1
EXHIBIT 10.5
[UNITED DOMINION Letterhead]
March 1, 1999
PRIVILEGED AND CONFIDENTIAL
[Participant]
Dear [Participant]:
United Dominion Industries, Inc. (the "Company") and its ultimate
parent company, United Dominion Industries Limited ("Limited"), for which the
Company provides management services, consider it essential to the best
interests of their shareholders to xxxxxx the continuous employment of key
Company management personnel. Further, the boards of directors of the Company
(the "Board") and of Limited (the "Limited Board") recognize that the
possibility of a change in control exists, and that such possibility, and the
uncertainty and questions which may arise among management, may result in the
departure or distraction of management personnel to the detriment of the
Company, Limited and their shareholders.
The Board and the Limited Board have determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the management of the Company and its subsidiaries,
including yourself, to their assigned duties without distraction in the face of
potentially disturbing circumstances arising from any possible change in control
of the Company or Limited.
In order to induce you to remain in the employ of the Company, the Company
agrees that you shall receive the severance benefits set forth in this letter
agreement (the "Agreement") in the event your employment with the Company is
terminated subsequent to a Change in Control
-1-
2
(as defined in Section 2 hereof) under the circumstances described below.
1. Term of Agreement. The term of this Agreement (the "Term") shall
commence on the date hereof and shall continue in effect for a period
of three years from the date hereof; provided, however, the original
Term of this Agreement shall automatically be extended each year, on
the anniversary date of this Agreement, for an additional year unless,
not later than ninety (90) days prior to any such anniversary date, the
Company shall have given notice that it does not wish to extend the
Term, in which case this Agreement shall expire at the end of the
two-year period following such anniversary date. Notwithstanding any
such notice by the Company not to extend the Term, if a Change in
Control shall have occurred during the original or extended Term, the
Term shall continue in effect for a period of thirty-six (36) months
beyond such Change in Control.
2. Change in Control. No benefits shall be payable hereunder unless there
shall have been a Change in Control, as set forth below. For purposes
of this Agreement, a "Change in Control" shall mean any one or more of
the events set forth below or a change in control of the Company of a
nature that would be required to be reported in response to Item 6(e)
of Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), whether or not
the Company is then subject to such reporting requirement. Without
limitation, a Change in Control shall be deemed to have occurred if:
(A) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a
"Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the
Company or Limited (in each case, the "Outstanding Company
Common Stock") or (ii) the combined voting power of the then
outstanding voting securities of the Company or Limited
entitled to vote generally in the election of directors (in
each case, the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (A),
the following acquisitions shall
-2-
3
not constitute a Change in Control: (i) any acquisition
directly from the Company or Limited, (ii) any acquisition by
the Company or Limited, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or Limited or any corporation controlled by or under
common control with the Company or Limited or (iv) any
acquisition by any corporation pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of subsection (C);
or
(B) Individuals who, as of the date hereof, constitute the Limited
Board cease for any reason to constitute at least a majority
of the Limited Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose
election, or nomination for election by the Limited's
shareholders, was approved by a vote of at least a majority of
the directors then comprising the Limited Board shall be
considered as though such individual were a member of the
Limited Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with
respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or
on behalf of a Person other than the Limited Board; or
(C) Consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the
assets of the Company or Limited (a "Business Combination"),
in each case, unless, following such Business Combination, (i)
all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 50% of, respectively,
the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such
Business Combination (including, without limitation, a
corporation which as a result of such
-3-
4
transaction owns the Company or Limited or all or
substantially all of the Company's or Limited's assets either
directly or through one or more subsidiaries) in substantially
the same proportions as their ownership, immediately prior to
such Business Combination, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case
may be, (ii) no Person (excluding any corporation resulting
from such Business Combination or any employee benefit plan
(or related trust) of the Company or Limited or such
corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of
the corporation resulting from such Business Combination or
the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such
ownership existed prior to the Business Combination and (iii)
at least a majority of the members of the board of directors
of any corporation resulting from such Business Combination,
or any corporation with direct or indirect control over any
such corporation, were members of the Incumbent Board at the
time of the execution of the initial agreement, or of the
action of the Board or the Limited Board, providing for such
Business Combination; or
(D) Approval by the shareholders of the Company or Limited of a
complete liquidation or dissolution of the Company or Limited;
or
(E) The Company or Limited executes an agreement, the consummation
of which would result in the occurrence of a Change in Control
as described above,
then, with respect to a termination of your employment, other than a
termination resulting from your death or Retirement, or initiated by
the Company for Cause or Disability, or otherwise initiated by you
other than for Good Reason occurring after such event or the execution
of such agreement and prior to the expiration or termination of such
agreement, a Change in Control shall be deemed to have occurred as of
the date of such event or the execution of such agreement.
