EXHIBIT 10.3
EXCISE TAX RESTORATION AGREEMENT
(Adopted on September 27, 2006)
Golden West Financial Corporation (the "Company") and Wachovia Corporation
entered into an Agreement and Plan of Merger dated May 7, 2006 (the "Merger
Agreement") pursuant to which it is contemplated that the Company will be merged
into a subsidiary of Wachovia Corporation (the "Merger"). Pursuant to the Merger
Agreement and in consideration of the willingness of the individual employees of
the Company who are listed in Attachment A (each a "Disqualified Individual") to
continue to serve the Company through the "Effective Time" (as such term is
defined in the Merger Agreement), the Company agrees to pay to each of the
Disqualified Individuals the amounts set forth below in this Excise Tax
Restoration Agreement (the "Agreement") conditioned upon the consummation of the
Merger. For purposes of this Agreement, any reference to a Disqualified
Individual shall be deemed to include such person's surviving spouse, estate
and/or beneficiaries with respect to payments and adjustments provided by this
Agreement.
1. EXCISE TAX RESTORATION PAYMENT. If it is determined that any payment or
distribution of any type to or for the benefit of a Disqualified Individual made
by the Company, by any of its affiliates, by any person who acquires ownership
or effective control of the Company or ownership of a substantial portion of the
Company's assets (within the meaning of section 280G of the Internal Revenue
Code of 1986, as amended, and the regulations thereunder (the "Code")) or by any
affiliate of such person, (the "Total Payments"), would be subject to the excise
tax imposed by section 4999 of the Code or any interest or penalties with
respect to such excise tax (such excise tax, together with any such interest or
penalties, are collectively referred to as the "Excise Tax"), then such
Disqualified Individual shall be entitled to receive an additional payment (an
"Excise Tax Restoration Payment") in an amount that shall fund the payment by
the Disqualified Individual of any Excise Tax on the Total Payments, as well as
any taxes imposed on the Excise Tax Restoration Payment, any Excise Tax imposed
on the Excise Tax Restoration Payment and any interest or penalties imposed with
respect to taxes on the Excise Tax Restoration Payment or any Excise Tax.
2. DETERMINATION BY ACCOUNTANTS. All mathematical determinations that are
required to be made under this Agreement, including without limitation all
determinations of whether any of the Total Payments are "parachute payments"
(within the meaning of section 280G of the Code), whether an Excise Tax
Restoration Payment is required and the amount of any such Excise Tax
Restoration Payment, shall be made by an independent registered public
accounting firm selected by the Company (which may or may not be the Company's
independent outside auditors) (the "Accountants"). The Accountants shall provide
their determinations (the "Determinations"), together with detailed supporting
calculations regarding the amounts of Total Payments and any Excise Tax
Restoration Payment and any other relevant matters, both to the Company and to
the applicable Disqualified Individuals. Any Determination for each Disqualified
Individual shall be provided at such time as is requested by the Company.
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If the Accountants determine that no Excise Tax is payable by the Disqualified
Individual, the Accountants shall furnish the Disqualified Individual with a
written statement that the Accountants have concluded that no Excise Tax is
payable (including the reasons for their conclusion) and that the Disqualified
Individual has substantial authority (within the meaning of Section 6662(d) of
the Code and the regulations thereunder) not to report any Excise Tax on the
Disqualified Individual's federal income tax return.
If an Excise Tax Restoration Payment is determined payable, it shall be paid by
the Company to the Internal Revenue Service or other applicable tax authority on
behalf of the Disqualified Individual by the applicable due date for withholding
or payment of any Excise Tax. Notwithstanding the preceding sentence, (i) upon
termination of the Disqualified Individual's employment, the amount of any
Excise Tax Restoration Payment that is eligible for prepayment pursuant to
Regulations Section 1.280G-1, Q&A 11(c) ("Amounts Eligible for Prepayment")
shall be paid by the Company to the Internal Revenue Service or other applicable
tax authority on behalf of the Disqualified Individual as soon as practicable
following such termination, provided that such payment shall be made no later
than the 15th day of the third month following the end of the calendar year
during which such termination occurs, and (ii) in the event that a Disqualified
Individual receives payments or benefits as a result of the consummation of the
Merger that are determined by the Accountants to be parachute payments (within
the meaning of Section 280G of the Code), any Excise Tax Restoration Payment,
which for this purpose shall include Amounts Eligible for Prepayment, payable
solely in respect of the vesting of stock options and/or supplemental retirement
benefits and without regard to such Disqualified Individual's termination of
employment shall be paid to the Internal Revenue Service or other applicable tax
authority on behalf of the Disqualified Individual no later than the EARLIER to
occur of (A) the due date for the withholding or payment of any Excise Tax and
(B) December 31, 2006 or as soon as practicable thereafter, but in any case no
later than March 15, 2007.
Any Determination by the Accountants shall be binding upon the Company and the
Disqualified Individual absent manifest error. All fees and expenses of the
Accountants shall be borne solely by the Company.
3. UNDERPAYMENTS AND OVERPAYMENTS.
(a) As a result of uncertainty in the application of section 4999 of the
Code at the time of the initial Determination by the Accountants
hereunder, it is possible that Excise Tax Restoration Payments that
were not made by the Company should have been made ("Underpayments")
or that Excise Tax Restoration Payments will have been made by the
Company which should not have been made ("Overpayments"). In either
event, the Accountants shall determine the amount of the Underpayment
or Overpayment that has occurred. In the case of an Underpayment and
in the event that the Company exhausts its remedies pursuant to
Section 3(c) and the
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Disqualified Individual thereafter is required to make a payment of
any Excise Tax, the amount of the Underpayment shall promptly be paid
by the Company to or for the benefit of the Disqualified Individual,
provided that such payment shall be made no later than the 15th day of
the third month following the end of the calendar year in which such
determination is made. In the case of an Overpayment, the Disqualified
Individual shall, at the direction and expense of the Company, take
such steps as are reasonably necessary (including the filing of
returns and claims for refund), follow reasonable instructions from,
and procedures established by, the Company, and otherwise reasonably
cooperate with the Company to correct and refund to the Company such
Overpayment.
