1 Exhibit 10.6
EXECUTIVE CHANGE-IN-CONTROL AGREEMENT
AGREEMENT between Payless Cashways, Inc. ( the "Corporation"), and
Xxxxxx X. Xxxxxxxx (the "Executive").
WITNESSETH:
WHEREAS, the Compensation Committee, having full authority to act for
the Board of Directors of the Corporation in this matter, has approved the
Corporation entering into Change-in-Control Agreements with key executives of
the Corporation;
WHEREAS, the Executive is a key executive of the Corporation and has
been selected by the Board of Directors of the Corporation as a key executive to
receive a Change-in-Control Agreement;
WHEREAS, in connection with any proposal from a third person concerning
a possible business combination with, or acquisition of equity securities of,
the Corporation, the Board believes it imperative that the Corporation and the
Board be able to rely upon the Executive to continue in his or her position, and
that they be able to receive and rely upon his or her advice, if they request
it, as to the best interests of the Corporation and its shareholders, without
concern that he or she might be distracted by the personal uncertainties and
risks created by such a proposal; and
WHEREAS, in connection with any such proposals, in addition to the
Executive's regular duties, he or she may be called upon to assist in the
assessment of such proposals, advise management and the Board as to whether such
proposals would be in the best interests of the Corporation and its
shareholders, and to take such other actions as the Board might determine to be
appropriate;
NOW, THEREFORE, to assure the Corporation that it will have the
continued dedication of the Executive and the availability of his or her advice
and counsel notwithstanding the possibility, threat, or occurrence of a bid to
take over control of the Corporation, and to induce the Executive to remain in
the employ of the Corporation, and for other good and valuable consideration,
the Corporation and the Executive agree as follows:
1. Term of Agreement. This Agreement will commence on June 26, 1997 and
shall continue in effect for a one-year term, which term shall be automatically
extended for successive one-year terms commencing on June 26, 1998 and on each
June 26 thereafter unless either party shall have given written notice to the
other at least forty-five (45) days prior to such date that the term shall not
be so extended; provided, however, if a "Change in Control of the Corporation"
(as defined in Section 2 hereof) shall have occurred prior to the end of the
term of this Agreement as it may be so extended, the term of this Agreement
shall continue in effect for a period of twenty-four (24) months beyond the
month in which such Change in Control of the Corporation occurred.
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2. Change in Control of the Corporation. No benefits shall be payable
hereunder unless there shall have been a Change in Control of the Corporation,
as set forth below. For purposes of this Agreement, a "Change in Control of the
Corporation" shall mean and deemed to have occurred if:
(i) any person, as defined in Sections 3(a)(9) and 13(d) of
the Securities Exchange Act of 1934 (the "Exchange Act"), becomes the
"beneficial owner" (as defined in Rule 13d-3 promulgated pursuant to the
Exchange Act), directly or indirectly, of securities of the Corporation having
25% or more of the voting power in the election of directors of the Corporation,
excluding, however, any person or an "affiliate" (as defined in the Exchange
Act) of such person who is the beneficial owner of any shares of any class
(preferred or common) of the Corporation's capital stock on the date hereof; or
(ii) the occurrence within any twelve-month period while this
Agreement is in effect of a change in the Board of Directors of the Corporation
with the result that the Incumbent Members (as defined below) do not constitute
a majority of the Corporation's Board of Directors. The term "Incumbent Members"
shall mean the members of the Board on the date immediately preceding the
commencement of such twelve-month period, provided that any person becoming a
director during such twelve-month period whose election or nomination for
election was approved by a majority of the directors who, on the date of such
election or nomination for election, comprised the Incumbent Members shall be
considered one of the Incumbent Members in respect of such twelve-month period.
3. Termination Following a Change in Control of the Corporation. If any
of the events described in Section 2 hereof constituting a Change in Control of
the Corporation shall have occurred, you shall be entitled to the benefits
provided in Subsection 4(d) hereof upon the subsequent termination of your
employment within the following twenty-four (24) month period unless such
termination is (i) because of your death, Disability or Retirement, (ii) by the
Corporation for Cause, or (iii) by you other than for Good Reason.
