Enhanced Severance Pay Plan
EFFECTIVE AS OF 10/31/11
The purpose of this Xylem
Enhanced Severance Pay Plan (Plan) is to assist in occupational
transition by providing Severance Benefits, as defined herein, for employees covered by this Plan
whose employment is terminated under conditions set forth in this Plan.
The Plan first became effective as of October 31, 2011 following the spin-off of Xylem
from ITT Corporation (the Predecessor Corporation) on October 31, 2011. The Predecessor
Corporation maintained a similar plan prior to the spin-off (the Predecessor Plan), and the Plan
was created to continue service accruals under the Predecessor Plan. The Plan shall remain in
effect as provided in Section 9 hereof, and covered employees shall receive full credit for their
service and participation with the Predecessor Corporation as provided in Section 5 hereof.
2. Covered Employees
Covered employees under this Plan (Employees) are active full-time, regular salaried
employees of Xylem
) and of any subsidiary company (Xylem
Employees who are short term disabled as of a Potential Acceleration event within the meaning of
the Companys short term disability benefit plans) (other than Employees on periodic severance as
of a Potential Acceleration Event) who are or were, at any time within the two year period
immediately preceding the Employees termination of employment (other than executives covered by
Special Senior Executive Severance Pay Plan), United States or Canadian citizens or who
are employed in the United States or Canada, whose primary employment location is at Xylem
Corporate Headquarters (currently in White Plains, New York
), and such other employees of the
Company who shall be designated as covered employees thereunder by the Chief Executive or the
Senior Vice President, Director-Human Resources of Xylem
or a designee of such officers
(Authorized Officers or Designees). No person who is employed on a temporary, occasional or
seasonal basis is eligible under this Plan.
After the occurrence of an Acceleration Event, the terms Xylem
, Xylem Subsidiary and
Company as used herein shall also include, respectively and as the context requires, any
successor company to Xylem or any successor company to any Xylem Subsidiary and any affiliate of
any such successor company.
An Acceleration Event shall occur if (i) a report on Schedule 13D shall be filed with the
Securities and Exchange Commission pursuant to Section 13(d) of the Securities Exchange Act of 1934
(the Act) disclosing that any person (within the meaning of Section 13(d) of the Act), other than
Xylem or a subsidiary of Xylem or any employee benefit plan sponsored by
Xylem or a subsidiary of Xylem, is the beneficial owner directly or indirectly of twenty
percent (20%) or more of the outstanding Common Stock $1 par value, of Xylem (the Stock); (ii)
any person (within the meaning of Section 13(d) of the Act), other than Xylem or a subsidiary of
Xylem, or any employee benefit plan sponsored by Xylem or a subsidiary of Xylem, shall purchase
shares pursuant to a tender offer or exchange offer to acquire any Stock of Xylem (or securities
convertible into Stock) for cash, securities or any other consideration, provided that after
consummation of the offer, the person in question is the beneficial owner (as such term is defined
in Rule 13d-3 under the Act), directly or indirectly, of twenty percent (20%) or more of the
outstanding Stock of Xylem (calculated as provided in paragraph (d) of Rule 13d-3 under the Act in
the case of rights to acquire Stock); (iii) the consummation of (A) any consolidation, business
combination or merger involving Xylem, other than a consolidation, business combination or merger
involving Xylem in which holders of Stock immediately prior to the consolidation, business
combination or merger (x) hold fifty percent (50%) or more of the combined voting power of Xylem
(or the corporation resulting from the merger or consolidation or the parent of such corporation)
after the merger and (y) have the same proportionate ownership of common stock of Xylem (or the
corporation resulting from the merger or consolidation or the parent of such corporation), relative
to other holders of Stock immediately prior to the merger, business combination or consolidation,
immediately after the merger as immediately before, or (B) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all or substantially all the
assets of Xylem, (iv) there shall have been a change in a majority of the members of the Board of
Directors of Xylem within a 12-month period unless the election or nomination for election by
Xylems stockholders of each new director during such 12-month period was approved by the vote of
two-thirds of the directors then still in office who (x) were directors at the beginning of such
12-month period or (y) whose nomination for election or election as directors was recommended or
approved by a majority of the directors who where directors at the beginning of such 12-month
period or (v) any person (within the meaning of Section 13(d) of the Act) (other than Xylem or any
subsidiary of Xylem or any employee benefit plan (or related trust) sponsored by Xylem or a
subsidiary of Xylem) becomes the beneficial owner (as such term is defined in Rule 13d-3 under the
Act) of twenty percent (20%) or more of the Stock.
