Exhibit 10.8
[EXECUTIVE SEVERANCE AGREEMENT - CATEGORY A]
Dear :
Xxxxx & Minor, Inc. (the "Company") considers it essential and in the
best interests of its stockholders to xxxxxx the continuous employment of key
management personnel. In this connection, the Board of Directors of the Company
(the "Board") recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control of the Company may exist
and that such possibility, and the uncertainty and questions that it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders.
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 senior management, including yourself, to their assigned duties
without distraction in the face of potentially disturbing circumstances arising
from the possibility of a change in control of the Company.
In order to induce you to remain in the employ of the Company, the
Company agrees that you shall receive the severance benefits set forth in this
letter agreement (the "Agreement") in the event your employment with the Company
is terminated under the circumstances described below subsequent to a "change in
control of the Company" (as defined in Section 2).
1. Term of Agreement. This Agreement shall commence on __________, and
shall continue in effect through December 31, _______; provided, however, that
commencing on January 1, 200___, and every other January 1 thereafter, the term
of this Agreement shall automatically be extended for one additional year
unless, not later than September 30 of the preceding year, the Company shall
have given notice that it does not wish to extend this Agreement provided that
no such notice may be given during the pendency of a potential change in control
of the Company, as defined in Section 2; and provided, further, that if a
"change in control of the Company", as defined in Section 2, shall have occurred
during the original and any extension of the term of this Agreement, this
Agreement shall continue in effect for a period of not less than twenty-four
(24) months beyond the month in which such change in control occurred.
2. Change in Control and Potential Change in Control.
(i) No benefits shall be payable hereunder unless there shall have
been a change in control of the Company, as set forth below. For purposes of
this Agreement, a "change in control of the Company" shall be deemed to have
occurred if:
(a) any "person," as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(other than the Company, any trustee or other fiduciary holding securities under
an employee benefit plan of the Company, or any Company owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company), is or becomes the owner
or "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of Company securities representing 20% or more of the
combined voting power of the then outstanding securities; provided, however,
that Company securities acquired directly from the Company shall be disregarded
for this purpose;
(b) during any period of two consecutive years (not
including any period prior to the execution of this Agreement), individuals who
at the beginning of such period constitute the Board, and any new director
(other than a director designated by a person who has entered into an agreement
with the Company to effect a transaction described in clause (a), (c) or (d) of
this Section) whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of a majority of the directors
then still in office who either (l) were directors at the beginning of such
period or (2) were so elected or nominated with such approval, cease for any
reason to constitute at least a majority of the Board;
(c) the stockholders of the Company approve a merger or
consolidation of the Company with any other Company and such merger or
consolidation is consummated, other than (l) a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more than 50% of
the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation or
(2) a merger or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no "person" (as hereinabove defined)
acquires more than 20% of the combined voting power of the Company's then
outstanding securities; or
(d) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets.
(ii) For purposes of this Agreement, a "potential change in
control of the Company" shall be deemed to have occurred if:
(a) the Company enters into an agreement, the consummation
of which would result in the occurrence of a change in control of the Company;
(b) any person (including the Company) publicly announces an
intention to take or to consider taking actions which if consummated would
constitute a change in control of the Company;
(c) any person, other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company (or a company
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company),
who is or becomes the beneficial owner, directly or indirectly, of securities of
the Company representing 9.5% or more of the combined voting power of the
Company's then outstanding securities, increases his beneficial ownership of
such securities by 3 percentage points or more over the percentage so owned by
such person on the date hereof; or
(d) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a potential change in control of the Company has
occurred.
(iii) You agree that, subject to the terms and conditions of this
Agreement, in the event of a potential change in control of the Company, you
will remain in the employ of the Company until the earliest of (a) a date which
is 180 days from the occurrence of such potential change in control of the
Company, (b) the termination by you of your employment by reason of Disability
as defined in Section 3(ii), or (c) the date on which you first become entitled
under this Agreement to receive the benefits provided in Section 4 (ii) below.
3. Termination Following Change in Control.
(i) General. If any of the events described in Section 2
constituting a change in control of the Company occurs, you shall be entitled to
the benefits provided in Section 4(ii) upon the subsequent termination of your
employment during the term of this Agreement regardless of the cause of
termination. In the event your employment with the Company is terminated for any
reason and a change in control of the Company occurs after your termination, you
shall not be entitled to any benefits hereunder.
(ii) Disability. If, as a result of your incapacity due to
physical or mental illness, you shall have been absent from the full-time
performance of your duties with the Company for six (6) consecutive months, and
within thirty (30) days after written notice of termination is given you shall
not have returned to the full-time performance of your duties, your employment
may be terminated for "Disability."
