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EXHIBIT 10(h)
HECHINGER COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
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HECHINGER COMPANY
SUPPLEMENT EXECUTIVE RETIREMENT AGREEMENT
THIS AGREEMENT is made and entered into at Landover, Maryland, this
24th day of October, 1995, by and between HECHINGER COMPANY (the "Company") and
______________________ (the "Executive").
WHEREAS, the Executive is presently employed by the Company or its
subsidiaries as a key management employee; and
WHEREAS, in consideration of the valuable services rendered by the
Executive and to induce the Executive to continue to render such services to
the Company, the Executive has been selected by the Company for a supplemental
retirement benefit and a preretirement death benefit on the terms and
conditions hereinafter set forth.
NOW THEREFORE, in consideration of the foregoing, and the mutual
provisions contained herein, the parties do hereby agree as follows:
I. Effective Date; Purpose; Termination
of Prior Agreements
1.1 Effective Date. The Company and the Executive agree that this
Agreement shall become effective as of the date first above written.
1.2 Purpose. This Agreement, together with other designated
supplemental executive retirement agreements between other executives and the
Company and its Affiliated Companies (as defined in Article II hereof), is
intended to constitute a single non qualified, unfunded deferred compensation
plan for a "select group of management or highly compensated employees", within
the meaning of section 201(2) of ERISA (as defined in Article II hereof). This
plan shall be known as the Hechinger Supplemental Executive Retirement Plan
(the "Plan") and shall be effective as of August 16, 1995. The Plan is
designed and intended to be exempt from the participation, vesting, funding,
and fiduciary requirements of Title I of ERISA.
1.3 Termination of Prior Agreements. In consideration of the
benefits described herein, the Executive irrevocably and
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unconditionally agrees to relinquish all rights to any and all retirement
benefits, death benefits, and all other rights and entitlements the Executive
may have had under the terms of the Hechinger Supplemental Executive Retirement
Program and all predecessor programs thereto and agreements thereunder
(hereinafter collectively referred to as the "Hechinger Supplemental Executive
Retirement Program"). The Executive hereby irrevocably and unconditionally
releases the Company, the Affiliated Companies, their owners, stockholders,
officers, directors, employees, representatives, and agents, and their
respective successors, and assigns, from any and all manner of actions, causes
of action, and claims that the Executive ever had, now has, or hereafter may
have, or that the Executive's heirs, next of kin, distributees, executors, or
administrators ever had, now have, or hereafter may have, by reason of any
matter, state of facts, or occurrence with regard to the Hechinger Supplemental
Executive Retirement Program.
II. Definitions
Whenever used in this Agreement, the following terms shall have the
meanings set forth below, unless otherwise expressly provided. When the
defined meaning is intended, the term is capitalized. The definition of any
term in the singular shall also include the plural.
2.1 "Affiliated Companies" shall mean any corporations, associations,
joint ventures, proprietorships, or partnerships while they are connected with
the Company through either stock ownership or common control, or while they are
members of an affiliated service group, within the meaning of Code section
414(b), (c), (m) or (o).
2.2 "Board" shall mean the Board of Directors of the Company.
2.3 "Cause" shall mean, with respect to termination by the Company of
the Executive's employment, (a) nonfeasance, which shall mean only 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 Executive gives notice of termination of
employment for Good Reason) after a written demand for substantial performance
is delivered to the
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Executive by the Board, which demand specifically identifies the manner in
which the Board believes that the Executive has no substantially performed the
Executive's duties, or (b) malfeasance, which shall mean only the willful
engaging by the Executive in conduct that is demonstrably and materially
injurious to the Company, monetarily or otherwise. For purposes of clauses (a)
and (b) of this definition, no act, or failure to act, on the Executive's part
shall be deemed "willful" unless done, or omitted to be done, by the Executive
not in good faith and without reasonable belief that the Executive's act, or
failure to act, was in the best interest of the Company.
2.4 "Code" shall mean the Internal Revenue Code of 1986 as amended
from time to time. A reference to a particular Code section shall also be
deemed to refer to the regulations and regulatory guidance under that section.
2.5 "Committee" shall mean the Compensation Committee of the Board,
or such other committee the Board shall designate.
2.6 "Company" shall mean the Hechinger Company.
2.7 "Compensation" shall mean the Executive's total wages and other
compensation reported on the Executive's W-2 income tax statement as adjusted
below. Compensation shall not include: reimbursements or other expense
allowances (including automobile allowances), cash and non-cash fringe benefits
(including income attributable to restricted stock, performance shares or from
the exercise of stock options), moving expenses (including any tax
reimbursement attributable to such moving expense), deferred compensation
(including distributions under the Hechinger Supplemental Executive Retirement
Program), welfare benefits (including severance pay and the cost of group term
life insurance) or other extraordinary items. Compensation shall also include
elective contributions that are made by the Company on behalf of its employees
that are not includible in gross income under pre-tax medical, flexible
spending or the Hechinger/HQ 401K Plans.
2.8 "Disability" shall mean permanent and total disability within the
meaning of Section 22(e) of the Code.
2.9 "Early Retirement" shall mean Termination of Service on or after
age 55 and before age 65, with the written consent of the Committee.
