AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT BETWEEN AND EASTMAN CHEMICAL COMPANY
_________________________________
AMENDED
AND RESTATED CHANGE IN CONTROL AGREEMENT
BETWEEN
_________________
AND
XXXXXXX
CHEMICAL COMPANY
_________________________________________________________________
148
AMENDED
AND RESTATED CHANGE IN CONTROL AGREEMENT
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1.
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Certain
Definitions
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150
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2.
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Change
in Control
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150
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3.
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Employment
Period
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151
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4.
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Terms
of Employment
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152
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(a) Position
and Duties
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152
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(b) Compensation
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152
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5.
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Termination
of Employment
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153
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(a) Death,
Retirement or Disability
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153
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(b) Cause
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153
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(c) Good
Reason
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154
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(d) Notice
of Termination
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155
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(e) Date
of Termination
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155
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6.
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Obligations
of the Company upon Termination
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155
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(a) Termination
by Executive for Good Reason; Termination by the Company other than for
Cause or Disability
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155
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(b) Death,
Disability or Retirement
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157
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(c) Cause;
Other than for Good Reason
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157
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7.
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Non-exclusivity
of Rights
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157
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8.
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Full
Settlement; No Mitigation
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157
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9.
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Costs
of Enforcement
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157
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10.
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Certain
Additional Payments by the Company
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158
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11.
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Confidential
Information
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160
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12.
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Arbitration
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160
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13.
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Successors
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161
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14.
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Code
Section 409A
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161
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15.
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Miscellaneous
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162
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(a) Governing
Law
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162
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(b) Captions
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162
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(c) Amendments
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162
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(d) Notices
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162
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(e) Severability
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163
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(f) Withholding
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163
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(g) Waivers
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163
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(h) Status
Before and After Effective Date
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163
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(i) Indemnification
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163
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(j) Related
Agreements
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163
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(k) Action
by the Company or the Board
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163
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(l) Counterparts
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163
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149
AMENDED
AND RESTATED
THIS AMENDED AND RESTATED CHANGE IN
CONTROL AGREEMENT (this “Agreement”) is entered into by and between Xxxxxxx
Chemical Company, a Delaware corporation (the “Company”) and _________________(“Executive”),
as of December 31, 2008. This Agreement amends and restates the Change in
Control between the parties dated as of December 1, 2005 (the “Original
Agreement”) for the purposes of complying with Section 409A of the Internal
Revenue Code of 1986, as amended, and the Treasury Regulations and Internal
Revenue Service guidance thereunder.
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 Executive, notwithstanding the possibility, threat or
occurrence of a Change in Control (as defined below) of the
Company. The Board believes it is imperative to diminish the
inevitable distraction of Executive by virtue of the personal uncertainties and
risks created by a threatened or pending Change in Control and to encourage
Executive’s full attention and dedication to the Company currently and in the
event of any threatened or pending Change in Control, and to provide Executive
with compensation and benefits arrangements upon a Change in Control. Therefore,
in order to accomplish these objectives, the Board has caused the Company to
enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS
FOLLOWS:
1. Certain
Definitions.
(a) The
“Effective Date” shall mean the first date during the Change in Control Period
(as defined in Section l(b)) on which a Change in Control (as defined in Section
2) occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change in Control occurs and if Executive’s employment
with the Company is terminated (either by the Company without Cause or by
Executive for Good Reason, as provided later in this Agreement) within six (6)
months prior to the date on which the Change in Control occurs, and if it is
reasonably demonstrated by Executive that such termination of employment (i) was
at the request of a third party who has taken steps reasonably calculated to
effect a Change in Control or (ii) otherwise arose in connection with or
anticipation of a Change in Control, then for all purposes of this Agreement the
“Effective Date” shall mean the date immediately prior to the date of such
termination of employment, and where any payment hereunder is specified to be
made within a certain time after the Date of Termination, such payment shall be
made within such specified time after the Change in Control (or any later date
required by Section 14 hereof).
(b) The
“Change in Control Period” shall mean the period commencing on the date of the
Original Agreement and ending on the third anniversary of the date thereof;
provided, however, that commencing on the date one year after the date of the
Original Agreement, 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 in 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 Executive that the Change in Control Period shall not be so
extended.
(c) “Code”
shall mean the Internal Revenue Code of 1986, as amended from time to time, and
includes a reference to the underlying proposed or final regulations, as
applicable.
