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EXHIBIT 10.11
SEVERANCE AGREEMENT
THIS AGREEMENT, dated as of July 23, 1997, is made by and between
XXXXX XXXXXX INCORPORATED, a Delaware corporation (the "Company"), and XXXXXXXX
X'XXXXXXX, III (the "Executive").
WHEREAS, the Company considers it essential to the best interests of
its stockholders to xxxxxx the continued employment of key management personnel;
and
WHEREAS, the Board recognizes that, as is the case with many publicly
held corporations, the possibility of a Change in Control exists and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its stockholders; and
WHEREAS, the Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of
members of the Company's management, including the Executive, to their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:
1. Defined Terms. The definitions of capitalized terms used in this
Agreement are provided in the last Section hereof.
2. Term of Agreement. Subject to the provisions of Section 12.2
hereof, the Term of this Agreement shall commence on the date hereof and shall
continue in effect through December 31, 1999; provided, however, that commencing
on January 1, 1998 and each January 1 thereafter (an "Extension Date"), the Term
shall automatically be extended for one additional year (i.e., resulting in a
two-year Term on the Extension Date) unless, not later than September 30 of the
year preceding the Extension Date, the Company or the Executive shall have given
notice not to extend the Term; and further provided, however, that if a Change
in Control shall have occurred during the Term, the Term shall expire no earlier
than twenty-four (24) months beyond the month in which such Change in Control
occurred.
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3. Company's Covenants Summarized. In order to induce the Executive to
remain in the employ of the Company and in consideration of the Executive's
covenants set forth in Section 4 hereof, the Company agrees, under the
conditions described herein, to pay the Executive the Severance Payments and the
other payments and benefits described herein. Except as provided in Section 9.1
hereof, no Severance Payments shall be payable under this Agreement unless there
shall have been (or, under the terms of the second sentence of Section 6.1
hereof, there shall be deemed to have been) a termination of the Executive's
employment with the Company following a Change in Control and during the Term.
This Agreement shall not be construed as creating an express or implied contract
of employment and, except as otherwise agreed in writing between the Executive
and the Company, the Executive shall not have any right to be retained in the
employ of the Company.
4. The Executive's Covenants. The Executive agrees that, subject to
the terms and conditions of this Agreement, in the event of a Potential Change
in Control during the Term, the Executive will remain in the employ of the
Company until the earliest of (i) a date which is six (6) months from the date
of such Potential Change of Control, (ii) the date of a Change in Control, (iii)
the date of termination by the Executive of the Executive's employment for Good
Reason or by reason of death, Disability or Retirement, or (iv) the termination
by the Company of the Executive's employment for any reason.
5. Compensation Other Than Severance Payments.
5.1 Following a Change in Control and during the Term, during any
period that the Executive fails to perform the Executive's full-time duties with
the Company as a result of incapacity due to physical or mental illness, the
Company shall pay the Executive's full salary to the Executive at the rate in
effect at the commencement of any such period, together with all compensation
and benefits payable to the Executive under the terms of any compensation or
benefit plan, program or arrangement maintained by the Company during such
period, until the Executive's employment is terminated by the Company for
Disability.
5.2 If the Executive's employment shall be terminated for any reason
following a Change in Control and during the Term, the Company shall pay the
Executive's full salary to the Executive through the Date of Termination at the
rate in effect immediately prior to the Date of Termination or, if higher, the
rate in effect immediately prior to the first occurrence of
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an event or circumstance constituting Good Reason, together with all
compensation and benefits payable to the Executive through the Date of
Termination under the terms of the Company's compensation and benefit plans,
programs or arrangements as in effect immediately prior to the Date of
Termination or, if more favorable to the Executive, as in effect immediately
prior to the first occurrence of an event or circumstance constituting Good
Reason.
5.3 If the Executive's employment shall be terminated for any reason
following a Change in Control and during the Term, the Company shall pay to the
Executive the Executive's normal post-termination compensation and benefits as
such payments become due. Such post-termination compensation and benefits shall
be determined under, and paid in accordance with, the Company's retirement,
insurance and other compensation or benefit plans, programs and arrangements as
in effect immediately prior to the Date of Termination or, if more favorable to
the Executive, as in effect immediately prior to the occurrence of the first
event or circumstance constituting Good Reason.
5.4 Upon the occurrence of a Change in Control all options to acquire
shares of Company stock, all shares of restricted Company stock and all other
equity or phantom equity incentives held by the Executive under any plan of the
Company (including, but not limited to, the Company's 1995 Stock Award Plan (and
the Stock Matching Programs thereunder), 1993 Stock Option Plan, 1993 Stock
Bonus Plan and 1991 Stock Bonus Plan) shall become immediately vested,
exercisable and nonforfeitable and all conditions thereof (including, but not
limited to, any required holding periods) shall be deemed to have been
satisfied.
