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EXHIBIT 10.8
CHANGE OF CONTROL SUPPLEMENT
AND AMENDMENT TO EMPLOYMENT AGREEMENT
FOR J. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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TABLE OF CONTENTS
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Article I. Certain Definitions ....................................................... 1
1.1 "Accrued LTIP Bonus" ..................................................... 1
1.2 "Accrued Obligations" .................................................... 1
1.3 "Annual Performance Period" .............................................. 2
1.4 "Annualized Target LTIP Bonus" ........................................... 2
1.5 "Article" ................................................................ 2
1.6 "Beneficial Owner" ....................................................... 2
1.7 "Board" .................................................................. 2
1.8 "Bonus Plan" ............................................................. 2
1.9 "Cause" .................................................................. 2
1.10 "Change of Control" ...................................................... 2
1.11 "Company" ................................................................ 3
1.12 "Company Certificate" .................................................... 3
1.13 "Consummation Date" ...................................................... 3
1.14 "Continuity of Ownership" ................................................ 3
1.15 "Demutualization" ........................................................ 4
1.16 "Effective Date" ......................................................... 4
1.17 "Employment Agreement" ................................................... 4
1.18 "Exchange Act" ........................................................... 4
1.19 "Excise Taxes" ........................................................... 4
1.20 "Good Reason" ............................................................ 4
1.21 "Gross-up Multiple" ...................................................... 4
1.22 "Gross-up Payment" ....................................................... 4
1.23 "Imminent Control Change" ................................................ 4
1.24 "Imminent Control Change Period" ......................................... 5
1.25 "including" .............................................................. 5
1.26 "IRS" .................................................................... 5
1.27 "IRS Claim" .............................................................. 5
1.28 "LTIP Target Award" ...................................................... 5
1.29 "LTIP Outstanding Award" ................................................. 6
1.30 "Lump Sum Value" ......................................................... 6
1.31 "Maximum Annuity" ........................................................ 6
1.32 "Merger of Equals" ....................................................... 6
1.33 "Merger of Equals Cessation Date" ........................................ 7
1.34 "Mutual Incumbent Directors" ............................................. 7
1.35 "New LTIP" ............................................................... 7
1.36 "Notice of Consideration" ................................................ 7
1.37 "Plans" .................................................................. 7
1.38 "Post-Change Employment Period" .......................................... 7
1.39 "Post-Merger of Equals Period" ........................................... 7
1.40 "Potential Parachute Payment" ............................................ 7
1.41 "Pro-rata Annual Bonus" .................................................. 7
1.42 "Pro-rata LTIP Bonus ..................................................... 8
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1.44 "Refund Claim" ............................................................... 9
1.45 "Reorganization Transaction" ................................................. 9
1.46 "Restricted Shares" .......................................................... 9
1.47 "SEC" ........................................................................ 9
1.48 "SEC Person" ................................................................. 9
1.49 "Section" .................................................................... 9
1.50 "SERP" ....................................................................... 9
1.51 "Stock Options" .............................................................. 9
1.52 "Supplement Date" ............................................................ 9
1.53 "Supplement Term" ............................................................ 9
1.54 "Surviving Corporation" ...................................................... 9
1.55 "Target Annual Bonus" ........................................................ 10
1.56 "Taxes" ...................................................................... 10
1.57 "Termination Date" ........................................................... 10
1.58 "Termination of Employment" .................................................. 10
1.59 "25% Owner" .................................................................. 10
1.60 "Voting Securities" .......................................................... 10
Article II. Post-Change Employment Period and Imminent Control Change Period ........... 11
2.1 Position and Duties .......................................................... 11
2.2 Compensation ................................................................. 11
2.3 Stock Incentive Awards ....................................................... 12
2.4 Unfunded Deferred Compensation ............................................... 13
2.5 Pro-rata Annual Bonus ........................................................ 13
2.6 Pro-rata LTIP Bonus .......................................................... 14
Article III. Termination of Employment ................................................. 14
3.1 Disability ................................................................... 14
3.2 Death ........................................................................ 15
3.3 Termination for Cause ........................................................ 15
3.4 Good Reason .................................................................. 17
Article IV. Company's Obligations Upon Certain Terminations of Employment .............. 19
4.1 Termination During the Post-Change Employment Period ......................... 19
4.2 Termination During a Post-Merger or Equals Period ............................ 22
4.3 Termination During an Imminent Control Change Period (with no Change
of Control) .................................................................. 23
4.4 Termination During an Imminent Control Change Period (which Culminates in a
Change of Control) ........................................................... 24
4.5 Waiver and Release ........................................................... 25
4.6 Termination by the Company for Cause ......................................... 25
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4.7 Termination by Executive Other Than for Good Reason ............. 26
4.8 Termination by the Company for Disability ....................... 26
4.9 If upon Death ................................................... 26
Article V. Certain Additional Payments by the Company ...................... 27
5.1 Gross-Up Payment ................................................ 27
5.2 Limitation on Gross-Up Payments ................................. 28
5.3 Additional Gross-up Amounts ..................................... 29
5.4 Amount Increased or Contested ................................... 29
5.5 Refunds ......................................................... 31
Article VI. Expenses, Interest and Dispute Resolution ...................... 31
6.1 Legal Fees and Other Expenses ................................... 31
6.2 Interest ........................................................ 32
6.3 Binding Arbitration ............................................. 32
Article VII. No Set-off or Mitigation; No Double Payment ................... 33
7.1 No Set-off by Company ........................................... 33
7.2 No Mitigation ................................................... 33
7.3 No Double Payment ............................................... 33
Article VIII. Non-Exclusivity of Rights .................................... 33
8.1 Waiver of Certain Other Rights .................................. 33
8.2 Other Rights .................................................... 34
8.3 No Right to Continued Employment ................................ 34
Article IX. Miscellaneous .................................................. 34
9.1 No Assignability ................................................ 34
9.2 Successors ...................................................... 34
9.3 Payments to Beneficiary ......................................... 34
9.4 Non-Alienation of Benefits ...................................... 34
9.5 Severability .................................................... 35
9.6 Amendments ...................................................... 35
9.7 Notices ......................................................... 35
9.8 Continuing Validity of Employment Agreement ..................... 35
9.9 Counterparts .................................................... 36
9.10 Governing Law ................................................... 36
9.11 Captions ........................................................ 36
9.12 Number and Gender ............................................... 36
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9.13 Tax Withholding................................................... 36
9.14 Waiver............................................................ 36
9.15 Joint and Several Liability....................................... 36
9.16 Entire Agreement.................................................. 37
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CHANGE-OF-CONTROL SUPPLEMENT
AND AMENDMENT TO EMPLOYMENT AGREEMENT
FOR
J. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
THIS CHANGE OF CONTROL SUPPLEMENT and AMENDMENT TO EMPLOYMENT AGREEMENT
("Supplement and Amendment") dated as of October 19, 2000 (the "Supplement
Date") is made by and among Principal Mutual Holding Company, an Iowa mutual
holding company (together with all successors thereto, "Mutual"), Principal
Financial Group, Inc., an Iowa corporation, Principal Financial Services, an
Iowa corporation, and Principal Life Insurance Company, an Iowa corporation
(together with all successors thereto, "Life") (each of the foregoing referred
to individually as a "Company" or collectively as "Companies"), and J. ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ("Executive").
RECITALS
The Companies have determined that it is in the best interests of the
Companies and their members, (and if, at the relevant time, any are stock
companies, their stockholders) to assure that the Companies will have the
continued service of Executive. The Companies also believe it is imperative to
reduce the distraction of Executive that would result from the personal
uncertainties caused by a pending or threatened change of control of Mutual, to
encourage Executive's full attention and dedication to the Companies, and to
provide Executive with compensation and benefits arrangements upon a change of
control which ensure that the expectations of Executive will be satisfied and
are competitive with those of similarly-situated businesses. This Supplement and
Amendment is intended to accomplish these objectives, and to amend Executive's
Employment Agreement with the Companies dated as of May 19,2000 (such agreement
as amended from time to time, and any successors thereto, the "Employment
Agreement") in order to coordinate it with certain provisions that apply in the
event of a Change of Control or Imminent Control Change.
ARTICLE I.
CERTAIN DEFINITIONS
As used in this Supplement and Amendment, capitalized terms have the
meaning specified in the Employment Agreement as amended from time to time,
except as indicated below:
1.1 "Accrued LTIP Bonus" means the amount of any LTIP Bonus earned but
either) deferred or not paid on or prior to the Effective Date, Merger of
Equals Cessation Date, or Termination Date, as applicable.
1.2 "Accrued Obligations" means, as of any date, the sum of Executive's
Accrued Base Salary, Accrued Annual Bonus, Accrued LTIP Bonus, any accrued but
unpaid paid time off, and any other amounts and benefits which are then due to
be paid or provided to Executive by the Company, but have not yet been paid or
provided (as applicable).
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1.3 "Annual Performance Period" -- see Section 2.2(b).
1.4 "Annualized Target LTIP Bonus" means, in respect of any Termination
Date, an amount, based on the most recently granted LTIP Award for which the
LTIP Performance Period has not expired or terminated (disregarding for this
purpose the premature termination of any LTIP Performance Period that occurred
on or after the Effective Date), calculated as follows:
(a) If the most recently granted LTIP Award was granted under the
1999 Long-Term Performance Plan, the projected target award (stated as a
percentage of Base Salary) as calculated at the beginning of the three-year
award cycle which Executive would have been entitled to receive with
respect to such most recent allocation of performance units as if "Gain
from Operations" and "Return on Equity" (as such terms are defined in the
1999 Long-Term Performance Plan) targets had been met.
(b) If the most recently granted LTIP Award was granted under a New
LTIP under which consecutive LTIP Performance Periods end each 12 months,
the Executive's LTIP Target Award with respect to such most recent grant.
(c) If the most recently granted LTIP Award was granted under a New
LTIP under which consecutive LTIP Performance Periods end more or less
frequently than each 12 months, the Executive's LTIP Target Award with
respect to such most recent grant, multiplied by a fraction, the numerator
of which is 12 and the denominator of which is the number of whole months
between payments of LTIP Bonuses.
(d) If the Executive has no LTIP Awards outstanding with respect to
which the LTIP Performance Period has not yet ended, the amount shall be
zero.
1.5 "Article" means, unless the context otherwise requires, an article of
this Supplement.
1.6 "Beneficial Owner" means such term as defined in Rule 13d-3 of the SEC
under the Exchange Act.
1.7 "Board" means the Board of Directors of Mutual or, from and after the
effective date of a Reorganization Transaction, the Board of Directors of the
Surviving Corporation.
1.8 "Bonus Plan" -- see Section 2.2(b).
1.9 "Cause" -- see Section 3.3.
1.10 "Change of Control" means, except as otherwise provided below, the
occurrence of any one or more of the following:
(a) any SEC Person becomes the Beneficial Owner of 25% or more of the
common stock of Mutual or of Voting Securities representing 25% or more of
the combined voting power of all Voting Securities of Mutual (such an SEC
Person, a "25% Owner"); or
(b) the Mutual Incumbent Directors (determined using the Supplement
Date as the baseline date) cease for any reason to constitute at least a
majority of the Board; or
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(c) consummation of a merger, reorganization, consolidation, or
similar transaction (any of the foregoing, a "Reorganization Transaction")
where the Continuity of Ownership is not more than 60%; or
(d) approval by the members of Mutual, if at the relevant time Mutual
is a mutual life insurance holding company, or approval by the stockholders
of Mutual, if at the relevant time Mutual is a stock company, of a plan or
agreement for the sale or other disposition of all or substantially all of
the consolidated assets of Mutual or a plan of liquidation of Mutual.
