AMENDED AND RESTATED CHANGE OF CONTROL EMPLOYMENT AGREEMENT
EXHIBIT
99.1
AMENDED
AND RESTATED
AGREEMENT
by and between BorgWarner Inc., a Delaware corporation (the “Company”) and
____________ (the “Executive”) dated as of the ___ day of _____________,
2009.
WHEREAS,
the Board of Directors of the Company (the “Board”), has determined that it is
in the best interests of the Company and its stockholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined below) of
the Company. The Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal uncertainties
and risks created by a pending or threatened Change of Control and to encourage
the Executive’s full attention and dedication to the Company currently and in
the event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other
corporations.
[WHEREAS,
because the Executive [has] [will obtain] intimate and valuable knowledge and
experience in the operation of the Company’s business, as well as technical,
financial, customer and other confidential information related to the Company’s
business, as a condition to the Company’s willingness to enter into this
Agreement, the Company has required that the Executive execute and deliver the
[Non-Compete Agreement] attached to this Agreement as Exhibit A (the
“Non-Compete”), pursuant to which Executive has agreed not to compete with the
Company or solicit the Company’s employees and customers during [the term of
this Agreement] [Executive’s employment with the Company] and during
the [one year] [18 month] period following Executive’s termination of
employment with the Company.]
WHEREAS,
the Company would not have entered into this Agreement but for Executive’s
execution of the Non-Compete and, accordingly, contemporaneous with the
execution of this Agreement, the Executive and the Company have entered into the
Non-Compete.
NOW,
THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain
Definitions. (a) The “Effective Date” shall mean
the first date during the Change of Control Period (as defined in Section 1(b))
on which a Change of Control (as defined in Section 2)
occurs. Anything in this Agreement to the contrary notwithstanding,
if (i) the Executive’s employment with the Company is terminated by the Company,
(ii) the Date of Termination is prior to the date on which a Change of Control
occurs, and (iii) it is reasonably demonstrated by the Executive that such
termination of employment (A) was at the request of a third party that has taken
steps reasonably calculated to effect a Change of Control or (B) otherwise arose
in connection with or anticipation of a Change of Control, then for all purposes
of this
2. Agreement
the “Effective Date” shall mean the date immediately prior to such Date of
Termination.
(b) The
“Change of Control Period” shall mean the period commencing on the date hereof
and ending on the third anniversary of the date hereof; provided, however, that
commencing on the date one year after the date hereof, and on each annual
anniversary of such date (such date and each annual anniversary thereof shall be
hereinafter referred to as the “Renewal Date”), unless previously terminated,
the Change of Control Period shall be automatically extended so as to terminate
three years from such Renewal Date, unless at least 60 days prior to the Renewal
Date the Company shall give notice to the Executive that the Change of Control
Period shall not be so extended.
3. Change of
Control. For the purpose of this Agreement, a “Change of
Control” shall mean:
(a) The
acquisition by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the
then outstanding shares of common stock of the Company (the “Outstanding Company
Common Stock”) or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the “Outstanding Company Voting Securities”); provided, however, that for
purposes of this subsection (a), the following acquisitions shall not constitute
a Change of Control: (W) any acquisition directly from the Company,
(X) any acquisition by the Company, (Y) any acquisition by
any employee benefit plan (or related trust) sponsored or maintained by the
Company or any entity controlled by the Company, (Z) any acquisition pursuant to
a transaction which complies with clauses (i), (ii) and (iii) of subsection (c)
of this Section 2;
(b) Individuals
who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease
for any reason to constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company’s stockholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board;
(c) Consummation
by the Company of a reorganization, statutory share exchange, merger or
consolidation or similar transaction involving the Company or any of its
subsidiaries or sale or other disposition of all or substantially all of the
assets of the Company or the acquisition of assets or stock of another entity by
the Company or any of its subsidiaries (each of the foregoing, a “Business
Combination”), in each case, unless, following such Business Combination, (i)
all or substantially all of the individuals and entities that were the
beneficial owners, respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 60%
of,
(d) respectively,
the then outstanding shares of common stock (or, for a non-corporate entity,
equivalent securities) and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors (or,
for a non-corporate entity, equivalent governing body), as the case may be, of
the entity resulting from such Business Combination (including,
without limitation, an entity which as a result of such transaction owns the
Company or all or substantially all of the Company’s assets either directly or
through one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may
be, (ii) no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock (or, for a non-corporate entity, equivalent securities)
of the entity resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such entity except to the
extent that such ownership existed prior to the Business Combination
and (iii) at least a majority of the members of the board of directors (or, for
a non-corporate entity, equivalent governing body) of the entity resulting from
such Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing for
such Business Combination; or
(e) Approval
by the stockholders of the Company of a complete liquidation or dissolution of
the Company.
4. Employment
Period. The Company hereby agrees to continue the Executive in
its employ, and the Executive hereby agrees to remain in the employ of the
Company subject to the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on the second anniversary of such
date (the “Employment Period”). The Employment Period shall terminate
upon the Executive’s termination of employment for any reason.
5. Terms of
Employment. (a) Position and
Duties. (i) During the Employment Period, (A) the
Executive’s position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant of those held,
exercised and assigned to the Executive at any time during the 120-day period
immediately preceding the Effective Date and (B) the Executive’s services shall
be performed at the location where the Executive was employed immediately
preceding the Effective Date or any office or location less than 35 miles from
such location.