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6. Severance Payments.
6.1 If (i) the Executive's employment is terminated following a Change
in Control and during the Term, other than (A) by the Company for Cause, (B) by
reason of death or Disability, or (C) by the Executive without Good Reason, or
(ii) the Executive voluntarily terminates his employment for any reason during
the one-month period commencing on the first anniversary of the Change in
Control, then, the Company shall pay the Executive the amounts, and provide the
Executive the benefits, described in this Section 6.1 ("Severance Payments") and
Section 6.2, in addition to any payments and benefits to which the Executive is
entitled under Section 5 hereof. For purposes of this Agreement, the Executive's
employment shall be deemed to have been terminated following a Change in Control
by the Company without Cause or by the Executive with Good Reason, if (i) the
Executive's employment is terminated by the Company without Cause prior to a
Change in Control (whether or not a Change in Control ever occurs) and such
termination was at the request or direction of a Person who has entered into an
agreement with the Company the consummation of which would constitute a Change
in Control, (ii) the Executive terminates his employment for Good Reason prior
to a Change in Control (whether or not a Change in Control ever occurs) and the
circumstance or event which constitutes Good Reason occurs at the request or
direction of such Person described in clause (i), or (iii) the Executive's
employment is terminated by the Company without Cause or by the Executive for
Good Reason and such termination or the circumstance or event which constitutes
Good Reason is otherwise in connection with or in anticipation of a Change in
Control (whether or not a Change in Control ever occurs). For purposes of any
determination regarding the applicability of the immediately preceding sentence,
any position taken by the Executive shall be presumed to be correct unless the
Company establishes to the Committee by clear and convincing evidence that such
position is not correct.
(A) In lieu of any further salary payments to the Executive
for periods subsequent to the Date of Termination and in lieu of any
severance benefit otherwise payable to the Executive, the Company shall pay
to the Executive a lump sum severance payment, in cash, equal to three
times the sum of (i) the Executive's base salary as in effect immediately
prior to the Date of Termination or, if higher, in effect immediately prior
to the first occurrence of an event or circumstance constituting Good
Reason, and (ii) the average annual bonus earned by the Executive pursuant
to any annual bonus or incentive plan maintained by the Company in respect
of the three fiscal years ending immediately prior to the fiscal year in
which occurs the Date of Termination or, if higher, immediately prior to
the fiscal year in which occurs the first event or circumstance
constituting
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Good Reason; provided, that if the Executive has not participated in an
annual bonus or incentive plan maintained by the Company for the entirety
of such three-year period, the amount referred to in this clause (ii)
shall be calculated using such lesser number of bonuses as have been
actually earned by the Executive in respect of such lesser period.
(B) For the thirty-six (36) month period immediately
following the Date of Termination, the Company shall arrange to provide the
Executive and his dependents life, disability, accident and health
insurance benefits and perquisites (including, but not limited to,
executive life insurance, club memberships, financial planning and tax
preparation, annual physical examination and charitable contributions), in
each case, substantially similar to those provided to the Executive and his
dependents immediately prior to the Date of Termination or, if more
favorable to the Executive, those provided to the Executive and his
dependents immediately prior to the first occurrence of an event or
circumstance constituting Good Reason, at no greater cost to the Executive
than the cost to the Executive immediately prior to such date or
occurrence; provided, however, that, unless the Executive consents to a
different method (after taking into account the effect of such method on
the calculation of "parachute payments" pursuant to Section 6.2 hereof),
such health insurance benefits shall be provided through a third-party
insurer. Benefits otherwise receivable by the Executive pursuant to this
Section 6.1(B) shall be reduced to the extent benefits of the same type are
received by or made available to the Executive during the thirty-six (36)
month period following the Executive's termination of employment (and any
such benefits received by or made available to the Executive shall be
reported to the Company by the Executive); provided, however, that the
Company shall reimburse the Executive for the excess, if any, of the cost
of such benefits to the Executive over such cost immediately prior to the
Date of Termination or, if more favorable to the Executive, the first
occurrence of an event or circumstance constituting Good Reason.
