EXHIBIT 10.21
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS AGREEMENT, dated as of September 2, 2002, is made by and between
XXXXXX HOLDINGS, INC., a Delaware corporation (the "Company"), and Xxxxxxx Xxx
(the "Executive"). The capitalized words and terms used throughout this
Agreement are defined in Article XIII.
RECITALS
A. The Company considers it essential to the best interests of
its shareholders to xxxxxx the continuous employment of key management
personnel.
B. The Board recognizes that, as is the case with many
publicly held corporations, the possibility of a Change in Control exists and
that such a possibility, and the uncertainty and questions that it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its shareholders.
C. 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.
D. The parties intend that no amount or benefit will be
payable under this Agreement unless a termination of the Executive's employment
with the Company occurs following a Change in Control or is deemed to have
occurred following a Change in Control as provided in this Agreement.
AGREEMENT
In consideration of the premises and the mutual covenants and
agreements set forth below, the Company and the Executive agree as follows:
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ARTICLE I
TERM OF AGREEMENT
This Agreement will commence on the date stated above and will continue
in effect through December 31, 2003. Beginning on January 1, 2004, and each
subsequent January 1, the term of this Agreement will automatically be extended
for one additional year, unless either party gives the other party written
notice not to extend this Agreement at least 30 days before the extension would
otherwise become effective or unless a Change in Control occurs. If a Change in
Control occurs during the term of this Agreement, this Agreement will continue
in effect for a period of 24 months from the end of the month in which the
Change in Control occurs. Notwithstanding the foregoing provisions of this
Article, this Agreement will terminate on the Executive's Retirement Date.
ARTICLE II
COMPENSATION OTHER THAN SEVERANCE PAYMENTS
SECTION 2.01. Disability Benefits. Following a Change in Control and
during the term of this Agreement, during any period that the Executive fails to
perform the Executive's full-time duties with the Company as a result of
Disability, the Executive will receive short-term and long-term disability
benefits no less favorable than those provided under the terms of the Company's
short-term and long-term disability plans as in effect immediately prior to the
Change in Control, together with all other compensation and benefits payable to
the Executive pursuant to the terms of any compensation or benefit plan,
program, or arrangement maintained by the Company during the period of
Disability.
SECTION 2.02. Compensation Previously Earned. If the Executive's
employment is terminated for any reason following a Change in Control and during
the term of
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this Agreement, the Company will pay the Executive's salary accrued through the
Date of Termination, at the rate in effect at the time the Notice of Termination
is given, together with all other compensation and benefits payable to the
Executive through the Date of Termination (including, without limitation, any
incentive compensation amounts owed the Executive for a completed calendar year
to the extent not yet paid) under the terms of any compensation or benefit plan,
program, or arrangement maintained by the Company during that period.
SECTION 2.03. Normal Post-Termination Compensation and Benefits. Except
as provided in Section 3.01, if the Executive's employment is terminated for any
reason following a Change in Control and during the term of this Agreement, the
Company will pay the Executive the normal post-termination compensation and
benefits payable to the Executive under the terms of the Company's retirement,
insurance, and other compensation or benefit plans, programs, and arrangements,
as in effect immediately prior to the Change in Control. This provision does not
restrict the Company's right to amend, modify, or terminate any plan, program,
or arrangement prior to a Change in Control.
SECTION 2.04. No Duplication. Notwithstanding any other provision of
this Agreement to the contrary, the Executive will not be entitled to duplicate
benefits or compensation under this Agreement and the terms of any other plan,
program, or arrangement maintained by the Company or any affiliate.
ARTICLE III
SEVERANCE PAYMENTS
SECTION 3.01. Payment Triggers.
(a) In lieu of any other severance compensation or benefits to
which the Executive may otherwise be entitled under any plan, program, policy,
or arrangement of the
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Company (and which the Executive hereby expressly waives), the Company will pay
the Executive the Severance Payments described in Section 3.02 upon termination
of the Executive's employment following a Change in Control and during the term
of this Agreement, in addition to the payments and benefits described in Article
II, unless the termination is (1) by the Company for Cause, (2) by reason of the
Executive's death, or (3) by the Executive without Good Reason.
