EXHIBIT 10.71
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SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT (the "Agreement"), dated as of
June 20, 2000, is made and entered by and between ▇▇▇▇▇▇ International
Industries, Incorporated ("Harman" or, including any successor thereto,
the "Company"), a Delaware corporation, and [Name of Executive] (the
"Executive").
WHEREAS, the Executive is a senior executive of Harman, and has
made, and is expected to continue to make, major contributions to the
Company's short and long-term profitability, growth and financial
strength;
WHEREAS, Harman recognizes that: (a) top-quality executives may
seek more secure career opportunities if a Change in Control, as defined
below, occurs in the future; and (b) the Company may encounter
difficulties in recruiting qualified senior executives unless it offers an
employment security arrangement, applicable in Change in Control
situations;
WHEREAS, Harman desires to assure itself of both present and future
continuity of management and desires to establish certain minimum
severance benefits for certain of its senior executives, including the
Executive, applicable in the event of a Change in Control;
WHEREAS, Harman wishes to ensure that its senior executives are not
practically disabled from discharging their duties in respect of a proposed
or actual transaction involving a Change in Control; and
WHEREAS, Harman desires to provide additional inducement for the
Executive to continue to remain in the Company's employ.
NOW, THEREFORE, Harman and the Executive agree as follows:
1. Certain Defined Terms. In addition to terms defined elsewhere in
this Agreement, the following terms have the following meanings:
(a) "Base Pay" means the Executive's annual base salary rate as in
effect from time to time;
(b) "Board" means ▇▇▇▇▇▇'▇ Board of Directors;
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(c) "Cause" means that, prior to any termination pursuant to
Section 3(b), the Executive shall have:
(i) been convicted of a criminal violation involving fraud,
embezzlement or theft in connection with his duties or in the course of his
employment with the Company or any Subsidiary;
(ii) committed intentional wrongful damage to property of Harman or
any Harman subsidiary;
(iii) committed intentional wrongful disclosure of secret processes or
confidential information of Harman or any Subsidiary; or
(iv) committed intentional wrongful engagement in any Competitive
Activity;
and any such act shall have been demonstrably and materially harmful to
Harman. For purposes of this Agreement, no act or failure to act on the
part of the Executive shall be deemed "intentional" if it was due primarily
to an error in judgment or negligence, but shall be deemed "intentional"
only if done or omitted to be done by the Executive not in good faith and
without reasonable belief that the Executive's action or omission was in
the best interest of Harman. Notwithstanding the foregoing, the Executive
shall not be deemed to have been terminated for "Cause" hereunder unless
and until there shall have been delivered to the Executive a copy of a
resolution duly adopted by the affirmative vote of a majority of the
Committee then in office at a meeting of the Committee called and held
for such purpose, after reasonable notice to the Executive and an
opportunity for the Executive, together with the Executive's counsel (if
the Executive chooses to have counsel present at such meeting), to be
heard before the Committee, finding that, in the good faith opinion of the
Committee, the Executive had committed an act constituting "Cause" as
defined in this Agreement and specifying the particulars thereof in detail.
Nothing in this Agreement will limit the right of the Executive or his
beneficiaries to contest the validity or propriety of any such determination;
(d) "Change in Control" means the occurrence during the Term of any
of the following events:
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(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 25% or more of the combined
voting power of the then outstanding Voting Stock of the Company;
provided, however, that for purposes of this Section 1(d)(i), the following
acquisitions shall not constitute a Change in Control: (A) any issuance of
Voting Stock of the Company directly from the Company that is approved
by the Incumbent Board (as defined in Section 1(d)(ii), below), (B) any
acquisition by the Company or a Subsidiary of Voting Stock of the
Company, (C) any acquisition of Voting Stock of the Company by any
employee benefit plan (or related trust) sponsored or maintained by the
Company or any Subsidiary, or (D) any acquisition of Voting Stock of the
Company by any Person pursuant to a Business Combination that
complies with clauses (A), (B) and (C) of Section 1(d)(iii), below; or
(ii) 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
after the date hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least two-thirds of
the Directors then comprising the Incumbent Board (either by a specific
vote or by approval of the proxy statement of the Company in which such
person is named as a nominee for director, without objection to such
nomination) shall be deemed to have been 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 (within the meaning of Rule 14a-11 of the Exchange Act) 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
( consummation of a reorganization, merger or consolidation, a sale or
other disposition of all or substantially all of the assets of the Company, or
other transaction (each, a "Business Combination"), unless, in each case,
immediately following such Business Combination, (A) all or
substantially all of the individuals and entities who were the beneficial
owners of Voting Stock of the Company immediately prior to such
Business Combination beneficially own, directly or indirectly, more than
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50% of the combined voting power of the then outstanding shares of
Voting Stock of the entity resulting from such Business Combination
(including, without limitation, an entity which as a result of such
transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries), (B) no Person
(other than the Company, such entity resulting from such Business
Combination, or any employee benefit plan (or related trust) sponsored or
maintained by the Company, any Subsidiary or such entity resulting from
such Business Combination) beneficially owns, directly or indirectly, 25%
or more of the combined voting power of the then outstanding shares of
Voting Stock of the entity resulting from such Business Combination, and
(C) at least a majority of the members of the Board of Directors of the
entity resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement or of
the action of the Board providing for such Business Combination; or
(iv) approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company, except pursuant to a Business
Combination that complies with clauses (A), (B) and (C) of
Section 1(d)(iii).
