SEVERANCE AGREEMENT
THIS AGREEMENT, dated as of December 3, 1997, is made by
and between XXXXX XXXXXX INCORPORATED, a Delaware corporation (the
"Company"), and XXXXXXX X. XXXX (the "Executive").
WHEREAS, the Company considers it essential to the best
interests of its stockholders to xxxxxx the continued employment of
key management personnel; and
WHEREAS, the Board recognizes that, as is the case with
many publicly held corporations, the possibility of a Change in
Control exists and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the
departure or distraction of management personnel to the detriment
of the Company and its stockholders; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention
and dedication of members of the Company's management, including
the Executive, to their assigned duties without distraction in the
face of potentially disturbing circumstances arising from the
possibility of a Change in Control;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the Company and the Executive
hereby agree as follows:
1. Defined Terms. The definitions of capitalized terms
used in this Agreement are provided in the last Section hereof.
2. Term of Agreement. Subject to the provisions of
Section 12.2 hereof, the Term of this Agreement shall commence on
the date hereof and shall continue in effect through December 31,
1999; provided, however, that commencing on January 1, 1998 and
each January 1 thereafter (an "Extension Date"), the Term shall
automatically be extended for one additional year (i.e., resulting
in a two-year Term on the Extension Date) unless, not later than
September 30 of the year preceding the Extension Date, the Company
or the Executive shall have given notice not to extend the Term;
and further provided, however, that if a Change in Control shall
have occurred during the Term, the Term shall expire no earlier
than twenty-four (24) months beyond the month in which such Change
in Control occurred.
3. Company's Covenants Summarized. In order to induce
the Executive to remain in the employ of the Company and in
consideration of the Executive's covenants set forth in Section 4
hereof, the Company agrees, under the conditions described herein,
to pay the Executive the Severance Payments and the other payments
and benefits described herein. Except as provided in Section 9.1
hereof, no Severance Payments shall be payable under this Agreement
unless there shall have been (or, under the terms of the second
sentence of Section 6.1 hereof, there shall be deemed to have been)
a termination of the Executive's employment with the Company
following a Change in Control and during the Term. This Agreement
shall not be construed as creating an express or implied contract
of employment and, except as otherwise agreed in writing between
the Executive and the Company, the Executive shall not have any
right to be retained in the employ of the Company.
4. The Executive's Covenants. The Executive agrees
that, subject to the terms and conditions of this Agreement, in the
event of a Potential Change in Control during the Term, the
Executive will remain in the employ of the Company until the
earliest of (i) a date which is six (6) months from the date of
such Potential Change of Control, (ii) the date of a Change in
Control, (iii) the date of termination by the Executive of the
Executive's employment for Good Reason or by reason of death, Dis-
ability or Retirement, or (iv) the termination by the Company of
the Executive's employment for any reason.
5. Compensation Other Than Severance Payments.
5.1 Following a Change in Control and during the Term,
during any period that the Executive fails to perform the
Executive's full-time duties with the Company as a result of
incapacity due to physical or mental illness, the Company shall pay
the Executive's full salary to the Executive at the rate in effect
at the commencement of any such period, together with all com-
pensation and benefits payable to the Executive under the terms of
any compensation or benefit plan, program or arrangement maintained
by the Company during such period, until the Executive's employment
is terminated by the Company for Disability.
5.2 If the Executive's employment shall be terminated
for any reason following a Change in Control and during the Term,
the Company shall pay the Executive's full salary to the Executive
through the Date of Termination at the rate in effect immediately
prior to the Date of Termination or, if higher, the rate in effect
immediately prior to the first occurrence of an event or cir-
cumstance constituting Good Reason, together with all compensation
and benefits payable to the Executive through the Date of Termina-
tion under the terms of the Company's compensation and benefit
plans, programs or arrangements as in effect immediately prior to
the Date of Termination or, if more favorable to the Executive, as
in effect immediately prior to the first occurrence of an event or
circumstance constituting Good Reason.
5.3 If the Executive's employment shall be terminated
for any reason following a Change in Control and during the Term,
the Company shall pay to the Executive the Executive's normal
post-termination compensation and benefits as such payments become
due. Such post-termination compensation and benefits shall be
determined under, and paid in accordance with, the Company's
retirement, insurance and other compensation or benefit plans,
programs and arrangements as in effect immediately prior to the
Date of Termination or, if more favorable to the Executive, as in
effect immediately prior to the occurrence of the first event or
circumstance constituting Good Reason.
5.4 Upon the occurrence of a Change in Control all
options to acquire shares of Company stock, all shares of
restricted Company stock and all other equity or phantom equity
incentives held by the Executive under any plan of the Company
(including, but not limited to, the Company's 1995 Stock Award Plan
(and the Stock Matching Programs thereunder), 1993 Stock Option
Plan, 1993 Stock Bonus Plan and 1991 Stock Bonus Plan) shall become
immediately vested, exercisable and nonforfeitable and all
conditions thereof (including, but not limited to, any required
holding periods) shall be deemed to have been satisfied.
