EXHIBIT 10(a)(xxxv)
SEVERANCE PROTECTION AGREEMENT
THIS AGREEMENT made as of the __ day of ____ 2005 by and between the
"Company" (as hereinafter defined) and ___________ (the "Executive").
WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that the possibility of a Change in Control (as hereinafter defined) exists and
that the threat or the occurrence of a Change in Control can result in
significant distractions of its key management personnel because of the
uncertainties inherent in such a situation;
WHEREAS, the Board has determined that it is essential and in the best
interest of the Company and its stockholders to retain the services of the
Executive in the event of a threat or occurrence of a Change in Control and to
ensure the Executive's continued dedication and efforts in such event without
undue concern for the Executive's personal financial and employment security;
and
WHEREAS, in order to induce the Executive to remain in the employ of the
Company, particularly in the event of a threat of the occurrence of a Change in
Control, the Company desires to enter into this Agreement with the Executive to
provide the Executive with certain benefits in the event the Executive's
employment is terminated as a result of, or in connection with, a Change in
Control.
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:
1. Term of Agreement. Subject to the remaining provisions of this
Section 1, this Agreement shall commence as of the date of this Agreement and
shall continue in effect until the first anniversary of such date; provided,
however, that commencing on such anniversary and on each anniversary thereafter,
the term of this Agreement shall automatically be extended for one (1) year
unless either the Company or the Executive shall have given written notice to
the other at least ninety (90) days prior thereto that the term of this
Agreement shall not be so extended; and provided, further, however, that
notwithstanding any such notice by the Company not to extend, if a Change in
Control occurs during the term of this Agreement, the term of this Agreement
shall not expire before the expiration of 24 months after the occurrence of a
Change in Control. Notwithstanding the foregoing, this Agreement shall expire
and be of no further force and effect in the event of any termination of
employment that occurs prior to a Change in Control; provided, that, in the
event that a Change in Control actually occurs following such termination of
employment, nothing in this Section 1 shall prohibit the Executive from
asserting that his or her termination of employment was for Good Reason,
consistent with the terms of this Agreement.
2. Definitions.
2.1. Accrued Compensation. For purposes of this Agreement, "Accrued
Compensation" shall mean an amount which shall include all amounts earned or
accrued through the "Termination Date" (as hereinafter defined) but not paid as
of the Termination Date including (i) base salary, (ii) reimbursement for
reasonable and necessary expenses incurred by the Executive on behalf of the
Company during the period ending on the Termination Date, (iii) vacation pay,
and (iv) bonuses and incentive compensation (other than the "Pro Rata Bonus" (as
hereinafter defined)).
2.2. Base Amount. For purposes of this Agreement, "Base Amount"
shall mean the greater of the Executive's annual base salary (a) at the rate in
effect on the Termination Date or (b) at the highest rate in effect at any time
during the ninety (90) day period before the Change in Control, and shall
include all amounts of the Executive's base salary that are deferred under the
qualified and non-qualified employee benefit plans of the Company or any other
agreement or arrangement.
2.3. Bonus Amount. For purposes of this Agreement, "Bonus Amount"
shall mean the average of the annual [cash] bonuses [(including both cash bonus
and any cash bonus foregone by the Executive in exchange for restricted stock
units of the Company)] paid or payable during the three full fiscal years ended
before the Termination Date or, if greater, the three full fiscal years ended
before the Change in Control (or, in each case, such lesser period for which
[cash] annual bonuses [(including both cash bonus and any cash bonus foregone by
the Executive in exchange for restricted stock units of the Company)] were paid
or payable to the
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Executive); provided, that, in the event the Executive has not
been employed by the Company for a full fiscal year, the "Bonus Amount" shall
equal the Executive's target annual [cash] bonus during the year of termination
of employment.