(e) "Committee" means the Compensation and Option Committee of
the Board or such similar committee of the Board comprised of non-
officer directors and responsible for executive compensation matters of the
Company generally;
(f) "Competitive Activity" means the Executive's participation,
without the Company's written consent, in the management of any
business enterprise if such enterprise engages in substantial and direct
competition with the Company or a Subsidiary and the enterprise's sales
of any product or service competitive with any product or service of the
Company or a Subsidiary amounted to 10% of the enterprise's net sales
for its most recently completed fiscal year and if the Company's or a
Subsidiary's net sales of said product or service amounted to 10% of the
Company's net sales for its most recently completed fiscal year.
"Competitive Activity" will not include (i) the mere ownership of
securities in any such enterprise and the exercise of rights appurtenant
thereto or (ii) participation in the management of any such enterprise other
than in connection with the competitive operations of such enterprise;
(g) "Employee Benefits" means the perquisites, benefits and service
credit for benefits as provided under any and all
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employee retirement income and welfare benefit policies, plans, programs
or arrangements in which Executive is entitled to participate, including
without limitation any stock option, performance share, performance unit,
stock purchase, stock appreciation, savings, pension, supplemental
executive retirement, or other retirement income or welfare benefit,
deferred compensation, incentive compensation, group or other life,
health, medical/hospital or other insurance (whether funded by actual
insurance or self-insured by the Company or a Subsidiary), disability,
salary continuation, expense reimbursement and other employee benefit
policies, plans, programs or arrangements that may now exist or any
equivalent successor policies, plans, programs or arrangements that may
be adopted by the Company or a Subsidiary, providing perquisites,
benefits and service credit for benefits at least as great in the aggregate as
are payable thereunder prior to a Change in Control;
(h) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time;
(i) "Incentive Pay" means an annual bonus, incentive or other payment
of compensation, in addition to Base Pay, made or to be made in regard to
services rendered in any year or other period pursuant to any bonus,
incentive, profit-sharing, performance, discretionary pay or similar
agreement, policy, plan, program or arrangement (whether or not funded)
of the Company or a Subsidiary, or any successor thereto;
(j) "Retirement Plans" means the retirement income, supplemental
executive retirement, excess benefits and retiree medical, life and similar
benefit plans providing retirement perquisites, benefits and service credit
for benefits at least as great in the aggregate as are payable thereunder
prior to a Change in Control;
(k) "Severance Period" means the period of time commencing on the
date of the first occurrence of a Change in Control and continuing until the
earlier of (i) the second anniversary of the occurrence of the Change in
Control, or (ii) the Executive's death; provided, however, that
commencing on each anniversary of the Change in Control, the Severance
Period will automatically be extended for an additional year unless, not
later than 90 calendar days before the anniversary date, either the
Company or the Executive shall have given written notice to the other that
the Severance Period is not to be so extended.
(l) "Subsidiary" means an entity in which the Company, directly or
indirectly, beneficially owns 50% or more of the outstanding Voting
Stock;
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(m) "Term" means the period commencing as of the date hereof and
expiring as of the later of (i) the close of business on December 31, 2001,
or (ii) the expiration of the Severance Period. However, commencing on
January 1, 2001 and each January 1 thereafter, the term of this Agreement
will automatically be extended for an additional year unless, not later than
September 30 of the immediately preceding year, the Company or the
Executive shall have given notice that it or the Executive, as the case may
be, does not wish to have the Term extended. Furthermore, subject to the
last sentence of Section 9, if, prior to a Change in Control, the Executive
ceases for any reason to be an officer of the Company or any Subsidiary,
thereupon without further action the Term shall be deemed to have expired
and this Agreement will immediately terminate and be of no further effect.
For purposes of this Section, the Executive shall not be deemed to have
ceased to be an officer of the Company and any Subsidiary by reason of
the transfer of Executive's employment between the Company and any
Subsidiary, or among any Subsidiaries;
(n) "Termination Date" means the date on which the Executive's
employment is terminated (the effective date of which shall be the date of
termination, or such other date that may be specified by the Executive if
the termination is pursuant to Section 3(b)); and
(o) "Voting Stock" means securities entitled to vote generally in the
election of directors.
2. Operation of Agreement. This Agreement will be effective and
binding immediately upon its execution, but, anything in this Agreement
to the contrary notwithstanding, this Agreement will not be operative
unless and until a Change in Control occurs. If a Change in Control
occurs at any time during the Term, this Agreement shall become
operative immediately, including without limitation, the last sentence of
Section 9 notwithstanding that the Term may have since expired.