Cause shall mean action by the Employee involving willful malfeasance or gross negligence or
the Employees failure to act involving material nonfeasance that would tend to have a materially
adverse effect on the Company. No act or omission on the part of the Employee shall be considered
willful unless it is done or omitted in bad faith or without reasonable belief that the action or
omission was in the best interests of the Company.
Company shall mean Xylem Inc. (Xylem) and of any subsidiary company (Xylem Subsidiary),
collectively or individually as the context requires Company; provided, however, that for
purposes of service under the Predecessor Plan, Company shall include the Predecessor Corporation.
Enhanced Severance Period shall mean the period, expressed in weeks, equal to the sum of (x)
two times the normal severance pay or termination pay period of weeks for the Employee (the Normal
Severance Period), determined as if the Employee were an employee of the same grade, and having
the same years of service, covered by and eligible for the severance pay or termination pay plans
or policies at Xylem Corporate Headquarters, White Plains, New
York, as in effect immediately preceding an Acceleration Event and (y) four (4) weeks (in lieu
of notice of termination), provided that the Enhanced Severance Period shall not exceed 108 weeks
and shall not be less than the Minimum Severance Period.
Enhanced Weeks Pay shall mean the sum of (x) the current annual base salary rate paid or in
effect at the time of Employees termination of employment and (y) the current annual bonus or
service recognition award paid or awarded to the Employee in respect of either (i) an Acceleration
Event or (ii) the Employees termination of employment, including, among the bonuses and service
recognition awards taken into account for this purpose, any bonus or service recognition award paid
or awarded by reason of an Acceleration Event, without regard to whether such bonus or service
recognition award is paid on or after an Acceleration Event, divided by 52 weeks.
Good Reason shall mean (i) without the Employees express written consent and excluding for
this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company or its affiliates within 30 days after receipt of notice thereof given by
the Employee, (A) a reduction in the Employees annual base compensation (whether or not deferred),
(B) the assignment to the Employee of any duties inconsistent in any material respect with the
Employees position (including status, offices, titles and reporting requirements), authority,
duties or responsibilities, or (C) any other action by the Company or its affiliates which results
in a material diminution in such position, authority, duties or responsibilities; (ii) without the
Employees express written consent, the Companys requiring the Employees work location to be
other than within twenty-five (25) miles of the location where such Employee was principally
working immediately prior to the Acceleration Event; or (iii) any failure by the Company to obtain
the express written assumption of this Plan from any successor to the Company; provided that Good
Reason shall cease to exist for an event on the 90th day following the later of its occurrence or
the Employees knowledge thereof, unless the Employee has given the Company notice thereof prior to
Minimum Severance Period shall mean (i) with respect to Employees with less than twenty (20)
years of service with the Company, twenty-six (26) weeks, (ii) with respect to Employees with
between twenty (20) and twenty-five (25) years of service with the Company, 52 weeks, (iii) with
respect to Employees with greater than twenty-five (25) years of service with the Company but less
than or equal to thirty (30) years of service with the Company, seventy-eight (78) weeks and (iv)
with respect to Employees with greater than thirty (30) years of service with the Company, one
hundred and four (104) weeks. For purposes hereof, years of service shall have the same meaning
as in the termination pay plans or policies at Xylem Corporate Headquarters, White Plains, New
, as in effect immediately preceding an Acceleration Event and shall be determined as of the
date of the Employees termination of employment with the Company.
Potential Acceleration Event shall mean any execution of an agreement, the commencement of a
tender offer or any other transaction or event that if consummated would result in an Acceleration
4. Severance Benefits Upon Termination of Employment
If an Employees employment with the Company is terminated due to a Qualifying Termination, he
or she shall receive the severance benefits set forth in Section 5 hereof (Severance Benefits).
For purposes hereof, (i) a Qualifying Termination shall mean a termination of an Employees
employment with the Company either (x) by the Company without Cause (A) within the two (2) year
period commencing on the date of the occurrence of an Acceleration Event or (B) prior to the
occurrence of an Acceleration Event and either (1) following the public announcement of the
transaction or event which ultimately results in such Acceleration Event or (2) at the request of a
party to, or participant in, the transaction or event which ultimately results in an Acceleration
Event; or (y) by an Employee for Good Reason within the two (2) year period commencing with the
date of the occurrence of an Acceleration Event and (ii) a determination by an Employee that he or
she has Good Reason hereunder shall be final and binding on the parties hereto unless the Company
can establish by a preponderance of the evidence that Good Reason does not exist.