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(C) Notwithstanding any provision of the Xxxxx Xxxxxx
Incorporated 1995 Employee Annual Incentive Compensation Plan (the "Annual
Incentive Plan"), the Company shall pay to the Executive a lump sum amount,
in cash, equal to the sum of (i) any unpaid incentive compensation which
has been allocated or awarded to the Executive for a completed fiscal year
or other measuring period preceding the Date of Termination under the
Annual Incentive Plan and which, as of the Date of Termination, is
contingent only upon the continued employment of the Executive to a
subsequent date, and (ii) a pro rata portion to the Date of Termination of
the aggregate value of all contingent incentive compensation awards to the
Executive for all then uncompleted periods under the Annual Incentive Plan,
calculated as to each such award by multiplying the award that the
Executive would have earned on the last day of the performance award
period, assuming the achievement, at the expected value target level, of
the individual and corporate performance goals established with respect to
such award, by the fraction obtained by dividing the number of full months
and any fractional portion of a month during such performance award period
through the Date of Termination by the total number of months contained in
such performance award period; provided, however, that if such termination
of employment occurs during the same year in which the Change in Control
occurs, the pro-rata bonus payment referred to in clause (ii) above shall
be offset by any payments received under the Annual Incentive Plan in
connection with such Change in Control.
(D) In addition to the retirement benefits to which the
Executive is entitled under the Company's Thrift Plan (the "Thrift Plan")
and the Company's Supplemental Retirement Plan (the "SRP"), the Company
shall pay the Executive a lump sum amount, in cash, equal to the present
value of the employer-provided contributions, deferrals and allocations the
Executive would have received had he continued to participate, after the
Date of Termination, in the Thrift Plan and the SRP for three (3)
additional years, assuming for this purpose that (i) the Executive earned
compensation for purposes of the Thrift Plan and SRP during such three-year
period the amount used to calculate the Executive's severance payment under
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subparagraph (A) of this Section 6.1, and (ii) the percentages of
contributions, deferrals and allocations made under the Thrift Plan and the
SRP by or on behalf of the Executive during such three-year period are the
same percentages of contributions, deferrals and allocations in effect on
the date of the Change in Control or the Date of Termination, whichever is
more favorable to the Executive.
(E) If the Executive would have become entitled to benefits
under the Company's post-retirement health care or life insurance plans, as
in effect immediately prior to the Date of Termination or, if more
favorable to the Executive, as in effect immediately prior to the first
occurrence of an event or circumstance constituting Good Reason, had the
Executive's employment terminated at any time during the period of
thirty-six (36) months after the Date of Termination, the Company shall
provide such post-retirement health care or life insurance benefits to the
Executive and the Executive's dependents commencing on the later of (i) the
date on which such coverage would have first become available and (ii) the
date on which benefits described in subsection (B) of this Section 6.1
terminate.
(F) The Company shall provide the Executive with
outplacement services suitable to the Executive's position for a period of
three years or, if earlier, until the first acceptance by the Executive of
an offer of employment.
6.2 (A) Whether or not the Executive becomes entitled to the Severance
Payments, if any of the payments or benefits received or to be received by the
Executive in connection with a Change in Control or the Executive's termination
of employment (whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company, any Person whose actions result
in a Change in Control or any Person affiliated with the Company or such Person)
(such payments or benefits, excluding the Gross-Up Payment, being hereinafter
referred to as the "Total Payments") will be subject to the Excise Tax, the
Company shall pay to the Executive an additional amount (the "Gross-Up Payment")
such that the net amount retained by the Executive, after deduction of any
Excise Tax on the Total Payments and any federal, state and local income and
employment taxes and Excise Tax upon the Gross-Up Payment, shall be equal to the
Total Payments.
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(B) For purposes of determining whether any of the Total Payments
will be subject to the Excise Tax and the amount of such Excise Tax, (i) all of
the Total Payments shall be treated as "parachute payments" (within the meaning
of section 280G(b)(2) of the Code) unless, in the opinion of tax counsel ("Tax
Counsel") reasonably acceptable to the Executive and selected by the accounting
firm which was, immediately prior to the Change in Control, the Company's
independent auditor (the "Auditor"), such payments or benefits (in whole or in
part) do not constitute parachute payments, including by reason of section
280G(b)(4)(A) of the Code, (ii) all "excess parachute payments" within the
meaning of section 280G(b)(l) of the Code shall be treated as subject to the
Excise Tax unless, in the opinion of Tax Counsel, such excess parachute payments
(in whole or in part) represent reasonable compensation for services actually
rendered (within the meaning of section 280G(b)(4)(B) of the Code) in excess of
the Base Amount allocable to such reasonable compensation, or are otherwise not
subject to the Excise Tax, and (iii) the value of any noncash benefits or any
deferred payment or benefit shall be determined by the Auditor in accordance
with the principles of sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, the Executive shall be deemed to
pay federal income tax at the highest marginal rate of federal income taxation
in the calendar year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rate of taxation in the state and
locality of the Executive's residence on the Date of Termination (or if there is
no Date of Termination, then the date on which the Gross-Up Payment is
calculated for purposes of this Section 6.2), net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state and
local taxes.