3. Termination Following a Change in Control. (a) In the event of the
occurrence of a Change in Control, the Executive's employment may be
terminated by the Company or a Subsidiary during the Severance Period
and the Executive shall be entitled to the benefits provided by Section 4
unless such termination is the result of the occurrence of one or more of
the following events:
(i) The Executive's death;
(ii) The Executive becoming permanently disabled within the meaning
of, and begins actually receiving
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disability benefits pursuant to, the long-term disability plan in effect for,
or applicable to, Executive immediately prior to the Change in Control; or
(iii) Cause.
If, during the Severance Period, the Executive's employment is terminated
by the Company or any Subsidiary other than pursuant to Section 3(a)(i),
3(a)(ii) or 3(a)(iii), the Executive will be entitled to the benefits provided
by Section 4 hereof.
(b) In the event of the occurrence of a Change in Control, the
Executive may terminate employment with the Company and any
Subsidiary during the Severance Period with the right to severance
compensation as provided in Section 4 upon the occurrence of one or more
of the following events (regardless of whether any other reason, other than
Cause, for such termination exists or has occurred, including without
limitation other employment):
(i) Failure to elect or reelect or otherwise to maintain the Executive in
the office or the position, or a substantially equivalent office or position,
of or with the Company and/or a Subsidiary (or any successor thereto by
operation of law or otherwise), as the case may be, which the Executive
held immediately prior to a Change in Control, or the removal of the
Executive as a Director of the Company and/or a Subsidiary (or any
successor thereto) if the Executive shall have been a Director of the
Company and/or a Subsidiary immediately prior to the Change in Control;
(ii) (A) A significant adverse change in the nature or scope of the
authorities, powers, functions, responsibilities or duties attached to the
position with the Company and any Subsidiary which the Executive held
immediately prior to the Change in Control, (B) a reduction in the
aggregate of the Executive's Base Pay and Incentive Pay received from
the Company and any Subsidiary, or (C) the termination or denial of the
Executive's rights to Employee Benefits or a reduction in the scope or
value thereof, any of which is not remedied by the Company within 10
calendar days after receipt by the Company of written notice from the
Executive of such change, reduction or termination, as the case may be;
(iii) A determination by the Executive (which determination will be
conclusive and binding upon the parties to
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this Agreement, provided that the determination has been made in good
faith and in all events will be presumed to have been made in good faith
unless otherwise shown by the Company by clear and convincing
evidence) that a change in circumstances has occurred following a Change
in Control, including, without limitation, a change in the scope of the
business or other activities for which the Executive was responsible
immediately prior to the Change in Control, which has rendered the
Executive substantially unable to carry out, has substantially hindered
Executive's performance of, or has caused Executive to suffer a
substantial reduction in, any of the authorities, powers, functions,
responsibilities or duties attached to the position held by the Executive
immediately prior to the Change in Control, which situation is not
remedied within 10 calendar days after written notice to the Company
from the Executive of such determination;
(iv) The liquidation, dissolution, merger, consolidation or
reorganization of the Company or transfer of all or substantially all of its
business and/or assets, unless the successor or successors (by liquidation,
merger, consolidation, reorganization, transfer or otherwise) to which all
or substantially all of its business and/or assets have been transferred (by
operation of law or otherwise) assumed all duties and obligations of the
Company under this Agreement pursuant to Section 11(a);
(v) The Company relocates its principal executive offices (if such
offices are the principal location of Executive's work), or requires the
Executive to have his principal location of work changed, to any location
that, in either case, is in excess of 50 miles from the principal executive
office's location immediately prior to the Change in Control, or requires
the Executive to travel away from his office in the course of discharging
his responsibilities or duties at least 20% more (in terms of aggregate days
in any calendar year or in any calendar quarter when annualized for
purposes of comparison to any prior year) than was required of Executive
in any of the three full years immediately prior to the Change in Control
without, in either case, his prior written consent; or
(vi) Without limiting the generality or effect of the foregoing, any
material breach of this Agreement by the Company or any successor
thereto which is not remedied by the Company within 10 calendar days
after receipt by the Company of written notice from the Executive of such
breach.
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(c) A termination by the Company pursuant to Section 3(a) or by the
Executive pursuant to Section 3(b) will not affect any rights that the
Executive may have pursuant to any agreement, policy, plan, program or
arrangement of the Company or any Subsidiary providing Employee
Benefits, which rights shall be governed by the terms thereof.
4. Severance Compensation. (a) If, following the occurrence of a
Change in Control, the Company or Subsidiary terminates the Executive's
employment during the Severance Period other than pursuant to
Section 3(a)(i), 3(a)(ii) or 3(a)(iii), or if the Executive terminates his
employment pursuant to Section 3(b), the Company will pay to the
Executive the amounts described in Annex A within five business days
after the Termination Date and will continue to provide to the Executive
the benefits described on Annex A for the periods described therein.
