MAYTAG CORPORATION
Exhibit 10(b)
Executive Severance Agreements.
The following executives are covered under this severance agreement:
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Change of Control Agreement
THIS AGREEMENT is made this _____________ day of _____________, 1998 (the
"Effective Date"), by and between Maytag Corporation, a Delaware corporation
(the "Company"), and ---------- (the "Executive"), and shall continue in effect
for three full calendar years (through the year 2001 (the Initial Term ).
The Initial Term of this agreement automatically shall be extended for one
additional year on the first anniversary of the Effective Date, and then again
on each anniversary thereafter (each such one-year period following the Initial
Term a "Successive Period").
In the event that a "Change of Control" of the Company occurs (as such term
is hereinafter defined) during the Initial Term or any Successive Period, upon
the effective date of such Change of Control, the term of this agreement shall
automatically and irrevocably be renewed for a period of thirty-six (36) full
calendar months from the effective date of such Change of Control. This
agreement shall thereafter automatically terminate following the thirty-six (36)
month Change-of-Control renewal period. Further, this agreement shall be
assigned to, and shall be assumed by the purchaser in such Change of Control, as
further provided herein in paragraph D5 of the section titled "Agreements."
RECITALS
A. The Board of Directors of the Company has approved the Company
entering into severance agreements with such executives of the Company and its
subsidiaries as is determined by the Chairman and Chief Executive Officer.
B. Should the Company receive or learn of any proposal by a third person
about a possible business combination with the Company or the acquisition of its
equity securities, the Board considers it imperative that the Company be able to
rely upon the Executive to continue in his or her position. This to the end that
the Company be able to receive and rely upon the Executive's advice concerning
the best interests of the Company and its stockholders, without concern that
person might be distracted by the personal uncertainties and risks created by
such a proposal.
C. Should the Company receive any such proposals, in addition to the
Executive's regular duties, he or she may be called upon to assist in the
assessment of such proposals, advise management and the Board as to whether such
proposals would be in the best interests of the Company and its stockholders,
and to take such other actions as the Board might determine to be appropriate.
AGREEMENT
NOW, THEREFORE, to assure the Company that it will have the continued
dedication of the Executive and the availability of that person's advice and
counsel notwithstanding the possibility, threat or occurrence of a bid to take
over control of the Company, and to induce the Executive to remain in the employ
of the Company, and for other good and valuable consideration, the Company and
the Executive agree that the Executive Severance Agreement described above be
amended and restated in its entirety as follows:
A. Should a third person, in order to effect a change of control (as
defined), begin a tender or exchange offer, circulate a proxy to stockholders or
take other steps, the Executive agrees that he or she will not voluntarily leave
the employ of the Company, and will render the services contemplated in the
recitals to this agreement, until the third person has abandoned or terminated
his efforts to effect a change of control or until a change of control has
occurred.
B. Should the Executive's employment with the Company or its subsidiaries
terminate for any reason (either voluntary or involuntary), other than because
of death, disability, Cause, or Normal Retirement within three (3) years after a
change of control of the Company, or in the event a successor company refuses to
accept its obligations under this agreement as required by paragraph D5 herein,
the following will be provided:
1. Lump Sum Cash Payment. On or before the Executive's last day of
employment with the Company or its subsidiaries, or as soon thereafter as
possible, the Company will pay to the Executive as compensation for services
rendered, a lump sum cash amount (subject to the usual withholding taxes) equal
to (A) three times the sum of (1) the Executive's annual salary at the rate in
effect immediately prior to the change of control and (2) the then-current
maximum cash bonus opportunity established under the annual incentive plan for
the bonus plan year in which termination occurs (but in no event shall such
maximum cash bonus be less than that in effect for the period immediately prior
to the change of control) plus (B) an amount equal to the compensation (at the
Executive's rate of pay in effect immediately prior to the change of control)
payable for any period for which the Executive could have, immediately prior to
the date of his termination of employment, been on vacation and received such
compensation, for unused and accrued vacation benefits determined under the
Company's vacation pay plan or program covering the Executive immediately prior
to the change of control.
