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EXHIBIT 10(l)
EXECUTIVE DEFERRED COMPENSATION AND BUYOUT PLAN
THIS AGREEMENT, made and to become effective this 31st day of
March, 1998 (the "Effective Date") by and between XXXXXXX CORPORATION
("Xxxxxxx"), an Alabama corporation with its principal office at Alexander
City, Alabama and XXXX X. XXXX, (the "Executive").
RECITALS:
Xxxxxxx and the Executive have executed an Employment
Agreement dated as of the date of this Agreement, incorporated herein and
attached hereto as Appendix A (the "Employment Agreement"). Pursuant to the
terms of the Employment Agreement, the Executive shall be employed by Xxxxxxx
for a term of three (3) years. The Executive is currently under an agreement
with his previous employer, Xxxx Xxx Corporation ("Xxxx Xxx"). By accepting
employment with Xxxxxxx, the Executive will lose certain benefits and
opportunities under his agreements with Xxxx Xxx. It is the wish of both
Xxxxxxx and the Executive that the Executive be compensated for such lost
benefits and opportunities or that they be replaced with comparable benefits
and opportunities. Capitalized terms not otherwise defined herein shall have
the meanings given to them in the Employment Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations herein and the compensation that Xxxxxxx agrees herein to pay the
Executive, and of other good and valuable consideration, the receipt of which
is hereby acknowledged, Xxxxxxx and the Executive agree as follows:
ARTICLE I. RABBI TRUST. A Rabbi Trust, entitled the "Xxxxxxx
Corporation Non-Qualified deferred Compensation Trust," shall be maintained for
the benefit of the Executive (the "Trust"). The Trust shall be irrevocable and
contain the amounts contributed pursuant to this Agreement and any interest or
income generated by such amounts. The Trust shall earn interest at a variable
rate (adjusted annually on the anniversary of the Effective Date) equal to the
Xxxxxxx Xxxxx Corporate Bond Rate published in The Wall Street Journal. In the
event of a Default Termination, as defined in Article VI, the funds in the
Trust shall be distributed in accordance with Article VI. After April 1, 2001
the funds in the Trust shall be distributed to the Executive in a lump sum upon
the termination of the Executive's employment. The Trust Agreement shall be
substantially in the form of Appendix B to this Agreement with no substantive
changes which are not acceptable to the Executive and his professional
advisors.
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ARTICLE II. STOCK OPTIONS.
2.1 Vested Stock Options. The Executive currently owns
124,109 options to purchase Xxxx Xxx stock. Of these options, 109,775
are currently fully vested. It is understood that the Executive will
exercise these vested options. It is agreed that the exercise of
these options, however, does not fully compensate the Executive for
the opportunity lost by exercising the options. To compensate the
Executive for the lost opportunities created by the exercise of the
Xxxx Xxx options, the Executive shall be granted 249,489 options to
purchase Xxxxxxx stock effective as of the Effective Date (computed by
multiplying the 109,775 Xxxx Xxx options by 56.666 (the Average of the
High and Low price for Xxxx Xxx common stock for January 1, 1998
through January 31, 1998 (the "Xxxx Xxx January Average")) divided by
24.933 (the Average of the High and Low price for Xxxxxxx Corporation
common stock for January 1, 1998 through January 31, 1998 (the
"Xxxxxxx January Average") (the "Conversion Ratio")). Subject to the
provisions of Article VI hereof, these Xxxxxxx stock options shall be
immediately vested and exercisable any time within 54 months from the
Effective Date at a price determined by taking the average of the high
and low price for Xxxxxxx common stock on the Effective Date as
reported in The Wall Street Journal.
2.2 Options That Will Not Vest Before Effective Date.
The Executive currently holds 14,334 options to purchase Xxxx Xxx
stock that will not vest before the Effective Date. To fully
compensate the Executive for these options which will be lost, the
Executive shall receive:
(a) An amount to be placed in the Trust on the
Effective Date equal to $418,925.48 (calculated by
subtracting $393,329.96, the aggregate option price from the
aggregate market value of Xxxx Xxx stock, computed using the
Xxxx Xxx January Average).
(b) In order to compensate the Executive for
the opportunities lost through the forfeiture of the Xxxx Xxx
stock options described in this Section 2.2, such options
will be replaced with options to purchase shares of Xxxxxxx
common stock. The number of shares of Xxxxxxx stock subject
to options to be received under this Section 2.2(b) shall be
32,577 (computed by multiplying 14,334 by the Conversion
Ratio). Subject to the provisions of Article VI hereof, such
options shall be effective as of the Effective Date,
immediately vested and exercisable any time within 54 months
from the Effective Date at a price determined by taking the
average of the high and low price for Xxxxxxx common stock on
the Effective Date as reported in The Wall Street Journal.
