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EXHIBIT 10.9
SEVERANCE AGREEMENT
THIS AGREEMENT, dated as of July 23, 1997, is made by and between XXXXX
XXXXXX INCORPORATED, a Delaware corporation (the "Company"), and XXX X. XXXXXX
(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 hereof and shall continue
in effect through December 31, 1999; provided, however, that commencing on
January 1, 1998 and each January 1 thereafter (an "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.
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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 right
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 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
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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-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 and 1991 Stock Bonus Plan) shall become immediately vested,
exercisable and nonforfeitable and all conditions thereof (including, but not
limited to, any required holding periods) shall be deemed to have been
satisfied.
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6. Severance Payments
6.1 If (i) 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,
or (ii) the Executive voluntarily terminates his employment for any reason
during the one-month period commencing on the first anniversary of the Change
in Control, 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 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
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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;
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, the amount referred to in this clause (ii) shall be
calculated using such lesser number of bonuses as have been actually
earned by the Executive in respect of such lesser period.
(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, annual physical examination and charitable contributions),
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 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
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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 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-rata 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
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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-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 (h) 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
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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 28OG(b)(2) of the Code) unless, 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 28OG(b)(4)(A) of the Code, (ii) all "excess parachute payments" within
the meaning of section 28OG(b)(1) 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 sections 28OG(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 finally determined, the portion of the Gross-Up
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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
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 subsections (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 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
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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
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
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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 by the
Company, shall not be less than thirty (30) days (except in the case of a
termination for Cause) and, in the case of a termination by the Executive,
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
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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 Section 7.4 are in addition to all other amounts due
under this Agreement (other than those due under Section 52 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 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,
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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, 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
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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.
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 recommend-
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ed, 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
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
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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 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 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
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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 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
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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 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)
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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).
(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
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clauses (ii) 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 (VIII)
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 status as a senior executive officer
of the Company or a substantial adverse alteration in the nature or
status of the Executive's responsibilities 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 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;
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(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), 1987 Convertible
Debenture 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 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
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effect at the time of the Change in Control; or
(VII) any purported termination of the Executives
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.
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 Art, 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;
(II) the Company or any Person publicly announces an
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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).
(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.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date above first written.
XXXXX XXXXXX INCORPORATED
By: /s/ XXXX X. XXXXX
-------------------------------
Xxxx X. Xxxxx
Chairman - Compensation Committee
of the Board of Directors
EXECUTIVE:
/s/ XXX X. XXXXXX
-------------------------------
XXX X. XXXXXX
Address:
-------------------------------
-------------------------------
-------------------------------
(Please print carefully)
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