Exhibit 10(y)
CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT (the "Agreement") is made this 8th day of April, 1998, by
and between X.X. Xxxxxx Company, a Minnesota corporation (the "Company") and
_________ (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company recognizes the valuable services that Executive has
rendered to the Company and/or its Affiliated Organizations and desires to be
assured that the Executive will continue to actively participate in the business
of the Company; and
WHEREAS, the Executive is willing to continue to serve the Company but
desires assurance that in the event of any change in control of the Company, the
Executive will continue to have the responsibility and status that the Executive
has earned; and
WHEREAS, the Company's Board of Directors has determined that it is
appropriate 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 potentially disturbing circumstances arising from
the possibility of a change in control of the Company;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Company and the Executive hereby agree as
follows:
1. Term. The Term of this Agreement shall commence on the date hereof
and shall terminate upon the earliest to occur of:
(a) The "Expiration Date;"
(b) the termination of the Executive's employment under
circumstances that do not entitle the Executive to benefits under
paragraph 3;
(c) the Executive's death;
(d) the date, prior to a Change in Control, on which the
Executive ceases to be in pay grade 35 through 49; or
(e) the third anniversary of the occurrence of a Change in
Control, if the Executive is still employed by the Company on such date;
provided, that the expiration of the Term shall not relieve the Company of its
obligations to make any payments or provide any benefits which are or become due
to the Executive subsequent to the expiration of the Term. For purposes of this
paragraph, the "Expiration Date" of this Agreement is the first anniversary of
the date on which the Term begins; provided, that on each day after the date on
which the Term begins the Expiration Date shall automatically extend for an
additional day, so that the remaining Term shall always be one year, unless the
Company gives written notice to the Executive that the Term shall not be so
extended, whereupon the Expiration Date shall be the date which is one year
after the date of such notice. Notwithstanding the foregoing, upon the
occurrence of a Change in Control during the Term of this Agreement, the
Expiration Date shall automatically be extended to the third anniversary of the
date on which the Change in Control occurs.
2. Employment. In the absence of a Change in Control, the Executive
agrees to remain in the employ of the Company in a pay grade which is not less
than the Executive's existing pay grade, during the Term of this Agreement,
unless the Executive's employment is earlier terminated by the Company. It is
understood and agreed that this paragraph 2 does not impose any additional
obligations on the Company prior to the occurrence of a Change in Control, nor
does it impair the Company's rights (if any) to terminate the Executive's
employment prior to a Change in Control with or without Cause.
3. Benefits. If, during the Term of this Agreement and upon or after the
occurrence of a Change in Control, the Executive's employment is terminated by
the Company other than for Cause or Disability or by the Executive for Good
Reason, or if the Executive's employment is terminated by the Executive for any
reason during a period of 90 days following the first anniversary of the
occurrence of the Change in Control, the Executive shall be entitled to the
following payments and benefits:
(a) Severance Pay. The Executive shall be entitled to a lump sum
payment in an amount equal to three times the Executive's Annual
Compensation, which payment shall be made to the Executive within ten
days after the Executive's termination of employment. If the Executive
is also entitled to severance payments which would be made in the
absence of a change in control under any plan or program of the Company,
or under the laws of any federal, state, local or foreign jurisdiction,
the amount payable to the Executive pursuant to this paragraph (a) shall
be reduced (but not below zero) by the Present Value of such other
severance payments. Payments under this paragraph (a) shall not be
considered in determining the amount of the Executive's benefits under
any pension, profit sharing, stock bonus or other employee benefit plan
of the Company or any Affiliated Organization.
(b) Medical and Dental Coverage. The Executive shall be entitled
to continued coverage under any medical or dental plan maintained by the
Company in which the Executive was participating at the time of the
Executive's termination of employment, for a period of three years
following the Executive's termination of employment. Rules comparable to
those governing the provision of continuation coverage under Section 602
of ERISA shall apply to the coverage provided under this paragraph,
except that:
(i) the coverage may not be discontinued prior to the
expiration of the period specified in this paragraph (a), except
for the Executive's failure to make a required contribution;
(ii) the contributions required of the Executive for
such coverage may not exceed the contributions required for the
same coverage from a similarly situated active employee; and
(iii) if the Company discontinues the plan or plans in
which the Executive was participating prior to the expiration of
such three year period, the Company shall substitute equivalent
coverage under one or more other plans or, if there are no other
plans, under one or more individual insurance policies.