2.3 Notwithstanding the foregoing, if the Xxxxxxx
shareholders fail to approve an amendment increasing the number of
options which may be granted annually to any one employee so that the
provisions of this Article 2 cannot be given full effect, any options
previously granted under this Article 2 in excess of this amount shall
lapse and be forfeited
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and in lieu of any grant of stock options required by this Article 2
that would exceed the maximum amount that can be granted under the
Xxxxxxx Stock Option Plan (the "Xxxxxxx Plan"), the Executive shall
receive $3,841,510, an amount equal to the agreed value of the options
that would otherwise be granted to the Executive under this Article 2,
as determined pursuant to Exhibit A.
ARTICLE III. RESTRICTED STOCK. The Executive currently has
the right to receive 35,260 shares of Xxxx Xxx restricted stock which will be
forfeited upon the Executive's commencement of employment with Xxxxxxx.
Xxxxxxx shall compensate the Executive for the value of such stock in cash. The
amount of such compensation shall be $1,998,043.16 (calculated by multiplying
35,260 by the Xxxx Xxx January Average) to be placed in the Trust by Xxxxxxx on
the Effective Date. The amount received under this Article 3, shall be
increased to compensate the Executive for any dividends Xxxx Xxx pays to its
retired employees who hold restricted stock under the 1989 plan at the time the
restrictions lapse.
ARTICLE IV. COMPENSATION. The Executive shall lose $302,350
in the form of the remainder of his Xxxx Xxx compensation for 1998 which he
would have received given only the passage of time if he had not accepted
employment with Xxxxxxx. This amount shall be provided to the Executive in
12,127 shares of Xxxxxxx common stock (valued by using the January Average for
Xxxxxxx Stock and rounded up to the nearest whole share). Two-thirds (2/3) of
the shares of Xxxxxxx Stock received under this Article IV shall be
restricted from resale and bear a restriction stating that sale of the shares
may be only in accordance with this Agreement. One-third of the stock shall
become unrestricted upon each of the next two anniversaries of the Effective
Date.
ARTICLE V. RETIREMENT PLANS.
5.1 SERP. The Executive is a participant in Xxxx Xxx'x
defined benefit retirement plans for executives including qualified
plans and a Supplemental Executive Retirement Plan ("SERP"). A portion
of the SERP benefit has been funded using a grantor revocable trust
("Secular Trust") at Northern Trust in Chicago with Northern Trust as
Trustee and the Executive as grantor. Xxxxxxx shall compensate the
Executive $1,880,000 (the preliminary estimate of what would have been
the required SERP balance on January 1, 1999 less the current balance
in the account increased by the amount of all applicable income and
other payroll taxes (the "Preliminary Estimate")). As soon as
practicable after September 21, 1998, the final amount due to the
Executive under this Section 5.1 (the "Final Amount") shall be
determined. Any amount by which the Final Amount exceeds the
Preliminary Estimate shall be paid to the Executive by Xxxxxxx. Any
amount by which the Preliminary Estimate shall exceed the Final Amount
shall be paid to Xxxxxxx by the Executive.
5.2 Estate Builder Program. The Executive currently
participates in the Xxxx Xxx Estate Builder Program (the "Program").
The Program is a Xxxx Xxx deferral program under which deferred
amounts earn interest at a rate well above market. The Executive will
be penalized under this Program for accepting employment with Xxxxxxx.
To compensate the Executive for this lost benefit, Xxxxxxx shall make
a cash payment to the Trust of $50,611.
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5.3 ESOP. The Executive shall be compensated for the
amount of incremental credit he would have received under his
Employee Stock Ownership Plan at Xxxx Xxx as if he had not accepted
employment with Xxxxxxx. The value of the addition that would have
been made to the Xxxx Xxx ESOP between the Effective Date and January
1, 1999 shall be paid into the Trust. This value, not to exceed
$50,000 unless approved by the Xxxxxxx Compensation Committee, shall
be determined no later than September 30, 1999 and deposited in the
Trust as soon as the final amounts are calculated.