Notwithstanding the foregoing, a Change of Control shall not occur merely as a
result of (i) Demutualization, or (ii) an underwritten initial public offering
of common stock of Mutual as filed with the SEC, unless such initial public
offering results in any SEC Person becoming a 25% Owner. Notwithstanding the
occurrence of any of the foregoing events, a Change of Control shall not occur
with respect to Executive if, in advance of such event, Executive agrees in
writing that such event shall not constitute a Change of Control.
1.11 "Company" - see the introductory paragraph to this Supplement.
1.12 "Company Certificate" -- see Section 5.4(a).
1.13 "Consummation Date" means the first date after an Imminent Control
Change upon which an Effective Date occurs, provided, however that one of the
following is satisfied:
(a) the Imminent Control Change has not lapsed; or
(b) the Imminent Control Change in effect upon such Effective Date is
the last Imminent Control Change in a series of Imminent Control Changes
unbroken by any period of time between the lapse of an Imminent Control
Change and the occurrence of a new Imminent Control Change.
1.14 "Continuity of Ownership" of a stated percentage means
(a) if at the relevant time Mutual is a mutual life insurance holding
company, the Persons who were the members of Mutual immediately before a
Reorganization Transaction became, immediately after the consummation of
such Reorganization Transaction, the direct or indirect owners of Voting
Securities of the Surviving Corporation representing the stated
percentage of the combined voting power of the then outstanding Voting
Securities of the Surviving Corporation, in substantially the same
respective proportions as such Person's ownership of Voting Securities of
Mutual immediately before such Reorganization Transaction, and
(b) if at the relevant time Mutual is a stock company, the Persons who
were the direct or indirect owners of the outstanding common stock and
Voting Securities of Mutual immediately before such Reorganization
Transaction became, immediately after the consummation of such
Reorganization Transaction, the direct or indirect owners of both the
stated percentage of the then-outstanding common stock of the Surviving
Corporation and Voting Securities representing the stated percentage of the
combined voting power of the then-outstanding Voting Securities of the
Surviving Corporation, in
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substantially the same respective proportions as such Persons' ownership of
the common stock and Voting Securities of Mutual immediately before such
Reorganization Transaction.
1.15 "Demutualization," solely as used in this Supplement and Amendment,
means the conversion of Mutual from a mutual life insurance company to a stock
company (x) at least 50% of whose stockholders are persons who were members of
Mutual immediately prior to such transaction or a trust or separate account
holding the shares of Mutual for the benefit of such members or (y) owned by a
corporation at least 50% of the shares of which are held by the persons or trust
described under clause (x), excluding any such conversion that results in any
SEC Person becoming a 25% Owner.
1.16 "Effective Date" means the date on which a Change of Control first
occurs during the Supplement Term.
1.17 "Employment Agreement" - see the introductory paragraph of this
Supplement and Amendment.
1.18 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
1.19 "Excise Taxes" -- see Section 5.1.
1.20 "Good Reason" -- see Section 3.4.
1.21 "Gross-up Multiple" -- see Section 5.1.
1.22 "Gross-Up Payment" -- see Section 5.1.
1.23 "Imminent Control Change" means, as of any date on or after the
Supplement Date and prior to the Effective Date, the occurrence of any one or
more of the following:
(a) Mutual enters into an agreement the consummation of which would
constitute a Change of Control;
(b) Any SEC Person attempts to acquire 25% or more of the member
interests in Mutual, as evidenced by filing or other certification of
notice of such intent with any State's governmental agency established to
regulate the insurance industry, which if consummated would constitute a
Change of Control;
(c) After Demutualization, any SEC Person commences a "tender offer"
(as such term is used in Section 14(d) of the Exchange Act) or exchange
offer, which, if consummated, would result in a Change of Control; or
(d) After Demutualization, any SEC Person files with the SEC a
preliminary or definitive proxy solicitation or election contest to elect
or remove one or more members of the Board, which, if consummated or
effected, would result in a Change of Control;
provided, however, that an Imminent Control Change will lapse and cease to
qualify as an Imminent Control Change:
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(i) With respect to an Imminent Control Change described in
clause (a) of this definition, the date such agreement is terminated,
cancelled or expires without a Consummation Date occurring;
(ii) With respect to an Imminent Control Change described in
clause (b) of this definition, the date such filing or other
certification is withdrawn, expires or is denied or otherwise rejected
by the relevant state regulators without a Consummation Date
occurring;
(iii) With respect to an Imminent Control Change described in
clause (c) of this definition, the date such tender offer or exchange
offer is withdrawn or terminates without a Consummation Date
occurring;
(iv) With respect to an Imminent Control Change described in
clause (d) of this definition, (1) the date the validity of such proxy
solicitation or election contest expires under relevant state
corporate law, or (2) the date such proxy solicitation or election
contest culminates in a stockholder vote, in either case without a
Consummation Date occurring; or
(v) The date a majority of the Mutual Incumbent Directors make a
good faith determination that any event or condition described in
clause (a), (b), (c) or (d) of this definition no longer constitutes
an Imminent Control Change, provided that such determination may not
be made prior to the six (6) month anniversary of the occurrence of
such event.
Notwithstanding the foregoing, an Imminent Control Change shall not occur merely
as a result of (A) planning, or filing or certifying an intent with any state's
governmental agency established to regulate the insurance industry of a
Demutualization application, or (B) the planned underwritten initial public
offering of common stock of Mutual as filed with the SEC; provided, however,
that such initial public offering is not expected to result in any SEC Person
becoming a 25% Owner.
1.24 "Imminent Control Change Period" means the period commencing on the
date of an Imminent Control Change (or the first Imminent Control Change in a
series of Imminent Control Changes unbroken by any period of time between the
lapse of an Imminent Control Change and the occurrence of a new Imminent Control
Change) and ending on the Consummation Date, or if earlier, the date an Imminent
Control Change lapses (without the prior or concurrent occurrence of a new
Imminent Control Change).
1.25 "including" means including without limitation.
1.26 "IRS" means the Internal Revenue Service of the United States of
America.
1.27 "IRS Claim" -- see Section 5.4.
1.28 "LTIP" means the 1999 Long-Term Performance Plan as amended from time
to time.
1.29 "LTIP Award" means an incentive compensation opportunity granted
under the LTIP or New LTIP.
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1.30 "LTIP Performance Period" means any performance period designated in
accordance with any LTIP or New LTIP approved by the Board of Life or any
committee of the Board of Life.
1.31 "LTIP Target Award" means, in respect of any LTIP Award under a New
LTIP, the amount which Executive would have been entitled to receive for the
LTIP Performance Period corresponding to such LTIP Award if the performance
goals established pursuant to such LTIP Award were achieved at the target level
(currently 100%) as of the end of the LTIP Performance Period.
1.32 "LTIP Outstanding Award" - see the definition of "Pro-rata LTIP
Bonus."
1.33 "Lump Sum Value" of an annuity payable pursuant to a defined benefit
plan (whether or not qualified under Section 401(a) of the Code) means, as of a
specified date, the present value of such annuity, as determined, as of such
date, under generally accepted actuarial principles using (i) the applicable
interest rate, mortality tables and other methods and assumptions that the
Pension Benefit Guaranty Corporation ("PBGC") would use in determining the value
of an immediate annuity on the Termination Date or (ii) interest rate and
mortality assumptions are no longer published by the PBGC, interest rate and
mortality assumptions determined in a manner as similar as practicable to the
manner by which the PBGC's interest rate and mortality assumptions were
determined immediately prior to the PBGC's cessation of publication of such
assumptions; provided, however, that if such defined benefit plan provides for a
lump sum distribution and such lump-sum distribution either (x) is the only
payment method available under such plan or (y) provides for a greater amount
than the Lump Sum Value of the Maximum Annuity available under such plan, then
"Lump Sum Value" shall mean such lump sum amount.
1.34 "Maximum Annuity" means, in respect of a defined benefit plan (whether
or not qualified under Section 401(a) of the Code), an annuity computed in
whatever manner permitted under such plan (including frequency of annuity
payments, attained age upon commencement of annuity payments, and nature of
surviving spouse benefits, if any) that yields the greatest Lump Sum Value.
1.35 "Merger of Equals" means a Change of Control consisting of, as of any
date on or after the Supplement Date, a Reorganization Transaction that,
notwithstanding the fact that such transaction also qualifies as a Change of
Control, satisfies all of the following:
(a) consummation of such Reorganization Transaction results in
Continuity of Ownership of at least 40%, but not more than 60%; and
(b) an SEC Person does not become a 25% Owner; and
(c) Mutual Incumbent Directors (determined using the date immediately
preceding the Effective Date as the baseline date), throughout the period
beginning on the Effective Date and ending on the second anniversary of the
Effective Date, continue to constitute not less than
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(i) a majority of the Board, if subsection (a) of this definition
is satisfied because the Reorganization Transaction resulted in
Continuity of Ownership of at least 50%, but not more than 60%; or
(ii) one (1) member less than a majority of the Board, if
subsection (a) of this definition is satisfied because the
Reorganization Transaction resulted in Continuity of Ownership of at
least 40%, but less than 50%; and
(d) the person who was the Chief Executive Officer of Mutual
immediately prior to the first to occur of the (x) the day prior to the
beginning of the Imminent Control Change Period or (y) the day prior to the
Effective Date shall serve as the Chief Executive Officer of the
Surviving Corporation at all times during the period commencing on the
Effective Date and ending on the first anniversary of the Effective Date;
provided, however, that a Merger of Equals shall cease to be considered a Merger
of Equals and shall instead qualify as a Change of Control that is not a Merger
of Equals from and after the first date (the "Merger of Equals Cessation Date")
as of which:
(i) during the Post-Change Employment Period the conditions of
any of clause (b) or clause (c) or clause (d) of this definition shall
not be satisfied; or
(ii) prior to the first anniversary of the Effective Date, the
Company shall make a filing with the SEC, issue a press release, or
make a public announcement to the effect that Mutual or the Surviving
Corporation is seeking or intends to seek a replacement for its Chief
Executive Officer, whether such replacement is to become effective
before or after such first anniversary.
1.36 "Merger of Equals Cessation Date" - see the definition of "Merger of
Equals."
1.37 "Mutual Incumbent Directors" means, as of any specified baseline date,
individuals then serving as members of the Board who were members of the Board
as of the date immediately preceding such baseline date; provided that any
subsequently-appointed or elected member of the Board whose election, or
nomination for election by numbers or by stockholders of Mutual if Mutual is a
stock company at the relevant time, or stockholders or members, as applicable,
of the Surviving Corporation, as applicable, was approved by a vote or written
consent of at least a majority of the directors then comprising the Mutual
Incumbent Directors shall also thereafter be considered a Mutual Incumbent
Director, unless the initial assumption of office of such subsequently-elected
or appointed director was in connection with an Imminent Control Change, but
only if such Imminent Control Change was triggered by the occurrence of an event
described in subsection (d) of the definition of Imminent Control Change.
1.38 "New LTIP" - see definition of "Pro-rata LTIP Bonus."
1.39 "Notice of Consideration" -- see Section 3.3(a)(ii)(2).
1.40 "Plans" means plans, programs, policies, practices or procedures of
the Company.
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1.41 "Post-Change Employment Period" means the period commencing on the
Effective Date and ending on the second anniversary of the Effective Date.