(ii) During
the Employment Period, and excluding any periods of vacation and sick leave to
which the Executive is entitled, the Executive agrees to devote reasonable
attention and time during normal business hours to the business and affairs of
the Company and, to the extent necessary to discharge the responsibilities
assigned to the Executive hereunder, to use the Executive’s reasonable best
efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a
violation of this Agreement for the Executive to (A) serve on corporate, civic
or charitable boards or committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (C) manage personal
investments, so long as such activities do not significantly interfere with the
performance of the
(iii) Executive’s
responsibilities as an employee of the Company in accordance with this
Agreement. It is expressly understood and agreed that to the extent
that any such activities have been conducted by the Executive prior to the
Effective Date, the continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to the Effective Date
shall not thereafter be deemed to interfere with the performance of the
Executive’s responsibilities to the Company.
(b) Compensation. (i) Base
Salary. During the Employment Period, the Executive shall
receive an annual base salary (“Annual Base Salary”), which shall be paid at an
annual rate, at least equal to twelve times the highest monthly base salary paid
or payable, including any base salary which has been earned but deferred, to the
Executive by the Company and its affiliated companies in respect of the
twelve-month period immediately preceding the month in which the Effective Date
occurs. The Annual Base Salary shall be paid at such intervals as the
Company pays executive salaries generally. During the Employment
Period, the Annual Base Salary shall be reviewed no more than 12 months after
the last salary increase awarded to the Executive prior to the Effective Date
and thereafter at least annually. Any increase in Annual Base Salary
shall not serve to limit or reduce any other obligation to the Executive under
this Agreement. Annual Base Salary shall not be reduced after any
such increase and the term Annual Base Salary as utilized in this Agreement
shall refer to Annual Base Salary as so increased. As used in this
Agreement, the term “affiliated companies” shall include any company controlled
by, controlling or under common control with the Company.
(ii) Annual
Bonus. In addition to Annual Base Salary, the Executive shall
be awarded, for each fiscal year ending during the Employment Period, an annual
bonus (the “Annual Bonus”) in cash at least equal to the Executive’s average of
the bonuses paid or payable under the Company’s Management Incentive Bonus Plan,
or any comparable annual bonus under any predecessor or successor plan, in
respect of the last three full fiscal years prior to the Effective Date (or, if
the Executive was first employed by the Company after the beginning of the
earliest of such three fiscal years, the average of the bonuses paid or payable
under such plan(s) in respect of the fiscal years ending before the Effective
Date during which the Executive was employed by the Company, with such bonus
being annualized with respect to any such fiscal year if the Executive was not
employed by the Company for the whole of such fiscal year) (the “Recent Average
Bonus”). If the Executive has not been eligible to earn such a bonus
for any period prior to the Effective Date, the “Recent Annual Bonus” shall mean
the Executive’s target annual bonus for the year in which
the Effective Date occurs. Each such Annual Bonus shall be paid no
later than two and a half months after the end of the fiscal year for which the
Annual Bonus is awarded, unless the Executive shall elect to defer the receipt
of such Annual Bonus pursuant to an arrangement that meets the requirements of
Section 409A of the Internal Revenue Code of 1986, as amended (the
“Code”).
(iii) Incentive, Savings and
Retirement Plans. During the Employment Period, the Executive
shall be entitled to participate in all incentive, savings and retirement plans,
practices, policies and programs applicable generally to other peer executives
of the Company and its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Executive with incentive
opportunities (measured with respect to both regular and special incentive
opportunities, to the extent,
(iv) if any,
that such distinction is applicable), savings opportunities and retirement
benefit opportunities, in each case, less favorable, in the aggregate, than the
most favorable of those provided by the Company and its affiliated companies for
the Executive under such plans, practices, policies and programs as in effect at
any time during the 120-day period immediately preceding the Effective Date or
if more favorable to the Executive, those provided generally at any time after
the Effective Date to other peer executives of the Company and its affiliated
companies.
(v) Welfare Benefit
Plans. During the Employment Period, the Executive and/or the
Executive’s family, as the case may be, shall be eligible for participation in
and shall receive all benefits under welfare benefit plans, practices, policies
and programs provided by the Company and its affiliated companies (including,
without limitation, medical, prescription, dental, disability, salary
continuance, employee life, group life, accidental death and travel accident
insurance plans and programs) (“Company Welfare Benefit Plans”) to the extent
applicable generally to other peer executives of the Company and its affiliated
companies, but if the Company Welfare Benefit Plans provide the
Executive with benefits which are less favorable, in the aggregate, than the
most favorable of such plans, practices, policies and programs in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date (the “Former Company Welfare Benefit Plans”), the Company shall
provide the Executive with supplemental arrangements (such as individual
insurance coverage purchased by the Company for the Executive) such that the
Company Welfare Benefit Plans together with such supplemental arrangements
provide the Executive with benefits which are at least as favorable, in the
aggregate, as those provided by the Former Company Welfare Benefit
Plans.
(vi) Expenses. During
the Employment Period, the Executive shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Executive in
accordance with the most favorable policies, practices and procedures of the
Company and its affiliated companies in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its affiliated
companies.