2. Change in
Control. For the purposes of this Agreement, a “Change in
Control” shall mean the occurrence of any of the following events:
150
(a) individuals
who, as of December 1, 2005, constitute the Board of Directors of the Company
(the “Incumbent Directors”) cease for any reason to constitute at least a
majority of such Board, provided that any person becoming a director after
December 1, 2005 and whose election or nomination for election was approved by a
vote of at least a majority of the Incumbent Directors then on the Board shall
be an Incumbent Director; provided, however, that no
individual initially elected or nominated as a director of the Company as a
result of an actual or threatened election contest with respect to the election
or removal of directors (“Election Contest”) or other actual or threatened
solicitation of proxies or consents by or on behalf of any “person” (such term
for purposes of this definition being as defined in Section 3(a)(9) of the
Exchange Act of 1934, as amended (“Exchange Act”), and as used in Section
13(d)(3) and 14(d)(2) of the Exchange Act) other than the Board (“Proxy
Contest”), including by reason of any agreement intended to avoid or settle any
Election Contest or Proxy Contest, shall be deemed an Incumbent Director;
or
(b) any
person is or becomes a “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of either (A) 35% or more of the
then-outstanding shares of common stock of the Company (“Company Common Stock”)
or (B) securities of the Company representing 35% or more of the combined voting
power of the Company’s then outstanding securities eligible to vote for the
election of directors (the “Company Voting Securities”); provided, however, that for
purposes of this subsection (b), the following acquisitions shall not constitute
a Change in Control: (i) an acquisition directly from the Company, (ii) an
acquisition by the Company or a subsidiary of the Company, or (iii) an
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any subsidiary of the Company; or
(c) the
consummation of a reorganization, merger, consolidation, statutory share
exchange or similar form of corporate transaction involving the Company or a
subsidiary (a “Reorganization”), or the sale or other disposition of all or
substantially all of the Company’s assets (a “Sale”) or the acquisition of
assets or stock of another corporation (an “Acquisition”), unless immediately
following such Reorganization, Sale or Acquisition: (A) all or substantially all
of the individuals and entities who were the beneficial owners, respectively, of
the outstanding Company Common Stock and outstanding Company Voting Securities
immediately prior to such Reorganization, Sale or Acquisition beneficially own,
directly or indirectly, more than 50% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such Reorganization, Sale or
Acquisition (including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of the Company’s
assets or stock either directly or through one or more subsidiaries, the
“Surviving Corporation”) in substantially the same proportions as their
ownership, immediately prior to such Reorganization, Sale or Acquisition, of the
outstanding Company Common Stock and the outstanding Company Voting Securities,
as the case may be, and (B) no person (other than (i) the Company or any
subsidiary of the Company, (ii) the Surviving Corporation or its ultimate parent
corporation, or (iii) any employee benefit plan or related trust sponsored or
maintained by any of the foregoing) is the beneficial owner, directly or
indirectly, of 35% or more of the total common stock or 35% or more of the total
voting power of the outstanding voting securities eligible to elect directors of
the Surviving Corporation, and (C) at least a majority of the members of the
board of directors of the Surviving Corporation were Incumbent Directors at the
time of the Board’s approval of the execution of the initial agreement providing
for such Reorganization, Sale or Acquisition (any Reorganization, Sale or
Acquisition which satisfies all of the criteria specified in (A), (B) and (C)
above shall be deemed to be a “Non-Qualifying Transaction”); or
(d) approval
by the shareowners of the Company of a complete liquidation or dissolution of
the Company.
3. Employment
Period. The Company hereby agrees to continue Executive in its
employ, and 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”).
151
4. Terms of
Employment.
(a) Position and
Duties.
(i) During the Employment
Period, (A) 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 at any time during the 120-day period immediately
preceding the Effective Date, and (B) Executive’s services shall be performed at
the location where Executive was employed immediately preceding the Effective
Date or any office or location less than 50 miles from such
location.
(ii) During the Employment
Period, and excluding any periods of vacation and sick leave to which Executive
is entitled, 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 Executive
hereunder, to use 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 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 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
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 Executive’s responsibilities to the Company.
(b) Compensation.
(i) Base
Salary. During the Employment Period, Executive shall receive
an annual base salary (“Annual Base Salary”) at a rate at least equal to the
rate of base salary in effect on the date of this Agreement or, if greater, on
the Effective Date, paid or payable (including any base salary which has been
earned but deferred) to Executive by the Company and its affiliated
companies. During the Employment Period, the Annual Base Salary shall
be reviewed no more than 12 months after the last salary increase awarded to
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 Executive under this
Agreement. Annual Base Salary shall not be reduced after any such
increase and the term Annual Base Salary as used 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, Executive shall be
awarded for each fiscal year ending during the Employment Period an annual
target bonus opportunity in cash at least equal to Executive’s target bonus
opportunity for the last full fiscal year prior to the Effective Date
(annualized in the event that Executive was not employed by the Company for the
whole of such fiscal year) (the “Target Annual Bonus”).
(iii) Incentive, Savings and
Retirement Plans. During
the Employment Period, 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 Executive with incentive opportunities, 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 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 Executive, those provided
generally at any time after the Effective Date to other peer executives of the
Company and its affiliated companies.