2. Salaried and Supplemental Executive Retirement Plans. The Executive
shall be paid a monthly retirement benefit, in addition to any benefits received
under the Salaried Retirement Plans maintained by the Company or its
subsidiaries, including The Maytag Corporation Salaried Retirement Plan and any
Supplemental Executive Retirement Plan, such benefit to commence on the first to
occur of (a) the commencement of payment of benefits under the Maytag
Corporation Salaried Retirement Plan or (b) attainment of age 65, but not prior
to three (3) years following the date of termination of employment or age 65,
whichever first occurs, such benefit to be an amount equal to the excess of (i)
the aggregate benefits under such Salaried Retirement Plans to which the
Executive would be entitled if he or she remained employed by the Company or its
subsidiaries, for an additional period of three (3) years, at the rate of annual
compensation specified herein; over (ii) the benefits to which the Executive is
actually entitled under such Salaried Retirement Plans.
The source of payment of these benefits shall be the general assets of the
Company unless the payment of such amounts is otherwise permissible from the
corresponding qualified plan trust without violating any governmental
regulations or statutes.
3. Life, Dental, Vision, Health and Long-Term Disability Coverage. The
Executive's participation in, and entitlement to, benefits under: (i) the life
insurance plan of the Company; (ii) all the health insurance plan or plans of
the Company or its subsidiaries, including but not limited to those providing
major medical and hospitalization benefits, dental benefits and vision benefits;
and (iii) the Company's long-term disability plan or plans; as all such plans
existed immediately prior to the change of control shall continue as though he
or she remained employed by the Corporation or its subsidiaries for an
additional period of three (3) years. The applicable COBRA health insurance
benefit continuation period shall begin at the end of this three (3) year
period. To the extent such participation or entitlement is not possible for any
reason whatsoever, equivalent benefits shall be provided.
The providing of these benefits by the Company shall be discontinued prior
to the end of the three (3) year continuation period in the event that the
Executive becomes covered under the insurance programs of a subsequent employer
and, with respect to all health insurance plans, provided that such subsequent
employer's health insurance plans do not contain any exclusion or limitation
with respect to any preexisting condition of the Executive or the Executive's
eligible dependents. For purposes of enforcing this offset provision, the
Executive shall have a duty to inform the Company as to the terms and conditions
of any subsequent employment and the corresponding benefits earned from such
employment. The Executive shall provide, or cause to provide, to the Company in
writing correct, complete, and timely information concerning the same.
4. Participation in Employee Benefit Plans. Unless otherwise provided,
the Executive's participation in any other savings, capital accumulation,
retirement, incentive compensation, profit sharing, stock option, and/or stock
appreciation rights plans of the Company or any of its subsidiaries shall
continue only through the last day of his or her employment. Any terminating
distributions and/or vested rights under such plans shall be governed by the
terms of those respective plans. Furthermore, the Executive's participation in
any insurance plans of the Company and rights to any other fringe benefits
shall, except as otherwise specifically provided in such plans or Company
policy, terminate as of the close of the Executive's last day of employment,
except to the extent specifically provided to the contrary in this agreement.
5. Incentive Plans. In addition to the payments required by paragraph 1
of this Section, the Company shall pay to the Executive as compensation for
services rendered cash in an amount equal to the then-current maximum cash bonus
opportunity established under the annual incentive plan for the bonus plan year
in which termination occurs, adjusted on a pro rata basis based on the number of
days the Executive was actually employed during such bonus plan year (but in no
event shall such maximum cash bonus be less than that in effect for the period
immediately prior to the change of control). In the case of long-term stock
incentive awards represented by restricted shares of stock of the Company, made
to Executive under the Maytag Corporation Employee Stock Incentive Plan (any
prior plan, or successor plan) in lieu of stock under such stock incentive
awards the Executive shall receive a cash payment equal to the aggregate value
of the maximum number of shares for which the Executive holds outstanding
awards, with share value determined at the closing price as of the date of the
change of control. Any payment due pursuant to this paragraph 5 shall be paid
at the same time as the amounts payable pursuant to paragraph 1 of this Section.
6. Excise Tax-Additional Payment. (a) Notwithstanding anything in this
agreement or any written or unwritten policy of the Company or its subsidiaries
to the contrary, (i) if it shall be determined that any payment or distribution
by the Company or its subsidiaries to or for the benefit of the Executive,
whether paid or payable or distributed or distributable pursuant to the terms of
this agreement, any other agreement between the Company or its subsidiaries and
the Executive or otherwise (a "Payment"), would be subject to the excise tax
imposed by section 4999 of the Internal Revenue Code of 1986, as amended, (the
"Code") or any interest or penalties 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"), or (ii) if the Executive shall
otherwise become obligated to pay the Excise Tax in respect of a Payment, then
the Company shall pay to the Executive an additional payment in an amount to
cover the full cost of any Excise Tax and the Executive's state and federal
income and employment taxes on this additional payment (cumulatively, the
"Gross-Up Payment").