(C) In the event that the Excise Tax is finally determined to be
less than the amount taken into account hereunder in calculating the Gross-Up
Payment, the Executive shall repay to the Company, within five (5) business days
following the time that the amount of such reduction in the Excise Tax is
finally determined, the portion of the Gross-Up Payment attributable to such
reduction (plus that portion of the Gross-Up Payment attributable to the Excise
Tax and federal, state and local income and employment taxes imposed on the
Gross-Up Payment being repaid by the Executive, to the extent that such
repayment results in a reduction in the Excise Tax and a dollar-for-dollar
reduction in the Executive's taxable income and wages for purposes of federal,
state and local income and employment taxes, plus interest
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on the amount of such repayment at 120% of the rate provided in section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to
exceed the amount taken into account hereunder in calculating the Gross- Up
Payment (including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment in respect of such excess (plus any
interest, penalties or additions payable by the Executive with respect to such
excess) within five (5) business days following the time that the amount of such
excess is finally determined. The Executive and the Company shall each
reasonably cooperate with the other in connection with any administrative or
judicial proceedings concerning the existence or amount of liability for Excise
Tax with respect to the Total Payments.
6.3 The payments provided in subsections (A), (C) and (D) of Section
6.1 hereof and in Section 6.2 hereof shall be made not later than the fifth day
following the Date of Termination; provided, however, that if the amounts of
such payments cannot be finally determined on or before such day, the Company
shall pay to the Executive on such day an estimate, as determined in good faith
by the Executive or, in the case of payments under Section 6.2 hereof, in
accordance with Section 6.2 hereof, of the minimum amount of such payments to
which the Executive is clearly entitled and shall pay the remainder of such
payments (together with interest on the unpaid remainder (or on all such
payments to the extent the Company fails to make such payments when due) at 120%
of the rate provided in section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined but in no event later than the thirtieth (30th) day
after the Date of Termination. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to the Executive, payable on the
fifth (5th) business day after demand by the Company (together with interest at
120% of the rate provided in section 1274(b)(2)(B) of the Code), but only to the
extent such amount has not been paid by the Executive pursuant to Section 6.2(C)
above. At the time that payments are made under this Agreement, the Company
shall provide the Executive with a written statement setting forth the manner in
which such payments were calculated and the basis for such calculations
including, without limitation, any opinions or other advice the Company has
received from Tax Counsel, the Auditor or other advisors or consultants (and any
such opinions or advice which are in writing shall be attached to the
statement).
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6.4 The Company also shall pay to the Executive all legal fees and
expenses incurred by the Executive in disputing in good faith any issue
hereunder relating to the termination of the Executive's employment, in seeking
in good faith to obtain or enforce any benefit or right provided by this
Agreement or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any payment or
benefit provided hereunder. Such payments shall be made within five (5) business
days after delivery of the Executive's written requests for payment accompanied
with such evidence of fees and expenses incurred as the Company reasonably may
require.
Termination Procedures and Compensation During Dispute.
7.1 Notice of Termination. After a Change in Control and during the
Term, any purported termination of the Executive's employment (other than by
reason of death) shall be communicated by written Notice of Termination from one
party hereto to the other party hereto in accordance with Section 10 hereof. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under the
provision so indicated. Further, a Notice of Termination for Cause is required
to include a copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board which was called and held for the purpose of considering
such termination (after reasonable notice to the Executive and an opportunity
for the Executive, together with the Executive's counsel, to be heard before the
Board) finding that, in the good faith opinion of the Board, the Executive was
guilty of conduct set forth in clause (i) or (ii) of the definition of Cause
herein, and specifying the particulars thereof in detail.
7.2 Date of Termination. "Date of Termination," with respect to any
purported termination of the Executive's employment after a Change in Control
and during the Term, shall mean (i) if the Executive's employment is terminated
for Disability, thirty (30) days after Notice of Termination is given (provided
that the Executive shall not have returned to the full-time performance of the
Executive's duties during such thirty (30) day period), and (ii) if
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the Executive's employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a termination by
the Company, shall not be less than thirty (30) days (except in the case of a
termination for Cause) and, in the case of a termination by the Executive, shall
not be less than fifteen (15) days nor more than sixty (60) days, respectively,
from the date such Notice of Termination is given).
