive may have under any other agreements with the
Company or any other Affiliate of the Company. Amounts which are vested benefits
or which the Executive is otherwise entitled to receive under any plan or
program of the Company or any other Affiliate of the Company shall be payable in
accordance with such plan or program, except as explicitly modified by this
Agreement.
10. (a) Full Settlement. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, defense, recoupment, or other claim,
right or action which the Company may have against the Executive or others.
(b) No Mitigation. The Executive shall not be required to
mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise and no such payment shall be offset or reduced by
the amount of any compensation or benefits provided to the Executive in any
subsequent employment except as provided in Section 2(b)(3).
(c) Springing Release. To obtain the benefits provided for in
this Agreement, Executive agrees that he shall execute an agreement in a form
satisfactory to the Company at the time he seeks such benefits which will
irrevocably and unconditionally release and discharge the Company, its
Successors and Assigns, and their officers, directors and employees from any and
all debts, obligations, claims, demands, judgments, or causes of action of any
kind arising out of or relating to Executive's employment with the Company or
out of or relating to the termination of that employment (including but not
limited to the Age Discrimination in Employment Act of 1967) and all federal,
state and local law claims, whether statutory or common law, including, but not
limited to, claims of defamation (including both libel and slander), wrongful
discharge, tortious interference with economic advantage, breach of contract,
negligence, employment discrimination on any basis, and any other claim relating
to Executive's employment with the Company or the termination of that
employment.
11. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and the Company. No waiver by any party
hereto at any time of any breach by any other party hereto of, 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 agreement or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by any party which are not expressly set forth in this Agreement.
12. Trust Funding. Within five (5) days following the occurrence of
a Change in Control or a Potential Change in Control (as defined in the Trust)
the Company shall contribute to the trust established pursuant to the trust
agreement dated as of January 30, 1998 between the Company and PNC Bank,
National Association (the "Trust"), for the benefit of the Executive, an amount
equal to the aggregate amounts payable to the Executive pursuant to
Sections 2(b)(1), (2), (4) and 3(b), determined as if the Executive's
Termination Date was the date of the Change in Control or the Potential Change
in Control, as the case may be. If the amounts payable are not determinable by
the fifth day following the date of the Change in Control or the Potential
Change in Control, as the case may be, the Company shall make a reasonable good
faith estimate of the amount to be contributed to the Trust. The amounts
contributed to the Trust pursuant to this Section shall be held pursuant to the
terms of the Trust, but shall in no event revert to the Company or any of its
Affiliates until all obligations of the Company to the Executive pursuant to
this Agreement have been satisfied.
13. Successors; Binding Agreement.
(a) This Agreement shall be binding upon and shall inure to the
benefit of the Company and its Successors and Assigns. The Company shall require
its Successors and Assigns, by agreement in form and substance reasonably
satisfactory to the Executive, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place.
(b) Neither this Agreement nor any right or interest hereunder
shall be assignable or transferable by the Executive, his beneficiaries or legal
representatives, except by will or by the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal personal representative.
14. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New Jersey without
giving effect to the conflict of laws principles thereof. Any action brought by
any party to this Agreement shall be brought and maintained in a court of
competent jurisdiction in Bergen County in the State of New Jersey.
15. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
16. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto, and supersedes all prior agreements, if
any, understandings and arrangements, oral or written, between the parties
hereto, with respect to the subject matter hereof.
17. Definitions.
17.1. Accrued Compensation. For purposes of this Agreement,
"Accrued Compensation" shall mean all amounts of compensation for services
rendered to the Company or an Employing Affiliate that have been earned or
accrued through the Termination Date but that have not been paid as of the
Termination Date including (a) base salary, (b) reimbursement for reasonable and
necessary business expenses incurred by the Executive on behalf of the Company
or an Employing Affiliate during the period ending on the Termination Date and
(c) vacation pay; provided, however, that Accrued Compensation shall not include
any amounts deferred pursuant to any salary reduction or deferred compensation
elections made by the Executive.