It is the intent of the Company that neither the coverage provided
pursuant to this paragraph (b), nor the benefits received as a result of
such coverage, shall be subject to U.S. income taxation to the
Executive. Accordingly, if the Company determines that the coverage to
be provided under this paragraph (b) would cause a self-insured plan
maintained by the Company or an Affiliated Organization to be in
violation of the nondiscrimination requirements of section 105(h) of the
Code, it shall substitute insured coverage providing equivalent
benefits, at no greater cost to the Executive, to the extent necessary
to avoid such discrimination.
(c) Outplacement Services. The Company shall pay for any
outplacement services provided to the Executive; provided, that the
total amount paid for such services shall not exceed $25,000. The
Employer shall pay (or, at its option, reimburse the Executive) for such
services within ten days after its receipt of a statement from the
service provider.
(d) Company Car. The Company shall transfer to the Executive
title to his or her Company car, if any, at no cost to the Executive.
4. Limitation; Make Whole Payment.
(a) If any payments or other benefits due to the Executive under
this Agreement and/or under any other plan or program of the Company or
an Affiliated Organization would be subject to the tax (the "Excise
Tax") imposed by section 4999 of the Code, and if the amount of the
Executive's "parachute
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payments" (as defined in section 280G(b)(2) of the Code) with respect to
such Change in Control does not exceed 330% of the Executive's "base
amount" (as defined in section 280G(b)(3) of the Code), then such
payments or other benefits shall be adjusted until the amount of the
parachute payments equals 299% of such base amount. The adjustments
shall be made in such manner, and to such payments or other benefits, as
the Executive and the Company shall mutually agree.
(b) If any payments or other benefits due to the Executive under
this Agreement and/or under any other plan or program of the Company or
an Affiliated Organization would be subject to the Excise Tax, and if
the amount of the Executive's parachute payments (as defined in
paragraph (a)) exceeds 330% of the Executive's base amount (as defined
in paragraph (a)), the Company shall pay to the Executive an additional
amount (the "Make Whole Payment") so that the net amounts retained by
the Executive, after the deduction of the Excise Tax and any federal,
state, local, and foreign income taxes and Excise Taxes imposed upon the
Make Whole Payment, shall be equal to the payments and other benefits
the Executive would have received in the absence of the Excise Tax. The
Make Whole Payment shall be paid to the Executive within 30 days after
the Executive's termination of employment.
(c) For purposes of determining the amount of the Make Whole
Payment, the Executive shall be deemed to pay federal income tax at the
highest marginal rate of federal income taxation in the calendar year(s)
in which the Make Whole Payment is to be made and state, local and
foreign income taxes at the highest marginal rates of taxation in the
state and locality or foreign jurisdiction of the Executive's residence,
net of the reduction in federal income taxes which could be obtained
from any deduction or credit attributable to the state, local or foreign
taxes. If, after a Make Whole Payment has been made, the Excise Tax is
determined to be less than the Make Whole Payment, the Executive shall
repay to the Company at the time that the amount of such reduction in
Excise Tax is finally determined the portion of the Make Whole Payment
attributable to such reduction, plus interest on the amount of such
repayment at the rate provided in section 1274(b)(2)(B) of the Code. If,
after a Make Whole Payment has been made, the Excise Tax is determined
to exceed the amount of the Make Whole Payment (including by reason of
any payment the existence or amount of which cannot be determined at the
time of the Make Whole Payment), the Company shall make an additional
Make Whole Payment in respect of such excess, plus interest on the
amount of such payment at the rate provided in section 1274(b)(2)(B) of
the Code, at the time that the amount of such excess is finally
determined.
5. Definitions. For the purposes of this Agreement:
(a) "Affiliated Organization" means any corporation that would
be a member of a controlled group of corporations (within the meaning of
section 414(b) of the Code) that includes the Company, and any trade or
business (whether or not incorporated) that would be controlled (within
the meaning of section 414(c) of the Code) by the Company, if the phrase
"at least 70%" were substituted for the phrase "at least 80%" each place
it appears in section 1563(a)(1) of the Code and in regulations under
section 414(c) of the Code.