1.42 "Post-Merger of Equals Period" means the period commencing on an
Effective Date of a Merger of Equals and ending on the first to occur of the
Merger of Equals Cessation Date or the end of the Post-Change Employment Period.
1.43 "Potential Parachute Payment" -- see Section 5.1.
1.44 "Pro-rata Annual Bonus" on and after the Effective Date means,
notwithstanding Section 1.32 of the Employment Agreement, an amount equal to the
product of Executive's Target Annual Bonus (for the fiscal year in which the
Effective Date, Merger of Equals Cessation Date or Termination Date occurs, as
applicable, but disregarding any reduction in such Target Annual Bonus that
would qualify as Good Reason if Executive were to terminate employment on
account thereof) multiplied by a fraction, the numerator of which equals the
number of days from and including the first day of such fiscal year through and
including the Effective Date, Merger of Equals Cessation Date or Termination
Date, as applicable, and the denominator of which equals 365.
1.45 "Pro-rata LTIP Bonus" means an amount equal to the sum of the
following amounts, calculated separately for each LTIP Award for which the LTIP
Performance Period has not ended as of the Effective Date, Merger of Equals
Cessation Date, or Termination Date, as applicable:
(a) For any LTIP Award that was granted under the LTIP, the sum of the
following amounts (recalculated as of the applicable date for each such
LTIP Award):
(i) Executive's LTIP Outstanding Award (as defined below) with
respect to any LTIP Performance Period which began prior to the
calendar year of the Effective Date, Merger of Equals Cessation Date
or Termination Date, as applicable; and
(ii) Executive's LTIP Outstanding Award (as defined below) with
respect to any LTIP Performance Period which began in the calendar
year in which the Effective Date, Merger of Equals Cessation Date or
Termination Date, as applicable, occurs, multiplied by a fraction, the
numerator of which equals the number of days from and including the
first day of such calendar year through and including the Effective
Date, Merger of Equals Cessation Date or Termination Date, as
applicable, and the denominator of which equals 365.
(b) For any LTIP Award that was granted under a new or successor plan
replacing or supplementing the LTIP ("New LTIP"), an amount calculated by
adding together the amounts determined by multiplying each LTIP Target
Award by a fraction, the numerator of which equals the number of days from
and including the beginning of the LTIP Performance Period applicable to
such LTIP Target Award through and including the Effective Date, Merger of
Equals Cessation Date or Termination Date, as applicable, and the
denominator of which equals the aggregate number of days in such LTIP
Performance Period.
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"LTIP Outstanding Award" means, in respect of any LTIP Award, the
amount which Executive would have been entitled to receive for the
LTIP Performance Period applicable to such LTIP Award, which amount is
equal to the product of (x) the number of Initial Performance Units
(as defined in the LTIP) multiplied by (y) an amount determined by
applying the formula described as the "Start Imputed Value" in the
LTIP, but determining "Average Return on Equity" and "Equity of the
consolidated Principal Financial Group" as of December 31 of the year
preceding the year in which the applicable determination date occurs,
and not taking into account any value for any unfinished year in the
award cycle, not taking into account any performance scores,
multipliers or adjustment factors, and not prorated for any unfinished
year in the award cycle.
1.46 "Refund Claim" -- see Section 5.4.
1.47 "Reorganization Transaction" -- see clause (c) of the definition of
"Change of Control."
1.48 "Restricted Shares" -- see Section 2.3.
1.49 "SEC" means the United States Securities and Exchange Commission.
1.50 "SEC Person" means any person (as such term is used in Rule 13d-5 of
the SEC under the Exchange Act) or group (as such term is defined in Sections
3(a)(9) and 13(d)(3) of the Exchange Act), other than an Affiliate or any
employee benefit plan (or any related trust) of Mutual or any of its Affiliates.
1.51 "Section" means, unless the context otherwise requires, a section of
this Supplement and Amendment.
1.52 "SERP" means a supplemental executive retirement Plan that is not
qualified under Section 401(a) of the Code, including the Supplemental Executive
Retirement Plan for Employees (or any successor plan).
1.53 "Stock Options" -- see Section 2.3.
1.54 "Supplement Date" -- see the introductory paragraph of this Supplement
and Amendment.
1.55 "Supplement Term" means the period commencing on the Supplement Date
and ending on the latest of (a) the third anniversary of the Supplement Date,
(b) the second anniversary of an Effective Date occurring within one year of the
Supplement Date, or (c) last day the Employment Agreement is in effect. An
Expiration Notice with respect to the Employment Agreement given on or after the
first anniversary of the Supplement Date shall apply equally to this Supplement
and Amendment. Notwithstanding the foregoing, if an Effective Date or an
Imminent Control Change occurs before the Expiration Date specified in an
Expiration Notice, then such Expiration Notice shall be void and of no further
effect; provided, however, if such Imminent Control Change does not culminate in
a Consummation Date, then such Expiration Notice shall be reinstated and the
Supplement and Amendment and Employment
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Agreement shall expire on the date originally specified as the Expiration Date,
or if later, the date the Imminent Control Change lapses.
1.56 "Surviving Corporation" means the corporation resulting from a
Reorganization Transaction or, if securities representing at least 50% of the
aggregate voting power of such resulting corporation, (if such corporation is a
stock company at the relevant time), or of the mutual life insurance holding
company policies (if such corporation is a mutual life insurance holding company
at the relevant time) are directly or indirectly owned by another corporation,
such other corporation.
1.57 "Target Annual Bonus," solely for purposes of this Supplement and
Amendment, means, as of any date, an amount equal to the product of Base Salary
determined as of such date multiplied by the percentage of such Base Salary to
which Executive would have been entitled immediately prior to such date under
any Bonus Plan for the Annual Performance Period for which such Annual Bonus is
awarded if the performance goals established pursuant to such Bonus Plan were
achieved at the 100% level as of the end of the Annual Performance Period;
provided, however, that any reduction in Executive's Base Salary or Annual Bonus
that would qualify as Good Reason shall be disregarded for purposes of this
definition.
1.58 "Taxes" means the incremental federal, state, local and foreign
income, employment, excise and other taxes payable by Executive with respect to
any applicable item of income.
1.59 "Termination Date" means the date of the receipt of the Notice of
Termination by Executive (if such Notice is given by the Company) or by the
Company (if such Notice is given by Executive), or any later date, not more than
15 days after the giving of such Notice, specified in such notice as of which
Executives' employment shall be terminated; provided, however, that:
(i) if Executive's employment is terminated by reason of death or
Disability, the Termination Date shall be the date of Executive's
death or the date of Disability (as described in Section 3.1(b)), as
applicable; and
(ii) if no Notice of Termination is given, the Termination Date
shall be the last date on which Executive is employed by the Company.
1.60 "Termination of Employment" means any termination of Executive's
employment with the Company, whether such termination is initiated by the
Company or by Executive.
1.61 "25% Owner" -- see paragraph (a) of the definition of "Change of
Control."
1.62 "Voting Securities" for purposes of this Supplement and Amendment
means, notwithstanding Section 1.42 of the Employment Agreement (defining Voting
Securities), (a) with respect to a corporation, securities of such corporation
that are entitled to vote generally in the election of directors of such
corporation, and (b) with respect to a mutual life insurance company or mutual
life insurance holding company, policies of such company entitled to vote
generally in the ejection of directors of such company.
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ARTICLE II.
POST-CHANGE EMPLOYMENT PERIOD AND IMMINENT CONTROL CHANGE PERIOD
2.1 Position and Duties.
(a) Change of Control and Merger of Equals. During the Post-Change
Employment Period (including any portion thereof that qualifies as a Merger
of Equals), the provisions of Article II of the Employment Agreement shall
continue to apply, except that Executive's services shall be performed at
the location where Executive was employed immediately before the Effective
Date (or if the Effective Date was the Consummation Date of an Imminent
Control Change, before the beginning of such Imminent Control Change
Period) or any other location no more than 50 miles Corn such former
location.
(b) Imminent Control Change Period. During any Imminent Control Change
Period, the provisions of Article II of the Employment Agreement shall
continue to apply.
2.2 Compensation.
(a) Base Salary During an Imminent Control Change Period and the
Post-Change Employment Period (including any portion thereof that
qualifies as a Merger of Equals), the provisions of Section 4.1 of the
Employment Agreement (Salary) shall continue to apply. Any increase in
Base Salary shall not limit or reduce any other obligation of the
Company to Executive under this Supplement and Amendment.
(b) Annual Bonus.
(i) Change of Control and Merger of Equals. During the
Post-Change Employment Period (including any portion thereof that
qualifies as a Merger of Equals), the provisions of Section 4.2
of the Employment Agreement (Annual Bonus) shall continue to
apply, unless modified by Section 2.2(b)(ii) below, provided that
on and after the Effective Date, Executive's bonus opportunity
shall be no less than and target performance goals shall be no
higher than those in effect immediately prior to the Effective
Date for each Annual Performance Period which ends during the
Post-Change Employment Period. "Annual Performance Period" means
each period of time designated in accordance with any annual
bonus arrangement, including the Principal Incentive Pay Plan
("Prin Pay") and any successor thereto, (a "Bonus Plan") which is
based upon performance and approved by the Board or any committee
of the Board, or in the absence of any Bonus Plan or any such
designated period of time, each calendar year.
(ii) Imminent Control Change Period. During an Imminent
Control Change Period, the provisions of Section 4.2 of the
Employment Agreement (Annual Bonus) shall continue to apply;
provided, however, that if the Imminent Control Change Period
culminates in a Consummation Date, then, in determining
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whether the Executive's Termination of Employment is for "Good
Reason" shall be determined as though the provisions of Section
2.2(b)(i) applied commencing with the first day of the Imminent
Control Change Period.
(c) Other Compensation and Benefits.
(i) Imminent Control Change Period, Post-Change Employment
Period, Merger of Equals. During an Imminent Control Change
Period and the Post-Change Employment Period (including any
portion thereof that qualifies as a Merger of Equals) the
provisions of Sections 4.3 (Long-Term Incentive Plan Bonus and
Other Incentive Compensation), 4.4 (Savings and Retirement Plans)
and Article V (Other Benefits) of the Employment Agreement shall
continue to apply; provided that on and after the Effective Date,
Executive's compensation and benefits shall not be materially
less favorable, in the aggregate, than the most favorable
compensation and benefits provided by the Company to Executive
(including any such compensation and benefits provided under
Plans) at any time during the 90-day period immediately before
the Effective Date. In addition, during the Post-Change
Employment Period (including any portion thereof that qualifies
as a Merger of Equals):
(1) LTIP Awards. LTIP Awards shall be granted to
Executive at least as frequently as LTIP Awards were granted
during the three-year period immediately preceding the
Effective Date, with target payments no less than the
average (expressed as a percentage of Executive's Base
Salary in effect at the beginning of the applicable
Performance Period) of the Executive's LTIP Awards
outstanding immediately prior to the Effective Date, with
target performance goals substantially comparable to the
target performance goals under Executive's LTIP Awards
outstanding on the Effective Date; and
(2) Office and Support Staff. Executive shall be
entitled to an office or offices of a size and with
furnishings and other appointments, and to secretarial and
other assistance in accordance with the most favorable Plans
in effect prior to the Change of Control or Imminent Control
Change.
2.3 Stock Incentive Awards.
(a) Change of Control that is not a Merger of Equals. On the Effective
Date, except as provided in Section 2.3 (b) or (c) below, Executive shall
(i) become fully vested in, and may thereafter exercise in whole or in
part, in accordance with the terms thereof, all outstanding stock options,
stock appreciation rights, or similar incentive awards (collectively,
"Stock Options") and (ii) become fully vested in all shares of restricted
stock or restricted stock units and similar awards ("Restricted Shares").