(b) If, after the payment by the Company of an Excise Tax Restoration
Payment or an amount on the Disqualified Individual's behalf pursuant
to Sections 1 or 3 of this Agreement, the Disqualified Individual
becomes entitled to receive any refund with respect to a claim such
that an Overpayment has been made, the Disqualified Individual shall
(subject to the Company's complying with the requirements of this
Section 3(b) if applicable) promptly pay to the Company the amount of
any refund (together with any interest paid or credited thereon after
taxes applicable thereto) upon receipt thereof. If, after payment by
the Company of an amount on the Disqualified Individual's behalf
pursuant to Sections 1 or 3 of this Agreement, a determination is made
that the Disqualified Individual shall not be entitled to any refund
with respect to such claim and the Company does not notify the
Disqualified Individual in writing of its intent to contest such
denial or refund prior to the expiration of 30 days after such
determination, then the amount of such payment shall offset, to the
extent thereof, the amount of any Excise Tax Restoration Payment
required to be paid.
(c) The Disqualified Individual shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would
require the payment by the Company of the Excise Tax Restoration
Payment. Such notification shall be given as soon as practicable but
no later than ten business days after the Disqualified Individual has
actual written notice of such claim and shall apprise the Company (c/o
Wachovia Executive Compensation Department) of the nature of such
claim and the date on which such claim is requested to be paid. The
Disqualified Individual shall not pay such claim prior to the
expiration of the 30-day period following the date on which it gives
such notice to the Company (or such shorter period ending on the date
that any payment of taxes with respect to such claim is due). If the
Company notifies the Disqualified Individual in writing prior to the
expiration of such period that it desires to contest such claim, the
Disqualified Individual shall:
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(i) give the Company any information reasonably requested
by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in
writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order to
effectively contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
PROVIDED, HOWEVER, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Disqualified Individual
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 3(c), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forego any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either pay the tax claimed to the appropriate taxing authority on
behalf of the Disqualified Individual and direct the Disqualified Individual to
▇▇▇ for a refund or contest the claim in any permissible manner, and the
Disqualified Individual agrees to prosecute such contest to a determination
before any administrative tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as the Company shall determine; provided, however,
that if the Company pays such claim and directs the Disqualified Individual to
▇▇▇ for a refund, the Company shall indemnify and hold the Disqualified
Individual harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such payment or with respect to any imputed income with respect to such payment;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Disqualified Individual with
respect to which such contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Company's control of the contest shall
be limited to issues with respect to which a Excise Tax Restoration Payment
would be payable hereunder and the Disqualified Individual shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
4. DELAYED PAYMENT DATE. Notwithstanding any provision to the contrary in
this Agreement, IF the Disqualified Individual is deemed at the time of his or
her termination of employment to be a "key employee" within the meaning of that
term under Code Section 416(i) (as used for purposes of defining a "specified
employee" under Section
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409A of the Code) AND delayed payment of an amount that is payable to or on
behalf of the Disqualified Individual in connection with termination of
employment is required in order to avoid a prohibited distribution under Section
409A(a)(2) of the Code, no such amount shall be provided to or paid on behalf of
the Disqualified Individual prior to the EARLIER of (i) the expiration of the
six (6)-month period measured from the date of the Disqualified Individual's
"separation from service" (as such term is defined in Treasury Regulations
issued under Code Section 409A) or (ii) the date of the Disqualified
Individual's death. Upon the expiration of the applicable Code Section
409A(a)(2) delay period referred to in the preceding sentence, all amounts
delayed pursuant to this Section 4 shall be promptly paid to or on behalf of the
Disqualified Individual in a lump sum, and any remaining payments due under this
Agreement shall be paid or provided in accordance with the terms hereof.
5. SUCCESSORS. This Agreement shall be binding upon any successor (whether
direct or indirect and whether by purchase, lease, merger, consolidation,
liquidation or otherwise) to all or substantially all of the Company's business
and/or assets pursuant to the Merger. The rights and obligations of each
Disqualified Individual hereunder are personal to each Disqualified Individual
and may not be transferred or assigned by any Disqualified Individual at any
time except by will or the laws of descent and distribution.
6. TERM. This Agreement will terminate and cease to be effective if the
Merger is not consummated. If the Merger is consummated, then this Agreement
will terminate as soon as the Company has fully satisfied its obligations to all
of the Disqualified Individuals, provided that in no event shall it terminate
prior to the expiration of the applicable statute of limitations with respect to
each Disqualified Individual.
7. INTEGRATION. This Agreement supersedes any other agreements,
representations or understandings (whether oral or written and whether express
or implied) with respect to the subject matter hereof.
8. GOVERNING LAW. The validity, interpretation, construction and performance
of this Agreement shall be governed by the laws of the State of California.
9. ENFORCEABILITY. This Agreement shall constitute a binding and
enforceable agreement between Golden West Financial Corporation and its
successors and each of the Disqualified Individuals as if they were a party
hereto. This Agreement shall inure to the benefit of and be enforceable by the
Disqualified Individuals and their respective heirs, successors and assigns.
This Agreement is adopted effective as of this 27th day of September, 2006.
GOLDEN WEST FINANCIAL CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Executive Officer
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