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2.10 "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time. A reference to a particular section of
ERISA shall also be deemed to refer to the regulations and regulatory guidance
under that section.
2.11 "Good Reason" shall mean, with respect to termination by the
Executive of the Executive's employment with the Company, the occurrence
(without the Executive's express written consent) 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 paragraphs (a), (b), (c) or (d) below,
such act or failure to act is corrected within ten (10) days after the
Executive has notified the Board of the occurrence of any such act or failure
to act:
(a) the assignment to the Executive of any duties substantially
inconsistent with the Executive's status in the position and title the
Executive held immediately prior to such assignment or a substantial
adverse alteration in the nature or status of the Executive's
responsibilities from those in effect immediately prior to such
alteration;
(b) a reduction by the Company in the Executive's annual base salary
or a material reduction in the amount of annual bonus that the
Executive has the opportunity to earn, as in effect on the date hereof
or as the same may be increased from time to time;
(c) the failure of the Company to obtain a satisfactory agreement from
any successor the assume and agree to perform this Agreement; or
(d) any adverse change in the moral or ethical standards under which
the business is conducted.
2.12 "The Hechinger Pension Plan" shall mean The Hechinger Pension
Plan, or any successor thereto, qualified under Code section 401(a).
2.13 "The Hechinger Profit Sharing Plan" shall mean The Hechinger
Profit Sharing Plan, or any successor thereto, qualified under Code section
401(a).
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2.14 "The Hechinger/HQ 401 (k) Plan" shall mean The Hechinger/HQ
401(k) Plan, or any successor thereto, qualified under Code section 401(a).
2.15 "Plan" shall mean the Hechinger Supplemental Executive
Retirement Plan.
2.16 "Plan Year" shall mean the calendar year.
2.17 "Primary Social Security Benefit" shall mean the annual primary
insurance amount to which the Executive is entitled, commencing at the later of
(a) age 65 or (b) the Executive's Termination of Service under Title II of the
Social Security Act in effect on the date of the Executive's Termination of
Service. The amount of the Executive's primary insurance amount shall be
estimated. In determining this estimated amount, it shall be assumed that the
Executive will make proper application for the benefit and will fulfill all
other conditions of the entitlement. If the Executive incurs a Termination of
Service before age 65, it shall be assumed that the Executive has no annual
earnings for the period from the Termination of Service to the attainment of
age 65. In estimating the Executive's Social Security Administration wage
history, it shall be assumed that the Executive's earnings were always equal
to, or in excess of , the maximum amount of earnings taken into account for
Social Security benefits.
2.18 "Retirement" shall mean the Executive's termination of
employment on or after attaining age 65.
2.19 "Supplemental Retirement Benefit" shall mean the benefit payable
in accordance with section 3.2 or 3.3 of the Plan.
2.20 "Termination of Service" shall mean the last day on which the
Executive performs duties, or for which the Executive is compensated, as an
employee of the Company or the Affiliated Companies.
III. Retirement Benefits
3.1 Retirement Benefit. If the Executive incurs a Termination of
Service (a) by the Company by reason other than for Cause, or (b) by the
Executive for Good Reason or by reason of Retirement, Early Retirement or
Disability, then the Executive
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shall be entitled to a Supplemental Retirement Benefit, which is a vested
accrued benefit payable pursuant to the terms of this Agreement. The total
retirement benefit, payable at age 65, shall equal the sum of the amounts
determined under sections 3.2 and 3.4 and, in the case of payment commencing
prior to age 65, shall be adjusted as prescribed in section 3.3.
3.2 Amount of Full Supplemental Retirement Benefit. Following
Termination of Service as described in section 3.1, the annual Supplemental
Retirement Benefit payable to an Executive at or subsequent to age 65 shall
equal (a) less the sum of (b), (c), (d) and (e), where--
(a) is 65 percent of the Executive's average annual Compensation for
the highest five calendar years out of the last ten full calendar
years ending on or preceding the Executive's Termination of Service,
multiplied by a fraction, the numerator of which is the number of
months of the Executive's employment with the Company and the
Affiliated Companies not in excess of 360 and the denominator of which
is 360;
(b) is the annual benefit payable (taking into account any applicable
adjustments or limitations required by the Code, ERISA or any other
provision of applicable law) to the Executive at age 65 or Termination
of Service, if later, on a single life annuity basis under The
Hechinger Pension Plan;
(c) is the Executive's Primary Social Security Benefit;
(d) is the annual benefit payable to the Executive (taking into
account any applicable adjustments or limitations required by the
Code, ERISA or any other provision of applicable law), at age 65 or
Termination of Service, if later, on a single life annuity basis from
the amount credited to the Executive's account, at the Executive's
Termination of Service, in The Hechinger Profit Sharing Plan. In
determining this annual amount, The Hechinger Profit Sharing Plan
balance shall be converted to an annuity-certain for a period equal to
the Executive's life expectancy, using the 1971 TPF&C Forecast
Mortality Table (set back two years) and an 8 percent interest rate;
and
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(e) is the annual benefit payable to the Executive (taking into
account any applicable adjustments or limitations required by the
Code, ERISA or any other provision of applicable law), at age 65 or
Termination of Service, if later, on a single life annuity basis from
the amount credited to the Executive's account, at the Executive's
Termination of Service, in The Hechinger/HQ 401(k) Plan that is
attributable to Company matching contributions, plus accumulated
interest and earnings thereon. In determining this annual amount,
this balance shall be converted to an annuity-certain for a period
equal to the Executive's life expectancy, using the 1971 TPF&C
Forecast Mortality Table (set back two years) and an 8 percent
interest rate; and
For purposes of determining the Executive's employment with the Company and the
Affiliated Companies under subsection (a), all service with the Company and the
Affiliated Companies shall be taken into account. For purposes of determining
the amounts described under subsections (b), (d) and (e) above, all
distributions and payments made, whether due to a termination of the referenced
plan or otherwise, shall be included in the calculation of annuities referenced
therein.
