CHANGE IN CONTROL AGREEMENT
Exhibit 10.22
This Change in Control Agreement is dated as of June 26, 2020, between Methode Electronics, Inc., a Delaware corporation (the “Company”), and Xxxxxx X. Xxxxxx (the “Executive”).
WHEREAS, Executive is employed by the Company and the Company desires to provide certain security to Executive in connection with any potential change in control of the Company.
(a)Salary Payment. The Company shall make a lump sum cash payment to Executive equal to two times the Executive’s Annual Salary (as defined below).
(b)Bonus. The Company shall make a lump sum cash payment to Executive equal to two times the lesser of: (i) the Executive’s target bonus amount for the fiscal year in which Executive’s Employment Termination occurs, or (ii) the bonus the Executive earned in the prior fiscal year; provided, however, that if the target bonus amount for the fiscal year has not yet been determined as of the date of the Executive’s Employment Termination, then the bonus amount payable hereunder shall be calculated based on the Executive’s target bonus amount for the previous fiscal year, regardless of whether such bonus was actually earned.
(c)Welfare Benefit Plans. With respect to each Welfare Benefit Plan (as defined below), for the period beginning on Executive’s Employment Termination and ending on the earlier of: (i) twenty-four (24) months following Executive’s Employment Termination, or (ii) the date Executive becomes covered by a welfare benefit plan or program maintained by an entity other than the Company which provides coverage or benefits substantially equivalent to such Welfare Benefit Plan, Executive shall continue to participate in such Welfare Benefit Plan on the same basis and at the same cost to Executive as was the case immediately prior to the Change in Control (or, if more favorable to Executive, as was the case at any time hereafter), or, if any benefit or coverage cannot be provided under a Welfare Benefit Plan because of applicable law or contractual provisions, Executive shall be provided with substantially similar benefits and coverage for such period. Immediately following the expiration of the continuation period required by the preceding sentence, Executive shall be entitled to continued group health benefit plan coverage (so‑called “COBRA coverage”) in accordance with Section 4980B of the Internal Revenue Code of 1986, as amended (the “Code”), it being intended that COBRA coverage shall be consecutive to the benefit and coverage provided for in the preceding sentence.
(d)Employment. This Agreement shall not be construed as creating an express or implied contract of employment and, except as otherwise agreed in writing between the Executive and the Company, the Executive shall not have any right to be retained in the employ of the Company.
(e)Section 409A. To the extent applicable, any payments to Executive called for under this Agreement or under the terms of any other plan, agreement or award, that are determined to be payments of deferred compensation to which Section 409A is applicable and that are paid by reason of Executive’s “separation from service,” as described in Section 409A, shall be delayed, to the extent necessary, to avoid a violation of Section 409A(a)(2)(B)(i). In general, this Section 1(e) may require that payments of deferred compensation to Executive that would otherwise be made within six (6) months following Executive’s separation from service shall be delayed until the earlier of (i) first day of the seventh (7th) month beginning after the Executive’s separation from service, or (ii) the Executive’s death, if Executive is determined to be a “specified employee” as that term is defined in Section 409A(a)(2)(B)(i). As used in this Agreement, Section 409A shall mean Section 409A of the Code, including any regulations or written guidance issued pursuant thereto.
2. Definitions. For purposes of this Agreement:
(a)“Annual Salary” shall mean Executive’s salary at the greater of (i) Executive’s annualized base salary (including Executive’s monthly car allowance, if any) in effect on the date of the Change in Control, or (ii) Executive’s annualized base salary in effect on Executive’s Employment Termination.
(b)“Change in Control” shall be deemed to have occurred on the first to occur of any of the following:
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(i) |
any one “person” or more than one person acting as a “group” becomes the “beneficial owner” (as such terms are used in the Securities Exchange Act of 1934) of more than fifty percent (50%) of the total voting power of common stock then outstanding; provided, however, that any acquisition by the Company, any entity controlled by the Company or any employee benefit plan (or related trust) sponsored or maintained by the Company or any entity controlled by the Company shall not constitute a Change in Control of the Company; or |
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(ii) |
a majority of the members of the Company’s Board of Directors is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the Company’s Board of Directors before the date of the appointment or election; or |
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(B) more than 50% of the combined outstanding voting power of the parent of the surviving entity in such transaction; or |
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(iv) |
the consummation of a sale, transfer or liquidation of all or substantially all of the assets of the Company and its subsidiaries. |
Notwithstanding the foregoing, however, in any circumstance or transaction in which compensation resulting from or in respect of this Agreement would result in the imposition of an additional tax under Section 409A of the Code if the foregoing definition of “Change in Control” were to apply, but would not result in the imposition of any additional tax if the term “Change in Control” were defined herein to mean a “change in control event” within the meaning of Treasury Regulation Section 1.409A-3(i)(5), then “Change in Control” shall mean a “change in control event” within the meaning of Treasury Regulation Section 1.409A-3(i)(5), but only to the extent necessary to prevent such compensation from becoming subject to an additional tax under Section 409A of the Code.
(c)“Employment Termination” shall mean the effective date of: (i) Executive’s voluntary termination of employment with the Company with Good Reason, or (ii) the termination of Executive’s employment by the Company without Good Cause.