17.2. Affiliate. For purposes of this Agreement, "Affiliate"
means, with respect to any Person, any entity, directly or indirectly,
controlled by, controlling or under common control with the Person.
17.3. Base Amount. For purposes of this Agreement, "Base Amount"
shall mean the Executive's annual base salary at the rate in effect as of the
date of a Change in Control or, if greater, at any time thereafter, determined
without regard to any salary reduction or deferred compensation elections made
by the Executive.
17.4. Bonus Amount. For purposes of this Agreement, "Bonus
Amount" shall mean the greater of (a) the target annual bonus payable to the
Executive under the Incentive Plan in respect of the fiscal year during which
the Change in Control occurs and (b) the annual bonus paid under the Incentive
Plan in respect of the fiscal year ending immediately prior to the Termination
Date or, if greater, ending immediately prior to the Change in Control;
provided, however, if, as of the date of the Change in Control, the Executive
has not been employed by the Company or an Employing Affiliate for a full fiscal
year, the Bonus Amount shall not be less than the target annual bonus payable to
the Executive under the Incentive Plan in respect of the fiscal year during
which the Change in Control occurs.
17.5. Cause. For purposes of this Agreement, a termination of
employment is for "Cause" if the Executive
(a) has been convicted of a felony; or
(b) intentionally engaged in illegal conduct or willful
misconduct that is demonstrably and materially injurious to the
Company or an Employing Affiliate; or
(c) intentionally and continually failed substantially to
perform his reasonably assigned duties with the Company or an
Employing Affiliate (other than a failure resulting from the
Executive's incapacity due to physical or mental illness or from
the assignment to the Executive of duties that would constitute
Good Reason) which failure continued for a period of at least
thirty (30) days after a written notice of demand for
substantial performance, signed by a duly authorized officer of
the Company, has been delivered to the Executive specifying the
manner in which the Executive has failed substantially to
perform.
For purposes of this Agreement, no act, nor failure to act, on the Executive's
part, shall be considered "intentional" unless the Executive has acted, or
failed to act, with a lack of good faith and with a lack of reasonable belief
that the Executive's action or failure to act was in the best interest of the
Company or an Employing Affiliate. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or upon the
instructions of the Company's Chief Executive Officer or a senior officer of the
Company or based upon the advice of counsel for the Company shall be
conclusively presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Company or an Employing Affiliate.
The termination of employment of the Executive shall not be deemed to be for
Cause pursuant to subparagraph (b) or (c) above 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-fourths of the entire membership of the
Board at a meeting of the Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is given an
opportunity, together with counsel, to be heard before the Board) finding that,
in the good faith opinion of the Board, the Executive is guilty of the conduct
described in subparagraph (b) or (c) above, and specifying the particulars
thereof in detail. Notwithstanding anything contained in this Agreement to the
contrary, no failure to perform by the Executive after a Notice of Termination
is given to the Company by the Executive shall constitute Cause for purposes of
this Agreement.
17.6. Change in Control. A "Change in Control" shall mean the
occurrence during the term of the Agreement of:
(a) An acquisition (other than directly from the Company) of any
common stock of the Company ("Common Stock") or other voting securities of the
Company entitled To vote generally for the election of directors (the "Voting
Securities") by any "Person" (as the term person is used for purposes of
Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), immediately after which such Person has "Beneficial Ownership"
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty
percent (20%) or more of (i) the then outstanding shares of Common Stock, (ii)
the combined voting power of the Company's then outstanding Voting Securities or
(iii) the voting power to elect a majority of the Company's Board of Directors;
provided, however, in determining whether a Change in Control has occurred,
Voting Securities which are acquired in a Non-Control Acquisition (as
hereinafter defined) shall not constitute an acquisition which would cause a
Change in Control; provided, further, however, that with respect to any
acquisition of Beneficial Ownership by Unitrin Inc. ("Unitrin") or Xxxxxxxx X.