6. Severance Payments.
6.1 If the Executive's employment is terminated
following a Change in Control and during the Term, other than (A)
by the Company for Cause, (B) by reason of death or Disability, or
(C) by the Executive without Good Reason, then, the Company shall
pay the Executive the amounts, and provide the Executive the
benefits, described in this Section 6.1 ("Severance Payments") and
Section 6.2, in addition to any payments and benefits to which the
Executive is entitled under Section 5 hereof. For purposes of this
Agreement, the Executive's employment shall be deemed to have been
terminated following a Change in Control by the Company without
Cause or by the Executive with Good Reason, if (i) the Executive's
employment is terminated by the Company without Cause prior to a
Change in Control (whether or not a Change in Control ever occurs)
and such termination was at the request or direction of a Person
who has entered into an agreement with the Company the consummation
of which would constitute a Change in Control, (ii) the Executive
terminates his employment for Good Reason prior to a Change in
Control (whether or not a Change in Control ever occurs) and the
circumstance or event which constitutes Good Reason occurs at the
request or direction of such Person described in clause (i), or
(iii) the Executive's employment is terminated by the Company
without Cause or by the Executive for Good Reason and such termi-
nation or the circumstance or event which constitutes Good Reason
is otherwise in connection with or in anticipation of a Change in
Control (whether or not a Change in Control ever occurs). For pur-
poses of any determination regarding the applicability of the
immediately preceding sentence, any position taken by the Executive
shall be presumed to be correct unless the Company establishes to
the Committee by clear and convincing evidence that such position
is not correct.
(A) In lieu of any further salary payments to
the Executive for periods subsequent to the Date of
Termination and in lieu of any severance benefit otherwise
payable to the Executive, the Company shall pay to the
Executive a lump sum severance payment, in cash, equal to
three times the sum of (i) the Executive's base salary as in
effect immediately prior to the Date of Termination or, if
higher, in effect immediately prior to the first occurrence of
an event or circumstance constituting Good Reason, and (ii) the
average annual bonus earned by the Executive pursuant to any annual
bonus or incentive plan maintained by the Company in respect of the
three fiscal years ending immediately prior to the fiscal year in
which occurs the Date of Termination or, if higher, immediately
prior to the fiscal year in which occurs the first event or
circumstance constituting Good Reason; provided, that if the
Executive has not participated in an annual bonus or incentive plan
maintained by the Company for the entirety of such three-year
period, the amount referred to in this clause (ii) shall be
calculated using such lesser number of bonuses as have been
actually earned by the Executive in respect of such lesser period.
(B) For the thirty-six (36) month period
immediately following the Date of Termination, the Company shall
arrange to provide the Executive and his dependents life,
disability, accident and health insurance benefits and perquisites
(including, but not limited to, executive life insurance, club
memberships, financial planning and tax preparation, annual
physical examination and charitable contributions), in each case,
substantially similar to those provided to the Executive and his
dependents immediately prior to the Date of Termination or, if more
favorable to the Executive, those provided to the Executive and his
dependents immediately prior to the first occurrence of an event or
circumstance constituting Good Reason, at no greater cost to the
Executive than the cost to the Executive immediately prior to such
date or occurrence; provided, however, that, unless the Executive
consents to a different method (after taking into account the
effect of such method on the calculation of "parachute payments"
pursuant to Section 6.2 hereof), such health insurance benefits
shall be provided through a third-party insurer. Benefits other-
wise receivable by the Executive pursuant to this Section 6.1(B)
shall be reduced to the extent benefits of the same type are
received by or made available to the Executive during the thirty-
six (36) month period following the Executive's termination of
employment (and any such benefits received by or made available to
the Executive shall be reported to the Company by the Executive);
provided, however, that the Company shall reimburse the Executive
for the excess, if any, of the cost of such benefits to the
Executive over such cost immediately prior to the Date of
Termination or, if more favorable to the Executive, the first
occurrence of an event or circumstance constituting Good Reason.
(C) Notwithstanding any provision of the Xxxxx
Xxxxxx Incorporated 1995 Employee Annual Incentive Compensation
Plan (the "Annual Incentive Plan"), the Company shall pay to the
Executive a lump sum amount, in cash, equal to the sum of (i) any
unpaid incentive compensation which has been allocated or awarded
to the Executive for a completed fiscal year or other measuring
period preceding the Date of Termination under the Annual Incentive
Plan and which, as of the Date of Termination, is contingent only
upon the continued employment of the Executive to a subsequent
date, and (ii) a pro rata portion to the Date of Termination of the
aggregate value of all contingent incentive compensation awards to
the Executive for all then uncompleted periods under the Annual
Incentive Plan, calculated as to each such award by multiplying the
award that the Executive would have earned on the last day of the
performance award period, assuming the achievement, at the expected
value target level, of the individual and corporate performance
goals established with respect to such award, by the fraction
obtained by dividing the number of full months and any fractional
portion of a month during such performance award period through the
Date of Termination by the total number of months contained in such
performance award period; provided, however, that if such
termination of employment occurs during the same year in which the
Change in Control occurs, the pro-rata bonus payment referred to in
clause (ii) above shall be offset by any payments received under
the Annual Incentive Plan in connection with such Change in
Control.