7.3 Dispute Concerning Termination. If within fifteen (15) days after
any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be extended
until the earlier of (i) the date on which the Term ends or (ii) the date on
which the dispute is finally resolved, either by mutual written agreement of the
parties or by a final judgment, order or decree of an arbitrator or a court of
competent jurisdiction (which is not appealable or with respect to which the
time for appeal therefrom has expired and no appeal has been perfected);
provided, however, that the Date of Termination shall be extended by a notice of
dispute given by the Executive only if such notice is given in good faith and
the Executive pursues the resolution of such dispute with reasonable diligence.
7.4 Compensation During Dispute. If a purported termination occurs
following a Change in Control and during the Term and the Date of Termination is
extended in accordance with Section 7.3 hereof, the Company shall continue to
pay the Executive the full compensation in effect when the notice giving rise to
the dispute was given (including, but not limited to, salary) and continue the
Executive as a participant in all compensation, benefit and insurance plans in
which the Executive was participating when the notice giving rise to the dispute
was given or those plans in which the Executive was participating immediately
prior to the first occurrence of an event or circumstance giving rise to the
Notice of Termination, if more favorable to the Executive, until the Date of
Termination, as determined in accordance with Section 7.3 hereof. Amounts paid
under this Section 7.4 are in addition to all other amounts due under this
Agreement (other than those due under Section 5.2 hereof) and shall not be
offset against or reduce any other amounts due under this Agreement.
8. No Mitigation. The Company agrees that, if the Executive's
employment with the Company terminates during the Term, the Executive is not
requiqred to seek other
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employment or to attempt in any way to reduce any amounts payable to the
Executive by the Company pursuant to Sections 5, 6 or 7.4 hereof. Further, the
amount of any payment or benefit provided for in this Agreement (other than
Section 6.1(B) hereof but including (but not limited to) Section 7.4 hereof)
shall not be reduced by any compensation earned by the Executive as the result
of employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by the Executive to the Company, or otherwise.
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by law upon any successor
to the Company, the Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
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
had taken place. Failure of the Company to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation from the Company in
the same amount and on the same terms as the Executive would be entitled to
hereunder if the Executive were to terminate the Executive's employment for Good
Reason after a Change in Control, except that, for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination.
9.2 This Agreement shall inure to the benefit of and be enforceable by
the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive shall
die while any amount would still be payable to the Executive hereunder (other
than amounts which, by their terms, terminate upon the death of the Executive)
if the Executive had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
the executors, personal representatives or administrators of the Executive's
estate.
10. Notices. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed, if to the
Executive, to the address inserted below the
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Executive's signature on the final page hereof and, if to the Company, to the
address set forth below, or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that notice of
change of address shall be effective only upon actual receipt:
To the Company:
0000 Xxxxx Xxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: General Counsel
11. Miscellaneous. Except as otherwise specifically provided in
Section 12.2 below, no provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
and signed by the Executive and such officer as may be specifically designated
by the Board. No waiver by either party hereto at any time of any breach by the
other party hereto of, or of any lack of 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. This Agreement supersedes any other agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof which have been made by either party; provided, however,
that this Agreement shall supersede any agreement setting forth the terms and
conditions of the Executive's employment with the Company only in the event that
the Executive's employment with the Company is terminated on or following a
Change in Control, by the Company other than for Cause or by the Executive other
than for Good Reason; and provided further that all agreements otherwise
superseded by this Agreement shall be automatically reinstated with full force
and effect to the extent this Agreement is terminated or otherwise rendered
inapplicable or amended in accordance with Section 12.2 hereof. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Texas. All references to sections of the Exchange
Act or the Code shall be deemed also to refer to any successor provisions to
such sections. Any payments provided for hereunder shall be paid net of any
applicable withholding
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required under federal, state or local law and any additional withholding to
which the Executive has agreed. The obligations of the Company and the Executive
under this Agreement which by their nature may require either partial or total
performance after the expiration of the Term (including, without limitation,
those under Sections 6 and 7 hereof) shall survive such expiration.
12. Validity; Pooling.
12.1 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.
