EXHIBIT 10.1
MANAGEMENT CONTINUITY AGREEMENT
THIS AGREEMENT, dated as of ________________, is made by and
between ▇▇▇▇▇▇ Industries, Inc., an Ohio corporation (the "Company"), and
_________________ (the "Executive").
WHEREAS, the Company is a significant subsidiary of ▇▇▇▇▇▇
Industries, Ltd., a Bermuda corporation ("▇▇▇▇▇▇") and Executive is employed by
the Company in a key management position; and
WHEREAS, the Executive is an officer of ▇▇▇▇▇▇; and
WHEREAS, ▇▇▇▇▇▇ considers it essential to the best interests
of its shareholders to ▇▇▇▇▇▇ the continued employment of key management
personnel of the Company; and
WHEREAS, the Board recognizes that, as is the case with many
publicly held corporations, the possibility of a Change in Control exists and
that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of ▇▇▇▇▇▇ and its shareholders; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the Company's management, including the Executive, to
their assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a Change in Control; and
WHEREAS, ▇▇▇▇▇▇ will derive substantial direct and indirect
benefit from this Agreement as the Company's parent and desires to guaranty the
company's obligations hereunder in order to induce the Executive to enter into
this Agreement;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, ▇▇▇▇▇▇, the Company and the Executive hereby
agree as follows:
1. Defined Terms. The definitions of capitalized terms used in
this Agreement are provided in Section 17 hereof.
2. Term of Agreement. The Term of this Agreement shall
commence on the date hereof and shall continue in effect through December 31,
2003; provided, however, that commencing on January 1, 2004 and each January 1
thereafter, the Term shall automatically be extended for one additional year
unless, not later than September 30 of the preceding year, the Company or the
Executive shall have given notice not to extend the Term; and further provided,
however, that if a Change in Control shall have occurred during the Term, the
Term shall expire no earlier than twenty-four (24) months beyond the month in
which such Change in Control occurred. Notwithstanding any other provision
hereof, (a) the Term shall expire upon any termination of the Executive's
employment prior to a Potential Change in Control and (b) the Term shall expire
(and for purposes of the application of the provisions of the Agreement, shall
be deemed to have expired) on the date (or scheduled date, as the case may be)
of the Executive's Retirement.
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3. Company's Covenants Summarized. In order to induce the
Executive to remain in the employ of the Company and in consideration of the
Executive's covenants set forth in Section 4 hereof, the Company agrees, under
the conditions described herein, to pay the Executive the Severance Payments and
the other payments and benefits described herein. Except as provided in Section
9.1 hereof, no Severance Payments shall be payable under this Agreement unless
there has been (or, under the terms of the second sentence of Section 6.1
hereof, there shall be deemed to have been) a termination of the Executive's
employment with the Company following a Change in Control and during the Term.
This Agreement shall not be construed as creating an express or implied contract
of employment and, except as otherwise agreed in writing between the Executive
and the Company, the Executive shall not have any right to be retained in the
employ of the Company.
4. The Executive's Covenants. The Executive agrees that,
subject to the terms and conditions of this Agreement, in the event of a
Potential Change in Control during the Term, the Executive intends to remain in
the employ of the Company until there occurs a Change in Control.
5. Compensation Other Than Severance Payments.
5.1 Following a Change in Control and during the Term, during
any period that the Executive fails to perform the Executive's full-time duties
with the Company as a result of incapacity due to physical or mental illness,
the Company shall pay the Executive's full salary to the Executive at the rate
in effect at the commencement of any such period, together with all compensation
and benefits payable to the Executive under the terms of any compensation or
benefit plan, program or arrangement maintained by the Company during such
period, until the Executive's employment is terminated by the Company for
Disability.
5.2 If the Executive's employment shall be terminated for any
reason following a Change in Control and during the Term, the Company shall pay
the Executive's full salary to the Executive through the Date of Termination at
the rate in effect immediately prior to the Date of Termination (without giving
effect to any reduction in base salary, which reduction constitutes an event of
Good Reason) or, if higher, the rate in effect immediately prior to the Change
in Control, together with all compensation and benefits payable to the Executive
through the Date of Termination under the terms of the Company's compensation
and benefit plans, programs or arrangements as in effect immediately prior to
the Date of Termination (without giving effect to any reduction in compensation
or benefits, which reduction constitutes an event of Good Reason) or, if more
favorable to the Executive, as in effect immediately prior to the Change in
Control.
5.3 If the Executive's employment shall be terminated for any
reason following a Change in Control and during the Term, the Company shall pay
to the Executive the Executive's normal post-termination compensation and
benefits as such payments become due. Such post-termination compensation and
benefits shall be determined under, and paid in accordance with, the Company's
retirement, insurance and other compensation or benefit plans, programs and
arrangements as in effect immediately prior to the Date of Termination (without
giving effect to any adverse change in such plans, programs and arrangements,
which adverse change constitutes an event of Good Reason) or, if more favorable
to the Executive, as in effect immediately prior to the Change in Control.
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6. Severance Payments.
