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EXHIBIT 10.2
SEVERANCE AGREEMENT
THIS AGREEMENT, dated July 17, 2000 is made by and between XXXXX XXXXXX
INCORPORATED, a Delaware corporation (the "Company"), and Xxxxxxx X. Xxxxx (the
"Executive").
WHEREAS, the Company considers it essential to the best interests of
its stockholders to xxxxxx the continued employment of key management personnel;
and
WHEREAS, the Board recognizes that, as is the case with many publicly
held corporations, the possibility of a Change in Control exists and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its stockholders; and
WHEREAS, the Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of
members of the Company's management, including the Executive, to their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:
1. Defined Terms. The definitions of capitalized terms used in this
Agreement are provided in the last Section hereof.
2. Term of Agreement. Subject to the provisions of Section 12.2 hereof,
the Term of this Agreement shall commence on the date of your employment with
the Company (which is expected to be August 14, 2000) and shall continue in
effect through December 31, 2001; provided, however, that commencing on January
1, 2001 and each January 1 thereafter (an
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"Extension Date"), the Term shall automatically be extended for one additional
year (i.e., resulting in a two-year Term on the Extension Date) unless, not
later than September 30 of the year preceding the Extension Date, the Company or
the Executive shall have given notice not to extend the Term; and further
provided, however, that if a Change in Control shall have occurred during the
Term, the Term shall expire no earlier than twenty-four (24) months beyond the
month in which such Change in Control occurred.
3. Company's Covenants Summarized. In order to induce the Executive to
remain in the employ of the Company and in consideration of the Executive's
covenants set forth in Section 4 hereof, the Company agrees, under the
conditions described herein, to pay the Executive the Severance Payments and the
other payments and benefits described herein. Except as provided in Section 9.1
hereof, no Severance Payments shall be payable under this Agreement unless there
shall have been (or, under the terms of the second sentence of Section 6.1
hereof, there shall be deemed to have been) a termination of the Executive's
employment with the Company following a Change in Control and during the Term.
This Agreement shall not be construed as creating an express or implied contract
of employment and, except as otherwise agreed in writing between the Executive
and the Company, the Executive shall not have any rights to be retained in the
employ of the Company.
4. The Executive's Covenants. The Executive agrees that, subject to the
terms and conditions of this Agreement, in the event of a Potential Change in
Control during the Term, the Executive will remain in the employ of the Company
until the earliest of (i) a date which is six (6) months from the date of such
Potential Change of Control, (ii) the date of a Change in Control, (iii) the
date of termination by the Executive of the Executive's employment for Good
Reason or by
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reason of death, Disability or Retirement, or (iv) the termination by the
Company of the Executive's employment for any reason.
5. Compensation Other Than Severance Payments.
5.1 Following a Change in Control and during the Term, during any
period that the Executive fails to perform the Executive's full-time duties with
the Company as a result of incapacity due to physical or mental illness, the
Company shall pay the Executive's full salary to the Executive at the rate in
effect at the commencement of any such period, together with all compensation
and benefits payable to the Executive under the terms of any compensation or
benefit plan, program or arrangement maintained by the Company during such
period, until the Executive's employment is terminated by the Company for
Disability.
5.2 If the Executive's employment shall be terminated for any reason
following a Change in Control and during the Term, the Company shall pay the
Executive's full salary to the Executive through the Date of Termination at the
rate in effect immediately prior to the Date of Termination or, if higher, the
rate in effect immediately prior to the first occurrence of an event or
circumstance constituting Good Reason, together with all compensation and
benefits payable to the Executive through the Date of Termination under the
terms of the Company's compensation and benefit plans, programs or arrangements
as in effect immediately prior to the Date of Termination or, if more favorable
to the Executive, as in effect immediately prior to the first occurrence of an
event or circumstance constituting Good Reason.
5.3 If the Executive's employment shall be terminated for any reason
following a Change in Control and during the Term, the Company shall pay to the
Executive the Executive's normal post-termination compensation and benefits as
such payments become due. Such post-
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termination compensation and benefits shall be determined under, and paid in
accordance with, the Company's retirement, insurance and other compensation or
benefit plans, programs and arrangements as in effect immediately prior to the
Date of Termination or, if more favorable to the Executive, as in effect
immediately prior to the occurrence of the first event or circumstance
constituting Good Reason.