3.3 Amount of Early Supplemental Retirement Benefit. The
Executive may elect to receive a benefit payment, following Termination of
Service as described in section 3.1, on or after age 55 and before age 65, with
the written approval of the Committee. Upon such early election, the Executive
shall be entitled to receive a Supplemental Retirement Benefit computed under
section 3.2, except that--
(a) the amounts calculated under subsections (a), (b), and (c) of
section 3.2 shall be actuarial reduced using the actuarial assumptions
provided in The Hechinger Pension Plan to reflect commencement of
benefits before age 65, and
(b) the amounts under subsections (d) and (e) of section 3.2 shall be
determined with the assumption that the annuity would be an
annuity-certain for a period equal to the Executive's life expectancy
at the date benefits under this section commence.
Following Termination of Service as described in section 3.1, the Executive may
elect benefits to commence as of the first day of the month following
attainment of age 55, or the first day of any
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month thereafter, but in no event shall benefits commence later than the first
day of the month following the Executive's attainment of age 65.
3.4 Cost of Living Adjustment. The amount of the benefits
described in section 3.2 or 3.3 payable to the Executive on and after age 65
shall be increased to reflect increases in the Consumer Price Index, or any
successor thereto pursuant to this section 3.4. No adjustment shall be made in
a year in which there is a decrease in the Consumer Price Index from the
preceding year. If there is an increase in the Consumer Price Index, the
increase in the benefits payable to the Executive shall be made commencing with
the first calendar year beginning after payment of 12 monthly Supplemental
Retirement Benefit payments have been made. The amount of this increase in
each such calendar year shall equal (a) multiplied by (b), where--
(a) is the lesser of:
(i) 50 percent of the difference between the Consumer Price
Index in the calendar year and the prior calendar year, or
(ii) 2-1/2 percent;
and
(b) is the sum of the following amounts:
(i) the Executive's Supplemental Retirement Benefit under section
3.2 or 3.3,
(ii) the amount computed under subsection (b) of section 3.2 (as
adjusted pursuant to section 3.3, if applicable),
(iii) the amount computed under subsection (d) of section 3.2 (as
adjusted pursuant to section 3.3, if applicable),
(iv) the amount computed under subsection (e) of section 3.2 ( as
adjusted pursuant to section 3.3, if applicable), and
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(v) the increase under this section 3.4 for preceding years, if
any.
If no Supplemental Retirement Benefit is payable to the Executive, for any
reason, there shall be no cost of living adjustment under this section.
3.5 Payment of Benefit. Following Termination of Service as
described in section 3.1, the annual retirement benefit shall be paid to the
Executive in equal monthly amounts commencing on the first day of the month
following the Executive's election to receive benefit payments under section
3.2 or 3.3, as the case may be, and ending with the later of the month in which
the Executive dies or the one hundred twentieth monthly payment.
3.6 Termination of Service Other Than Early Retirement, Retirement or
as Otherwise Described in Section 3.1. If the Executive incurs a Termination of
Service by reason of death, no benefits shall be payable to or on account of
the Executive under this Article III. If the Executive incurs a Termination of
Service other than (a) by reason of death or (b) by an reason enumerated in
section 3.1, no benefits shall be payable to or on behalf of the Executive
under this Agreement.
IV. Pre-Retirement Death Benefits
4.1 Pre-Retirement Death Benefit. If the Executive dies while
employed by the Company or any of the Affiliated Companies, the Executive's
name beneficiary shall be entitled to an annual amount equal to 50 percent of
the Executive's Compensation for the calendar year prior to the year of the
Executive's death. If there is no surviving named beneficiary, benefits
hereunder shall be paid to the Executive's estate. This annual amount shall be
payable in equal monthly installments commencing on the first day of the month
after the Executive's death and ending with the later of the month following
the month in which the Executive would have reached age 65 or the one hundred
twentieth monthly payment.
Article V. Financing
5.1 Financing. The benefits under this Agreement and the Plan shall
be paid out of the general assets of the Company. The benefits shall not be
funded in advance of payment in any way.
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5.2 No Trust Created. Nothing contained n this Agreement or the
Plan, and no action taken thereunder, shall create a trust of any kind or a
fiduciary relationship between the Company or the Affiliated Companies and the
Executive.