(iii) Notice of Termination. Any purported termination of your
employment by the Company or by you shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 7. "Notice of
Termination" shall mean a notice that shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of your
employment under the provision so indicated.
(iv) Date of Termination, Etc. "Date of Termination" shall mean
(a) if your employment is terminated for Disability, thirty (30) days after
Notice of Termination is given (provided that you shall not have returned to the
full-time performance of your duties during such thirty (30)-day period), and
(b) if your employment is terminated for any reason (other than Disability), the
date specified in the Notice of Termination.
4. Compensation Upon Termination or During Disability. Following a
change in control of the Company, you shall be entitled to the following
benefits during a period of disability, or upon termination of your employment,
as the case may be, provided that such period or termination occurs during the
term of this Agreement:
(i) During any period that you fail to perform your full-time
duties with the Company as a result of incapacity due to physical or mental
illness, you shall continue to receive your base salary at the rate in effect at
the commencement of any such period, together with all compensation payable to
you under the Company's disability plan or program or other similar plan during
such period, until this Agreement is terminated pursuant to Section 3(ii)
hereof. Thereafter, or in the event your employment shall be terminated by
reason of your death, your benefits shall be determined under the Company's
retirement, insurance and other compensation programs then in effect in
accordance with the terms of such programs.
(ii) If your employment by the Company should be terminated for
any reason, you shall be entitled to the benefits provided below:
(a) the Company shall pay to you your full base salary
through the Date of Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you are entitled under any
compensation plan of the Company, at the time such payments are due;
(b) in lieu of any further salary payments to you for
periods subsequent to the Date of Termination, the Company shall pay as
severance pay to you, at the time specified in Section 5(vii), a lump sum
severance payment equal to 2.99 times (or such lesser number of years and
partial years as may then be remaining until your normal retirement age under
the Company Pension Plan) the sum of (1) the greater of (i) your annual rate of
base salary in effect on the Date of Termination or (ii) your annual rate of
base salary in effect immediately prior to the change in control of the Company
and (2) the greater of (i) the average of the last three annual bonuses
(annualized in the case of any bonus paid with respect to a partial year) paid
to you preceding the Date of Termination or (ii) your target or budgeted annual
bonus of the year that includes your Date of Termination;
(c) the Company shall pay to you all reasonable legal fees
and expenses incurred by you as a result of such termination, including all such
fees and expenses, if any, incurred in contesting or disputing any such
termination or in seeking to obtain or enforce any right or benefit provided by
this Agreement (other than any such fees or expenses incurred in connection with
any such claim which is determined by a court of competent jurisdiction to be
frivolous) or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"); and
(d) the Company shall allow you and your dependents to
continue participation in the Company's medical benefits and life insurance
plans for a period of 2.99 years from your Date of Termination.
(iii) You shall not be required to mitigate the amount of any
payment provided for in this Section 4 by seeking other employment or otherwise,
nor shall the amount of any payment or benefit provided for in this Section 4 be
reduced by any compensation earned by you as a result of employment by another
employer, by retirement benefits, or by offset against any amount claimed to be
owed by you to the Company, or otherwise.
5. Limit on Amounts Payable.
(i) The severance pay and other payments, distributions and
benefits provided by the Company to or for your benefit pursuant to this
Executive Severance Agreement and under other plans, programs, and agreements
may constitute Parachute Payments that are subject to the "golden parachute"
rules of Code section 280G and the excise tax of Code section 4999. The Company
and you intend to reduce any Parachute Payments (but not any payment,
distribution or other benefit that is not a Parachute Payment) if, and only to
the extent that, a reduction will allow you to receive a greater Net After Tax
Amount than you would receive absent a reduction. The remaining provisions of
this subsection describe how that intent will be effectuated.
(ii) The Accounting Firm will first determine the amount of any
Parachute Payments that are payable to you. The Accounting Firm will also
determine the Net After Tax Amount attributable to your total Parachute
Payments.
(iii) The Accounting Firm will next determine the amount of your
Capped Parachute Payments. Thereafter, the Accounting Firm will determine the
Net After Tax Amount attributable to your Capped Parachute Payments.