-4-
5
3. Potential Change in Control. You agree, subject to the terms and
conditions of this Agreement, to remain in the employ of the Company in
the event of a Potential Change in Control until the earliest of (a) a
date which is two hundred seventy (270) days from the occurrence of
such Potential Change in Control, (b) the termination of your
employment by reason of your death or your Disability or Retirement as
defined in Subsection 4(A) of this Agreement, respectively, or (c) the
date on which you first become entitled under this Agreement to receive
the benefits provided in Subsection 5(D) of this Agreement. For
purposes of this Agreement, a Potential Change in Control shall be
deemed to have occurred if:
(A) The Company or Limited enters into an agreement or agreements
which, if carried out, would result in the occurrence of a
Change in Control;
(B) Any person publicly announces an intention to take or to
consider taking actions which, if carried out, would
constitute a Change in Control;
(C) Any person, other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or
Limited (or a company owned, directly or indirectly, by the
shareholders of the Company or Limited in substantially the
same proportions as their ownership of shares of the Company
or Limited), who is or becomes the beneficial owner, directly
or indirectly, of securities of the Company or Limited
representing 10 percent or more of the combined voting power
of the Company's or Limited's then outstanding securities,
increases his beneficial ownership of such securities by 10
percentage points or more over the percentage so owned by such
person on the date hereof; or
(D) The Board or the Limited Board adopts a resolution to the
effect that, for purposes of this Agreement, a Potential
Change in Control has occurred.
4. Termination Following Change in Control. If any of the events described
in Section 2 hereof constituting a Change in Control shall have
occurred, you shall be entitled to the benefits provided in Subsection
5(D) hereof upon subsequent termination of your employment
-5-
6
during the Term unless such termination is because of your death or
Retirement, by the Company for Cause or Disability, or by you other
than for Good Reason.
(A) Disability; Retirement. If, as a result of your incapacity due
to physical or mental illness, you shall have been absent from
the full-time performance of your duties with the Company for
six (6) consecutive months, and within thirty (30) days after
written Notice of Termination is given, you shall not have
returned to the full-time performance of your duties, the
Company may terminate your employment for "Disability". Any
question as to the existence of your Disability upon which you
and the Company cannot agree shall be determined by a
qualified independent physician selected by you (or, if you
are unable to make such selection, it shall be made by any
adult member of your immediate family), and approved by the
Company. The determination of such physician made in writing
to the Company and to you shall be final and conclusive for
all purposes of this Agreement. Termination of your employment
based on "Retirement" shall mean your voluntary termination of
employment on an Early or Normal Retirement Date as defined in
the United Dominion Industries, Inc. Revised Retirement Plan
(the "Pension Plan") as in effect immediately prior to the
occurrence of a Change in Control whether or not you are a
participant in the Pension Plan, or in accordance with any
retirement arrangement established with your consent with
respect to you.
(B) Cause. Termination by the Company of your employment for
"Cause" shall mean termination upon (i) the willful and
continued failure by you substantially to perform your duties
with the Company (other than any such failure resulting from
your incapacity due to physical or mental illness or from your
Retirement or any such actual or anticipated failure resulting
from termination by you for Good Reason) after a written
demand for substantial performance is delivered to you by the
Board, which demand specifically identifies the manner in
which the Board believes that you have not substantially
performed your duties, or, (ii) the willful engaging by you in
conduct which is demonstrably and materially injurious to the
Company,
-6-
7
monetarily or otherwise. For purposes of this Subsection, no
act or failure to act on your part shall be deemed "willful"
unless done, or omitted to be done, by you not in good faith
and without reasonable belief that your action or omission was
in the best interest of the Company. Notwithstanding the
foregoing, you shall not be deemed to have been terminated for
Cause unless and until there shall be delivered to you a copy
of a resolution duly adopted by the affirmative vote of not
less than three-quarters (3/4) of the entire membership of the
Board at a meeting of the Board called and held for such
purpose (after reasonable notice to you and an opportunity for
you, together with your counsel, to be heard before the
Board), finding that in the good faith opinion of the Board
you were guilty of conduct set forth above in clause (i) or
(ii) of the first sentence of this Subsection and specifying
the particulars thereof in detail.