2.4. Cause. For purposes of this Agreement, a termination of
employment is for "Cause" if (a) the Executive has been convicted of, or has
entered a plea of no lo contendere to, (i) a crime constituting a felony under
the laws of the United States or any state thereof or (ii) a misdemeanor
involving moral turpitude, or (b) the termination is evidenced by a resolution
adopted in good faith by two-thirds of the Board that the Executive (i)
intentionally and continually failed substantially to perform the Executive's
reasonably assigned duties with the Company (other than a failure resulting from
the Executive's incapacity due to physical or mental illness or from the
Executive's assignment of duties that would constitute "Good Reason" as
hereinafter defined) which failure continued for a period of at least thirty
(30) days after a written notice of demand for substantial performance has been
delivered to the Executive by the Company specifying the manner in which the
Executive has failed substantially to perform, or (ii) intentionally engaged in
conduct which is demonstrably and materially injurious to the Company; provided,
however, that no termination of the Executive's employment shall be for Cause as
set forth in clause (ii) above until (x) there shall have been delivered to the
Executive a copy of a written notice setting forth that the Executive was guilty
of the conduct set forth in clause (ii) and specifying the particulars thereof
in detail, and (y) the Executive shall have been provided an opportunity to be
heard in person by the Board (with the assistance of the Executive's counsel if
the Executive so desires). No act, nor failure to act, on the Executive's part,
shall be considered "intentional" unless the Executive has acted, or failed to
act, with a lack of good faith and with a lack of reasonable belief that the
Executive's action or failure to act was in the best interest of the Company.
2.5. Change in Control. For purposes of this Agreement:
(a) A "Change in Control" shall mean any of the following
events:
(1) An acquisition (other than directly from the Company) of
any voting securities of the Company (the "Voting Securities") by
any "Person" (as the term person is used for purposes of Section
13(d) or 14(d) of the Securities Exchange Act
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of 1934, as amended (the "1934 Act")) immediately after which
such Person has "Beneficial Ownership" (within the meaning of Rule
13d-3 promulgated under the 0000 Xxx) of twenty percent (20%) or
more of the combined voting power of the Company's then outstanding
Voting Securities; provided, however, that in determining whether a
Change in Control has occurred, Voting Securities which are acquired
in a "Non-Control Acquisition" (as hereinafter defined) shall not
constitute an acquisition which would cause a Change in Control. A
"Non-Control Acquisition" shall mean an acquisition by (i) an
employee benefit plan (or a trust forming a part thereof) maintained
by (x) the Company or (y) any corporation or other Person of which a
majority of its voting power or its equity securities or equity
interest is owned directly or indirectly by the Company (a
"Subsidiary"), (ii) the Company or any Subsidiary, or (iii) any
Person in connection with a "Non-Control Transaction" (as
hereinafter defined).
(2) The individuals who, as of the date of this Agreement, are
members of the Board (the "Incumbent Board"), cease for any reason
to constitute at least two-thirds of the Board; provided, however,
that if the election, or nomination for election by the Company's
stockholders, of any new director was approved by a vote of at least
two-thirds of the Incumbent Board, such new director shall, for
purposes of this Agreement, be considered as a member of the
Incumbent Board; provided, further, however, that no individual
shall be considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an actual
or threatened "Election Consent" (as described in Rule 14a-11
promulgated under the 0000 Xxx) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board (a "Proxy Contest") including by reason of any
agreement intended to avoid or settle any Election Contest or Proxy
Contest;
(3) A merger, consolidation or reorganization involving the
Company or a subsidiary of the Company, unless
(i) the Voting Securities of the Company, immediately
before such merger, consolidation or reorganization, continue
immediately following such merger, consolidation or
reorganization to represent, either
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by remaining outstanding or by being converted into
voting securities of the surviving corporation resulting from
such merger, consolidation or reorganization or its parent
(the "Surviving Corporation"), at least sixty percent (60%) of
the combined voting power of the outstanding voting securities
of the Surviving Corporation;
(ii) the individuals who were members of the Incumbent
Board immediately before the execution of the agreement
providing for such merger, consolidation or reorganization
constitute more than one-half of the members of the board of
directors of the Surviving Corporation; and
(iii) no person (other than the Company, any Subsidiary,
any employee benefit plan (or any trust forming a part
thereof) maintained by the Company, the Surviving Corporation
or any Subsidiary, or any Person who, immediately before such
merger, consolidation or reorganization had Beneficial
Ownership of fifteen percent (15%) or more of the then
outstanding Voting Securities) has Beneficial Ownership of
fifteen percent (15%) or more of the combined voting power of
the Surviving Corporation's then outstanding voting
securities.
(a transaction described in clauses (i) through (iii) shall herein
be referred to as a "Non-Control Transaction");
(4) A complete liquidation or dissolution of the Company; or
(5) The consummation of a sale, lease, transfer, conveyance or
other disposition, in one or a series of related transactions, of
all or substantially all of the assets of the Company to any Person
(other than a transfer to a Subsidiary).