(iv) You will receive the total Parachute Payments unless the
Accounting Firm determines that the Capped Parachute Payments will yield you a
higher Net After Tax Amount, in which case you will receive the Capped Parachute
Payments. If you will receive the Capped Parachute Payments, your total
Parachute Payments will be adjusted by first reducing the amount payable under
any other plan, program, or agreement that, by its terms, requires a reduction
to prevent a "golden parachute" payment under Code section 280G; by next
reducing your benefit, if any, under this Executive Severance Agreement, to the
extent it is a Parachute Payment; by next reducing the severance pay payable
under Section 4(ii) of this Agreement; and thereafter by reducing Parachute
Payments payable under other plans and agreements (with the reductions first
coming from cash benefits and then from noncash benefits). The Accounting Firm
will notify you and the Company if it determines that the Parachute Payments
must be reduced to the Capped Parachute Payments and will send you and the
Company a copy of its detailed calculations supporting that determination.
(v) If, pursuant to paragraph (iv), you will receive the total
Parachute Payments, the Company shall indemnify you and hold you harmless
against all claims, losses, damages, penalties, expenses, and excise taxes. To
effect this indemnification, the Company must pay you an additional amount (the
"Gross-Up Payment") that after payment by you of all taxes, including, without
limitation, any income, employment and excise taxes (and any interest and
penalties imposed with respect thereto), imposed upon the Gross-Up Payment
leaves you a net amount from the Gross-Up Payment equal to the excise tax under
Code section 4999 imposed on the Parachute Payments. The determination of any
additional amount that must be paid under this paragraph must be made by the
Company in good faith.
(vi) As a result of any uncertainty in the application of Code
sections 280G and 4999 at the time that the Accounting Firm makes its
determinations under this Section 5, it is possible that amounts will have been
paid or distributed to you that should not have been paid or distributed under
this Section 5 ("Overpayments"), or that additional amounts should be paid or
distributed to you under this Section 5 ("Underpayments"). If the Accounting
Firm determines, based on either controlling precedent, substantial authority or
the assertion of a deficiency by the Internal Revenue Service against you or the
Company, which assertion the Accounting Firm believes has a high probability of
success, that an Overpayment has been made, then you shall have an obligation to
pay the Company upon demand an amount equal to the sum of the Overpayment plus
interest on such Overpayment at the prime rate provided in Code section
7872(f)(2) from the date of your receipt of such Overpayment until the date of
such repayment; provided, however, that you shall be obligated to make such
repayment if, and only to the extent, that the repayment would either reduce the
amount on which you are subject to tax under Code section 4999 or generate a
refund of tax imposed under Code section 4999. If the Accounting Firm
determines, based upon controlling precedent or substantial authority, that an
Underpayment has occurred, the Accounting Firm will notify you and the Company
of that determination and the Company will pay the amount of that Underpayment
to you promptly in a lump sum, with interest calculated on such Underpayment at
the prime rate provided in Code section 7872(f)(2) from the date such
Underpayment should have been paid until actual payment.
(vii) All determinations made by the Accounting Firm under this
Section 5 are binding on you and the Company and must be made as soon as
practicable but no later than thirty days after your Date of Termination. Within
thirty days after your Date of Termination, the Company will pay to you the
severance pay under Section 4 or the reduced Severance Amount as calculated by
the Accounting Firm pursuant to Section 5.
(viii) For purposes of this Agreement, the following terms shall
have the meanings indicated below:
(a) "Accounting Firm" means the public accounting firm retained as
the Company's independent auditor as of the date immediately prior to the Change
in Control. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the Change in Control, you
shall be entitled to appoint another nationally recognized public accounting
firm to make the determinations required hereunder (which accounting firm shall
then be referred to as the Accounting Firm hereunder). If, however, such firm
declines or is unable to undertake the determinations assigned to it under this
Agreement, then "Accounting Firm" shall mean such other independent accounting
firm mutually agreed upon by the Company and you.
(b) "Capped Parachute Payments" means the largest amount of
Parachute Payments that may be paid to you without liability for any excise tax
under Code section 4999.
(c) "Net After Tax Amount" means the amount of any Parachute
Payments or Capped Parachute Payments, as applicable, net of taxes imposed under
Code sections 1, 3101(b) and 4999 and any state or local income taxes applicable
to you as in effect on the date of the payment under Section 5 of this
Agreement. The determination of the Net After Tax Amount shall be made using the
highest combined effective rate imposed by the foregoing taxes on income of the
same character as the Parachute Payments or Capped Parachute Payments, as
applicable, in effect for the year for which the determination is made.
(d) "Parachute Payment" means a payment that is described in Code
section 280G(b)(2) (without regard to whether the aggregate present value of
such payments exceeds the limit prescribed by Code section 280G(b)(2)(A)(ii)).