6.1 Subject to Section 6.2 hereof, if (i) the Executive's
employment is terminated following a Change in Control and during the Term,
other than (A) by the Company for Cause, (B) by reason of death, Disability or
Retirement, or (C) by the Executive without Good Reason, then the Company shall
pay the Executive the amounts, and provide the Executive the benefits, described
in this Section 6.1 ("Severance Payments") and Section 6.2, in addition to any
payments and benefits to which the Executive is entitled under Section 5 hereof.
For purposes of this Agreement, the Executive's employment shall be deemed to
have been terminated following a Change in Control by the Company without Cause
or by the Executive with Good Reason, if (i) the Executive's employment is
terminated by the Company without Cause after the occurrence of a Potential
Change in Control and prior to a Change in Control (whether or not a Change in
Control ever occurs) and such termination was at the request or direction of a
Person who has entered into an agreement with the Company the consummation of
which would constitute a Change in Control or (ii) the Executive terminates his
employment for Good Reason after the occurrence of a Potential Change in Control
and prior to a Change in Control (whether or not a Change in Control ever
occurs) and the circumstance or event which constitutes Good Reason occurs at
the request or direction of such Person.
(A) In lieu of any further salary payments to the Executive
for periods subsequent to the Date of Termination and in lieu of any severance
benefit otherwise payable to the Executive, the Company shall pay to the
Executive a lump sum severance payment, in cash, equal to _____________ [three
in the case of the Chief Executive Officer, Chief Operating Officer and Senior
and Executive Vice Presidents and two in the case of other key executives] (or,
if less, the number of full and partial years between the Date of Termination
and the Executive's scheduled date of Retirement) times the sum of (i) the
Executive's base salary as in effect immediately prior to the Date of
Termination (without giving effect to any reduction in base salary, which
reduction constitutes an event of Good Reason) or, if higher, in effect
immediately prior to the Change in Control, and (ii) the higher of (A) the
average annual bonus earned by the Executive pursuant to the annual bonus or
incentive plan maintained by the Company in respect of the three fiscal years
ending immediately prior to the fiscal year in which occurs the Date of
Termination (without giving effect to any reduction in bonus caused by an
adverse change in the Executive's bonus plan participation, which adverse
constitutes an event of Good Reason) or, if higher, immediately prior to the
fiscal year in which occurs the Change in Control or (B) the Executive's target
annual bonus for the fiscal year in which occurs the Date of Termination
(without giving effect to any reduction in bonus caused by an adverse change in
the Executive's bonus plan participation, which adverse change constitutes an
event of Good Reason) or, if higher, the fiscal year in which occurs the Change
in Control.
(B) For the ______________ [thirty-six in the case of the
Chief Executive Officer, Chief Operating Officer and Senior and Executive Vice
Presidents and twenty-four in the case of other key executives] month period
(or, if less, the number of months between the Date of Termination and the
Executive's scheduled date of Retirement) immediately following the Date of
Termination, the Company shall arrange to provide the Executive and his
dependents with life, disability, accident and health insurance benefits
substantially similar to those provided to the Executive and his dependents
immediately prior to the Date of Termination (without giving effect to any
reduction in benefits, which reduction constitutes an event of Good Reason) or,
if more favorable to the Executive, those provided to the Executive and his
dependents immediately prior to the Change in Control, at no greater cost to the
Executive than the cost to the Executive immediately prior to such date;
provided, however, that, unless the Executive consents to a different method
(after taking into account the effect of such method on
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the calculation of "parachute payments" pursuant to Section 6.2 hereof), such
health insurance benefits shall be provided through a third-party insurer.
Benefits otherwise receivable by the Executive pursuant to this Section 6.1 (B)
shall be reduced to the extent benefits of the same type are received by or made
available to the Executive during the ______________ [thirty-six in the case of
the Chief Executive Officer, Chief Operating Officer and Senior and Executive
Vice Presidents and twenty-four in the case of other key executives] (or, if
less, the number of months between the Date of Termination and the Executive's
scheduled date of Retirement) month period following the Executive's termination
of employment (and any such benefits received by or made available to the
Executive shall be reported to the Company by the Executive); provided, however,
that the Company shall reimburse the Executive for the excess, if any, of the
cost of such benefits to the Executive over such cost immediately prior to the
Date of Termination or, if more favorable to the Executive, the date on which
the Change in Control occurs. If the Severance Payments shall be decreased
pursuant to Section 6.2 hereof, and the Section 6.1(B) benefits which remain
payable after the application of Section 6.2 hereof are thereafter reduced
pursuant to the immediately preceding sentence, the Company shall, no later than
five (5) business days following such reduction, pay to the Executive the least
of (a) the amount of the decrease made in the Severance Payments pursuant to
Section 6.2 hereof, (b) the amount of the subsequent reduction in these Section
6.1(B) benefits, or (c) the maximum amount which can be paid to the Executive
without being, or causing any other payment to be, nondeductible by reason of
section 280G of the Code.