(b) Notwithstanding the foregoing, a Change in Control shall
not be deemed to occur solely because any Person (the "Subject
Person") acquired Beneficial Ownership of more than the permitted
amount of the outstanding Voting Securities as a result of the
acquisition of Voting Securities by the Company which, by reducing
the number of Voting Securities outstanding, increases the
proportional number of shares Beneficially Owned
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by the Subject Person, provided that if a Change in Control would occur (but for
the operation of this sentence) as a result of the acquisition of Voting
Securities by the Company, and after such share acquisition by the Company, the
Subject Person becomes the Beneficial Owner of any additional voting Securities
which increases the percentage of the then outstanding Voting Securities
Beneficially Owned by the Subject Person, then a Change in Control shall occur.
(c) Notwithstanding anything contained in this Agreement to
the contrary, if the Executive's employment is terminated before a Change in
Control and the Executive reasonably demonstrates that such termination (1) was
at the request of a third party who has indicated an intention or taken steps
reasonably calculated to effect a Change in Control and who effectuates a Change
in Control (a "Third Party") or (2) otherwise occurred in connection with, or in
anticipation of, a Change in Control which actually occurs, then for all
purposes of this Agreement, the date of a Change in Control with respect to the
Executive shall mean the date immediately before the date of such termination of
the Executive's employment.
2.6. Company. For purposes of this Agreement, the "Company" shall
mean X. X. Xxxxx Company, a Pennsylvania corporation with its principal offices
at Pittsburgh, Pennsylvania, and shall include its "Successors and Assigns" (as
hereinafter defined).
2.7. Disability. For purposes of this Agreement, "Disability" shall
mean a physical or mental infirmity which impairs the Executive's ability to
substantially perform the Executive's duties with the Company for a period of
one hundred eighty (180) consecutive days and the Executive has not returned to
the Executive's full time employment before the Termination Date as stated in
the "Notice of Termination" (as hereinafter defined).
2.8. Good Reason. For purposes of this Agreement:
(a) "Good Reason" shall mean the occurrence after a Change in
Control of any of the events or conditions described in subsections
(l) through (7) hereof:
(1) a change in the Executive's title, position, duties or
responsibilities (including reporting responsibilities) which
represents an adverse change from the Executive's title, position,
duties or responsibilities as in effect at any time within ninety
(90)
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days preceding the date of a Change in Control or at any time
thereafter; or any removal of the Executive from or failure to
reappoint or reelect him to any one of such offices or positions,
except in connection with the termination of the Executive's
employment for Disability, Cause, as a result of the Executive's
death or by the Executive other than for Good Reason;
(2) a reduction in the Executive's base salary or any failure
to pay the Executive any compensation or benefits to which the
Executive is entitled within five (5) days of the date due;
(3) the Executive being required by the Company to perform the
Executive's regular duties at any place outside a 30-mile radius
from the place where the Executive's regular duties were performed
immediately before the Change in Control, except for reasonably
required travel on the Company's business which is not materially
greater than such travel requirements in effect immediately before
the Change in Control;
(4) the failure by the Company to provide the Executive with
compensation and benefits, in the aggregate, at least equal (in
opportunities) to those provided for under the compensation and
employee benefit plans, programs and practices in which the
Executive was participating at any time within ninety (90) days
preceding the date of a Change in Control or at any time thereafter,
which may include, but not be limited to, the plans listed on
Appendix A;
(5) any material breach by the Company of any provision of
this Agreement;
(6) any purported termination of the Executive's employment
for Cause by the Company which does not comply with the terms of
Section 2.4; or
(7) the failure of the Company to obtain an agreement,
satisfactory to the Executive, from any Successors and Assigns to
assume and agree to perform this Agreement, as contemplated in
Section 7 hereof.
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(b) Any event or condition described in this Section 2.8(a)(1)
through (7) which occurs before a Change in Control but which the
Executive reasonably demonstrates (1) was at the request of a Third
Party, or (2) otherwise arose in connection with, or in anticipation
of, a Change in Control which actually occurs, shall constitute Good
Reason for purposes of this Agreement notwithstanding that it
occurred before the Change in Control.
(c) The Executive's right to terminate the Executive's
employment pursuant to this Section 2.8 shall not be affected by the
Executive's incapacity due to physical or mental illness.
2.9. Notice of Termination. For purposes of this Agreement,
following a Change in Control, "Notice of Termination" shall mean a
written notice of termination from the Company of the Executive's
employment which indicates the specific termination provision in
this Agreement relied upon and which sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated.
