CHANGE IN CONTROL EMPLOYMENT AGREEMENT (Senior Executive)
Exhibit
10b (ix)
(Senior
Executive)
AGREEMENT by and between ▇.▇. ▇▇▇▇▇▇▇▇, Inc.,
an Illinois corporation (the “Company”), and INSERT
NAME (“Executive”), dated
as _____________________(the “Agreement
Date”).
Recitals
A. The Board of Directors of the
Company (the “Board”) has
determined that it is in the best interests of the Company and its shareholders
to assure that the Company will have the continued dedication of Executive,
notwithstanding the possibility, threat, or occurrence of a Change in Control
(as defined below) of the Company.
B. The Board believes it is
imperative to diminish the inevitable distraction of Executive by virtue of the
personal uncertainties and risks created by a pending or threatened Change in
Control, to encourage Executive's full attention and dedication to the Company,
and to provide Executive with compensation and benefits arrangements upon a
Change in Control which (i) will satisfy Executive's compensation and
benefits expectations and (ii) are competitive with those of other major
corporations.
Agreement
In consideration of the mutual agreements
contained herein, and of certain other commitments separately made by the
Executive to the Company concerning the Company's competitors, the protection of
the Company's confidential information, and the non-solicitation of the
Company's customers and employees, the Company and Executive hereby agree as
follows:
1. Certain
Definitions. The terms set forth below in alphabetical order
have the following meanings (such meanings to be applicable to both the singular
and plural forms):
“Accrued Annual Bonus”
means the amount of any annual bonus accrued but not yet paid with respect to
each fiscal year of the Company ended prior to the Date of
Termination.
“Accrued Base Salary”
means the amount of Executive's Annual Base Salary which is accrued but not yet
paid as of the Date of Termination.
“Accrued Obligations”
-- see Section 4(a)(i)(A).
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“Agreement Term” means
the period commencing on the Agreement Date and ending on the third anniversary
of such date or, if later, such later date to which the Agreement Term is
extended pursuant to the following sentence. On each day after the
second anniversary of the Agreement Date, the Agreement Term shall be
automatically extended by one day to create a new one-year term until, at any
time on or after the second anniversary of the Agreement Date, the Company
delivers a written notice (an “Expiration Notice”)
to Executive stating that this Agreement shall expire on a date specified in the
Expiration Notice (the “Expiration Date”)
that is at least 12 months after the date the Expiration Notice is delivered to
Executive; provided, however, that if a Change in Control occurs before the
Expiration Date specified in an Expiration Notice, then (a) such Expiration
Notice shall automatically be cancelled and of no further effect and (b) the
Company shall not give Executive any additional Expiration Notice prior to the
date which is 24 months after the Effective Date.
“Annual Base Salary”
-- see Section 2(b)(i).
“Annual Bonus” -- see
Section 2(b)(ii).
“Average Profit Sharing Plan
Contribution” -- see Section 2(b)(iii).
“Cause” -- see Section
3(b).
“Change in Control”
means any one or more of the following events:
(a) the consummation
of:
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(i) any
merger, reorganization or consolidation of the Company or any Subsidiary
with or into any corporation or other Person if Persons who were the
beneficial owners (as such term is used in Rule 13d-3 under the Act) of
the Company’s Common Stock and securities of the Company entitled to vote
generally in the election of directors (“Voting
Securities”) immediately before such merger, reorganization or
consolidation are not, immediately thereafter, the beneficially owners,
directly or indirectly, of at least 60% of the then-outstanding common
shares and the combined voting power of the then-outstanding Voting
Securities (“Voting Power”)
of the corporation or other Person surviving or resulting from such
merger, reorganization or consolidation (or the parent corporation
thereof) in substantially the same respective proportions as their
beneficial ownership, immediately before the consummation of such merger,
reorganization or consolidation, of the then-outstanding Common Stock and
Voting Power of the Company; or
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(ii) the
sale or other disposition of all or substantially all of the consolidated
assets of the Company, other than a sale or other disposition by the
Company of all or substantially all of its consolidated assets to an
entity of which at least 60% of the common shares and the Voting Power
outstanding
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immediately after
such sale or other disposition are then beneficially owned (as such term is used
in Rule 13d-3 under the Act) by shareholders of the Company in substantially the
same respective proportions as their beneficial ownership of Common Stock and
Voting Power of the Company immediately before the consummation of such sale or
other disposition; or
(b) approval by the shareholders of
the Company of a liquidation or dissolution of the Company; or
(c) the following individuals cease
for any reason to constitute a majority of the directors of the Company then
serving: individuals who, on the Agreement Date, constitute the Board and any
subsequently-appointed or elected director of the Company whose appointment or
election by the Board or nomination for election by the Company's shareholders
was approved or recommended by a vote of at least two-thirds of the Company’s
directors then in office whose appointment, election or nomination for election
was previously so approved or recommended or who were directors on the Agreement
Date; or
(d) the acquisition or holding by
any person, entity or “group” (within the meaning of Section 13(d)(3) or
14(d)(2) of the Act), other than by any Exempt Person, the Company, any
Subsidiary, any employee benefit plan of the Company or a Subsidiary, of
beneficial ownership (as such term is used in Rule 13d-3 under the Act) of 20%
or more of either the Company’s then-outstanding Common Stock or Voting Power;
provided
that:
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(i) no
such person, entity or group shall be deemed to own beneficially any
securities held by the Company or a Subsidiary or any employee benefit
plan (or any related trust) of the Company or a
Subsidiary;
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(ii) no
Change in Control shall be deemed to have occurred solely by reason of any
such acquisition if both (x) after giving effect to acquisition, such
person, entity or group has beneficial ownership of less than 30% of the
then-outstanding Common Stock and Voting Power of the Company and (y)
prior to such acquisition, at least two-thirds of the directors described
in paragraph (c) of this definition vote to adopt a resolution of the
Board to the specific effect that such acquisition shall not be deemed a
Change in Control; and
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(iii) no
Change in Control shall be deemed to have occurred solely by reason any
such acquisition or holding in connection with any merger, reorganization
or consolidation of the Company or any Subsidiary which is not a Change in
Control within the meaning of paragraph (a)(i) of this
definition.