The amount of any Parachute Payment shall be determined in accordance with Code
section 280G and the regulations promulgated thereunder, or, in the absence of
final regulations, the proposed regulations promulgated under Code section 280G
6. Successors; Binding Agreement.
(i) 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 effective date of any such succession shall be a breach of this
Agreement and shall entitle you to compensation from the Company in the same
amount and on the same terms to which you would have been entitled hereunder if
you had terminated your employment following a change in control of the Company,
except that for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of Termination. As
used in this Agreement, "Company" shall mean the Company as hereinbefore defined
and any successor to its business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be
enforceable by you and your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If you
should die while any amount would still be payable to you hereunder had you
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to your devisee, legatee or
other designee or, if there is no such designee, to your estate.
7. Notice. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this
Agreement, provided that all notice to the Company shall be directed to the
attention of the Board with a copy to the Secretary of the Company, or to such
other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
8. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by you 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 compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the Commonwealth of Virginia without regard to its conflicts of
law principles. 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. The obligations of the Company under
Section 4 shall survive the expiration of the initial or any extension term of
this Agreement if benefits have become payable under such section before such
expiration.
9. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
10. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
11. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three arbitrators in the Commonwealth of Virginia,
in accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction; provided, however, that you shall be entitled to seek specific
performance of your 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.
12. Entire Agreement. This Agreement sets forth the entire agreement of
the parties hereto in respect to the subject matter contained herein and during
the term of the Agreement supersedes the provisions of all prior agreements,
promises, covenants, arrangements, communications, representations or
warranties, whether oral or written, by any officer, employee or representative
of any party hereto with respect to the subject matter hereof.
13. Effective Date. This Agreement is effective as of the date set
forth below. If this letter sets forth our agreement on the subject
matter thereof, kindly sign and return to the Company the enclosed
copy of this letter, which will then constitute our agreement on
this subject.
Sincerely,
X. Xxxxxx Minor, III
President and
Chief Executive Officer
Agreed as of the ____ day
of __________________, 19___.
[EXECUTIVE SEVERANCE AGREEMENT - CATEGORY B]
Dear :
Xxxxx & Minor, Inc. (the "Company") considers it essential to the best
interests of its stockholders to xxxxxx the continuous employment of key
management personnel. In this connection, the Board of Directors of the Company
(the "Board") recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control of the Company may exist
and that such possibility, and the uncertainty and questions that it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders.
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 senior management, including yourself, to their assigned duties
without distraction in the face of potentially disturbing circumstances arising
from the possibility of a change in control of the Company.
In order to induce you to remain in the employ of the Company, the Company
agrees that you shall receive the severance benefits set forth in this letter
agreement (the "Agreement") in the event your employment with the Company is
terminated under the circumstances described below subsequent to a "change in
control of the Company" (as defined in Section 2).
1. Term of Agreement. This Agreement shall commence on ______________, and
shall continue in effect through December 31, ______; provided, however, that
commencing on January 1, 200___, and every other January 1 thereafter, the term
of this Agreement shall automatically be extended for one additional year
unless, not later than September 30 of the preceding year, the Company shall
have given notice that it does not wish to extend this Agreement provided that
no such notice may be given during the pendency of a potential change in control
of the Company, as defined in Section 2; and provided, further, that if a
"change in control of the Company", as defined in Section 2, shall have occurred
during the original and any extension of the term of this Agreement, this
Agreement shall continue in effect for a period of not less than twenty-four
(24) months beyond the month in which such change in control occurred.
2. Change in Control and Potential Change in Control.
(i) No benefits shall be payable hereunder unless there shall have
been a change in control of the Company, as set forth below. For purposes of
this Agreement, a "change in control of the Company" shall be deemed to have
occurred if:
(a) any "person," as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(other than the Company, any trustee or other fiduciary holding securities under
an employee benefit plan of the Company, or any Company owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company), is or becomes the owner
or "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of Company securities representing 20% or more of the
combined voting power of the Company's then outstanding securities; provided,
however, that Company securities acquired directly from the Company shall be
disregarded for this purpose;
(b) during any period of two consecutive years (not including
any period prior to the execution of this Agreement), individuals who at the
beginning of such period constitute the Board, and any new director (other than
a director designated by a person who has entered into an agreement with the
Company to effect a transaction described in clause (a), (c) or (d) of this
Section) whose election by the Board or nomination for election by the Company's
stockholders was approved by a vote of a majority of the directors then still in
office who either (l) were directors at the beginning of such period or (2) were
so elected or nominated with such approval, cease for any reason to constitute
at least a majority of the Board;
(c) the stockholders of the Company approve a merger or
consolidation of the Company with any other Company and such merger or
consolidation is consummated, other than (l) a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more than 50% of
the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation or
(2) a merger or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no "person" (as hereinabove defined)
acquires more than 20% of the combined voting power of the Company's then
outstanding securities; or
(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets and such liquidation
or sale of assets is consummated.