152
(iv) Welfare Benefit
Plans. During the Employment Period, Executive and/or
Executive’s eligible dependents, 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 to the extent 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 Executive with benefits which are less
favorable, in the aggregate, than the most favorable of such plans, practices,
policies and programs in effect for Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to
Executive, those provided generally at any time after the Effective Date to
other peer executives of the Company and its affiliated companies.
(v) Expenses, Fringe Benefits
and Paid Time Off. During the Employment Period, Executive
shall be entitled to expense reimbursement, fringe benefits and paid time off in
accordance with the most favorable plans, practices, programs and policies of
the Company and its affiliated companies in effect for Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its affiliated
companies.
5. Termination of
Employment.
(a) Death, Retirement or
Disability. Executive’s employment shall terminate
automatically upon Executive’s death or Retirement during the Employment
Period. For purposes of this Agreement, “Retirement” shall mean
retirement that would entitle Executive to normal retirement benefits under the
Company’s then-current retirement plans. If the Company determines in
good faith that the Disability of Executive has occurred during the Employment
Period (pursuant to the definition of Disability set forth below), it may give
to Executive written notice of its intention to terminate Executive’s
employment. In such event, Executive’s employment with the Company
shall terminate effective on the 30th day after receipt of such written notice
by Executive (the “Disability Effective Date”), provided that, within the 30
days after such receipt, Executive shall not have returned to full-time
performance of Executive’s duties. For purposes of this Agreement,
“Disability” has the meaning assigned such term in the Company's long-term
disability plan, from time to time in effect. At the request of
Executive or his personal representative, the Company’s determination that the
Disability of Executive has occurred shall be certified by two physicians
mutually agreed upon by Executive, or his personal representative, and the
Company. Failing such independent certification (if so requested by
Executive), Executive’s termination shall be deemed a termination by the Company
without Cause and not a termination by reason of his Disability.
(b) Cause. The
Company may terminate Executive’s employment during the Employment Period for
Cause. For purposes of this Agreement, “Cause” shall
mean:
(i)
a material breach by Executive of any provision of this
Agreement;
(ii) the conviction of
Executive of any criminal act that the Board shall, in its sole and absolute
discretion, deem to constitute Cause for purposes of this
Agreement;
(iii) material breach by
Executive of published Company code of conduct or code of ethics;
or
(iv) conduct by Executive
in his office with the Company that is grossly inappropriate and demonstrably
likely to lead to material injury to the Company, as determined by the Board
acting reasonably and in good faith;
153
provided,
however, that in the case of clauses (i), (iii) and (iv) above, such conduct
shall not constitute Cause unless the Company shall have delivered to Executive
notice setting forth with specificity (x) the conduct deemed to qualify as
Cause, (y) reasonable action, if any, that would remedy such objection, and (z)
if such conduct is of a nature that may be remedied, a reasonable time (not less
than thirty (30) days) within which Executive may take such remedial action, and
Executive shall not have taken such specified remedial action to the
satisfaction of the Compensation and Management Development Committee of the
Board of Directors of the Company within such specified reasonable
time.
(c) Good
Reason. Executive’s employment may be terminated by Executive
for Good Reason. For purposes of this Agreement, “Good Reason” shall
mean, without the written consent of Executive:
(i) the assignment to
Executive of any duties materially inconsistent with Executive’s position
(including status, offices, titles and reporting requirements), authority,
duties or responsibilities as in effect immediately prior to the Effective Date,
or any other action by the Company which results in a material diminution in
such position, authority, duties or responsibilities, 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 Executive;
(ii) a reduction by the
Company in Executive’s Base Salary or Target Annual Bonus, as in effect
immediately prior to the Effective Date, as the same may be increased from time
to time;
(iii) any failure by the
Company to comply with any of the other 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 Executive;
(iv) the Company’s
requiring Executive to be based at any office or location other than as provided
in Section 4(a)(i)(B) hereof;
(v) any failure by the
Company to comply with and satisfy Section 13(c) of this Agreement;
or
(vi) the material breach by
the Company of any other provision of this Agreement;
Good Reason shall not include
Executive’s death, Disability or Retirement. Executive’s continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason hereunder. A
termination by Executive shall not constitute termination for Good Reason unless
Executive shall first have delivered to the Company, within 90 days of the
occurrence of the event giving rise to Good Reason, written notice setting forth
with specificity the occurrence deemed to give rise to a right to terminate for
Good Reason, and there shall have passed a reasonable time (not less than 60
days) within which the Company may take action to correct, rescind or otherwise
substantially reverse the occurrence supporting termination for Good Reason as
identified by Executive. Absent further guidance to the contrary, the
parties intend, believe and take the position that a resignation by the
Executive for Good Reason as defined above effectively constitutes an
“involuntary separation from service” within the meaning of Section 409A of the
Code and Treas. Reg §1.409A-1(n)(2).