(b) For purposes of this Section 3.01, the Executive's
employment will be deemed to have been terminated following a Change in Control
by the Company without Cause or by the Executive with Good Reason if (1) the
Executive's employment is terminated without Cause prior to a Change in Control
at the direction of a Person who has entered into an agreement with the Company,
the consummation of which will constitute a Change in Control; or (2) the
Executive terminates his employment with Good Reason prior to a Change in
Control (determined by treating a Potential Change in Control as a Change in
Control in applying the definition of Good Reason), if the circumstance or event
that constitutes Good Reason occurs at the direction of such a Person.
(c) The Severance Payments described in this Article III are
subject to the conditions stated in Article VI.
SECTION 3.02. Severance Payments. The following are the Severance
Payments referenced in Section 3.01:
(a) Lump Sum Severance Payment. In lieu of any further salary
payments to the Executive for periods after the Dateof Termination, and in lieu
of any severance benefits otherwise payable to the Executive, the Company will
pay to the Executive a lump sum severance payment, in cash, equal to two (or, if
less, the number of years, including fractions, from the Date of Termination
until the Executive reaches his Retirement Date), times the sum of
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(1) the higher of the Executive's annual base salary in effect immediately prior
to the event or circumstance upon which the Notice of Termination is based or in
effect immediately prior to the Change in Control, and (2) the amount of the
Executive's target annual bonus entitlement under the Incentive Plan (or any
other bonus plan of the Company then in effect) as in effect immediately prior
to the event or circumstance giving rise to the Notice of Termination. If the
Board determines that it is not workable to determine the amount that the
Executive's target bonus would have been for the year in which the Notice of
Termination was given, then, for purposes of this paragraph (a), the Executive's
target annual bonus entitlement will be the amount of the largest aggregate
annual bonus paid to the Executive with respect to the three years immediately
prior to the year in which the Notice of Termination was given.
(b) Incentive Compensation. Notwithstanding any provision of the
Incentive Plan or any other compensation or incentive plans of the Company, the
Company will pay to the Executive a lump sum amount, in cash, equal to the sum
of (1) any incentive compensation that has been allocated or awarded to the
Executive for a completed calendar year or other measuring period preceding the
Date of Termination ( to the extent not payable pursuant to Section 2.02), and
(2) a pro rata portion (based on elapsed time) to the Date of Termination of the
aggregate value of all contingent incentive compensation awards to the Executive
for the current calendar year or other measuring period under the Incentive
Plan, the Award Plan, or any other compensation or incentive plans of the
Company, calculated as to each such plan using the Executive's annual target
percentage under that plan for that year or other measuring period and as if all
conditions for receiving that target award had been met.
(c) Options and Restricted Shares. All outstanding Options will
becomeimmediately vested and exercisable (to the extent not yet vested and
exercisable as of the Date of
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Termination). To the extent not otherwise provided under the written agreement
evidencing the grant of any restricted Shares to the Executive, all outstanding
Shares that have been granted to the Executive subject to restrictions that, as
of the Date of Termination, have not yet lapsed will lapse automatically upon
the Date of Termination, and the Executive will own those Shares free and clear
of all such restrictions.
(d) Additional Pension Benefit. In addition to the retirement
benefitsto which the Executive is entitled under the Retirement Plan and BEP, or
any successors to those plans, the Company will pay the Executive an additional
amount under the BEP (or a successor plan) equal to the excess of (1) over (2),
where (1) is the retirement pension (determined as a straight life annuity
commencing on the Executive's Retirement Date) that the Executive would have
accrued under the terms of the Retirement Plan and BEP (without regard to any
amendment to the Retirement Plan or BEP that is made subsequent to a Change in
Control and on or prior to the Date of Termination and that adversely affects in
any manner the computation of the Executive's retirement benefits), determined
as if the Executive (a) were fully vested under the Retirement Plan and the BEP,
and (b) had accumulated (after the Date of Termination) 24 additional months of
age and service credit under the Retirement Plan and the BEP at the higher of
(i) the Executive's highest annual rate of compensation (as compensation is
defined for purposes of the BEP) in effect during the three years immediately
preceding the Date of Termination, or (ii) the sum of the Executive's annual
salary and target annual bonus in effect immediately prior to the Change in
Control (but in no event will the Executive be deemed to have accumulated
additional service credit in excess of the maximum permitted pursuant to the
Retirement Plan and BEP); and (2) is the retirement pension (determined as a
straight life annuity commencing on the Executive's Retirement Date) that the
Executive had then accrued pursuant to the respective
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provisions of the Retirement Plan and BEP. This additional amount will be paid
in the form and at the time or times that the relevant benefits are payable to
the Executive under the BEP or any successor plan; provided, however, that if
the transaction constituting the Change in Control has not been approved by the
Board prior to its consummation, the actuarial equivalent of the additional
benefits under this Section 3.02(d) will be paid in a cash lump sum. The
Executive understands and acknowledges that the additional retirement benefit
described in this Section 3.02(d) is payable entirely under the BEP, a
nonqualified plan, and will not be subject to any special tax treatment
applicable to benefits under the Retirement Plan and other tax-qualified plans.