(b) All determinations and computations required to be made under this
section B6, including whether a Gross-Up Payment is required under clause (ii)
of paragraph B6(a) above, and the amount of any Gross-Up Payment, shall be made
by the Company's regularly engaged independent certified public accountants (the
"Accounting Firm"). The Company shall cause the Accounting Firm to provide
detailed supporting calculations both to the Company and the Executive within 15
business days after such determination or computation is requested by the
Executive. Any initial Gross-Up Payment determined pursuant to this paragraph B6
shall be paid by the Company or the subsidiary to the Executive within 5 days of
the receipt of the Accounting Firm's determination. A determination that no
Excise Tax is payable by the Executive shall not be valid or binding unless
accompanied by a written opinion of the Accounting Firm to the Executive that
the Executive has substantial authority not to report any Excise Tax on his
federal income tax return. Any determination by the Accounting Firm shall be
binding upon the Company, its subsidiaries and the Executive, except to the
extent the Executive becomes obligated to pay an Excise Tax in respect of a
Payment. In the event that the Company or the subsidiary exhausts or waives its
remedies pursuant to subparagraph B6(c) and the Executive thereafter shall
become obligated to make a payment of any Excise Tax, and if the amount thereof
shall exceed the amount, if any, of any Excise Tax computed by the Accounting
Firm pursuant to this subparagraph (b) in respect to which an initial Gross-Up
Payment was made to the Executive, the Accounting Firm shall within 15 days
after Notice thereof determine the amount of such excess Excise Tax and the
amount of the additional Gross-Up Payment to the Executive. All expenses and
fees of the Accounting Firm incurred by reason of this paragraph B6 shall be
paid by the Company.
(c) The 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 a Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the Executive knows 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. The Executive shall not pay
such claim prior to the expiration of the thirty-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 the Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested 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,
(iv) permit the Company to participate in any proceedings relating to
such claim;
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 the 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 on the foregoing provisions of
this subparagraph B6(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 the Executive to pay the tax claimed and ▇▇▇ for a refund or contest the
claim in any permissible manner, and the 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 or the
subsidiary shall determine; provided, however, that if the Company or the
subsidiary directs the Executive to pay such claim and ▇▇▇ for a refund, the
Company or the subsidiary shall advance the amount of such payment to the
Executive, on an interest-free basis and shall indemnify and hold the 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 statue of limitations relating to payment of
taxes for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, control of the contest by the Company or the subsidiary shall be
limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and the 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 the Executive of an amount advanced by the
Company or the subsidiary pursuant to subparagraph B6(c), the Executive becomes
entitled to receive any refund with respect to such claim, the Executive shall
(subject to compliance with the requirements of paragraph B6 by the Company or
the subsidiary) promptly pay to the Company or the subsidiary the amount of such
refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company or the subsidiary pursuant to subparagraph B6(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of thirty 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 off-set,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
C. Definitions.
1. "Cause." For purposes of this agreement, Cause shall be determined
by the Board of Directors, in the exercise of good faith and reasonable
judgment, and shall mean the occurrence of any one or more of the following:
(a) A demonstrably willful and deliberate act or failure to act by the
Executive (other than as a result of incapacity due to physical or mental
illness) which is committed in bad faith, without reasonable belief that such
action or inaction is in the best interests of the Company, which causes actual
material financial injury to the Company and which act or inaction is not
remedied within fifteen (15) business days of written notice from the Company;
or
(b) The Executive's conviction for committing an act of fraud,
embezzlement, theft, or any other act constituting a felony involving moral
turpitude or causing material harm, financial or otherwise, to the Company.