(ii) For purposes of this Agreement, a "potential change in control
of the Company" shall be deemed to have occurred if:
(a) the Company enters into an agreement, the consummation of
which would result in the occurrence of a change in control of the Company;
(b) any person (including the Company) publicly announces an
intention to take or to consider taking actions which if consummated would
constitute a change in control of the Company;
(c) any person, other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company (or a company
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company),
who is or becomes the beneficial owner, directly or indirectly, of securities of
the Company representing 9.5% or more of the combined voting power of the
Company's then outstanding securities, increases his beneficial ownership of
such securities by 3 percentage points or more over the percentage so owned by
such person on the date hereof; or
(d) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a potential change in control of the Company has
occurred.
(iii) You agree that, subject to the terms and conditions of this
Agreement, in the event of a potential change in control of the Company, you
will remain in the employ of the Company until the earliest of (a) a date which
is 180 days from the occurrence of such potential change in control of the
Company, (b) the termination by you of your employment by reason of Disability
as defined in Section 3(ii), or (c) the date on which you first become entitled
under this Agreement to receive the benefits provided in Section 4(ii) below.
3. Termination Following Change in Control.
(i) General. If any of the events described in Section 2
constituting a change in control of the Company occurs, you shall be entitled to
the benefits provided in Section 4(iii) upon the subsequent termination of your
employment during the term of this Agreement unless such termination is (a)
because of your death or Disability, (b) by the Company for Cause, or (c) by you
other than for Good Reason. In the event your employment with the Company is
terminated for any reason and subsequently a change in control of the Company
should have occurred, you shall not be entitled to any benefits hereunder.
(ii) Disability. If, as a result of your incapacity due to physical
or mental illness, you shall have been absent from the full-time performance of
your duties with the Company for six (6) consecutive months, and within thirty
(30) days after written notice of termination is given you shall not have
returned to the full-time performance of your duties, your employment may be
terminated for "Disability."
(iii) Cause. Termination by the Company of your employment for
"Cause" shall mean termination (a) upon the willful and continued failure by you
to substantially perform your duties with the Company (other than any such
failure resulting from your incapacity due to physical or mental illness or any
such actual or anticipated failure after the issuance of a Notice of Termination
(as defined in Subsection 3(v)) by you for Good Reason (as defined in Subsection
3(iv)), after a written demand for substantial performance is delivered to you
by the Board, which demand specifically identifies the manner in which the Board
believes that you have not substantially performed your duties, or (b) the
willful engaging by you in conduct which is demonstrably and materially
injurious to the Company, monetarily or otherwise. For purposes of this
Subsection, no act, or failure to act, on your part shall be deemed "willful"
unless done, or omitted to be done, by you without good faith and without
reasonable belief that your action or omission was in the best interest of the
Company. Notwithstanding the foregoing, you shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to you a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters (3/4) of the entire membership of the Board at a meeting of the
Board (after reasonable notice to you and an opportunity for you, together with
your counsel, to be heard before the Board), finding that in the good faith
opinion of the Board you were guilty of conduct set forth above in this
Subsection and specifying the particulars thereof in detail.