(e) Welfare Benefits. Except as otherwise provided in this Section
3.02(e), for a 24-month period after the Date of Termination, the Company will
arrange to provide the Executive with life and health (including medical and
dental) insurance benefits and perquisites substantially similar to those that
the Executive is receiving immediately prior to the Notice of Termination
(without giving effect to any reduction in those benefits subsequent to a Change
in Control). Benefits and perquisites otherwise receivable by the Executive
pursuant to this Section 3.02(e) will be reduced to the extent comparable
benefits are actually received by or made available to the Executive without
greater cost to him than as provided by the Company during the 24-month period
following the Executive's termination of employment (and the Executive will
report to the Company any such benefits actually received by or made available
to the Executive).
If, as of the Date of Termination, the Company reasonably determines
that the continued life insurance coverage required by this Section 3.02(e) is
not available from the Company's group insurance carrier, cannot be procured
from another carrier, and cannot be
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provided on a self-insured basis without adverse tax consequences to the
Executive or his death beneficiary, then, in lieu of continued life insurance
coverage, the Company will pay the Executive a lump sum payment, in cash, equal
to 24 times the full monthly premium payable to the Company's group insurance
carrier for comparable coverage for an executive employee under the Company's
group life insurance plan then in effect. If, as of the Date of Termination,
the Company reasonably determines that the continued medical and dental
coverage required by this Section 3.02(e) cannot be provided without violating
applicable nondiscrimination requirements under the Code, then, in lieu of the
continued medical and dental coverage, the Company will pay the Executive a
lump sum payment, in cash, equal to 24 times the monthly premium then charged
to qualified beneficiaries for full family COBRA continuation coverage under
the Company's medical and dental plans.
(f) Matching Contributions. In addition to the vested amounts, if
any,to which the Executive is entitled under the Savings Plan as of the Date of
Termination, the Company will pay the Executive a lump sum amount equal to the
value of the unvested portion, if any, of the employer matching contributions
(and attributable earnings) credited to the Executive under the Savings Plan.
(g) Outplacement Services. The Company will provide the Executive
withreasonable outplacement services consistent with past practices of the
Company prior to the Change in Control or, if no past practice has been
established prior to the Change in Control, consistent with the prevailing
practice in the medical device manufacturing industry.
SECTION 3.03. Gross-Up Payment.
(a) In the event that any Severance Payments paid or payable to
the Executive or for his benefit pursuant to the terms of this Agreement or
otherwise in connection with a
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Change in Control (" Total Payments") would be subject to any Excise Tax, then
the Executive will be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after the Executive's payment of all taxes
(including any interest, penalties, additional tax, or similar items imposed
with respect to the Gross-Up Payment and the Excise Tax), including any Excise
Tax upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Total Payments.
(b) An initial determination as to whether a Gross-Up Payment is
required pursuant to this Agreement and the amount of that Gross-Up Payment will
be made at the Company's expense by an Accounting Firm selected by the Executive
and reasonably acceptable to the Company. The Accounting Firm will provide its
determination, together with detailed supporting calculations and documentation,
to the Company and the Executive within 10 business days after the Date of
Termination, or such other time as requested by the Company and the Executive.
If the Accounting Firm determines that no Excise Tax is payable by the Executive
with respect to the Payments, it will furnish the Executive with an opinion
reasonably acceptable to the Executive that no Excise Tax will be imposed with
respect to the Payments. Within 10 business days after the Accounting Firm
delivers its determination to the Executive, the Executive will have the right
to dispute the determination. The Gross-Up Payment, if any, as determined by the
Accounting Firm in accordance with the preceding provisions of this Section,
will be paid by the Company to the Executive within 5 business days of the
receipt of the Accounting Firm's determination. The existence of a dispute will
not in any way affect the Executive's right to receive the Gross-Up Payment in
accordance with the determination. If there is no dispute, the determination
will be final, binding, and conclusive upon the Company and the Executive. If
there is a dispute, then the Company and the Executive will together select a
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second Accounting Firm, which will review the determination and the Executive's
basis for the dispute and then render its own determination, which will be
final, binding, and conclusive on the Company and the Executive. The Company
will bear all costs associated with that determination, unless the determination
is not greater than the initial determination, in which case all such costs will
be borne by the Executive.