(C) Good Reason. You shall be entitled to terminate your
employment for Good Reason. For purposes of this Agreement,
"Good Reason" shall mean, without your express written
consent, any of the following:
(i) Inconsistent Duties. A meaningful and detrimental
alteration (in your reasonable good faith
determination) in the nature or status of your
responsibilities (including those as a director of
the Company, if any) from those in effect
immediately prior to the Change in Control;
(ii) Reduced Salary. A reduction by the Company in your
annual base salary as in effect on the date hereof
or as the same may be increased from time to time;
(iii) Relocation. The relocation of the office of the
Company where you are employed at the time of the
Change in Control (the "CIC Location") to a
location that is more than fifty (50) miles from
your current location, or which in your good faith
assessment is an area not generally considered
conducive to maintaining the executive offices of a
company such as
-7-
8
the Company because of hazardous or undesirable
conditions, including without limitation a high crime
rate or inadequate facilities;
(iv) Incentive Compensation Plans. The failure by the
Company to continue in effect any compensation plan
in which you participate, including but not limited
to the United Dominion Industries Corporate Net Worth
Incentive Compensation Plan or any other plans
adopted prior to the Change in Control, which failure
has a significant adverse effect on your total
compensation, unless an equitable arrangement
(embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan in
connection with the Change in Control, or the failure
by the Company to continue your participation therein
on at least as favorable a basis, in terms of the
amount of benefits available to you as existed at the
time of the Change in Control;
(v) Benefits and Perquisites. The failure by the Company
to continue to provide you with benefits and
perquisites substantially similar to those enjoyed by
you under the Company's pension, life insurance,
medical, health and accident, disability, savings and
other qualified and non-qualified executive benefit
plans in which you were participating at the time of
the Change in Control;
(vi) No Assumption by Successor. The failure of the
Company to obtain a satisfactory agreement from any
successor to assume and agree to perform this
Agreement, as contemplated in Section 6 hereof or, if
the business of the Company for which your services
are principally performed is sold at any time after a
Change in Control, the purchaser of such business
shall fail to agree to provide you with the same or a
comparable position, duties, compensation and
benefits (as described in Clauses 4(C)(iv) and (v)
above) as provided to you by the Company
-8-
9
immediately prior to the Change in Control; or
(vii) No Notice. Any purported termination of your
employment which is not effected pursuant to a Notice
of Termination satisfying the requirements of
Subsection (D) below (and, if applicable, the
requirements of Subsection (B) above); for purposes
of this Agreement, no such purported termination
shall be effective.
(D) Notice of Termination. Any purported termination of your
employment by the Company or by you shall be communicated by
written Notice of Termination to the other party hereto in
accordance with Section 7 hereof. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so
indicated.
(E) Date of Termination, Etc. "Date of Termination" shall mean (i)
if your employment is terminated for Disability, thirty (30)
days after a Notice of Termination is given (provided that you
shall not have returned to the full-time performance of your
duties during such thirty (30) day period), and (ii) if your
employment is terminated pursuant to Subsection (B) or (C)
above or for any other reason (other than Disability), the
date specified in the Notice of Termination (which, in the
case of a termination pursuant to Subsection (B) above shall
not be less than thirty (30) days, and in the case of a
termination pursuant to Subsection (C) above shall not be less
than thirty (30) nor more than sixty (60) days, respectively,
from the date such Notice of Termination is given); provided
that if within thirty (30) days after any Notice of
Termination is given the party receiving such Notice of
Termination notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be
the date on which the dispute is finally determined, either by
mutual written agreement of the parties, by a binding
arbitration award, or by a final judgment, order or decree of
a
-9-
10
court of competent jurisdiction (which is not appealable or
the time for appeal therefrom having expired and no appeal
having been perfected); provided further that the Date of
Termination shall be extended by a notice of dispute only if
such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable
diligence. Notwithstanding the pendency of any such dispute,
the Company will continue to pay you your full compensation in
effect when the notice giving rise to the dispute was given
and continue you as a participant in all compensation,
benefit, and insurance plans and perquisites in which you were
participating when the notice giving rise to the dispute was
given, until the dispute is finally resolved in accordance
with this Subsection. Amounts paid under this Subsection are
in addition to all other amounts due under this Agreement and
shall not be offset against or reduce any other amounts due
under this Agreement.