(vii) Fringe
Benefits. During the Employment Period, the Executive shall be
entitled to fringe benefits, including, without limitation, tax and financial
planning services, payment of club dues, and, if applicable, use of an
automobile and payment of related expenses, in accordance with the most
favorable plans, practices, programs and policies of the Company and its
affiliated companies in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies; provided, that such
fringe benefits may be provided in cash or in kind, so long as the after-tax
benefits to the Executive of such fringe benefits are not diminished in the
aggregate.
(viii) Office and Support
Staff. During the Employment Period, the Executive shall be
entitled to an office or offices of a size and with furnishings and other
appointments, and to personal secretarial and other assistance, at least equal
to the most favorable of the foregoing provided to the Executive by the Company
and its affiliated companies at any time during the 120-day period immediately
preceding the
(ix) Effective
Date or, if more favorable to the Executive, as provided generally at any time
thereafter with respect to other peer executives of the Company and its
affiliated companies.
(x) Vacation. During
the Employment Period, the Executive shall be entitled to paid vacation as well
as paid days off for the period between Christmas and January 1, in each case in
accordance with the most favorable plans, policies, programs and practices of
the Company and its affiliated companies as in effect for the Executive at any
time during the 365-day period immediately preceding the Effective Date or, if
more favorable to the Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies.
6. Termination of
Employment. (a) Death or
Disability. The Executive’s employment shall terminate
automatically upon the Executive’s death during the Employment
Period. If the Company determines in good faith that the Disability
of the Executive has occurred during the Employment Period (pursuant to the
definition of Disability set forth below), it may give to the Executive written
notice in accordance with Section 12(b) of this Agreement of its intention to
terminate the Executive’s employment. In such event, the Executive’s
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by the Executive (the “Disability Effective Date”), provided that, within
the 30 days after such receipt, the Executive shall not have returned to
full-time performance of the Executive’s duties. For purposes of this
Agreement, “Disability” shall mean the absence of the Executive from the
Executive’s duties with the Company on a full-time basis for 180 consecutive
business days (or for 180 business days in any consecutive 365 days) as a result
of incapacity due to mental or physical illness which is determined to be total
and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive’s legal
representative.
(b) Cause. The
Company may terminate the Executive’s employment during the Employment Period
with or without Cause. For purposes of this Agreement, “Cause” shall
mean:
(i) the
willful and continued failure of the Executive to perform substantially the
Executive’s duties with the Company or one of its affiliates (other than any
such failure resulting from incapacity due to physical or mental illness or
following the Executive’s delivery of a Notice of Termination for Good Reason),
after a written demand for substantial performance is delivered to the Executive
by the Board or the Chief Executive Officer of the Company which specifically
identifies the manner in which the Board or Chief Executive Officer of the
Company believes that the Executive has not substantially performed the
Executive’s duties, or
(ii) the
willful engaging by the Executive in illegal conduct or gross misconduct which
is materially and demonstrably injurious to the Company.
For
purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered “willful” unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that
the
Executive’s
action or omission was in the best interests of the Company. Any act,
or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board, or if the Company is not the ultimate parent entity and is
not publicly-traded, the board of directors (or, for a non-corporate entity,
equivalent governing body) of the ultimate parent of the Company (the
“Applicable Board”)or upon the instructions of the Chief Executive Officer of
the Company or a senior officer of the Company or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by the Executive in good faith and in the best interests of the
Company. The cessation of employment of the Executive shall not be
deemed to be for Cause unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters of the entire membership of the Applicable Board
(excluding the Executive if the Executive is a member of the Applicable Board)
at a meeting of the Applicable Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is given an
opportunity, together with counsel for the Executive, to be heard before the
Applicable Board), finding that, in the good faith opinion of the Applicable
Board, the Executive is guilty of the conduct described in subparagraph (i) or
(ii) above, and specifying the particulars thereof in detail.
(c) Good
Reason. The Executive’s employment may be terminated by the
Executive for Good Reason or by the Executive voluntarily without Good
Reason. For purposes of this Agreement, “Good Reason” shall
mean:
(i) the
assignment to the Executive of any duties inconsistent in any respect with the
Executive’s position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as contemplated by Section
4(a) of this Agreement, or any other diminution in such position, authority,
duties or responsibilities (whether or not occurring solely as a result of the
Company’s ceasing to be a publicly traded entity), excluding for this purpose an
isolated, insubstantial and inadvertent action not taken in bad faith and which
is remedied by the Company promptly after receipt of notice thereof given by the
Executive;
(ii) any
failure by the Company to comply with any of the provisions of Section 4(b) of
this Agreement, other than an isolated, insubstantial and inadvertent
failure not occurring in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive;
(iii) the
Company’s requiring the Executive to be based at any office or location other
than as provided in Section 4(a)(i)(B) hereof or the Company’s requiring the
Executive to travel on Company business to a substantially greater extent than
required immediately prior to the Effective Date;
(iv) any
purported termination by the Company of the Executive’s employment otherwise
than as expressly permitted by this Agreement; or
(v) any
failure by the Company to comply with and satisfy Section 11(c) of this
Agreement.