Notwithstanding the foregoing, if the Effective Date is a Reorganization
Transaction and if so provided under the agreement pursuant to which the
Reorganization Transaction is effected, then all Executive Stock Options
shall (x) be extinguished for such consideration as is provided for vested
options under such agreement or (y) be converted into options to purchase
the stock of the Surviving Corporation, and such converted options shall be
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subject to the same option terms and restrictions as those applicable on
the Effective Date.
(b) Merger of Equals. Section 2.3(a) shall not apply in the case of a
Merger of Equals unless there occurs a Merger of Equals Cessation Date, at
which time Section 2.3(a) shall be applied by substituting the Merger of
Equals Cessation Date for the Effective Date wherever such term appears.
(c) Imminent Control Change Period. Section 2.3(a) and (b) shall not
apply during an Imminent Control Change Period.
2.4 Unfunded Deferred Compensation.
(a) Change of Control that is not a Merger of Equals. On the Effective
Date, except as provided in Section 2.4(b) or (c) below, Executive shall
become fully vested in all benefits previously accrued under any deferred
compensation Plan (including a SERP and any defined contribution excess
plan) that is not qualified under Section 401(a) of the Code. To the
extent not so provided under such non-qualified plan, within ten business
days after the Effective Date, the Company shall pay or cause to be paid to
Executive a lump-sum cash amount equal to:
(i) the sum of the Lump-Sum Values of all Maximum Annuities that
are payable pursuant to all such non-qualified plans that are defined
benefit Plans, plus
(ii) the sum of Executive's account balances under all such non-
qualified plans that are defined contribution Plans.
(b) Merger of Equals. Section 2.4(a) shall not apply in the case of a
Merger of Equals unless there occurs a Merger of Equals Cessation Date, at
which time Section 2.4(a) shall be applied by substituting the Merger of
Equals Cessation Date for the Effective Date wherever such term appears.
(c) Imminent Control Change Period. Section 2.4(a) and (b) shall not
apply during an Imminent Control Change Period.
Executive shall have the opportunity to waive the accelerated vesting and
lump-sum payment at any time prior to the earlier of (i) the 15th day after the
date of an Imminent Control Change or (ii) the 30th day prior to a Change of
Control which is not preceded by an Imminent Control Change; provided, however,
that in no event shall the waiver be allowed on the Effective Date or
thereafter.
2.5 Pro-rata Annual Bonus.
(a) Change of Control that is not a Merger of Equals. Except as
provided in Section 2.5(b) or (c) below, to the extent not so provided by
the Bonus Plan, the Company shall pay or cause to be paid to Executive
within ten business days after the Effective Date, a lump-sum cash payment
equal to the Pro-rata Annual Bonus, in
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satisfaction of the Company's obligations under the Bonus Plan for periods
prior to the Effective Date.
(b) Merger of Equals. Section 2.5(a) shall not apply in the case of a
Merger of Equals unless there occurs a Merger of Equals Cessation Date, at
which time Section 2.5(a) shall be applied by substituting the Merger of
Equals Cessation Date for the Effective Date.
(c) Imminent Control Change Period. Section 2.5(a) and (b) shall not
apply during an Imminent Control Change Period.
2.6 Pro-rata LTIP Bonus.
(a) Change of Control that is not a Merger of Equals. Except as
provided in Section 2.6(b) or (c) below, to the extent not so provided by
the LTIP or New LTIP, as applicable, the Company shall pay or cause to be
paid to Executive, within ten business days after the Effective Date a
lump-sum cash payment equal to the sum of (i) the Pro-rata LTIP Bonus and
(ii) all Accrued LTIP Bonuses, in satisfaction of the Company's obligations
under the LTIP and New LTIP for periods prior to the Effective Date.
(b) Merger of Equals. Section 2.6(a) shall not apply in the case of a
Merger of Equals unless there occurs a Merger of Equals Cessation Date, at
which time Section 2.6(a) shall be applied by substituting the Merger of
Equals Cessation Date for the Effective Date.
(c) Imminent Control Change Period. Section 2.6(a) and (b) shall not
apply during an Imminent Control Change Period.
ARTICLE III.
TERMINATION OF EMPLOYMENT
3.1 Disability. The provisions of this Section 3.1 and Section 4.8 shall
supersede the provisions of Section 1.17 of the Employment Agreement (definition
of "Disability") and Section 6.2 of the Employment Agreement (Termination for
Retirement, Death or Disability) during the Post-Change Employment Period or any
Imminent Control Change Period but only insofar as such Section 6.2 applies to
termination for Disability.
(a) During the Post-Change Employment Period or any Imminent Control
Change Period, the Company may terminate Executive's employment at any time
because of Executive's Disability by giving Executive or his legal
representative, as applicable, (i) written notice in accordance with
Section 9.7 of the Company's intention to terminate Executive's employment
pursuant to this Section and (ii) a certification of Executive's Disability
by a physician selected by the Company or its insurers, subject to the
consent of Executive or Executive's legal representative, which consent
shall not be unreasonably withheld or delayed. Executive's employment shall
terminate effective on the 30th day after Executive's receipt of such
notice (which such 30th day shall be deemed to be the date of the
Disability) unless, before such 30th day, Executive shall have resumed the
full-time performance of Executive's duties.
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(b) "Disability" means any medically determinable physical or mental
impairment that has lasted for a continuous period of not less than six
months and can be expected to be permanent or of indefinite duration, and
that renders Executive unable to perform the duties required under this
Supplement and Amendment.
3.2 Death. Executive's employment shall terminate automatically upon
Executive's death during the Post-Change Employment Period or Imminent Control
Change Period.
3.3 Termination for Cause.
(a) Post-Change Employment Period. During the Post-Change Employment
Period (including any portion thereof that qualifies as a Post-Merger of
Equals Period), the Company may terminate Executive's employment for Cause
solely in accordance with all of the substantive and procedural provisions
of this Section 3.3(a). Section 1.11 of the Employment Agreement
(definition of "Cause") and Section 6.1 of the Employment Agreement
(Termination for Cause or Other than for Good Reason, etc.) shall be
inapplicable during any Post-Change Employment Period, insofar as it
relates to the material contained in this Section 3.3 and Section 4.6,
except as otherwise provided herein.
(i) Definition of Cause. For purposes of this section 3.3(a),
"Cause" has the following meaning:
(1) Executive's conviction of, plea of guilty to, or plea of
nolo contendere to a felony or misdemeanor (other than a
traffic-related felony or misdemeanor) that involves fraud,
dishonesty or moral turpitude;
(2) Executive's willful and intentional material misconduct
in the performance or gross neglect of his duties that results in
substantial financial detriment to a Company or any Affiliate;
(3) Executive's habitual neglect of duties (other than
resulting from Executive's incapacity due to physical or mental
illness other than habitual abuse of or addiction to alcohol or
controlled substances) which results in substantial financial
detriment to any of the Companies or any Affiliate; or
(4) Executive's willful and intentional material breach of
the Employment Agreement or this Supplement and Amendment;
provided, however, that for purposes of clauses (2), (3) and (4),
Cause shall not include any one or more of the following:
(A) Executive's bad judgment
(B) Executive's negligence, other than Executive's habitual
neglect of duties or gross negligence;
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(C) any act or omission believed by Executive in good faith
to have been in or not opposed to the interest of the Company
(without intent of Executive to gain, directly or indirectly, a
profit to which Executive was not legally entitled); or
(D) failure to meet performance goals, objectives or
measures following good faith efforts to meet such goals,
objectives or measures; and
further provided that, if a breach of the Employment Agreement or this
Supplement and Amendment involved an act, or a failure to act, which
was done, or omitted to be done, by Executive in good faith and with a
reasonable belief that Executive's act, or failure to act, was in the
best interests of the Company or was required by applicable law or
administrative regulation, such breach shall not constitute Cause if,
within 30 days after Executive is given written notice of such breach
that specifically refers to this Section, Executive cures such breach
to the fullest extent that it is curable.
(ii) Procedural Requirements for Termination for Cause. The
Company shall strictly observe each of the following procedures:
(1) Board Meeting. A meeting of the Board shall be called
for the stated purpose of determining whether Executive's acts or
omissions constitute Cause and, if so, whether to terminate
Executive's employment for Cause.
(2) Notice of Consideration, Not less than 30 days prior to
the date of such meeting the Company shall provide Executive and
each member of the Board written notice (a "Notice of
Consideration") of (x) a detailed description of the acts or
omissions alleged to constitute Cause, (y) the date, time and
location of such meeting of the Board, and (z) Executive's rights
under clause (3) below.
(3) Opportunity to Present Response. Executive shall have
the opportunity with or without counsel, at Executive's election,
an opportunity to be heard and present arguments and evidence on
Executive's behalf at such a meeting and / or to present to the
Board a written response to the Notice of Consideration.
(4) Cause Determination. Executive's employment may be
terminated for Cause only if (x) the acts or omissions specified
in the Notice of Consideration did in fact occur and do
constitute Cause as defined in this Section, (y) the Board makes
a specific determination to such effect and to the effect that
Executive's employment should be terminated for Cause ("Cause
Determination") and (z) the Company thereafter provides
Executive with a Notice of Termination which specifies in
specific detail the basis of such Termination of Employment for
Cause and which Notice shall be consistent with the reasons set
forth
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in the Notice of Consideration. The Cause Determination shall
require the affirmative vote of at least 66-2/3% of the members
of the Board.
(b) Imminent Control Change Period. Except as provided below, this
Section 3.3 shall not apply during any Imminent Control Change Period.
Instead, the terms of Section 6.1 of the Employment Agreement shall govern
a termination of Executive for Cause during an Imminent Control Change
Period. However, in the case of an Imminent Control Change Period that
culminates in a Consummation Date, no termination of Executive's employment
during such Imminent Control Change Period shall be deemed to have been for
Cause unless all the substantive and procedural provisions of Section
3.3(b) shall have been satisfied:
(i) Definition of Cause. For purposes of this Section 3.3(b),
"Cause" shall have the meaning ascribed to it in Section 3.3(a).
(ii) Procedural Requirements for Termination for Cause. To
qualify as a termination for Cause, a termination by the Company
during the Imminent Control Change Period shall have strictly complied
with the procedures set forth in Section 3.3(a)(ii), substituting the
phrase Imminent Control Change Period for Post-Change Employment
Period wherever it appears.
(c) Standard of Review. If the Notice of Consideration is given to
Executive during an Imminent Control Change Period or a Post-Change
Employment Period, then in the event that the existence of Cause shall
become an issue in any action or proceeding between the Company and
Executive, the Company shall, notwithstanding the Cause determination
referenced in clause (4)(y) of Section 3.3(a)(ii), have the burden of
establishing that the actions or omissions specified in the Notice of
Consideration did in fact occur and do constitute Cause and that the
Company has satisfied the procedural requirements of Section 3.3(a)(ii).
3.4 Good Reason. During the Post-Change Employment Period (including any
portion thereof that is a Post-Merger of Equals Period), the Executive may
terminate his employment for Good Reason solely in accordance with all of the
substantive and procedural provisions of this Section 3.4. Section 1.21 of the
Employment Agreement (definition of "Good Reason") and Section 6.3 of the
Employment Agreement (Termination Without Cause or for Good Reason) shall be
inapplicable during any Post-Change Employment Period, insofar as it relates to
the material contained in this Section 3.4 and Article IV, except as otherwise
provided herein.