2.10. Pro Rata Bonus. For purposes of this Agreement, "Pro
Rata Bonus" shall mean an amount equal to the Bonus Amount
multiplied by a fraction, the numerator of which is the number of
days in the fiscal year through the Termination Date and the
denominator of which is 365.
2.11. Successors and Assigns. For purposes of this Agreement,
"Successor and Assigns" shall mean a corporation or other entity
which has acquired or succeeded to all or substantially all or the
assets and business of the Company (including this Agreement)
whether by operation of law or otherwise.
2.12. Termination Date. For purposes of this Agreement,
"Termination Date" shall mean in the case of the Executive's death,
the Executive's date of death, in the case of Good Reason, the last
day of the Executive's employment, and in all other cases, the date
specified in the Notice of Termination; provided, however, that if
the Executive's employment is terminated by the Company for Cause or
due to Disability, the date specified in the Notice of Termination
shall be at least 30 days from the date the Notice of Termination is
given to the Executive, provided that in the case of Disability the
Executive shall not have returned to the full-time performance of
the Executive's duties during such period of at least 30 days.
3. Termination of Employment.
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3.1. Amount of Compensation and Benefits. If, during the term of this
Agreement, the Executive's employment with the Company shall be terminated
within twenty-four (24) months following a Change in Control, the Executive
shall be entitled to the following compensation and benefits:
(a) If the Executive's employment with the Company shall be
terminated (1) by the Company for Cause or Disability, (2) by reason of the
Executive's death, or (3) by the Executive for other than Good Reason, the
Company shall pay to the Executive the Accrued Compensation and, if such
termination is by the Company due to the Executive's Disability or by reason of
the Executive's death, a Pro Rata Bonus.
(b) If the Executive's employment with the Company shall be
terminated for any reason other than as specified in Section 3.1(a), the
Executive shall be entitled to the following:
(i) the Company shall pay the Executive all Accrued
Compensation and a Pro-Rata Bonus; and
(ii) the Company shall pay the Executive as severance pay in
lieu of any further compensation for periods subsequent to the
Termination Date, in a single payment an amount in cash equal to
[three (3)/two (2)] times the sum of (A) the Base Amount and (B) the
Bonus Amount; and
(iii) for a number of months equal to [thirty-six (36)/twenty
four (24)] (the "Continuation Period"), the Company shall at its
expense continue on behalf of the Executive and the Executive's
dependents and beneficiaries the life insurance, short-term
disability, medical, dental and hospitalization benefits provided
(x) to the Executive immediately prior to the Change in Control or
at any time thereafter or (y) to other similarly situated executives
who continue in the employ of the Company during the Continuation
Period. The coverage and benefits (including deductibles and costs)
provided in this Section 3.1(b)(iii) during the Continuation Period
shall be no less favorable to the Executive and the Executive's
dependents and beneficiaries, than the most favorable of such
coverages and
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benefits during any of the periods referred to in clauses (x) and
(y) above. The Company's obligation hereunder with respect to the
foregoing benefits shall be limited to the extent that the Executive
becomes eligible for any such benefits pursuant to a subsequent
employer's benefit plans (whether or not the Executive actually
elects coverage), in which case the Company may reduce the coverage
of any benefits it is required to provide the Executive hereunder as
long as the aggregate coverages and benefits of the combined benefit
plans (computed assuming that the Executive elected to participate
in the subsequent employer's benefit plans to the maximum extent
allowable) is no less favorable to the Executive than the coverages
and benefits required to be provided hereunder. This subsection
(iii) shall not be interpreted so as to limit any benefits to which
the Executive, the Executive's dependents or beneficiaries may be
entitled under any of the Company's employee benefit plans, programs
or practices following the Executive's termination of employment,
including without limitation, retiree medical and life insurance
benefits; and
(iv) the Company shall pay in a single payment an amount in
cash equal to the excess of (A) the lump sum actuarial equivalent of
the aggregate retirement benefit the Executive would have been
entitled to receive under the Company's supplemental and other
retirement plans including, but not limited to, the retirement plans
listed in Appendix A, had (w) the Executive remained employed by the
Company for an additional [two/three] complete years of credited
service, (x) the Executive's annual compensation during such period
been equal to the Executive's Base Salary and the Bonus Amount, (y)
the Company made employer contributions to each defined contribution
plan in which the Executive was a participant at the Termination
Date (in the amount that would have been contributed based on the
assumptions in (w) and (x) above) and (z) the Executive been fully
(100%) vested in the Executive's benefit under each retirement plan
in which the Executive was a participant, over (B) the lump sum
actuarial equivalent of the aggregate retirement benefit the
Executive is actually entitled to receive under such retirement
plans.
