Exhibit 10.1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of the 1st day of July 2002, by and between The
Xxxxxx Group, Inc., a Maryland corporation (the "Company"), and R. Xxxx Xxxxxx
(the "Executive").
In consideration of the mutual covenants and agreements of the parties set
forth in this Agreement, and other good and valuable consideration the receipt
and sufficiency of which are acknowledged, the parties agree as follows:
1. TERM OF EMPLOYMENT. The Company agrees to employ the Executive until
December 30, 2007. This Agreement shall automatically renew for a one
(1) year renewal period on December 30, 2007, or for a one (1) year
renewal period at the end of each renewal period until terminated in
accordance with the terms of this Agreement. Either party may
terminate this Agreement on December 30, 2007, or at the end of each
one (1) year renewal period by giving the other party written notice
of termination delivered at least one hundred eighty (180) days prior
to December 30, 2007, or any renewal period.
If at any time during the initial term or any renewal period, a
Change of Control of the Company occurs (as defined in Section 6.2
below), the term of this Agreement shall be the longer of (a) three
(3) years beyond the effective date of the Change of Control or (b)
the term as provided in this Section 1.
2. POSITION AND RESPONSIBILITIES. The Executive shall serve as the
Chairman of the Board of Directors, President and Chief Executive
Officer of the Company. In his capacity as Chairman of the Board,
President and Chief Executive Officer, the Executive shall be the
Company's highest ranking executive officer and shall have full
authority and responsibility for formulating and administering the
plans and policies of the Company subject to the control of the Board
of Directors.
3. PERFORMANCE OF DUTIES. The Executive shall devote his full time
attention and energies to the Company's business and will not engage
in consulting work or any business for his own account or for any
person, firm or corporation. The Executive may serve as a director of
other companies so long as this service does not interfere with the
performance of his duties with the Company.
4. COMPENSATION. For all services to be rendered by the Executive
during the term of this Agreement, the Company shall pay and provide
to the Executive:
4.1 BASE SALARY. The Company shall pay the Executive a Base
Salary in the fixed amount of one million dollars
($1,000,000) per year for the term of this Employment
Agreement. This Base Salary is paid in installments
consistent with the normal payroll practices of the Company.
4.2 ANNUAL BONUS. The Executive is eligible to receive an annual
cash bonus (the "Bonus") in respect of each fiscal year
during the term of this Agreement equal to two percent (2%)
of the Company's earnings before taxes and extraordinary
items as reflected in the audited consolidated financial
statements of the Company. The Bonus shall be payable to the
Executive in cash within sixty (60) days after the end of
each fiscal year during the term of this Agreement.
4.3 INCENTIVE PLANS. The Executive shall participate in the TRG
Incentive Plan and shall have an individual target
performance award equal to 150% of the Executive's Base
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Salary. The Executive shall participate in any additional
incentive award programs available to executive officers of
the Company. This participation is on a basis which is
commensurate with the Executive's position with the Company.
4.4 OTHER BENEFITS. The Executive is entitled to receive other
employee benefits, such as disability, group life, sickness,
accident and health insurance programs, split-dollar life
insurance programs and other perquisites that are available
to executive officers of the Company. This participation is
on a basis which is commensurate with the Executive's
position with the Company.
4.5 STOCK UNITS
(a) Grant of Stock Units
Pursuant to the terms and conditions of The Xxxxxx
Group, Inc. 2002 Equity Incentive Plan (the Plan),
the Company grants to the Executive an award of
235,000 Stock Units.
Subject to Subsection (b) below, the Stock Units
become vested and payable in accordance with the
following vesting schedule:
VESTING DATE
2003
----
47,000 Stock Units May 1, 2003
plus an amount equal to unless the Company's return on equity (XXX)
2003 federal and state income and for the period of July 1, 2002 through
medicare taxes assuming the December 31, 2002 is less than 60% of the
highest marginal tax rate. ten-year median return on equity of the
industrial companies within the Fortune 500
for the ten-year period ending with the 2001
calendar year in which event this installment
of the Stock Unit grant is forfeited.