(c) The value of any non-cash benefits or any deferred payment or
benefit paid or payable to the Executive will be determined in accordance with
the principles of Code section 280G(d)(3) and (4). For purposes of determining
the amount of the Gross-Up Payment, the Executive will be deemed to pay federal
income taxes at the highest marginal rate of federal income taxation in the
calendar year in which the Gross-Up Payment is to be made and applicable 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, net of the
maximum reduction in federal income taxes that would be obtained from deduction
of those state and local taxes.
(d) Notwithstanding anything contained in this Agreement
to the contrary, in the event that, according to the Accounting
Firm'sdetermination, an Excise Tax will be imposed on the Total Payments, the
Company will pay to the applicable government taxing authorities as Excise Tax
withholding the amount of the Excise Tax that the Company has actually withheld
from the Total Payments in accordance with applicable law.
(e) Notwithstandingthe preceding provisions of this
Section 3.03, the Company will not have anyobligation to make the Gross-Up
Payment unless the value of the Total Payments exceeds 110% of the maximum
amount of parachute payments that could be paid to the Executive without any
imposition of golden parachute excise taxes under Code sections 280G and 4999
(the "110% Amount"). In that case, the value of the Total Payments
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will be reduced to the extent necessary so that, within the meaning of Code
section 280G(b)(2)(A)(ii), the aggregate present value of the payments in the
nature of compensation to (or for the benefit of) the Executive that are
contingent on a Change in Control (with a Change in Control for this purpose
being defined in terms of a "change" described in Code section 280G(b)(2)(A)(i)
or (ii)), do not exceed 2.999 multiplied by the Base Amount. For this purpose,
cash Severance Payments will be reduced first (if necessary, to zero), and all
other, non-cash Severance Payments will be reduced next (if necessary, to zero).
For purposes of the limitation described in the preceding sentence, the
following will not be taken into account: (1) any portion of the Total Payments
the receipt or enjoyment of which the Executive effectively waived in writing
prior to the Date of Termination, and (2) any portion of the Total Payments
that, in the opinion of the Accounting Firm, does not constitute a "parachute
payment" within the meaning of Code section 280G(b)(2).
(f) For purposes of this Section 3.03, the value of any non-cash
benefit or any deferred payment orbenefit included in the Total Payments will be
determined by the Accounting Firm in accordance with the principles of Code
sections 280G(d)(3) and (4).
SECTION 3.04. Time of Payment. Except as otherwise expressly provided
in Section 3.02 or Section 3.03, payments provided for in those Sections will be
made as follows:
(a) No later than the fifth business day following the Date of
Termination, the Company will pay to the Executive an estimate, as determined by
the Company in good faith, of 90% of the minimum amount of the payments under
Sections 3.02 and 3.03 to which the Executive is clearly entitled.
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(b) The Company will pay to the Executive the remainder of the payments
due him under Sections 3.02 and 3.03 (together with interest at the rate
provided in Code section 1274(b)(2)(B)) not later than the 30th business day
after the Date of Termination.
(c) At the time that payment is made under Section 3.04(b), the Company
will provide the Executive with a written statement setting forth the manner in
which all of the payments to him under this Agreement were calculated and the
basis for the calculations including, without limitation, any opinions or other
advice the Company received from auditors or consultants (other than legal
counsel) with respect to the calculations (and any such opinions or advice that
are in writing will be attached to the statement).
SECTION 3.05. Attorneys Fees and Expenses. If the Executive finally
prevails with respect to any good faith dispute between the Executive and the
Company regarding the interpretation, terms, validity or enforcement of this
Agreement (including any dispute as to the amount of any payment due under this
Agreement), the Company will pay or reimburse the Executive for all reasonable
attorneys fees and expenses incurred by the Executive in connection with that
dispute. In addition, the Company will pay the reasonable legal fees and
expenses incurred by the Executive in connection with any tax audit or
proceeding to the extent attributable to the application of Code section 4999 to
any payment or benefit provided under this Agreement and including, but not
limited to, auditors' fees incurred in connection with the audit or proceeding.