(d)“Good Cause” shall mean: (i) Executive’s conviction of a felony; (ii) Executive’s commission of any act or acts of personal dishonesty intended to result in substantial personal enrichment to Executive to the detriment of the Company; or (iii) repeated violations of Executive’s responsibilities which are demonstrably willful and deliberate, provided that such violations have continued more than ten days after the Board of Directors of the Company has given written notice of such violations and of its intention to terminate Executive’s employment because of such violations.
(e)“Good Reason” shall exist if, without Executive’s express written consent any of the following events or actions occurs, provided that no finding of Good Reason shall be effective unless and until the Executive has provided the Company, within sixty (60) calendar days of becoming aware of the facts and circumstances underlying the finding of Good Reason, with written notice thereof stating with specificity the facts and circumstances underlying the finding of Good Reason and, if the basis for such finding of Good Reason is capable of being cured by the Company, providing the Company with an opportunity to cure the same within thirty (30) calendar days after receipt of such notice:
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(i) |
The Company shall materially reduce the nature, scope or level of Executive’s responsibilities from the nature, scope or level of such responsibilities prior to the Change in Control (or prior to the Period Pending a Change in Control), or shall fail to provide Executive with adequate office facilities and support services to perform such responsibilities. |
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Executive’s principal business office is not located at the Company’s then current corporate headquarters, and the Company requires Executive to move Executive’s principal business office to such corporate headquarters, or assigns to Executive duties that would reasonably require such move, such actions shall not constitute “Good Reason” under this subsection (ii). |
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(iii) |
The Company shall require Executive, or assign duties to Executive which would reasonably require Executive, to increase, by more than twenty-four, the number of normal working days (determined at the time of this Agreement) that Executive spends away from Executive’s principal business office during any consecutive twelve-month period. |
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(iv) |
The Company shall reduce Executive’s Annual Salary below that in effect as of the date of this Agreement (or as of the Change in Control, if greater), |
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(v) |
The Company shall materially reduce or fail to continue in effect any cash or stock-based incentive or bonus plan, retirement plan, welfare benefit plan, or other benefit plan, program or arrangement, unless the aggregate value (as computed by an independent employee benefits consultant selected by the Company) of all such incentive, bonus, retirement and benefit plans, programs and arrangements provided to Executive is not materially less than their aggregate value as of the date of this Agreement (or as of the Change in Control, if greater). |
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(vi) |
If the Board of Directors fails to act in good faith with respect to the Company’s obligations hereunder, or the Company breaches its obligations hereunder. |
(f)“Period Pending a Change in Control” shall mean the period between the time an agreement is entered into by the Company with respect to a merger or other business combination or transaction of the Company, which would constitute a Change in Control, and the effective time of such merger or other business combination or transaction of the Company.
(g)“Welfare Benefit Plan” shall mean each welfare benefit plan maintained or contributed to by the Company, including, but not limited to a plan that provides health (including medical and dental), life, accident or disability benefits or insurance, or similar coverage, in which Executive was participating at the time of the Change in Control.
5. Code Section 4999.
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(a)In the event it shall be determined that as a result, directly or indirectly, of any payment or distribution by the Company to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a “Payment”), the Executive would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then the Executive shall be entitled to have the Payment either (A) paid or delivered in full, or (B) capped at the amount that is $1 less than three times the Executive’s “base amount,” whichever of the foregoing results in the receipt by the Executive of the greatest benefit on an after-tax basis (taking into account applicable taxes, including federal, state and local income taxes and the Excise Tax). Any reduction of the Payment required by this subsection shall be carried out by applying the following principles, in order: (1) the payment or benefit with the higher ratio of the parachute payment value to present economic value (determined using reasonable actuarial assumptions) shall be reduced or eliminated before a payment or benefit with a lower ratio; (2) the payment or benefit with the later possible payment date shall be reduced or eliminated before a payment or benefit with an earlier payment date; and (3) cash payments shall be reduced prior to non-cash benefits; provided that if the foregoing order of reduction or elimination would violate Code Section 409A, then the reduction shall be made pro rata among the payments or benefits included in the Payment (on the basis of the relative present value of the parachute payments).
(b)All determinations required to be made under this Section 5, shall be made by the Company’s Independent Public Accounting Firm (the “Accounting Firm”) which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of receipt of notice from the Executive that there has been a Payment or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall furnish the Executive with a written opinion that failure to report the Excise Tax on the Executive’s applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm shall be binding upon the Company and the Executive.
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8. Assignment, Successors. This Agreement may not be assigned by the Company without the written consent of Executive but the obligations of the Company under this Agreement shall be the binding legal obligations of any successor to the Company by merger or other business combination, and in the event of any business combination or transaction that results in the transfer of substantially all of the assets or business of the Company, the Company will cause the transferee to assume the obligations of the Company under this Agreement. This Agreement may not be assigned by Executive during Executive’s life, and upon Executive’s death will inure to the benefit of Executive’s heirs, legatees and legal representatives of Executive’s estate.
9. Interpretation. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Illinois, without regard to the conflict of law principles thereof. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.
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an action for those purposes. The Federal Arbitration Act shall apply to the construction, interpretation and enforcement of this arbitration provision.
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METHODE ELECTRONICS, INC.
By: /s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
Its:Chair, Compensation Committee
EXECUTIVE:
/s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxx
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