For
purposes of this Section 5(c), any good faith determination of “Good Reason”
made by the Executive shall be conclusive.
(d) Incapacity. The
Executive’s mental or physical incapacity following the occurrence of an event
described above in clauses (i) through (v) of Section 5(c) shall not affect the
Executive’s ability to terminate employment for Good Reason and the Executive’s
death following delivery of a Notice of Termination for Good Reason shall not
affect the entitlement of the estate of the Executive to severance payments or
benefits provided hereunder upon a termination of employment for Good
Reason.
(e) Notice of
Termination. Any termination of employment by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a “Notice of
Termination” means a written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) to the extent applicable, 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 and (iii) if the Date of Termination (as defined below) is other than
the date of receipt of such notice, specifies the Date of Termination (which
date shall be not more than thirty days after the giving of such
notice). The failure by the Executive or the Company to set forth in
the Notice of Termination any fact or circumstance which contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or
the Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive’s or the Company’s rights hereunder.
(f) Date of
Termination. “Date of Termination” means (i) if the
Executive’s employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive’s
employment is terminated by the Company other than for Cause or
Disability, the date on which the Company notifies the Executive of such
termination, (iii) if the Executive resigns without Good Reason, the date on
which the Executive notifies the Company of such termination and (iv) if the
Executive’s employment is terminated by reason of death or Disability, the date
of death of the Executive or the Disability Effective Date, as the case may
be. Notwithstanding the foregoing, in no event shall the Date of
Termination occur until the Executive experiences a “separation from service”
within the meaning of Section 409A of the Code, and notwithstanding anything
contained herein to the contrary, the date on which such separation from service
takes place shall be the “Date of Termination.”
7. Obligations of the Company
upon Termination. (a) Good Reason; Other Than for
Cause, Death or Disability. If, during the Employment Period,
the Company shall terminate the Executive’s employment other than for Cause,
Death or Disability or the Executive shall terminate employment for Good
Reason:
8. the
Company shall pay to the Executive in a lump sum in cash within 30 days after
the Date of Termination the aggregate of the following amounts:
(A) the sum
of (1) the Executive’s Annual Base Salary through the Date of Termination to the
extent not theretofore paid, (2) the Executive’s business expenses that are
reimbursable pursuant to Section 4(b)(v) but have not been reimbursed by the
Company as of the Date of Termination; (3) the Executive’s Annual Bonus for the
fiscal year immediately preceding the fiscal year in which the Date of
Termination occurs, if such bonus has been determined but not paid as of the
Date of Termination; (4) any accrued vacation pay to the extent not theretofore
paid (the sum of the amounts described in subclauses (1), (2), (3) and (4), the
“Accrued Obligations”) and (5) an amount equal to the product of (x) the Recent
Average Bonus and (y) a fraction, the numerator of which is the number of days
in the current fiscal year through the Date of Termination, and the denominator
of which is 365 (the “Pro Rata Bonus”); provided, that
notwithstanding the foregoing, if the Executive has made an irrevocable election
under any deferred compensation arrangement subject to Section 409A of the Code
to defer any portion of the Annual Base Salary or the Annual Bonus described in
clauses (1) or (3) above, then for all purposes of this Section 6 (including,
without limitation, Sections 6(b) through 6(d)), such deferral election, and the
terms of the applicable arrangement shall apply to the same portion of the
amount described in such clause (1) or clause (3), and such portion shall not be
considered as part of the “Accrued Obligations” but shall instead be an “Other
Benefit” (as defined below); and
(B) the
amount equal to the product of (1) [two] [three] and (2) the sum of (x) the
Executive’s Annual Base Salary and (y) the Recent Average Bonus;
and
(C) an amount
equal to the product of (1) [two] [three] and (2) the sum of (a) the Company
Retirement Contributions (as defined in the BorgWarner Inc. Retirement Savings
Plan (“RSP”)) that would have been made under the RSP for the first Plan Year
(as defined in the RSP) ending after the Date of Termination if there had been
no Limitations (as defined below) on such Company Retirement Contributions and
(b) an amount equal to the Company Matching Contributions (as defined in the
RSP) that would have been made under the RSP in the first Plan Year after the
Date of Termination if there had been no Limitations on such Company Matching
Contributions, and assuming for these purposes that the Executive had elected to
defer the maximum amount of Compensation (as defined in the RSP) permitted by
the RSP (without regard to any Limitations on such deferral), and assuming for
purposes of calculating the amounts in clauses (a) and (b) that the Executive
had remained employed by the Company through the end of such Plan Year with
compensation equal to that required by Section 4(b)(i) and Section 4(b)(ii) of
this Agreement (“Limitations” meaning limitations contained in the RSP, the
Employee Retirement Income Security Act (“ERISA”) or the Code (including without
limitation the $150,000 cap on Compensation);
D) for [two]
[three] years following the Date of Termination (the “Benefits Period”), the
Company shall provide the Executive and his eligible dependents with medical and
dental insurance coverage (the “Health Care Benefits”) and life insurance
benefits no less favorable to those which the Executive and his spouse and
eligible dependents were receiving immediately prior to the Date of Termination
or, if more favorable to such persons, as in effect generally at any time