In the event the Executive receives health insurance benefits
during the _______________ [thirty-six in the case of the Chief Executive
Officer, Chief Operating Officer and Senior and Executive Vice Presidents and
twenty-four in the case of other key executives]-month period following the Date
of Termination pursuant to the foregoing provisions of this Section 6.1(B), the
Executive and his or her dependents shall continue to be eligible for health
insurance benefits for up to an additional sixty (60) months, provided however,
that no benefits will be provided (i) if health insurance benefits are available
to the Executive through another employer during such period, or (ii) after the
insured individual reaches age 65. Such health insurance benefits shall be
substantially similar to, and have no greater cost to the Executive than those
in effect for the [NUMBER]-month period following the Date of Termination.
(C) Notwithstanding any provision of any annual incentive plan
to the contrary, the Company shall pay to the Executive a lump sum amount, in
cash, equal to the product of (i) the target bonus to which the Executive would
have been entitled under the Company's annual incentive plan in respect of the
year in which the Date of Termination occurs and (ii) a fraction, the numerator
of which shall be the number of months (including fractions thereof) from the
first day of the fiscal year during which the Date of Termination occurs to the
Date of Termination, and the denominator of which shall be twelve (12);
provided, however, that if the Date of Termination occurs during the same year
as the Change in Control, the payment under this Section 6.1(C) shall be offset
by any payments received under the Company's annual incentive plan in connection
with such Change in Control.
(D) In addition to the retirement benefits to which the
Executive is entitled under each Pension Plan or any successor plan thereto, the
Company shall pay the Executive a lump sum amount, in cash, equal to the sum of
(i) the pay related credits the Executive would have accrued under the Salaried
Employees' Retirement Plan of ▇▇▇▇▇▇ Industries, Inc. and the ▇▇▇▇▇▇ Industries,
Inc., Supplemental Excess Defined Benefit Plan; and (ii) the Company-Matching
Contributions the Executive would have accrued under the ▇▇▇▇▇▇ Industries,
Inc., Savings and Stock Ownership Plan and the ▇▇▇▇▇▇ Industries, Inc.,
Supplemental Excess Defined Contribution Plan (the plans referred to in
subsections (i) and (ii) hereof, "The Plans"),
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in each case, during the ______________ [thirty-six in the case of the Chief
Executive Officer, Chief Operating Officer and Senior and Executive Vice
Presidents and twenty-four in the case of other key executives] month (or, if
less, the number of months between the Date of Termination and the Executive's
scheduled date of Retirement) period immediately following the Executive's Date
of Termination based upon: (1) the terms and provisions of The Plans as in
effect immediately prior to the Change in Control; (2) the lump sum payment set
forth in Section 6.1(A) hereof, which lump sum shall be deemed to have been
earned ratably over such period; and (3) the assumption that the Executive was
making the maximum allowable pre-tax contributions under The Plans during such
period.
(E) The Company shall provide the Executive with outplacement
services suitable to the Executive's position for a period of one year or, if
earlier, until the first acceptance by the Executive of an offer of employment.
(F) ▇▇▇▇▇▇ shall continue to maintain officers'
indemnification insurance for the Executive for a period of five years following
the Date of Termination, the terms and conditions of which shall be no less
favorable than the terms and conditions of the officers' indemnification
insurance maintained by ▇▇▇▇▇▇ for the Executive immediately prior to the date
on which the Change in Control occurs.
6.2 (A) Whether or not the Executive becomes entitled to the
Severance Payments, if any payment or benefit received or to be received by the
Executive in connection with a Change in Control or the termination of the
Executive's employment (whether pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with the Company, any Person whose actions
result in a Change in Control or any Person affiliated with the Company or such
Person) (all such payments and benefits, including the Severance Payments, being
hereinafter called "Total Payments") will be subject (in whole or part) to the
Excise Tax, then, subject to the provisions of subsection (B) of this Section
6.2, the Company shall pay to the Executive an additional amount (the "Gross-Up
Payment") such that the net amount retained by the Executive, after deduction of
any Excise Tax on the Total Payments and any federal, state and local income and
employment taxes and Excise Tax upon the Gross-Up Payment, shall be equal to the
Total Payments. For purposes of determining the amount of the Gross-Up Payment,
the Executive shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the highest
marginal rate of taxation in the state and locality of the Executive's residence
on the Date of Termination (or if there is no Date of Termination, then the date
on which the Gross-Up Payment is calculated for purposes of this Section 6.2),
net of the maximum reduction in federal income tax which could be obtained from
deduction of such state and local taxes.
(B) In the event that the amount of the Total Payments does
not exceed 110% of the largest amount that would result in no portion of the
Total Payments being subject to the Excise Tax (the "Safe Harbor"), then
subsection (A) of this Section 6.2 shall not apply and the noncash Severance
Payments shall first be reduced (if necessary, to zero), and the cash Severance
Benefits shall thereafter be reduced (if necessary, to zero) so that the amount
of the Total Payments is equal to the Safe Harbor; provided, however, that the
Executive may elect to have the cash Severance Payments reduced (or eliminated)
prior to any reduction of the noncash Severance Payments.