154
(d) Notice of
Termination. Any termination by the Company or Executive shall
be communicated by Notice of Termination to the other party hereto given in
accordance with Section 15(d) 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 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 termination
date. The failure by 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 Executive or the Company,
respectively, hereunder or preclude Executive or the Company, respectively, from
asserting such fact or circumstance in enforcing Executive’s or the Company’s
rights hereunder.
(e) Date of
Termination. “Date of Termination” means (i) if the
Executive’s employment is terminated by the Executive for Good Reason, the date
specified in the Notice of Termination, which may not be less than 60 days after
the date of delivery of the Notice of Termination; provided that the Company may
specify any earlier Date of Termination, (ii) if the Executive’s employment is
terminated by the Company for Cause, the date specified in the Notice of
Termination, which in the case of a termination for Cause as defined in Section
5(b) may not be less than 30 days after the date of delivery of the Notice of
Termination, (iii) if the Executive’s employment is terminated by the Company
other than for Cause or Disability, the Date of Termination shall be the date on
which the Company notifies the Executive of such termination or any later date
specified in such notice, and (iv) if the Executive’s employment is terminated
by reason of death, Disability or Retirement, the Date of Termination shall be
the date of death or Retirement of the Executive or the Disability Effective
Date, as the case may be.
6. Obligations of the Company
upon Termination.
(a) Termination by Executive for
Good Reason; Termination by the Company other than for Cause or
Disability. If, during the Employment Period the Company shall
terminate Executive’s employment other than for Cause or Disability, or
Executive shall terminate employment for Good Reason, then:
(i) the Company shall pay
to Executive in a single lump sum cash payment on a date determined by the
Company that is within 30 days after the Date of Termination (or any later date
that may be required pursuant to Section 1(a) or Section 14 hereof), the
aggregate of the following amounts:
A. the
sum of (1) Executive’s Annual Base Salary through the Date of Termination to the
extent not theretofore paid, (2) the product of (x) the Executive’s Target
Annual Bonus for the year in which the Date of Termination occurs, 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, and
(3) any accrued vacation pay to the extent not theretofore paid (the sum of the
amounts described in clauses (1), (2) and (3) shall be hereinafter referred to
as the “Accrued Obligations”); and
B. a
severance payment (the “Severance Payment”) equal to three times the sum of
Executive’s Annual Base Salary and Target Annual Bonus for the year in which the
Date of Termination occurs; and
155
(ii) the Company shall
continue to provide, for 36 months after the Date of Termination (the “Welfare
Benefits Continuation Period”), or such longer period as may be provided by the
terms of the appropriate plan, program, practice or policy, any group health
benefits to which Executive and/or Executive’s eligible dependents would
otherwise be entitled to continue under COBRA, or benefits substantially
equivalent to those group health benefits which would have been provided to them
in accordance with the welfare plans described in Section 4(b)(iv) of this
Agreement if Executive’s employment had not been terminated, provided, however, that (A)
if Executive becomes employed with another employer (including self-employment)
and receives group health benefits under another employer provided plan, the
Company’s obligation to provide group health benefits described herein shall
cease, except as otherwise provided by law; (B) the Welfare Benefits
Continuation Period shall run concurrently with any period for which Executive
is eligible to elect health coverage under COBRA; (C) during the Welfare
Benefits Continuation Period, the benefits provided in any one calendar year
shall not affect the amount of benefits to be provided in any other calendar
year; (D) the reimbursement of an eligible expense shall be made as soon as
practicable but not later than December 31 of the year following the year in
which the expense was incurred; and (E) Executive’s rights pursuant to this
Section 6(a)(ii) shall not be subject to liquidation or exchange for another
benefit; and
(iii) Executive shall be
fully vested as of the Date of Termination in any benefits under the Company’s
Xxxxxxx Retirement Assistance Plan ("ERAP"), the Company's Unfunded Retirement
Income Plan, and the Company’s Excess Retirement Income Plan (hereinafter
referred to collectively as the “Retirement Plan”). Any Retirement
Plan benefits that are exempt from Section 409A of the Code due to having been
fully vested as of December 31, 2004, and any Retirement Plan benefits that
became vested between December 31, 2004 and the day before the Date of
Termination, shall be distributed to Executive in accordance with the terms of
the applicable Retirement Plan. The Company shall pay to Executive,
on a date determined by the Company that is within 30 days after the Date of
Termination (or any later date that may be required pursuant to Section 1(a) or
Section 14 hereof), any Retirement Plan benefits that became vested as of the
Date of Termination pursuant to this Section 6(a)(iii) plus an additional
Retirement Plan benefit equal to the actuarial equivalent of the excess of (A)
minus (B) where (A) equals the amount of the retirement benefits (determined as
a straight life annuity payable to Executive on his normal retirement date) to
which Executive would have been entitled under the terms of the Retirement Plan
as if Executive had accumulated three additional years of total service as
defined in ERAP and Executive’s age was increased by three years, and where (B)
equals the amount of the retirement benefits (determined as a straight life
annuity payable to Executive on Executive’s normal retirement date), to which
Executive actually is entitled pursuant to the provisions of the Retirement
Plan. For purposes of this subparagraph (iii), “actuarial equivalent”
shall be determined using the same methods and assumptions used under the
Retirement Plan for computing a lump sum payment as of the date of distribution
to Executive under this Agreement; and
(iv) the terms and
conditions of the Company's long-term incentive plans and any applicable award
agreements thereunder shall control with respect to the vesting of any options
or other awards thereunder then held by Executive; and
(v) To the extent not
theretofore paid or provided, the Company shall timely pay or provide to
Executive any other amounts or benefits required to be paid or provided or which
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”).