(a) Change of Control and a Merger of Equals. During the Post-Change
Employment Period (including any portion thereof that is a Merger of
Equals), Executive may terminate his employment for Good Reason in
accordance with the substantive and procedural provisions of this Section
3.4(a).
(i) Good Reason Definition. For purposes of this Section 3.4(a),
"Good Reason" means the occurrence of any one or more of the following
actions or omissions during the Post-Change Employment Period:
(1) any act or omission that would constitute Good Reason as
defined in Section 1.21 of the Employment Agreement;
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(2) failure to pay Executive's Base Salary in violation of
Section 2.2(a) or any failure to increase Executive's Base Salary
to the extent, if any, required by such Section;
(3) any failure to pay Executive's Annual Bonus or any
reduction in Executive's bonus opportunity, in either case in
violation of Section 2.2(b);
(4) requiring Executive to be based at any office or
location other than the location specified in Section 2.1(a);
(5) any other material breach of this Supplement and
Amendment by the Company;
(6) any Termination of Employment by the Company that
purports to be for Cause, but is not in full compliance with all
of the substantive and procedural requirements of this Supplement
and Amendment (any such purported termination shall be treated as
a Termination of Employment without Cause for all purposes of
this Supplement and Amendment); or
(7) the failure at any time of a successor to the Company
explicitly to assume and agree to be bound by this Supplement and
Amendment.
(ii) Determination of Good Reason. Any reasonable determination
by Executive that any of the events specified in subsection (i) above
has occurred and constitutes Good Reason shall be conclusive and
binding for all purposes, unless the Company establishes that
Executive did not have any reasonable basis for such determination.
(b) Imminent Control Change Period. Except as provided below, this
Section 3.4 shall not apply during any Imminent Control Change Period.
Instead, the terms of Section 6.3 of the Employment Agreement (Termination
Without Cause or for Good Reason) shall govern a termination by Executive
for Good Reason during an Imminent Control Change Period. However, in the
case of an Imminent Control Change Period that culminates in a Consummation
Date, no termination of Executive's employment during such Imminent Control
Change Period shall be deemed to have been for Good Reason unless all the
substantive and procedural provisions of this Section 3.4(b) shall have
been satisfied:
(i) Definition of Good Reason. For purposes of this Section
3.4(b), "Good Reason" shall have the same meaning as in Section
3,4(a)(i), except that the act or omission shall have occurred during
the Imminent Control Change Period.
(ii) Determination of Good Reason. Executive's determination that
an event constituting Good Reason as defined in Section
3.4(a)(i)(2)-(7) has occurred
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during an Imminent Control Change Period shall not be entitled to any
presumptive validity or other deference by a court.
(c) Notice by Executive. In the event of any Termination of
Employment by Executive for Good Reason during a Post-Change Employment
Period (or during an Imminent Control Change Period if Executive intends to
claim benefits hereunder in the event the Imminent Control Change Period
culminates in a Consummation Date), Executive shall as soon as practicable
thereafter notify the Company of the events constituting such Good Reason
by a Notice of Termination. A delay in the delivery of such Notice of
Termination or a failure by Executive to include in the Notice of
Termination any fact or circumstance which contributes to a showing of Good
Reason shall not waive any right of Executive under this Supplement and
Amendment or preclude Executive from asserting such fact or circumstance in
enforcing rights under this Supplement and Amendment; provided that no act
or omission by the Company shall qualify as Good Reason if Executive's
Termination of Employment occurs more than 12 months after Executive first
obtains actual knowledge of such act or omission.
ARTICLE IV.
COMPANY'S OBLIGATIONS UPON CERTAIN TERMINATIONS OF EMPLOYMENT
4.1 Termination During the Post-Change Employment Period. If, during the
Post-Change Employment Period (other than during a Post-Merger of Equals Period)
the Company terminates Executive's employment other than for Cause or
Disability, or Executive terminates employment for Good Reason, Section 6.3 of
the Employment Agreement (Termination Without Cause or For Good Reason) shall
not apply, and the Company's sole obligations to Executive under Articles II and
IV shall be as follows:
(a) Severance Payments. The Company shall pay or provide Executive, in
addition to all vested rights arising from Executive's employment as
specified in Article II, a lump-sum cash amount equal to the sum of the
following, no more than ten business days after the Termination Date:
(i) Accrued Obligations. All Accrued Obligations;
(ii) Prorated Annual Bonus for Year of Termination. Executive's
Pro-rata Annual Bonus reduced (but not below zero) by the amount of
any Annual Bonus paid to Executive with respect to the Company's
fiscal year in which the Termination Date occurs, whether paid under
Section 2.5 or otherwise;
(iii) Prorated LTIP Bonus. Executive's Pro-rata LTIP Bonus
reduced (but not below zero) by the amount of any LTIP Bonus paid to
Executive with respect to the LTIP Performance Periods not completed
as of the Termination Date, whether such amount was paid under Section
2.6 or otherwise;
(iv) Additional LTIP Amount. For each LTIP Performance Period
that is unexpired as of the Date of Termination, Executive shall be
treated as he would be treated under the LTIP in effect on the
effective date of the Employment Agreement if (1) he terminated
employment at age 57 other than for cause (as
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defined in the LTIP) and (2) he retired ("LTIP Benefit"); provided
that the discretion of the Committee shall not be exercised so as to
treat Executive less favorably than other members of Senior
Management; provided further that if such payment cannot be provided
under the terms of the LTIP or New LTIP, as applicable, then the
Company shall pay amounts equal to such LTIP Benefit, reduced by
amounts actually payable under the LTIP or New LTIP, as applicable, at
the same time as they otherwise would have been paid;
(v) Deferred Pensions and Pension Enhancements. The sum of
(1) all amounts previously deferred by, or accrued to the
benefit of, Executive under any defined contribution
non-qualified Plans (as described in Section 2.4), whether vested
or unvested, together with any accrued earnings thereon, to the
extent that such amounts and earnings have not been previously
paid by the Company (whether pursuant to Section 2.4 or
otherwise) or are provided under the terms of such non- qualified
Plan; plus
(2) an amount equal to the positive difference, if any,
between:
(A) the sum of the Lump-Sum Values of each Maximum Annuity
that would be payable to Executive under any defined benefit Plan
(whether or not qualified under Section 401(a)) if Executive had:
(1) become fully vested in all such previously-
unvested benefits,
(2) accrued a number of years of service (for
purposes of determining the amount of such
benefits, entitlement to early retirement
benefits, and all other purposes of such defined
benefit plans) that is three years greater than
the number of years of service actually accrued
by Executive as of the Termination Date, and
(3) received the lump-sum severance benefits
specified in Section 4.1(a) (excluding LTip
Bonuses and any amounts in respect of Stock
Options or Restricted Shares, if any, including
severance multiples thereof) as covered
compensation in equal monthly installments during
the period of three years following the
Termination Date, minus
(B) the sum of(x) the Lump-Sum Values of the Maximum
Annuity benefits actually payable to Executive under each defined
benefit Plan that is qualified under Section 401(a) of the Code
and (y) the
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aggregate amounts previously paid (whether pursuant to Section
2.4 or otherwise) to Executive under the defined benefit Plans
(whether or not qualified under Section 401(a) of the Code)
described in clause (A) of this Section 4.1 (a)(v)(2).
Notwithstanding the foregoing, the amount payable under this
Section 4.1(a)(v)(2) with respect to the SERP and Principal
Pension Plan for Employees in the aggregate, shall not be less
than the amount to which Executive would be entitled as of the
Date of Termination under Section 6.3(f) of the Employment
Agreement (providing for certain benefits if the Date of
Termination occurs prior to the Executive's 57th birthday).
(vi) Multiple of Salary, Bonus and LTIP. An amount equal to three
(3.0) times the sum of (x) Base Salary, (y) the Target Annual Bonus,
and (z) the Annualized Target LTIP Bonus, each determined as of the
Termination Date; provided, however, that any reduction in Executive's
Base Salary or Annual Bonus that would qualify as Good Reason shall be
disregarded for purposes of this clause (vi); and provided further,
that the Annualized Target LTIP Bonus in clause (z) of this Section
4.1(a)(vi) shall not be included in the sum referenced above if the
Termination Date occurs on or after the third anniversary of the date
the Company first makes a grant of stock options to a peer executive
of the Company pursuant to a written employee stock option plan
applicable to peer executives of the Company; and
(vii) Unvested Defined Contribution Plan. To the extent not paid
pursuant to Section 4.1(a)(v), an amount equal to the sum of the value
of the unvested portion of Executive's accounts or accrued benefits
under any unqualified or qualified defined contribution retirement
plan maintained by the Company as of the Termination Date and
forfeited by Executive by reason of the Termination of Employment.
(b) Continuation of Welfare and Fringe Benefits. Until the third
anniversary of the Termination Date or such later date as any Plan may
specify, the Company shall continue to provide to Executive and Executive's
family welfare benefits (including medical, prescription, dental,
disability, salary continuance, individual life, group life, accidental
death and travel accident insurance plans and programs) and fringe benefits
which are at least as favorable as the most favorable Plans of the Company
applicable to members of Senior Management who are actively employed on the
Termination Date and their families. The cost of such welfare benefits to
Executive shall not exceed the cost of such benefits to actively employed
members of Senior Management as applicable from time to time.
If the Date of Termination occurs prior to the Executive's 57th birthday,
Executive shall be entitled to the benefits equivalent to those payable
under the Principal Welfare Benefit Plan for Employees calculated under the
terms of such plan as if the Date of Termination occurred after Executive's
57th birthday, reduced by amounts actually payable under such plan, and if
either Executive or the Company reasonably believes it is likely that such
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benefits cannot be provided on a tax-favored basis, the Company shall pay
the cost of the insurance premium for such benefits.
Executive's rights under this Section shall be in addition to, and not in
lieu of, any post-termination continuation coverage or conversion rights
Executive may have pursuant to applicable law, including continuation
coverage required by Section 4980 of the Code.
(c) Outplacement. The Company shall pay on behalf of Executive
reasonable fees and costs charged by the outplacement firm selected by
Executive to provide outplacement services to Executive after the
Termination Date, within ten business days of its receipt of an invoice
therefor, subject to a maximum of $30,000.
(d) Indemnification, Directors' and Officers' Liability Insurance.
The provisions of Section 9.4 of the Employment Agreement (Indemnification
and Insurance) shall continue to apply after the Effective Date.
(e) Stock Incentive Awards. Immediately prior to the Executive's
Termination of Employment, Executive shall (i) become fully vested in, and
may thereafter exercise in whole or in part, in accordance with the terms
thereof, all outstanding Stock Options and (ii) become fully vested in all
Restricted Shares.
4.2 Termination During a Post-Merger of Equals Period. If, during a
Post-Merger of Equals Period, the Company terminates Executive's employment
other than for Cause or Disability, or if Executive terminates employment for
Good Reason, Section 6.3 of the Employment Agreement (Termination Without Cause
or for Good Reason) shall not apply, and the Company's sole obligations to
Executive under Articles II and IV shall be as follows:
(a) Severance Payments. The Company shall pay or provide Executive, in
addition to all vested rights arising from Executive's employment as
specified in Article II, a lump-sum cash amount, no more than thirty
business days after the Termination Date, equal to the sum of all amounts
described in Section 4.1(a).
(b) Continuation of Welfare and Fringe Benefits. Until the third
anniversary of the Termination Date or such later date as any Plan may
specify, the Company shall continue to provide to Executive and Executive's
family welfare benefits and fringe benefits with the same scope and cost as
described in Section 4.1 (b).