thereafter with respect to other peer executives of the Company and the
Affiliated Companies; provided, however, that the
Health Care Benefits shall be provided during the Benefits Period in such a
manner that such benefits are excluded from the Executive’s income for federal
income tax purposes; provided, further, however, that if the
Executive becomes re-employed with another employer and is eligible to receive
health care benefits under another employer-provided plan, the health care
benefits provided hereunder shall be secondary to those provided under such
other plan during such applicable period of eligibility. The receipt
of the Health Care Benefits shall be conditioned upon the Executive continuing
to pay the Applicable COBRA Premium with respect to the level of coverage that
the Executive has elected for the Executive and the Executive’s spouse and
eligible dependents (e.g., single, single plus
one, or family). During the portion of the Benefits Period in which
the Executive and his eligible dependents continue to receive coverage under the
Company’s Health Care Benefits plans, the Company shall pay to the Executive a
monthly amount equal to the Applicable COBRA Premium in respect of the maximum
level of coverage that the Executive could have elected to receive for the
Executive and the Executive’s spouse and eligible dependents if the Executive
were still an employee of the Company during the Benefits Period (e.g., single, single plus
one, or family) regardless of what level of coverage is actually elected, which
payment shall be paid in advance on the first payroll day of each month,
commencing with the month immediately following the Executive’s Date of
Termination. The Company shall use its reasonable best efforts to
ensure that, following the end of the Benefit Period, the Executive and the
Executive’s spouse and eligible dependents shall be eligible to elect continued
health coverage pursuant to Section 4980B of the Code or other applicable law
(“COBRA Coverage”), as if the Executive’s employment with the Company had
terminated as of the end of such period. For purposes of determining
eligibility (but not the time of commencement of benefits) of the Executive for
retiree welfare benefits pursuant to the Company’s retiree welfare benefit
plans, if any, the Executive shall be considered to have remained employed until
the end of the Benefit Period and to have retired on the last day of such
period. For purposes of this Provision, “Applicable COBRA Premium” means the
monthly premium in effect from time to time for coverage provided to former
employees under Section 4980B of the Code and the regulations thereunder with
respect to a particular level of coverage (e.g., single, single plus
one, or family).
(ii) the
Company shall, at its sole expense as incurred, provide the Executive with
outplacement services the scope and provider of which shall be selected by the
Executive in the Executive’s sole discretion, but the cost
(iii) thereof
shall not exceed $40,000; provided, further, that such
outplacement benefits shall end not later than the last day of the second
calendar year that begins after the Date of Termination; and
(iv) except as
otherwise set forth in the last sentence of Section 7, to the extent not
theretofore paid or provided, the Company shall timely pay or provide to the
Executive any other amounts or benefits required to be paid or provided or which
the Executive is eligible to receive under any plan, program, policy or practice
or contract or agreement of the Company and its affiliated companies (such other
amounts and benefits shall be hereinafter referred to as the “Other Benefits”)
in accordance with the terms of the underlying plans or agreements.
Notwithstanding
the foregoing provisions of Section 6(a)(i) and Section 6(a)(ii), in the event
that the Executive is a “specified employee” within the meaning of Section 409A
of the Code (as determined in accordance with the methodology established by the
Company as in effect on the Date of Termination) (a “Specified Employee”),
amounts that constitute “nonqualified deferred compensation” within the meaning
of Section 409A of the Code that would otherwise be payable and benefits that
would otherwise be provided under Section 6(a)(i) or Section 6(a)(ii) during the
six-month period immediately following the Date of Termination (other than the
Accrued Obligations) shall instead be paid, with interest on any delayed payment
at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Code
(“Interest”) determined as of the Date of Termination, or provided on the first
business day after the date that is six months following the Executive’s Date of
Termination (the “Delayed Payment Date”);
(b) Death. If
the Executive’s employment is terminated by reason of the Executive’s death
during the Employment Period, the Company shall provide the Executive’s estate
or beneficiaries with the Accrued Obligations and the Pro Rata Bonus and the
timely payment or delivery of the Other Benefits, and shall have no other
severance obligations under this Agreement. The Accrued Obligations
(subject to the proviso set forth in Section 6(a)(1)(A) to the extent
applicable) and the Pro Rata Bonus shall be paid to the Executive’s estate or
beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of
Termination. With respect to the provision of the Other Benefits, the
term “Other Benefits” as utilized in this Section 6(b) shall include, without
limitation, and the Executive’s estate and/or beneficiaries shall be entitled to
receive, benefits (either pursuant to a plan, program, practice or policy or an
individual arrangement) at least equal to the most favorable benefits provided
by the Company and the affiliated companies to the estates and beneficiaries of
peer executives of the Company and such affiliated companies under such plans,
programs, practices and policies relating to death benefits, if any, as in
effect with respect to other peer executives and their beneficiaries at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive’s estate and/or the Executive’s beneficiaries, as in
effect on the date of the Executive’s death with respect to other peer
executives of the Company and its affiliated companies and their
beneficiaries.