(a) Disability; Retirement. If, as a result of your incapacity
due to physical or mental illness, you shall have been absent from the full-time
performance of your duties with the Corporation for six (6) consecutive months,
and within thirty (30) days after written notice of termination is given you
shall not have returned to the full-time performance of your duties, the
Corporation may terminate your employment for "Disability." Termination by the
Corporation or you of your employment by reason of "Retirement" shall mean
termination on or after attainment of your "normal retirement age," as defined
in the Payless Cashways, Inc. Amended Retirement Plan as of the date hereof, or
in accordance with any retirement arrangement established with your consent with
respect to you.
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(b) Cause. Termination by the Corporation of your employment
for "Cause" shall mean termination upon (i) the willful and continued failure by
you to substantially perform your duties with the Corporation (other than any
such failure resulting from termination by you for Good Reason), after a demand
for substantial performance is delivered to you that specifically identifies the
manner in which the Corporation believes that you have not substantially
performed your duties, and you have failed to resume substantial performance of
your duties on a continuous basis within fourteen (14) days of receiving such
demand, (ii) the willful engaging by you in conduct which is demonstrably and
materially injurious to the Corporation, monetarily or otherwise, or (iii) your
conviction of a felony or conviction of a misdemeanor which impairs your ability
substantially to perform your duties with the Corporation. For purposes of this
Subsection, no act, or failure to act, on your part shall be deemed "willful"
unless done, or omitted to be done, by you not in good faith and without
reasonable belief that your action or omission was in the best interest of the
Corporation.
(c) Good Reason. You shall be entitled to terminate your
employment for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean, without your express written consent, the occurrence after a Change in
Control of the Corporation of any one or more of the following:
(i) the assignment to you of duties inconsistent with
your present duties, responsibilities and status as the Senior Vice
President-Marketing of the Corporation or a reduction or alteration in
the nature or status of your responsibilities from those in effect
immediately prior to the date of Change in Control of the Corporation;
(ii) a reduction by the Corporation in your base
salary as in effect on the date hereof, or as in effect as of the date
of Change in Control of the Corporation, if greater ("Base Salary");
(iii) the Corporation's requiring you to be based at
a location in excess of forty-five (45) miles from the location where
you are currently based;
(iv) the failure by the Corporation to continue in
effect the Corporation's Corporate Management Annual Incentive
Compensation Program, Deferred Compensation Plan for Key Employees,
Employee Stock Option Plans, any other of the Corporation's employee
benefit plans, policies, practices, or arrangements in which you
participate, unless a comparable plan has been established with respect
to you, or the failure by the Corporation to continue your
participation therein on substantially the same basis, both in terms of
the amount of benefits provided and the level of your participation
relative to other participants, as existed as of the date of Change in
Control of the Corporation; and
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(v) the failure of the Corporation to obtain a
satisfactory agreement from any successor to the Corporation to assume
and agree to perform this Agreement, as contemplated in Section 7
hereof.
Your right to terminate your employment pursuant to this
Subsection (c) shall not be affected by your incapacity due to physical or
mental illness. Your continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstances constituting Good Reason
hereunder.
(d) Notice of Termination. Any termination by the Corporation
for Cause or Disability or by you for Good Reason shall be communicated
by Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a written 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
your employment under the provision so indicated. Such "Notice of
Termination" shall specify the "Date of Termination," as defined in
Subsection (e) below, provided that in the event of a termination for
Cause or Disability by the Corporation, such Date of Termination will
be no sooner than thirty (30) days following Notice of Termination. Any
purported termination by the Corporation of your employment for Cause
or Disability that is not effected pursuant to a Notice of Termination
satisfying the requirements of this Subsection (d) shall be deemed to
be a termination without Cause by the Corporation and you will be
entitled to the benefits under Section 4(d) below.