ARTICLE VI. TERMINATION. The Executive shall receive all
compensation and benefits provided for under this agreement unless his
employment is terminated before April 1, 2001 in a Default Termination. A
Default Termination shall mean a termination either by Xxxxxxx For Cause (as
defined in the Employment Agreement) or by the Executive for any reason other
than: Good Reason, Death or Total Disability, as those terms are defined in the
Employment Agreement. In the event of a Default Termination, certain
compensation and benefits provided for under this Agreement shall be forfeited
as follows:
(a) Upon the event of a Default Termination, the
Executive shall receive a lump sum payment from the Trust. The amount
of this payment shall be calculated by multiplying the total amount in
the Trust on the day of the Default Termination (the "Default Date")
by a fraction, the numerator of which shall be the number of days from
the Effective Date to the Default Date (including both the Effective
Date and the Default Date) and the denominator of which shall be
1,095. The Executive shall also receive in the same proportion
provided for above any amount to be placed in the Trust under this
Agreement that has not been placed in the Trust as of the Default
Date.
(b) Any stock received under Article 4 that is still
restricted on the date of the Default Termination shall be forfeited
by the Executive.
(c) Upon a Default Termination the Executive shall
forfeit and surrender to Xxxxxxx a number of the options granted to
him under Article 2 hereof equal to the total number of options
granted to him under Article 2 hereof multiplied by a fraction, the
numerator of which shall be the number of days between the Default
Date and March 31, 2001 (including both the Default Date and March 31)
and the denominator of which shall be 1,095. If the number of options
required to be forfeited by the Executive under the immediately
preceding sentence exceeds the number of options granted to the
Executive under Article 2 hereof that have not been exercised by the
Executive (such excess being hereinafter referred to as the "Excess
Options"), then the Executive shall pay to Xxxxxxx within ten (10)
days of the Default Date an amount of cash equal to the Spread. The
"Spread" means an amount equal to (x) the average of the high and low
price on the date of acquisition of each share of Xxxxxxx stock
acquired by the Executive pursuant to the exercise of any Options
granted to the Executive under Article 2 hereof, (y) minus the amount
paid by the Executive for such share of Xxxxxxx stock pursuant to the
exercise of such options, (z) multiplied by a fraction, the numerator
of which shall be the number of Xxxxxxx shares that have been acquired
upon the exercise of the Excess Options, and the denominator of which
shall be the total number of Xxxxxxx shares previously acquired by the
Executive pursuant to the exercise of options granted to him under
Article 2 hereof. For purposes hereof, the Executive shall be deemed
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to have been granted a number of options under Article 2 hereof equal
to the total number of shares of Xxxxxxx stock that can be acquired
pursuant to the exercise of such options.
ARTICLE VII. REDUCTION OF BENEFITS. The Executive and Xxxxxxx
acknowledge and agree that the amounts required to be paid to or for the
benefit of the Executive hereunder, including the stock options provided for in
Section 2.2 hereof received in exchange for the Xxxx Xxx stock options that
will not have vested before the Effective Date (the "Stock Options"), are being
paid in the belief that the Executive will forfeit certain benefits and
opportunities under his agreements with Xxxx Xxx by reason of his accepting
employment with Xxxxxxx. If, contrary to such belief, any such benefit or
opportunity for which the Executive is being compensated or which are being
replaced hereunder is not lost or forfeited as a result of his accepting
employment with Xxxxxxx, and such benefit is actually received by the Executive
from Xxxx Xxx then appropriate adjustments shall be made to the amounts
previously paid, or to the amounts required to be paid, to the Executive
hereunder, including any appropriate adjustment to the Stock Options, and, if
so required as a result of any such adjustment, the Executive shall reimburse
Xxxxxxx for any excess amounts previously paid to him.
ARTICLE VIII. GENERAL PROVISIONS.
8.1 Governing Law. This Agreement shall be interpreted
under the laws of the State of North Carolina.
8.2 Nonassignability. Benefits under this Agreement
shall not be subject to anticipation or assignment by any person
entitled thereto.
8.3 Binding Agreement. This Agreement shall be binding
and inured to the benefit of the Executive, his executors,
administrators, heirs and next of kin, and Xxxxxxx, its successors and
assigns.
8.4 Merger or Consolidation. Xxxxxxx shall not
consolidate or merge into or with another corporation or entity, or
transfer all or substantially all of its assets to another
corporation, partnership, trust or other entity unless such entity
shall assume the rights, obligations and liabilities of Xxxxxxx under
the agreement and upon such assumption, shall become obligated to
perform the terms and conditions of the agreement.
8.5 Waiver. No term or condition of this Agreement shall
be deemed to have been waived, nor shall there be any estoppel against
the enforcement of any provision of this Agreement, except by written
instrument of the party charged with such waiver, and any such waiver
shall operate only as to the specific term or condition waived and
shall not constitute a waiver of such term or condition for the future
or as to any act other than that specifically waived.
8.6 Amendment; Termination. This Agreement may not be
amended or terminated except by an instrument in writing signed by the
parties hereto.
8.7 Recitals. The recitals to this Agreement shall become
part of this Agreement.