5.3 Unsecured Interest. The Executive shall have no interest
whatsoever in any specific asset of the Company or an of the Affiliated
Companies. To the extent that any person acquires a right to receive payments
under this Agreement or the Plan, such right shall be no greater than the right
of any unsecured general creditor of the Company.
VI. Administration
6.1 Administration. This Agreement and the Plan shall be
administered by the Committee. A majority of the members of the Committee at
the time in office shall constitute a quorum for the transaction of business.
All resolutions and other actions taken by the Committee at any meeting shall
be by a majority vote of those present at the meeting. Upon the unanimous
concurrence in writing of all Committee members, action of the Committee may be
taken other than at a meeting.
The Committee shall have all powers necessary or appropriate to carry
out the provisions of this Agreement and the Plan. It may, from time to time,
establish rules for the administration of this Agreement and the Plan.
The Committee shall have the exclusive right to make any finding of
fact necessary or appropriate for any purpose under this Agreement and the Plan
including, but not limited to, the determination of eligibility for and the
amount of any benefit.
The Committee shall have the exclusive right to interpret the terms
and provisions of this Agreement and the Plan and to determine any and all
questions arising under this Agreement and the Plan or in connection with their
administration, including, without limitation, the right to remedy or resolve
possible ambiguities, inconsistencies, or omissions by general rule or
particular decision, all in its sole and absolute discretion.
The Committee shall have the right to delegate any of its powers and
duties hereunder.
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To the fullest extent permitted by law, all findings of fact,
determinations, interpretations, and decisions of the Committee shall be
conclusive and binding upon all persons having or claiming to have any interest
or right under this Agreement or the Plan.
6.2 Appeals from Denial of Claims. If any claim for benefits under
this Agreement and the Plan is wholly or partially denied, the claimant shall
be given notice of the denial. This notice shall be in writing, within a
reasonable period of time after receipt of the claim by the Committee. This
period shall not exceed 90 days after receipt of the claim; however, if special
circumstances require an extension of time, written notice of the extension
shall be furnished to the claimant, and an additional 90 days shall be
considered reasonable.
This notice shall be written in a manner calculated to be understood
by the claimant and shall set forth the following information:
(a) the specific reasons for the denial;
(b) specific reference to the provisions on which the denial is
based;
(c) a description of any additional material or information
necessary for the claimant to perfect the claim and an explanation of
why this material or information is necessary;
(d) an explanation that a full and fair review by the Committee
of the decision denying the claim may be requested by the claimant or
an authorized representative by filing with the Committee, within 60
days after the notice has been received, a written request for the
review; and
(e) if this request is so filed, an explanation that the claimant
or an authorized representative may review pertinent documents and
submit issues and comments in writing within the same 60-day period
specified in sub section (d).
The decision of the Committee upon review shall be made promptly, and not later
than 60 days after the Committee's receipt of the request for review, unless
special circumstances require an
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extension of time for processing. In this case the claimant shall be so
notified, and a decision shall be rendered as soon as possible, but not later
than 120 days after receipt of the request for review. If the claim is denied,
wholly or in part, the claimant shall be given a copy of the decision promptly.
The decision shall be in writing, shall include specific reasons for the
denial, shall include specific references to the pertinent provisions on which
the denial is based, and shall be written in a manner calculated to be
understood by the claimant.
6.3 Expenses. All expenses incurred in the administration of this
Agreement and the Plan shall be paid by the Company.
6.4 Indemnification. To the extent permitted by law, each employee
of the Company or the Affiliated Companies shall be indemnified by the
Company, and saved harmless against any claims, and the expenses of defending
against such claims, resulting from any action or conduct relating to the
administration of the Plan, except claims arising from gross negligence or
willful misconduct.
VII. Miscellaneous
7.1 No Employment Rights. Nothing herein shall constitute a
contract of continuing employment or in any manner obligate the Company or the
Affiliated Companies to continue the services of the Executive or to obligate
the Executive to continue in the service of the Company or the Affiliated
Companies, and nothing herein shall be construed as fixing or regulating the
compensation paid to the Executive.
7.2 Fiscal Year. The fiscal year of the Plan shall be the Plan Year.
7.3 Severability. If any provision of this Agreement or the Plan is
held illegal or invalid, the illegality or invalidity shall be affect their
remaining parts. This Agreement and the Plan shall be continued and enforced
as if they did not contain the illegal or invalid provision.
7.4 Tax Withholding. The Company may withhold from any payment under
this Agreement any federal, state, or local taxes required by law to be
withheld with respect to the payment and any sum the Company may reasonably
estimate as a necessary to
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cover any taxes for which it may be liable and that may be assessed with regard
to the payment.
7.5 Amendment and Termination. Except as expressly limited in this
Agreement, the Company hereby reserves the right to amend, modify, or terminate
this Agreement or the Plan at any time, and for any reason, by action of the
Board. However, no amendment or termination shall adversely affect the vested
accrued benefits to which the Executive would have been entitled had the
Executive incurred a Termination of Service for reasons described in section
3.1, as of the date of the amendment or termination.