Payment of fees and expenses due under this Section will be made to the
Executive within 15 business days after delivery of the Executive's written
request for payment, accompanied by such evidence of fees and expenses incurred
as the Company reasonably may require. With respect to fees and expenses
incurred in connection with a good faith dispute, the Executive may not submit a
request for payment or reimbursement until the dispute has been
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finally resolved (either by agreement or by an order or judgment that is not
subject to appeal or with respect to which all appeals have been exhausted or
waived).
ARTICLE IV
TERMINATION OF EMPLOYMENT
SECTION 4.01. Notice of Termination. After a Change in Control and
during the term of this Agreement, any purported termination of the Executive's
employment (other than by reason of death) will be communicated by a written
Notice of Termination from one party to the other party in accordance with
Article VIII. The Notice of Termination will indicate the specific termination
provision in this Agreement relied upon and will set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the cited provision.
SECTION 4.02. Date of Termination. Except as otherwise provided in
1Section 4.01, with respect to any purported termination of the Executive's
employment after a Change in Control and during the term of this Agreement, the
term "Date of Termination" will have the meaning set forth in this Section. If
the Executive's employment is terminated for Disability, Date of Termination
means thirty (30) days after Notice of Termination is given, provided that the
Executive does not return to the full-time performance of the Executive's duties
during that 30 day period. If the Executive's employment is terminated for any
other reason, Date of Termination means the date specified in the Notice of
Termination, which, in the case of a termination by the Company, cannot be less
than 30 days (except in the case of a termination for Cause) and, in the case of
a termination by the Executive, cannot be less than 15 days nor more than 60
days from the date on which the Notice of Termination is given.
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ARTICLE V
NO MITIGATION
The Company agrees that, if the Executive's employment by the Company
is terminated during the term of this Agreement, the Executive is not required
to seek other employment or to attempt in any way to reduce any amounts payable
to the Executive by the Company pursuant to Article III. Further, the amount of
any payment or benefit provided for in Article III (other than Section 3.02(e))
will 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.
ARTICLE VI
THE EXECUTIVE'S COVENANTS
SECTION 6.01. Noncompetition Agreement. In consideration for
this Agreement, the Executive will execute, concurrent with the execution of
this Agreement, a noncompetition agreement in the form attached to this
Agreement as Exhibit A.
SECTION 6.02. Potential Change in Control. 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 of this Agreement, the Executive
will remain employed by the Company until the earliest of (a) a date that is six
months from the date of the Potential Change of Control, (b) the date of a
Change in Control, (c) the date on which the Executive terminates employment for
Good Reason (determined by treating the Potential Change in Control as a Change
in Control in applying the definition of Good Reason) or by reason of death, or
(d) the date the Company terminates the Executive's employment for any reason.
SECTION 6.03. General Release. The Executive agrees that,
notwithstanding
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any other provision of this Agreement, the Executive will not be eligible for
any Severance Payments under this Agreement unless the Executive timely signs,
and does not timely revoke, a General Release in substantially the form attached
to this Agreement as Exhibit B. The Executive will be given 21 days to consider
the terms of the General Release. The General Release will not become effective
until seven days following the date the General Release is executed. If the
Executive does not return the executed General Release to the Company by the end
of the 21 day period, that failure will be deemed a refusal to sign, and the
Executive will not be entitled to receive any Severance Payments under this
Agreement. In certain circumstances, the 21 day period to consider the General
Release may be extended to a 45 day period. The Executive will be advised in
writing if the 45 day period is applicable. In the absence of such notice, the
21 day period applies.
ARTICLE VII
SUCCESSORS; BINDING AGREEMENT
SECTION 7.01. Obligation of Successors. 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 succession had occurred. Failure of the Company to obtain such an
assumption and agreement prior to the effectiveness of any such succession will
be a breach of this Agreement and will entitle the Executive to compensation
from the Company in the same amount and on the same terms as the Executive would
be entitled to under this Agreement if the Executive were to terminate
employment for Good Reason after a Change in Control, except
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that, for purposes of implementing the foregoing, the date on which the
succession becomes effective will be deemed the Date of Termination.