Xxxxxxxxx, as the Sole Trustee of the Xxxxxxxxx Family Trust or the Xxxxxxxxx
Group, L.L.C. (collectively referring to Xxxxxxxx Xxxxxxxxx, Xxxxxxxxx Family
Trust and Xxxxxxxxx Group L.L.C. as "Xxxxxxxxx"), the reference to twenty
percent (20%) in this Section 17.6(a) and Section 17.6(c) shall be deemed to be
forty-five percent (45%) for purposes of Unitrin and twenty-two percent (22%)
for purposes of Xxxxxxxxx. A "Non-Control Acquisition" shall mean an acquisition
by (i) an employee benefit plan (or a trust forming a part thereof) maintained
by (A) the Company or (B) any corporation or other Person of which a majority of
its voting power or its voting equity securities or equity interest is owned,
directly or indirectly, by the Company (a "Subsidiary") (ii) the Company or its
Subsidiaries, or (iii) any Person in connection with a Non-Control Transaction
(as hereinafter defined); or
(b) The individuals who, as of June 1, 1998, are members of the
Board (the "Incumbent Board"), cease for any reason to constitute at least a
majority of the members of the Board; provided, however, that if the election,
or nomination for election by the Company's shareholders, of any new director
was approved by a vote of at least two-thirds of the Incumbent Board, such new
director shall, for purposes of this Agreement, be considered as a member of the
Incumbent Board; provided further, however, that no individual shall be
considered a member of the Incumbent Board if such individual initially assumed
office as a result of either an actual or threatened "Election Contest" (as
described in Rule 14a-11 promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board (a "Proxy Contest") including by reason of any agreement intended
to avoid or settle any Election Contest or Proxy Contest; or
(c) The consummation of:
(1) A merger, consolidation or reorganization to which the
Company is a party or in which securities of the Company are
issued, unless such merger, consolidation or reorganization is a
"Non-Control Transaction." A "Non-Control Transaction" shall
mean a merger, consolidation or reorganization with or into the
Company or in which securities of the Company are issued where:
(A) the shareholders of the Company, immediately before
such merger, consolidation or reorganization, own directly
or indirectly immediately following such merger,
consolidation or reorganization, at least sixty percent
(60%) of the combined voting power of the outstanding voting
securities of the corporation resulting from such merger or
consolidation or reorganization (the "Surviving
Corporation") in substantially the same proportion as their
ownership of the Voting Securities immediately before such
merger, consolidation or reorganization,
(B) the individuals who were members of the Incumbent
Board immediately prior to the execution of the agreement
providing for such merger, consolidation or reorganization
constitute at least a majority of the members of the board
of directors of the Surviving Corporation, or a corporation
beneficially directly or indirectly owning a majority of the
combined voting power of the outstanding voting securities
of the Surviving Corporation, and
(C) no Person other than (i) the Company, (ii) any
Subsidiary, (iii) any employee benefit plan (or any trust
forming a part thereof) that, immediately prior to such
merger, consolidation or reorganization, was maintained by
the Company, the Surviving Corporation, or any Subsidiary,
or (iv) any Person who, immediately prior to such merger,
consolidation or reorganization had Beneficial Ownership of
twenty percent (20%) or more of the then outstanding Voting
Securities or common stock of the Company, has Beneficial
Ownership of twenty percent (20%) or more of the combined
voting power of the Surviving Corporation's then outstanding
voting securities or its common stock.