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Notwithstanding the
occurrence of any of the foregoing events, no Change in Control shall occur with
respect to Executive if (i) the event which otherwise would be
a
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Change in Control
(or the transaction which resulted in such event) was initiated by Executive or
was discussed by him with any third party, in either case without the approval
of the Board with respect to Executive’s initiation or discussion, as
applicable, or (ii) Executive is, by written agreement, a participant on his own
behalf in a transaction in which the persons (or their affiliates) with whom
Executive has the written agreement cause the Change in Control to occur and,
pursuant to the written agreement, Executive has an equity interest (or a right
to acquire such equity interest) in the resulting entity.
“Code” means the
Internal Revenue Code of 1986, as amended.
“Date of Termination”
means the effective date of any termination of Executive's employment for any or
no reason, whether by the Company or by Executive, as specified in the Notice of
Termination; provided, however, that if Executive's employment is terminated by
reason of his death or Disability, the Date of Termination shall be the date of
death or the Disability Effective Date, as the case may be.
“Effective Date” means
the first date during the Agreement Term on which a Change in Control
occurs. Anything in this Agreement to the contrary notwithstanding,
if Executive's employment with the Company is terminated prior to the date on
which a Change in Control occurs, and Executive reasonably demonstrates that
such termination of employment (i) was requested by a third party who has taken
steps reasonably calculated to effect the Change in Control or
(ii) otherwise arose in connection with or anticipation of the Change in
Control, then for all purposes of this Agreement the Effective Date shall be the
date immediately prior to the Date of Termination.
“Employment Period”
means the period commencing on the Effective Date and ending on the second
anniversary of such date.
“Exempt Person” means
any one or more of the following:
(a) any descendant of ▇.▇. ▇▇▇▇▇▇▇▇,
or any spouse, widow or widower of ▇.▇. ▇▇▇▇▇▇▇▇ or any such descendant (any
such descendants, spouses, widows and widowers collectively defined as the
“Grainger Family
Members”);
(b) any descendant of ▇.▇. ▇▇▇▇▇▇,
or any spouse, widow or widower of ▇.▇. ▇▇▇▇▇▇ or any such descendant (any such
descendants, spouses, widows and widowers collectively defined as the “▇▇▇▇▇▇ Family
Members” and with the Grainger Family Members collectively defined as the
“Family
Members”);
(c) any trust which is in existence
on the Agreement Date and which has been established by one or more Grainger
Family Members, any estate of a Grainger Family Member who died on or before the
Agreement Date, and The
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Grainger Foundation
(such trusts, estates and named entity collectively defined as the “Grainger Family
Entities”);
(d) any trust which is in existence
on the Agreement Date and which has been established by one or more Slavik
Family Members, any estate of a Slavik Family Member who died on or before the
Agreement Date and ▇▇▇▇ ▇▇ Capital, Inc. (such trusts, estates and named
entities collectively defined as the “▇▇▇▇▇▇ Family
Entities” and with the Grainger Family Entities collectively defined as
the “Existing Family
Entities”);
(e) any estate of a Family Member
who dies after the Agreement Date or any trust established after the Agreement
Date by one or more Family Members or Existing Family Entities; provided that
one or more Family Members, Existing Family Entities or
charitable organizations which qualify as exempt organizations under Section
501(c) of the Code (“Charitable
Organizations”), collectively are the beneficiaries of at least 50% of
the actuarially-determined beneficial interests in such estate or
trust;
(f) any Charitable Organization
which is established by one or more Family Members or Existing Family Entities
(a “Family Charitable
Organization”);
(g) any corporation of which a
majority of the voting power and a majority of the equity interest is held,
directly or indirectly, by or for the benefit of one or more Family Members,
Existing Family Entities, estates or trusts described in clause (e) above, or
Family Charitable Organizations; or
(h) any partnership or other entity
or arrangement of which a majority of the voting interest and a majority of the
economic interest is held, directly or indirectly, by or for the benefit of one
or more Family Members, Existing Family Entities, estates or trusts described in
clause (e) above, or Family Charitable Organizations.