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For purposes of this subsection (iv), the "lump sum actuarial
equivalent" shall be determined in accordance with the "Lump
Sum Factors" as prescribed under the terms of the Employees'
Retirement System of X. X. Xxxxx Company Plan "A" - For
Salaried Employees immediately before the Executive's
termination of employment.
(c) The amounts provided for in Sections 3.1(a) and 3.1(b)(i),
(ii) and (iv) shall be paid in a single lump sum cash payment as soon as
reasonably practicable following the Executive's Termination Date (or earlier,
if required by applicable law).
(d) The Executive shall not be required to mitigate the amount
of any payment provided for in this Agreement by seeking other employment or
otherwise and no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to the Executive in any subsequent employment
except as provided in Section 3.1(b)(iii).
(e) Notwithstanding the foregoing, the payments otherwise due
hereunder may be limited to the extent provided in Section 5 and Section 12(b)
hereof.
3.2. Coordination with other Compensation and Benefits.
(a) The severance pay and benefits provided for in this
Section 3 shall be in lieu of any other severance or termination pay to which
the Executive may be entitled under any other Company plan, program, practice or
arrangement providing severance benefits.
(b) The Executive's entitlement to any other compensation or
benefits shall be determined in accordance with the Company's employee benefit
plans (including, the plans listed on Appendix A) and other applicable programs,
policies and practices then in effect.
4. Notice of Termination. Following a Change in Control, any purported
termination of the Executive's employment by the Company and/or the Employer
shall be communicated by Notice of Termination to the Executive. For purposes of
this Agreement, no such purported termination shall be effective without such
Notice of Termination.
5. Excise Tax Limitation.
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(a) Notwithstanding anything contained in this Agreement to the
contrary, to the extent that the payments and benefits provided under this
Agreement and benefits provided to, or for the benefit of, the Executive under
any other Company plan or agreement (such payments or benefits are collectively
referred to as the "Payments") would be subject to the excise tax (the "Excise
Tax") imposed under Section 4999 of the Internal Revenue Code of l986, as
amended (the "Code"), the Payments shall be reduced (but not below zero) if and
to the extent necessary so that no Payment to be made or benefit to be provided
to the Executive shall be subject to the Excise Tax (such reduced amount is
hereinafter referred to as the "Limited Payment Amount"). The reduction provided
for in the preceding sentence shall not apply, and Section 6 below shall apply,
if the Payments, prior to any reduction in accordance with the preceding
sentence, exceed one hundred and ten percent (110%) of the maximum amount which
could be received without incurring the Excise Tax.
(b) If a reduction is required pursuant to Section 5(a), unless the
Executive shall have given prior written notice specifying a different order to
the Company to effectuate the Limited Payment Amount, the Company shall reduce
or eliminate the Payments by first reducing or eliminating those payments or
benefits which are not payable in cash and then by reducing or eliminating cash
payments, in each case in reverse order beginning with payments or benefits
which are to be paid the farthest in time for the Determination (as hereinafter
defined). Any notice given by the Executive pursuant to the preceding sentence
shall take precedence over the provisions of any other plan, arrangement or
agreement governing the Executive's rights and entitlements to any benefits or
compensation.
(c) An initial determination as to whether the Payments shall be
reduced to the Limited Payment Amount pursuant to the Plan and the calculation
of such Limited Payment Amount shall be made at the Company's expense by an
accounting firm selected by the Company which is designated as one of the five
largest accounting firms in the United States (the "Accounting Firm"). The
Accounting Firm shall provide its determination (the "Determination") together
with detailed supporting calculations and documentation to the Company and the
Executive within five (5) days of the Termination Date if applicable, or such
other time as requested by the Company or by the Executive (provided the
Executive reasonably believes that any of the Payments may be subject to the
Excise Tax) and, if the Accounting Firm determines that no Excise Tax is payable
by the Executive with respect to
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a Payment or Payments, it shall furnish to the Executive an opinion reasonably
acceptable to the Executive that no Excise Tax will be imposed with respect to
any such Payment or Payments. Within ten (10) days of the delivery of the
Determination to the Executive, the Executive shall have the right to dispute
the Determination (the "Dispute"). If there is no Dispute, the Determination
shall be binding, final and conclusive upon the Company and the Executive
subject to the application of Section 5(d) below.