7.6 Successors. This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators and legatees. If the Executive should die while any amount
would still be payable to the Executive had the Executive continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement, to the Executive's named beneficiary, or if
there is no such surviving named beneficiary, to the Executive's estate.
7.7 Beneficiaries. The Executive may designate one or more persons
or entities as the primary and/or contingent beneficiary of any benefits to be
paid under this Agreement. Such designation must be in the form of a signed
writing acceptable to the Committee. The Executive may make or change such
designation at any time.
7.8 Applicable Law. Except to the extent preempted by applicable
federal law, this Agreement shall be governed and construed in accordance with
the laws of the State of Delaware.
*****
IN WITNESS WHEREOF, parties have executed this Agreement as of the day
and year first above written.
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HECHINGER COMPANY
By:
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Xxxx X. Xxxxx
Title: Sr. Vice President,
Treasurer and Secretary
EXECUTIVE
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AMENDMENT TO THE
HECHINGER COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
THIS AMENDMENT to the Supplemental Executive Retirement Agreement (the
"Agreement"), is made and entered into at Largo, Maryland, this 16th day of
October, 1996, by and between HECHINGER COMPANY (the "Company") and
______________________ (the "Executive").
WHEREAS, the Company has entered into the Agreement with the Executive
as of October 24, 1995, to provide supplemental retirement benefits and
preretirement death benefits on the terms and conditions set forth in the
Agreement;
WHEREAS, pursuant to Section 7.5 of the Agreement, and in
consideration of the valuable services rendered by the Executive and to induce
the Executive to continue to render such services to the Company, the Company
desires to amend the Agreement to enable the Company to distribute to the
Executive certain benefits under the Agreement;
NOW THEREFORE, in consideration of the foregoing, and the mutual
provisions contained herein, the parties do hereby agree as follows:
Effective as of October 16, 1996, Article V of the Agreement is hereby
amended and restated in its entirety to read as follows:
"Article V. Financing; Annuity Purchase; Change of Control
5.1 Financing. The benefits under this Agreement and the Plan may
be paid out of the general assets of the Company, or in the Company's sole
discretion, may be funded in advance of payment at such time, and in such
manner, as the Company, in its discretion, deems appropriate.
5.2 Trust. Nothing contained in this Agreement or the Plan, and
no action taken thereunder, shall require
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the creation of a trust of any kind or the establishment of a fiduciary
relationship between the Company or the Affiliated Companies and the Executive.
Notwithstanding the foregoing, the Company, in its discretion, may establish a
trust, including a grantor or "rabbi trust," for the funding of any current or
future liabilities under the Agreement, including the benefits described in
section 5.6.
5.3 Unsecured Interest; Annuity Purchase. Except as provided
below or as otherwise determined by the Company, the Executive shall have no
interest whatsoever in any specific asset of the Company or any of the
Affiliated Companies, and to the extent that any person acquires a right to
receive payments under this Agreement or the Plan, such right shall be no
greater than the right of any unsecured general creditor of the Company.
Notwithstanding any other provision in this Agreement or the Plan to
the contrary, as soon as practicable following October 16, 1996, the Company
shall pay to the Executive, in the form of an employee-owned annuity,
$_________ (the "Initial Funded Benefit"), which represents the estimated
present value of the Executive's Supplemental Retirement Benefit (a) assuming
that the Executive was entitled to receive a Supplemental Retirement Benefit as
of December 31, 1995, and (b) based on the Executive's months of employment
with the Company and the Affiliated Companies (not in excess of 360) as of
December 31, 1995.
In the event that the Executive has not incurred a Termination of
Service as of December 31, 1996, then, as soon as practicable following April
1, 1997, the Company shall pay to the Executive, in the form of an
employee-owned annuity, $_______ (the "1996 Funded Benefit"), which represents
the estimated present value of the increase in the Executive's Supplemental
Retirement Benefit between December 31, 1995 and December 31, 1996 (a) assuming
that the Executive was entitled to receive a Supplemental Retirement Benefit as
of December 31, 1996, and (b) based on the Executive's months of employment
with the Company and the Affiliated Companies (not in excess of 360) as of
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December 31, 1996; provided, however, that in the event that the Committee, in
its sole discretion, at its February, 1997 meeting authorizes a reduction in
the amount of the estimated cost of living adjustment (provided pursuant to
section 3.4 hereof) funded (pursuant to this section 5.3), then the 1996 Funded
Benefit paid to the Executive pursuant to this paragraph shall reflect such
lower amount.
In the event that the Executive has not incurred a Termination of
Service as of December 31, 1997, then, as soon as practicable following April
1, 1998, the Company shall pay to the Executive, in the form of an
employee-owned annuity, $________ (the "1997 Funded Benefit"), which represents
the estimated present value of the increase in the Executive's Supplemental
Retirement Benefit between December 31, 1996 and December 31, 1997 (a) assuming
that the Executive was entitled to receive a Supplemental Retirement Benefit as
of December 31, 1997, and (b) based on the Executive's months of employment
with the Company and the Affiliated Companies (not in excess of 360) as of
December 31, 1997; provided, however, that in the event that the Committee, in
its sole discretion, at its February, 1997 meeting authorizes a reduction in
the amount of the estimated cost of living adjustment (provided pursuant to
section 3.4 hereof) funded (pursuant to this section 5.3), then the 1997 Funded
Benefit paid to the Executive pursuant to this paragraph shall reflect such
lower amount.