156
(b) Death, Disability or
Retirement. If Executive’s employment is terminated by reason
of Executive’s death, Disability or Retirement during the Employment Period,
this Agreement shall terminate without further obligations to Executive or
Executive’s legal representatives under this Agreement, other than the
obligation to pay Executive’s Annual Base Salary through the Date of Termination
and any accrued vacation pay to the extent then unpaid. Payment of
such accrued amounts shall be paid on a date determined by the Company that is
within 30 days after the Date of Termination (or any later date that may be
required pursuant to Section 1(a) or Section 14 hereof). Executive or
Executive’s estate and/or beneficiaries shall be entitled to receive benefits
under such plans, programs, practices and policies relating to death, disability
or retirement benefits, if any, and any Other Benefits (as defined in Section
6(a)(v) hereof) as are applicable to Executive on the Date of Termination, in
each case to the extent then unpaid.
(c) Cause; Other than for Good
Reason. If Executive’s employment shall be terminated for
Cause during the Employment Period, or if Executive voluntarily terminates
employment during the Employment Period other than for Good Reason, this
Agreement shall terminate without further obligations to Executive under this
Agreement other than the obligation to pay Executive’s Annual Base Salary
through the Date of Termination and any accrued vacation pay to the extent then
unpaid. Payment of such accrued amounts shall be paid on a date
determined by the Company that is within 30 days after the Date of Termination
(or any later date that may be required pursuant to Section 1(a) or Section 14
hereof). Executive shall be entitled to receive any Other Benefits
(as defined in Section 6(a)(v) hereof) as are applicable to Executive on the
Date of Termination, to the extent then unpaid.
7. Non-exclusivity of
Rights. Nothing in this Agreement shall prevent or limit
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 Executive may qualify, nor, subject to Section 15(j), shall anything
herein limit or otherwise affect such rights as Executive may have under any
contract or agreement with the Company or any of its affiliated
companies. Amounts which are vested benefits or which 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.
8. Full Settlement; No
Mitigation. 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
Executive or others. In no event shall Executive be obligated to seek
other employment or take any other action by way of mitigation of the amounts
payable to Executive under any of the provisions of this Agreement and such
amounts shall not be reduced whether or not Executive obtains other
employment.
9. Costs of
Enforcement.
(a) The
Company shall reimburse Executive, on a current basis, for all reasonable legal
fees and related expenses incurred by Executive in contesting or disputing any
termination of Executive’s employment after the Effective Date, or Executive’s
seeking to obtain or enforce any right or benefit provided by this Agreement, in
each case, regardless of whether or not Executive’s claim is upheld by an
arbitral panel or a court of competent jurisdiction; provided, however,
Executive shall be required to repay to the Company any such amounts to the
extent that an arbitral panel or a court issues a final and non-appealable
order, judgment, decree or award setting forth the determination that the
position taken by Executive was frivolous or advanced by Executive in bad
faith. All such payments shall be made within five (5) business days
after delivery of Executive’s respective written requests for payment
accompanied with such evidence of fees and expenses incurred as the Company
reasonably may require, but in any event no later than December 31 of the year
after the year in which the expense was incurred.
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(b) In
addition, Executive shall be entitled to be paid all reasonable legal fees and
expenses, if any, incurred in connection with any tax audit or proceeding to the
extent attributable to the application of Section 4999 of the Code to any
payment or benefit hereunder. Such reimbursement of expenses shall be
made on a current basis, as incurred, and in no event later than December 31 of
the year following the calendar year in which the taxes that are the subject of
the audit or proceeding are remitted to the taxing authority, or where as a
result of such audit or proceeding no taxes are remitted, December 31 of the
year following the calendar year in which the audit is completed or there is a
final and nonappealable settlement or other resolution of the
proceeding.