“Good Reason” -- see
Section 3(c).
“including” means
including without limitation.
“Non-Employee
Director” means a director of the Company who is not an employee of (i)
the Company, (ii) any Subsidiary or (iii) any Person who beneficially owns more
than 30% of the Common Stock then outstanding.
“Person” means any
individual, corporation, partnership, limited liability company, sole
proprietorship, trust or other entity.
“Policies” means
policies, practices and programs.
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“Prorated Annual
Bonus” means the product of (i) the amount of the annual bonus to which
Executive would have been entitled (based on target-level performance) if he had
been employed by the Company on the last day of the Company's fiscal year that
includes the Date of Termination and if performance were achieved at the target
level for such fiscal year, multiplied by (ii) a fraction of which the
numerator is the numbers of days that have elapsed in such fiscal year through
the Date of Termination and the denominator is 365.
“Subsidiary” means
corporation, limited liability company, partnership or other business entity in
which the Company, directly or indirectly, holds a majority of the voting power
of the outstanding securities.
“Target
Bonus” means the amount of the annual bonus which Executive
was, as of the Date of Termination, eligible to receive in respect of the fiscal
year of the Date of Termination, assuming for purposes of this paragraph (i)
that target-level performance had been achieved for such fiscal year, (ii) that
Executive's employment would have continued until the first date on which such
annual bonus would have been payable, and (iii) if the amount of such annual
bonus that Executive was eligible to receive was reduced after the Effective
Date (whether or not such reduction qualified as Good Reason), that such
reduction had not occurred.
“Taxes” means the
incremental United States federal, state and local income, excise and other
taxes payable by Executive with respect to any applicable item of
income.
2. Terms of
Employment. The Company shall continue Executive in its employ
during the Employment Period on the following terms and conditions:
(a) Position and
Duties.
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(i) During
the Employment Period, (A) Executive's position (including status,
offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects
with the most significant of those held, exercised and assigned at any
time during the 90-day period immediately preceding the Effective Date and
(B) Executive's services shall be performed at the location where
Executive was employed immediately preceding the Effective Date or any
office or location less than 50 miles from such
location.
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(ii) During
the Employment Period, and excluding any periods of vacation, sick leave
and disability to which Executive is entitled, Executive shall devote
reasonable attention and time during normal business hours to the business
and affairs of the Company and, to the extent necessary to discharge the
responsibilities assigned to Executive thereunder, use Executive's
reasonable best efforts to perform faithfully and efficiently
such
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responsibilities. During
the Employment Period, Executive may (A) serve on corporate, civic or
charitable boards or committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (C) manage personal
investments, so long as such activities are consistent with the policies of the
Company at the Effective Date and do not significantly interfere with the
performance of Executive's responsibilities (as set forth in this Agreement) as
an employee of the Company. To the extent that any such activities
have been conducted by Executive prior to the Effective Date and were consistent
with the policies of the Company at the Effective Date, the continued conduct of
such activities (or the conduct of activities similar in nature and scope
thereto) subsequent to the Effective Date shall not thereafter be deemed to
interfere with the performance of Executive's responsibilities to the
Company.
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(b) Compensation.
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(i) Base
Salary. During the Employment Period, Executive shall
receive an annual base salary in cash (“Annual Base
Salary”), which shall be paid in a manner consistent with the
Company's payroll practices immediately preceding the Effective Date at a
rate at least equal to 12 times the highest monthly base salary (unreduced
by any salary reductions or deferrals pursuant to a plan maintained under
Section 401(k) of the Code or any similar plan) paid or payable to
Executive by the Company in respect of the 12-month period immediately
preceding the month in which the Effective Date occurs. During
the Employment Period, the Company shall review the Annual Base Salary at
least annually and may increase Annual Base Salary at any time and from
time to time based on the performance of the Executive and the
Company. Any increase in Annual Base Salary shall not serve to
limit or reduce any other obligation to Executive under this
Agreement. Annual Base Salary shall not be reduced after any
such increase and the term “Annual Base Salary” shall refer to Annual Base
Salary as so increased.
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(ii) Annual
Bonus. In addition to Annual Base Salary, during the
Employment Period Executive shall be entitled to participate in the
Management Incentive Program or other annual bonus program maintained by
the Company for peer executives, and the Executive's target bonus
thereunder shall be not be less than the Target Bonus. Any
annual bonus due to Executive under such program (the "Annual Bonus")
shall be paid in cash no later than 90 days after the end of the fiscal
year for which the Annual Bonus is awarded, unless Executive shall elect
to defer the receipt of such Annual
Bonus.