5. Severance Benefits
Severance Benefits for Employees:
Accrued Rights The Employees base salary through the date of termination of employment,
any annual bonus earned but unpaid as of the date of termination for any previously completed
fiscal year, reimbursement for any unreimbursed business expenses properly incurred by the Employee
in accordance with Company policy prior to the date of the Employees termination of employment and
such employee benefits, if any, as to which the Employee may be entitled under the employee benefit
plans of the Company, including without limitation, the payment of any accrued or unused vacation
under the Companys vacation policy.
Severance Pay The number of weeks of the Employees Enhanced Severance Period times the
Employees Enhanced Weeks Pay, paid in the form described in Section 6 below.
Continued health and life insurance benefits for a period equal to the Employees Enhanced
Severance Period following the Employees termination of employment at the same cost to the
Employee, and at the same coverage levels, as provided to the Employee (and the Employees eligible
dependents) immediately prior to his or her termination of employment.
Payment of a lump sum amount (Pension Lump Sum Amount) equal to the difference between (i)
the total lump sum value of the Employees pension benefit under the Xylem Salaried Retirement Plan
and, as applicable, the Predecessor Corporations Excess Pension Plan IIA, Excess Pension Plan IIB
or any successor plan; provided that the benefits under such successor plan is no less favorable
than the benefits under the plans set forth herein (or corresponding pension arrangements (i)
outside the United States or (ii) as may be designated by an Authorized Officer or Designee)
(Pension Plans) as of the Employees termination of employment and (ii) the total lump sum value
of the Employees pension benefit under the Pension Plans after crediting to the Employee an
additional two (2) years of age and two (2) years of eligibility and benefit service and applying
the highest annual base salary rate and
highest bonus or service recognition award determined above under Enhanced Weeks Pay with
respect to the additional period of service so credited for purposes of determining the Final
Average Compensation under the Excess Pension Plans of the Company. The above total lump sum values
shall be determined in the manner provided in the Pension Plans of the Company for determination of
lump sum benefits upon the occurrence of an Acceleration Event, as defined in said Plans. This
provision shall apply to any Employee having a pension benefit under any of the Pension Plans as of
the Employees termination of employment. An example of the calculation of benefits set forth in
this paragraph is set forth on Schedule A.
Crediting of an additional two (2) years of age and an additional two (2) years of
eligibility service for purposes of the Companys retiree health and retiree life insurance
benefits. This provision shall apply to any Employees covered under such benefits any time during
the three (3) year period immediately preceding the Employees termination of employment.
Payment of a lump sum amount (Savings Plan Lump Sum Amount) equal to the number of weeks
of the Employees Enhanced Severance Period times the following amount: the highest annual base
salary rate determined above under Enhanced Weeks Pay, divided by 52 weeks, times the highest
percentage rate of Company Contributions (not to exceed 3 1/2%) with respect to the Employee under
the Xylem Investment and Savings Plan for Salaried Employees and/or the Xylem Excess Savings Plan
(or corresponding savings plan arrangements (i) outside the United States or (ii) as may be
designated by an Authorized Officer of Designee) (Savings Plans) (including matching
contributions and floor contributions) at any time during the three (3) year period immediately
preceding the Employees termination of employment or the three (3) year period immediately
preceding the Acceleration Event. This provision shall apply to any Employee who is a member of any
of the Savings Plans at any time during such three (3) year period.
Outplacement Outplacement services for one (1) year.
With respect to the provision of benefits described above during the above period equal to the
Employees Enhanced Severance Period, if, for any reason at any time the Company is unable to treat
the Employee as being eligible for ongoing participation in any Company employee benefit plans in
existence immediately prior to the termination of employment of the Employee, and if, as a result
thereof, the Employee does not receive a benefit or receives a reduced benefit the Company shall
provide such benefits by making available equivalent benefits from other sources in a manner
consistent with Section 15 below.
Notwithstanding any other provision of the Plan to the contrary, all prior service and
participation by an Employee with the Predecessor Corporation shall be credited in full towards an
Employees service and participation with the Company.
6. Form of Payment of Severance Pay and Lump Sum Payments
Severance Pay shall be paid in cash, in non-discounted equal periodic installment payments
corresponding to the frequency and duration of the severance payments that the Employee would have
been entitled to receive under the Normal Severance Period. The Pension
Lump Sum Amount and the Savings Plan Lump Sum Amount shall be paid in cash within thirty (30)
calendar days after the date the employment of the Employee terminates.