(c) Disability. If
the Executive’s employment is terminated by reason of the Executive’s Disability
during the Employment Period, the Company shall provide the Executive with the
Accrued Obligations and Pro Rata Bonus and the timely payment or delivery of the
Other Benefits in accordance with the terms of the underlying plans or
agreements, and shall have no other severance obligations under this
Agreement. The Accrued Obligations (subject to the proviso set forth
in Section 6(a)(1)(A) to the extent applicable) and the Pro Rata Bonus shall be
paid to the Executive in a lump sum in cash within 30 days of the Date of
Termination, provided, that in the
event that the Executive is a Specified Employee, the Pro Rata Bonus shall be
paid, with Interest, to the Executive on the Delayed Payment
Date. With respect to the provision of the Other Benefits, the term
“Other Benefits” as utilized in this Section 6(c) shall include, and the
Executive shall be entitled after the Disability Effective Date to receive,
disability and other benefits (either pursuant to a plan, program, practice or
policy or an individual arrangement) at least equal to the most favorable of
those generally provided by the Company and the affiliated companies to disabled
executives and/or their families in accordance with such plans, programs,
practices and policies relating to disability, if any, as in effect generally
with respect to other peer executives and their families at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to
the Executive and/or the Executive’s family, as in effect at any time thereafter
generally with respect to other peer executives of the Company and the
affiliated companies and their families.
(d) Cause; Other than for Good
Reason. If the Executive’s employment is terminated for
Cause during the Employment Period, the Company shall provide the Executive with
the Executive’s Annual Base Salary (subject to the proviso set forth in Section
6(a)(1)(A) to the extent applicable) through the Date of Termination, and the
timely payment or delivery of the Other Benefits, and shall have no other
severance obligations under this Agreement. If the Executive
voluntarily terminates employment during the Employment Period, excluding a
termination for Good Reason, the Company shall provide to the Executive the
Accrued Obligations and the Pro Rata Bonus and the timely payment or delivery of
the Other Benefits and shall have no other severance obligations under this
Agreement. In such case, all the Accrued Obligations (subject to the
proviso set forth in Section 6(a)(1)(A) to the extent applicable) and the Pro
Rata Bonus shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination, provided, that in the
event that the Executive is a Specified Employee, the Pro Rata Bonus shall be
paid, with Interest, to the Executive on the Delayed Payment Date.
9. Non-exclusivity of
Rights. Nothing in this Agreement shall prevent or limit the
Executive’s continuing or future participation in any plan, program, policy or
practice provided by the Company or any of its affiliated companies and for
which the Executive may qualify, nor, subject to Section 12(f), shall anything
herein limit or otherwise affect such rights as the Executive may have under any
other contract or agreement with the Company or any of its affiliated
companies. Amounts which are vested benefits or which the Executive
is otherwise entitled to receive under any plan, policy, practice or program of
or any contract or agreement with the Company or any of its affiliated companies
at or subsequent to the Date of Termination shall be payable in accordance with
such plan, policy, practice or program or contract or agreement except as
explicitly modified by this Agreement. Without limiting the
generality of the foregoing, the Executive’s resignation under this Agreement
with or without Good Reason, shall in no way affect the Executive’s ability to
terminate employment by reason of the Executive’s “retirement” under any
compensation and benefits plans, programs or arrangements of the affiliated
companies, including without limitation any retirement or pension plans or
arrangements or to be eligible to receive benefits under any compensation or
benefit plans, programs or arrangements of the Company or any of its affiliated
companies, including without limitation any retirement or pension plan or
arrangement of the Company or any of its affiliated companies or
substitute plans adopted by the Company or its successors, and
any termination which otherwise qualifies as Good Reason shall be
treated as such even if it is also a “retirement” for purposes of any such
plan. Notwithstanding the foregoing, if the Executive receives
payments and benefits pursuant to Section 6(a) of this Agreement, the Executive
shall not be entitled to any severance pay or benefits under any severance plan,
program or policy of the Company and the affiliated companies, unless otherwise
specifically provided therein in a specific reference to this
Agreement.
10. Full Settlement; Legal
Fees. 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 set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and except as
specifically provided in Section 6(a)(ii), such amounts shall not be reduced
whether or not the Executive obtains other employment. The Company
agrees to pay as incurred (within 10 days following the Company’s receipt of an
invoice from the Executive), at any time from the Effective Date through the
Executive’s remaining lifetime (or, if longer, through the 20th anniversary of
the Effective Date) to the full extent permitted by law, all legal fees and
expenses which the Executive may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company, the Executive or others of
the validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof whether such contest is
between the Company and the Executive or between either of them and any third
party, and (including as a result of any contest by the Executive about the
amount of any payment pursuant to this Agreement), plus in each case Interest
determined as of the date such legal fees and expenses were
incurred. In order to comply with Section 409A of the Code, in no
event shall the payments by the Company under this Section 8 be made later than
the end of the calendar year next following the calendar year in which such fees
and expenses were incurred, provided that the
Executive or the Executive’s estate shall have submitted an invoice for such
fees and expenses at least 10 days before the end of the calendar year next
following the calendar year in which such fees and expenses were incurred. The
amount of such legal fees and expenses that the Company is obligated to pay in
any given calendar year shall not affect the legal fees and expenses that the
Company is obligated to pay in any other calendar year, and the Executive’s
right to have the Company pay such legal fees and expenses may not be liquidated
or exchanged for any other benefit.
11. Certain Reduction of
Payments by the Company.