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(iii) Incentive, Savings and
Retirement Plans. In addition to Annual Base Salary and
Annual Bonus payable as hereinabove provided, Executive shall be entitled
to participate during the Employment Period in all incentive, savings and
retirement plans and Policies applicable to
peer
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executives of the
Company, but in no event shall such plans and Policies provide Executive with
incentive, savings and retirement benefits opportunities, in each case, less
favorable, in the aggregate, than the most favorable of those provided by the
Company for Executive under such plans and Policies as in effect at any time
during the 90-day period immediately preceding the Effective
Date. Benefits to which this paragraph shall apply include, but are
not limited to, a contribution (“Average Profit Sharing Plan
Contribution”) for each calendar year of Executive's employment during
the Employment Period, on Executive's behalf to the ▇.▇. ▇▇▇▇▇▇▇▇, Inc. Profit
Sharing Plan (the “PST”) and, if
applicable, a credit under the ▇.▇. ▇▇▇▇▇▇▇▇, Inc. Supplemental Profit Sharing
Plan (the “Supplemental Plan”
and with the PST, collectively referred to as the “Profit Sharing
Plans”) equal to not less than the product of (A) the average
percentage of the sum of Executive's base salary and annual bonus paid or
payable as a contribution to or credit under the Profit Sharing Plans, as
applicable, for the three fiscal years preceding the Effective Date, and
(B) the sum of Executive's Annual Base Salary and annual bonus, each as of
the first day of such calendar year. In the event that a contribution
or credit, as applicable, of less than the Average Profit Sharing Plan
Contribution is made to the Profit Sharing Plans on Executive's behalf for any
calendar year of Executive's employment during the Employment Period, Executive
shall be entitled to a cash payment equal to the difference between the Average
Profit Sharing Plan Contribution and the amount of the Company's contribution or
credit, as applicable, to the Profit Sharing Plans on Executive's behalf for
such year, payable at the time that the Company's contribution is made to the
PST, but in no event later than the date prescribed by law, including extensions
of time, for the filing of the Company's federal income tax return for such
year.
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(iv) Welfare Benefit
Plans. During the Employment Period, Executive and/or
Executive's family, as the case may be, shall be eligible to participate
in and shall receive all benefits under welfare benefit plans and Policies
provided by the Company (including medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental
death and travel accident insurance plans and programs) and applicable to
peer executives of the Company, but in no event shall such plans and
Policies provide benefits which are less favorable, in the aggregate, than
the most favorable of such plans and Policies in effect at any time during
the 90-day period immediately preceding the Effective
Date.
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(v) Expenses. During
the Employment Period, Executive shall be entitled to prompt reimbursement
for all reasonable expenses incurred by Executive in accordance with the
most favorable Policies of the Company in effect at any time during the
90-day period immediately preceding the Effective Date or, if more
favorable to Executive, as in effect at any time thereafter with respect
to peer executives of the
Company.
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(vi) Fringe
Benefits. During the Employment Period, Executive shall
be entitled to fringe benefits in accordance with the most favorable plans
and Policies of the Company in effect at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to
Executive, as in effect at any time thereafter with respect to peer
executives of the Company.
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(vii) Office; Support
Staff. During the Employment Period, Executive shall be
entitled to an office or offices of a size and with furnishings and other
appointments, and to personal secretarial and other assistance, at least
equal to the most favorable of the foregoing provided to Executive by the
Company at any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to Executive, as provided at any time
thereafter with respect to peer executives of the
Company.
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(viii) Vacation. During
the Employment Period, Executive shall be entitled to paid vacation in
accordance with the most favorable plans and Policies of the Company as in
effect at any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to Executive, as in effect at any
time thereafter with respect to peer executives of the
Company.
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(ix) Subsidiaries. To
the extent that, immediately prior to the Effective Date, Executive has
been on the payroll of, and participated in the bonus, incentive or
employee benefit plans of, a Subsidiary, the references to the Company
contained in Sections 2(b)(i) through 2(b)(viii) and elsewhere in this
Agreement referring to benefits to which Executive may be entitled shall
also refer to such Subsidiary.
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3. Termination of
Employment.
(a) Death or
Disability. Executive's employment shall terminate
automatically upon Executive's death during the Employment Period. If
the Company determines in good faith that the Disability of Executive has
occurred during the Employment Period, it may give to Executive written notice
of its intention to terminate Executive's employment. In such event,
Executive's employment with the Company shall terminate as of the 30th day after
Executive’s receipt of such notice (the “Disability Effective
Date”); provided that, within the 30 days after such receipt, Executive
shall not have returned to full-time performance of his
duties. “Disability” means the
absence of Executive from Executive's duties with the Company on a full-time
basis for a period of time equal to the Waiting Period as a result of incapacity
due to mental or physical illness that is determined to be total and permanent
by a physician selected by the Company or its insurers and acceptable to
Executive or Executive's legal representative (such agreement as to
acceptability not to be unreasonably withheld or delayed). “Waiting Period” means
the waiting period under
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a
long-term disability plan of the Company that is applicable to Executive and
satisfies the requirements of Section 2(b)(iv).