SECTION 7.02. Enforcement Rights of Others. This Agreement will 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 dies while any amount is still payable
to the Executive under this Agreement, (other than amounts that, by their terms,
terminate upon the Executive's death), then, unless otherwise provided in this
Agreement, all such amounts will be paid in accordance with the terms of this
Agreement to the executors, personal representatives, or administrators of the
Executive's estate.
ARTICLE VIII
NOTICES
For the purpose of this Agreement, notices and all other communications
provided for in the Agreement will be in writing and will be deemed to have been
duly given when delivered or mailed by United States registered mail, return
receipt requested, postage prepaid, addressed to the respective addresses set
forth below, or to such other address as either party may furnish to the other
in writing in accordance with this Article VIII, except that notice of change of
address will be effective only upon actual receipt:
To the Company:
Xxxxxx Holdings, Inc.
000 Xxxx Xxxx Xxxxxx
Post Xxxxxx Xxx 000
Xxxxxx, Xxxxxxx 00000-0000
To the Executive:
Xxxxxxx Xxx
000 Xxxxxxxxx Xxxx
#00-00 Xxxxxxxxxxx Xxxxxx
Xxxxxxxxx 000000
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ARTICLE IX
MISCELLANEOUS
This Agreement will 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 will not have any right to be retained
in the employ of the Company. No provision of this Agreement may be modified,
waived, or discharged unless the waiver, modification, or discharge is agreed to
in writing and signed by the Executive and an officer of the Company
specifically designated by the Board. No waiver by either party 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 the other party will be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any other time.
Neither party has made any agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter of this Agreement that
are not expressly set forth in this Agreement. The validity, interpretation,
construction, and performance of this Agreement will be governed by the laws of
the State of Indiana. All references to sections of the Exchange Act or the Code
will be deemed also to refer to any successor provisions to those sections. Any
payments provided for under this Agreement will be paid net of any applicable
withholding 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 Articles III, IV, and VI will survive the expiration of
the term of this Agreement.
ARTICLE X
VALIDITY
The invalidity or unenforceability of any provision or this Agreement
will not
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affect the validity or enforceability of any other provision of this Agreement,
which will remain in full force and effect.
ARTICLE XI
COUNTERPARTS
This Agreement may be executed in several counterparts, each of which
will be deemed to be an original but all of which together will constitute one
and the same instrument.
ARTICLE XII
SETTLEMENT OF DISPUTES; ARBITRATION
All claims by the Executive for benefits under this Agreement must be
in writing and will be directed to and determined by the Board. Any denial by
the Board of a claim for benefits under this Agreement will be delivered to the
Executive in writing and will set forth the specific reasons for the denial and
the specific provisions of this Agreement relied upon. The Board will afford a
reasonable opportunity to the Executive for a review of the decision denying a
claim and will further allow the Executive to appeal to the Board a decision of
the Board within 60 days after notification by the Board that the Executive's
claim has been denied. Any further dispute or controversy arising under or in
connection with this Agreement will be settled exclusively by arbitration in
Warsaw, Indiana in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award in
any court having jurisdiction. Each party will bear its own expenses in the
arbitration for attorneys' fees, for its witnesses, and for other expenses of
presenting its case. Other arbitration costs, including arbitrators' fees,
administrative fees, and fees for records or transcripts, will be borne equally
by the parties. Notwithstanding anything in this Article to the contrary, if the
Executive prevails with respect to any dispute submitted to arbitration under
this Article, the Company will
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reimburse or pay all reasonable legal fees andexpenses that the Executive
incurred in connection with that dispute as required by Section 3.05.
ARTICLE XIII
DEFINITIONS
For purposes of this Agreement, the following terms will have the
meanings indicated below:
(a) "Accounting Firm" means an accounting firm that is designated as
one of the five largest accounting firms in the United States (which may include
the Company's independent auditors).
(b) "Award Plan" means the Xxxxxx Holdings, Inc. Stock Incentive Plan.
(c) "Base Amount" has the meaning stated in Code section 280G(b)(3).
(d) "Beneficial Owner" has the meaning stated in Rule 13d-3 under the
Exchange Act.
(e) "BEP" means the Benefit Equalization Plan of Xxxxxx Holdings, Inc.
and Its Subsidiary or AffiliatedCorporations Participating in the Xxxxxx
Holdings, Inc. Retirement Income Plan or the Zimmer Puerto Rico Retirement
Income Plan.
(f) "Board" means the Board of Directors of the Company.