12.2 Pooling. In the event that (A) the Company is party to a
transaction which is otherwise intended to qualify for "pooling of interests"
accounting treatment, (B) such transaction constitutes a Change in Control
within the meaning of Section 15(G)(III) and (C) individuals who satisfy the
requirements in clauses (i) and (ii) below constitute more than two-thirds (2/3)
of the number of directors of the entity surviving such transaction and the
parent thereof, if any: individuals who (i) immediately prior to such
transaction constitute the Board and (ii) on the date hereof constitute the
Board and any new director (other than a director whose initial assumption of
office is in connection with an actual or threatened election contest relating
to the election of directors of the Company) whose appointment or election by
the Board or nomination for election by the Company's stockholders was approved
or recommended, by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors on the date hereof or whose
appointment, election or nomination for election was previously so approved or
recommended then (a) this Agreement shall, to the extent practicable, be
interpreted so as to permit such accounting treatment, and (b) to the extent
that the application of clause (a) of this Section 12.2 does not preserve the
availability of such accounting treatment, then, to the extent that any
provision or combination of provisions of the Agreement disqualifies the
transaction as a "pooling" transaction (including, if applicable, the entire
Agreement), the Board shall have the right, by sending written notice to the
Executive prior to the Change in Control, to unilaterally amend (without the
consent of the Executive) such provision or provisions if and to the extent
necessary (including declaring such provision or provisions to be null and void
as of the date hereof) so that such transaction may be
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accounted for as a "pooling of interests." All determinations under this Section
12.2 shall be made by the Board prior to the Change in Control, based upon the
advice of the accounting firm whose opinion with respect to "pooling of
interests" is required as a condition to the consummation of such transaction.
13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. Settlement of Disputes; Arbitration.
14.1 All claims by the Executive for benefits under this Agreement
shall be directed to and determined by the Committee and shall be in writing.
Any denial by the Committee of a claim for benefits under this Agreement shall
be delivered to the Executive in writing within thirty (30) days after written
notice of the claim is provided to the Company in accordance with Section 10
and shall set forth the specific reasons for the denial and the specific
provisions of this Agreement relied upon. The Committee shall afford a
reasonable opportunity to the Executive for a review of the decision denying a
claim and shall further allow the Executive to appeal to the Committee a
decision of the Committee within sixty (60) days after notification by the
Committee that the Executive's claim has been denied.
14.2 Any further dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Houston, Texas in accordance with the rules of the American Arbitration
Association then in effect; provided, however, that the evidentiary standards
set forth in this Agreement shall apply. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. Notwithstanding any
provision of this Agreement to the contrary, the Executive shall be entitled to
seek specific performance of the Executive's right to be paid until the Date of
Termination during the pendency of any dispute or controversy arising under or
in connection with this Agreement.
15. Definitions. For purposes of this Agreement, the following
terms shall have the meanings indicated below:
(A) "Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under Section 12 of the Exchange Act.
(B) "Auditor" shall have the meaning set forth in Section 6.2 hereof.
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(C) "Base Amount" shall have the meaning set forth in section
280G(b)(3) of the Code.
(D) "Beneficial Owner" shall have the meaning set forth in Rule 13d-3
under the Exchange Act.
(E) "Board" shall mean the Board of Directors of the Company.
(F) "Cause" for termination by the Company of the Executive's
employment shall mean (i) the willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company (other than any
such failure resulting from the Executive's incapacity due to physical or mental
illness or any such actual or anticipated failure after the issuance of a Notice
of Termination for Good Reason by the Executive pursuant to Section 7.1 hereof)
after a written demand for substantial performance is delivered to the Executive
by the Board, which demand specifically identifies the manner in which the Board
believes that the Executive has not substantially performed the Executive's
duties, or (ii) the willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company or its subsidiaries,
monetarily or otherwise. For purposes of clauses (i) and (ii) of this
definition, (x) no act, or failure to act, on the Executive's part shall be
deemed "willful" unless done, or omitted to be done, by the Executive not in
good faith and without reasonable belief that the Executive's act, or failure to
act, was in the best interest of the Company and (y) in the event of a dispute
concerning the application of this provision, no claim by the Company that Cause
exists shall be given effect unless the Company establishes to the Committee by
clear and convincing evidence that Cause exists.