(b) Cause. The
Company may terminate Executive's employment during the Employment Period for
Cause. “Cause” means the
occurrence of any one or more of the following actions or failures to act as
determined by the Board in its reasonable judgment and in good
faith:
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(i) embezzlement,
fraud or theft with respect to the property of the Company or a conviction
for any felony involving moral turpitude or causing material harm,
financial or otherwise, to the
Company;
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(ii) habitual
neglect in the performance of Executive's significant duties (other than
on account of incapacity due to physical or mental illness or Disability);
or
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(iii) a
demonstrably deliberate act or failure to act, including a violation of
the rules or policies of the Company, which causes a material financial or
other loss, damage or injury to the property, reputation or employees of
the Company; provided, however, that, unless such an act or a failure to
act was done by Executive in bad faith or without a reasonable belief that
Executive's act or failure to act, as the case may be, was in the best
interest of the Company or was required by applicable law, such act or
failure to act shall not constitute Cause if, within 20 days after the
Board or the Chief Executive Officer of the Company gives Executive
written notice of such act or failure to act that specifically refers to
this Section, Executive cures such act or failure to act to the fullest
extent that it is curable.
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“Cause” shall not
mean (x) bad judgment or negligence other than habitual neglect of significant
duties or (y) any act or omission in respect of which the Board could have
properly determined that Executive met the applicable standard of conduct for
the indemnification or reimbursement under the by-laws of the Company or
applicable law, in each case as in effect at the time of such act or
omission. In addition, a termination of Executive's employment shall
not be deemed to be for Cause unless each of the following conditions is
satisfied:
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(v) The
Company provides Executive a written notice (a “Notice of Intent to
Terminate”) not less than 30 days prior to the Date of Termination
setting forth the Company's intention to consider terminating Executive’s
employment. Such Notice shall include a statement of the
intended Date of Termination and a detailed description of the specific
facts that the Company believes to constitute
Cause.
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(w) No
act or omission of Executive shall constitute Cause if such act or
omission occurred more than 12 months before the earliest date on which
any member of the Board who is not a party to the act or
omission
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knew or in the
reasonable exercise of his or her duties as a director should have known of such
act or omission.
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(x) Executive
is offered an opportunity to respond to such Notice of Intent to Terminate
by appearing in person, together with Executive's legal counsel, before
the Board on a date specified in the Notice of Intent to Terminate, which
date shall be at least 25 days after Executive’s receipt of the Notice of
Intent to Terminate and, in any event, at least five days prior to the
Date of Termination proposed in such
Notice.
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(y) By
a vote of the Board that includes the affirmative vote of at least 75% of
the Non-Employee Directors, the Board determines that the actions of
Executive specified in the Notice of Intent to Terminate constitute Cause
and that Executive's employment should accordingly be terminated for
Cause.
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(z) The
Company provides Executive a copy of the Board's written determination
setting forth in detail (I) the specific basis for such termination for
Cause and (II) if the Date of Termination is other than the date of
Executive’s receipt of such determination, the Date of Termination (which
date shall be not more than 15 days after the giving of such
notice).
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By
determination of the Board, the Company may suspend Executive from his duties
for a period of up to 30 days with full pay and benefits thereunder during the
period of time in which the Board is determining whether to terminate Executive
for Cause. Any purported termination for Cause by the Company that does not
satisfy each substantive and procedural requirement of this Section 3(b) shall
be treated for all purposes under this Agreement as a termination by the Company
without Cause.
(c) Good
Reason. Executive may terminate his employment at any time
during the Employment Period for Good Reason. “Good Reason” means
any one or more of the following:
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(i) the
assignment to Executive of any duties inconsistent in any material respect
with Executive's position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as contemplated by
Section 2(a), or any other action by the Company which results in a
material adverse change in such position, authority, duties or
responsibilities, excluding an isolated, insubstantial and inadvertent
action not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by Executive (it
being understood that, without limiting the generality of the foregoing,
if a substantial portion of Executive's duties prior to the Change in
Control related to the Company's status as a public company and such
activities no longer constitute a substantial portion of Executive's
duties during the Employment Period, then Executive shall be deemed to
have "Good Reason");
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(ii) any
reduction by the Company in the base salary, annual bonus opportunity or
long-term incentive opportunity provided to the Executive under Section
2(b), or any material reduction by the Company in the aggregate benefits
(other than base salary, annual bonus opportunity or long-term incentive
opportunity) provided to the Executive under such
section;
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(iii) any
requirement that Executive be based at any office or location other than
the location specified in Section
2(a)(i)(B);
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(iv) any
purported termination by the Company of Executive's employment otherwise
than as expressly permitted by this Agreement (it being understood that
any such purported termination shall not be effective for any other
purpose of this Agreement); or
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(v) any
failure by the Company to comply with Section
10(c).
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Any good faith
determination of Good Reason made by Executive shall be conclusive.
