CHANGE IN CONTROL SEVERANCE AGREEMENT FOR EXECUTIVE OFFICERS
Exhibit
10.7
CHANGE IN CONTROL SEVERANCE
AGREEMENT FOR EXECUTIVE OFFICERS
THIS
AGREEMENT, dated [insert date], is made by and between Itron, Inc. (the
"Company"), and [] (the
"Executive").
WHEREAS,
the Company considers the establishment and maintenance of a sound and vital
management to be essential to protecting and enhancing the best interests of the
Company and its stockholders; and
WHEREAS,
the Executive has made and is expected to make a significant contribution to the
Company; and
WHEREAS,
the Company, as a publicly held corporation, recognizes that the possibility of
a Change in Control may exist, and that such possibility and the uncertainty and
questions which it may raise among management may result in the departure or
distraction of the Executive in the performance of the Executive's duties, to
the detriment of the Company and its stockholders; and
WHEREAS,
it is in the best interests of the Company and its stockholders to reinforce and
encourage the continued attention and dedication of management personnel,
including the Executive, to their assigned duties without distraction and to
ensure the continued availability to the Company of the Executive in the event
of a Change in Control;
THEREFORE,
in consideration of the foregoing and other respective covenants and agreements
of the parties herein contained, the parties hereto agree as
follows:
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1.
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Defined
Terms. The definitions of capitalized terms used in this
Agreement are provided in Section
16.
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2.
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Term of
Agreement. The term of this Agreement (the "Term") shall
commence on [DATE] and shall continue in effect through [INSERT SECOND
ANNIVERSARY OF PRECEDING DATE]; provided, however, that
commencing on [SUCH SECOND ANNIVERSARY] and each [MONTH/DATE OF
ANNIVERSARY] thereafter, the Term shall automatically be extended for one
additional year unless, not later than [ONE YEAR PRIOR TO ANNIVERSARY
MONTH/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 on the last day of the twenty-fourth (24th)
month following the month in which such Change in Control
occurred.
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3.
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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 in Section 4 and Section 15, the Company, under the conditions
described herein, shall pay the Executive the Severance Payments and the
other payments and benefits described herein. Except as
provided in Section 5.3, no Severance Payments shall be payable under this
Agreement unless there shall have been (or, pursuant to the second
sentence of Section 6.1, 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.
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4.
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The Executive's
Covenants. Subject to the terms and conditions of this
Agreement, in the event of a Potential Change in Control, the Executive
shall remain in the employ of the Company until the earliest of (i) a date
which is six (6) months from the date of the first occurrence of a
Potential Change in 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, Disability or Retirement, or (iv) the
termination by the Company of the Executive's employment for any
reason.
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5.
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Compensation Other
Than Severance Payments; Equity Award
Treatment.
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5.1 If the
Executive's employment shall be terminated for any reason following a Change in
Control, the Company shall pay the Base Salary to the Executive through the Date
of Termination, together with all compensation and benefits payable to the
Executive through the Date of Termination 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 (including, without limitation, a payment
in respect of the Executive’s accrued and unused vacation, determined without
regard to any adverse change to the vacation accrual or payout policy occurring
following the Change in Control).
5.2 If the
Executive's employment shall be terminated for any reason following a Change in
Control, 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, subject to the application of
6.1(D) hereof.
5.3 Notwithstanding
anything to the contrary contained in any equity plan or arrangement of the
Company or any agreement between the Company and the Executive (but subject to
the provisions of Section 14.3 hereof), upon the occurrence of a Change in
Control, each outstanding stock option, restricted stock or other equity or
equity-based award granted to the Executive (other than Long Term Performance
Plan awards) shall become immediately and fully vested and (if applicable)
exercisable as of the date of such Change in Control. In the case of
Long Term Performance Plan awards outstanding as of the Change in Control, such
awards shall be vested at the greater of target or actual performance for the
year (which shall be determined by the Board if the Board concludes that such
performance may be determined as of the date of the Change in Control), which
amount shall be paid out pro-rata within five days following the Change in
Control, based on the portion of the performance period which has elapsed as of
the date of the Change in Control.
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6.
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Severance Payments and
Benefits.