(b) Without limiting the rights of the Executive at law or in equity, if
the Company fails to make any payment or provide any benefit required to
be made or provided under this Agreement on a timely basis, the
Company will pay interest on the amount or value thereof at an
annualized rate of interest equal to the so-called composite "prime rate" as
quoted from time to time during the relevant period in The Wall Street
Journal , plus 2%. Such interest will be payable as it accrues on demand.
Any change in such prime rate will be effective on and as of the date of
such change.
(c) Notwithstanding any provision of this Agreement to the contrary,
the parties' respective rights and obligations under this Section 4 and
under Sections 5, 7, 8 and the last sentence of Section 9 will survive any
termination or expiration of this Agreement or the termination of the
Executive's employment following a Change in Control for any reason
whatsoever.
5. Certain Additional Payments by the Company. (a) Anything in this
Agreement to the contrary notwithstanding but subject to Section 5(h), in
the event that this Agreement shall become operative and it shall be
determined (as hereafter provided) that any payment (other than the Gross-
Up payments provided for in this Section 5) or distribution by the
Company or any of its affiliates to or for the benefit of the Executive,
whether paid or payable or distributed or distributable under the terms of
this Agreement or otherwise pursuant to or by reason of any other
agreement, policy, plan, program or arrangement, including without
limitation any stock option, performance share, performance unit, stock
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appreciation right or similar right, or the lapse or termination of any
restriction on or the vesting or exercisability of any of the foregoing (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
successor provision thereto) by reason of being considered "contingent on
a change in ownership or control" of the Company, within the meaning of
Section 280G of the Code (or any successor provision thereto) or to any
similar tax imposed by state or local law, or any interest or penalties with
respect to such tax (such tax or taxes, together with any such interest and
penalties, being hereafter collectively referred to as the "Excise Tax"),
then the Executive shall be entitled to receive, and the Company shall be
required to pay, an additional payment or payments (collectively, a
"Gross-Up Payment"); provided, however, that no Gross-up Payment shall
be made with respect to the Excise Tax, if any, attributable to (i) any
incentive stock option, as defined by Section 422 of the Code ("ISO")
granted prior to the execution of this Agreement, or (ii) any stock
appreciation or similar right, whether or not limited, granted in tandem
with any ISO described in clause (i). The Gross-Up Payment shall be in
an amount such that, after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including any Excise Tax imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise
Tax imposed upon the Payment.
(b) Subject to the provisions of Section 5(f), all determinations
required to be made under this Section 5, including whether an Excise Tax
is payable by the Executive and the amount of such Excise Tax and
whether a Gross-Up Payment is required to be paid by the Company to the
Executive and the amount of such Gross-Up Payment, if any, shall be
made by a nationally recognized accounting firm (the "Accounting Firm")
selected by the Executive in his sole discretion. The Executive shall direct
the Accounting Firm to submit its determination and detailed supporting
calculations to both the Company and the Executive within 30 calendar
days after the Termination Date, if applicable, and any such other time or
times as may be requested by the Company or the Executive. If the
Accounting Firm determines that any Excise Tax is payable by the
Executive, the Company shall pay the required Gross-Up Payment to the
Executive within five business days after receipt of such determination
and calculations with respect to any Payment to the Executive. If the
Accounting Firm determines that no Excise Tax is payable by the
Executive, it shall, at the same time as it makes such determination,
furnish the Company and the Executive an opinion that the Executive has
substantial authority not to report any Excise Tax on his federal, state or
local income or other tax return. As a result of the
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uncertainty in the application of Section 4999 of the Code (or any
successor provision thereto) and the possibility of similar uncertainty
regarding applicable state or local tax law at the time of any determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments
which will not have been made by the Company should have been made
(an "Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts or fails to pursue its
remedies pursuant to Section 5(f) and the Executive thereafter is required
to make a payment of any Excise Tax, the Executive shall direct the
Accounting Firm to determine the amount of the Underpayment that has
occurred and to submit its determination and detailed supporting
calculations to both the Company and the Executive as promptly as
possible. Any such Underpayment shall be promptly paid by the
Company to, or for the benefit of, the Executive within five business days
after receipt of such determination and calculations.
(c) The Company and the Executive shall each provide the Accounting
Firm access to and copies of any books, records and documents in the
possession of the Company or the Executive, as the case may be,
reasonably requested by the Accounting Firm, and otherwise cooperate
with the Accounting Firm in connection with the preparation and issuance
of the determinations and calculations contemplated by Section 5(b). Any
determination by the Accounting Firm as to the amount of the Gross-Up
Payment shall be binding upon the Company and the Executive.
(d) The federal, state and local income or other tax returns filed by
the Executive shall be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the Excise Tax
payable by the Executive. The Executive shall make proper payment of
the amount of any Excise Tax, and at the request of the Company, provide
to the Company true and correct copies (with any amendments) of his
federal income tax return as filed with the Internal Revenue Service and
corresponding state and local tax returns, if relevant, as filed with the
applicable taxing authority, and such other documents reasonably
requested by the Company, evidencing such payment. If prior to the filing
of the Executive's federal income tax return, or corresponding state or
local tax return, if relevant, the Accounting Firm determines that the
amount of the Gross-Up Payment should be reduced, the Executive shall
within five business days pay to the Company the amount of such
reduction.