(d) Notice of
Termination. Any termination of Executive’s employment by the
Company or by Executive shall be communicated by Notice of Termination to the
other party hereto. “Notice of
Termination” means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so indicated and
(iii) if the Date of Termination is other than the date of receipt of such
notice, specifies the Date of Termination (which date shall be not more than 15
days after the giving of such notice). The failure by Executive to
set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason shall not waive any right of Executive
thereunder or preclude Executive from asserting such fact or circumstance in
enforcing Executive's rights thereunder.
(e) Transitional
Assistance. If the Company shall so request, Executive shall
provide reasonable assistance to the Company to help ensure an orderly
transition of Executive's duties and responsibilities to such individual(s) as
the Company may designate, provided that the period during which Executive shall
provide such assistance shall not exceed ninety (90) days and that during such
period Executive's employment with the Company shall continue and the Company
shall compensate Executive as described in Section 2(b) above. Any
such transitional assistance and continuation of employment shall not waive,
release or otherwise affect any of the Executive's rights or the Company's
obligations hereunder, including without limitation those set forth in Section 4
below.
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4. Obligations of the Company
upon Termination.
(a) Good Reason; Other Than for
Cause or Disability. If, during the Employment Period,
Executive's employment shall be terminated by the Company other than for Cause,
death or Disability, or by Executive for Good Reason, then the Company shall
have all of the following obligations:
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(i) The
Company shall pay to Executive the following amounts in a lump sum in cash
within 10 days after Executive's Date of
Termination:
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(A) an
amount equal to the sum of Executive's Accrued Base Salary, Accrued Annual
Bonus and accrued but unpaid vacation pay (collectively, the “Accrued
Obligations”),
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(B) the
Prorated Annual Bonus,
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(C) the
product of three (3.0) (such number, the “Severance
Multiple”) times the sum of Executive's (I) Annual Base
Salary, (II) Target Bonus and (III) Average Profit Sharing Plan
Contribution; and
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(D) an
amount equal to the value of the unvested portion of Executive's accounts
under the Profit Sharing Plans as of the Date of
Termination.
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(ii)
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(A) During
the period commencing on the Date of Termination and continuing thereafter
for a number of years equal to the Severance Multiple, or such longer
period as any plan or Policy in which Executive is a participant as of the
Date of Termination (such eligibility to be determined based on the terms
of such plan or Policy as in effect on the Effective Date or, if more
favorable to Executive, the terms of such plan or Policy as in effect on
the Date of Termination), the Company shall continue to provide medical
(including post-retirement medical benefits to the extent that Executive
is or becomes eligible for such benefits as of the Date of Termination
after giving effect to paragraph (C) of this Section 4(a)(ii)),
prescription, dental and similar health care benefits (or, if such
benefits are not available, the after-tax economic value thereof
determined pursuant to paragraph (D) of this Section 4(a)(ii)) to
Executive and his family.
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(B) The
terms of such benefits shall be at least as favorable to Executive as the
terms of the most favorable plans or Policies of the Company applicable to
peer executives at Executive's Date of Termination, but in no event less
favorable to Executive than the most favorable plans or Policies of the
Company applicable to peer
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executives during
the 90-day period immediately preceding the Effective Date.
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(C) Such
benefits shall be provided at no cost to Executive and his family, except
that Executive shall be responsible for the payment of premiums,
co-payments, deductibles and similar charges based on the terms of the
most favorable plans or Policies of the Company applicable to peer
executives at Executive's Date of Termination, but in no event less
favorable to Executive than the most favorable plans or Policies of the
Company applicable to peer executives during the 90-day period immediately
preceding the Effective Date.
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(D) For
purposes of determining whether, and on what terms and conditions,
Executive is eligible to receive the post-retirement medical benefits
specified in paragraph (A) above, Executive shall on the Date of
Termination be credited with three (3.0) additional years for purposes of
attained age and years of service.
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(E) The
after-tax economic value of any benefit to be provided pursuant to
paragraph (A) above shall be deemed to be the present value of the
premiums expected to be paid for all such benefits that are to be provided
on an insured basis. The after-tax economic value of all other
benefits shall be deemed to be the present value of the expected net cost
to the Company of providing such
benefits.
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(iii) The
Company shall cause Executive to receive, at the Company's expense,
standard outplacement services from a nationally-recognized firm selected
by Executive; provided that the cost of such services to the Company shall
not exceed 15% of Executive's Annual Base Salary in effect on the Date of
Termination.
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(iv) If
on the Date of Termination the Executive is a “specified employee” of the
Company (as defined in Treasury Regulation Section 1.409A-1(i)), and if
amounts payable under this Section 4(a) (other than Accrued Obligations)
are not on account of an “involuntary separation from service” (as defined
in Treasury Regulation Section 1.409A – 1(n)), amounts that would
otherwise have been paid during the 6-month period immediately following
the Date of Termination shall be paid on the first regular payroll date
immediately following the 6-month anniversary of the Date of
Termination.