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6.1 If the
Executive's employment is terminated within twenty-four (24) months following a
Change in Control, 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, if
applicable, Section 6.2, in addition to any payments and benefits to which the
Executive is entitled under Section 5. For purposes of this
Agreement, the Executive's employment shall be deemed to have been terminated
within twenty-four (24) months following a Change in Control and during the Term
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 during a
Potential Change in Control Period, or (ii) the Executive terminates Executive’s
employment for Good Reason during a Potential Change in Control
Period. In the event that the Executive's employment is terminated in
the manner described in the preceding sentence, a Change in Control shall be
deemed to have occurred immediately preceding such termination for purposes of
Section 5.3 hereof. Except as described above, the Executive shall
not be entitled to benefits pursuant to this Section 6.1 unless a Change in
Control shall have occurred during the Term.
(A) The
Company shall pay to the Executive a lump sum severance payment, in cash, equal
to [INSERT SEVERANCE MULTIPLIER—3x, 2.5x, 2x, 1x] times the sum of (a) the Base
Salary, and (b) the target annual bonus available to the Executive pursuant to
the Company's annual bonus plan in which the Executive participates in respect
of the fiscal year in which the Date of Termination occurs (without giving
effect to any event or circumstance constituting Good Reason).
(B) For the
[INSERT SEVERANCE PERIOD—36, 30, 24, 12] month period immediately following the
Date of Termination, the Company shall arrange to provide the Executive and
Executive’s dependents life, disability and health insurance benefits
substantially similar to those provided to the Executive and Executive’s
dependents immediately prior to the Date of Termination or, if more favorable to
the Executive, those provided to the Executive and Executive’s dependents
immediately prior to the first occurrence of an event or circumstance
constituting Good Reason, at no greater after-tax cost to the Executive than the
cost to the Executive immediately prior to such date or
occurrence. The cost of providing the benefits set forth in this
Section 6.1(B) shall be in addition to (and shall not reduce) the Severance
Payments. Benefits otherwise receivable by the Executive pursuant to
this Section 6.1(B) shall be reduced to the extent the Executive becomes
eligible to receive comparable benefits at comparable cost from a new employer
or pursuant to a government-sponsored health insurance or health care
program.
(C) The
Company shall pay to the Executive an amount in respect of the Executive's
annual cash bonus compensation for the fiscal year in which the Date of
Termination occurs at the greater of target or actual performance for the year,
which amount shall be paid out pro-rata, based on the portion of the performance
period which has elapsed as of the date of Termination. In
addition, if the Date of Termination occurs during the Term and following the
year in which the Change in Control occurs, the Executive’s Long Term
Performance Plan award outstanding as of the Date of Termination (which shall be
determined without regard to any event or circumstance constituting Good Reason)
shall be vested at the greater of target or actual performance for the year,
which amount shall be paid out pro-rata based on the portion of the performance
period which has elapsed as of the date of Termination. If the Date
of Termination occurs in the same year as the Change in Control, the amount paid
under the preceding sentence shall be offset by amounts paid out in respect of
the Long Term Performance Plan pursuant to Section 5.3. All equity or
equity based awards which have been granted to the Executive following the
Change in Control shall be vested upon the Date of Termination.
6.2 Gross Up. [Only applicable to executives with
prior CIC agreements]
(A) Subject
to Section 6.2(E) and Section 6.2(F), 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 (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) (all such payments and 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 accounting 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 payments, 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. If there has not been a Date of
Termination with respect to the Executive, the Company shall cause the Gross-Up
Payment to be calculated within 30 days of a written request to that effect from
the Executive.
(C) Upon
Executive's request, the Company shall promptly provide the Executive with a
written statement setting forth the manner in which calculations were made
pursuant to this Section 6.2 including, without limitation, any opinions or
other advice the Company has received from Tax Counsel or other advisors or
consultants (and any such opinions or advice which are in writing shall be
attached to the statement).
(D) 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 determined, 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 employment 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 payment 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, provided that such additional payment shall only
be made to the extent that the payment (or the right to the payment) does not
result in taxation under section 409A of the Code, including pursuant to
Treasury Regulation Section 1.409A-3(d) (in which case the payment shall be made
in no event later than the end of the calendar year following the calendar year
in which the calculation of the Executive's excise tax liability under section
280G of the Code may be calculated). The Executive and the Company
shall each reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or amount of
liability for Excise Tax with respect to the Total Payments.