5.4 Upon the occurrence of a Change in Control all options to acquire
shares of Company stock, all shares of restricted Company stock and all other
equity or phantom equity incentives held by the Executive under any plan of the
Company (including, but not limited to, the Company's 1995 Stock Award Plan (and
the Stock Matching Programs thereunder) 1993 Stock Option Plan, 1993 Stock Bonus
Plan, 1991 Stock Bonus Plan and Long Term Incentive Plan) shall become
immediately vested, exerciseable and nonforfeitable and all conditions thereof
(including, but not limited to, any required holding periods) shall be deemed to
have been satisfied.
6. Severance Payments.
6.1 If the Executive's employment is terminated following a Change in
Control and during the Term, other than (A) by the Company for Cause, (B) by
reason of death or Disability, or (C) by the Executive without Good Reason,
then, the Company shall pay the Executive the amounts, and provide the Executive
the benefits, described in this Section 6.1 ("Severance Payments") and Section
6.2, in addition to any payments and benefits to which the Executive is entitled
under Section 5 hereof. For purposes of this Agreement, the Executive's
employment shall be deemed to have been terminated following a Change in Control
by the Company without Cause or by the Executive with Good Reason, if (i) the
Executive's employment is terminated by the Company without Cause prior to a
Change in Control (whether or not a Change in Control ever
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occurs) and such termination was at the request or direction of a Person who has
entered into an agreement with the Company the consummation of which would
constitute a Change in Control, (ii) the Executive terminates his employment for
Good Reason prior to a Change in Control (whether or not a Change in Control
ever occurs) and the circumstance or event which constitutes Good Reason occurs
at the request or direction of such Person described in clause (i), or (iii) the
Executive's employment is terminated by the Company without Cause or by the
Executive for Good Reason and such termination or the circumstance or event
which constitutes Good Reason is otherwise in connection with or in anticipation
of a Change in Control (whether or not a Change in Control ever occurs). For
purposes of any determination regarding the applicability of the immediately
preceding sentence, any position taken by the Executive shall be presumed to be
correct unless the Company establishes to the Committee by clear and convincing
evidence that such position is not correct.
(A) In lieu of any further salary payments to the Executive
for periods subsequent to the Date of Termination and in lieu of any
severance benefit otherwise payable to the Executive, the Company shall pay
to the Executive a lump sum severance payment, in cash, equal to three
times the sum of (i) the Executive's base salary as in effect immediately
prior to the Date of Termination or, if higher, in effect immediately prior
to the first occurrence of an event or circumstance constituting Good
Reason, and (ii) the average annual bonus earned by the Executive pursuant
to any annual bonus or incentive plan maintained by the Company in respect
of the three fiscal years ending immediately prior to the fiscal year in
which occurs the Date of Termination or, if higher, immediately prior to
the fiscal year in which occurs the first event or circumstance
constituting Good Reason;
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provided, that if the Executive has not participated in an annual bonus or
incentive plan maintained by the Company for the entirety of such
three-year period (including those years in which the Company did not
employ the Executive), for those years in which the Executive has not so
participated, the amount referred to in this clause (ii) shall be
calculated using the Executive's Expected Value Bonus level as in effect at
the time of determination (as defined in the Company's Annual Incentive
Plan, and assuming for this purpose that any performance goals under such
Plan for such Plan year have been achieved at the Expected Value level), or
similar award opportunity under a successor plan thereto.
(B) For the thirty-six (36) month period immediately following
the Date of Termination, the Company shall arrange to provide the Executive
and his dependents life, disability, accident and health insurance benefits
and perquisites (including, but not limited to, executive life insurance,
club memberships, financial planning and tax preparation and annual
physical examination), in each case, substantially similar to those
provided to the Executive and his dependents immediately prior to the Date
of Termination or, if more favorable to the Executive, those provided to
the Executive and his dependents immediately prior to the first occurrence
of an event or circumstance constituting Good Reason, at no greater cost to
the Executive than the cost to the Executive immediately prior to such date
or occurrence; provided, however, that, unless the Executive consents to a
different method (after taking into account the effect of such method on
the calculation of "parachute payments" pursuant to Section 6.2 hereof),
such health insurance benefits shall be provided through a third-party
insurer. Benefits otherwise receivable by the Executive pursuant to this
Section 6.1(B) shall be reduced to the extent benefits of the same type are
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received by or made available to the Executive during the thirty-six (36)
month period following the Executive's termination of employment (and any
such benefits received by or made available to the Executive shall be
reported to the Company by the Executive); provided, however, that the
Company shall reimburse the Executive for the excess, if any, of the cost
of such benefits to the Executive over such cost immediately prior to the
Date of Termination or, if more favorable to the Executive, the first
occurrence of an event or circumstance constituting Good Reason.