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(b) Cause; Other than for Good
Reason. If, during the Employment Period, Executive's
employment is terminated by the Company for Cause or by Executive other than for
Good Reason, the Company shall pay to Executive in a lump sum in cash within no
more than 10 days after the Date of Termination, any Accrued
Obligations.
(c) Death or
Disability. If, during the Employment Period, Executive's
employment is terminated by reason of Executive's death or Disability, the
Company shall pay to Executive in cash a lump sum amount equal to all Accrued
Obligations within no more than 10 days after the Date of
Termination.
5. Non-exclusivity of
Rights. If Executive receives payments pursuant to Section
4(a), Executive hereby waives the right to receive severance payments under any
other plan, policy or agreement of the Company. Except as provided in
the previous sentence, nothing in this Agreement shall prevent or limit
Executive's continuing or future participation in any benefit, bonus, incentive
or other plans or Policies provided by the Company or any of its Subsidiaries
and for which Executive may qualify, nor shall anything herein limit or
otherwise affect such rights as Executive may have under any other agreements
with the Company or any of its Subsidiaries.
6. Full
Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including set-off,
counterclaim, recoupment, defense or other claim, right or action that the
Company may have against Executive or others.
7. No Duty to
Mitigate. Executive shall not be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to Executive under any of the provisions of this Agreement, nor shall the amount
of any payment hereunder be reduced by any compensation earned by Executive as
result of employment by another employer or by any retirement benefits which may
be paid or payable to Executive; provided, however, that any continued welfare
benefits provided for pursuant to Section 4(a)(ii) shall not duplicate any
benefits that are provided to Executive and his family by such other employer
and shall be secondary to any coverage provided by such other
employer.
8. Enforcement.
(a) If Executive incurs legal,
accounting, expert witness or other fees and expenses in an effort to establish
entitlement to compensation and benefits under this Agreement, the Company
shall, regardless of the outcome of such effort, pay or reimburse Executive for
such fees and expenses. The Company shall reimburse Executive for
such fees and expenses on a monthly basis within 10 days after its receipt of
his request for reimbursement accompanied by reasonable evidence that the fees
and expenses were incurred.
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(b) If Executive does not prevail
(after exhaustion of all available judicial remedies), and the Company
establishes before a court of competent jurisdiction that Executive had no
reasonable basis for bringing an action hereunder and acted in bad faith in
doing so, no further reimbursement for legal fees and expenses shall be due to
Executive and Executive shall refund any amounts previously reimbursed hereunder
with respect to such action.
(c) If the Company fails to pay any
amount provided under this Agreement when due, the Company shall pay interest on
such amount at a rate equal to 200 basis points over the prime commercial
lending rate published from time to time in The Wall Street Journal;
provided, however, that if the interest rate determined in accordance with this
Section shall in no event exceed the highest legally-permissible interest
rate.
9. Better After
Tax Approach.
(a) Excise
Taxes. In the event that any monetary or other benefit
received or deemed received by Executive from the Company or any Subsidiary or
affiliate pursuant to this Agreement or otherwise (“Change in Control
Benefits”): (i) constitutes or may constitute “Parachute Payments” within the
meaning of Section 280G of the Code, and (ii) but for this Section 9, would be
subject to any excise tax under Section 4999 of the Code or any similar tax
under any United States federal, state, local or other law (such excise tax and
all such similar taxes individually and collectively, “Excise Taxes”), then,
at the option of Executive, such Change in Control Benefits shall be either: (x)
delivered in full, or (y) delivered as to such lesser extent which would result
in no portion of such Change in Control Benefits being subject to Excise Taxes;
whichever of the foregoing amounts, taking into account the applicable federal,
state and local income and employment taxes and the Excise Taxes results in the
receipt by the Executive on an after-tax basis, of the greatest amount of Change
in Control Benefits, notwithstanding that all or some portion of such Change in
Control Benefits may be taxable under Section 4999 of the Code. For the
avoidance of doubt, this Section 9 provides Executive with the option to reduce
the amount of any such Change in Control Benefits payable to such Executive, if
doing so would place the Executive in a better net after-tax economic position
as compared with not doing so (taking into account the applicable federal, state
and local income and employment taxes and the Excise Taxes).
(b) Reduction. Any
reduction in Change in Control Benefits allowed by Section 9(a) shall occur in
the following order: (i) reduction of cash payments; (ii) reduction of vesting
acceleration of equity awards; and (iii) reduction of other benefits paid or
provided to the Executive. In the event that acceleration of vesting of equity
awards is to be reduced, such acceleration of vesting shall be canceled in the
reverse order of the date of grant for the Executive's equity awards. If two or
more equity awards are granted on the same date, each award will be reduced on a
pro-rata basis. In the event that the other benefits paid or provided
to the Executive are
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to
be reduced the reduction in the specific benefit or amount of benefit shall be
determined by the Company in its sole discretion.