(D) In addition to the retirement benefits to which
the Executive is entitled under the Company's Thrift Plan (the
"Thrift Plan") and the Company's Supplemental Retirement Plan (the
"SRP"), the Company shall pay the Executive a lump sum amount, in
cash, equal to the present value of the employer-provided
contributions, deferrals and allocations the Executive would have
received had he continued to participate, after the Date of
Termination, in the Thrift Plan and the SRP for three (3)
additional years, assuming for this purpose that (i) the Executive
earned compensation for purposes of the Thrift Plan and SRP during
such three-year period the amount used to calculate the Executive's
severance payment under subparagraph (A) of this Section 6.1, and
(ii) the percentages of contributions, deferrals and allocations
made under the Thrift Plan and the SRP by or on behalf of the
Executive during such three-year period are the same percentages of
contributions, deferrals and allocations in effect on the date of
the Change in Control or the Date of Termination, whichever is more
favorable to the Executive.
(E) If the Executive would have become entitled to
benefits under the Company's post-retirement health care or life
insurance plans, as in effect immediately prior to the Date of
Termination or, if more favorable to the Executive, as in effect
immediately prior to the first occurrence of an event or
circumstance constituting Good Reason, had the Executive's
employment terminated at any time during the period of thirty-six
(36) months after the Date of Termination, the Company shall
provide such post-retirement health care or life insurance benefits
to the Executive and the Executive's dependents commencing on the
later of (i) the date on which such coverage would have first
become available and (ii) the date on which benefits described in
subsection (B) of this Section 6.1 terminate.
(F) The Company shall provide the Executive with
outplacement services suitable to the Executive's position for a
period of three years or, if earlier, until the first acceptance by
the Executive of an offer of employment.
6.2 (A) Whether or not the Executive becomes entitled
to the Severance Payments, if any of the payments or benefits
received or to be received by the Executive in connection with a
Change in Control or the Executive's termination of employment
(whether pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any Person whose actions
result in a Change in Control or any Person affiliated with the
Company or such Person) (such payments or benefits, excluding the
Gross-Up Payment, being hereinafter referred to as the "Total
Payments") will be subject to the Excise Tax, the Company shall pay
to the Executive an additional amount (the "Gross-Up Payment") such
that the net amount retained by the Executive, after deduction of
any Excise Tax on the Total Payments and any federal, state and
local income and employment taxes and Excise Tax upon the Gross-Up
Payment, shall be equal to the Total Payments.
(B) For purposes of determining whether any of the
Total Payments will be subject to the Excise Tax and the amount of
such Excise Tax, (i) all of the Total Payments shall be treated as
"parachute payments" (within the meaning of section 280G(b)(2) of
the Code) unless, in the opinion of tax counsel ("Tax Counsel")
reasonably acceptable to the Executive and selected by the account-
ing firm which was, immediately prior to the Change in Control, the
Company's independent auditor (the "Auditor"), such payments or
benefits (in whole or in part) do not constitute parachute pay-
ments, including by reason of section 280G(b)(4)(A) of the Code,
(ii) all "excess parachute payments" within the meaning of section
280G(b)(l) of the Code shall be treated as subject to the Excise
Tax unless, in the opinion of Tax Counsel, such excess parachute
payments (in whole or in part) represent reasonable compensation
for services actually rendered (within the meaning of section
280G(b)(4)(B) of the Code) in excess of the Base Amount allocable
to such reasonable compensation, or are otherwise not subject to
the Excise Tax, and (iii) the value of any noncash benefits or any
deferred payment or benefit shall be determined by the Auditor in
accordance with the principles of sections 280G(d)(3) and (4) of
the Code. For purposes of determining the amount of the Gross-Up
Payment, the Executive shall be deemed to pay federal income tax at
the highest marginal rate of federal income taxation in the
calendar year in which the Gross-Up Payment is to be made and state
and local income taxes at the highest marginal rate of taxation in
the state and locality of the Executive's residence on the Date of
Termination (or if there is no Date of Termination, then the date
on which the Gross-Up Payment is calculated for purposes of this
Section 6.2), net of the maximum reduction in federal income taxes
which could be obtained from deduction of such state and local tax-
es.