(2) A complete liquidation or dissolution of the Company; or
(3) The sale or other disposition of all or substantially
all of the assets of the Company to any Person (other than a
transfer to a Subsidiary or a distribution to the Company's
shareholders); or
(4) The sale or other disposition of all or substantially
all of the assets of the Subsidiary which employs Executive to
any Person (other than a transfer to a Subsidiary or a
distribution to the Company's shareholders);
Notwithstanding the foregoing, a Change in Control shall not be
deemed to occur solely because any Person (the "Subject Person") acquired
Beneficial Ownership of more than the permitted amount of the then outstanding
common stock or Voting Securities as a result of the acquisition of Common Stock
or Voting Securities by the Company which, by reducing the number of shares of
Common Stock or Voting Securities then outstanding, increases the proportional
number of shares Beneficially Owned by the Subject Person, provided that if a
Change in Control would occur (but for the operation of this sentence) as a
result of the acquisition of shares of Common Stock or Voting Securities by the
Company, and after such share acquisition by the Company, the Subject Person
becomes the Beneficial Owner of any additional shares of Common Stock or Voting
Securities which increases the percentage of the then outstanding shares of
Common Stock or Voting Securities Beneficially Owned by the Subject Person, then
a Change in Control shall occur.
17.7. Company. For purposes of this Agreement, all references to
the Company shall include its Successors and Assigns.
17.8. Disability. For purposes of this Agreement, "Disability"
shall mean a physical or mental infirmity which (i) impairs the Executive's
ability to substantially perform his duties with the Company or an Employing
Affiliate for six (6) consecutive months and (ii) is intended to be permanent,
or last for a period of at least twelve (12) months or result in death.
17.9. Good Reason. (a) For purposes of this Agreement, "Good
Reason" shall mean the occurrence after a Change in Control of any of the
following events or conditions:
(1) a change in the Executive's status, title, position or
responsibilities (including reporting responsibilities) which, in the
Executive's reasonable judgment, represents an adverse change from his status,
title, position or responsibilities as in effect immediately prior thereto; the
assignment to the Executive of any duties or responsibilities which, in the
Executive's reasonable judgment, are inconsistent with his status, title or
position; or any removal of the Executive from or failure to reappoint or
reelect him to any of such offices or positions, except in connection with the
termination of his employment for Disability, Cause, as a result of his death or
by the Executive other than for Good Reason;
(2) a reduction in the Executive's annual base salary below
the Base Amount;
(3) the relocation of the offices of the Company or an
Employing Affiliate at which the Executive is principally employed to a location
more than twenty-five (25) miles from the location of such offices immediately
prior to the Change in Control, or the requirement that the Executive be based
anywhere other than such offices, except to the extent the Executive was not
previously assigned to a principal location and except for required travel on
the business of the Company or an Employing Affiliate to an extent substantially
consistent with the Executive's business travel obligations at the time of the
Change in Control;
(4) the failure by the Company or an Employing Affiliate to
pay to the Executive any portion of the Executive's current compensation or to
pay to the Executive any portion of an installment of deferred compensation
under any deferred compensation program of the Company or an Employing Affiliate
in which the Executive participated, within seven (7) days of the date such
compensation is due;
(5) the failure by the Company or an Employing Affiliate to
(A) continue in effect (without reduction in benefit level and/or reward
opportunities) any material compensation or employee benefit plan in which the
Executive was participating immediately prior to the Change in Control,
including, but not limited to, any of the plans listed in Appendix A hereto,
unless a substitute or replacement plan has been implemented which provides
substantially identical compensation or benefits to the Executive or (B) provide
the Executive with compensation and benefits, in the aggregate, at least equal
(in terms of benefit levels and/or reward opportunities) to those provided for
under each other compensation, employee benefit or fringe benefit plan, program
or practice in which the Executive was participating immediately prior to the
Change in Control;
(6) the failure of the Company to obtain from its Successors
or Assigns the express assumption and agreement required under Section 12
hereof; or
(7) any purported termination of the Executive's employment
by the Company or an Employing Affiliate which is not effected pursuant to a
Notice of Termination satisfying the terms set forth in the definition of Notice
of Termination (and, if applicable, the terms set forth in the definition of
Cause).