(C) Notwithstanding any provision of the Xxxxx Xxxxxx
Incorporated 1995 Employee Annual Incentive Compensation Plan (the "Annual
Incentive Plan"), the Company shall pay to the Executive a lump sum amount,
in cash, equal to the sum of (i) any unpaid incentive compensation which
has been allocated or awarded to the Executive for a completed fiscal year
or other measuring period preceding the Date of Termination under the
Annual Incentive Plan and which, as of the Date of Termination, is
contingent only upon the continued employment of the Executive to a
subsequent date, and (ii) a pro rata portion to the Date of Termination of
the aggregate value of all contingent incentive compensation awards to the
Executive for all then uncompleted periods under the Annual Incentive Plan,
calculated as to each such award by multiplying the award that the
Executive would have earned on the last day of the performance award
period, assuming the achievement, at the expected value target level, of
the individual and corporate performance goals established with respect to
such award, by the fraction obtained by dividing the number of full months
and any fractional portion of a month during such performance award period
through the Date of Termination by the total number of months contained in
such
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performance award period; provided, however, that if such termination of
employment occurs during the same year in which the Change in Control
occurs, the pro-rate bonus payment referred to in clause (ii) above shall be
offset by any payments received under the Annual Incentive Plan in
connection with such Change in Control.
(D) In addition to the retirement benefits to which the
Executive is entitled under the Company's Thrift Plan (the "Thrift Plan")
and the Company's Supplemental Retirement Plan (the "SRP"), the Company
shall pay the Executive a lump sum amount, in cash, equal to the present
value of the employer-provided contributions, deferrals and allocations the
Executive would have received had he continued to participate, after the
Date of Termination, in the Thrift Plan and the SRP for three (3)
additional years, assuming for this purpose that (i) the Executive earned
compensation for purposes of the Thrift Plan and SRP during such three-year
period the amount used to calculate the Executive's severance payment under
subparagraph (A) of this Section 6.1, and (ii) the percentages of
contributions, deferrals and allocations made under the Thrift Plan and the
SRP by or on behalf of the Executive during such three-year period are the
same percentages of contributions, deferrals and allocations in effect on
the date of the Change in Control or the Date of Termination, whichever is
more favorable to the Executive.
(E) If the Executive would have become entitled to benefits
under the Company's post-retirement health care or life insurance plans, as
in effect immediately prior to the Date of Termination or, if more
favorable to the Executive, as in effect immediately prior to the first
occurrence of an event or circumstance constituting Good Reason, had the
Executive's employment terminated at any time during the period of thirty-
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six (36) months after the Date of Termination, the Company shall provide
such post-retirement health care or life insurance benefits to the
Executive and the Executive's dependents commencing on the later of (i) the
date on which such coverage would have first become available and (ii) the
date on which benefits described in subsection (B) of this Section 6.1
terminate.
(F) The Company shall provide the Executive with outplacement
services suitable to the Executive's position for a period of three years
or, if earlier, until the first acceptance by the Executive of an offer of
employment.
6.2 (A) Whether or not the Executive becomes entitled to the Severance
Payments, if any of the payments or benefits received or to be received by the
Executive in connection with a Change in Control or the Executive's termination
of employment (whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company, any Person whose actions result
in a Change in Control or any Person affiliated with the Company or such Person)
(such payments or benefits, excluding the Gross-Up Payment, being hereinafter
referred to as the "Total Payments") will be subject to the Excise Tax, the
Company shall pay to the Executive an additional amount (the "Gross-Up Payment")
such that the net amount retained by the Executive, after deduction of any
Excise Tax on the Total Payments and any federal, state and local income and
employment taxes and Excise Tax upon the Gross-Up Payment, shall be equal to the
Total Payments.
(B) 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) all of
the Total Payments shall be treated as "parachute payments" (within the meaning
of section 280G(b)(2) of the Code) unless,
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in the opinion of tax counsel ("Tax Counsel") reasonably acceptable to the
Executive and selected by the accounting firm which was, immediately prior to
the Change in Control, the Company's independent auditor (the "Auditor"), such
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, (ii) all "excess
parachute payments" within the meaning of section 280G(b)(I) of the Code shall
be treated as subject to the Excise Tax unless, in the opinion of Tax Counsel,
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
(iii) the value of any noncash benefits or any deferred payment or benefit shall
be determined by the Auditor in accordance with the principles of section
280G(d)(3) and (4) of the Code. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal income tax at the
highest marginal rate of federal income taxation in the calendar year in which
the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of the Executive's
residence on the Date of Termination (or if there is no Date of Termination,
then the date on which the Gross-Up Payment is calculated for purposes of this
Section 6.2), net of the maximum reduction in federal income taxes which could
be obtained from deduction of such state and local taxes.