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(C) For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amount of such Excise Tax,
(i) all of the Total Payments shall be treated as "parachute payments" within
the meaning of section 280G(b)(2) of the Code, unless in the opinion of tax
counsel ("Tax Counsel") reasonably acceptable to the Executive and selected by
the accounting firm which was, immediately prior to the Change in Control,
▇▇▇▇▇▇'▇ independent auditor (the "Auditor"), such other payments or benefits
(in whole or in part) do not constitute parachute payments, including by reason
of section 280G(b)(4)(A) of the Code, (ii) all "excess parachute payments"
within the meaning of section 280G(b)(l) of the Code shall be treated as subject
to the Excise Tax unless, in the opinion of Tax Counsel, such excess parachute
payments (in whole or in part) represent reasonable compensation for services
actually rendered, within the meaning of section 280G(b)(4)(B) of the Code, in
excess of the Base Amount allocable to such reasonable compensation, or are
otherwise not subject to the Excise Tax, and (iii) the value of any noncash
benefits or any deferred payment or benefit shall be determined by the Auditor
in accordance with the principles of sections 280G(d)(3) and (4) of the Code.
Prior to the payment date set forth in Section 6.3 hereof, the Company shall
provide the Executive with its calculation of the amounts referred to in this
Section 6.2(C) and such supporting materials as are reasonably necessary for the
Executive to evaluate the Company's calculations. If the Executive disputes the
Company's calculations (in whole or in part), the reasonable opinion of Tax
Counsel with respect to the matter in dispute shall prevail.
(D) In the event that (i) amounts are paid to the Executive
pursuant to subsection (A) of this Section 6.2, (ii) the Excise Tax is finally
determined to be less than the amount taken into account hereunder in
calculating the Gross-Up Payment, and (iii) after giving effect to such
redetermination, the Severance Payments are to be reduced pursuant to subsection
(B) of this Section 6.2, the Executive shall repay to the Company, within five
(5) business days following the time that the amount of such reduction in Excise
Tax is finally determined, the portion of the Gross-Up Payment attributable to
such reduction (plus that portion of the Gross-Up Payment attributable to the
Excise Tax and federal, state and local income and employment taxes imposed on
the Gross-Up Payment being repaid by the Executive), to the extent that such
repayment results in (i) no portion of the Total Payments being subject to the
Excise Tax and (ii) a dollar-for-dollar reduction in the Executive's taxable
income and wages for purposes of federal, state and local income and employment
taxes) plus interest on the amount of such repayment at the rate provided in
section 1274(b)(2)(B) of the Code. In the event that (x) the Excise Tax is
determined to exceed the amount taken into account hereunder at the time of the
termination of the Executive's employment (including by reason of any payment
the existence or amount of which cannot be determined at the time of the
Gross-Up Payment) and (y) after giving effect to such redetermination, the
Severance Payments should not have been reduced pursuant to subsection (B) of
this Section 6.2, the Company shall make an additional Gross-Up Payment in
respect of such excess and in respect of any portion of the Excise Tax with
respect to which the Company had not previously made a Gross-Up Payment (plus
any interest, penalties or additions payable by the Executive with respect to
such excess and such portion) within five (5) business days following the time
that the amount of such excess is finally determined.
6.3 The payments provided in subsections (A), (C) and (D) of
Section 6.1 hereof and in Section 6.2 hereof shall be made not later than the
fifth day following the Date of Termination; provided, however, that if the
amounts of such payments, and the limitations on such payments set forth in
Section 6.2 hereof, cannot be finally determined on or before such day, the
Company shall pay to the Executive on such day an estimate, as determined in
good
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faith by the Executive or, in the case of payments under Section 6.2 hereof, in
accordance with Section 6.2 hereof, of the minimum amount of such payments to
which the Executive is clearly entitled and shall pay the remainder of such
payments (together with interest on the unpaid remainder [or on all such
payments to the extent the Company fails to make such payments when due] at the
rate provided in section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined but in no event later than the thirtieth (30th) day
after the Date of Termination. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to the Executive, payable on the
fifth (5th) business day after demand by the Company (together with interest at
the rate provided in section 1274(b)(2)(B) of the Code). At the time that
payments are made under this Agreement, the Company shall provide the Executive
with a written statement setting forth the manner in which such payments were
calculated and the basis for such calculations including, without limitation,
any opinions or other advice the Company has received from Tax Counsel, the
Auditor or other advisors or consultants (and any such opinions or advice which
are in writing shall be attached to the statement).
6.4 The Company also shall pay to the Executive all legal fees
and expenses incurred by the Executive in disputing in good faith any issue
hereunder relating to the termination of the Executive's employment, in seeking
in good faith to obtain or enforce any benefit or right provided by this
Agreement or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any payment or
benefit provided hereunder. Such payments shall be made within five (5) business
days after delivery of the Executive's written request(s) for payment
accompanied with such evidence of fees and expenses incurred as the Company
reasonably may require.