(E) Notwithstanding
the foregoing provisions of this Section 6.2, if it shall be determined that the
Executive is entitled to a Gross-Up Payment with respect to a Change in Control
occurring prior to the third anniversary of the date of this Agreement, but the
Total Payments do not exceed 105% of the greatest amount that could be paid to
the Executive such that the receipt of Total Payments would not give rise to any
Excise Tax (the "Reduced Amount"), then no Gross-Up Payment shall be made to the
Executive and the Total Payments, in the aggregate, shall be reduced to the
Reduced Amount. If a reduction is required, the reduction shall be applied to
the cash payment otherwise payable pursuant to Section 6.1(A)
hereof.
(F) The
Executive will not be entitled to a Gross-Up Payment under this Agreement with
respect to any Change in Control occurring on or after the third anniversary of
the date of this Agreement, but shall continue to remain entitled to a Gross-Up
Payment with respect to any Change in Control occurring prior to the third
anniversary of the date of this Agreement in accordance with this Section 6.2,
even if the Date of Termination occurs following the third anniversary of the
date of this Agreement. In the event (1) the Executive’s entitlement
to a Gross-Up Payment is eliminated pursuant to this Section 6.2(F) and (2) the
Reduced Amount (reduced by applicable taxes) exceeds the net amount of the Total
Payments which would be retained by the Executive after deduction of any Excise
Tax (and all other applicable taxes) on the Total Payments, the Total Payments
shall be reduced to the Reduced Amount. If a reduction is required, the
reduction shall be applied to the payment otherwise payable pursuant to Section
6.1(A) hereof.
6.3 Except as
set forth below or as required by the operation of Section 14.3, the payments
provided in subsection (A) of Section 6.1 and in Section 6.2 shall be made not
later than the fifth day following the Date of Termination (or, in the case of
Section 6.2, if there is no Date of Termination, then the fifth day following
date on which the Gross-Up Payment is calculated for purposes of Section 6.2,
which calculation shall be done not later than the 30th day
following the date upon which there occurs a change in ownership or control of
the Company for purposes of section 280G of the Code), 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 Company or, in the case of payments under Section 6.2, in
accordance with Section 6.2, 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
occurrence of a 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). 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). The payments provided in Section
6.1(C) will be paid not later than 75 days following the end of the calendar
year in which the Date of Termination occurs, unless another payment date is
required by the operation of Section 14.3.
6.4 The
Company 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
enforce any benefit or right provided by this Agreement or 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 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 expenses incurred as the Company reasonably may
require. The Executive's reimbursement rights described in this Section 6.4
shall remain in effect for the life of the Executive, provided, that, in order
for the Executive to be entitled to reimbursement hereunder, the Executive must
submit the written reimbursement request described above within 180 days
following the date upon which the applicable fee or expense is
incurred.
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7.
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Termination Procedures
and Compensation During
Dispute.
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7.1 Notice of
Termination. After a Change in Control, 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. 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 any 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 two-thirds (2/3) 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), (ii) or (iii) 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,
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 the Company's right to cure set forth in Section 16.16
expires).
7.3 Dispute Concerning
Termination. If within ten (10) 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 the Date of Termination is extended in accordance
with Section 7.3, 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, the Base 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, until the Date of Termination, as determined in accordance with Section
7.3. Amounts paid under this Section 7.4 are in addition to all other
amounts due under this Agreement (other than those due under Section 5.1) and
shall not be offset against or reduce any other amounts due under this
Agreement.
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8.
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No
Mitigation. If the Executive's employment with the
Company terminates following a Change in Control, 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 Section 6 or
Section 7.4. Except as set forth in Section 6.1(B), the amount
of any payment or benefit provided for or referenced in this Agreement
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.
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9.
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Entire Agreement;
Binding Agreement.
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9.1 This
Agreement supersedes any other agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof (including the
Change in Control Agreement by and between the Company and the Executive dated
[INSERT DATE]) which
have been made by either party; provided, however, that this
Agreement shall not supersede any agreement setting forth the terms and
conditions of the Executive's employment with the Company or any subsidiary of
the Company.
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.
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10.
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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
or certified mail, return receipt requested, postage prepaid, addressed to
the last known residence address of the Executive or in the case of the
Company, to its principal office to the attention of the General Counsel
of the Company with a copy to its clerk or Secretary, 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 receipt.