(d) As a result of the uncertainty in the application of Sections
4999 and 280G of the Code, it is possible that the Payments to be made to, or
provided for the benefit of, the Executive either have been made or will not be
made by the Company which, in either case, will be inconsistent with the
limitations provided in Section 5(a) (hereinafter referred to as an "Excess
Payment" or "Underpayment" respectively). If it is established, pursuant to a
final determination of a court or an Internal Revenue Service (the "IRS")
proceeding which has been finally and conclusively resolved, that an Excess
Payment has been made, such Excess Payment shall be deemed for all purposes to
be a loan to the Executive made on the date the Executive received the Excess
Payment and the Executive shall repay the Excess Payment to the Company on
demand (but not less than ten (10) days after written notice is received by the
Executive) together with interest on the Excess Payment at the applicable
"federal short term rate" prescribed pursuant to Code section 1274(d)(1)(C)(i)
(hereinafter the "Applicable Federal Rate") from the date of the Executive's
receipt of such Excess Payment until the date of such repayment. In the event
that it is determined (i) by the Accounting Firm, the Company (which shall
include the position taken by the Company, or together with its consolidated
group, on its federal income tax return) or the IRS, (ii) pursuant to a
determination by a court, or (iii) upon the resolution to the Executive's
satisfaction of the Dispute, that an Underpayment has occurred, the Company
shall pay an amount equal to the Underpayment to the Executive within ten (10)
days of such determination or resolution together with interest on such amount
at the Applicable Federal Rate from the date such amount would have been paid to
the Executive until the date of payment.
6. Excise Tax Indemnification. If the payments and benefits provided under
this Agreement and benefits provided to, or for the benefit of, the Executive
under any other Company plan or agreement are subject to the excise tax imposed
under Section 4999 of the Internal Revenue Code of l986, as amended (the
"Code"), or under any other similar provision of the laws of any state or local
jurisdiction within the United States (the "Excise Tax"), the Company shall
indemnify and hold harmless the Executive and the Executive's
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heirs, executors, administrators and permitted assigns (all such aforesaid
parties shall be referred to as "Indemnified Parties") from and against any loss
("the Loss") incurred by imposition on the Executive of the Excise Tax, such
indemnification to be implemented by paying to the Indemnified Parties an amount
("Indemnification Payment") as hereinafter provided. The intent of this Section
6 is to provide for payments or reimbursements on a grossed-up basis which are
sufficient, but not more than sufficient, to make the Indemnified Parties
economically whole with respect to any Excise Tax imposed on the Executive's
Share, any costs of contesting any such Excise Tax and any other taxes imposed
by reason of a loan to the Indemnified Parties pending resolution of any such
contest, and the foregoing provisions are to be interpreted accordingly.
6.1. Amount of Indemnification Payment. The Indemnification Payment
shall be the amount which, after deduction of all income taxes and additional
federal, state and local taxes (including, without limitation, any additional
Excise Tax) required to be paid by the Executive in respect of receipt of the
Indemnification Payment (assuming, for this purpose, that the Executive is
subject to the highest marginal rate of federal income taxation in effect during
the calendar year in which the Indemnification Payment is to be made and that
state and local income taxes are due for such year at the highest marginal rates
of taxation in effect in the state and locality of the Executive's residence on
the date of payment, and applying the maximum reduction in federal income taxes
which could be obtained from deduction of such state and local taxes, but
assuming that the Executive has no other deductions or credits available to
reduce such taxes), shall be equal to the sum of (i) the Excise Tax resulting in
the Loss and (ii) the net amount of any interest, penalties or additions to tax
payable to any taxing authority (after allowing for the deduction of such
amounts, to the extent properly deductible, for federal, state or local income
tax purposes) as a result of the Loss. The amount determined above shall be
adjusted to take into account on a grossed-up basis any expenses described in
Section 6.3(a) and any additional taxes incurred by reason of the inclusion in
income of, or imputation of, interest on any advance pursuant to Section 6.3(b).
6.2. Time of Indemnification Payment. The Indemnification Payment
(or each applicable portion thereof) shall be made within thirty (30) days after
the compensation or benefits (or each applicable portion thereof) to which the
Excise Tax (as determined by the Company) relates is received by the Executive.