7. Termination Procedures and Compensation During Dispute.
7.1 Notice of Termination. After a Change in Control and
during the Term, any purported termination of the Executive's employment (other
than by reason of death) shall be communicated by written Notice of Termination
from either ▇▇▇▇▇▇ or the Company to the Executive (or in the case of a
termination for Good Reason, from the Executive to the Company) in accordance
with Section 10 hereof. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated. Further, a Notice of
Termination for Cause is required to include a copy of a resolution duly adopted
by the affirmative vote of not less than three-quarters (3/4) of the entire
membership of the Board at a meeting of the Board which was called and held for
the purpose of considering such termination (after reasonable notice to the
Executive and an opportunity for the Executive, together with the Executive's
counsel, to be heard before the Board) finding that, in the good faith opinion
of the Board, the Executive was guilty of conduct set forth in clause (i) or
(ii) of the definition of Cause herein, and specifying the particulars thereof
in detail.
7.2 Date of Termination. "Date of Termination," with respect
to any purported termination of the Executive's employment after a Change in
Control and during the Term, shall mean (i) if the Executive's employment is
terminated for Disability, thirty (30) days after Notice of Termination is given
(provided that the Executive shall not have returned to the full-time
performance of the Executive's duties during such thirty (30) day period), and
(ii) if the
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Executive's employment is terminated for any other reason, the date specified in
the Notice of Termination (which, in the case of a termination by ▇▇▇▇▇▇ or the
Company, shall not be less than thirty (30) days (except in the case of a
termination for Cause) and, in the case of a termination by the Executive, shall
not be less than fifteen (15) days nor more than sixty (60) days, respectively,
from the date such Notice of Termination is given).
7.3 Dispute Concerning Termination. If within fifteen (15)
days after any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be extended
until the earlier of (i) the date on which the Term ends or (ii) the date on
which the dispute is finally resolved, either by mutual written agreement of the
parties or by a final judgment, order or decree of an arbitrator or a court of
competent jurisdiction (which is not appealable or with respect to which the
time for appeal therefrom has expired and no appeal has been perfected);
provided, that the Date of Termination shall be extended by a notice of dispute
given by the Executive only if such notice is given in good faith and the
Executive pursues the resolution of such dispute with reasonable diligence.
7.4 Compensation During Dispute. If a purported termination
occurs following a Change in Control and during the Term and the Date of
Termination is extended in accordance with Section 7.3 hereof, the Company shall
continue to pay the Executive the full compensation in effect when the notice
giving rise to the dispute was given (including, but not limited to, salary) and
continue the Executive as a participant in all compensation, benefit and
insurance plans in which the Executive was participating when the notice giving
rise to the dispute was given, until the Date of Termination, as determined in
accordance with Section 7.3 hereof. Amounts paid under this Section 7.4 are in
addition to all other amounts due under this Agreement (other than those due
under Section 5.2 hereof) and shall not be offset against or reduce any other
amounts due under this Agreement.
8. No Mitigation. The Company agrees that, if the Executive's
employment with the Company terminates during the Term, the Executive is not
required to seek other employment or to attempt in any way to reduce any amounts
payable to the Executive by the Company pursuant to Section 6 hereof or Section
7.4 hereof. Further, the amount of any payment or benefit provided for in this
Agreement (other than Section 6.1(B) hereof) shall not be reduced by any
compensation earned by the Executive as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by the Executive to the Company, or otherwise.
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by law upon any
successor to ▇▇▇▇▇▇ or the Company, ▇▇▇▇▇▇ or the Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of ▇▇▇▇▇▇
or the Company as the case may be, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that ▇▇▇▇▇▇ or the Company
would be required to perform it if no such succession had taken place. Failure
of ▇▇▇▇▇▇ or the Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company
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in the same amount and on the same terms as the Executive would be entitled to
hereunder if the Executive were to terminate the Executive's employment for Good
Reason after a Change in Control, except that, for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination.
9.2 This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive shall die while any amount would still be payable to the Executive
hereunder (other than amounts which, by their terms, terminate upon the death of
the Executive) if the Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the executors, personal representatives or administrators of the
Executive's estate.
10. Notices. For the purpose of this Agreement, notices and
all other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed, if
to the Executive, to the address inserted below the Executive's signature on the
final page hereof and, if to ▇▇▇▇▇▇ or the Company, to the addresses set forth
below, or to such other address as either party may have furnished to the other
in writing in accordance herewith, except that notice of change of address shall
be effective only upon actual receipt:
To the Company:
▇▇▇▇▇▇ Industries, Inc.
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Senior Vice President, Human Resources
To ▇▇▇▇▇▇:
▇▇▇▇▇▇ Industries, Ltd.
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: General Counsel
11. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and authorized officers of
▇▇▇▇▇▇ and the Company. No waiver by any party hereto at any time of any breach
by another party hereto of, or of any lack of compliance with, any condition or
provision of this Agreement to be performed by any party shall be deemed a
waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. This Agreement supersedes any other agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof which have been made by either party; provided, however,
that this Agreement shall supersede any agreement setting forth the terms and
conditions of the Executive's employment with the Company only in the event that
the Executive's employment with the Company is terminated on or following a
Change in Control by the Company other than for Cause or by the Executive for
Good Reason. The validity,
9
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Ohio. All references to sections of the Exchange Act
or the Code shall be deemed also to refer to any successor provisions to such
sections. Any payments provided for hereunder shall be reduced to the extent
necessary so that the Company may satisfy any applicable withholding required
under federal, state or local law and any additional withholding to which the
Executive has agreed. The obligations of ▇▇▇▇▇▇, the Company and the Executive
under this Agreement which by their nature may require either partial or total
performance after the expiration of the Term (including, without limitation,
those under Sections 6 and 7 hereof) shall survive such expiration.
12. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. Settlement of Disputes; Arbitration.
14.1 All claims by the Executive for benefits under this
Agreement shall be directed to and determined by the Board and shall be in
writing. Any denial by the Board of a claim for benefits under this Agreement
shall be delivered to the Executive in writing and shall set forth the specific
reasons for the denial and the specific provisions of this Agreement relied
upon. The Board shall afford a reasonable opportunity to the Executive for a
review of the decision denying a claim and shall further allow the Executive to
appeal to the Board a decision of the Board within sixty (60) days after
notification by the Board that the Executive's claim has been denied.
14.2 Any further dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Houston, Texas in accordance with the rules of the American Arbitration
Association then in effect; provided, however, that the evidentiary standards
set forth in this Agreement shall apply. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. Notwithstanding any
provision of this Agreement to the contrary, the Executive shall be entitled to
seek specific performance of the Executive's right to be paid until the Date of
Termination during the pendency of any dispute or controversy arising under or
in connection with this Agreement.
15. Termination of Prior Management Continuity Agreement. This
Agreement supercedes any Management Continuity Agreement previously executed by
the Company and the Executive and any such previous agreement is terminated
effective as of the date hereof.
16. Guarantee by ▇▇▇▇▇▇. ▇▇▇▇▇▇, as direct obligor and not
merely as a surety, absolutely and unconditionally guarantees the punctual
payment, performance and observance of each and every covenant, agreement, duty
or any other obligation of the Company under or arising out of this Agreement
(collectively, the "Guaranteed Obligations"). This is an irrevocable and
continuing guarantee of payment and performance and not merely a guarantee of
collection and shall remain in full force and effect until the Guaranteed
Obligations have been
10
satisfied, paid and performed in full. ▇▇▇▇▇▇ waives any right to require that
an Executive proceed against any other person or entity or asset liable on or
securing the Guaranteed Obligations or pursue or exhaust any other remedy
whatsoever. To the fullest extent permitted by applicable law, ▇▇▇▇▇▇ further
waives any legal or equitable defense to the enforceability of its obligations
hereunder, and agrees that its obligations shall be absolute and unconditional
and shall not be affected or discharged by any circumstance, act or event
whatsoever (including without limitation the insolvency, voluntary or
involuntary bankruptcy, liquidation, dissolution, winding up, merger,
consolidation or reorganization of the Company), except payment and performance
in full of the Guaranteed Obligations.
17. Definitions. For purposes of this Agreement, the following
terms shall have the meanings indicated below:
(A) "Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under Section 12 of the Exchange Act.
(B) "Auditor" shall have the meaning set forth in Section 6.2
hereof.
(C) "Base Amount" shall have the meaning set forth in section
280G(b)(3) of the Code.
(D) "Beneficial Owner" shall have the meaning set forth in
Rule 13d3 under the Exchange Act.
(E) "Board" shall mean the Board of Directors of ▇▇▇▇▇▇
Industries, Ltd.
(F) "Cause" for termination by the Company of the Executive's
employment shall mean (i) the willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company (other than any
such failure resulting from the Executive's incapacity due to physical or mental
illness or any such actual or anticipated failure after the issuance of a Notice
of Termination for Good Reason by the Executive pursuant to Section 7.1 hereof)
after a written demand for substantial performance is delivered to the Executive
by the Board, which demand specifically identifies the manner in which the Board
believes that the Executive has not substantially performed the Executive's
duties, or (ii) the willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company or its subsidiaries,
monetarily or otherwise. For purposes of clauses (i) and (ii) of this
definition, (x) no act, or failure to act, on the Executive's part shall be
deemed "willful" unless done, or omitted to be done, by the Executive not in
good faith and without reasonable belief that the Executive's act, or failure to
act, was in the best interest of the Company and (y) in the event of a dispute
concerning the application of this provision, no claim by the Company that Cause
exists shall be given effect unless the Company establishes to the Board by
clear and convincing evidence that Cause exists.