(G) A "Change in Control" shall be deemed to have occurred if the
event set forth in any one of the following paragraphs shall have occurred:
(I) any Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company (not including in
the securities beneficially owned by such Person any securities
acquired directly from the Company or its affiliates) representing 20%
or more of the combined voting power of the Company's then outstanding
securities, excluding any Person who becomes such a Beneficial Owner
in connection with a transaction described in clause (i) of
paragraph (III) below; or
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(II) the following individuals cease for any reason to
constitute a majority of the number of directors then serving:
individuals who, on the date hereof, constitute the Board and any new
director (other than a director whose initial assumption of office is
in connection with an actual or threatened election contest relating
to the election of directors of the Company) whose appointment or
election by the Board or nomination for election by the Company's
stockholders was approved or recommended by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors on the date hereof or whose appointment, election or
nomination for election was previously so approved or recommended; or
(III) there is consummated a merger or consolidation of
the Company or any direct or indirect subsidiary of the Company with
any other corporation, other than (i) a merger or consolidation which
would result in the voting securities of the Company outstanding
immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity or any parent thereof), in
combination with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of the Company or
any subsidiary of the Company, at least 65% of the combined voting
power of the securities of the Company or such surviving entity or any
parent thereof outstanding immediately after such merger or
consolidation, or (ii) a merger or consolidation effected to implement
a recapitalization of the Company (or similar transaction) in which no
Person is or becomes the Beneficial Owner, directly or indirectly, of
securities of the Company (not including in the securities
Beneficially Owned by such Person any securities acquired directly
from the Company or its Affiliates other than in connection with the
acquisition by the Company or its Affiliates of a business)
representing 20% or more of the combined voting power of the
Company's then outstanding securities; or
(IV) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company or there is
consummated
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an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets, other than a sale or
disposition by the Company of all or substantially all of the
Company's assets to an entity, at least 65% of the combined voting
power of the voting securities of which are owned by stockholders of
the Company in substantially the same proportions as their ownership
of the Company immediately prior to such sale.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have
occurred by virtue of the consummation of any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity which owns all or substantially all of the assets of the Company
immediately following such transaction or series of transactions.
(H) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(I) "Committee" shall mean (i) the individuals (not fewer than three
in number) who, on the date six months before a Change in Control, constitute
the Compensation Committee of the Board, plus (ii) in the event that fewer than
three individuals are available from the group specified in clause (i) above for
any reason, such individuals as may be appointed by the individual or
individuals so available (including for this purpose any individual or
individuals previously so appointed under this clause (ii)); provided, however,
that the maximum number of individuals constituting the Committee shall not
exceed six (6).
(J) "Company" shall mean Xxxxx Xxxxxx Incorporated and, except in
determining under Section 15(G) hereof whether or not any Change in Control of
the Company has occurred, shall include any successor to its business and/or
assets which assumes and agrees to perform this Agreement by operation of law,
or otherwise.
(K) "Date of Termination" shall have the meaning set forth in Section
7.2 hereof.
(L) "Disability" shall be deemed the reason for the termination by the
Company of the Executive's employment, if, as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from the full-time performance
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of the Executive's duties with the Company for a period of six (6) consecutive
months, the Company shall have given the Executive a Notice of Termination for
Disability, and, within thirty (30) days after such Notice of Termination is
given, the Executive shall not have returned to the full-time performance of the
Executive's duties.
(M) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(N) "Excise Tax" shall mean any excise tax imposed under section 4999
of the Code.
(O) "Executive" shall mean the individual named in the first paragraph
of this Agreement.
(P) "Extension Date" shall have the meaning set forth in Section 2
hereof.
(Q) "Good Reason" for termination by the Executive of the Executive's
employment shall mean the occurrence (without the Executive's express written
consent) after any Change in Control, or prior to a Change in Control under the
circumstances described in clauses (ii) and (iii) of the second sentence of
Section 6.1 hereof (treating all references in paragraphs (I) through (VII)
below to a "Change in Control" as references to a "Potential Change in
Control"), of any one of the following acts by the Company, or failures by the
Company to act, unless, in the case of any act or failure to act described in
paragraph (I), (V), (VI) or (VII) below, such act or failure to act is corrected
prior to the Date of Termination specified in the Notice of Termination given in
respect thereof:
(I) the assignment to the Executive of any duties
inconsistent with the Executive's status as a senior executive officer
of the Company or a substantial adverse alteration in the nature or
status of the Executive's responsibilities from those in effect
immediately prior to the Change in Control;
(II) a reduction by the Company in the Executive's annual
base salary as in effect on the date hereof or as the same may be
increased from time to time except for across-the-board salary
reductions similarly affecting all senior executives of the Company