(C) In the event that the Excise Tax is finally determined to be
less than the amount taken into account hereunder in calculating the Gross-Up
Payment, the Executive shall repay to the Company, within five (5) business days
following the time that the amount of such reduction in the Excise Tax is fully
determined, the portion of the Gross-Up Payment attributable
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to such reduction (plus that portion of the Gross-Up Payment attributable to the
Excise Tax and federal, state and local income and employment taxes imposed on
the Gross-Up Payment being repaid by the Executive, to the extent that such
repayment results in a reduction in the Excise Tax and a dollar-for-dollar
reduction in the Executive's taxable income and wages for purposes of federal,
state and local income and employment taxes, plus interest on the amount of such
repayment at 120% of 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 in calculating the Gross-Up Payment (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 the
Executive with respect to such excess) within five (5) business days following
the time that the amount of such excess is finally determined. The Executive and
the Company shall each reasonably cooperate with the other in connection with
any administrative or judicial proceedings concerning the existence or amount of
liability for Excise Tax with respect to the Total Payments.
6.3 The payments provided in subsection (A), (C) and (D) of Section 6.1
hereof and in Section 6.2 hereof shall be made not later than the fifth day
following the Date of Termination; provided, however, that if the amounts of
such payments cannot be finally determined on or before such day, the Company
shall pay to the Executive on such day an estimate, as determined in good faith
by the Executive or, in the case of payments under Section 6.2 hereof, in
accordance with Section 6.2 hereof, of the minimum amount of such payments to
which the Executive is clearly entitled and shall pay the remainder of such
payments (together with interest on the unpaid remainder (or on all such
payments to the extent the Company fails to make such
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payments when due) at 120% of the rate provided in section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be determined but in no event later than
the thirtieth (30th) day after the Date of Termination. In the event that the
amount of the estimated payments exceeds the amount subsequently determined to
have been due, such excess shall constitute a loan by the Company to the
Executive, payable on the fifth (5th) business day after demand by the Company
(together with interest at 120% of the rate provided in section 1274(b)(2)(B) of
the Code), but only to the extent such amount has not been paid by the Executive
pursuant to Section 6.2(C) above. At the time that payments are made under this
Agreement, the Company shall provide the Executive with a written statement
setting forth the manner in which such payments were calculated and the basis
for such calculations including, without limitation, any opinions or other
advice the Company has received from Tax Counsel, the Auditor or other advisors
or consultants (and any such opinions or advice which are in writing shall be
attached to the statement).
6.4 The Company also shall pay to the Executive all legal fees and
expenses incurred by the Executive in disputing in good faith any issue
hereunder relating to the termination of the Executive's employment, in seeking
in good faith to obtain or enforce any benefit or right provided by this
Agreement or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any payment or
benefit provided hereunder. Such payments shall be made within five (5) business
days after delivery of the Executive's written requests for payment accompanied
with such evidence of fees and expenses incurred as the Company reasonably may
require.
7. Termination Procedures and Compensation During Dispute.
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7.1 Notice of Termination. After a Change in Control and during the
Term, any purported termination of the Executive's employment (other than by
reason of death) shall be communicated by written Notice of Termination from one
party hereto to the other party hereto in accordance with Section 10 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 the Executive's employment under the
provision so indicated. Further, a Notice of Termination for Cause is required
to include 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 which was called and held for the purpose of considering
such termination (after reasonable notice to the Executive and an opportunity
for the Executive, together with the Executive's counsel, to be heard before the
Board) finding that, in the good faith opinion of the Board, the Executive was
guilty of conduct set forth in clause (i) or (ii) of the definition of Cause
herein, and specifying the particulars thereof in detail.
7.2 Date of Termination. "Date of Termination," with respect to any
purported termination of the Executive's employment after a Change in Control
and during the Term, shall mean (i) 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 full-time performance of the
Executive's duties during such thirty (30) day period), and (ii) 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) and,
in the case of a termination by the Executive,
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shall not be less than fifteen (15) days nor more than sixty (60) days,
respectively, from the date such Notice of Termination is given.
7.3 Dispute Concerning Termination. If within fifteen (15) days after
any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be extended
until the earlier of (i) the date on which the Term ends or (ii) the date on
which the dispute is finally resolved, either by mutual written agreement of the
parties or by a final judgment, order or decree of an arbitrator or a court of
competent jurisdiction (which is not appealable or with respect to which the
time for appeal therefrom has expired and no appeal has been perfected);
provided, however, that the Date of Termination shall be extended by a notice of
dispute given by the Executive only if such notice is given in good faith and
the Executive pursues the resolution of such dispute with reasonable diligence.