(e) The fees and expenses of the Accounting Firm for its services in
connection with the determinations and calculations
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contemplated by Section 5(b) shall be borne by the Company. If such fees
and expenses are initially paid by the Executive, the Company shall
reimburse the Executive the full amount of such fees and expenses within
five business days after receipt from the Executive of a statement therefor
and reasonable evidence of Executive's payment thereof.
(f) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service or any other taxing authority that, if
successful, would require the payment by the Company of a Gross-Up
Payment. Such notification shall be given as promptly as practicable but
no later than 10 business days after the Executive actually receives notice
of such claim and the Executive shall further apprise the Company of the
nature of such claim and the date on which such claim is requested to be
paid (in each case, to the extent known by the Executive). The Executive
shall not pay such claim prior to the earlier of (i) the expiration of the
30-calendar-day period following the date on which he gives such notice
to the Company and (ii) the date that any payment of amount 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) provide the Company with any written records or documents in his
possession relating to such claim reasonably requested by the Company;
(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 competent in respect of the subject matter and
reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order effectively to
contest such claim; and
(iv) permit the Company to participate in any proceedings relating to
such claim; provided, however, that the Company shall bear and pay
directly all costs and expenses (including interest and penalties) incurred
in connection with such contest and shall indemnify and hold harmless the
Executive, on an after-tax basis, for and against 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
limiting the foregoing provisions of this Section 5(f), the
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Company shall control all proceedings taken in connection with the
contest of any claim contemplated by this Section 5(f) and, at its sole
option, may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect
of such claim (provided, however, that the Executive may participate
therein at his own cost and expense) and may, at its 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 shall determine; provided, however, that if the Company directs
the Executive to pay the tax claimed and ▇▇▇ for a refund, the Company
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 or other tax,
including interest or penalties with respect thereto, imposed with respect
to such advance; and provided further, however, that any extension of the
statute of limitations relating to payment of taxes for the taxable year of
the Executive with respect to which the contested amount is claimed to be
due is limited solely to such contested amount. Furthermore, the
Company's control of any such contested claim 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.
(g) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 5(f), the Executive receives any refund with
respect to such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 5(f)) promptly pay to the
Company the amount of such refund (together with any interest paid or
credited thereon after any taxes applicable thereto). If, after the receipt by
the Executive of an amount advanced by the Company pursuant to Section
5(f), 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 or refund prior to
the expiration of 30 calendar days after such determination, then such
advance shall be forgiven and shall not be required to be repaid and the
amount of any such advance shall offset, to the extent thereof, the amount
of Gross-Up Payment required to be paid by the Company to the
Executive pursuant to this Section 5.
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(h) (i) The Company's obligation to make Gross-Up Payments under
Section 5(a) will be subject to the limitation set forth in this Section 5(h).
(ii) The limitation in this Section 5(h) will apply only if:
(A) The sum of all of the obligations of the Company under Sections 4
and 5 of this Agreement and under the provisions that correspond to
Sections 4 and 5 of each other agreement with the Company that includes
a provision that corresponds to this Section 5(h), determined as of the date
that a payment is due to be made under Section 5(a), would, but for this
Section 5(h) and the provisions in such other agreements that correspond
to Section 5(h), exceed
(B) 2% multiplied by the Market Capitalization of the Company (as
defined below).
(iii) For purposes of this Agreement, the "Market Capitalization of the
Company"
(A) will be determined as of the first date on which occurs a change in
ownership or control of the Company, as determined for purposes of
Section 280G of the Code (the "Section 280G Change Date"), and
(B) will be equal to the product obtained by multiplying (I) the number
of shares of common stock of the Company issued and outstanding on the
trading day immediately preceding the Section 280G Change Date, by
(II) the closing sale price per common share of the Company as reported
on the trading day immediately preceding the Section 280G Change Date
on the principal exchange on which such common shares were then
trading.
(iv) If the limitation imposed by Section 5(h) is applicable, the
obligation of the Company to make Gross-Up Payments under
Section 5(a) will be reduced by the excess of the amount determined under
Section 5(h)(ii)(A) over the amount determined under Section 5(h)(ii)(B).
(v) If the limitation imposed by this Section 5(h) would be applicable
to the Executive and a provision corresponding to Section 5(h) would be
applicable to one or more
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other employees of the Company at approximately the same time, the
obligation of the Company to the Executive under Section 5(a) and the
corresponding obligations of the Company to such other employees of the
Company will all be reduced. Such reductions will be determined in
proportion to the obligation of the Company to the Executive under
Section 5(a) and the corresponding obligations of the Company to such
other employees of the Company, determined in each case without regard
to Section 5(h) and the provisions that correspond to Section 5(h). The
aggregate amount of such reductions will be equal to the excess
determined under Section 5(h)(iv).