and all senior executives of any Person in control of the Company;
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(III) the relocation of the Executive's principal place of
employment to a location more than 50 miles from the Executive's
principal place of employment immediately prior to the Change in
Control or the Company's requiring the Executive to be based anywhere
other than such principal place of employment (or permitted relocation
thereof) except for required travel on the Company's business to an
extent substantially consistent with the Executive's present business
travel obligations;
(IV) the failure by the Company to pay to the Executive any
portion of the Executive's current compensation except pursuant to an
across-the-board compensation deferral similarly affecting all senior
executives of the Company and all senior executives of any Person in
control of the Company, or to pay to the Executive any portion of an
installment of deferred compensation under any deferred compensation
program of the Company, within seven (7) days of the date such
compensation is due;
(V) the failure by the Company to continue in effect any
compensation plan in which the Executive participates immediately
prior to the Change in Control which is material to the Executive's
total compensation, including but not limited to the Company's 1993
Stock Option Plan, 1993 Employee Stock Bonus Plan, 1991 Employee Stock
Bonus Plan, 1995 Stock Award Plan (and the 1995, 1996 and 1997 Stock
Matching Programs thereunder and any subsequent Stock Matching
Programs in which the Executive participates), 1987 Convertible
Debenture Plan and 1995 Employee Annual Incentive Compensation Plan or
any substitute plans adopted prior to the Change in Control, unless an
equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such plan, or the
failure by the Company to continue the Executive's participation
therein (or in such substitute or alternative plan) on a basis not
materially less favorable, both in terms of the amount or timing of
payment of benefits provided and the level of the Executive's
participation relative to other participants, as existed immediately
prior to the Change in Control;
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(VI) the failure by the Company to continue to provide the
Executive with benefits substantially similar to those enjoyed by the
Executive under any of the Company's pension, savings, life insurance,
medical, health and accident, or disability plans in which the
Executive was participating immediately prior to the Change in Control
(except for across the board changes similarly affecting all senior
executives of the Company and all senior executives of any Person in
control of the Company), the taking of any other action by the Company
which would directly or indirectly materially reduce any of such
benefits or deprive the Executive of any material fringe benefit or
perquisite enjoyed by the Executive at the time of the Change in
Control, or the failure by the Company to provide the Executive with
the number of paid vacation days to which the Executive is entitled on
the basis of years of service with the Company in accordance with the
Company's normal vacation policy in effect at the time of the Change
in Control; or
(VII) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 7.1 hereof; for purposes of
this Agreement, no such purported termination shall be effective.
The Executive's right to terminate the Executive's employment for Good
Reason shall not be affected by the Executive's incapacity due to physical or
mental illness. The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.
For purposes of any determination regarding the existence of Good
Reason, any claim by the Executive that Good Reason exists shall be presumed to
be correct unless the Company establishes to the Committee by clear and
convincing evidence that Good Reason does not exist.
(R) "Gross-Up Payment" shall have the meaning set forth in Section 6.2
hereof.
(S) "Notice of Termination" shall have the meaning set forth in
Section 7.1 hereof.
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(T) "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except
that such term shall not include (i) the Company or any of its subsidiaries,
(ii) a trustee or other fiduciary holding securities under an employee benefit
plan of the Company or any of its Affiliates, (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company.
(U) "Potential Change in Control" shall be deemed to have occurred if
the event set forth in any one of the following paragraphs shall have occurred:
(I) the Company enters into an agreement, the consummation
of which would result in the occurrence of a Change in Control;
(II) the Company or any Person publicly announces an
intention to take or to consider taking actions which, if consummated,
would constitute a Change in Control;
(III) any Person becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing 15% or more of
either the then outstanding shares of common stock of the Company or
the combined voting power of the Company's then outstanding securities
(not including in the securities beneficially owned by such Person any
securities acquired directly from the Company or its affiliates); or
(IV) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control has
occurred.
(V) "Retirement" shall, for purposes of Section 4 hereof, be deemed
the reason for the termination by the Executive of the Executive's employment if
such employment is terminated after completion of ten (10) years of service with
the Company and attainment of age fifty-five (55).
(W) "Severance Payments" shall have the meaning set forth in Section
6.1 hereof.
(X) "SRP" shall have the meaning set forth in Section 6.1 hereof.
(Y) "Tax Counsel" shall have the meaning set forth in Section 6.2
hereof.
(Z) "Term" shall mean the period of time described in Section 2 hereof
(including any extension, continuation or termination described therein).
(AA) "Thrift Plan" shall have the meaning set forth in Section 6.1
hereof.
(BB) "Total Payments" shall mean those payments so described in
Section 6.2 hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date above first written.
XXXXX XXXXXX INCORPORATED
By: /s/ XXXX X. XXXXX
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Xxxx X. Xxxxx
Chairman - Compensation Committee
of the Board of Directors
EXECUTIVE:
/s/ XXXXXXXX X'XXXXXXX, III
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XXXXXXXX X'XXXXXXX, III
Address:
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(Please print carefully)
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