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11.
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Miscellaneous. 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. The
validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of Washington. 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, 7 and 15) shall survive such
expiration.
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12.
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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.
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13.
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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.
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14.
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Settlement of
Disputes; Arbitration; 409A
Compliance.
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14.1 All
claims by the Executive for benefits under this Agreement shall be directed to
and determined by the Board and shall be in writing. Any denial by
the Board of a claim for benefits under this Agreement shall be delivered to the
Executive in writing and shall set forth the specific reasons for the denial and
the specific provisions of this Agreement relied upon. The Board
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
Board a decision of the Board within sixty (60) days after notification by the
Board 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 Seattle, Washington 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.
14.3 It
is the intention of the Company and the Executive that this Agreement not result
in taxation of the Executive under Section 409A of the Code and the regulations
and guidance promulgated thereunder and that the Agreement shall be construed in
accordance with such intention. Without limiting the generality of
the foregoing, the Company and the Executive agree as follows:
(A) Notwithstanding
anything to the contrary herein, if the Executive is a “specified employee”
(within the meaning of Section 409A(a)(2)(B)(i) of the Code) with respect to the
Company, any amounts (or benefits) otherwise payable to or in respect of him
under this Agreement pursuant to the Executive's termination of employment with
the Company shall be delayed, to the extent required so that taxes are not
imposed on the Executive pursuant to Section 409A of the Code, and shall be paid
upon the earliest date permitted by Section 409A(a)(2) of the Code;
(B) For
purposes of this Agreement, the Executive's employment with the Company will not
be treated as terminated unless and until such termination of employment
constitutes a "separation from service" for purposes of Section 409A of the
Code;
(C) To the
extent necessary to comply with the provisions of Section 409A of the Code and
the guidance issued thereunder (1) reimbursements to or tax gross-ups of the
Executive as a result of the operation of Section 6.1(B), Section 6.2 or Section
6.4 hereof shall be made not later than the end of the calendar year following
the year in which the reimbursable expense is incurred or applicable tax is paid
and shall otherwise be made in a manner that complies with the requirements of
Treasury Regulation Section 1.409A-3(i)(l)(iv), (2) if Executive is a "specified
employee" (within the meaning of Section 409A(a)(2)(B)(i) of the Code), any
reimbursements to the Executive as a result of the operation of such sections
with respect to a reimbursable event within the first six months following the
Date of Termination which are required to be delayed pursuant to Section 14.1(A)
shall be made as soon as practicable following the date which is six months and
one day following the Date of Termination (subject to clause (A) of this
sentence); and
(D) If the
provisions of Section 5.3 or 6.1(C) are applicable to an equity or equity-based
award subject to the provisions of Section 409A of the Code and the immediate
payment of the award contemplated by such sections would result in taxation
under Section 409A, payment of such awards shall be made upon the earliest date
upon which such payment may be made without resulting in taxation under Section
409A of the Code.
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15.
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Non-Solicitation;
Non-Disparagement.
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15.1 During
the period commencing on the Date of Termination and ending upon the first
anniversary of the Date of Termination, the Executive shall not, directly or
indirectly: (i) recruit, hire or solicit for employment or
engagement, any person who is employed by the Company or any Affiliate, or (ii)
solicit (A) any client or customer doing business with the Company or any
Affiliate, as of the Date of Termination and with whom or which the Executive
had any contact or involvement during the Executive’s employment with the
Company or (B) any prospective client or customer of the Company or any
Affiliate whom or which is a prospective client of the Company or any Affiliate
as of the Date of Termination and with whom or which the Executive had any
contact or involvement during the Executive’s employment with the Company to
adversely alter its relationship or cease doing business with the Company or any
Affiliate.
15.2 Following
the Date of Termination and thereafter, the Executive shall not, directly or
indirectly, make disparaging remarks about the Company or any Affiliate or any
of their respective directors, officers or employees.
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16.
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Definitions. For
purposes of this Agreement, the following terms shall have the meanings
indicated below:
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16.1 "Affiliate"
shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of
the Exchange Act.
16.2 "Auditor"
shall have the meaning set forth in Section 6.2.
16.3 "Base
Amount" shall have the meaning set forth in section 280G(b)(3) of the
Code.