The total benefit paid to the Executive under this section 5.3 shall
hereinafter be referred to as the "Total Funded Benefit."
5.4 Adjustment of Future Supplemental Retirement Benefits.
Effective as of January 1, 1998, unless otherwise determined by the Company,
the Executive shall be entitled to receive the value of the undistributed
Supplemental Executive Retirement Benefit computed under the Agreement, but
only to the extent that the Executive would be entitled to such benefit upon
Termination of Service pursuant to section 3.1. The value of the Supplemental
Retirement Benefit otherwise due to the Executive under the terms of this
Agreement (taking into account any increased service
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credit determined pursuant to section 5.6 below, to the extent applicable)
shall be appropriately reduced (but not below zero) by the annual accrued
benefit equivalent of the value of the Total Funded Benefit as of the date
hereof. In this regard, the Committee, in is discretion, shall determine an
equitable adjustment to the benefits payable to the Executive under the
Agreement to ensure that the aggregate value of distributed benefits do not
exceed the value of benefits the Executive would have been entitled to receive
had no distributions been made prior to such Executive's Termination of
Service.
5.5 Gross-Up Payments. With respect to the Initial Funded
Benefit, the 1996 Funded Benefit and the 1997 Funded Benefit, in each case only
to the extent paid to the Executive, the Company shall also pay to or on behalf
of the Executive (in the form of withholding to the appropriate governmental
taxing authority or authorities) an additional payment or payments (the
"Gross-Up Payments") in the amount or amounts of $_______, $_______ and
$_______, respectively; provided, however, that in the event that the cost of
living adjustment is reduced pursuant to section 5.3 hereof, then the Gross-Up
Payments will be reduced accordingly.
5.6 Change in Control. As soon as possible, but in no event later
than ten days following the occurrence of a Change in Control (as defined
below), the Company shall make an irrevocable contribution to a grantor trust
established for this purpose (the "Rabbi Trust"), in an amount sufficient to
pay the present value of the Supplemental Retirement Benefit (the "Change in
Control Supplemental Retirement Benefit") to which the Executive would be
entitled under the terms of the Agreement, calculated by Xxxxxx Associates, or
any other nationally recognized actuarial or consulting firm, in accordance
with section 3.2 of the Agreement, and based on a methodology that is
substantially comparable to, and consistent with, such methodology used by
Xxxxxx Associates for its calculation of the Total Funded Benefit, but adjusted
by adding to the numerator of the fraction described in section 3.2(a) the
lesser of (a) 120, and (b) the number of months between the occurrence of the
Change in Control and the month in which the Executive attains age 65;
provided,
20
however, that in no event shall the total number of months taken into account
for purposes of the numerator of the fraction set forth in section 3.2(a)
exceed 360. Such Supplemental Retirement Benefit shall be reduced, if
applicable, pursuant to the provisions of section 5.4 hereof. At the same
time, the Company shall also make an irrevocable contribution to the Rabbi
Trust (the "Change in Control Gross-Up Amount") in an amount sufficient to
compensate the Executive, on an after-tax basis, for all federal, state and
local income tax due with respect to the amount contributed on behalf of the
Executive pursuant to the foregoing sentence.
If, within two years following the occurrence of a Change in Control,
the Executive incurs a Termination of Service (a) by the Company by reason
other than for Cause, or (b) by the Executive for Good Reason, then, as soon as
practicable following such Termination of Service, the trustee of the Rabbi
Trust (the "Trustee") shall pay to the Executive, in the form of an
employee-owned annuity with respect to the Change in Control Supplemental
Retirement Benefit, and in cash with respect to the Change in Control Gross-up
Amount, the proceeds in the Rabbi Trust that have been contributed on behalf of
the Executive pursuant to the foregoing paragraph.
If a Change in Control occurs prior to the payment to the Executive of
the Total Funded Benefit, then, in addition to the annuity that may be payable
to the Executive pursuant to the foregoing provisions of this section 5.6, but
in lieu of any further payments pursuant to sections 5.3 and 5.5 hereof, the
Trustee, at such time or times as the unpaid portion or portions of the Total
Funded Benefit would otherwise be paid to the Executive pursuant to section 5.3
hereof, shall pay to the Executive, in the form of an employee-owned annuity or
annuities, such unpaid portion or portions of the Total Funded Benefit, and
shall also pay to or on behalf of the Executive, the Gross-Up Payments with
respect thereto, determined pursuant to section 5.5.
For purposes of this Agreement, "Change in Control" shall mean a
change in control of the Company,
21
which shall be deemed to have occurred only if (A) any Person (as hereinafter
defined) is or becomes the Beneficial Owner (as hereinafter defined), directly
or indirectly, of securities of the Company representing twenty percent (20%)
or more of the combined voting power of the Company's then outstanding
securities at a time at which the members of the H Group(as hereinafter
defined) are collectively the Beneficial Owners of Company securities
representing a percentage of the combined voting power of the Company's then
outstanding securities which is less than the percentage of such voting power
owed by such Person or (B) during any period of two consecutive years (not
including any period prior to October 16, 1996), individuals who at the
beginning of such period constitute the Board of Directors 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) of this
paragraph) whose election by the Board of Directors or nomination for election
by the Company's stockholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority thereof.