7.4 Compensation During Dispute. If a purported termination occurs
following a Change in Control and during the Term and the Date of Termination is
extended in accordance with Section 7.3 hereof, the Company shall continue to
pay the Executive the full compensation in effect when the notice giving rise to
the dispute was given (including, but not limited to, salary) and continue the
Executive as a participant in all compensation, benefit and insurance plans in
which the Executive was participating when the notice giving rise to the dispute
was given or those plans in which the Executive was participating immediately
prior to the first occurrence of an event or circumstance giving rise to the
Notice of Termination, if more favorable to the Executive, until the Date of
Termination, as determined in accordance with Section 7.3 hereof. Amounts paid
under this
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Section 7.4 are in addition to all other amounts due under this Agreement (other
than those due under Section 5.2 hereof) and shall not be offset against or
reduce any other amounts due under this Agreement.
8. No Mitigation. The Company agrees that, if the Executive's
employment with the Company terminates during the Term, the Executive is not
required to seek other employment or to attempt in any way to reduce any amounts
payable to the Executive by the Company pursuant to Sections 5, 6 or 7.4 hereof.
Further, the amount of any payment or benefit provided for in this Agreement
(other than Section 6.1(B) hereof but including (but not limited to) Section 7.4
hereof) shall not be reduced by any compensation earned by the Executive as the
result of employment by another employer, by retirement benefits, by offset
against any amount claimed to be owed by the Executive to the Company, or
otherwise.
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by law upon any successor to
the Company, the Company will require any successor (whether direct or indirect,
by 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 it 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 the Executive to compensation from the Company in the same amount
and on the same terms as the Executive would be entitled to hereunder if the
Executive were to terminate the Executive's employment for Good Reason after a
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Change in Control, except that, for purposes of implementing the foregoing, the
date on which any such succession becomes effective shall be deemed the Date of
Termination.
9.2 This Agreement shall inure to the benefit of and be enforceable by
the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive shall
die while any amount would still be payable to the Executive hereunder (other
than amounts which, by their terms, terminate upon the death of the Executive)
if the Executive had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
the executors, personal representatives or administrators of the Executive's
estate.
10. Notices. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed, if to the
Executive, to the address inserted below the Executive's signature on the final
page hereof and, if to the Company, to the address set forth below, 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 actual receipt:
To the Company:
0000 Xxxxx Xxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: General Counsel
11. Miscellaneous. Except as otherwise specifically provided in Section
12.2 below, no provision of this Agreement may be modified, waived or discharged
unless such waiver,
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modification or discharge is agreed to in writing and signed by the Executive
and such officer as may be specifically designated by the Board. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
of any lack of 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. This Agreement supersedes any other agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof which
have been made by either party, provided, however, that this Agreement shall
supersede any agreement setting forth the terms and conditions of the
Executive's employment with the Company only in the event that the Executive's
employment with the Company is terminated on or following a Change in Control,
by the Company other than for Cause or by the Executive other than for Good
Reason; and provided further that all agreements otherwise superseded by this
Agreement shall be automatically reinstated with full force and effect to the
extent this Agreement is terminated or otherwise rendered inapplicable or
amended in accordance with Section 12.2 hereof. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Texas. All references to sections of the Exchange Act or the Code
shall be deemed also to refer to any successor provisions to such sections. Any
payments provided for hereunder shall be paid net of any applicable withholding
required under federal, state or local law and any additional withholding to
which the Executive has agreed. The obligations of the Company and the Executive
under this Agreement which by their nature may require either partial or total
performance after the expiration of the Term (including, without limitation,
those under Sections 6 and 7 hereof) shall survive such expiration.
12. Validity; Pooling.
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12.1 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.