If the Date of Termination occurs prior to the Executive's 57th birthday,
Executive shall be entitled to the benefits equivalent to those payable
under the Principal Welfare Benefit Plan for Employees calculated under the
terms of such plan as if the Date of Termination occurred after Executive's
57th birthday, reduced by amounts actually payable under such plan, and if
either Executive or the Company reasonably believes it is likely that such
benefits cannot be provided on a tax-favored basis, the Company shall pay
the cost of the insurance premium for such benefits.
Executive's rights under this Section shall be in addition to, and not in
lieu of, any post-termination continuation coverage or conversion rights
Executive may have pursuant to applicable law, including continuation
coverage required by Section 4980 of the Code.
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(c) Outplacement. The Company shall pay on behalf of Executive
reasonable fees and costs charged by the outplacement firm selected by the
Company to provide outplacement services to Executive after the Termination
Date, within ten business days of its receipt of an invoice therefor,
subject to a maximum of $30,000.
(d) Indemnification, Directors' and Officers' Liability Insurance The
provisions of Section 9.4 of the Employment Agreement (Indemnification and
Insurance) shall continue to apply during a Post-Merger of Equals Period.
(e) Stock Incentive Awards. Immediately prior to Executive's
Termination of Employment, Executive shall (i) become fully vested in, and
may thereafter exercise in whole or in part, in accordance with the terms
thereof, all outstanding Stock Options and (ii) become fully vested in all
Restricted Shares.
4.3 Termination During an Imminent Control Change Period (with no Change of
Control). If, during an Imminent Control Change Period, the Company terminates
Executive's employment other than for Disability and other than for a reason
that would constitute Cause if there were a Change of Control, or if Executive
terminates employment for a reason that would constitute Good Reason if there
were a Change of Control, and in either case the Imminent Control Change Period
does not culminate in a Consummation Date, the applicable terms of the
Employment Agreement shall govern, except that:
(a) Continuation of Welfare Benefits. Until the earlier of(i) the
third anniversary of the Termination Date or (ii) the last day of the
Imminent Control Change Period (or such later date as any Plan may
specify), if it would provide greater benefits to Executive than under the
Employment Agreement, the Company shall continue to provide to Executive
and Executive's family welfare benefits with the same scope and cost as
described in Section 6.3(d) of the Employment Agreement (Termination
Without Cause or for Good Reason).
(b) Outplacement. The Company shall pay on behalf of Executive
reasonable fees and costs charged by the outplacement firm selected by
Executive to provide outplacement services to Executive after the
Termination Date, within ten business days of its receipt of an invoice
therefor, subject to a maximum of $30,000. All outplacement amounts payable
on account of a Termination Date which occurred during an Imminent Control
Change Period will be reduced (but not below zero) by outplacement amounts
paid to Executive on account of such Termination Date but before payment
pursuant to this Section 4.3(b).
(c) Stock Incentive Awards. In addition to vesting in accordance with
Section 6.3(g) of the Employment Agreement, Executive's Stock Options
(whether vested prior to or upon such Termination Date) will:
(i) not expire (unless such Stock Options would have so expired
had Executive remained an employee of the Company) during the Imminent
Control Change Period; and
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(ii) continue to be exercisable after the Termination Date to the
extent provided in the applicable grant agreement or Plan, and
thereafter, such Stock Options shall not be exercisable during the
Imminent Control Change Period.
Upon the date the Imminent Control Change lapses without a
Consummation Date Executive's vested Stock Options may be
exercised, in whole or in part, during the 30-day period
following the lapse of the Imminent Control Change, (but in no
case shall Stock Options remain exercisable after the date on
which such Stock Options would have expired if Executive had
remained an employee of the Company).
4.4 Termination During an Imminent Control Change Period (which Culminates
in a Change of Control). If, during an Imminent Control Change Period that
culminates in a Consummation Date, the Company terminates Executive's employment
other than for Cause or Disability, or if Executive terminates employment for
Good Reason, the Employment Agreement shall govern prior to the Consummation
Date, and upon the Consummation Date the Company's sole obligations to Executive
under Articles II and IV shall be as follows:
(a) Severance Payments. The Company shall pay or provide Executive, in
addition to all vested rights arising from Executive's employment as
specified in Article II, a lump-sum cash amount equal to the sum of all
amounts described in Section 4.1(a). Such amount shall be paid no more
than ten business days after an Effective Date that does not qualify as a
Merger of Equals and no more than 30 business days after an Effective Date
which does qualify as a Merger of Equals. Notwithstanding the foregoing,
all amounts paid pursuant to this Section 4.4(a) shall be reduced (but not
below zero) by the same or similar amounts paid to Executive on account of
the Termination of Employment (under this Supplement and Amendment, the
Employment Agreement, or otherwise), to the extent such amounts would
reasonably be considered duplicative, prior to the date payment is made
under this Section 4.4(a).
(b) Continuation of Welfare Benefits. Until the third anniversary of
the Termination Date or such later date as any Plan may specify, the
Company shall continue to provide to Executive and Executive's family
welfare benefits with the same scope and cost as described in Section
4.1(b). Notwithstanding the foregoing, all coverage under this Section
4.4(b) shall be reduced by all coverage provided by the Company to
Executive on account of the Termination of Employment (under this
Supplement and Amendment, the Employment Agreement, or otherwise), to the
extent such amounts would reasonably be considered duplicative, prior to
the date such benefits are provided under this Section 4.4(b).
If the Date of Termination occurs prior to the Executive's 57th birthday,
Executive shall be entitled to the benefits equivalent to those payable
under the Principal Welfare Benefit Plan for Employees calculated under the
terms of such plan as if the Date of Termination occurred after Executive's
57th birthday, reduced by amounts actually payable under such plan, and if
either Executive or the Company reasonably believes it is likely that such
benefits cannot be provided on a tax-favored basis, the Company shall pay
the cost of the insurance premium for such benefits.
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Executive's rights under this Section shall be in addition to, and not in
lieu of, any post-termination continuation coverage or conversion rights
Executive may have pursuant to applicable law, including continuation
coverage required by Section 4980 of the Code.
(c) Outplacement. The Company shall pay on behalf of Executive
reasonable fees and costs charged by the outplacement firm selected by
Executive to provide outplacement services to Executive after the
Termination Date, within ten business days of its receipt of an invoice
therefor, subject to a maximum of $30,000. Notwithstanding the foregoing,
all outplacement amounts payable pursuant to this Section 4.4(c) shall be
reduced (but not below zero) by outplacement amounts paid to Executive on
account of such Termination Date (under this Supplement and Amendment, the
Employment Agreement, or otherwise) prior to the date payment is made under
this Section 4.4(c).
(d) Stock Incentive Awards. In addition to vesting in accordance with
Section 6.3(g) of the Employment Agreement, Executive's vested Stock
Options (whether vested prior to or upon such Termination Date) shall be
treated as follows:
(i) not expire (unless such Stock Options would have so expired
had Executive remained an employee of the Company) during the Imminent
Control Change Period; and
(ii) continue to be exercisable after the Termination Date to the
extent provided in the applicable grant agreement or Plan, and
thereafter, such Stock Options shall not be exercisable during the
Imminent Control Change Period.
Upon the Consummation Date, such vested Stock Options may be
exercised by Executive in whole or in part, during the 30-day
period following the Consummation Date, (but in no case shall
Stock Options remain exercisable after the date on which such
Stock Options would have expired if Executive had remained an
employee of the Company). Notwithstanding any provision in this
Section, if the Consummation Date is a Reorganization
Transaction, and if so provided under the agreement pursuant to
which the Reorganization Transaction is effected, then all
Executive's Stock Options shall (a) be extinguished for such
consideration as is provided for vested options under such
agreement; or (b) be converted into options to purchase the stock
of the Surviving Corporation, and such converted options shall be
subject to the same option terms as those applicable prior to the
Consummation Date.
4.5 Waiver and Release. Notwithstanding anything herein to the contrary,
the Company shall have no obligation to Executive under Section 4.1, 4.2, 4.3,
or 4.4 or Article V unless and until Executive executes a release and waiver of
Mutual and the Companies, in substantially the same form as attached hereto as
Exhibit A. This Section 4.5 shall supersede Section 6.5 of the Employment
Agreement (Waiver and Release) insofar as it relates to material contained in
this Section 4.5, effective on the Effective Date.
4.6 Termination by the Company for Cause. If the Company terminates
Executive's employment for Cause during the Post-Change Employment Period or
Imminent Control Change Period, Section 6.1 of the Employment Agreement
(Termination for Cause or Other than for
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Good Reason, etc.) shall not apply, and the Company's sole obligation to
Executive under Articles II and IV shall be to pay Executive a lump-sum cash
amount equal to all Accrued Obligations determined as of the Termination Date.
The LTIP Bonus shall be governed according to the terms of the LTIP and New
LTIP, as applicable.
4.7 Termination by Executive Other Than for Good Reason.
(a) If Executive terminates employment during the Post-Change
Employment Period or Imminent Control Change Period other than for
Retirement, Good Reason, Disability or death, Section 6.2 of the Employment
Agreement (Termination for Retirement, Death or Disability) shall not
apply, and the Company's sole obligation to Executive under Articles II and
IV shall be to pay Executive a lump-sum cash amount equal to all Accrued
Obligations determined as of the Termination Date. The LTIP Bonus shall be
governed according to the terms of the LTIP and New LTIP, as applicable.
(b) If Executive terminates employment during the Post-Change
Employment Period or Imminent Control Change Period due to his Retirement,
Section 6.2 of the Employment Agreement (Termination for Retirement, Death
or Disability) shall govern.
4.8 Termination by the Company for Disability. If the Company terminates
Executive's employment by reason of Executive's Disability during the
Post-Change Employment Period or Imminent Control Change Period, Section 6.2 of
the Employment Agreement (Termination for Retirement, Death or Disability) shall
not apply, and Company's sole obligation to Executive under Articles II and IV
shall be as follows:
(a) to pay Executive (i) the amount determined in accordance with
Section 6.2 of the Employment Agreement (Termination for Retirement, Death
or Disability), and (ii) to the extent not paid under the Employment
Agreement, a lump-sum cash amount equal to all Accrued Obligations
determined as of the Termination Date, and
(b) to provide Executive disability and other benefits after the
Termination Date that are not less than the most favorable of such benefits
then available under Plans of the Company to disabled peer executives of
the Company.
If the Termination Date occurred during an Imminent Control Change Period which
had a Consummation Date which is not also a Merger of Equals or a Post-Change
Employment Period other than a Post-Merger of Equals Period, such disability and
other benefits shall also be no less favorable, in the aggregate, than the most
favorable of the disability and other benefits available to Executive under such
Plans in effect at any time during the 90-day period immediately preceding (1)
the Effective Date if such Termination Date occurred during a Post-Change
Employment Period or (2) the date of the Imminent Control Change if such
Termination Date occurred during an Imminent Control Change Period. The LTIP
Bonus shall be governed according to the terms of the LTIP and New LTIP, as
applicable.
4.9 If upon Death. If Executive's employment is terminated by reason of
Executive's death during the Post-Change Employment Period or Imminent Control
Change Period, Section 6.2 of the Employment Agreement (Termination for
Retirement, Death or Disability)
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shall not apply, and the Company's sole obligations to Executive under Articles
II and IV shall be as follows:
(a) to pay Executive's Beneficiary or estate (i) the amount determined
in accordance with Section 6.2 of the Employment Agreement (Termination for
Retirement, Death or Disability) and (ii) to the extent not paid under the
Employment Agreement, a lump-sum cash amount equal to all Accrued
Obligations; and
(b) to provide Executive's estate or Beneficiary survivor and other
benefits that are not less than the most favorable survivor and other
benefits then available under Plans of the Company to the estates or the
surviving families of peer executives of the Company.