For purposes of the Agreement: the term "Person," shall have the same meaning
as it does in Section 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), but shall not included (i) a trustee or other
fiduciary holding securities under an employee benefit plan of the Company,
(ii) the H Group (as defined below) or (iii) 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; the term "H Group"
shall mean Xxxx X. Xxxxxxxxx, Xx., Xxxxxxx Xxxxxxx, their respective heirs and
members of their respective families, and Persons controlled by Xxxx X.
Xxxxxxxxx, Xx., Xxxxxxx Xxxxxxx, their respective heirs and members of their
respective families; and the term "Beneficial Owner" shall have the meaning
prescribed by Rule 13d-3 under the Exchange Act."
* * * * *
22
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and year first above written.
HECHINGER COMPANY
By:
----------------------
Title:
-------------------
EXECUTIVE
---------------------------
23
AMENDMENT NUMBER TWO
TO THE HECHINGER COMPANY SUPPLEMENTAL EXECUTIVE
RETIREMENT AGREEMENT
THIS AMENDMENT to the Supplemental Executive Retirement Agreement (the
"Agreement"), is made and entered into at Largo, Maryland, this 10th day of
April, 1997, by and between HECHINGER COMPANY (the "Company") and
_________________ (the "Executive").
WHEREAS, the Company has entered into the Agreement with the Executive
as of October 24, 1995, as amended effective as of October 16, 1996, to provide
supplemental retirement benefits and preretirement death benefits on the terms
and conditions set forth in the Agreement;
WHEREAS, pursuant to Section 7.5 of the Agreement, and in
consideration of the valuable services rendered by the Executive and to induce
the Executive to continue to render such services to the Company, the Company
desires to amend the Agreement to provide a gross-up payment for certain excise
taxes that may be imposed on the Executive in the event of a Change in Control
(as defined in the Agreement) and to conform the Agreement to certain actions
taken by the Committee at its February, 1997 meeting relating to cost of living
adjustments;
NOW THEREFORE, in consideration of the foregoing, and the mutual
provisions contained herein, the parties do hereby agree as follows:
Effective as of March 11, 1997, the Agreement is hereby amended as
provided below.
1. Acknowledgement Relating to Sections 5.3 and 5.5 of the
Agreement.
The Compensating Committee, at its February 1997 meeting, authorized a
reduction in the amounts payable with respect to the 1996 Funded Benefit, the
1997 Funded Benefit, the Gross-Up Payment related to the 1996 Funded Benefit
and the Gross-Up Payment related to the 1997 Funded Benefit. These payments,
as so reduced, shall be in the amounts of $______, $______, $______ and
$______.
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2. Section 5.4 of the Agreement is hereby amended and restated,
reading in its entirety as follows:
5.4 Adjustment of Future Supplemental Retirement
Benefits. Effective as of January 1, 1998, unless otherwise
determined by the Company, the Executive shall be entitled to receive
the value of the undistributed Supplemental Retirement Benefit
computed under the Agreement, but only to the extent that the
Executive would be entitled to such benefit upon Termination of
Service pursuant to section 3.1; provided, however that such
undistributed Supplemental Retirement Benefit shall not include any
cost of living adjustment relating to service in 1996 and 1997, that
might otherwise have been provided pursuant to section 3.4.
The value of the Supplemental Retirement Benefit otherwise due
to the Executive under the terms of this Agreement (taking into
account any increased service credit determined pursuant to section
5.6 below, to the extent applicable, but excluding any cost of living
adjustment relating to service in 1996 and 1997 that might otherwise
have been provided pursuant to section 3.4) shall be appropriately
reduced (but not below zero) by the annual accrued benefit equivalent
of the value of the Total Funded Benefit as of the date hereof. In
this regard, the Committee, in its discretion, shall determine an
equitable adjustment to the benefits payable to the Executive under
the Agreement to ensure that the aggregate value of distributed
benefits do not exceed the value of benefits the Executive would have
been entitled to receive had no distributions been made prior to such
Executive's Termination of Service.
3. Article V of the Agreement is hereby amended by adding a new
section, Section 5.7, at the end thereof, reading in its entirety as follows:
5.7 280G Gross-Up. In the event that all or any portion
of the benefits (including any Gross-Up Payments) pursuant to this
Agreement become subject to any excise tax imposed under section 4999
of the
2
25
Code (the "Excise Tax") (such payments or benefits that are subject to
the Excise Tax are for purposes of this Section 5.7 referred to as the
"Parachute SERP"), the Company shall pay to the Executive an
additional amount (the "280G Gross-Up Payment") such that the net
benefit provided to the Executive with respect to the Parachute SERP,
after deduction of the Excise Tax imposed with respect to the
Parachute SERP (but not any federal, state or local income taxes) and
any Excise Tax (but not any federal, state, or local income taxes)
imposed on the payment provided for by this Section, shall be equal to
the Parachute SERP.