(iv) Good Reason. You shall be entitled to terminate your employment
for Good Reason. For purposes of this Agreement, "Good Reason" shall mean,
without your express written consent, the occurrence after a change in control
of the Company of any of the following circumstances unless, in the case of
paragraphs (a), (e), (f), (g) or (h), such circumstances are fully corrected
prior to the Date of Termination (as defined in Section 3(vi)) specified in the
Notice of Termination (as defined in Section 3(v)) given in respect thereof:
(a) the assignment to you of any duties inconsistent (except
in the nature of a promotion) with the position in the Company that you held
immediately prior to the change in control of the Company, or an adverse
alteration in the nature or status of your position or responsibilities or the
conditions of your employment from those in effect immediately prior to such
change in control;
(b) a reduction by the Company in your annual base salary as
in effect on the date hereof or as the same may be increased from time to time
except for across-the-board salary reductions similarly affecting all management
personnel of the Company and all management personnel of any person in control
of the Company;
(c) the Company's requiring you to be based more than 25 miles
from the Company's offices at which you are principally employed immediately
prior to the date of the change in control except for required travel on the
Company's business to an extent substantially consistent with your present
business travel obligations
(d) the failure by the Company to pay to you any portion of
your current compensation or compensation under any deferred compensation
program of the Company within seven (7) days of the date such compensation is
due;
(e) the failure by the Company to continue in effect any
material compensation or benefit plan in which you participate immediately prior
to the change in control of the Company, 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 your
participation therein (or in such substitute or alternative plan) on a basis not
materially less favorable, both in terms of the amount of benefits provided in
the level of your participation relative to other participants, than existed at
the time of the change in control of the Company;
(f) the failure by the Company to continue to provide you with
benefits substantially similar to those enjoyed by you under any of the
Company's life insurance, medical, dental, accident, or disability plans in
which you were participating at the time of the change in control of the
Company, the taking of any action by the Company which would directly or
indirectly materially reduce any of such benefits, or the failure by the Company
to provide you with the number of paid vacation days to which you are entitled
on the basis of your 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
of the Company;
(g) the failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to perform this Agreement, as
contemplated in Section 6 hereof; or
(h) any purported termination of your employment that is not
effected pursuant to a Notice of Termination satisfying the requirements of
Subsection (v) hereof (and, if applicable, the requirements of Subsection (iii)
hereof), which purported termination shall not be effective for purposes of this
Agreement.
Your right to terminate your employment pursuant to this
Subsection shall not be affected by your incapacity due to physical or mental
illness. Your continued employment shall not constitute consent to, or a waiver
of rights with respect to, any circumstances constituting Good Reason hereunder.
(v) Notice of Termination. Any purported termination of your
employment by the Company or by you shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 7. "Notice of
Termination" shall mean a notice that shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of your
employment under the provision so indicated.
(vi) Date of Termination, Etc. "Date of Termination" shall mean (a)
if your employment is terminated for Disability, thirty (30) days after Notice
of Termination is given (provided that you shall not have returned to the
full-time performance of your duties during such thirty (30)-day period), and
(b) if your employment is terminated pursuant to Subsection (iii) or (iv) hereof
or for any other reason (other than Disability), the date specified in the
Notice of Termination (which, in the case of a termination for Cause shall not
be less than thirty (30) days from the date such Notice of Termination is given,
and in the case of termination for Good Reason shall not be less than fifteen
(15) nor more than sixty (60) days from the date such Notice of Termination is
given); provided, however, that 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 proviso), the party receiving such Notice of
Termination notifies the other party that a dispute exists concerning the
termination, then the Date of Termination shall be the date on which the dispute
is finally determined, either by mutual written agreement of the parties or by a
binding arbitration award; and provided, further, that the Date of Termination
shall be extended by a notice of dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence. Notwithstanding the pendency of any dispute, the
Company will continue to pay you your full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to, base
salary) and continue you as a participant in all compensation, benefit and
insurance plans in which you were participating when the notice giving rise to
the dispute was given, until the dispute is finally resolved in accordance with
this Subsection. Amounts paid under this Subsection are in addition to all other
amounts due under this Agreement, and shall not be offset against or reduce any
other amounts due under this Agreement and shall not be reduced by any
compensation earned by you as the result of employment by another employer.
4. Compensation Upon Termination or During Disability. Following a change
in control of the Company, you shall be entitled to the following benefits
during a period of disability, or upon termination of your employment, as the
case may be, provided that such period or termination occurs during the term of
this Agreement:
(i) During any period that you fail to perform your full-time duties
with the Company as a result of incapacity due to physical or mental illness,
you shall continue to receive your base salary at the rate in effect at the
commencement of any such period, together with all compensation payable to you
under the Company's disability plan or program or other similar plan during such
period, until this Agreement is terminated pursuant to Section 3(ii) hereof.
Thereafter, or in the event your employment shall be terminated by reason of
your death, your benefits shall be determined under the Company's retirement,
insurance and other compensation programs then in effect in accordance with the
terms of such programs.
(ii) If your employment shall be terminated by the Company for Cause
or by you other than for Good Reason, the Company shall pay you your full base
salary through the Date of Termination at the rate in effect at the time Notice
of Termination is given, plus all other amounts to which you are entitled under
any compensation plan of the Company at the time such payments are due, and the
Company shall have no further obligations to you under this Agreement.