(vi) If a payment has been made to the Executive under Section 5(a)
and it is subsequently determined that the limitation imposed by
Section 5(h) has become applicable to the Executive or should be adjusted
(because, for example, the Company subsequently became obligated to
make payments to another employee of the Company under a provision
that corresponds to Section 5(a) or because the Company subsequently
became obligated to make additional payments to the Executive under
Section 5(a)), Section 5(h)(v) (and the provisions that correspond to
Section 5(h)(v) in the agreements applicable to other employees) will be
applied to the Executive and to such other employees as if the payments
due under Section 5(a) and the other provisions that correspond to
Section 5(a) had all been due to be paid at approximately the same time.
The Executive will be required to repay to the Company without interest
any excess amount determined to have been previously paid to the
Executive under Section 5(a).
(vii) All determinations under this Section 5(h) will be made by the
Company's independent auditor as in effect immediately prior to the
Section 280G Change Date. The determinations of such independent
auditor will be final and binding on the Company, the Executive and any
other employee subject to a limitation corresponding to this Section 5(h).
6. No Mitigation Obligation. The Company hereby acknowledges that
it will be difficult and may be impossible for the Executive to find
reasonably comparable employment following the Termination Date and
that the non-competition covenant contained in Section 8 will further limit
the employment opportunities for the Executive. In addition, the
Company acknowledges that its severance pay plans applicable in general
to its salaried employees do not provide for
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mitigation, offset or reduction of any severance payment received
thereunder. Accordingly, the payment of the severance compensation by
the Company to the Executive in accordance with the terms of this
Agreement is hereby acknowledged by the Company to be reasonable, and
the Executive will not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise,
nor will any profits, income, earnings or other benefits from any source
whatsoever create any mitigation, offset, reduction or any other obligation
on the part of the Executive under this agreement or otherwise, except as
expressly provided in the last sentence of Paragraph 2 set forth on Annex
A.
7. Legal Fees and Expenses. (a) The Executive shall not be required to
incur legal fees and the related expenses associated with the interpretation,
enforcement or defense of Executive's rights under this Agreement by
litigation or otherwise because such costs substantially would detract from
the Executive's benefits under this Agreement. Accordingly, if it should
appear to the Executive that the Company has failed to comply with any of
its obligations under this Agreement or in the event that the Company or
any other person takes or threatens to take any action to declare this
Agreement void or unenforceable, or institutes any litigation or other
action or proceeding designed to deny, or to recover from, the Executive
the benefits provided or intended to be provided to the Executive
hereunder, the Company irrevocably authorizes the Executive from time
to time to retain counsel of Executive's choice, at the expense of the
Company as hereafter provided, to advise and represent the Executive in
connection with any such interpretation, enforcement or defense, including
without limitation the initiation or defense of any litigation or other legal
action, whether by or against the Company or any Director, officer,
stockholder or other person affiliated with the Company, in any
jurisdiction. Notwithstanding any existing or prior attorney-client
relationship between the Company and such counsel, the Company
irrevocably consents to the Executive's entering into an attorney-client
relationship with such counsel, and in that connection the Company and
the Executive agree that a confidential relationship shall exist between the
Executive and such counsel. Without respect to whether the Executive
prevails, in whole or in part, in connection with any of the foregoing, the
Company will pay and be solely financially responsible for any and all
attorneys' and related fees and expenses incurred by the Executive in
connection with any of the foregoing. However, if the Executive brings an
action in bad faith, or with no colorable claim of success, the Company
shall not pay for any of Executive's attorneys' fees or related expenses.
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(b) Without limiting the obligations of the Company under Section
7(a) of this Agreement, in the event a Change in Control occurs, the
performance of the Company's obligations under this Section 7 shall be
secured by amounts deposited or to be deposited in trust pursuant to
certain trust agreements to which the Company shall be a party, which
amounts deposited shall in the aggregate be not less than $1,000,000,
providing that the fees and expenses of counsel selected from time to time
by the Executive pursuant to Section 7(a) shall be paid, or reimbursed to
the Executive if paid by the Executive, either in accordance with the terms
of such trust agreements, or, if not so provided, on a regular, periodic basis
upon presentation by the Executive to the trustee of a statement or
statements prepared by such counsel in accordance with its customary
practices. Any failure by the Company to satisfy any of its obligations
under this Section 7(b) shall not limit the rights of the Executive
hereunder. Subject to the foregoing, the Executive shall have the status of
a general unsecured creditor of the Company and shall have no right to, or
security interest in, any assets of the Company or any Subsidiary.
8. Competitive Activity; Confidentiality; Nonsolicitation. (a) During
the Term and for a period ending one year following the Termination
Date, if the Executive shall have received or shall be receiving benefits
under Section 4, and, if applicable, Section 5, the Executive shall not,
without the prior written consent of the Company, which consent shall not
be unreasonably withheld, engage in any Competitive Activity.