For purposes of determining whether any part of the benefits provided
under the Agreement will be subject to the Excise Tax and the amount
of such Excise Tax, (i) no portion of the Total Benefits (as defined
below) the receipt or enjoyment of which the Executive shall have
effectively waived in writing shall be taken into account, (ii) any
other payments or benefits received or to be received by the Executive
in connection with a Change in Control (as defined in Section 5.6) or
the Executive's termination of employment (pursuant to the terms of
any plan, arrangement or agreement with the Company, any Person (as
defined in Section 5.6 above) whose actions result in a Change in
Control or any Person affiliated with the Company or such Person)
shall be treated as "parachute payments" within the meaning of section
280G(b) (2) of the Code, and all "excess parachute payments" within
the meaning of section 280G(b) (1) of the Code shall be treated as
subject to the Excise Tax, unless in the opinion of tax counsel
reasonably selected by the Company's independent auditors (which were,
immediately prior to the Change in Control, the Company's independent
auditors), such other payments or benefits (in whole or in part) do
not constitute parachute payments, including by reason of section
280G(b) (4) (A) of the Code, or such excess parachute payments (in
whole or in part) represent reasonable compensation for services
actually rendered, within the meaning of section 280G (b) (4) (B) of
the Code, in excess
3
26
of the Base Amount, within the meaning of section 280G (b) (3) of the
Code, allocable to such reasonable compensation, or are otherwise not
subject to the Excise Tax, (iii) the amount of benefits under the
Agreement that shall be treated as subject to the Excise Tax (and
therefore as Parachute SERP) shall be equal to the lesser of (A) the
portion of the benefits under the Agreement treated as a parachute
payment within the meaning of section 280G (b) (2) of the Code or (B)
the amount of excess parachute payments within the meaning of section
280G (b) (1) of the Code (after applying clause (i) above), and (iv)
the value of any noncash benefits or any deferred payment or benefit
shall be determined by the Company's independent auditors in
accordance with the principles of sections 280G (d) (3) and (4) of the
Code.
In the event that the Excise Tax is subsequently determined to
be less than the amount taken into account hereunder pursuant to the
foregoing provisions of this Section 5.7, the Executive shall repay to
the Company, at the time that the amount of such reduction in Excise
Tax is finally determined, the portion (if any) of the 280G Gross-Up
Payment attributable to such reduction (determined in accordance with
the foregoing provisions of this Section 5.7) plus interest on the
amount of such repayment at the rate provided in section 1274 (b) (2)
(B) of the Code.
In the event that the Excise Tax attributable to the benefits
under the Agreement is determined to exceed the amount taken into
account hereunder pursuant to the foregoing provisions of this Section
5.7 (including by reason of any payment the existence or amount of
which cannot be determined at the time of the 280G Gross-Up Payment),
the Company shall make an additional 280G Gross-Up Payment in respect
of such excess (plus any interest, penalties or additions, but not any
federal, state, or local income taxes, payable by the Executive with
respect to such excess) at the time that the amount of such excess is
finally
4
27
determined. The Company shall provide the Executive with its
calculation of the amounts referred to in this Section 5.7, and such
supporting materials as are reasonably necessary for the Executive to
evaluate the Company's calculations. 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 benefits under
the Agreement.
The payment provided for in this Section 5.7 shall be made not
later than the seventh day following the date that it is determined
that any or all of the benefits pursuant to this Agreement are or will
be subject to the excise tax (the "Payment Date"); provided, however,
that if the amount of such payment 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 Company, of the
minimum amount of such payment and shall pay the remainder of such
(together with interest at 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 forty-fifth day after the Payment Date. In
the event that the amount of the payment made on an estimated basis
exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to the Executive,
payable on the thirtieth day after demand by the Company (together
with interest at the rate provided in section 1274 (b) (2) (B) of the
Code).
Notwithstanding the foregoing provisions of this Sections 5.7,
in the event that any payment or benefit received or to be received by
the Executive in connection with a Change in Control or the
termination of the Executive's employment (whether pursuant to the
terms of the 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) (all
such payments and benefits, including
5
28
benefits pursuant to the Agreement, being hereinafter called "Total
Benefits") would be subject (in whole or part), to the Excise Tax,
then the amount paid to the Executive pursuant to the Agreement and
the corresponding 280G Gross-Up Payment, if any, shall be reduced to
the extent necessary so that no portion of such amount paid pursuant
to the Agreement is subject to the Excise Tax if (A) the net amount of
the Total Benefits, as so reduced, (and after deduction of the net
amount of federal, state and local income tax on such reduced Total
Benefits) is greater than (B) the excess of (i) the net amount of such
Total Benefits, without reduction (but after deduction of federal,
state and local income tax on such Total Benefits), over (ii) the
amount of Excise Tax to which the Executive would be subject in
respect of such Total Benefits.
* * * * *
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the day and year first above written.
HECHINGER COMPANY
By:
-----------------------
Title:
--------------------
EXECUTIVE
--------------------------
6