7. Termination of Employment Other
The Severance Benefits shall only be payable upon an Employees termination of employment due
to a Qualifying Termination; provided, that if, following the occurrence of an Acceleration Event,
an Employee is terminated due to the Employees death or disability (as defined in the long-term
disability plan in which the Employee is entitled to participate (whether or not the Employee
voluntarily participates in such plan)) and, at the time of such termination, the Employee had
grounds to resign with Good Reason, such termination of employment shall be deemed to be a
8. Administration of Plan
This Plan shall be administered by Xylem, who shall have the exclusive right to interpret this
Plan, adopt any rules and regulations for carrying out this Plan as may be appropriate and decide
any and all matters arising under this Plan, including but not limited to the right to determine
appeals. Subject to applicable Federal and state law, all interpretations and decisions by Xylem
shall be final, conclusive and binding on all parties affected thereby.
Notwithstanding the preceding paragraph, following an Acceleration Event, any controversy or
claim arising out of or relating to this Plan, or the breach thereof, shall be settled by
arbitration administered by the American Arbitration Association under its Commercial Arbitration
Rules and the entire cost thereof shall be borne by the Company. The location of the arbitration
proceedings shall be reasonably acceptable to the Employee. Judgment on the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof. The Company shall pay all
legal fees, costs of litigation, prejudgment interest, and other expenses which are incurred in
good faith by the Employee as a result of the Companys refusal to provide any of the Severance
Benefits to which the Employee becomes entitled under this Plan, or as a result of the Companys
(or any third partys) contesting the validity, enforceability, or interpretation of this Plan, or
as a result of any conflict between the Employee and the Company pertaining to this Plan. The
Company shall pay such fees and expenses from the general assets of the Company.
9. Termination or Amendment
Xylem may terminate or amend this Plan (Plan Change) at any time except, that following the
occurrence of (i) an Acceleration Event or (ii) a Potential Acceleration Event, no Plan Change that
would adversely affect any Employee may be made without the prior written consent of such Employee
affected thereby; provided, however, that (ii) above shall cease to apply if such Potential
Acceleration Event does not result in the occurrence of an Acceleration Event.
Any Severance Benefits provided to an Employee under this Plan shall be offset in a manner
consistent with Section 15 by reducing (x) any Severance Pay hereunder by any severance pay, salary
continuation pay, termination pay or similar pay or allowance and (y) any other Severance Benefits
hereunder by corresponding employee benefits, or outplacement services, which the Employee receives
or is entitled to receive, (i) pursuant to any other Company policy, practice program or
arrangement, (ii) pursuant to any Company employment agreement or other agreement with the Company,
or (iii) by virtue of any law, custom or practice excluding, however, any unemployment compensation
in the United States, unless the Employee voluntarily expressly waives (which the Employee shall
have the exclusive right to do) in writing any such respective entitlement.
11. Excise Tax
In the event that it shall be determined that any Payment would constitute an excess
parachute payment within the meaning of Section 280G of the Code, then the aggregate of all
Payments shall be reduced so that the Present Value of the aggregate of all Payments does not
exceed the Safe Harbor Amount; provided, however, that no such reduction shall be effected, if the
Net After-tax Benefit to Employee of receiving all of the Payments exceeds the Net After-tax
Benefit to Employee resulting from having such Payments so reduced. In the event a reduction is
required pursuant hereto, the order of reduction shall be first all cash payments on a pro rata
basis, then any equity compensation on a pro rata basis, and lastly medical and dental coverage.
For purposes of this Section 11, the following terms have the following meanings:
(i) Net After-tax Benefit shall mean the Present Value of a Payment net of all federal state
and local income, employment and excise taxes imposed on Employee with respect thereto, determined
by applying the highest marginal rate(s) applicable to an individual for Employees taxable year in
which the Change in Control occurs.
(ii) Payment means any payment or distribution or provision of benefits by the Company to or
for the benefit of Employee, whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise, but determined without regard to any reductions required
by this Section 11.
(iii) Present Value shall mean such value determined in accordance with Section 280G(d)(4)
of the Code.
(iv) Safe Harbor Amount shall be an amount expressed in Present Value which maximizes the
aggregate Present Value of Payments without causing any Payment to be subject to excise tax under
Section 4999 of the Code or the deduction limitation of Section 280G of the Code.