5. Compensation Upon Termination or During Disability. Following a Change
in Control, upon termination of your employment or during Disability
during the Term, the Company shall cause there to be provided to you
the following benefits:
(A) Disability. During any period that you fail to perform your
full-time duties with the Company as a result of your
Disability, you shall continue to receive your base salary at
the rate in effect at the commencement of any such period,
inclusive of all compensation payable to you under the
Company's disability insurance coverage or other plan during
such period, until your employment is terminated pursuant to
Subsection 4(A) hereof. Thereafter, your benefits shall be
determined in accordance with the Company's insurance programs
and other benefit or pension plans then in effect, including
those listed in Clause 4(C)(v) hereof.
(B) Termination for Other than Good Reason or for Cause. If your
employment shall be terminated by the Company for Cause or by
you other than for Good Reason, death or Retirement, the
Company shall pay you your full base salary through the Date
of Termination at the rate in effect at the time Notice of
Termination is given and any
-10-
11
amounts to be paid to you pursuant to the Company's benefit
and pension plans then in effect, including those listed in
Clause 4(C)(v), and the Company shall have no further
obligations to you under this Agreement.
(C) Retirement; Death. If your employment shall be terminated for
Retirement, or by reason of your death, your benefits shall be
determined in accordance with the Company's benefit and
pension plans then in effect, including those listed in Clause
4(C)(v).
(D) Termination Otherwise. If your employment with the Company
shall be terminated by the Company for a reason other than
Cause, Retirement, Disability, or your death, or if your
employment with the Company shall be terminated by you for
Good Reason, then you shall be entitled to the benefits
provided below:
(i) Base Salary. The Company shall pay you your full base
salary through the Date of Termination at the rate in
effect at the time the Notice of Termination is
given;
(ii) Severance Payment. In lieu of any further salary
payments to you for periods subsequent to the Date of
Termination, the Company shall pay as severance pay
to you, not later than the fifth (5th) day following
the Date of Termination (the "Payment Date"), a lump
sum severance payment (the "Severance Payment") equal
to the amount of base salary you would have earned
had you continued to be employed until the earlier of
(a) the end of the thirty-six (36) month period
following the Date of Termination or (b) the
attainment of your Normal Retirement age (the
"Severance Period"), assuming that your rate of
monthly base salary during the Severance Period would
be equal to the highest monthly rate of base salary
which was payable to you by the Company (or any
company affiliated with the Company) during the
thirty-six (36) month period immediately preceding
the Date of Termination.
-11-
12
(iii) Incentive Compensation Plans. The Company shall pay
you any amounts required to be paid to you under the
terms of the United Dominion Industries Corporate Net
Worth Incentive Compensation Plan and the United
Dominion Industries Long-Term Performance Incentive
Plan, other applicable management incentive
compensation programs in effect, or any successor
plan(s) in which you participate (each an "MIC
Plan"). The Company shall pay you, in cash, in a lump
sum, no later than the Payment Date, an amount in
lieu of your participation in an MIC Plan during the
Severance Period which shall be equal to the sum of:
(A) for the year during which the Date of Termination
occurs, an amount equal to the greater of (I) your
target bonus determined in accordance with your class
of participation in such MIC Plan, and (II) the
amount that would have been payable to you under such
MIC Plan for that year, if the actual performance of
the Company from the beginning of that year to the
end of the most recently completed fiscal quarter
during that year, if any, prior to the Date of
Termination, on an annualized basis, were the actual
performance of the Company for that year and (B) for
each other year or portion thereof remaining in the
Severance Period, an amount equal to your target
bonus determined in accordance with your class of
participation in such MIC Plan prior to your Date of
Termination multiplied by the number of full years
remaining in the Severance Period following the year
during which the Date of Termination occurs, plus a
portion of such annual bonus for any partial year
remaining during the Severance Period, prorated based
upon the number of days completed during such year.