2004
----
47,000 Stock Units February 15, 2004
plus an amount equal to unless the Company's return on equity (XXX) for
2004 federal and state income and the year ended December 31, 2003 is less than
medicare taxes assuming the 60% of the ten-year median return on equity of
highest marginal tax rate. the industrial companies within the Fortune 500
for the ten-year period ending with the 2002
calendar year in which event this installment
of the Stock Unit grant is forfeited.
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2005
----
47,000 Stock Units February 15, 2005
plus an amount equal to unless the Company's return on equity (XXX) for
2005 federal and state income and the year ended December 31, 2004 is less than
medicare taxes assuming the 60% of the ten-year median return on equity of
highest marginal tax rate. the industrial companies within the Fortune 500
for the ten-year period ending with the 2003
calendar year in which event this installment
of the Stock Unit grant is forfeited.
2006
----
47,000 Stock Units February 15, 2006
plus an amount equal to unless the Company's return on equity (XXX) for
2006 federal and state income and the year ended December 31, 2005 is less than
medicare taxes assuming the 60% of the ten-year median return on equity of
highest marginal tax rate. the industrial companies within the Fortune 500
for the ten-year period ending with the 2004
calendar year in which event this installment
of the Stock Unit grant is forfeited.
2007
----
47,000 Stock Units February 15, 2007
plus an amount equal to unless the Company's return on equity (XXX) for
2007 federal and state income and the year ended December 31, 2006 is less than
medicare taxes assuming the 60% of the ten-year median return on equity of
highest marginal tax rate. the industrial companies within the Fortune 500
for the ten-year period ending with the 2005
calendar year in which event this installment
of the Stock Unit grant is forfeited.
The Company's XXX for the fiscal years used in the
determination of the "Vesting Dates" above is the
Company's consolidated net earnings after taxes and
extraordinary items and before the payment of
dividends on the Company's common stock divided by
the Company's beginning common stockholder's equity
during such fiscal year period, all of which is
determined under generally accepted accounting
principles on a basis consistent with the Company's
audited consolidated financial statements.
(b) Vesting of Stock Units.
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If the Executive terminates employment with the
Company voluntarily or because of death,
Disability, retirement or for Cause (as defined in
Section 5) prior to any vesting date, all unvested
Stock Units are immediately forfeited and
cancelled. Notwithstanding the foregoing, all
unvested Stock Units shall vest and be paid by the
Company to the Executive upon the occurrence of a
Change of Control (as defined in Section 6.2 below)
or a termination by the Company without Cause (as
stated in Section 5.4).
(c) Payment of Stock Units.
Upon each vesting date on which the Executive is
employed by the Company, the number of Stock Units
which become vested on such date shall be paid to
the Executive in an equal number of shares of
Common Stock of the Company and, upon payment, such
Stock Units are automatically fully paid and
cancelled.
(d) Dividend Equivalents.
As of each dividend payment date with respect to
Common Stock, the Executive shall receive a cash
dividend equivalent payment equal to the product of
(i) the per-share cash dividend amount payable with
respect to each share of Common Stock on that date
and (ii) the total number of Stock Units which have
not been vested, paid or cancelled as of the record
date corresponding to such dividend payment date.
(e) Delivery of Stock Certificates.
The stock certificate for shares of Common Stock
issued to the Executive in payment of any vested
Stock Unit shall be delivered to the Executive on
the applicable vesting date.
(f) Rights of Executive With Respect to Stock Units.
The Executive shall have no rights as a stockholder
with respect to any Stock Unit or any share of
Common Stock to be issued with respect to any Stock
Unit until the date of vesting and payment. The
Executive's rights with respect to Stock Units
shall be the rights of a general unsecured creditor
of the Company until the Stock Units vest and
shares of Common Stock are actually issued to the
Executive.
(g) Adjustments.
The number of Stock Units shall be appropriately
adjusted, as determined by the Board of Directors
or Compensation Committee of the Board of Directors
pursuant to the Plan, in the event of any stock
split, combination or similar transaction.