(e) Date of Termination. "Date of Termination" shall mean the
date specified in the Notice of Termination where required or in any
other case upon ceasing to perform services to the Corporation;
provided that if within thirty (30) days after any Notice of
Termination one party in good faith notifies the other party that a
dispute exists concerning the termination, the Date of Termination,
shall be the date finally determined to be the Date of Termination,
either by mutual written agreement of the parties or by a binding and
final arbitration award; provided, however, that in no case shall the
Date of Termination be subsequent to the Term of this Agreement.
4. Compensation Upon Termination or During Disability. Following a
Change in Control of the Corporation, as defined in Section 2 hereof, upon
termination of your employment or during a period of disability you shall be
entitled to the following benefits:
(a) During any period that you fail to perform your full-time
duties with the Corporation as a result of incapacity due to physical or mental
illness, you shall continue to receive your Base Salary at the rate in effect at
the commencement of any such period plus all other amounts to which you are
entitled under any compensation plan of the Corporation at the time such
payments are due, until your employment is
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terminated pursuant to Subsection 3(a) hereof. Thereafter, your benefits shall
be determined in accordance with the Corporation's retirement, insurance, and
other applicable programs and plans then in effect.
(b) If your employment shall be terminated by the Corporation
for Cause or by you other than for Good Reason, the Corporation shall pay you
your full Base Salary through the Date of Termination at the rate in effect at
the time Notice of Termination is given or on the Date of Termination if no
Notice of Termination is required hereunder, plus all other amounts to which you
are entitled under any compensation plan of the Corporation at the time such
payments are due, and the Corporation shall have no further obligations to you
under this Agreement.
(c) If your employment terminates by reason of your
Retirement, or by reason of your death, the Corporation shall pay you your full
Base Salary through the date of retirement or death, plus all other amounts to
which you are entitled under any compensation plan of the Corporation at the
time such payments are due, and any other benefits shall be determined in
accordance with the Corporation's retirement, survivor's benefits, insurance,
and other applicable programs and plans then in effect.
(d) If your employment by the Corporation shall be terminated
(i) by the Corporation other than for Cause, Retirement, or Disability, or (ii)
by you for Good Reason, you shall be entitled to the benefits (the "Severance
Payments") provided below:
(1) the Corporation shall pay you your full Base
Salary through the Date of Termination at the rate in effect at the
time Notice of Termination is given, or the Date of Termination where
no Notice of Termination is required hereunder;
(2) the Corporation will pay as severance benefits to
you, not later than the fifteenth (15) day following the Date of
Termination, a lump sum severance payment equal to the sum of:
(i) one year's annual Base Salary if you
have been employed by the Corporation for one year or less prior to
your Date of Termination, or two years' annual Base Salary if you have
been employed by the Corporation for a period of time in excess of one
year prior to your Date of Termination. For purposes of this section,
"Base Salary" shall mean the salary in effect immediately prior to the
occurrence of the circumstances giving rise to such termination, or, if
greater, the salary in effect as of the date of Change in Control of
the Corporation. And,
(ii) two times your average bonus for the
prior three years, or such fewer number of years as you were entitled
to participate in the plan, under the Corporation's Corporate
Management Annual Incentive Compensation Program. However, if you are
participating in the Corporate Management Annual Incentive Compensation
Program for the first time at the
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Date of Termination, you will receive two times your annual Target
Incentive Pay.