(b) During the Term, the Company agrees that it will disclose to
Executive its confidential or proprietary information (as defined in this
Section 8(b)) to the extent necessary for Executive to carry out his
obligations to the Company. The Executive hereby covenants and agrees
that he will not, without the prior written consent of the Company, during
the Term or thereafter disclose to any person not employed by the
Company, or use in connection with engaging in competition with the
Company, any confidential or proprietary information of the Company.
For purposes of this Agreement, the term "confidential or proprietary
information" will include all information of any nature and in any form
that is owned by the Company and that is not publicly available (other
than by Executive's breach of this Section 8(b)) or generally known to
persons engaged in businesses similar or related to those of the Company.
Confidential or proprietary information will include, without limitation,
the Company's financial matters, customers, employees, industry
contracts, strategic business plans, product development (or other
proprietary product data), marketing plans, and all other secrets and all
other information of a confidential or proprietary nature. For purposes of
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the preceding two sentences, the term "Company" will also include any
Subsidiary (collectively, the "Restricted Group"). The foregoing
obligations imposed by this Section 8(b) will not apply (i) during the
Term, in the course of the business of and for the benefit of the Company,
(ii) if such confidential or proprietary information will have become,
through no fault of the Executive, generally known to the public or (iii) if
the Executive is required by law to make disclosure (after giving the
Company notice and an opportunity to contest such requirement).
(c) The Executive hereby covenants and agrees that during the Term
and for one years thereafter Executive will not, without the prior written
consent of the Company, which consent shall not unreasonably be
withheld, on behalf of Executive or on behalf of any person, firm or
company, directly or indirectly, attempt to influence, persuade or induce,
or assist any other person in so persuading or inducing, any employee of
the Restricted Group to give up, or to not commence, employment or a
business relationship with the Restricted Group.
(d) Executive and the Company agree that the covenants contained in
this Section 8 are reasonable under the circumstances, and further agree
that if in the opinion of any court of competent jurisdiction any such
covenant is not reasonable in any respect, such court will have the right,
power and authority to excise or modify any provision or provisions of
such covenants as to the court will appear not reasonable and to enforce
the remainder of the covenants as so amended. Executive acknowledges
and agrees that the remedy at law available to the Company for breach of
any of his obligations under this Section 8 would be inadequate and that
damages flowing from such a breach may not readily be susceptible to
being measured in monetary terms. Accordingly, Executive
acknowledges, consents and agrees that, in addition to any other rights or
remedies that the Company may have at law, in equity or under this
Agreement, upon adequate proof of his violation of any such provision of
this Agreement, the Company will be entitled to immediate injunctive
relief and may obtain a temporary order restraining any threatened or
further breach, without the necessity of proof of actual damage.
9. Employment Rights. Nothing expressed or implied in this
Agreement will create any right or duty on the part of the Company or the
Executive to have the Executive remain in the employment of the
Company or any Subsidiary prior to or following any Change in Control.
Any termination of employment of the Executive or the removal of the
Executive from the office or position in the Company or any Subsidiary
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that occurs (i) not more than 180 days prior to the date on which a Change
in Control occurs, and (ii) following the commencement of any discussion
with a third person that ultimately results in a Change in Control, shall be
deemed to be a termination or removal of the Executive after a Change in
Control for purposes of this Agreement.
10. Withholding of Taxes. The Company may withhold from any
amounts payable under this Agreement all federal, state, city or other taxes
as the Company is required to withhold pursuant to any applicable law,
regulation or ruling.
11. Successors and Binding Agreement. (a) The Company will require
any successor (whether direct or indirect, by purchase, merger,
consolidation, reorganization or otherwise) to all or substantially all of the
business or assets of the Company, by agreement in form and substance
reasonably satisfactory to the Executive, expressly to assume and agree to
perform this Agreement in the same manner and to the same extent the
Company would be required to perform if no such succession had taken
place. This Agreement will be binding upon and inure to the benefit of the
Company and any successor to the Company, including without limitation
any persons acquiring directly or indirectly all or substantially all of the
business or assets of the Company whether by purchase, merger,
consolidation, reorganization or otherwise (and such successor shall
thereafter be deemed the "Company" for the purposes of this Agreement),
but will not otherwise be assignable, transferable or delegable by the
Company.
(b) This Agreement will inure to the benefit of and be enforceable by
the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees and legatees.
(c) This Agreement is personal in nature and neither of the parties
hereto shall, without the consent of the other, assign, transfer or delegate
this Agreement or any rights or obligations hereunder except as expressly
provided in Sections 11(a) and 11(b). Without limiting the generality or
effect of the foregoing, the Executive's right to receive payments
hereunder will not be assignable, transferable or delegable, whether by
pledge, creation of a security interest, or otherwise, other than by a
transfer by Executive's will or by the laws of descent and distribution and,
in the event of any attempted assignment or transfer contrary to this
Section 11(c), the Company shall have no liability to pay any amount so
attempted to be assigned, transferred or delegated.