(a) Anything
in this Agreement to the contrary notwithstanding, in the event the independent
accounting firm then used by the Company or such other nationally recognized
certified public accounting firm as may be designated by the Executive (the
“Accounting Firm”) shall determine that receipt of all payments or distributions
by the Company or the affiliated companies in the nature of compensation to or
for the Executive’s benefit, whether paid or payable pursuant to this Agreement
or otherwise (a “Payment”), would subject the Executive to the excise tax under
Section 4999 of the Code, the Accounting Firm shall determine whether to reduce
any of the Payments paid or payable pursuant to this Agreement (the “Agreement
Payments”) to the Reduced Amount (as defined below). The Agreement
Payments shall be reduced to the Reduced Amount only if the Accounting Firm
determines that the Executive would have a greater Net After-Tax Receipt (as
defined below) of aggregate Payments if the Executive’s Agreement Payments were
reduced to the Reduced Amount. If the Accounting Firm determines that
the Executive would not have a greater Net After-Tax Receipt of aggregate
Payments if the Executive’s Agreement Payments were so reduced, the Executive
shall receive all Agreement Payments to which the Executive is entitled under
this Agreement.
(b) If the
Accounting Firm determines that aggregate Agreement Payments should be reduced
to the Reduced Amount, the Company shall promptly give the Executive notice to
that effect and a copy of the detailed calculation thereof. All
determinations made by the Accounting Firm under this Section 9 shall be binding
upon the Company and the Executive and shall be made as soon as reasonably
practicable and in no event later than fifteen (15) days following the Date of
Termination. For purposes of reducing the Agreement Payments to the
Reduced Amount, only amounts payable under this Agreement (and no other
Payments) shall be reduced. The reduction of the amounts payable
hereunder, if applicable, shall be made by reducing the payments and benefits
under the following sections in the following order: (i) Section
6(a)(i)(B), (ii) Section 6(a)(i)(C), (iii) Section 6(a)(i)(A)(5) and (iv)
Section 6(a)(ii). All fees and expenses of the Accounting Firm shall
be borne solely by the Company.
(c) As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that amounts will have been paid or distributed by the Company to or
for the benefit of the Executive pursuant to this Agreement which should not
have been so paid or distributed (“Overpayment”) or that additional amounts
which will have not been paid or distributed by the Company to or for the
benefit of the Executive pursuant to this Agreement could have been so paid or
distributed (“Underpayment”), in each case, consistent with the calculation of
the Reduced Amount hereunder. In the event that the Accounting Firm,
based upon the assertion of a deficiency by the Internal Revenue Service against
either the Company or the Executive which the Accounting Firm believes has a
high probability of success determines that an Overpayment has been made, the
Executive shall pay any such Overpayment to the Company together with Interest;
provided, however, that no
amount shall be payable by the Executive to the Company if and to the extent
such payment would not either reduce the amount on which the Executive is
subject to tax under Section 1 and Section 4999 of the Code or generate a refund
of such taxes. In the event that the Accounting Firm, based upon
controlling precedent or substantial authority, determines that an Underpayment
has occurred, any such Underpayment shall be paid promptly (and in no event
later than 60 days following the date on which the Underpayment is determined)
by the Company to or for the benefit of the Executive together with
Interest.
(d) For
purposes hereof, the following terms have the meanings set forth
below:
(i) “Reduced
Amount” shall mean the greatest amount of Agreement Payments that can be paid
that would not result in the imposition of the excise tax under Section 4999 of
the Code if the Accounting Firm determines to reduce Agreement Payments pursuant
to Section 9(a).
(ii) “Net
After-Tax Receipt” shall mean the present value (as determined in accordance
with Sections 280G(b)(2)(A)(ii) and 280G(d)(4) of the Code) of a Payment net of
all taxes imposed on the Executive with respect thereto under Sections 1 and
4999 of the Code and under applicable state and local laws, determined by
applying the highest marginal rate under Section 1 of the Code and under state
and local laws which applied to the Executive’s taxable income for the
immediately preceding taxable year, or such other rate(s) as the Accounting Firm
determined to be likely to apply to the Executive in the relevant tax
year(s).
(e) [To the
extent requested by the Executive, the Company shall cooperate with the
Executive in good faith in valuing, and the Accounting Firm shall take into
account the value of, services provided or to be provided by the Executive
(including without limitation, the Executive agreeing to refrain from performing
services pursuant to a covenant not to compete or similar covenant) before, on
or after the date of a change in ownership or control of the Company (within the
meaning of Q&A-2(b) of Section 280G of the Code), such that payments in
respect of such services (or refraining from performing such services) may be
considered reasonable compensation within the meaning of Q&A-9 and
Q&A-40 to Q&A-44 of Section 280G of the Code and/or exempt from the
definition of the term “parachute payment” within the meaning of Q&A-2(a) of
Section 280G of the Code in accordance with Q&A-5(a) of Section 280G of the
Code.]
12. Confidential
Information. The Executive shall hold in a fiduciary capacity
for the benefit of the Company all secret or confidential information, knowledge
or data relating to the Company or any of its affiliated companies, and their
respective businesses, which shall have been obtained by the Executive during
the Executive’s employment by the Company or any of its affiliated companies and
which shall not be or become public knowledge (other than by acts by the
Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive’s employment with the
Company, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those persons designated by it. In no event shall an asserted
violation of the provisions of this Section 10 constitute a basis for deferring
or withholding any amounts otherwise payable to the Executive under this
Agreement, but the Company otherwise shall be entitled to all other remedies
that may be available to it at law or equity.