12.2 Pooling. In the event that (A) the Company is party to a
transaction which is otherwise intended to qualify for "pooling of interests"
accounting treatment, (B) such transaction constitutes a Change in Control
within the meaning of Section 15(G)(III) and (C) individuals who satisfy the
requirements in clauses (i) and (ii) below constitute more than two-thirds (2/3)
of the number of directors of the entity surviving such transaction and the
parent thereof, if any: individuals who (i) immediately prior to such
transaction constitute the Board and (ii) on the date hereof constitute the
Board and any new director (other than a director whose initial assumption of
office is in connection with an actual or threatened election contest relating
to the election of directors of the Company) whose appointment or election by
the Board or nomination for election by the Company's stockholders was approved
or recommended, by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors on the date hereof or whose
appointment, election or nomination for election was previously so approved or
recommended then (a) this Agreement shall, to the extent practicable, be
interpreted so as to permit such accounting treatment, and (b) to the extent
that the application of clause (a) of this Section 12.2 does not preserve the
availability of such accounting treatment, then, to the extent that any
provision or combination of provisions of the Agreement disqualifies the
transaction as a "pooling" transaction (including, if applicable, the entire
Agreement), the Board shall have the right, by sending written notice to the
Executive prior to the Change in Control, to unilaterally amend (without the
consent of the Executive) such provision or provisions if and to the extent
necessary (including declaring such
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provision or provisions to be null and void as of the date hereof) so that such
transaction may be accounted for as a "pooling of interests." All determinations
under this Section 12.2 shall be made by the Board prior to the Change in
Control, based upon the advice of the accounting firm whose opinion with respect
to "pooling of interests" is required as a condition to the consummation of such
transaction.
13. 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.
14. Settlement of Disputes; Arbitration.
14.1 All claims by the Executive for benefits under this Agreement
shall be directed to and determined by the Committee and shall be in writing.
Any denial by the Committee of a claim for benefits under this Agreement shall
be delivered to the Executive in writing within thirty (30) days after written
notice of the claim is provided to the Company in accordance with Section 10 and
shall set forth the specific reasons for the denial and the specific provisions
of this Agreement relied upon. The Committee shall afford a reasonable
opportunity to the Executive for a review of the decision denying a claim and
shall further allow the Executive to appeal to the Committee a decision of the
Committee within sixty (60) days after notification by the Committee that the
Executive's claim has been denied.
14.2 Any further dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in Houston,
Texas in accordance with the rules of the American Arbitration Association then
in effect; provided, however, that the evidentiary standards set forth in this
Agreement shall apply. Judgment may be entered on the arbitrator's award
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in any court having jurisdiction. Notwithstanding any provision of this
Agreement to the contrary, the Executive shall be entitled to seek specific
performance of the Executive's right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in connection
with this Agreement.
15. Definitions. For purposes of this Agreement, the following terms
shall have the meanings indicated below:
(A) "Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under Section 12 of the Exchange Act.
(B) "Auditor" shall have the meaning set forth in Section 6.2 hereof.
(C) "Base Amount" shall have the meaning set forth in section
280G(b)(3) of the Code.
(D) "Beneficial Owner" shall have the meaning set forth in Rule 13d-3
under the Exchange Act.
(E) "Board" shall mean the Board of Directors of the Company.
(F) "Cause" for termination by the Company of the Executive's
employment shall mean (i) the willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company (other than any
such failure resulting from the Executive's incapacity due to physical or mental
illness or any such actual or anticipated failure after the issuance of a Notice
of Termination for Good Reason by the Executive pursuant to Section 7.1 hereof)
after a written demand for substantial performance is delivered to the Executive
by the Board, which demand specifically identifies the manner in which the Board
believes that the Executive has not substantially performed the Executive's
duties, or (ii) the willful engaging by the Executive in conduct which is
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demonstrably and materially injurious to the Company or its subsidiaries,
monetarily or otherwise. For purposes of clauses (i) and (ii) of this
definition, (x) no act, or failure to act, on the Executive's part shall be
deemed "willful" unless done, or omitted to be done, by the Executive not in
good faith and without reasonable belief that the Executive's act, or failure to
act, was in the best interest of the Company and (y) in the event of a dispute
concerning the application of this provision, no claim by the Company that Cause
exists shall be given effect unless the Company establishes to the Committee by
clear and convincing evidence that Cause exists.