(c) The
amount reimbursable by the Company under this Section 9 in any one calendar year
shall not affect the amount reimbursable in any other calendar
year. Executive’s rights pursuant to this Section 9 shall expire at
the end of ten years after the Date of Termination and shall not be subject to
liquidation or exchange for another benefit.
10. Certain Additional Payments
by the Company.
(a) Anything
in this Agreement to the contrary notwithstanding and except as set forth below,
in the event it shall be determined that any payment or distribution by the
Company to or for the benefit of Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 10) (a “Payment”) would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties are incurred by
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
“Excise Tax”), then Executive shall be entitled to receive an additional payment
(a “Gross-Up Payment”) in an amount such that after payment by Executive of all
taxes (including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
Notwithstanding
the foregoing provisions of this Section 10(a), if it shall be determined that
Executive would be entitled to a Gross-Up Payment under Section 10(a), but that
Executive, after taking into account the Payments and the Gross-Up Payment,
would not receive a net after-tax benefit of at least $75,000 (taking into
account both income and employment taxes and any Excise Tax) as compared to the
net after-tax proceeds to Executive if he had received only the Safe Harbor
Amount (as defined below), then the Company shall not pay Executive a Gross-Up
Payment, and the Payments due under this Agreement shall be reduced so that the
Parachute Value of all Payments, in the aggregate, equals the Safe Harbor
Amount; provided, that if even after all Payments due under this Agreement are
reduced to zero, the Parachute Value of all Payments would still exceed the Safe
Harbor Amount, then no reduction of any Payments shall be made and the Gross-Up
Payment shall be made. The reduction of the Payments due hereunder,
if applicable, shall be made by first reducing the Severance Payment under
Section 6(a)(i), and then shall be made in such a manner as to maximize the
economic present value of all Payments actually made to Executive, determined by
the Accounting Firm (as defined in Section 10(b) below) as of the date of the
Change in Control for purposes of Section 280G of the Code using the discount
rate required by Section 280G(d)(4) of the Code. For purposes of this
Section 10, the “Parachute Value” of a Payment means the present value as of the
date of the Change in Control for purposes of Section 280G of the Code of the
portion of such Payment that constitutes a “parachute payment” under Section
280G(b)(2) of the Code, as determined by the Accounting Firm for purposes of
determining whether and to what extent the Excise Tax will apply to such
Payment. For purposes of this Section 10, Executive’s “Safe Harbor
Amount” means one dollar less than three times Executive’s “base amount” within
the meaning of Section 280G(b)(3) of the Code.
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(b) Subject
to the provisions of Section 10(c), all determinations required to be made under
this Section 10, including whether and when a Gross-Up Payment is required and
the amount of such Gross-Up Payment and the assumptions to be used in arriving
at such determination, shall be made by the firm serving as independent auditors
of the Company immediately prior to the Effective Date (the “Accounting Firm”)
which shall provide detailed supporting calculations both to the Company and
Executive within 15 business days of the receipt of notice from Executive that
there has been a Payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting the Change
in Control, Executive shall appoint another nationally recognized accounting
firm to make the determinations required hereunder (which accounting firm shall
then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the
Company. Any Gross-Up Payment, as determined pursuant to this Section
10, shall be paid by the Company to Executive within five days of the receipt of
the Accounting Firm’s determination, but no event later than December 31 of the
year after the year in which Executive remits taxes to the applicable taxing
authorities. Any determination by the Accounting Firm shall be
binding upon the Company and Executive. 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
Gross-Up Payments which will not have been made by the Company should have been
made (“Underpayment”), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies
pursuant to Section 10(c) and Executive thereafter is required to make a payment
of any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly paid
by the Company to or for the benefit of Executive, but no later than December 31
of the year after the year in which the Underpayment is determined to
exist.