(3) the Corporation will arrange to provide you, at
the Corporation's expense, with benefits under the Corporation's
Hospital/Medical Plan, and all group Life Insurance Plans, and any
other Welfare Plans then existing, or benefits substantially similar to
the benefits you were receiving immediately prior to the Notice of
Termination under the named plans, for a period of one year if you have
been employed by the Corporation for one year or less prior to your
Date of Termination, or for a period of two years if you have been
employed by the Corporation for a period of time in excess of the year
prior to your Date of Termination, such benefits specifically being in
addition to any and all rights you may have under the plan and under
the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA); but
benefits otherwise receivable by you pursuant to this Subsection (3)
shall be reduced to the extent comparable benefits are actually
received by you from a subsequent employer during the such period
following your termination, and any such benefits actually received by
you shall be reported to the Corporation;
(4) to the extent that benefits under each of the
Corporation's pension plans and the Corporation's Supplemental
Retirement Plan are computed on the basis of either the salary and
benefits paid while in the Corporation's employ or the term of your
employment with the Corporation, the benefits payable and your
eligibility therefor shall be determined as though you were employed by
the Corporation under this Agreement for and had attained the age that
you would have attained at the end of the Severance Period.
(5) the Corporation will pay your reasonable costs of
using a qualified outplacement service. You must initiate the use of
such outplacement counseling within thirty (30) days following Date of
Termination. The assumption of these costs by the Corporation also
includes incidental expenses which are customarily paid for a
terminated employee occupying a position similar to your position on
Date of Termination.
(e) If you are within twenty-four (24) months of age
sixty-five (65), or older, your Severance Payments or Alternative Severance
Payments (as defined below) provided for in Subsections (d)(2) and (d)(3) above
shall be multiplied by a fraction, the numerator of which is the greater of
twelve (12) or the number of months until age sixty-five (65), and the
denominator of which is twenty-four (24).
(f)(1) Notwithstanding any other provision contained in this
Agreement, if any payments made or payable to you, whether pursuant to this
Agreement or otherwise, would be subject to the excise tax ("Excise Tax")
imposed under Section 4999 of the code, then (i) the amounts otherwise payable
pursuant to this Agreement ("Agreement Payments") shall be reduced, but not
below zero, if such reduction would result in your retaining a larger amount,
after-taxes, including the Excise Tax, than if you had received all of the
Agreement Payments or (ii) the aggregate present value of
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the "parachute payments" (as hereinafter defined) other than Agreement Payments
shall also be reduced, but not below zero, if such reduction would result in
your retaining a larger amount after taxes, including the Excise Tax, than if
you had received all of the "parachute payments" other than Agreement Payments.
If the application of the preceding sentence should require a
reduction in Agreement Payments or other "parachute payments," such reduction
shall be implemented first, by reducing any noncash benefits to the extent
necessary. In each case, the reductions shall be made starting with the payment
or benefit to be made on the latest date following the Date of Termination and
reducing payments or benefits in reverse chronological order therefrom.
(2) Any determination as to which amounts paid or payable to
you constitute "parachute payments" and the present value thereof shall be made
in accordance with Section 280G of the Code and any rulings and regulations
promulgated thereunder and shall be made within fifteen (15) days after the Date
of Termination by a nationally recognized firm of independent accountants
selected by you (the "Auditing Firm"). The Auditing Firm shall provide detailed
supporting calculations both to the Corporation and you within fifteen (15)
business days of the Date of Termination or such earlier time as is requested by
the Corporation. Any such determination by the Auditing Firm shall be binding
upon the Corporation and you.
(3) It is possible that as a result of a mistake of fact or
the clarification of the application of Sections 280G and 4999 of the Code
subsequent to the making of Agreement Payments or "parachute payments" to you,
the Auditing Firm will determine that because of the provisions of Section 4(f)
hereof, either Agreement Payments or "parachute payments" have been made that
would not have been made ("Overpayments") or that additional Agreement Payments
or "parachute payments," would have been made ("Underpayments"), in either case
had the mistake been discovered or the clarification been known at the time of
payment. In the event that the Auditing Firm determines that an Overpayment has
been made, any such Overpayment shall be treated for all purposes as a loan to
you which you shall repay to the Corporation together with interest at the
applicable Federal Rate provided for in Section 7872(f)(2) of the Code (the
"Federal Rate"), provided, however, that no amount shall be payable by you to
the Corporation (or if paid by you to the Corporation shall be returned to you)
if and to the extent such payment would not reduce the amount which is subject
to taxation under Section 4999 of the Code. In the event that the Auditing Firm
determines that an Underpayment has occurred, any such Underpayment shall be
paid by the Corporation to you within fifteen (15) business days of the
determination by the Auditing Firm of such Underpayment together with interest
at the Federal Rate.