(G) A "Change in Control" shall be deemed to have occurred if the event
set forth in any one of the following paragraphs shall have occurred:
(I) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities acquired
directly from the Company or its affiliates) representing 20% or more
of the combined voting power of the Company's then outstanding
securities, excluding any Person who becomes such a Beneficial Owner in
connection with a transaction described in clause (i) of paragraph
(III) below; or
(II) the following individuals cease for any reason to
constitute a majority of the number of directors then serving:
individuals who, on the date hereof, constitute the Board and any new
director (other than a director whose initial assumption of office is
in connection with an actual or threatened election contest relating to
the election of directors of the Company) whose appointment or election
by the Board or nomination for election by the Company's stockholders
was
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approved or recommended by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors on the date
hereof or whose appointment, election or nomination for election was
previously so approved or recommended; or
(III) there is consummated a merger or consolidation of the
Company or any direct or indirect subsidiary of the Company with any
other corporation, other than (i) a merger or consolidation which would
result in the voting securities of the Company outstanding immediately
prior to such merger or consolidation continuing to represent (either
by remaining outstanding or by being converted into voting securities
of the surviving entity or any parent thereof), in combination with the
ownership of any trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any subsidiary of the Company,
at least 65% of the combined voting power of the securities of the
Company or such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (ii) a merger or
consolidation effected to implement a recapitalization of the Company
(or similar transaction) in which no Person is or becomes the
Beneficial Owner, directly or indirectly, of securities of the Company
(not including in the securities Beneficially Owned by such Person any
securities acquired directly from the Company or its Affiliates other
than in connection with the acquisition by the Company or its
Affiliates of a business) representing 20% or more of the combined
voting power of the Company's then outstanding securities; or
(IV) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company or there is
consummated an agreement for
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the sale or disposition by the Company of all or substantially all of
the Company's assets, other than a sale or disposition by the Company
of all or substantially all of the Company's assets to an entity, at
least 65% of the combined voting power of the voting securities of
which are owned by stockholders of the Company in substantially the
same proportions as their ownership of the Company immediately prior to
such sale.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have
occurred by virtue of the consummation of any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity which owns all or substantially all of the assets of the Company
immediately following such transaction or series of transactions.
(H) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(I) "Committee" shall mean (i) the individuals (not fewer than three in
number) who, on the date six months before a Change in Control, constitute the
Compensation Committee of the Board, plus (ii) in the event that fewer than
three individuals are available from the group specified in clause (i) above for
any reason, such individuals as may be appointed by the individual or
individuals so available (including for this purpose any individual or
individuals previously so appointed under this clause (ii)); provided, however,
that the maximum number of individuals constituting the Committee shall not
exceed six (6).
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(J) "Company" shall mean Xxxxx Xxxxxx Incorporated and, except in
determining under Section 15(G) hereof whether or not any Change in Control of
the Company has occurred, shall include any successor to its business and/or
assets which assumes and agrees to perform this Agreement by operation of law,
or otherwise.
(K) "Date of Termination" shall have the meaning set forth in Section
7.2 hereof.
(L) "Disability" shall be deemed the reason for the termination by the
Company of the Executive's employment, if, as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from the full-time performance of the Executive's duties with the Company
for a period of six (6) consecutive months, the Company shall have given the
Executive a Notice of Termination for Disability, and, within thirty (30) days
after such Notice of Termination is given, the Executive shall not have returned
to the full-time performance of the Executive's duties.
(M) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(N) "Excise Tax" shall mean any excise tax imposed under section 4999
of the Code.
(O) "Executive" shall mean the individual named in the first paragraph
of this Agreement.
(P) "Extension Date" shall have the meaning set forth in Section 2
hereof.
(Q) "Good Reason" for termination by the Executive of the Executive's
employment shall mean the occurrence (without the Executive's express written
consent) after any Change in Control, or prior to a Change in Control under the
circumstances described in clauses (ii)
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and (iii) of the second sentence of Section 6.1 hereof (treating all references
in paragraphs (I) through (VII) below to a "Change in Control" as references to
a "Potential Change in Control"), of any one of the following acts by the
Company, or failures by the Company to act, unless, in the case of any act or
failure to act described in paragraph (I), (V), (VI) or (VII) below, such act or
failure to act is corrected prior to the Date of Termination specified in the
Notice of Termination given in respect thereof:
(I) the assignment to the Executive of any duties inconsistent
with the Executive's position as Chairman of the Board, President and
Chief Executive Officer of the Company (including status, office, title
and reporting requirements), which shall be no less than those of the
usual and customary duties of such office, which shall be those
normally inherent in such capacity in U.S. publicly held corporations
of similar size and character, or a substantial adverse alteration in
the nature or status of the Executive's responsibilities or authority
from those in effect immediately prior to the Change in Control;
(II) a reduction by the Company in the Executive's annual base
salary as in effect on the date hereof or as the same may be increased