13. Successors. (a) This
Agreement is personal to the Executive and without the prior written consent of
the Company shall not be assignable by the Executive other than by will or the
laws of descent and distribution. This Agreement shall inure to the
benefit of and be enforceable by the Executive’s legal
representatives.
(b) This
Agreement shall inure to the benefit of and be binding upon the Company and its
successors and assigns. Except as provided in Section 11(c), without
the prior written consent of the Executive this Agreement shall not be
assignable by the Company.
(c) The
Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. As used
in this Agreement, “Company” shall mean the Company as hereinbefore defined and
any successor to its business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or otherwise.
14. Miscellaneous. (a) This
Agreement shall be governed by and construed in accordance with the laws of the
State of Michigan, without reference to principles of conflict of
laws. The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect. Subject to the last
sentence of Section 12(g), this Agreement may not be amended or modified other
than by a written agreement executed by the parties hereto or their respective
successors and legal representatives.
(b) All
notices and other communications hereunder shall be in writing and shall be
given by hand delivery to the other party or by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:
If to the
Executive:
If to the
Company:
0000
Xxxxxx Xxxx
Xxxxxx
Xxxxx, Xxxxxxxx 00000
Attention: General Counsel
or to
such other address as either party shall have furnished to the other in writing
in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this
Agreement.
(d) The
Company may withhold from any amounts payable under this Agreement such Federal,
state, local or foreign taxes as shall be required to be withheld pursuant to
any applicable law or regulation.
(e) The
Executive’s or the Company’s failure to insist upon strict compliance with any
provision hereof or any other provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder, including,
without limitation, the right of the Executive to terminate employment for Good
Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be
deemed to be a waiver of such provision or right or any other provision or right
of this Agreement.
(f) The
Executive and the Company acknowledge that, except as may otherwise be provided
under any other written agreement between the Executive and the Company, the
employment of the Executive by the Company is “at will” and, subject to Section
1(a) of this Agreement, prior to the Effective Date, the Executive’s employment
may be terminated by either the Executive or the Company at any time prior to
the Effective Date, in which case the Executive shall have no further rights
under this Agreement. From and after the Effective Date this
Agreement shall supersede any other agreement between the parties with respect
to the subject matter hereof.
(g) The
Agreement is intended to comply with the requirements of Section 409A of the
Code or an exemption or exclusion therefrom and, with respect to amounts that
are subject to Section 409A of the Code, shall in all respects be administered
in accordance with Section 409A of the Code. Each payment under this
Agreement shall be treated as a separate payment for purposes of Section 409A of
the Code. In no event may the Executive, directly or indirectly,
designate the calendar year of any payment to be made under this
Agreement. If the Executive dies following the Date of Termination
and prior to the payment of the any amounts delayed on account of Section 409A
of the Code, such amounts shall be paid to the personal representative of the
Executive’s estate within 30 days after the date of the Executive’s
death. All reimbursements and in-kind benefits provided under this
Agreement that constitute deferred compensation within the meaning of Section
409A of the Code shall be made or provided in accordance with the requirements
of Section 409A of the Code, including, without limitation, that (i) in no event
shall reimbursements by the Company under this Agreement be made later than the
end of the calendar year next following the calendar year in which the
applicable fees and expenses were incurred, provided, that the
Executive shall have submitted an invoice for such fees and expenses at least 10
days before the end of the calendar year next following the calendar year in
which such fees and expenses were incurred; (ii) the amount of in-kind benefits
that the Company is obligated to pay or provide in any given calendar year shall
not affect the in-kind benefits that the Company is obligated to pay or provide
in any other calendar year; (iii) the Executive’s right to have the Company pay
or provide such reimbursements and in-kind benefits may not be liquidated or
exchanged for any other benefit; and (iv) in no event shall the Company’s
obligations to make such reimbursements or to provide such in-kind benefits
apply later than the Executive’s remaining lifetime (or if longer, through the
20th anniversary of the Effective Date). Prior to the Effective Date
but within the time period permitted by the applicable Treasury Regulations, the
Company may, in consultation with the Executive, modify the Agreement, in the
least restrictive manner necessary and without any diminution in the value of
the payments to the Executive, in order to cause the provisions of the Agreement
to comply with the requirements of Section 409A of the Code, so as to avoid the
imposition of taxes and penalties on the Executive pursuant to
Section 409A of the Code.
15. Survivorship. Upon
the expiration or other termination of this Agreement or the Executive’s
employment, the respective rights and obligations of the parties hereto shall
survive to the extent necessary to carry out the intentions of the parties under
this Agreement.
SIGNATURE
PAGE FOLLOWS
IN
WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused this Agreement to be executed in its name on its behalf, all as of the
day and year first above written.
| EXECUTIVE | |||
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By:
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/s/ | |
| Name: | |||
| Title: | |||
| BORGWARNER INC. | |||
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By:
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/s/ Xxxx X. Xxxxxxxxxx | |
| Name: Xxxx X. Xxxxxxxxxx | |||
| Title: Vice President, General Counsel and Secretary | |||
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