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12. Notices. For all purposes of this Agreement, all communications,
including without limitation notices, consents, requests or approvals,
required or permitted to be given hereunder will be in writing and will be
deemed to have been duly given when hand delivered or dispatched by
electronic facsimile transmission (with receipt thereof orally confirmed),
or five business days after having been mailed by United States registered
or certified mail, return receipt requested, postage prepaid, or three
business days after having been sent by a nationally recognized overnight
courier service such as FedEx, UPS, or Purolator, addressed to the
Company (to the attention of the Secretary of the Company) at its
principal executive office and to the Executive at his principal residence,
or to such other address as any party may have furnished to the other in
writing and in accordance herewith, except that notices of changes of
address shall be effective only upon receipt.
13. Governing Law. The validity, interpretation, construction and
performance of this Agreement will be governed by and construed in
accordance with the substantive laws of the State of Delaware, excluding
any conflicts or choice of law rule or principle that might otherwise refer
construction or interpretation of this Agreement to the substantive law of
another jurisdiction.
14. Consent to Jurisdiction. Any disputes, litigation, proceedings or
other legal actions by any party to this Agreement in connection with or
relating to this Agreement or any matters described or contemplated in this
Agreement may be instituted in the courts of the State of Delaware or of
the United States sitting in the State of Delaware. Each party to this
Agreement irrevocably submits to the jurisdiction of the courts of the State
of Delaware and of the United States sitting in the State of Delaware in
connection with any such dispute, litigation, proceeding or other legal
action arising out of or relating to this Agreement.
15. Validity. If any provision of this Agreement or the application of
any provision hereof to any person or circumstances is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and
the application of such provision to any other person or circumstances
will not be affected, and the provision so held to be invalid, unenforceable
or otherwise illegal will be reformed to the extent (and only to the extent)
necessary to make it enforceable, valid or legal.
16. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and the Company. No waiver
by either party to this Agreement at any time of any
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breach by the other contracting party or compliance with any condition or
provision of this Agreement to be performed by such other party will be
deemed a waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, expressed or implied with respect to the
subject matter hereof have been made by either party which are not set
forth expressly in this Agreement. References to Sections are to
references to Sections of this Agreement.
17. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed and delivered as of the date first above written.
▇▇▇▇▇▇ INTERNATIONAL
INDUSTRIES, INCORPORATED
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Chairman - Compensation and
Option Committee
/s/ [Name of Executive]
------------------------
[Name of Executive]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed and delivered as of the date first above written.
▇▇▇▇▇▇ INTERNATIONAL
INDUSTRIES, INCORPORATED
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Member - Compensation and
Option Committee
--------------------------------
[Name of Executive]
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Annex A
Severance Compensation
(1) (i) A lump sum payment in an amount equal to three times the sum of
(A) Base Pay (at the highest rate in effect for any period prior to the
Termination Date), plus (B) Incentive Pay (in an amount equal to not less
than the highest aggregate Incentive Pay earned in any of the three fiscal
years immediately preceding the year in which the Change in Control
occurred).
(2) For a period of twenty-four months following the Termination Date
(the "Continuation Period"), the Company will arrange to provide the
Executive with Employee Benefits that are welfare benefits (but not stock
option, performance share, performance unit, stock purchase, stock
appreciation or similar compensatory benefits) substantially similar to
those that the Executive was receiving or entitled to receive immediately
prior to the Termination Date (or, if greater, immediately prior to the
reduction, termination, or denial described in Section 3(b)(ii)). If and to
the extent that any benefit described in this Paragraph 2 is not or cannot be
paid or provided under any policy, plan, program or arrangement of the
Company or any Subsidiary, as the case may be, then the Company will
itself pay or provide for the payment to the Executive, his dependents and
beneficiaries, of such Employee Benefits along with, in the case of any
benefit described in this Paragraph 2 which is subject to tax because it is
not or cannot be paid or provided under any such policy, plan, program or
arrangement of the Company or any Subsidiary, an additional amount
such that after payment by the Executive, or his dependents or
beneficiaries, as the case may be, of all taxes so imposed, the recipient
retains an amount equal to such taxes. Notwithstanding the foregoing, or
any other provision of the Agreement, for purposes of determining the
period of continuation coverage to which the Executive or any of his
dependents is entitled pursuant to Section 4980B of the Code (or any
successor provision thereto) under the Company's medical, dental and
other group health plans, or successor plans, the Executive's "qualifying
event" shall be the termination of the Continuation Period and the
Executive shall be considered to have remained actively employed on a
full-time basis through that date. Without otherwise limiting the purposes
or effect of Section 5, Employee Benefits
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otherwise receivable by the Executive pursuant to this Paragraph 2 will be
reduced to the extent comparable welfare benefits are actually received by
the Executive from another employer during the Continuation Period
following the Executive's Termination Date, and any such benefits
actually received by the Executive shall be reported by the Executive to
the Company. The welfare benefits are imputed value life insurance over
$50,000 (Does not include death benefit paid pursuant to the SERP) and
health insurance premiums.
(3) Outplacement services by a firm selected by the Executive, at the
expense of the Company in an amount up to 20% of the Executive's Base
Pay.
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