(b) "Annual Compensation" means the sum of:
(i) the Executive's annual base salary at the highest
rate in effect during the period commencing three months prior
to the occurrence of the Change in Control and ending on the
date of the Executive's termination of employment; plus
(ii) the largest bonus and/or incentive payments payable
to the Executive for any fiscal year of the Company during the
period commencing 36 months prior to the occurrence of the
Change in Control and ending on the date of the Executive's
termination of employment.
(c) "Cause" means any act by the Executive that is materially
inimical to the best interests of the Company and that constitutes
common law fraud, a felony or other gross malfeasance of duty on the
part of the Executive. The Executive may only be terminated for Cause
upon 90 days prior written notice to the Executive, which notice shall
specify the nature of the Cause for termination, and then only if it is
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subsequently determined by the Board of Directors of the Company that
the Executive has failed to cure the stated Cause prior to or during
such 90-day period.
(d) "Disability" or "Disabled" means the Executive's inability,
by reason of any physical or mental impairment, to perform the duties of
the position the Executive then occupies for a period of not less than
180 consecutive days. The Executive may only be terminated for
Disability upon receipt by the Company of an opinion of one or more
physicians jointly selected by the Executive and the Company that the
Executive has been Disabled for such period, and then only if the
Executive is eligible for immediate benefits under the Company's
long-term disability plan.
(e) "Change in Control" means:
(i) a change in control of the Company of a nature that
would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Exchange
Act, whether or not the Company is then subject to such
reporting requirement;
(ii) the public announcement (which, for purposes of
this definition, shall include, without limitation, a report
filed pursuant to Section 13(d) of the Exchange Act) by the
Company or any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) that such person has become the
"beneficial owner" (as defined in Rule 13d-3 promulgated under
the Exchange Act), directly or indirectly, of securities of the
Company representing 30% or more of the combined voting power of
the Company's then outstanding securities;
(iii) the Continuing Directors cease to constitute a
majority of the Company's Board of Directors;
(iv) the shareholders of the Company approve (A) any
consolidation, merger, or statutory share exchange of the
Company with any person in which the surviving entity would not
have as its directors at least 60% of the Continuing Directors
and would not have at least 60% of the combined voting power of
its outstanding securities held by persons who were shareholders
of the Company immediately prior to such consolidation, merger,
or statutory share exchange; (B) any sale, lease, exchange or
other transfer (in one transaction or a series of related
transactions) of all or substantially all of the assets of the
Company; or (C) any plan of liquidation or dissolution of the
Company; or
(v) the majority of the Continuing Directors determine
in their sole and absolute discretion that there has been a
change in control of the Company.
The Company shall notify the Executive promptly of the occurrence of a
Change in Control.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
Any reference to a specific provision of the Code will include a
reference to such provision as it may be amended from time to time and
to any successor provision.
(g) "Company" means the Company as hereinbefore defined and any
successor or assign to its business and/or assets which executes and
delivers the agreement provided for in paragraph 9 or which otherwise
becomes bound by all the terms and provisions of this Agreement by
operation of law. If at any time during the term of this Agreement the
Executive is employed by an Affiliated Organization, the term "Company"
as used in this Agreement (other than in paragraphs 5(e) and 9(a)
hereof) shall in addition include such Affiliated Organization. In such
event, the Company agrees that it shall pay or provide, or shall cause
such Affiliated Organization to pay or provide, any amounts or benefits
due the Executive pursuant to this Agreement.
(h) "Continuing Director" means any person who is a member of
the Board of Directors of the Company, while such person is a member of
the Board of Directors, who is not an Acquiring Person (as
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defined below) or an Affiliate or Associate (as defined below) of an
Acquiring Person, or a representative of an Acquiring Person or any such
Affiliate or Associate, and who (i) was a member of the Board of
Directors on August 1, 1997 or (ii) subsequently becomes a member of the
Board of Directors, if such person's initial nomination for election or
initial election to the Board of Directors is recommended or approved by
a majority of the Continuing Directors. For purposes of this paragraph,
"Acquiring Person" shall mean any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) who or which, together
with all Affiliates and Associates of such person, is the "beneficial
owner" (as defined in Rule 13d-3 promulgated under the Exchange Act),
directly or indirectly, of securities of the Company representing 30% or
more of the combined voting power of the Company's then outstanding
securities, but shall not include the Company, any subsidiary of the
Company, any employee benefit plan of the Company or of any subsidiary
of the Company or any entity holding shares of the Company's common
stock organized, appointed or established for, or pursuant to the terms
of, any such plan; and "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 promulgated
under the Exchange Act.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(j) "Good Reason" means:
(i) any change adverse to the Executive in the
Executive's position, reporting responsibilities, duties,
compensation, benefits or other terms or conditions of
employment; or
(ii) any change in the Executive's principal place of
employment, if the new principal place of employment is more
than 50 miles from the previous principal place of employment.