(c) Executive
shall notify the Company in writing of any claim by the Internal Revenue Service
that, if successful, would require the payment by the Company of the Gross-Up
Payment. Such notification shall be given as soon as practicable but
no later than ten business days after Executive is informed in writing of such
claim and shall apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid. Executive shall not pay
such claim prior to the expiration of the 30-day period following the date on
which it gives such notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is due). If
the Company notifies Executive in writing prior to the expiration of such period
that it desires to contest such claim, Executive shall:
(i) give the Company any
information reasonably requested by the Company relating to such
claim,
(ii) take such action in
connection with contesting such claim as the Company shall reasonably request in
writing from time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney reasonably selected by
the Company,
(iii) cooperate with the
Company in good faith in order effectively to contest such claim,
and
(iv) permit the Company to
participate in any proceedings relating to such claim;
159
provided,
however, that the Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with such
contest and shall indemnify and hold Executive harmless, on an after-tax basis,
for any Excise Tax or income tax (including interest and penalties with respect
thereto) imposed as a result of such representation and payment of costs and
expenses. Without limitation of the foregoing provisions of this
Section 10(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
Executive to pay the tax claimed and xxx for a refund or contest the claim in
any permissible manner, and Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs Executive to pay such
claim and xxx for a refund, the Company shall advance the amount of such payment
to Executive, on an interest-free basis and shall indemnify and hold Executive
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment of
taxes for the taxable year of Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company’s control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and Executive shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If,
after the receipt by Executive of an amount advanced by the Company pursuant to
Section 10(c), Executive becomes entitled to receive any refund with respect to
such claim, Executive shall (subject to the Company’s complying with the
requirements of Section 10(c)) promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by Executive of an amount
advanced by the Company pursuant to Section 10(c), a determination is made that
Executive shall not be entitled to any refund with respect to such claim and the
Company does not notify Executive in writing of its intent to contest such
denial of refund prior to the expiration of 30 days after such determination,
then such advance shall be forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.
11. Confidential
Information. 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 Executive during
Executive’s employment by the Company or any of its affiliated
companies. After termination of Executive’s employment with the
Company, 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 designated by it. It is understood, however, that the
obligations of this Section 11 shall not apply to the extent that the aforesaid
matters (i) are disclosed in circumstances where Executive is legally required
to do so or (ii) become generally known to and available for use by the public
other than by acts by Executive or representatives of Executive in violation of
this Agreement.
12. Arbitration. Any
dispute or controversy arising under or in connection with this Agreement shall
be settled exclusively by arbitration in the State of Tennessee by three
arbitrators in accordance with the rules of the Employment Dispute Rules of the
American Arbitration Association and the Federal Arbitration Act, 9 U.S.C. §1,
et.
seq. Judgment may be entered on the arbitrators’ award in any
court having jurisdiction. Except as provided in Section 9, the
Company shall bear all costs and expenses arising in connection with any
arbitration proceeding pursuant to this Section 12.
160
13. Successors.
(a) This
Agreement is personal to Executive and without the prior written consent of the
Company shall not be assignable by Executive otherwise than by will or the laws
of descent and distribution. This Agreement shall inure to the
benefit of and be enforceable by Executive’s legal representatives.
(b) This
Agreement shall inure to the benefit of and be binding upon the Company and its
successors and assigns.
(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. Code Section
409A.
(a) This
Agreement shall be interpreted and administered in a manner so that any amount
or benefit payable hereunder shall be paid or provided in a manner that is
either exempt from or compliant with the requirements Section 409A of the Code
and applicable Internal Revenue Service guidance and Treasury Regulations issued
thereunder (and any applicable transition relief under Section 409A of the
Code).
(b) Notwithstanding
anything in this Agreement to the contrary, to the extent that any amount or
benefit that would constitute non-exempt “deferred compensation” for purposes of
Section 409A of the Code would otherwise be payable or distributable hereunder,
or a different form of payment would be effected, by reason of Executive’s
Disability or termination of employment, such amount or benefit will not be
payable or distributable to Executive, and/or such different form of payment
will not be effected, by reason of such circumstance unless (i) the
circumstances giving rise to such Disability or termination of employment, as
the case, may be, meet any description or definition of “disability” or
“separation from service”, as the case may be, in Section 409A of the Code and
applicable regulations (without giving effect to any elective provisions that
may be available under such definition), or (ii) the payment or distribution of
such amount or benefit would be exempt from the application of Section 409A of
the Code by reason of the short-term deferral exemption or
otherwise. This provision does not prohibit the vesting of any amount upon a
Disability or termination of employment, however defined. If this
provision prevents the payment or distribution of any amount or benefit, such
payment or distribution shall be made on the date, if any, on which an event
occurs that constitutes a Section 409A-compliant “disability” or “separation
from service,” as the case, may be, or such later date as may be required by
Section 14(c) below.
161
(c) Notwithstanding
anything in this Agreement to the contrary, if any amount or benefit that would
constitute non-exempt “deferred compensation” for purposes of Section 409A of
the Code would otherwise be payable or distributable under this Agreement by
reason of Executive’s separation from service during a period in which he is a
Specified Employee (as defined below), then, subject to any permissible
acceleration of payment by the Company under Treas. Reg. Section
1.409A-3(j)(4)(ii) (domestic relations order), (j)(4)(iii) (conflicts of
interest), or (j)(4)(vi) (payment of employment taxes), such non-exempt payments
or benefits shall be delayed in order to comply
with Section 409A(a)(2)(B)(i) of the Code, and such payments or benefits shall
be paid or distributed to Executive during the five-day period commencing on the
earlier of: (i) the expiration of the six-month period measured from the date of
Executive’s “separation from service”, or (ii) the date of Executive’s
death. Upon the expiration of the applicable six-month period under
Section 409A(a)(2)(B)(i) of the Code, all payments deferred pursuant to this
Section 14(c) shall be paid to Executive (or Executive’s estate, in the event of
Executive’s death) in a lump sum payment. Any remaining payments and
benefits due under the Agreement shall be paid as otherwise provided in the
Agreement. If any amounts or benefits payable hereunder could
qualify for one or more separation pay exemptions described in Treas. Reg.