(h) Stock Units Subject to Terms and Conditions of the
Plan.
The Stock Units and all shares of Common Stock
issued with respect to Stock Units shall be subject
to the terms and conditions of the Plan, which is
incorporated herein by this reference.
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4.6 SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. The Executive shall
receive the benefit payable under the Supplemental Executive
Retirement Plan (SERP) in the amount and form and pursuant
to the terms and conditions set forth in Exhibit A attached
to this Agreement. The Company shall establish a grantor
"rabbi" trust (the "Trust"), having a commercial trustee,
and to which the Company shall deposit an amount of cash or,
in its discretion, other assets, including if desirable
securities issued by the Company, equal to $3.4 million per
annum for the five (5) year period commencing July 1, 2002.
Immediately before the closing of any transaction
constituting a Change of Control (as defined in Section
6.2), the Company shall deposit into the Trust such amount
of cash and other assets, if any, sufficient in amount to
cause the total value of the assets held in such Trust at
that time to equal the present value of the SERP Benefit (as
defined in the SERP) calculated using an 8% discount rate.
4.7 EXECUTIVE RETIREMENT HEALTH INSURANCE PROGRAM. The Executive
shall be provided with an Executive Retirement Health
Insurance Program for the Executive and the Executive's
spouse at the time that the Executive is eligible to receive
his Vested SERP Benefit as provided within the SERP. This
Program shall be provided to the Executive and the
Executive's Spouse for a period of fifteen (15) years. This
Executive Retirement Health Insurance Program is at the
expense of the Company and shall be equivalent to and
provide the same coverage and benefits as the Company's
executive health insurance program in which the Executive
participated prior to the time of eligibility to receive his
Vested SERP Benefit or prior to Retirement as defined with
the SERP.
5. EMPLOYMENT TERMINATION.
5.1 TERMINATION DUE TO RETIREMENT OR DEATH. In the event the
Executive's employment is terminated by reason of Retirement
(as defined below) or death, the Executive's benefits shall
be determined in accordance with the Company's Retirement,
SERP survivor's benefits, insurance or other applicable
program then in effect. Upon the effective date of
termination of employment by reason of Retirement or death,
the Company's obligation to pay and provide the compensation
described in Section 4 shall expire, except to the extent
the benefits described in Section 4 continue after
Retirement or death. In addition, the Company shall pay to
the Executive or the Executive's beneficiaries or estate a
pro rata share of the Bonus for the year in which the
termination occurs based on the results of the Company for
that fiscal year. This pro rata Bonus shall be determined by
multiplying the Bonus for the applicable fiscal year by a
fraction, the numerator of which is the number of days in
such fiscal year prior to the date of termination and the
denominator of which is the total number of days in such
fiscal year. The pro rata Bonus shall be paid within sixty
(60) days of the end of the applicable fiscal year.
"Retirement" is defined as a termination of employment on or
after the first day of the month after attaining age 60.
5.2 TERMINATION DUE TO DISABILITY. In the event the Executive
becomes Disabled (as defined below) and is unable to perform
his duties for more than one hundred twenty (120) days
during any period of twelve (12) months or, in the
reasonable determination of the Board of Directors, the
Executive's Disability (as defined below) will exist for
more than one hundred twenty (120) days, the Company has the
right to terminate the Executive's employment and the
Company's obligation to pay and provide the compensation
described in Section 4 shall expire, except to the extent
the benefits described in Section 4 continue after
Disability. In addition, the Company shall pay to the
Executive a pro rata share of the Bonus for the year in
which the termination occurs based on the results of the
Company for that fiscal year determined as provided in
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Section 5.1. The pro rata Bonus shall be paid within sixty
(60) days of the end of the applicable fiscal year.
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The term "Disabled" or "Disability" means the incapacity of
the Executive, due to injury, illness, disease or bodily or
mental infirmity, to engage in the performance of his duties
with the Company. A Disability is determined by the Board of
Directors upon receipt of and in reliance on competent
medical advice from one or more individuals selected by the
Board who are qualified to give professional medical advice.