The Executive shall not be deemed to have terminated employment for Good
Reason unless the termination occurs within 180 days after the Executive
is notified by the Company of the event constituting Good Reason or, if
later, within 180 days after the occurrence of such event.
(k) "Present Value" shall be determined based on the following
actuarial assumptions:
(i) Interest: The interest rate on 30-year U.S. Treasury
obligations as of the December 31 coinciding with or immediately
preceding the date as of which Present Value is determined.
(ii) Mortality: 1993 Group Annuity Mortality Table.
6. Legal Expenses. If the Executive institutes or defends any legal
action to enforce the Executive's rights under, or to defend the validity of,
this Agreement, the Executive shall be entitled to recover from the Company any
actual expenses for attorney's fees and disbursements incurred by the Executive.
Such fees and disbursements shall be paid or reimbursed by the Company on a
regular, periodic basis upon presentation of statements prepared by the
Executive's attorney in accordance with his or her customary practices. Any
amounts paid to the Executive pursuant to this paragraph 6 shall be refunded to
the Company, with interest at the rate provided in section 1274(b)(2)(B) of the
Code, if the claim or defense asserted by the Executive is dismissed under
circumstances resulting in the imposition of sanctions under Rule 11 of the
Federal Rules of Civil Procedure, or under any similar federal, state or foreign
rule or statute.
7. No Mitigation. The Executive's benefits hereunder shall be in
consideration of the Executive's past service and the Executive's continued
service from the date of this Agreement, and the Executive's entitlement thereto
shall not be governed by any duty to mitigate damages by seeking further
employment nor offset by any compensation which the Executive may receive from
future employment.
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8. Other Benefits. The specific arrangements referred to in this
Agreement are not intended to exclude Executive's participation in other
benefits available to executive personnel generally or to preclude other
compensation or benefits as may be authorized by the Company from time to time.
9. Successors.
(a) The Company will require any successor or assign (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to the Executive, expressly, absolutely and
unconditionally to assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if no
such succession or assignment had taken place. Any failure of the Company to
obtain such agreement prior to the effectiveness of any such succession or
assignment shall be a material breach of this Agreement and shall entitle the
Executive to terminate the Executive's employment for Good Reason, whereupon the
Executive shall be entitled to receive the payments and other benefits described
in this Agreement as though such termination had occurred upon or after the
occurrence of a Change in Control.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal and legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive should die while any amounts are still payable to the Executive
hereunder, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the Executive's devisee, legatee,
or other designee or, if there be no such designee, to the Executive's estate.
10. Notice. For 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 (or its equivalent for overseas delivery), return receipt
requested, postage prepaid, and addressed as follows:
If to the Company:
X.X. Xxxxxx Company
X.X. Xxx 00000
Xx. Xxxx, XX 00000-0000
Attention: General Counsel
If to the Executive:
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or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
11. Severability. If any provision of this Agreement is held by a court
of competent jurisdiction to be prohibited by or invalid under applicable law,
such provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
12. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
13. Modifications; Waiver. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and the Company. No
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waiver by either party hereto at any time of any breach by the other party of,
or compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar provisions
or conditions at the same or at any prior or subsequent time.
14. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota.
15. Status of Agreement. This Agreement is designated as a "Change in
Control Agreement" for the purposes of Article XIII of the X.X. Xxxxxx Company
Group Benefit Plan and for the purposes of any successor or substitute provision
requiring such a designation.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
X.X. XXXXXX COMPANY
By: /s/ Xxxxxx Xxxxxxxx
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As its: President and Chief Executive Officer
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Executive
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