(C) In the event that the Excise Tax is finally
determined to be less than the amount taken into account hereunder
in calculating the Gross-Up Payment, the Executive shall repay to
the Company, within five (5) business days following the time that
the amount of such reduction in the Excise Tax is finally deter-
mined, the portion of the Gross-Up Payment attributable to such
reduction (plus that portion of the Gross-Up Payment attributable
to the Excise Tax and federal, state and local income and em-
ployment taxes imposed on the Gross-Up Payment being repaid by the
Executive, to the extent that such repayment results in a reduction
in the Excise Tax and a dollar-for-dollar reduction in the
Executive's taxable income and wages for purposes of federal, state
and local income and employment taxes, plus interest on the amount
of such repayment at 120% of the rate provided in section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder in
calculating the Gross-Up Payment (including by reason of any pay-
ment the existence or amount of which cannot be determined at the
time of the Gross-Up Payment), the Company shall make an additional
Gross-Up Payment in respect of such excess (plus any interest,
penalties or additions payable by the Executive with respect to
such excess) within five (5) business days following the time that
the amount of such excess is finally determined. The Executive and
the Company shall each reasonably cooperate with the other in
connection with any administrative or judicial proceedings concern-
ing the existence or amount of liability for Excise Tax with
respect to the Total Payments.
6.3 The payments provided in subsections (A), (C) and
(D) of Section 6.1 hereof and in Section 6.2 hereof shall be made
not later than the fifth day following the Date of Termination;
provided, however, that if the amounts of such payments cannot be
finally determined on or before such day, the Company shall pay to
the Executive on such day an estimate, as determined in good faith
by the Executive or, in the case of payments under Section 6.2
hereof, in accordance with Section 6.2 hereof, of the minimum
amount of such payments to which the Executive is clearly entitled
and shall pay the remainder of such payments (together with
interest on the unpaid remainder (or on all such payments to the
extent the Company fails to make such payments when due) at 120% of
the rate provided in section 1274(b)(2)(B) of the Code) as soon as
the amount thereof can be determined but in no event later than the
thirtieth (30th) day after the Date of Termination. In the event
that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall
constitute a loan by the Company to the Executive, payable on the
fifth (5th) business day after demand by the Company (together with
interest at 120% of the rate provided in section 1274(b)(2)(B) of
the Code), but only to the extent such amount has not been paid by
the Executive pursuant to Section 6.2(C) above. At the time that
payments are made under this Agreement, the Company shall provide
the Executive with a written statement setting forth the manner in
which such payments were calculated and the basis for such
calculations including, without limitation, any opinions or other
advice the Company has received from Tax Counsel, the Auditor or
other advisors or consultants (and any such opinions or advice
which are in writing shall be attached to the statement).
6.4 The Company also shall pay to the Executive all
legal fees and expenses incurred by the Executive in disputing in
good faith any issue hereunder relating to the termination of the
Executive's employment, in seeking in good faith to obtain or en-
force any benefit or right provided by this Agreement or in con-
nection with any tax audit or proceeding to the extent attributable
to the application of section 4999 of the Code to any payment or
benefit provided hereunder. Such payments shall be made within
five (5) business days after delivery of the Executive's written
requests for payment accompanied with such evidence of fees and ex-
penses incurred as the Company reasonably may require.
7. Termination Procedures and Compensation During
Dispute.
7.1 Notice of Termination. After a Change in Control
and during the Term, any purported termination of the Executive's
employment (other than by reason of death) shall be communicated by
written Notice of Termination from one party hereto to the other
party hereto in accordance with Section 10 hereof. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this Agreement
relied upon and shall set 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. Further,
a Notice of Termination for Cause is required to include a copy of
a resolution duly adopted by the affirmative vote of not less than
three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board which was called and held for the purpose of
considering such termination (after reasonable notice to the
Executive and an opportunity for the Executive, together with the
Executive's counsel, to be heard before the Board) finding that, in
the good faith opinion of the Board, the Executive was guilty of
conduct set forth in clause (i) or (ii) of the definition of Cause
herein, and specifying the particulars thereof in detail.
7.2 Date of Termination. "Date of Termination," with
respect to any purported termination of the Executive's employment
after a Change in Control and during the Term, shall mean (i) if
the Executive's employment is terminated for Disability, thirty
(30) days after Notice of Termination is given (provided that the
Executive shall not have returned to the full-time performance of
the Executive's duties during such thirty (30) day period), and
(ii) if the Executive's employment is terminated for any other
reason, the date specified in the Notice of Termination (which, in
the case of a termination by the Company, shall not be less than
thirty (30) days (except in the case of a termination for Cause)
and, in the case of a termination by the Executive, shall not be
less than fifteen (15) days nor more than sixty (60) days,
respectively, from the date such Notice of Termination is given).