If the Termination Date occurred during an Imminent Control Change which had a
Consummation Date which is not also a Merger of Equals or a Post-Change
Employment Period other than a Post-Merger of Equals Period, such survivor
benefits shall also be no less favorable, in the aggregate, than the most
favorable of the survivor benefits available to Executive under such Plans in
effect at any time during the go-day period immediately preceding (1) the
Effective Date if such Termination Date occurred during a Post-Change Employment
Period or (2) the date of the Imminent Control Change if such Termination Date
occurred during an Imminent Control Change Period. The LTIP Bonus shall be
governed according to the terms of the LTIP and New LTIP, as applicable.
4.10 Executive's Election to Waive. Notwithstanding the foregoing
provisions of this Article IV or any provision of the Employment Agreement, if
Executive's employment is terminated during a Post-Change Employment Period
other than for Disability, or other than by the Company for Cause, including
under circumstances entitling Executive to payments and provision of benefits
under Section 4.1 or 4.2., then Executive may waive ("Severance Waiver") all his
rights to such payments and benefits, and all rights to payments and provision
of benefits under Section 6.3 of the Employment Agreement; provided, however
that the Severance Waiver shall not include a waiver of payment or provision of
Executive's Accrued Obligations. Any such Severance Waiver shall be in writing,
and shall be delivered to the Company as provided in Section 9.7 within three
days of such termination of employment (and in any event prior to Executive's
receipt of any payments or benefits). The provisions of Section 7.1 of the
Employment Agreement (Non-Competition) shall not apply from and after the date
the Severance Waiver is duly delivered to the Company.
ARTICLE V.
CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY
5.1 Gross-Up Payment. During the Supplement Term, this Section 5.1 shall
supersede Section 8.1 of the Employment Agreement, effective on an Effective
Date. If at any time or from time to time, it shall be determined by the
Company's independent auditors, but only after an Effective Date, that any
payment or other benefit to Executive pursuant to Article II or Article IV of
this Supplement and Amendment or otherwise ("Potential Parachute Payment") is or
will become subject to the excise tax imposed by Section 4999 of the Code or any
similar tax payable under any United States federal, state, local, foreign or
other law ("Excise Taxes"), then the
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Company shall pay or cause to be paid a tax gross-up payment ("Gross-Up
Payment") with respect to all such Excise Taxes and other Taxes on the Gross-Up
Payment. The Gross-Up Payment shall be an amount equal to the product of
(a) The amount of the Excise Taxes (calculated at the effective
marginal rates of all federal, state, local, foreign or other law),
multiplied by
(b) A fraction (the "Gross-Up Multiple"), the numerator or which is
one (1.0), and the denominator of which is one (1.0) minus the lesser
of (i) the sum, expressed as a decimal fraction, of the effective marginal
rates of any Taxes and any Excise Taxes applicable to the Gross-Up Payment
or (ii) .80. If different rates of tax are applicable to various portions
of a Gross-Up Payment, the weighted average of such rates shall be used.
For purposes of this section, Executive shall be deemed to be subject to
the highest effective marginal rate of Taxes.
The Gross-Up Payment is intended to compensate Executive for all such Excise
Taxes and any other Taxes payable by Executive with respect to the Gross-Up
Payment. The Company shall pay or cause to be paid the Gross-Up Payment to
Executive within ten (10) days of the calculation of such amount, but in no
event after the Executive is required to make payment to the IRS of such Excise
Taxes.
5.2 Limitation on Gross-Up Payments. This Section 5.2 shall supersede
Section 8.2 of the Employment Agreement, effective on the Supplement Date.
(a) To the extent possible, any payments or other benefits to
Executive pursuant to Article II and Article IV of this Supplement and
Amendment shall be allocated as consideration for Executive's entry into
the covenants of Article VII of the Employment Agreement (Restrictive
Covenants).
(b) Notwithstanding any other provision of this Article V, if the
aggregate After-Tax Amount (as defined below) of the Potential Parachute
Payments and Gross-Up Payment that, but for this Section 5.2, would be
payable to Executive, does not exceed 110% of After-Tax Floor Amount (as
defined below), then no Gross-Up Payment shall be made to Executive and the
aggregate amount of Potential Parachute Payments payable to Executive shall
be reduced (but not below the Floor Amount) to the largest amount which
would both (i) not cause any Excise Tax to be payable by Executive and (ii)
not cause any Potential Parachute Payments to become nondeductible by the
Company by reason of Section 280G of the Code (or any successor provision).
For purposes of the preceding sentence, Executive shall be deemed to be
subject to the highest effective marginal rate of Taxes.
(c) For purposes of this Supplement and Amendment:
(i) "After-Tax Amount" means the portion of a specified amount
that would remain after payment of all Taxes paid or payable by
Executive in respect of such specified amount;
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(ii) "Floor Amount" means the greatest pre-tax amount of
Potential Parachute Payments that could be paid to Executive without
causing Executive to become liable for any Excise Taxes in connection
therewith; and
(iii) "After-Tax Floor Amount" means the After-Tax Amount of the
Floor Amount.
5.3 Additional Gross-up Amounts. If for any reason (whether pursuant to
subsequently enacted provisions of the Code, final regulations or published
rulings of the IRS, or a final judgment of a court of competent jurisdiction)
the Company's independent auditors later determine that the amount of Excise
Taxes payable by Executive is greater than the amount initially determined
pursuant to Section 5.1, then the Company shall, subject to Sections 5.2 and
5.4, pay Executive, within ten (10) days of such determination, or pay to the
IRS as required by applicable law, an amount (which shall also be deemed a
Gross-Up Payment) equal to the product of:
(a) the sum of (i) such additional Excise Taxes and (ii) any interest,
penalties, expenses or other costs incurred by Executive as a result of
having taken a position in accordance with a determination made pursuant to
Section 5.1 or 5.4,
multiplied by
(b) the Gross-Up Multiple.
5.4 Amount Increased or Contested.
(a) Executive shall notify the Company in writing (an "Executive's
Notice") of any claim by the IRS or other taxing authority (an "IRS Claim")
that, if successful, would require the payment by Executive of Excise Taxes
in respect of Potential Parachute Payments in an amount in excess of the
amount of such Excise Taxes determined in accordance with Section 5.1.
Executive's Notice shall include the nature and amount of such IRS
Claim, the date on which such IRS Claim is due to be paid (the "IRS Claim
Deadline"), and a copy of all notices and other documents or correspondence
received by Executive in respect of such IRS Claim. Executive shall give
the Executive's Notice as soon as practicable, but no later than the
earlier of (i) 10 days after Executive first obtains actual knowledge of
such IRS Claim or (ii) five days before the IRS Claim Deadline; provided,
however, that any failure to give such Executive's Notice shall affect the
Company's obligations under this Article only to the extent that the
Company is actually prejudiced by such failure. If at least one business
day before the IRS Claim Deadline the Company shall:
(i) deliver to Executive a written certificate from the
Company's independent auditors ("Company Certificate") to the effect
that, notwithstanding the IRS Claim, the amount of Excise Taxes,
interest or penalties payable by Executive is either zero or an amount
less than the amount specified in the IRS Claim,
(ii) pay to Executive, or to the IRS as required by applicable
law, an amount (which shall also be deemed a Gross-Up Payment) equal
to difference
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between the product of (x) amount of Excise Taxes, interest and
penalties specified in the Company Certificate, if any, multiplied by
(y) the Gross-Up Multiple, less the portion of such product, if any,
previously paid to Executive by the Company, and
(iii) direct Executive pursuant to Section 5.4(d) to contest the
balance of the IRS Claim,
then Executive shall pay only the amount, if any, of Excise Taxes, interest
and penalties specified in the Company Certificate. In no event shall
Executive pay an IRS Claim earlier than 30 days after having given an
Executive's Notice to the Company (or, if sooner, the IRS Claim Deadline).
(b) At any time after the payment by Executive of any amount of Excise
Taxes, other Taxes or related interest or penalties in respect of Potential
Parachute Payments (including any such amount equal to or less than the
amount of such Excise Taxes specified in any Company Certificate, or IRS
Claim), the Company may in its discretion require Executive to pursue a
claim for a refund (a "Refund Claim") of all or any portion of such Excise
Taxes, other Taxes, interest or penalties as may be specified by the
Company in a written notice to Executive.
(c) If the Company notifies Executive in writing that the Company
desires Executive to contest an IRS Claim or to pursue a Refund Claim,
Executive shall:
(i) give the Company all information that it reasonably requests
in writing from time to time relating to such IRS Claim or Refund
Claim, as applicable,
(ii) take such action in connection with such IRS Claim or
Refund Claim (as applicable) as the Company reasonably requests in
writing from time to time, including accepting legal representation
with respect thereto by an attorney selected by the Company, subject
to the approval of Executive (which approval shall not be unreasonably
withheld or delayed),
(iii) cooperate with the Company in good faith to contest such
IRS Claim or pursue such Refund Claim, as applicable,
(iv) permit the Company to participate in any proceedings
relating to such IRS Claim or Refund Claim, as applicable, and
(v) contest such IRS Claim or prosecute Refund Claim (as
applicable) to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts,
as the Company may from time to time determine in its discretion.
The Company shall control all proceedings in connection with such IRS Claim
or Refund Claim (as applicable) and in its discretion may cause Executive
to pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the Internal Revenue Service or other taxing
authority in respect of such IRS Claim or Refund Claim
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(as applicable); provided that (i) any extension of the statute of
limitations relating to payment of taxes for the taxable year of Executive
relating to the IRS Claim is limited solely to such IRS Claim, (ii) the
Company's control of the IRS Claim or Refund Claim (as applicable) shall be
limited to issues with respect to which a Gross-Up Payment would be
payable, and (iii) Executive shall be entitled to settle or contest, as the
case may be, any other issue raised by the Internal Revenue Service or
other taxing authority.
(d) The Company may at any time in its discretion direct Executive to
(i) contest the IRS Claim in any lawful manner or (ii) pay the amount
specified in an IRS Claim and pursue a Refund Claim; provided, however,
that if the Company directs Executive to pay an IRS Claim and pursue a
Refund Claim, the Company shall advance the amount of such payment to
Executive on an interest-free basis and shall indemnify Executive, on an
after-tax basis, for any Excise Tax or income tax, including related
interest or penalties, imposed with respect to such advance.
(e) The Company shall pay directly all legal, accounting and other
costs and expenses (including additional interest and penalties) incurred
by the Company or Executive in connection with any IRS Claim or Refund
Claim, as applicable, and shall indemnify Executive, on an after-tax basis,
for any Excise Tax or income tax, including related interest and penalties,
imposed as a result of such payment of costs and expenses.
5.5 Refunds. If, after the receipt by Executive or the IRS of any payment
or advance of Excise Taxes or other Taxes by the Company pursuant to this
Article, Executive receives any refund with respect to such Excise Taxes,
Executive shall (subject to the Company's complying with any applicable
requirements of Section 5.4) promptly pay the Company the amount of such refund
(together with any interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by Executive of an amount advanced by the
Company pursuant to Section 5.4, or receipt by the IRS of an amount paid by the
Company on behalf of the Executive pursuant to Section 5.4, a determination is
made that Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify Executive in writing of its intent to
contest such determination within 30 days after the Company receives written
notice of such determination, then such advance shall be forgiven and shall not
be required to be repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid. Any contest
of a denial of refund shall be controlled by Section 5.4(d).