(iv) Benefit and Perquisite Continuation. For a thirty-six
(36) month period after such termination (or for such
longer period that the Company may have obligated
itself by separate agreement
-12-
13
with you), the Company shall arrange to provide you
with life, disability, accident, automobile
liability, health & dental insurance and such other
benefits and perquisites substantially similar to
those which you are receiving immediately prior to
the Notice of Termination. In addition, the Company
shall provide you with reasonable outplacement
benefits consistent with the Company's Corporate
Office Severance Policy in effect prior to the Change
in Control. Benefits otherwise receivable by you
pursuant to this Clause 5(D)(iv) shall be reduced to
the extent comparable benefits are actually received
by you during the thirty-six (36) month period
following your termination, and any such benefit
actually received by you shall be reported to the
Company.
(v) Supplemental Pension. In addition to the pension
benefits to which you are entitled under the Pension
Plan or any related excess benefit or supplemental
retirement programs or any successor plans thereto,
including without limitation the United Dominion
Industries, Inc. Supplemental Executive Retirement
Plan and the Restoration Plan for the Salaried
Defined Benefit Plans of United Dominion Industries,
Inc. (collectively, the "Defined Benefit Plans"), the
Company shall pay you in one sum in cash on the fifth
(5th) day following the Date of Termination, a lump
sum determined as of the Date of Termination equal to
the actuarial equivalent (determined based on your
attained age as of the Date of Termination) of the
excess of (1) the retirement pension (determined as a
joint and 50% survivor annuity if you are married or
a 10-year certain and life annuity if you are
unmarried, in either case such annuity commencing at
age fifty-five (55), or if you have already attained
age fifty-five (55) at the Date of Termination,
commencing at the Date of Termination) which you
would have accrued under the terms of the Defined
Benefit
-13-
14
Plans in which you are a participant as of the Date
of Termination (without regard to any amendment to
the Defined Benefit Plans made subsequent to the
Change in Control and on or prior to the Date of
Termination, which amendment adversely affects in any
manner the computation of pension benefits
thereunder) determined as if you had accumulated
(after the Date of Termination) thirty-six (36)
additional months of both age and service credit
under each of the Defined Benefit Plans in which you
participate as of the Date of Termination at your
highest annual rate of compensation during the twelve
(12) months immediately preceding the Date of
Termination (but in no event shall you be deemed to
have accumulated additional months of age or service
credit after your sixty-fifth (65th) birthday for
purposes of the Pension Plan), over (2) the
retirement pension (stated in the same form of
annuity and commencing on the same date as described
in subclause (1) above) which you had then accrued
pursuant to the provisions of the Defined Benefit
Plans in which you are a participant as of the Date
of Termination. For purposes of subclause (1), the
term "compensation" shall include amounts payable
pursuant to Clauses 5(D)(ii) and (iii) hereof, and
amounts payable pursuant to Clauses 5(D)(ii) and
(iii) hereof shall be deemed to represent thirty-six
(36) months of compensation (or for purposes of the
Pension Plan such lesser number of months of
compensation to your sixty-fifth (65th) birthday) for
purposes of determining benefits under the Defined
Benefit Plans. For purposes of this Subsection,
"actuarial equivalent" shall be determined using the
same methods and assumptions utilized under the
Pension Plan immediately prior to the Change in
Control.
(vi) Employee Benefit Plans. Any unvested rights in any
employee benefit plan in which you are eligible to
participate
-14-
15
shall immediately vest, such plans including but not
limited to those listed on Schedule A to this letter
agreement. You shall be entitled to receive all
benefits payable to you under the Company's benefit
and pension plans, not otherwise specifically
provided for in Subsection 4(D), including those
listed in Clause 4(C)(v).