7.3 Dispute Concerning Termination. If within fifteen
(15) days after any Notice of Termination is given, or, if later,
prior to the Date of Termination (as determined without regard to
this Section 7.3), the party receiving such Notice of Termination
notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be extended until the
earlier of (i) the date on which the Term ends or (ii) the date on
which the dispute is finally resolved, either by mutual written
agreement of the parties or by a final judgment, order or decree of
an arbitrator or a court of competent jurisdiction (which is not
appealable or with respect to which the time for appeal therefrom
has expired and no appeal has been perfected); provided, however,
that the Date of Termination shall be extended by a notice of
dispute given by the Executive only if such notice is given in good
faith and the Executive pursues the resolution of such dispute with
reasonable diligence.
7.4 Compensation During Dispute. If a purported
termination occurs following a Change in Control and during the
Term and the Date of Termination is extended in accordance with
Section 7.3 hereof, the Company shall continue to pay the Executive
the full compensation in effect when the notice giving rise to the
dispute was given (including, but not limited to, salary) and
continue the Executive as a participant in all compensation,
benefit and insurance plans in which the Executive was
participating when the notice giving rise to the dispute was given
or those plans in which the Executive was participating immediately
prior to the first occurrence of an event or circumstance giving
rise to the Notice of Termination, if more favorable to the
Executive, until the Date of Termination, as determined in
accordance with Section 7.3 hereof. Amounts paid under this
Section 7.4 are in addition to all other amounts due under this
Agreement (other than those due under Section 5.2 hereof) and shall
not be offset against or reduce any other amounts due under this
Agreement.
8. No Mitigation. The Company agrees that, if the
Executive's employment with the Company terminates during the Term,
the Executive is not required to seek other employment or to
attempt in any way to reduce any amounts payable to the Executive
by the Company pursuant to Sections 5, 6 or 7.4 hereof. Further,
the amount of any payment or benefit provided for in this Agreement
(other than Section 6.1(B) hereof but including (but not limited
to) Section 7.4 hereof) shall not be reduced by any compensation
earned by the Executive as the result of employment by another
employer, by retirement benefits, by offset against any amount
claimed to be owed by the Executive to the Company, or otherwise.
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by law upon
any successor to the Company, 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 expressly assume and agree
to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle
the Executive to compensation from the Company in the same amount
and on the same terms as the Executive would be entitled to
hereunder if the Executive were to terminate the Executive's
employment for Good Reason after a Change in Control, except that,
for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of
Termination.
9.2 This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive shall die while any amount
would still be payable to the Executive hereunder (other than
amounts which, by their terms, terminate upon the death of the
Executive) if the Executive had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the executors,
personal representatives or administrators of the Executive's
estate.
10. Notices. For the purpose of this Agreement, notices
and all other communications provided for in the Agreement shall be
in writing and shall be deemed to have been duly given when
delivered or mailed by United States registered mail, return
receipt requested, postage prepaid, addressed, if to the Executive,
to the address inserted below the Executive's signature on the
final page hereof and, if to the Company, to the address set forth
below, or to such other address as either party may have furnished
to the other in writing in accordance herewith, except that notice
of change of address shall be effective only upon actual receipt:
To the Company:
0000 Xxxxx Xxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: General Counsel
11. Miscellaneous. Except as otherwise specifically
provided in Section 12.2 below, no provision of this Agreement may
be modified, waived or discharged unless such waiver, modification
or discharge is agreed to in writing and signed by the Executive
and such officer as may be specifically designated by the Board.
No waiver by either party hereto at any time of any breach by the
other party hereto of, or of any lack of compliance with, any
condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent
time. This Agreement supersedes any other agreements or
representations, oral or otherwise, express or implied, with
respect to the subject matter hereof which have been made by either
party; provided, however, that this Agreement shall supersede any
agreement setting forth the terms and conditions of the Executive's
employment with the Company only in the event that the Executive's
employment with the Company is terminated on or following a Change
in Control, by the Company other than for Cause or by the Executive
other than for Good Reason; and provided further that all
agreements otherwise superseded by this Agreement shall be
automatically reinstated with full force and effect to the extent
this Agreement is terminated or otherwise rendered inapplicable or
amended in accordance with Section 12.2 hereof. The validity,
interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of Texas. All
references to sections of the Exchange Act or the Code shall be
deemed also to refer to any successor provisions to such sections.
Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law
and any additional withholding to which the Executive has agreed.
The obligations of the Company and the Executive under this
Agreement which by their nature may require either partial or total
performance after the expiration of the Term (including, without
limitation, those under Sections 6 and 7 hereof) shall survive such
expiration.