2. Change of Control. For purposes of this agreement, "change of control"
shall mean:
(a) The acquisition by any individual, entity or group (within the meaning
of Section 13 (d) (3) or 14 (d) (2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the Company (the
Outstanding Company Common Stock ) or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition by
the Company, (ii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled by
the Company or (iii) any acquisition by any corporation pursuant to a
transaction which complies with clauses (i), (ii) and (iii) of subsection (c)
below; or
(b) Individuals who, as of the date hereof, constitute the Board (the
Incumbent Board ) cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of a least a majority of the directors then
comprising the Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of directors
or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, (i) 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
Business Combination 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 Business Combination (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 either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (ii) no
Person (excluding any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of the members
of the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(d) Approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company.
3. Normal Retirement. For purposes of this agreement, "Normal Retirement"
shall have the same meaning as provided in the Maytag Corporation Salaried
Retirement Plan; provided, however, that "Normal Retirement" shall not include
terminations of the Executive by the Company without Cause.
4. Subsidiary. For purposes of this agreement, a "Subsidiary" shall mean
any domestic or foreign corporation at least 20% of whose shares normally
entitled to vote in electing directors is owned directly or indirectly by the
Company or by other subsidiaries.
D. General Provisions.
1. No Guaranty of Employment. Nothing in this agreement shall be deemed
to entitle the Executive to continued employment with the Company or its
subsidiaries, and the rights of the Company to terminate the employment of the
Executive shall continue as fully as if this agreement were not in effect,
provided that any such termination of employment within three (3) years
following a change of control shall entitle the Executive to the benefits herein
provided.
2. Confidentiality. The Executive shall retain in confidence any
confidential information known to him concerning the Company and its business so
long as such information is not publicly disclosed.
3. Payment Obligation Absolute. The Company's obligation to pay the
Executive the compensation and to make the arrangements provided herein shall be
absolute and unconditional and shall not be affected by any circumstances,
including without limitation, any set-off, counterclaim, recoupment, defense or
other right which the Company may have against him, her or anyone else. All
amounts payable by the Company hereunder shall be paid without notice or demand.
Each and every payment made hereunder by the Company shall be final and the
Company shall not seek to recover all or any part of such payment from the
Executive or from whoever may be entitled thereto, for any reason whatsoever.
In the event that the cash payment due the Executive under Paragraph B1 or
B5 herein is not paid to the Executive within thirty (30) calendar days of the
Executive's employment termination, such amount due shall accrue interest
(compounded monthly) beginning on the date of employment termination at a rate
equal to the prevailing Prime Rate as determined by ▇▇▇▇▇▇ Bank of Chicago, or
the Company's then-current primary banking institution. Further, to the extent
this additional amount would be subject to the Excise Tax, the Company shall pay
to the Executive a Gross-Up Payment, as such terms are described in Paragraph B6
herein.
4. Dispute Resolution.
(a) The Company shall pay all legal fees, costs of litigation, prejudgment
interest, and other expenses which are incurred in good faith by the Executive
as a result of the Company's refusal to provide the benefits to which the
Executive becomes entitled under this agreement, or as a result of the Company's
(or any third party's) contesting the validity, enforceability, or
interpretation of the agreement, or as a result of any conflict between the
parties pertaining to this agreement.
(b) The Executive shall have the right and option to elect (in lieu of
litigation) to have any dispute or controversy arising under or in connection
with this agreement settled by arbitration, conducted before a panel of three
(3) arbitrators sitting in a location selected by the Executive within fifty
(50) miles from the location of his or her job with the Company, in accordance
with the rules of the American Arbitration Association then in effect. The
Executive's election to arbitrate, as herein provided, and the decision of the
arbitrators in that proceeding, shall be binding on the Company and the
Executive.
Judgment may be entered on the award of the arbitrator in any court having
jurisdiction. All expenses of such arbitration, including the fees and expenses
of the counsel for the Executive, shall be borne by the Company.
5. Successors. This agreement shall be binding upon and inure to the
benefit of the Executive and his or her estate, and the Company and any
successor of the Company, but neither this agreement nor any rights arising
hereunder may be assigned or pledged by the Executive.
6. Severability. Any provision in this agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
only to the extent of such prohibition or unenforceability without invalidating
or affecting the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
7. Entire Agreement. With respect to the subject matter hereof, this
agreement supersedes any prior agreements or understandings, oral or written,
between the parties hereto and contains the entire understanding of the Company
and the Executive.
8. Controlling Law. This agreement shall in all respects be governed by,
and construed in accordance with, the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties have executed this agreement on the date
set out above.
MAYTAG CORPORATION
By_____________________
Chairman & CEO
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