(iii) If your employment by the Company should be terminated by the
Company other than for Cause or disability or your death or if you should
terminate your employment for Good Reason, you shall be entitled to the benefits
provided below:
(a) the Company shall pay to you your full base salary through
the Date of Termination at the rate in effect at the time Notice of Termination
is given, plus all other amounts to which you are entitled under any
compensation plan of the Company, at the time such payments are due;
(b) in lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Company shall pay as severance pay to
you, at the time specified in Section 5(vii), a lump sum severance payment equal
to 2.00 times (or such lesser number of years and partial years as may then be
remaining until your normal retirement age under the Company Pension Plan) the
sum of (l) the greater of (i) your annual rate of base salary in effect on the
Date of Termination or (ii) your annual rate of base salary in effect
immediately prior to the change in control of the Company and (2) the greater of
(i) the average of the last three annual bonuses (annualized in the case of any
bonus paid with respect to a partial year) paid to you preceding the Date of
Termination or (ii) your target or budgeted annual bonus for the year that
includes your Date of Termination;
(c) the Company shall pay to you all reasonable legal fees and
expenses incurred by you as a result of such termination, including all such
fees and expenses, if any, incurred in contesting or disputing any such
termination or in seeking to obtain or enforce any right or benefit provided by
this Agreement (other than any such fees or expenses incurred in connection with
any such claim which is determined by a court of competent jurisdiction to be
frivolous) or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"); and
(d) the Company shall allow you and your dependents to
continue participation in the Company's medical benefits and life insurance
plans for a period of 2.00 years from your Date of Termination.
(iv) You shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or otherwise, nor
shall the amount of any payment or benefit provided for in this Section 4 be
reduced by any compensation earned by you as a result of employment by another
employer, by retirement benefits, or by offset against any amount claimed to be
owed by you to the Company, or otherwise.
5. Limit on Amounts Payable.
(i) The severance pay and other payments, distributions and benefits
provided by the Company to or for your benefit pursuant to this Executive
Severance Agreement and under other plans, programs, and agreements may
constitute Parachute Payments that are subject to the "golden parachute" rules
of Code section 280G and the excise tax of Code section 4999. The Company and
you intend to reduce any Parachute Payments (but not any payment, distribution
or other benefit that is not a Parachute Payment) if, and only to the extent
that, a reduction will allow you to receive a greater Net After Tax Amount than
you would receive absent a reduction. The remaining provisions of this
subsection describe how that intent will be effectuated.
(ii) The Accounting Firm will first determine the amount of any
Parachute Payments that are payable to you. The Accounting Firm will also
determine the Net After Tax Amount attributable to your total Parachute
Payments.
(iii) The Accounting Firm will next determine the amount of your
Capped Parachute Payments. Thereafter, the Accounting Firm will determine the
Net After Tax Amount attributable to your Capped Parachute Payments.
(iv) You will receive the total Parachute Payments unless the
Accounting Firm determines that the Capped Parachute Payments will yield you a
higher Net After Tax Amount, in which case you will receive the Capped Parachute
Payments. If you will receive the Capped Parachute Payments, your total
Parachute Payments will be adjusted by first reducing the amount payable under
any other plan, program, or agreement that, by its terms, requires a reduction
to prevent a "golden parachute" payment under Code section 280G; by next
reducing your benefit, if any, under this Executive Severance Agreement, to the
extent it is a Parachute Payment; by next reducing the severance pay payable
under Subsection 4(iii) of this Agreement; and thereafter by reducing Parachute
Payments payable under other plans and agreements (with the reductions first
coming from cash benefits and then from noncash benefits). The Accounting Firm
will notify you and the Company if it determines that the Parachute Payments
must be reduced to the Capped Parachute Payments and will send you and the
Company a copy of its detailed calculations supporting that determination.
(v) If, pursuant to paragraph (iv), you will receive the total
Parachute Payments, the Company shall indemnify you and hold you harmless
against all claims, losses, damages, penalties, expenses, and excise taxes. To
effect this indemnification, the Company must pay you an additional amount (the
"Gross-Up Payment") that after payment by you of all taxes, including, without
limitation, any income, employment and excise taxes (and any interest and
penalties imposed with respect thereto), imposed upon the Gross-Up Payment
leaves you a net amount from the Gross-Up Payment equal to the excise tax under
Code section 4999 imposed on the Parachute Payments. The determination of any
additional amount that must be paid under this paragraph must be made by the
Company in good faith.