Additional Indemnification Payments shall be made within thirty (30) days after
receipt by the Company of written notice from the
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Executive of any claim by a taxing authority that any additional Excise Tax is
due, which notice by the Executive shall include a copy of the written statement
from the taxing authority setting forth the amount of additional tax, interest,
penalties or additions to tax claimed to be due in respect thereof; provided
that, if a contest is being conducted pursuant to Section 6.3 below, any
additional Indemnification Payments (or applicable portion thereof) shall not be
required to be made shall until 30 days after the completion or termination of
such contest except as provided in Section 6.3(b) below. Any Indemnification
Payment required hereunder and not timely made shall accrue interest until paid
at the Applicable Federal Rate.
6.3. Management of Tax Contests. The Company shall have the sole and
exclusive right to initiate and to conduct on behalf of the Indemnified Parties
all aspects of any contest or appeal of any tax controversy relating to the
Excise Tax. The Indemnified Parties shall cooperate with the Company in the
conduct of any such contest or appeal (at the expense of the Company). The
indemnifications provided for in this Section 6 are conditional on the Company
receiving from the Indemnified Parties timely notice of any actual or threatened
tax controversy relating to the Excise Tax (including, without limitation, an
inquiry or notice of audit by a taxing authority with respect to the years
involved or any request for extension of the period for assessment or collection
of taxes for such years) and upon the continuing cooperation of the Indemnified
Parties during the course of any such contest or appeal.
(a) During the course of any such contest or appeal the Company
shall promptly defray any and all expenses that the Indemnified Parties may
incur as a result of contesting such proposed Excise Tax, including, without
limitation, indemnification and prompt payment of all costs, legal and
accounting fees and disbursements, bonding fees, or other litigation related
expenses so incurred.
(b) If the Company shall elect to contest a proposed Excise Tax by
causing the Indemnified Parties to make payment and then seek a refund, then the
Company shall advance to the Indemnified Parties, on an interest-free basis, the
aggregate amount of the required payment. If as a result of such contest a
refund becomes payable to the Indemnified Parties, upon receipt of such refund
the Indemnified Parties shall promptly pay over to the Company the amount of
such refund (and included interest) received by the Indemnified Parties (which
amount shall be deemed to be in repayment of the loan advanced by the Company to
the extent fairly attributable thereto), subject to offset of any
Indemnification Payment then due and owing by the Company to the
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Indemnified Parties pursuant to this Section 6. Upon final denial of any such
refund or a portion thereof, the Company shall forgive the amount of such
advance fairly attributable to the amount not refunded (which forgiveness shall
be applied against the Indemnification Payment determined under Section 6.1.
7. Successors; Nonalienation.
7.1. Successors.
(a) This Agreement shall be binding upon and shall inure to the
benefit of the Company, its Successors and Assigns and the Company shall require
any Successor and Assigns 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 or assignment had taken place.
(b) This Agreement shall inure to the benefit of and be enforceable
by the Executive's legal personal representative.
7.2. Nonalienation. Neither this Agreement nor any right or interest
hereunder shall be assignable or transferable by the Executive, the Executive's
beneficiaries or legal representatives, except by will or by the laws of descent
and distribution.
8. Settlement of Claims and Resolution of Disputes. The Company's
obligation to make the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any circumstances,
including, without limitation, any set-off, counterclaim, recoupment, defense or
other right which the Company may have against the Executive or others. Any
disputes arising under or in connection with this Agreement shall, at the
discretion of the Executive or the Company, be resolved by binding arbitration,
to be held in Pittsburgh, Pennsylvania, in accordance with the rules and
procedures of the American Arbitration Association. Judgment upon the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction
thereof. If arbitration is not requested by either party, any action brought by
any party to this Agreement shall be brought and maintained in a court of
competent jurisdiction in Pittsburgh, Pennsylvania.
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9. Fees and Expenses.
(a) Subject to Section 9(b) below, the Company shall pay all
reasonable legal fees and related expenses (including the costs of experts,
evidence and counsel) incurred by the Executive as they become due as a result
of (1) the Executive's termination of employment (including all such fees and
expenses, if any, incurred in contesting or disputing any such termination of
employment), (2) the Executive seeking to obtain or enforce any right or benefit
provided by this Agreement or by any other plan or arrangement maintained by the
Company under which the Executive is or may be entitled to receive benefits, and
(3) the Executive's hearing before the Board as contemplated in Section 2.4 of
this Agreement; provided, however, that the circumstances set forth in clauses
(1) and (2) (other than as a result of the Executive's termination of employment
under circumstances described in Sections 2.5(c) and 2.8(b)) occurred on or
after a Change in Control.