12. Validity; Pooling.
12.1 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
12.2 Pooling. In the event that (A) the Company is
party to a transaction which is otherwise intended to qualify for
"pooling of interests" accounting treatment, (B) such transaction
constitutes a Change in Control within the meaning of Section
15(G)(III) and (C) individuals who satisfy the requirements in
clauses (i) and (ii) below constitute more than two-thirds (2/3) of
the number of directors of the entity surviving such transaction
and the parent thereof, if any: individuals who (i) immediately
prior to such transaction constitute the Board and (ii) on the date
hereof constitute the Board and any new director (other than a
director whose initial assumption of office is in connection with
an actual or threatened election contest relating to the election
of directors of the Company) whose appointment or election by the
Board or nomination for election by the Company's stockholders was
approved or recommended, by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors on the
date hereof or whose appointment, election or nomination for
election was previously so approved or recommended then (a) this
Agreement shall, to the extent practicable, be interpreted so as to
permit such accounting treatment, and (b) to the extent that the
application of clause (a) of this Section 12.2 does not preserve
the availability of such accounting treatment, then, to the extent
that any provision or combination of provisions of the Agreement
disqualifies the transaction as a "pooling" transaction (including,
if applicable, the entire Agreement), the Board shall have the
right, by sending written notice to the Executive prior to the
Change in Control, to unilaterally amend (without the consent of
the Executive) such provision or provisions if and to the extent
necessary (including declaring such provision or provisions to be
null and void as of the date hereof) so that such transaction may
be accounted for as a "pooling of interests." All determinations
under this Section 12.2 shall be made by the Board prior to the
Change in Control, based upon the advice of the accounting firm
whose opinion with respect to "pooling of interests" is required as
a condition to the consummation of such transaction.
13. 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.
14. Settlement of Disputes; Arbitration.
14.1 All claims by the Executive for benefits under this
Agreement shall be directed to and determined by the Committee and
shall be in writing. Any denial by the Committee of a claim for
benefits under this Agreement shall be delivered to the Executive
in writing within thirty (30) days after written notice of the
claim is provided to the Company in accordance with Section 10 and
shall set forth the specific reasons for the denial and the
specific provisions of this Agreement relied upon. The Committee
shall afford a reasonable opportunity to the Executive for a review
of the decision denying a claim and shall further allow the
Executive to appeal to the Committee a decision of the Committee
within sixty (60) days after notification by the Committee that the
Executive's claim has been denied.
14.2 Any further dispute or controversy arising under or
in connection with this Agreement shall be settled exclusively by
arbitration in Houston, Texas in accordance with the rules of the
American Arbitration Association then in effect; provided, however,
that the evidentiary standards set forth in this Agreement shall
apply. Judgment may be entered on the arbitrator's award in any
court having jurisdiction. Notwithstanding any provision of this
Agreement to the contrary, the Executive shall be entitled to seek
specific performance of the Executive's right to be paid until the
Date of Termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
15. Definitions. For purposes of this Agreement, the
following terms shall have the meanings indicated below:
(A) "Affiliate" shall have the meaning set forth in Rule
12b-2 promulgated under Section 12 of the Exchange Act.
(B) "Auditor" shall have the meaning set forth in
Section 6.2 hereof.
(C) "Base Amount" shall have the meaning set forth in
section 280G(b)(3)of the Code.
(D) Beneficial Owner" shall have the meaning set forth
in Rule 13d-3 under the Exchange Act.
(E) "Board" shall mean the Board of Directors of the
Company.
(F) "Cause" for termination by the Company of the
Executive's employment shall mean (i) the willful and continued
failure by the Executive to substantially perform the Executive's
duties with the Company (other than any such failure resulting from
the Executive's incapacity due to physical or mental illness or any
such actual or anticipated failure after the issuance of a Notice
of Termination for Good Reason by the Executive pursuant to Section
7.1 hereof) after a written demand for substantial performance is
delivered to the Executive by the Board, which demand specifically
identifies the manner in which the Board believes that the
Executive has not substantially performed the Executive's duties,
or (ii) the willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company or its
subsidiaries, monetarily or otherwise. For purposes of clauses (i)
and (ii) of this definition, (x) no act, or failure to act, on the
Executive's part shall be deemed "willful" unless done, or omitted
to be done, by the Executive not in good faith and without
reasonable belief that the Executive's act, or failure to act, was
in the best interest of the Company and (y) in the event of a
dispute concerning the application of this provision, no claim by
the Company that Cause exists shall be given effect unless the
Company establishes to the Committee by clear and convincing
evidence that Cause exists.