(G) A "Change in Control" shall be deemed to have occurred if
the event set forth in any one of the following paragraphs shall have occurred:
(I) any Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of ▇▇▇▇▇▇ (not including
in the securities beneficially
11
owned by such Person any securities acquired directly from
▇▇▇▇▇▇ or its Affiliates) representing 25% or more of the
combined voting power of ▇▇▇▇▇▇'▇ then outstanding securities
(other than ▇▇▇▇▇▇'▇ Class B Common Shares), excluding any
Person who becomes such a Beneficial Owner in connection with
a transaction described in clause (i) of paragraph (III)
below; or
(II) the following individuals cease for any reason
to constitute a majority of the number of directors then
serving on the Board: individuals who, on the date hereof,
constitute the Board and any new director (other than a
director whose initial assumption of office is in connection
with an actual or threatened election contest, including but
not limited to a consent solicitation, relating to the
election of directors of ▇▇▇▇▇▇) whose appointment or election
by the Board or nomination for election by ▇▇▇▇▇▇'▇
shareholders was approved or recommended by a vote of at least
two-thirds (2/3) of the directors then still in office who
either were directors on the date hereof or whose appointment,
election or nomination for election was previously so approved
or recommended; or
(III) there is consummated a merger or consolidation
of ▇▇▇▇▇▇ or any direct or indirect subsidiary of ▇▇▇▇▇▇ with
any other corporation, other than (i) a merger or
consolidation which results in the directors of ▇▇▇▇▇▇
immediately prior to such merger or consolidation continuing
to constitute at least a majority of the board of directors of
▇▇▇▇▇▇, the surviving entity or any parent thereof, or (ii) a
merger or consolidation effected to implement a
recapitalization of ▇▇▇▇▇▇ (or similar transaction) in which
no Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of ▇▇▇▇▇▇ (not including in the
securities Beneficially Owned by such Person any securities
acquired directly from the ▇▇▇▇▇▇ or its Affiliates)
representing 25% or more of the combined voting power of
▇▇▇▇▇▇'▇ then outstanding securities (other than ▇▇▇▇▇▇'▇
Class B Common shares); or
(IV) the shareholders of ▇▇▇▇▇▇ approve a plan of
complete liquidation or dissolution of ▇▇▇▇▇▇ or there is
consummated an agreement for the sale or disposition by ▇▇▇▇▇▇
of all or substantially all of ▇▇▇▇▇▇'▇ assets, other than a
sale or disposition by ▇▇▇▇▇▇ of all or substantially all of
▇▇▇▇▇▇'▇ assets to an entity, at least 60% of the combined
voting power of the voting securities of which are owned by
shareholders of ▇▇▇▇▇▇ in substantially the same proportions
as their ownership of ▇▇▇▇▇▇ immediately prior to such sale.
(H) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(I) "Company" shall mean ▇▇▇▇▇▇ Industries, Inc. and, shall
include any successor to its business and/or assets which assumes and agrees to
perform this Agreement by operation of law or otherwise.
(J) "▇▇▇▇▇▇" shall mean ▇▇▇▇▇▇ Industries, Ltd., a Bermuda
corporation and, except in determining under Section 17(G) hereof whether any
change in Control has occurred,
12
shall include any successor to its business and/or assets which assumes and
agrees to perform this Agreement by operation of law or otherwise.
(K) "Date of Termination" shall have the meaning set forth in
Section 7.2 hereof.
(L) "Disability" shall be deemed the reason for the
termination by the Company of the Executive's employment, if, as a result of the
Executive's incapacity due to physical or mental illness, the Executive shall
have been absent from the full-time performance of the Executive's duties with
the Company for a period of six (6) consecutive months, the Company shall have
given the Executive a Notice of Termination for Disability, and, within thirty
(30) days after such Notice of Termination is given, the Executive shall not
have returned to the full-time performance of the Executive's duties.
(M) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(N) "Excise Tax" shall mean any excise tax imposed under
section 4999 of the Code.
(O) "Executive" shall mean the individual named in the first
paragraph of this Agreement.
(P) "Good Reason" for termination by the Executive of the
Executive's employment shall mean the occurrence (without the Executive's
express written consent) after any Change in Control, or prior to a Change in
Control under the circumstances described in clauses (ii) and (iii) of the
second sentence of Section 6.1 hereof (treating all references in paragraphs (I)
through (VII) below to a "Change in Control" as references to a "Potential
Change in Control"), of any one of the following acts by ▇▇▇▇▇▇ or the Company,
or failures by the Company to act, unless, in the case of any act or failure to
act described in paragraph (I), (V), (VI) or (VII) below, such act or failure to
act is corrected prior to the Date of Termination specified in the Notice of
Termination given in respect thereof:
(I) the assignment to the Executive of any duties
inconsistent with the Executive's status as a senior executive
officer of the Company or a substantial adverse alteration in
the nature or status of the Executive's responsibilities or
reporting relationship from those in effect immediately prior
to the Change in Control;
(II) a reduction by the Company in the Executive's
annual base salary as in effect on the date hereof or as the
same may be increased from time to time;
(III) the relocation of the Executive's principal
place of employment to a location which increases the
Executive's one-way commuting distance by more than 50 miles
or the Company's requiring the Executive to be based anywhere
other than the Executive's principal place of employment
immediately prior to the Change in Control (or permitted
relocation thereof) except for required travel on the
Company's business to an extent substantially
13
consistent with the Executive's business travel obligations
immediately prior to the Change in Control;