(c) Tax
Advisor. Unless the Company and the Executive otherwise agree
in writing, the determinations set forth in Section 9(a) will be made in writing
by an independent tax advisor selected by the Company (the “Tax Advisor”). For
purposes of making the calculations required by this Section 9, the Tax Advisor
may make reasonable assumptions and approximations concerning applicable taxes
and may rely on reasonable, good faith interpretations concerning the
application of Sections 280G and 4999 of the Code. The Company and the Executive
agree to furnish to the Tax Advisor such information and documents as the Tax
Advisor may reasonably request in order to make a determination under this
provision. The Company will bear all costs the Tax Advisor may reasonably incur
in connection with any calculations contemplated by this provision. Further, the
Company shall, in addition to complying with this Section 9(c), cause all
determinations under Section 9(a) to be made as soon as reasonably possible
after the announcement of the Change in Control and in adequate time to permit
Executive to determine which election to make under Section 9(a) and to prepare
and file Executive’s individual tax returns on a timely
basis.
10. Successors.
(a) This Agreement is personal to
Executive and without the prior written consent of the Company shall not be
assignable by Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by Executive's legal representatives.
(b) The Company may not assign its
rights and obligations under this Agreement without the prior written consent of
Executive except to a successor which has satisfied the provisions of Section
10(c). This Agreement shall inure to the benefit of the Company and
such permitted assigns.
(c) The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. All references to the Company
shall also refer to any such successor, and the Company and such successor shall
be jointly and severally liable for all obligations of the Company under this
Agreement.
11. Miscellaneous.
(a) Applicable
Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois, without reference to such
State's principles of conflict of laws.
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(b) Notices. All
notices hereunder shall be in writing and shall be given by hand delivery,
nationally-recognized courier service that provides overnight delivery, or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to Executive, at his most recent home
address on file with the Company.
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If
to the Company, to:
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▇.▇.
▇▇▇▇▇▇▇▇, Inc.
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▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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Attention: General
Counsel
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or
to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice shall be effective when
actually received by the addressee.
(c) Severability. If
any part of this Agreement is declared by any court or governmental authority to
be unlawful or invalid, such unlawfulness or invalidity shall not serve to
invalidate any part of this Agreement not declared to be unlawful or
invalid. Any paragraph or part of a paragraph so declared to be
unlawful or invalid shall, if possible, be construed in a manner which will give
effect to the terms of such paragraph or part of a paragraph to the fullest
extent possible while remaining lawful and valid.
(d) Tax
Withholding. The Company may withhold from any amounts payable
under this Agreement such federal, state or local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
(e) Amendments;
Waiver. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the Company and
Executive. A waiver of any term, covenant or condition contained in
this Agreement shall not result in a waiver of any other term, covenant or
condition, and any waiver of any default shall not result in a waiver of any
later default.
(f) Entire
Agreement. This Agreement contains the entire understanding of
the Company and Executive with respect to the subject matter hereof, and shall
supersede all prior agreements, promises and representations of the parties
regarding employment or severance, whether in writing or
otherwise. Without limiting the generality of the foregoing, this
Agreement expressly terminates, with immediate effect, any Change in Control
Employment Agreement which may previously have been entered into between the
Company and Executive.
(g) No Right to
Employment. Except as may be provided under any other
agreement between Executive and the Company, the employment of Executive by the
Company is at will, and, prior to the Effective Date, may be terminated by
either Executive or the Company at any time. Upon a termination of
Executive's
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employment prior to
the Effective Date, there shall be no further rights under this
Agreement.
(h) Sections. Except
where otherwise indicated by the context, any reference to a “Section” shall be
to a section of this Agreement.
(i) Survival of Executive's
Rights. All of Executive's rights hereunder shall survive the
termination of Executive's employment.
(j) Number and
Gender. Wherever appropriate, the singular shall include the
plural, the plural shall include the singular, and the masculine shall include
the feminine.
(k) Counterparts. This
Agreement may be executed in multiple counterparts, each of which shall be
deemed an original, but all of which together will constitute one and the same
instrument.
(l) Section 409A
Compliance. To the extent applicable, it is intended that this
Agreement shall comply with the provisions of Section 409A of the Code, and this
Agreement shall be construed and applied in a manner consistent with this
intent. In the event that any payment or benefit under this Agreement
is determined by the Company to be in the nature of a deferral of compensation,
the Company and the Executive hereby agree to take such actions, not otherwise
provided herein, as may be mutually agreed between the parties to ensure that
such payments comply with the applicable provisions of Section 409A of the Code
and the Treasury Regulations thereunder. To the extent that any
payment or benefit under this Agreement is modified by reason of this Section
11(l), it shall be modified in a manner that complies with Section 409A of the
Code and preserves to the maximum possible extent the economic costs or value
thereof (as applies) to the respective parties (determined on a pre-tax
basis).
IN WITNESS WHEREOF, Executive and the Company
have executed this Agreement as of the date first above written.
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▇▇▇▇▇▇▇▇, INC.
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By:________________________________________________ |
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▇▇▇▇▇ ▇.
▇▇▇▇
Chairman,
President and Chief Executive Officer
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EXECUTIVE:
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| ___________________________________________________ | |
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INSERT
NAME
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