(G) A "Change in Control" shall be deemed to have
occurred if the event set forth in any one of the following
paragraphs shall have occurred:
(I) any Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company (not including
in the securities beneficially owned by such Person any securities
acquired directly from the Company or its affiliates) representing
20% or more of the combined voting power of the Company's then
outstanding securities, excluding any Person who becomes such a
Beneficial Owner in connection with a transaction described in
clause (i) of paragraph (III) below; or
(II) the following individuals cease for any reason
to constitute a majority of the number of directors then serving:
individuals who, on the date hereof, constitute the Board and any
new director (other than a director whose initial assumption of
office is in connection with an actual or threatened election
contest relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for election by
the Company's stockholders was approved or recommended by a vote of
at least two-thirds (2/3) of the directors then still in office who
either were directors on the date hereof or whose appointment,
election or nomination for election was previously so approved or
recommended; or
(III) there is consummated a merger or
consolidation of the Company or any direct or indirect subsidiary
of the Company with any other corporation, other than (i) a merger
or consolidation which would result in the voting securities of
the Company outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity or any parent thereof), in combination with the
ownership of any trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any subsidiary of
the Company, at least 65% of the combined voting power of the
securities of the Company or such surviving entity or any parent
thereof outstanding immediately after such merger or consolidation,
or (ii) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which
no Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not including in the
securities Beneficially Owned by such Person any securities
acquired directly from the Company or its Affiliates other than in
connection with the acquisition by the Company or its Affiliates of
a business) representing 20% or more of the combined voting power
of the Company's then outstanding securities; or
(IV) the stockholders of the Company approve a plan
of complete liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition by the Company
of all or substantially all of the Company's assets, other than a
sale or disposition by the Company of all or substantially all of
the Company's assets to an entity, at least 65% of the combined
voting power of the voting securities of which are owned by
stockholders of the Company in substantially the same proportions
as their ownership of the Company immediately prior to such sale.
Notwithstanding the foregoing, a "Change in Control" shall not be
deemed to have occurred by virtue of the consummation of any
transaction or series of integrated transactions immediately
following which the record holders of the common stock of the
Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate
ownership in an entity which owns all or substantially all of the
assets of the Company immediately following such transaction or
series of transactions.
(H) "Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time.
(I) "Committee" shall mean (i) the individuals (not
fewer than three in number) who, on the date six months before a
Change in Control, constitute the Compensation Committee of the
Board, plus (ii) in the event that fewer than three individuals are
available from the group specified in clause (i) above for any
reason, such individuals as may be appointed by the individual or
individuals so available (including for this purpose any individual
or individuals previously so appointed under this clause (ii));
provided, however, that the maximum number of individuals
constituting the Committee shall not exceed six (6).
(J) "Company" shall mean Xxxxx Xxxxxx Incorporated and,
except in determining under Section 15(G) hereof whether or not any
Change in Control of the Company has occurred, shall include any
successor to its business and/or assets which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
(K) "Date of Termination" shall have the meaning set
forth in Section 7.2 hereof.
(L) "Disability" shall be deemed the reason for the
termination by the Company of the Executive's employment, if, as a
result of the Executive's incapacity due to physical or mental
illness, the Executive shall have been absent from the full-time
performance of the Executive's duties with the Company for a period
of six (6) consecutive months, the Company shall have given the
Executive a Notice of Termination for Disability, and, within
thirty (30) days after such Notice of Termination is given, the
Executive shall not have returned to the full-time performance of
the Executive's duties.
(M) "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended from time to time.
(N) "Excise Tax" shall mean any excise tax imposed
under section 4999 of the Code.
(O) "Executive" shall mean the individual named in the
first paragraph of this Agreement.
(P) "Extension Date" shall have the meaning set forth
in Section 2 hereof.
(Q) "Good Reason" for termination by the Executive of
the Executive's employment shall mean the occurrence (without the
Executive's express written consent) after any Change in Control,
or prior to a Change in Control under the circumstances described
in clauses (ii) and (iii) of the second sentence of Section 6.1
hereof (treating all references in paragraphs (I) through (VII)
below to a "Change in Control" as references to a "Potential Change
in Control"), of any one of the following acts by the Company, or
failures by the Company to act, unless, in the case of any act or
failure to act described in paragraph (I), (V), (VI) or (VII)
below, such act or failure to act is corrected prior to the Date of
Termination specified in the Notice of Termination given in respect
thereof:
(I) the assignment to the Executive of any duties
inconsistent with the Executive's status as a senior executive
officer of the Company or a substantial adverse alteration in the
nature or status of the Executive's responsibilities from those in
effect immediately prior to the Change in Control;
(II) a reduction by the Company in the Executive's
annual base salary as in effect on the date hereof or as the same
may be increased from time to time except for across-the-board
salary reductions similarly affecting all senior executives of the
Company and all senior executives of any Person in control of the
Company;
(III) the relocation of the Executive's principal