(IV) the failure by the Company to pay to the
Executive any portion of the Executive's current compensation,
or to pay to the Executive any portion of an installment of
deferred compensation under any deferred compensation program
of the Company, within seven (7) days of the date such
compensation is due, unless paid by ▇▇▇▇▇▇ pursuant to Section
16 of this Agreement;
(V) the failure by the Company to continue in effect
any compensation plan in which the Executive participates
immediately prior to the Change in Control which is material
to the Executive's total compensation, including but not
limited to the Stock Incentive Plan, the Amended and Restated
Management Annual Incentive Plan and the Management Incentive
Compensation Deferral Plan or any substitute plans adopted
prior to the Change in Control, unless an equitable
arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan, or the failure
by the Company to continue the Executive's participation
therein (or in such substitute or alternative plan) on a basis
not materially less favorable, both in terms of the amount or
timing of payment of benefits provided and the level of the
Executive's participation relative to other participants, as
existed immediately prior to the Change in Control;
(VI) the failure by the Company to continue to
provide the Executive with benefits substantially similar to
those enjoyed by the Executive under any of the Company's
pension, savings, life insurance, medical, health and
accident, or disability plans in which the Executive was
participating immediately prior to the Change in Control, the
taking of any other action by the Company which would directly
or indirectly materially reduce any of such benefits or
deprive the Executive of any material fringe benefit enjoyed
by the Executive at the time of the Change in Control, or the
failure by the Company to provide the Executive with the
number of paid vacation days to which the Executive is
entitled on the basis of years of service with the Company in
accordance with the Company's normal vacation policy in effect
at the time of the Change in Control;
(VII) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 7.1 hereof;
for purposes of this Agreement, no such purported termination
shall be effective. The Executive's right to terminate the
Executive's employment for Good Reason shall not be affected
by the Executive's incapacity due to physical or mental
illness. The Executive's continued employment shall not
constitute consent to, or a waiver of rights with respect to,
any act or failure to act constituting Good Reason hereunder;
or
(VIII) any failure of ▇▇▇▇▇▇ or the Company to obtain
assumption of this Agreements, as set forth in Section 9.1
hereof.
14
For purposes of any determination regarding the existence of
Good Reason, any claim by the Executive that Good Reason
exists shall be presumed to be correct unless the Company
establishes to the Board by clear and convincing evidence that
Good Reason does not exist.
(Q) "Gross-Up Payment" shall have the meaning set forth in
Section 6.2 hereof.
(R) "Notice of Termination" shall have the meaning set forth
in Section 7.1 hereof.
(S) "Pension Plan" shall mean any tax-qualified, supplemental
or excess benefit pension plan maintained by the Company and any other plan or
agreement entered into between the Executive and the Company which is designed
to provide the Executive with supplemental retirement benefits.
(T) "Person" shall have the meaning given in Section 3(a)(9)
of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof,
except that such term shall not include (i) ▇▇▇▇▇▇ or any of its subsidiaries,
(ii) a trustee or other fiduciary holding securities under an employee benefit
plan of the Company or any of its Affiliates, (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the shareholders of the ▇▇▇▇▇▇ in
substantially the same proportions as their ownership of ▇▇▇▇▇▇ stock or (v) any
individual, entity or group whose ownership of ▇▇▇▇▇▇ securities is reported on
Schedule 13G pursuant to Rule 13d-1 promulgated under the Exchange Act (but only
for so long as such ownership is so reported).
(U) "Potential Change in Control" shall be deemed to have
occurred if the event set forth in any one of the following paragraphs shall
have occurred:
(I) ▇▇▇▇▇▇ enters into an agreement, the consummation
of which would result in the occurrence of a Change in
Control;
(II) ▇▇▇▇▇▇ or any Person publicly announces an
intention to take or to consider taking actions which, if
consummated, would constitute a Change in Control;
(III) any Person becomes the Beneficial Owner,
directly or indirectly, of securities of ▇▇▇▇▇▇ representing
15% or more of either the then outstanding Class A Common
Shares of ▇▇▇▇▇▇ or the combined voting power of ▇▇▇▇▇▇'▇ then
outstanding securities other than ▇▇▇▇▇▇'▇ Class B Common
Shares (not including in the securities beneficially owned by
such Person any securities acquired directly from ▇▇▇▇▇▇ or
its Affiliates); or
(I) the Board adopts a resolution to the effect that,
for purposes of this Agreement, a Potential Change in Control
has occurred.
(V) "Retirement" shall mean the termination of the Executive's
employment in accordance with the Company's mandatory retirement policy as in
effect immediately prior to the Change in Control.
15
(W) "Severance Payments" shall have the meaning set forth in
Section 6.1 hereof.
(X) "Tax Counsel" shall have the meaning set forth in Section
6.2 hereof.
(Y) "Term" shall mean the period of time described in Section
2 hereof (including any extension, continuation or termination described
therein).
(Z) "Total Payments" shall mean those payments so described in
Section 6.2 hereof.
▇▇▇▇▇▇ INDUSTRIES, LTD ▇▇▇▇▇▇ INDUSTRIES, INC.
By: By:
-------------------------------- --------------------------------
Name: H. ▇▇▇▇ ▇▇▇▇▇, Jr. Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman, President and Title: Senior Vice President,
Chief Executive Officer Human Resources
-----------------------------------
EXECUTIVE
Address:
16