16.4 "Base
Salary" shall mean the annual base salary in effect for the Executive
immediately prior to a Change in Control, as such salary may be increased from
time to time during the Term (in which case such increased amount shall be the
Base Salary for purposes hereof), but without giving effect to any reduction
thereto.
16.5 "Beneficial
Owner" shall have the meaning set forth in Rule 13d-3 under the Exchange
Act.
16.6 "Board"
shall mean the Board of Directors of the Company.
16.7 "Cause"
for termination by the Company of the Executive's employment shall mean (i) the
willful and continued failure by the Executive (other than any such failure
resulting from (A) the Executive's incapacity due to physical or mental illness,
(B) any such actual or anticipated failure after the issuance of a Notice of
Termination by the Executive for Good Reason or (C) the Company's active or
passive obstruction of the performance of the Executive's duties and
responsibilities) to perform substantially the duties and responsibilities of
the Executive's position with the Company 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 such duties or responsibilities; (ii)
the conviction of the Executive by a court of competent jurisdiction for felony
criminal conduct; or (iii) the willful engaging by the Executive in fraud or
dishonesty which is demonstrably and materially injurious to the Company or its
reputation, monetarily or otherwise. No act, or failure to act, on
the Executive's part shall be deemed "willful" unless committed, or omitted by
the Executive in bad faith and without reasonable belief that the Executive's
act or failure to act was in, or not opposed to, the best interest of the
Company.
16.8 A "Change
in Control" shall be deemed to have occurred if any of the events set forth in
any one of the following paragraphs shall have occurred:
(A) any
Person is or becomes the Beneficial Owner, directly or indirectly, of securities
of the Company representing 25% 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, excluding any Person who becomes such a Beneficial Owner
in connection with a transaction described in Section 16.8(C)(i);
(B) a change
in the composition of the Board during any two-year period such that the
individuals who, as of the date of this agreement, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that for purposes of this definition, any individual
who becomes a member of the Board subsequent to the beginning of the two-year
period, whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least two-thirds of those individuals
who are members of the Board and who were also members of the Incumbent Board
(or deemed to be such pursuant to this proviso) shall be considered as though
such individual were a member of the Incumbent Board; and provided further,
however, that any such individual whose initial assumption of office occurs as a
result of or in connection with an actual or threatened solicitation of proxies
or consents by or on behalf of an Person other than the Board shall not be
considered a member of the Incumbent Board;
(C) 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 immediately following which members of the Incumbent Board
constitute a majority of the members of the board of directors (or similar body)
of the surviving entity or, if the surviving entity is a subsidiary, any parent
thereof, 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) representing
25% or more of the combined voting power of the Company's then outstanding
securities; or
(D) the
stockholders of the Company approve a plan of complete liquidation or
dissolution of the Company or the consummation of a 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 50% 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.
16.9 "Code"
shall mean the Internal Revenue Code of 1986, as amended from time to
time.
16.10 "Company"
shall mean Itron, Inc. and, except in determining under Section 16.8 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.
16.11 "Date of
Termination" shall have the meaning set forth in Section 7.2.
16.12 "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 at least
one hundred twenty (120) days, 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. Any question as to
the existence of the Executive's Disability upon which the Executive and the
Company cannot agree shall be determined by a qualified independent physician
selected by the Executive (or, if the Executive is unable to make such
selection, it shall be made by any adult member of the Executive's immediate
family), and approved by the Company. The determination of such
physician made in writing to the Company and to the Executive shall be final and
conclusive for all purposes of this Agreement, absent fraud.
16.13 "Exchange
Act" shall mean the Securities Exchange Act of 1934, as amended from time to
time.
16.14 "Excise
Tax" shall mean any excise tax imposed under section 4999 of the
Code.
16.15 "Executive"
shall mean the individual named in the first paragraph of this
Agreement.