ARTICLE VI.
EXPENSES, INTEREST AND DISPUTE RESOLUTION
6.1 Legal Fees and Other Expenses.
(a) If Executive incurs legal fees or other expenses (including
expert witness and accounting fees and arbitration costs and expenses under
Section 6.3) in an effort to secure, preserve, establish entitlement to, or
obtain benefits under this Supplement and Amendment, the Company shall,
regardless of the outcome of such effort, reimburse Executive on a current
basis (in accordance with Section 6.1(b)) for such fees and expenses.
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(b) Reimbursement of legal fees and expenses and gross-up payments
shall be made monthly within 10 days after Executive's written submission
of a request for reimbursement together with evidence that such fees and
expenses were incurred.
(c) If Executive does not prevail (after exhaustion of all available
judicial remedies) in respect of a claim by Executive or by the Company
hereunder, and the Company establishes before a court of competent
jurisdiction that Executive had no reasonable basis for Executive's claim
hereunder, or for Executive's response to the Company's claim hereunder, or
that Executive acted in bad faith, no further reimbursement for legal fees
and expenses shall be due to Executive in respect of such claim and
Executive shall refund any amounts previously reimbursed hereunder with
respect to such claim.
(d) In no event shall Executive be entitled to reimbursement under
this Supplement and Amendment and under the Employment Agreement for the
same fees, costs or expenses.
(e) The Company shall promptly reimburse Executive for all attorneys'
fees, costs and expenses incurred by Executive in connection with the
negotiation, execution and delivery of this Supplement and Amendment.
6.2 Interest. If the Company does not pay any amount due to Executive under
this Supplement and Amendment within ten business days after such amount first
became due and owing, interest shall accrue on such amount from the date it
became due and owing until the date of payment at an annual rate equal to 300
basis points above the base commercial lending rate published in The Wall Street
Journal in effect from time to time during the period of such nonpayment.
6.3 Binding Arbitration. Any dispute, controversy or claim arising out of
or in connection with or relating to this Supplement and Amendment or any breach
or alleged breach thereof, or any benefit or alleged benefit hereunder, shall be
submitted to and settled by binding arbitration in Des Moines, Iowa, in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. Any dispute, controversy or claim submitted for resolution shall be
submitted to three (3) arbitrators, each of whom is a nationally recognized
executive compensation specialist. The Company involved in the dispute,
controversy or claim, or Mutual if more than one Company is so involved, shall
select one arbitrator, the Executive shall select one arbitrator and the third
arbitrator shall be selected by the first two arbitrators. Any award rendered
shall be final and conclusive upon the parties and a judgment thereon may be
entered in the highest court of a forum, state or federal, having jurisdiction.
The expenses of the arbitration shall be borne according to Section 6.1. No
arbitration shall be commenced after the date when institution of legal or
equitable proceedings based upon such subject matter would be barred by the
applicable statute of limitations. Notwithstanding anything to the contrary
contained in this Section 6.3 or elsewhere in this Supplement and Amendment,
either party may bring an action in the District Court of Polk County, or the
United States District Court for the Southern District of Iowa, if jurisdiction
there lies, in order to maintain the status quo ante of the parties. The "status
quo ante" is defined as the last peaceable, uncontested status between the
parties. However, neither the party bringing the action nor the party defending
the action thereby waives its right to arbitration of any dispute, controversy
or claim arising out of or in connection or relating to this
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Supplement and Amendment. Notwithstanding anything to the contrary
contained in this Section 6.3 or elsewhere in this Supplement and
Amendment, either party may seek relief in the form of specific
performance, injunctive or other equitable relief in order to enforce the
decision of the arbitrator(s). The parties agree that in any arbitration
commenced pursuant to this Supplement and Amendment, the parties shall be
entitled to such discovery (including depositions, requests for the
production of documents and interrogatories) as would be available in a
federal district court pursuant to Rules 26 through 37 of the Federal Rules
of Civil Procedure. In the event that either party fails to comply with its
discovery obligations hereunder, the arbitrator(s) shall have full power
and authority to compel disclosure or impose sanctions to the full extent
of Rule 37 of the Federal Rules of Civil Procedure.
Article VII.
No Set-off or Mitigation; No Double Payment
7.1 No Set-off by Company. Executive's right to receive when due the
payments and other benefits provided for under this Supplement and Amendment is
absolute, unconditional and subject to no setoff, counterclaim or legal or
equitable defense. Time is of the essence in the performance by the Company of
its obligations under this Supplement and Amendment. Any claim which the Company
may have against Executive, whether for a breach of this Supplement and
Amendment or otherwise, shall be brought in a separate action or proceeding and
not as part of any action or proceeding brought by Executive to enforce any
rights against the Company under this Supplement and Amendment.
7.2 No Mitigation. Executive shall not have any duty to mitigate the
amounts payable by the Company under this Supplement and Amendment by seeking
new employment or self-employment following termination. Except as specifically
otherwise provided in this Supplement and Agreement, all amounts payable
pursuant to this Supplement and Agreement shall be paid without reduction
regardless of any amounts of salary, compensation or other amounts which may be
paid or payable to Executive as the result of Executive's employment by another
employer or self-employment.
7.3 No Double Payment. Notwithstanding any other provision of this
Supplement and Amendment, the Executive shall not be entitled to payment under
both this Supplement and Amendment and the Employment Agreement for the same
type of benefit or payment, to the extent such payment would reasonably be
considered duplicative. Amounts paid hereunder shall be reduced by amounts paid
under the Employment Agreement for the same type of benefit or payment, to the
extent such payment would reasonably be considered duplicative.
ARTICLE VIII.
NON-EXCLUSIVITY OF RIGHTS
8.1 Waiver of Certain Other Rights. To the extent that lump sum cash
severance payments are made to Executive pursuant to Article IV, Executive
hereby waives the right to receive severance payments or severance benefits
under any other Plan or agreement of the Company, including under the Employment
Agreement.
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8.2 Other Rights. Except as expressly provided in Section 8.1 or elsewhere
in this Supplement and Amendment, this Supplement and Amendment shall not
prevent or limit Executive's continuing or future participation in any benefit,
bonus, incentive or other Plans provided by the Company and for which Executive
may qualify, nor shall this Supplement and Amendment limit or otherwise affect
such rights as Executive may have under any other agreements with the Company.
The applicable provisions of the Employment Agreement (including the provisions
in Article VII (Restrictive Covenants)) shall continue to apply, except as
expressly provided in Sections 8.1 and 4.10 or elsewhere in this Supplement and
Amendment. Amounts which are vested benefits or which Executive is otherwise
entitled to receive under any Plan and any other payment or benefit required by
law at or after the Termination Date shall be payable in accordance with such
Plan or applicable law except as expressly modified by this Supplement and
Amendment.
8.3 No Right to Continued Employment. Nothing in this Supplement and
Amendment shall guarantee the right of Executive to continue in employment, and
the Companies retain the right to terminate the Executive's employment at any
time for any reason or for no reason.
ARTICLE IX.
MISCELLANEOUS
9.1 No Assignability. This Supplement and Amendment 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 Supplement and Amendment shall inure to the benefit of and be
enforceable by Executive's legal representatives.
9.2 Successors. This Supplement and Amendment shall inure to the benefit of
and be binding upon the Company and its successors and assigns. The Company will
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of the Company to assume expressly and agree to perform this Supplement
and Amendment 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. Any successor
to the business or assets of the Company which assumes or agrees to perform this
Supplement and Amendment by operation of law, contract, or otherwise shall be
jointly and severally liable with the Company under this Supplement and
Amendment as if such successor were the Company.
9.3 Payments to Beneficiary. If Executive dies before receiving amounts to
which Executive is entitled under this Supplement and Amendment, such amounts
shall be paid in a lump sum to Executive's Beneficiary (or estate).
9.4 Non-Alienation of Benefits. Benefits payable under this Supplement and
Amendment shall not be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, charge, garnishment, execution or
levy of any kind, either voluntary or involuntary, before actually being
received by Executive, and any such attempt to dispose of any right to benefits
payable under this Supplement and Amendment shall be void.
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9.5 Severability. If any one or more Articles, Sections or other portions
of this Supplement and Amendment are declared by any court or governmental
authority to be unlawful or invalid, such unlawfulness or invalidity shall not
serve to invalidate any Article, Section or other portion not so declared to be
unlawful or invalid. Any Article, Section or other portion so declared to be
unlawful or invalid shall be construed so as to effectuate the terms of such
Article, Section or other portion to the fullest extent possible while remaining
lawful and valid.
9.6 Amendments. This Supplement and Amendment shall not be amended or
modified except by written instrument executed by the Company and Executive.
9.7 Notices. All notices and other communications under this Supplement and
Amendment shall be in writing and delivered by hand, by nationally-recognized
delivery service that promises overnight delivery, or by first-class registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to Executive, to Executive at his most recent home
address on file with the Company.
With copy to:
▇▇▇▇▇ ▇▇▇▇▇, Esq.
Altheimer & Grey
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to any Company:
Principal Mutual Holding Company
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With copy to:
▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as either party shall have furnished to the other in
writing. Notice and communications shall be effective when actually received by
the addressee.
9.8 Continuing Validity of Employment Agreement. Except as amended herein
or as subsequently amended, the Employment Agreement shall remain in effect in
accordance with its terms.
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9.9 Counterparts. This Supplement and Amendment may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together constitute one and the same instrument.
9.10 Governing Law. This Supplement and Amendment shall be interpreted and
construed in accordance with the laws of the State of Iowa, without regard to
its choice of law principles.
9.11 Captions. The captions of this Supplement and Amendment are not a part
of the provisions hereof and shall have no force or effect.
9.12 Number and Gender. Wherever appropriate, the singular shall include
the plural, the plural shall include the singular, and the masculine shall
include the feminine.
9.13 Tax Withholding. The Company may withhold from any amounts payable
under this Supplement and Amendment any Taxes that are required to be withheld
pursuant to any applicable law or regulation and may report all such amounts
payable to such authority as is required by any applicable law or regulation.
9.14 Waiver. Executive's failure to insist upon strict compliance with any
provision of this Supplement and Amendment shall not be deemed a waiver of such
provision or any other provision of this Supplement and Amendment. A waiver of
any provision df this Supplement and Amendment shall not be deemed a waiver of
any other provision, and any waiver of any default in any such provision shall
not be deemed a waiver of any later default thereof or of any other provision.
9.15 Joint and Several Liability. The obligations of the Companies to
Executive under this Supplement and Amendment shall be joint and several.
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9.16 Entire Agreement. This Supplement and Amendment, together with the
Employment Agreement, contains the entire understanding of Mutual, Company and
Executive with respect to its subject matter.
IN WITNESS WHEREOF, Executive, Principal Mutual Holding Company, Principal
Financial Group, Principal Financial Services, Inc., and Principal Life
Insurance Company have executed this Supplement and Amendment as of the date
first above written.
EXECUTIVE
/s/ J. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------------------
J. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
PRINCIPAL MUTUAL HOLDING COMPANY
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------------------
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman Human Resource Committee of the
Board of Directors
PRINCIPAL FINANCIAL GROUP
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------------------
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman Human Resource Committee of the
Board of Directors
PRINCIPAL FINANCIAL SERVICES, INC.
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------------------
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman Human Resource Committee of the
Board of Directors
PRINCIPAL LIFE INSURANCE COMPANY
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------------------
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman Human Resource Committee of the
Board of Directors
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