place of employment to a location more than 50 miles from the
Executive's principal place of employment immediately prior to the
Change in Control or the Company's requiring the Executive to be
based anywhere other than such principal place of employment (or
permitted relocation thereof) except for required travel on the
Company's business to an extent substantially consistent with the
Executive's present business travel obligations;
(IV) the failure by the Company to pay to the
Executive any portion of the Executive's current compensation
except pursuant to an across-the-board compensation deferral
similarly affecting all senior executives of the Company and all
senior executives of any Person in control of the Company, or to
pay to the Executive any portion of an installment of deferred
compensation under any deferred compensation program of the
Company, within seven (7) days of the date such compensation is
due;
(V) the failure by the Company to continue in
effect any compensation plan in which the Executive participates
immediately prior to the Change in Control which is material to the
Executive's total compensation, including but not limited to the
Company's 1993 Stock Option Plan, 1993 Employee Stock Bonus Plan,
1991 Employee Stock Bonus Plan, 1995 Stock Award Plan (and the
1995, 1996 and 1997 Stock Matching Programs thereunder and any
subsequent Stock Matching Programs in which the Executive
participates), 1987 Convertible Debenture Plan and 1995 Employee
Annual Incentive Compensation Plan or any substitute plans adopted
prior to the Change in Control, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been
made with respect to such plan, or the failure by the Company to
continue the Executive's participation therein (or in such
substitute or alternative plan) on a basis not materially less fa-
vorable, both in terms of the amount or timing of payment of bene-
fits provided and the level of the Executive's participation
relative to other participants, as existed immediately prior to the
Change in Control;
(VI) the failure by the Company to continue to
provide the Executive with benefits substantially similar to those
enjoyed by the Executive under any of the Company's pension,
savings, life insurance, medical, health and accident, or
disability plans in which the Executive was participating
immediately prior to the Change in Control (except for across the
board changes similarly affecting all senior executives of the
Company and all senior executives of any Person in control of the
Company), the taking of any other action by the Company which would
directly or indirectly materially reduce any of such benefits or
deprive the Executive of any material fringe benefit or perquisite
enjoyed by the Executive at the time of the Change in Control, or
the failure by the Company to provide the Executive with the number
of paid vacation days to which the Executive is entitled on the
basis of years of service with the Company in accordance with the
Company's normal vacation policy in effect at the time of the
Change in Control; or
(VII) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 7.1 hereof; for
purposes of this Agreement, no such purported termination shall be
effective.
The Executive's right to terminate the Executive's em-
ployment for Good Reason shall not be affected by the Executive's
incapacity due to physical or mental illness. The Executive's
continued employment shall not constitute consent to, or a waiver
of rights with respect to, any act or failure to act constituting
Good Reason hereunder.
For purposes of any determination regarding the existence
of Good Reason, any claim by the Executive that Good Reason exists
shall be presumed to be correct unless the Company establishes to
the Committee by clear and convincing evidence that Good Reason
does not exist.
(R) "Gross-Up Payment" shall have the meaning set forth
in Section 6.2 hereof.
(S) "Notice of Termination" shall have the meaning set
forth in Section 7.1 hereof.
(T) "Person" shall have the meaning given in Section
3(a)(9) of the Exchange Act, as modified and used in Sections 13(d)
and 14(d) thereof, except that such term shall not include (i) the
Company or any of its subsidiaries, (ii) a trustee or other
fiduciary holding securities under an employee benefit plan of the
Company or any of its Affiliates, (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities,
or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions
as their ownership of stock of the Company.
(U) "Potential Change in Control" shall be deemed to
have occurred if the event set forth in any one of the following
paragraphs shall have occurred:
(I) the Company enters into an agreement, the
consummation of which would result in the occurrence of a Change in
Control;
(II) the Company or any Person publicly announces
an intention to take or to consider taking actions which, if
consummated, would constitute a Change in Control;
(III) any Person becomes the Beneficial Owner,
directly or indirectly, of securities of the Company representing
15% or more of either the then outstanding shares of common stock
of the Company or the combined voting power of the Company's
then outstanding securities (not including in the securities
beneficially owned by such Person any securities acquired directly
from the Company or its affiliates); or
(IV) the Board adopts a resolution to the effect
that, for purposes of this Agreement, a Potential Change in Control
has occurred.
(V) "Retirement" shall, for purposes of Section 4
hereof, be deemed the reason for the termination by the Executive
of the Executive's employment if such employment is terminated
after completion of ten (10) years of service with the Company and
attainment of age fifty-five (55).
(W) "Severance Payments" shall have the meaning set
forth in Section 6.1 hereof.
(X) "SRP" shall have the meaning set forth in Section
6.1 hereof.
(Y) "Tax Counsel" shall have the meaning set forth in
Section 6.2 hereof.
(Z) "Term" shall mean the period of time described in
Section 2 hereof (including any extension, continuation or
termination described therein).
(AA) "Thrift Plan" shall have the meaning set forth in
Section 6.1 hereof.
(BB) "Total Payments" shall mean those payments so
described in Section 6.2 hereof.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date above first written.
XXXXX XXXXXX INCORPORATED
By: /s/ Xxxx X. Xxxxx
------------------------------
Xxxx X. Xxxxx
Chairman - Compensation Committee
of the Board of Directors
EXECUTIVE:
----------
/s/ Xxxxxxx X. Xxxx
------------------------------
XXXXXXX X. XXXX
Address:
000 Xxxxx Xxxxxx Xx. Xx.
Xxx Xxxxxxxxx, Xxxxx 00000
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(Please print carefully)