16.16 "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 the second sentence of Section 6.1 (treating all references in
subsections (A) through (F) 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 subsection (A), (B), (C), (D), (E) or (F) 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:
(A) an
adverse change in the Executive's status or position(s) as an officer of the
Company as in effect immediately prior to the Change in Control, including,
without limitation, any adverse change in the Executive's status or position as
a result of a diminution of the Executive's duties or responsibilities (other
than, if applicable, any such change directly and solely attributable to the
fact that the Company is no longer publicly owned) or the assignment to the
Executive of any duties or responsibilities which are inconsistent with such
status or position(s), or any removal of the Executive from, or any failure to
reappoint or reelect the Executive to, such position(s);
(B) a
reduction in the Executive's Base Salary;
(C) a
reduction in the Executive’s annual bonus opportunity or long term incentive
opportunity, as compared to the year immediately preceding the year in which the
Change in Control occurs;
(D) the
failure to continue provide welfare, pension and fringe benefits which are in
each case, in the aggregate, substantially similar to those provided to the
Executive immediately prior to Change in Control;
(E) the
Company requiring the Executive to be based at an office that is greater than 50
miles from where the Executive's office is located immediately prior to the
Change in Control except for required travel on the Company's business to an
extent substantially consistent with the business travel obligations which the
Executive undertook on behalf of the Company prior to the Change in Control;
or
(F) any
failure by the Company to 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;
Notwithstanding
the foregoing, the events described in clauses (B), (C) or (D) above shall not
constitute Good Reason hereunder to the extent they are as a result of across
the board reductions of the applicable compensation element following the Change
in Control which are equally applicable to all similarly situated employees of
the surviving corporation and its Affiliates. The Executive's right
to terminate the Executive's employment for Good Reason shall not be affected by
the Executive's incapacity due to physical or mental illness. In
order for Good Reason to exist hereunder, the Executive must provide notice to
the Company of the existence of the condition or circumstance described above
within 90 days of the initial existence of the condition or circumstance (or, if
later, within 90 days of the Executive's becoming aware of such condition or
circumstance), and the Company must have failed to cure such condition within 30
days of the receipt of such notice. Subject to the preceding sentence, 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.
16.17 "Gross-Up
Payment" shall have the meaning set forth in Section 6.2.
16.18 "Notice
of Termination" shall have the meaning set forth in Section 7.1.
16.19 "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.
16.20 "Potential
Change in Control" shall be deemed to have occurred if the event set forth in
any one of the following subsections shall have occurred:
(A) the
Company enters into an agreement, the consummation of which would result in the
occurrence of a Change in Control;
(B) 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;
(C) 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; or
(D) the Board
adopts a resolution to the effect that, for purposes of this Agreement, a
Potential Change in Control has occurred.
16.21 "Potential
Change in Control Period" shall commence upon the occurrence of a Potential
Change in Control and shall lapse upon the occurrence of a Change in Control or,
if earlier (i) with respect to a Potential Change in Control occurring pursuant
to Section 16.20(A), immediately upon the abandonment or termination of the
applicable agreement, (ii) with respect to a Potential Change in Control
occurring pursuant to Section 16.20(B), immediately upon a public announcement
by the applicable party that such party has abandoned its intention to take or
consider taking actions which if consummated would result in a Change in Control
or (iii) with respect to a Potential Change in Control occurring pursuant to
Section 16.20(C) or (D), upon the one year anniversary of the occurrence of a
Potential Change in Control (or such earlier date as may be determined by the
Board).
16.22 "Retirement"
shall be deemed the reason for the termination by the Executive of the
Executive's employment if such employment is terminated in accordance with the
Company's retirement policy, including early retirement, generally applicable to
its salaried employees.
16.23 "Severance
Payments" shall have the meaning set forth in Section 6.1.
16.24 "Tax
Counsel" shall have the meaning set forth in Section 6.2.
16.25 "Term"
shall mean the period of time described in Section 2 (including any extension,
continuation or termination described therein).
16.26 "Total
Payments" shall mean those payments so described in Section 6.2.
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17.
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Benefit Offset.
[This section is
applicable to any Executive who resides in a country outside of the United
States who may be eligible to receive severance benefits under the laws of
the other country.]
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Notwithstanding
any other provision to the contrary set forth herein, if there is a Change in
Control and Executive’s employment is terminated such that Executive would be
eligible to receive the severance and termination benefits set forth in this
Agreement, any severance or termination payments and benefits received by
Executive pursuant to (i) [country] law, or (ii) pursuant to any other agreement
Executive may have with the Company (or any direct or indirect subsidiary of the
Company), shall be offset against any benefits that may be payable to the
Executive pursuant to this Agreement.
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
above written.
ITRON,
INC.
By:__________________________________
Name:
Title:
__________________________________
EXECUTIVE
Address:
____________________________
____________________________
____________________________
(Please print
carefully)