(g) The Corporation shall also pay to you all legal fees and
expenses incurred by you as a result of such termination of employment
(including all such fees and expenses, if any, incurred in contesting or
disputing any such termination or in seeking to obtain or enforce any right or
benefit provided by this Change-in-Control Agreement or in connection with any
tax audit or proceeding to the extent attributable
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to the application of IRC Section 4999 of the Code to any payment or benefit
provided hereunder).
(h) You shall not be required to mitigate the amount of any
payment provided for in this Section 4 by seeking other employment or otherwise,
nor shall the amount of any payment provided for in this Section 4, except for
benefits as described in this Subsection 4(d)(3), be reduced by any compensation
earned by you as a result of employment by another employer after the Date of
Termination, or otherwise.
(5) Withholding of Taxes. The Corporation may withhold from any amounts
payable under this Agreement all Federal, State, City, or other taxes as legally
shall be required.
(6) Limitation of Effect. This Agreement shall have no effect on any
termination of your employment prior to a Change in Control of the Corporation.
(7) Successors; Binding Agreement.
(a) The Corporation will require any successor (whether direct or
indirect, by purchase, merger, consolidation, or otherwise) to all or
substantially all of the business and/or assets of the Corporation or of any
division or subsidiary thereof employing you to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Corporation would be required to perform it if no such succession had taken
place. Failure of the Corporation to obtain such assumption and agreement prior
to the effectiveness of any such succession shall be a breach of this Agreement
and shall entitle you to compensation from the Corporation in the same amount
and on the same terms as you would be entitled hereunder if you terminated your
employment for Good Reason, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination.
(b) This Agreement shall insure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees, and legatees. If you
should die while any amount would still be payable to you hereunder if you had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement, to your devisee, legatee,
or other designee, or if there is not such designee, to your estate.
8. Notice. For the purposes 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 to the
respective addresses set forth on the first page of this Agreement.
9. Modifications. 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 you and such officer as may be specifically
designated by the Board.
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10. 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.
11. 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.
12. Governing Law; Resolution of Disputes. This Agreement and the
rights and obligations hereunder shall be governed by and construed in
accordance with the laws of the State of Missouri. Any dispute arising out of
this Agreement shall, at the Executive's election, be determined by arbitration
under the rules of the American Arbitration Association then in effect or by
litigation. Whether the dispute is to be settled by arbitration or litigation,
the venue for the arbitration or litigation shall be Kansas City, Missouri or,
at the Executive's election, if the Executive is no longer residing or working
in the Kansas City, Missouri, metropolitan area, in a court in the judicial
district encompassing the city in which the Executive resides; provided, that,
if the Executive is not then residing in the United States, the election of the
Executive with respect to such venue shall be either Kansas City, Missouri or a
court in the judicial district encompassing that city in the United States among
the 30 cities having the largest population (as determined by the most recent
United States Census data available at the Termination Date) which is closest to
the Executive's residence. The parties consent to personal jurisdiction in each
trial court in the selected venue having subject matter jurisdiction
notwithstanding their residence or situs, and each party irrevocably consents to
service of process in the manner provided hereunder for the giving of notices.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
26th day of June, 1997.
PAYLESS CASHWAYS, INC.
BY: /s/ X. X. Xxxxxxx, Xx.
----------------------------
Name: X. X. Xxxxxxx, Xx.
Title: Sr. VP-Administration/
Secretary
Agreed to this 26th day of June, 1997.
By: /s/ Xxxxxx X. Xxxxxxxx
--------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Sr. VP-Marketing
Attest:
/s/ Xxxxxxx X. Xxxx
------------------------------------
Xxxxxxx X. Xxxx, Assistant Secretary