(g) "Cause" for termination by the Company of the Executive's
employment, after any Change in Control, means (1) 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 4.01) for a period of at least 30 consecutive days
after a written
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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; (2) the
Executive willfully engages in conduct that is demonstrably and materially
injurious to the Company or its subsidiaries, monetarily or otherwise; or (3)
the Executive is convicted of, or has entered a plea of no contest to, a felony.
For purposes of clauses (1) and (2) of this definition, no act, or failure to
act, on the Executive's part will be deemed "willful" unless it is 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.
(h) A "Change in Control" will be deemed to have occurred if any of the
following events occur:
(1) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not including in the securities
beneficially owned by that 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; or
21
(2) during any period of two consecutive years (not including
any period prior to the execution of this Agreement), individuals who at the
beginning of the period constitute the Board and any new director (other than a
director designated by a Person who has entered into an agreement with the
Company to effect a transaction described in clause (1), (3) or (4) of this
paragraph whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at the beginning
of the period or whose election or nomination for election was previously
approved), cease for any reason to constitute a majority of the Board; or
(3) the shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (A) a
merger or consolidation that would result in the voting securities of the
Company outstanding immediately prior to the merger or consolidation continuing
to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity), in combination with the ownership of any
trustee or other fiduciary holding securities under an employee benefit plan of
the Company, at least 75% of the combined voting power of the voting securities
of the Company or the surviving entity outstanding immediately after the merger
or consolidation; or (B) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no Person
acquires more than 50% of the combined voting power of the Company's then
outstanding securities; or
(4) the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all the Company's assets.
22
Notwithstanding the foregoing, a Change in Control will not include any event,
circumstance, or transaction occurring during the six-month period following a
Potential Change in Control that results from the action of any entity or group
that includes, is affiliated with, or is wholly or partly controlled by the
Executive; provided, further, that such an action will not be taken into account
for this purpose if it occurs within a six-month period following a Potential
Change in Control resulting from the action of any entity or group that does not
include the Executive.
(i) "COBRA" means the continuation coverage provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
(j) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and interpretative rules and regulations.
(k) "Company" means Xxxxxx Holdings, Inc., a Delaware corporation, and
any successor to its business and/or assets that assumes and agrees to perform
this Agreement by operation of law, or otherwise (except in determining, under
Section XIII(h), whether or not any Change in Control of the Company has
occurred in connection with the succession).
(l) "Company Shares" means shares of common stock of the Company or any
equity securities into which those shares have been converted.
(m) "Date of Termination" has the meaning stated in Section 4.02.
(n) "Disability" has the meaning stated in the Company's short-term or
long-term disability plan, as applicable, as in effect immediately prior to a
Change in Control.
(o) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and interpretive rules and regulations.
(p) "Excise Tax" means any excise tax imposed under Code Section 4999.
(q) "Executive" means the individual named in the first paragraph of
this
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Agreement.
(r) "General Release" has the meaning stated in Section 6.03.
(s) "Good Reason" for termination by the Executive of the Executive's
employment means the occurrence (without theExecutive's express written consent)
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
(1), (4), (5), (6), or (7) below, the act or failure to act is corrected prior
to the Date of Termination specified in the Executive's Notice of Termination:
(1) the assignment to the Executive of any duties inconsistent
with the Executive's status as an 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
a Change in Control;
(2) a reduction by the Company in the Executive's annual base salary as
in effect on the date of this Agreement or as the same may be
increased from time to time, or the level of the Executive's
entitlement under the Incentive Plan as in effect on the date of this
Agreement or as the same may be increased from time to time;
(3) the Company's requiring the Executive to be based more
than 50 miles from the Company's offices at which the Executive is
based immediately prior to a Change in Control (except for required
travel on the Company's business to an extent substantially
consistent with the Executive's business travel obligations
immediately prior to the Change in Control), or, in the event the
Executive consents to any such relocation of his offices, the
Company's failure to provide the Executive with all of the benefits
of the Company's relocation policy as in operation immediately prior
to the Change in Control;
24
(4) the Company's failure, without the Executive's consent, to
pay to the Executive any portion of the Executive's current
compensation (which means, for purposes of this paragraph (4), the
Executive's annual base salary as in effect on the date of this
Agreement, or as it may be increased from time to time, and the
awards earned pursuant to the Incentive Plan) or to pay to the
Executive any portion of an installment of deferred compensation
under any deferred compensation program of the Company, within seven
days of the date the compensation is due;
(5) the Company's failure to continue in effect any
compensation plan in which the Executive participates immediately
prior to a Change in Control, which plan is material to the
Executive's total compensation, including, but not limited to, the
Incentive Plan and the Award 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 that plan, or the Company's failure to continue the
Executive's participation in such a plan (or in a substitute or
alternative plan) on a basis not materially less favorable, both in
terms of the amount of benefits provided and the level of the
Executive's participation relative to other participants, as existed
at the time of the Change in Control;
(6) the Company's failure to continue to provide the Executive
with benefits substantially similar to those enjoyed by the Executive
under any of the Company's pension (including, without limitation,
the Company's Retirement Plan, the BEP, and the Company's Savings and
Investment Program, including the Company's Benefit Equalization Plan
for the Savings and Investment Program), life insurance, medical,
health and accident, or disability plans in which the Executive was
participating at the
25
time of the Change in Control; the taking of any action by the Company
that would directly or indirectly materially reduce any of those
benefits or deprive the Executive of any material fringe benefit
enjoyed by the Executive at the time of a Change in Control; or the
Company's failure 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
(7) any purported termination of the Executive's employment
that is not effected pursuant to a Notice of Termination satisfying
the requirements of Section 4.01; for purposes of this Agreement, no
such purported termination will be effective.