§1.409A-1(b)(9), but such payments in the aggregate exceed the dollar limit
permitted for the separation pay exemptions, the Company (acting through its
head of human resources or any other designated officer) shall determine which
portions thereof will be subject to such exemptions.
For
purposes of this Agreement, the term “Specified Employee” has the meaning given
such term in Code Section 409A and the final regulations thereunder (“Final 409A
Regulations”), provided,
however, that, as permitted in the Final 409A Regulations, the Company’s
Specified Employees and its application of the six-month delay rule of Code
Section 409A(a)(2)(B)(i) shall be determined in accordance with rules adopted by
the Board of Directors or a committee thereof, which shall be applied
consistently with respect to all nonqualified deferred compensation arrangements
of the Company, including this Agreement.
15. Miscellaneous.
(a) Governing
Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference to
principles of conflict of laws.
(b) Captions. The
captions of this Agreement are not part of the provisions hereof and shall have
no force or effect.
(c) Amendments. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(d) Notices. 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
Executive: the
address set forth below
under
Executive’s signature
If to the
Company: Xxxxxxx
Chemical Company
000 Xxxxx Xxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxx
00000-0000
Attention: Chairman of the
Board
Copy to: Corporate
Secretary
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.
162
(e) Severability. The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
and the Agreement shall be construed in all respects as if the invalid or
unenforceable provision were omitted.
(f) Withholding. 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.
(g) Waivers. Executive’s
or the Company’s failure to insist upon strict compliance with any provision of
this Agreement or the failure to assert any right Executive or the Company may
have hereunder, shall not be deemed to be a waiver of such provision or right or
any other provision or right of this Agreement.
(h) Status Before and After
Effective Date. Executive and the Company acknowledge that,
except as may otherwise be provided under any other written agreement between
Executive and the Company, the employment of Executive by the Company is “at
will” and, subject to Section 1(a) hereof, Executive’s employment and/or this
Agreement may be terminated by either Executive or the Company at any time prior
to the Effective Date, in which case 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.
(i) Indemnification. Executive
shall be entitled to the benefits of the indemnity provided by the Company’s
certificate of incorporation and bylaws, by agreement, or otherwise immediately
prior to Effective Date, or any greater rights to indemnification thereafter
provided to executive officers of the Company, and any subsequent changes to the
certificate of incorporation, bylaws, agreement, or otherwise reducing the
indemnity granted to such Executive shall not affect the rights granted
hereunder. The Company may not reduce these indemnity benefits
confirmed to Executive hereunder without the written consent of
Executive.
(j) Related
Agreements. To the extent that any provision of any other
agreement between the Company and Executive shall limit, qualify or be
inconsistent with any provision of this Agreement, then for purposes of this
Agreement, while the same shall remain in force, the provisions of this
Agreement shall control and such provision of such other agreement shall be
deemed to have been superseded, and to be of no force and effect, as if such
other agreement had been formally amended to the extent necessary to accomplish
such purpose. Without limiting the foregoing, this Agreement hereby
supersedes that certain Severance Agreement between Executive and the Company,
in the form referenced in the Exhibit Index to the Company’s 2004 Annual Report
on Form 10-K, which prior agreement is hereby terminated and of no further force
or effect.
(k) Action by the Company or the
Board. Whenever this Agreement calls for action to be taken by
the Company, such action may be taken by the Board or by the Compensation and
Management Development Committee of the Board. Whenever this
Agreement calls for action to be taken by the Board, or if the Board takes
action on behalf of the Company for purposes of this Agreement, such action
shall be taken by a majority vote of the members of the Board, excluding
Executive if Executive is then a member of the Board.
(l) Counterparts. This
Agreement may be executed in several counterparts, each of which shall be deemed
to be an original but all of which together will constitute one and the same
instrument.
(signatures
on following page)
163
IN WITNESS WHEREOF, Executive has
hereunto set Executive’s hand and, pursuant to the authorization from its Board
of Directors, the Company has caused these presents to be executed in its name
on its behalf, all as of the day and year first above written.
_____________________________
[Executive]
Address:
_________________________
_________________________
XXXXXXX
CHEMICAL COMPANY
By:
__________________________
164