(b) Section 9(a) shall not apply, and all legal fees and related
expenses incurred by the Executive shall remain the responsibility of the
Executive, if the Executive does not prevail on at least one material issue in
dispute in such contest or dispute.
10. Notice. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by certified mail, return receipt requested,
postage prepaid, addressed to the respective addresses last given by each party
to the other, provided that all notices to the Company shall be directed to the
attention of the Board with a copy to the Secretary of the Company. All notices
and communications shall be deemed to have been received on the date of delivery
thereof or on the third business day after the mailing thereof, except that
notice of change of address shall be effective only upon receipt.
11. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Company (except for any
severance or termination policies, plans, programs or practices) and for which
the Executive may qualify, nor shall anything herein limit or reduce such rights
as the Executive may have under any other agreements with the Company (except
for any severance or termination agreement). Amounts which are vested benefits
or which the Executive is otherwise entitled to receive under any plan or
program of the Company shall be payable in
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accordance with such plan or program, except as explicitly modified by this
Agreement.
12. Miscellaneous.
(a) No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
and signed by the Executive and the Company. 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 agreement 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.
(b) Notwithstanding Section 12(a) or any other provision of this
Agreement to the contrary, if consummation of a transaction may be contingent on
the parties' ability to use pooling of interests accounting and the Company
reasonably determines (after consultation with its independent auditors) that a
provision of this Agreement would preclude the use of pooling of interests
accounting with respect to such transaction, the Company may, with or without
the acquiescence of the Executive, eliminate or modify that provision to the
extent required to allow pooling of interests accounting.
13. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the Commonwealth of Pennsylvania without
giving effect to the conflict of laws principles thereof.
14. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
15. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto
with respect to the subject matter hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE TO FOLLOW.]
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by its duly authorized officer and the Executive has executed this Agreement as
of the day and year first above written.
X. X. XXXXX COMPANY
ATTEST: By:
---------------------------------
Name: D.E.I. Xxxxx
Title: Senior Vice President -
------------------------------
Name: Xxxx Xxxxxxxxxx Corporate and Government
Title: Secretary Affairs and Chief
Administrative Officer
By:
---------------------------------
[Insert Name of the Executive]
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APPENDIX A
COMPENSATION AND BENEFIT PLANS
Retirement Plans
X. X. Xxxxx Company Employees Retirement and Savings Plan
Employees' Retirement System of X. X. Xxxxx Company Plan "A" - For Salaried
Employees
X. X. Xxxxx Company Supplemental Executive Retirement Plan
X. X. Xxxxx Company Employees Retirement and Savings Excess Plan
Welfare Plans
X. X. Xxxxx Company Non-bargaining Employees Welfare Benefit Program
Components of Welfare Benefits Program
- Medical and Prescription Drug Coverage
- Dental Coverage
- Vision Coverage
- Short-Term Disability Plan
- Medical and Dependent Care Flexible Spending Accounts
- Tuition Reimbursement Plan
X. X. Xxxxx Company Voluntary Employees' Beneficiary Association Long
Term Disability Plan*
X. X. Xxxxx Company Severance Pay Plan
Executive Life Insurance Plan
Executive Group Umbrella Liability Plan
Long Term Care Plan
* Executives are eligible for Supplemental Disability coverage on preferred
terms with UNUM Provident. This is a voluntary program, at the executive's
own expense.
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APPENDIX A (CONT'D)
COMPENSATION AND BENEFIT PLANS
Other Compensation and Benefit Plans
X. X. Xxxxx Company Incentive Compensation Plan ("SSP")
X. X. Xxxxx Company Senior Executive Incentive Compensation Plan
Global Stock Purchase Plan
1986 Deferred Compensation Program for Executives of X. X. Xxxxx Company and
Affiliated Companies
X. X. Xxxxx Company Executive Deferred Compensation Plan
Stock Option Plans
- X. X. Xxxxx Company 1990 Stock Option Plan
- X. X. Xxxxx Company 1994 Stock Option Plan
- X. X. Xxxxx Company 1996 Stock Option Plan
- X. X. Xxxxx Company 2000 Stock Option Plan
- X. X. Xxxxx Company FY2003 Stock Incentive Plan
Plus any employee benefit plans, programs and practices that would be specific
to an Executive who does not participate in U.S. benefit plans, programs and
practices.
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