The Executive's right to terminate the Executive's employment for Good
Reason will not be affected by the Executive's incapacity due to physical or
mental illness. The Executive's continued employment will not constitute
consent to, or a waiver of rights with respect to, any act or failure to act
that constitutes Good Reason.
Notwithstanding the foregoing, the occurrence of an event that would
otherwise constitute Good Reason will cease to be an event constituting Good
Reason if the Executive does not timely provide a Notice of Termination to the
Company within 120 days of the date on which the Executive first becomes aware
(or reasonably should have become aware) of the occurrence of that event.
(t) "Gross-Up Payment" has the meaning stated in Section 3.03.
(u) "Incentive Plan" means the Company's Executive Performance
Incentive Plan.
(v) "Notice of Termination" has the meaning stated in Section 4.01.
26
(w) "Options" means options for Shares granted to the Executive under
the Award Plan.
(x) "Person" has the meaning stated in section 3(a)(9) of the Exchange
Act, as modified and used in sections 13(d) and 14(d) of the Exchange Act;
however, a Person will not include (1) the Company or any of its subsidiaries,
(2) a trustee or other fiduciary holding securities under an employee benefit
plan of the Company or any of its subsidiaries, (3) an underwriter temporarily
holding securities pursuant to an offering of those securities, or (4) 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.
(y) "Potential Change in Control" will be deemed to have occurred if
any one of the following events occur:
(1) the Company enters into an agreement, the consummation
of which would result in the occurrence of a Change in Control;
(2) the Company or any Person publicly announces an
intention to take or to consider taking actions that, if consummated,
would constitute a Change in Control;
(3) any Person who is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company representing 10%
or more of the combined voting power of the Company's then outstanding
securities, increases that Person's beneficial ownership of those
securities by 5% or more over the percentage so owned by that Person on
the date of this Agreement; or
(4) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control has occurred.
27
(z) "Retirement Date" means the later of (1) the Executive's normal
retirement date under the Retirement Plan and(2) another date for retirement by
the Executive that has been approved by the Board at any time prior to a Change
in Control.
(aa) "Retirement Plan" means the Xxxxxx Holdings, Inc.
Retirement Income Plan.
(bb) "Savings Plan" means the Xxxxxx Holdings, Inc. Savings
and Investment Program, which, for purposes of this Agreement, will be deemed to
include the Benefit Equalization Plan of Xxxxxx Holdings, Inc. and Its
Subsidiary or Affiliated Corporations Participating in the Xxxxxx Holdings, Inc.
Savings and Investment Program.
(cc) "Severance Payments" means the payments described in
Section 3.02.
(dd) "Shares" means shares of the common stock, $0.10 par
value, of the Company.
(ee) "Total Payments" has the meaning stated in Section
3.03(a).
EXECUTIVE XXXXXX HOLDINGS, INC.
/s/ Xxxxxxx Xxx By: /s/ Xxxxx Xxxxxx
--------------- ---------------------------------------
Xxxxxxx Xxx Xxxxx Xxxxxx
_______________________________________
SVP, Corporate Affairs & General
Counsel/Corporate Secretary