All determinations required to be made under this Section 11, including whether and when a
reduction is required and the amount of such reduction and the assumptions to be utilized in
arriving at such determination, shall be made by a nationally recognized accounting firm mutually
agreed to by the Employee and the Company (the Accounting Firm) which shall provide detailed
supporting calculations both to the Company and the Employee within ten (10) business days of the
receipt of notice from the Employee that there has been a Payment, or such
earlier time as is requested by the Company; provided that for purposes of determining the
amount of any reduction, the Employee shall be deemed to pay federal income tax at the highest
marginal rates applicable to individuals in the calendar year in which any such
All fees and expenses of the Accounting Firm shall be borne solely by the Company. If the
Accounting Firm determines that no excise tax is payable by the Employee, it shall so indicate to
the Employee in writing. Any determination by the Accounting Firm shall be binding upon the Company
and the Employee.
The Employee shall not be entitled to any notice of termination or pay in lieu thereof except
as included as part of Severance Pay as provided herein.
Severance Benefits under this Plan are paid entirely by the Company from its general assets.
This Plan is not a contract of employment, does not guarantee the Employee employment for any
specified period and does not limit the right of the Company to terminate the employment of the
Employee at any time.
If an Employee should die while any amount is still payable to the Employee hereunder had the
Employee continued to live, all such amounts shall be paid in accordance with this Plan to the
Employees designated heirs or, in the absence of such designation, to the Employees estate.
The numbered section headings contained in this Plan are included solely for convenience of
reference and shall not in any way affect the meaning of any provision of this Plan.
If, for any reason, any one or more of the provisions or part of a provision contained in this
Plan shall be held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision or part of a provision of this
Plan not held so invalid, illegal or unenforceable, and each other provision or part of a provision
shall to the full extent consistent with law remain in full force and effect.
The Plan shall be governed by and construed in accordance with the laws of the State of New
without regard to the conflicts of laws provisions thereof.
The Plan shall be binding on all successors and assigns of the Xylem and an Employee.
Any notice and all other communication provided for in this Plan shall be in writing and shall
be deemed to have been duly given when delivered by hand or overnight courier or three days after
it has been mailed by United States registered mail, return receipt requested, postage prepaid,
addressed to the respective 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 receipt.
If to the Company:
1133 Westchester Avenue, Suite 2000
White Plains, New York
Attention: General Counsel
If to Employee:
To the most recent address of Employee set forth in the personnel records of Xylem.
14. Adoption Date
This Plan was initially adopted by Xylem on October 31, 2011 (Adoption Date) and does not
apply to any termination of employment which occurred or which was communicated to the Employee
prior to the Adoption Date.
15. Section 409A
This Plan is intended to comply with Section 409A of the Code and will be interpreted in a
manner intended to comply with Section 409A of the Code. Notwithstanding anything herein to the
contrary, (i) if at the time of the Employees termination of employment with the Company the
Employee is a specified employee as defined in Section 409A of the Code (and any related
regulations or other pronouncements thereunder) and the deferral of the commencement of any
payments or benefits otherwise payable hereunder as a result of such termination of employment is
necessary in order to prevent any accelerated or additional tax under Section 409A of the Code,
then the Company will defer the commencement of the payment of any such payments or benefits
hereunder (without any reduction in such payments or benefits ultimately paid or provided to the
Employee) until the date that is six months following the Employees termination of employment with
the Company (or the earliest date as is permitted under
Section 409A of the Code), at which point all payments deferred pursuant to this Section 15
shall be paid to the Employee in a lump sum and (ii) if any other payments of money or other
benefits due hereunder could cause the application of an accelerated or additional tax under
Section 409A of the Code, such payments or other benefits shall be deferred if deferral will make
such payment or other benefits compliant under Section 409A of the Code, or otherwise such payment
or other benefits shall be restructured, to the extent possible, in a manner, determined by the
Company, that does not cause such an accelerated or additional tax. To the extent any
reimbursements or in-kind benefits due under this Plan constitute deferred compensation under
Section 409A of the Code, any such reimbursements or in-kind benefits shall be paid in a manner
consistent with Treas. Reg. Section 1.409A-3(i)(1)(iv). Each payment made under this Plan shall be
designated as a separate payment within the meaning of Section 409A of the Code. The Company
shall consult with Employees in good faith regarding the implementation of the
provisions of this section; provided that neither the Company nor any of its employees or
representatives shall have any liability to Employees with respect thereto.