(vii) Normal Retirement Date. In the event you become
eligible for pension benefits under the Pension Plan
on the first day of the month following your
attaining age sixty-five (65), your Normal Retirement
Date, during the thirty-six (36) month period
following the commencement of payments pursuant to
Subsection 5(D), then you will only be entitled to
the lump sum payment as provided by Clauses 5(D)(ii),
(iii) and (v) for that period between the Date of
Termination and the last day of the month immediately
preceding your Normal Retirement Date. In addition,
any entitlement you shall have to benefits provided
by Clauses 5(D)(iv) and (vi) shall also cease as of
the date you attain your Normal Retirement Date.
(E) No Mitigation. You shall not be required to mitigate the
amount of any payment provided for in this Section 5 by
seeking other employment or otherwise, nor shall the amount of
any payment or benefit provided for in this Section 5 be
reduced by any compensation earned by you as the result of
employment by another employer or by pension benefits after
the Date of Termination, or otherwise except as specifically
provided in this Section 5.
(F) Gross-Up Payment. In the event that any payment received by
you or paid by the Company on behalf of you under this
Agreement or under any other plan, arrangement or agreement
with the Company or any person whose actions result in a
Change in Control (collectively, the "Total Payments") will be
subject to the excise tax (the "Excise Tax") imposed by
section 4999 (or any successor provision) of the Internal
Revenue Code of 1986, as amended (the "Code"), the Company
shall pay
-15-
16
to you an additional amount (the "Gross-Up Payment") such that
the net amount retained by you, after deduction of any Excise
Tax on the Total Payments and on any federal, state and local
income, excise and/or other taxes upon the Gross-Up Payment
provided for by this Section 6, shall be equal to the Total
Payments.
For purposes of determining whether any of the Total Payments
will be subject to the Excise Tax and the amount of such
Excise Tax, (i) the Total Payments shall be treated as
"parachute payments" within the meaning of Section 280G(b)(2)
of the Code, and all "excess parachute payments" within the
meaning of Section 280G(b)(1) of the Code shall be treated as
subject to the Excise Tax, unless in the written opinion of
tax counsel selected by the Company's independent auditors
such other payments or benefits (in whole or in part) do not
constitute parachute payments, including by reason of Section
280G(b)(4)(A) of the Code, or such excess parachute payments
(in whole or in part) represent reasonable compensation for
services actually rendered, within the meaning of Section
280G(b)(4)(B) of the Code, in excess of the Base Amount
allocable to such reasonable compensation, or are otherwise
not subject to the Excise Tax, and (ii) the value of any
non-cash benefits or any deferred payment or benefit shall be
determined by the Company's independent auditors in accordance
with the principles of Sections 280G(d)(3) and (4) of the
Code.
For purposes of determining the amount of the Gross-Up
Payment, you shall be deemed to pay federal income and other
taxes at the highest applicable marginal rate of taxation in
the calendar year in which the Gross-Up Payment is to be made
and state and local income and other taxes at the highest
applicable marginal rate of taxation in the state and locality
of your residence on the date the Gross-Up Payment is to be
made, net of the maximum reduction in federal income taxes
which could be obtained from deduction of such state and local
taxes and any other taxes. In the event that the Excise Tax is
subsequently determined to be less than the amount taken into
account hereunder, you shall repay to the Company, at the time
that the amount of such reduction in Excise Tax is
-16-
17
finally determined or upon your receipt of a refund from the
taxing authorities of the amount attributable to the reduction
in the excise tax, whichever is later, the portion of the
Gross-Up Payment attributable to such reduction (plus that
portion of the Gross-Up Payment attributable to the Excise Tax
and federal, state and local income and other taxes imposed on
the Gross-Up Payment being repaid by you to the extent that
such repayment results in a reduction in Excise Tax and/or a
federal, state or local income tax deduction) plus interest on
the amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder
(including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up
Payment), the Company shall make an additional Gross-Up
Payment in respect of such excess (plus any interest,
penalties or additions payable by you with respect to such
excess) at the time that the amount of such excess is finally
determined. You and the Company shall each reasonably
cooperate with the other in connection with any administration
or judicial proceedings concerning the existence or amount of
liability for Excise Tax with respect to the Total Payments.
The Gross-Up Payment payable pursuant to this subsection shall
be payable on the earlier of (i) the date the Company is
required to withhold the Excise Tax pursuant to Section 4999
of the Code, or (ii) the date you are required to pay the
Excise Tax.