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8.8 Funding. This Agreement is intended to be an
unfunded plan of deferred compensation maintained for a highly
compensated management employee. The obligations of Xxxxxxx to make
payments hereunder shall constitute a general unsecured obligation of
Xxxxxxx to the Executive. To the extent that any person acquires a
right to receive payments from the Trust or Xxxxxxx hereunder, such
right shall be no greater than the right of an unsecured creditor of
Xxxxxxx.
IN WITNESS WHEREOF, this Agreement has been executed by and
in behalf of the parties hereto on the day and year first above written.
XXXXXXX CORPORATION
By: /s/ Xxxx X. Xxxxx
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Xxxx X. Xxxxx
Chairman of the Board, President and
Chief Executive Officer
/s/ Xxxx X. Xxxx
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XXXX X. XXXX
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Exhibit A (Example)
ARTICLE 2.3 -- EXECUTIVE DEFERRED COMPENSATION AND BUYOUT PLAN
LET A = 124,109 OPTIONS TO PURCHASE XXXX XXX COMMON STOCK
B = PRICE/SHARE OF XXXX XXX COMMON STOCK
FV = FUTURE VALUE, ASSUMING 13% GROWTH (COMPOUNDED ANNUALLY) FOR 4.5 YEARS;
FACTOR = 1.733217.
PV = PRESENT VALUE, ASSUMING A DISCOUNT RATE OF 6.9005% (EQUIVALENT TO A
PRE-TAX RATE OF 13%, GIVEN A MARGINAL TAX RATE OF 46.919%) FOR 4.5
YEARS; FACTOR = .740613.
ASSUME A MARGINAL TAX RATE OF 46.919% FOR ALL YEARS (37.719% FEDERAL, 7.75%
STATE, 1.45% MEDICARE).
FORMULA:
PV [FV(A x B) - (A x B)]
EXAMPLE (XXXX XXX PRICE = $57/SHARE):
.740613 [1.733217 (124,109 x 57.00) - (124,109 x 57,00)] =
.740613 [12,261,146 - 7,074,213] =
$3,841,510
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0
XXXXXXX XXXXXXXXXXX, XXXXXXXXX XXXX, XXXXXXX 00000
XXXXXXX CORPORATION
INTER-OFFICE CORRESPONDENCE
TO: Xxxx Xxxx DATE: May 20, 1998
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FROM: Xxxxx X. Xxxxxxxx
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Re: Rabbi Trust
Attached are three fully executed counterparts of your Rabbi Trust. I have sent
one counterpart to Xxx Xxxx, one counterpart to Xxxxxx Xxxxxxx and have
retained one counterpart in the company file. Please let me know if you want the
company file handled differently.
SRF:jb
Encl.
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EXHIBIT C
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Optionee Statement
Exercisable as of 8/14/2000
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XXXX X. XXXX
0000 Xxxxx Xxxxx Xxx. X.X.
Xxxxxxx, XX 00000
SSN ###-##-####
Expiration Grant Options Options Options
Grant Date Date Plan ID Type Granted Option Price Outstanding Vested
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03/31/1998 03/31/2008 1993 Plan Incentive 3,682 $27.1563 3,682 3,682 current
03/31/1998 03/31/2008 1993 Plan Non-Qualified 278,384 $27.1563 278,384 278,384 current
03/31/1998 03/31/2008 1993 Plan Incentive 11,046 $27.1563 11,046 7,364 current
3682 on 3/31/2001
03/31/1998 03/31/2008 1993 Plan Non-Qualified 113,954 $27.1563 113,954 75,969 current
37,985 on 3/31/2001
02/24/1999 02/24/2009 1993 Plan Incentive 3,682 $27.1563 3,682 0 current
3,682 on 3/31/2001
02/24/1999 02/24/2009 1993 Plan Non-Qualified 121,318 $27.1563 121,318 62,500 current
58,818 on 3/31/2001
02/24/1999 02/24/2009 1993 Plan Incentive 5,169 $19.3438 5,169 0 current
5,169 on 3/31/2001
02/24/1999 02/24/2009 1993 Plan Non-Qualified 119,831 $19.3438 119,831 31,250 current
88,581 on 3/31/2001
01/18/2000 01/18/2010 Executive Incentive 6611 15.125 6611 0 current
Incentive (reload 1,652 on 1/18/2001
eligible) 4,959 on 3/31/2001
01/18/2000 01/18/2010 Executive Non-Qualified 493,369 15.125 493,389 0 current
Incentive (reload 123,347 on 1/18/2001
eligible) 370,042 on 3/31/2001
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TOTALS 1,157,066 1,157,066 459,149