from time to time except for across-the-board salary reductions
similarly affecting all senior executives of the Company and all senior
executives of any Person in control of the Company;
(III) the relocation of the Executive's principal place of
employment to a location more than 50 miles from the Executive's
principal place of employment immediately prior to the Change in
Control or the Company's
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requiring the Executive to be based anywhere other than such principal
place of employment (or permitted relocation thereof) except for
required travel on the Company's business to an extent substantially
consistent with the Executive's present business travel obligations;
(IV) the failure by the Company to pay to the Executive any
portion of the Executive's current compensation except pursuant to an
across-the-board compensation deferral similarly affecting all senior
executives of the Company and all senior executives of any Person in
control of the Company, or to pay to the Executive any portion of an
installment of deferred compensation under any deferred compensation
program of the Company, within seven (7) days of the date such
compensation is due;
(V) the failure by the Company to continue in effect any
compensation plan in which the Executive participates immediately prior
to the Change in Control which is material to the Executive's total
compensation, including but not limited to the Company's 1993 Stock
Option Plan, 1993 Employee Stock Bonus Plan, 1991 Employee Stock Bonus
Plan, 1995 Stock Award Plan (and the 1995, 1996 and 1997 Stock Matching
Programs thereunder and any subsequent Stock Matching Programs in which
the Executive participates), Long Term Incentive Plan and 1995 Employee
Annual Incentive Compensation Plan or any substitute plans adopted
prior to the Change in Control, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been made
with respect to such plan, or the failure by the Company to continue
the Executive's participation therein (or
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in such substitute or alternative plan) on a basis not materially less
favorable, both in terms of the amount or timing of payment of benefits
provided and the level of the Executive's participation relative to
other participants, as existed immediately prior to the Change in
Control;
(VI) the failure by the Company to continue to provide the
Executive with benefits substantially similar to those enjoyed by the
Executive under any of the Company's pension, savings, life insurance,
medical, health and accident, or disability plans in which the
Executive was participating immediately prior to the Change in Control
(except for across the board changes similarly affecting all senior
executives of the Company and all senior executives of any Person in
control of the Company), the taking of any other action by the Company
which would directly or indirectly materially reduce any of such
benefits or deprive the Executive of any material fringe benefit or
perquisite enjoyed by the Executive at the time of the Change in
Control, or the failure by the Company to provide the Executive with
the number of paid vacation days to which the Executive is entitled on
the basis of years of service with the Company in accordance with the
Company's normal vacation policy in effect at the time of the Change in
Control; or
(VII) any purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination satisfying
the requirements of Section 7.1 hereof; for purposes of this Agreement,
no such purported termination shall be effective.
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The Executive's right to terminate the Executive's employment for Good
Reason shall not be affected by the Executive's incapacity due to physical or
mental illness. The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.
For purposes of any determination regarding the existence of Good
Reason, any claim by the Executive that Good Reason exists shall be presumed to
be correct unless the Company establishes to the Committee by clear and
convincing evidence that Good Reason does not exist.
(R) "Gross-Up Payment" shall have the meaning set forth in Section 6.2
hereof.
(S) "Notice of Termination" shall have the meaning set forth in Section
7.1 hereof.
(T) "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except
that such term shall not include (i) the Company or any of its subsidiaries,
(ii) a trustee or other fiduciary holding securities under an employee benefit
plan of the Company or any of its Affiliates, (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company.
(U) "Potential Change in Control" shall be deemed to have occurred if
the event set forth in any one of the following paragraphs shall have occurred:
(I) the Company enters into an agreement, the consummation of
which would result in the occurrence of a Change in Control;
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(II) the Company or any Person publicly announces an intention
to take or to consider taking actions which, if consummated, would
constitute a Change in Control;
(III) any Person becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing 15% or more of
either the then outstanding shares of common stock of the Company or
the combined voting power of the Company's then outstanding securities
(not including in the securities beneficially owned by such Person any
securities acquired directly from the Company or its affiliates); or
(IV) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control has occurred.
(V) "Retirement" shall, for purposes of Section 4 hereof, be
deemed the reason for the termination by the Executive of the
Executive's employment if such employment is terminated after
completion of ten (10) years of service with the Company and attainment
of age fifty-five (55).
(W) "Severance Payments" shall have the meaning set forth in
Section 6.1 hereof.
(X) "SRP" shall have the meaning set forth in Section 6.1
hereof.
(Y) "Tax Counsel" shall have the meaning set forth in Section
6.2 hereof.
(Z) "Term" shall mean the period of time described in Section
2 hereof (including any extension, continuation or termination
described therein).
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(AA) "Thrift Plan" shall have the meaning set forth in Section
6.1 hereof.
(BB) "Total Payments" shall mean those payments so described
in Section 6.2 hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date above first written.
XXXXX XXXXXX INCORPORATED
By: /s/ XXX X. XXXXXX
--------------------------------------
Xxx X. Xxxxxx
Chairman of the Board, President and
Chief Executive Officer
EXECUTIVE:
/s/ XXXXXXX X. XXXXX
-----------------------------------------
Xxxxxxx X. Xxxxx
Address:
00000 Xxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
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