(b) Any event or condition described in Section 17.9(a)(1)
through (7) which occurs prior to a Change in Control but which the Executive
reasonably demonstrates (1) was at the request of a Third Party who effectuates
a Change in Control or (2) otherwise arose in connection with, or in
anticipation of a Change in Control which has been threatened or proposed and
which actually occurs, shall constitute Good Reason for purposes of this
Agreement notwithstanding that it occurred prior to a Change in Control.
17.10. Incentive Plan. For purposes of this Agreement,
"Incentive Plan" shall mean the Company's Modified Incentive Compensation Plan,
or any successor annual incentive plan, maintained by the Company or any
Affiliate of the Company.
17.11. Notice of Termination. For purposes of this Agreement,
following a Change in Control, "Notice of Termination" shall mean a written
notice of termination of the Executive's employment, signed by the Executive if
to the Company or by a duly authorized officer of the Company if to the
Executive, which indicates the specific termination provision in this Agreement,
if any, relied upon and which sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated. The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason, Disability or Cause shall not serve to
waive any right of the Executive or the Company, respectively, hereunder or
preclude the Executive or the Company, respectively, from asserting such fact or
circumstance in enforcing the Executive's or the Company's rights hereunder.
17.12. Pro Rata Bonus. For purposes of this Agreement, "Pro Rata
Bonus" shall mean an amount equal to the Bonus Amount multiplied by a fraction
the numerator of which is the number of days in the fiscal year in which the
Executive's Termination Date occurs that have elapsed through the Termination
Date and the denominator of which is 365.
17.13. Successors and Assigns. For purposes of this Agreement,
"Successors and Assigns" shall mean, with respect to the Company, a corporation
or other entity acquiring all or substantially all the assets and business of
the Company, as the case may be whether by operation of law or otherwise.
17.14. Termination Date. For purposes of this Agreement,
"Termination Date" shall mean (a) in the case of the Executive's death, his date
of death, (b) if the Executive's employment is terminated for Disability,
thirty (30) days after Notice of Termination is given (provided that the
Executive shall not have returned to the performance of his duties on a
full-time basis during such thirty (30) day period) and (c) if the Executive's
employment is terminated for any other reason, the date specified in the Notice
of Termination (which, in the case of a termination for Cause shall not be less
than thirty (30) days, and in the case of a termination for Good Reason shall
not be more than sixty (60) days, from the date such Notice of Termination is
given); provided, however, that if within thirty (30) days after any Notice of
Termination is given the party receiving such Notice of Termination in good
faith notifies the other party that a dispute exists concerning the basis for
the termination, the Termination Date shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties, or by the
final judgment, order or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been taken).
Notwithstanding the pendency of any such dispute, the Company or an Employing
Affiliate shall continue to pay the Executive his Base Amount and continue the
Executive as a participant (at or above the level provided prior to the date of
such dispute) in all compensation, incentive, bonus, pension, profit sharing,
medical, hospitalization, prescription drug, dental, life insurance and
disability benefit plans in which he was participating when the notice giving
rise to the dispute was given, until the dispute is finally resolved whether or
not the dispute is resolved in favor of the Company, and the Executive shall not
be obligated to repay to the Company or an Employing Affiliate any amounts paid
or benefits provided pursuant to this sentence.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officers and the Executive has executed this
Agreement as of the day and year first above written.
XXXXXXX-XXXXXX CORPORATION
By:_________________
Xxxxxx X. Xxxxxxx
Title: Chief Executive Officer
ATTEST:________________
Xxxxx X. X'Xxxxx, Secretary
By:_________________
Executive
APPENDIX A
Long Term Incentive Plan
Modified Incentive Compensation Plan
Retirement Plan
Retirement Benefits Restoration Plan
Deferred Compensation Plan
Savings and Investment Plan
Medical, dental and prescription coverage
Long Term Disability Plan
Life insurance coverage
Business travel insurance coverage
Salary continuation program