You shall notify the Company of any audit or review by the
Internal Revenue Service of your federal income tax return for
the year in which a payment under this Agreement is made
within ten (10) days of your receipt of such audit or review.
In addition, you shall notify the Company of the final
resolution of such audit or review within ten (10) days of
such resolution.
6. Successors: Binding Agreement
(A) Assumption by Successor. The Company will require any successor
(whether direct or indirect, by
-17-
18
purchase, merger, consolidation or otherwise) to all or substantially
all of the business and/or assets of the Company 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 if no such
succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle you to
compensation from the Company in the same amount and on the same terms
as you would be entitled hereunder if you had terminated your
employment for Good Reason following a Change in Control, except that
for purposes of implementing the foregoing, the date on which any
succession becomes effective shall be deemed the Date of Termination.
As used in this Agreement, "the Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
(B) Enforceability by Beneficiaries. This Agreement shall inure to the
benefit of and be enforceable by your personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If you should die while any amount
would still be payable to you hereunder if you had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to your devisee, legatee or
other designee or, if there is no such designee, to your estate.
7. Notice. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed in the
United States, registered mail, return receipt requested, postage
prepaid, addressed to UNITED DOMINION INDUSTRIES, INC., XXX XXXXX XXXXX
XXXXXX, XXXXX 0000, XXXXXXXXX, XX 00000, with a copy to the Senior Vice
President - Human Resources & Administration (or his successor) of the
Company, or to you at the address set forth on the first page of this
Agreement or to such other address as either party may have furnished
to the other in writing in accordance herewith, except that notice of
change of address shall be effective only upon receipt.
-18-
19
8. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed
to in writing. No waiver by either party hereto at any time of any
breach by the 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 either party which are
not expressly set forth in this Agreement and this Agreement shall
supersede all prior agreements, negotiations, correspondence,
undertakings, and communications of the parties, oral or written, with
respect to the subject matter hereof. The validity, interpretation,
construction and performance of this Agreement shall be governed by the
laws of the State of North Carolina applicable to contracts entered
into and performed in such State. Notwithstanding the fact this
Agreement is governed by the laws of the State of North Carolina, any
action brought by you may be instituted in your state of residence.
9. Validity. The invalidity or unenforceability of any provision 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.
10. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original, but all of which
together will constitute one and the same instrument.
11. Expenses of Enforcement. In the event of any dispute between the
Company and you with respect to the subject matter of this Agreement
and the enforcement of rights hereunder, the Company shall reimburse
you for all reasonable costs and expenses relating to litigation,
actions or other proceedings as they are incurred, including reasonable
attorney's fees and expenses reasonably incurred, regardless of whether
such litigation, actions or other proceedings result in any settlement
or judgment or order in favor of any party; provided, however, that
such costs and expenses will be reimbursable in the event of any claim
or action initiated by you relating to this Agreement only if such
claim shall have been made or
-19-
20
brought after reasonable inquiry and shall be well-grounded in fact,
and warranted by existing law or a good faith argument for the
extension, modification or reversal of existing law, and that is not
interposed for any improper purpose, such as to harass or to cause
unnecessary delay or needless increase in the cost of litigation.
Unless required by applicable Delaware law, in no event shall you be
required to reimburse the Company for any of the costs and expenses
relating to such litigation or other proceeding. The obligation of the
Company under this Section 11 shall survive the termination for any
reason of this Agreement (whether such termination is by the Company,
by you, upon the expiration of this Agreement or otherwise).
12. No Contract of Employment. Nothing in this Agreement shall be construed
as giving you any right to be retained in the employ of the Company.
13. Headings. The headings contained in this Agreement are intended solely
for convenience and shall not affect the rights of the parties to this
Agreement.
14. Confidentiality. In consideration for the payments to be made by the
Company hereunder, you agree to maintain the confidentiality of all
information relating to the Company, Limited, or any of its or their
subsidiaries not otherwise available to the public during the term, and
following the expiration, of this Agreement.
15. Guarantee by Limited. In consideration of the management services
provided to it by the Company, and by its signature hereto, Limited
agrees that it will guarantee the payment and performance of all
obligations of the Company hereunder.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter which
will then constitute our agreement on this subject.
Sincerely,
[Signatures]
-20-