(vi) As a result of any uncertainty in the application of Code
sections 280G and 4999 at the time that the Accounting Firm makes its
determinations under Section 5, it is possible that amounts will have been paid
or distributed to you that should not have been paid or distributed under this
Section 5 ("Overpayments"), or that additional amounts should be paid or
distributed to you under this Section 5 ("Underpayments"). If the Accounting
Firm determines, based on either controlling precedent, substantial authority or
the assertion of a deficiency by the Internal Revenue Service against you or the
Company, which assertion the Accounting Firm believes has a high probability of
success, that an Overpayment has been made, then you shall have an obligation to
pay the Company upon demand an amount equal to the sum of the Overpayment plus
interest on such Overpayment at the prime rate provided in Code section
7872(f)(2) from the date of your receipt of such Overpayment until the date of
such repayment; provided, however, that you shall be obligated to make such
repayment if, and only to the extent, that the repayment would either reduce the
amount on which you are subject to tax under Code section 4999 or generate a
refund of tax imposed under Code section 4999. If the Accounting Firm
determines, based upon controlling precedent or substantial authority, that an
Underpayment has occurred, the Accounting Firm will notify you and the Company
of that determination and the Company will pay the amount of that Underpayment
to you promptly in a lump sum, with interest calculated on such Underpayment at
the prime rate provided in Code section 7872(f)(2) from the date such
Underpayment should have been paid until actual payment.
(vii) All determinations made by the Accounting Firm under this
Section 5 are binding on you and the Company and must be made as soon as
practicable but no later than thirty days after your Date of Termination. Within
thirty days after your Date of Termination, the Company will pay to you the
severance pay under Section 4 or the reduced Severance Amount as calculated by
the Accounting Firm pursuant to Section 5.
(viii) For purposes of this Agreement, the following terms shall
have the meanings indicated below:
(a) "Accounting Firm" means the public accounting firm
retained as the Company's independent auditor as of the date immediately prior
to the Change in Control. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting the Change
in Control, you shall be entitled to appoint another nationally recognized
public accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder). If,
however, such firm declines or is unable to undertake the determinations
assigned to it under this Agreement, then "Accounting Firm" shall mean such
other independent accounting firm mutually agreed upon by the Company and you.
(b) "Capped Parachute Payments" means the largest amount of
Parachute Payments that may be paid to you without liability for any excise tax
under Code section 4999.
(c) "Net After Tax Amount" means the amount of any Parachute
Payments or Capped Parachute Payments, as applicable, net of taxes imposed under
Code sections 1, 3101(b) and 4999 and any state or local income taxes applicable
to you as in effect on the date of the payment under Section 5 of this
Agreement. The determination of the Net After Tax Amount shall be made using the
highest combined effective rate imposed by the foregoing taxes on income of the
same character as the Parachute Payments or Capped Parachute Payments, as
applicable, in effect for the year for which the determination is made.
(d) "Parachute Payment" means a payment that is described in
Code section 280G(b)(2) (without regard to whether the aggregate present value
of such payments exceeds the limit prescribed by Code section
280G(b)(2)(A)(ii)). The amount of any Parachute Payment shall be determined in
accordance with Code section 280G and the regulations promulgated thereunder,
or, in the absence of final regulations, the proposed regulations promulgated
under Code section 280G.
6. Successors: Binding Agreement.
(i) 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 effective date of any such succession shall be a breach of this
Agreement and shall entitle you to compensation from the Company in the same
amount and on the same terms to which you would be entitled hereunder if you
terminate your employment for Good Reason following a change in control of the
Company, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be enforceable
by you and your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder had you continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or,
if there is no such designee, to your estate.
7. Notice. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this
Agreement, provided that all notice to the Company shall be directed to the
attention of the Board with a copy to the Secretary of the Company, or to such
other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
8. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by you 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 compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the Commonwealth of Virginia without regard to its conflicts of
law principles. 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. The obligations of the Company under
Section 4 shall survive the expiration of the initial or any extension term of
this Agreement if benefits have become payable under such section before such
expiration.
9. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
10. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
11. Arbitration. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration, conducted
before a panel of three arbitrators in the Commonwealth of Virginia, in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction; provided, however, that you shall be entitled to seek specific
performance of your 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.
12. Entire Agreement. This Agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter contained herein and during
the term of the Agreement supersedes the provisions of all prior agreements,
promises, covenants, arrangements, communications, representations or
warranties, whether oral or written, by any officer, employee or representative
of any party hereto with respect to the subject matter hereof.
13. Effective Date. This Agreement shall become effective as of the date
set forth below.
If this letter sets forth our agreement on the subject matter thereof,
kindly sign and return to the Company the enclosed copy of this letter, which
will then constitute our agreement on this subject.
Sincerely,
------------------------------
X. Xxxxxx Minor, III
Chairman, President and
Chief Executive Officer
Agreed as of the ___ day
of ________,__________