5.3 VOLUNTARY TERMINATION BY THE EXECUTIVE. The Executive may
terminate this Agreement at any time by giving the Board of
Directors written notice of intent to terminate delivered at
least ninety (90) days prior to the effective date of such
termination. Upon the expiration of this ninety (90) day
period, the termination by the Executive shall become
effective. The Company shall pay the Executive his Base
Salary through the effective date of termination plus all
benefits to which the Executive has a vested right at that
time. The Executive shall not receive a Bonus for the fiscal
year in which voluntary termination occurs. Upon the date of
termination, the Company and the Executive shall have no
further rights or obligations under this Agreement, except
as set forth in Sections 7 and 8, and shall have no further
rights or obligations with respect to unvested awards under
this Agreement, any incentive plan or other compensation
arrangement or plan.
5.4 TERMINATION BY THE COMPANY WITHOUT CAUSE. Other than during
a Change of Control Period (as defined in Section 6.2), the
Board of Directors may terminate the Executive's employment
for reasons other than death, Disability, Retirement or for
Cause (as defined in Section 5.5) by notifying the Executive
in writing at least sixty (60) days prior to the effective
date of termination. Upon the expiration of this sixty (60)
day period, the termination by the Company is effective.
Within thirty (30) days after the date of termination, the
Company shall pay to the Executive a lump sum cash payment
equal to the greater of (a) the aggregate amount of Base
Salary as then in effect, payable for the remaining term of
this Agreement, or (b) the aggregate amount of twenty-four
(24) months of the Base Salary as in effect prior to the
date of notice of termination, and shall provide to the
Executive a continuation of his health and welfare benefits
for the greater of (a) the remaining term of this Agreement
or (b) twenty-four (24) months. If the Company is unable to
provide health and welfare benefits as required by this
Section 5.4, the Company shall provide equivalent benefits
to the Executive or pay to the Executive a lump sum cash
payment equal to the value of the benefits which the Company
is unable to provide. The Company shall also pay the
Executive a Bonus for the year in which termination occurs
equal to the Bonus paid or payable in respect of the fiscal
year prior to the year in which termination occurs
multiplied by the number of fiscal years that end within the
remaining term of this Agreement (including the fiscal year
in which the termination occurs if the termination becomes
effective on the last day of the year). This Bonus payment
shall be paid within thirty (30) days after the date of
termination. The Company shall also pay the Executive all
benefits to which the Executive has a vested right at the
time of termination as well as the SERP. The Executive shall
be fully vested in the grant of Stock Units pursuant to
Section 4.5 of this Agreement, and shall be fully vested in
any prior year awards that remain unvested or any awards
made for the fiscal year in which termination occurs under
the TRG Incentive Plan or any successor plan. All vested
awards under any equity incentive or other incentive
programs shall be paid notwithstanding any provision of the
governing plan or program calling for forfeiture of benefits
upon termination. If for any reason the Company is unable to
comply with the preceding sentence, the Company shall pay
the Executive a lump-sum cash payment equal to the value of
the benefits or awards it is unable to vest, pay or give
credit for. Upon the date of termination, the Company and
the Executive shall have no further obligations under this
Agreement except as set forth in Sections 7 and 8.
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5.5 TERMINATION FOR CAUSE. The Board of Directors may terminate
the Executive's employment at any time for "Cause." "Cause"
is determined by the Board of Directors and is defined as
the Executive's (i) willful and continued failure to perform
the material duties of his position after receiving notice
of such failure and being given reasonable opportunity to
cure such failure; (ii) willful misconduct which is
demonstrably and materially injurious to the Company; or
(iii) conviction of a felony. No act or failure to act on
the part of the Executive shall be considered "willful"
unless it is done or omitted to be done in bad faith or
without reasonable belief that the action or omission was in
the best interest of the Company. In the event this
Agreement is terminated by the Board of Directors for Cause,
the Company shall pay the Executive his Base Salary through
the date of termination and the Executive shall forfeit all
rights and benefits he is entitled to receive under this
Agreement including any right to a Bonus for the fiscal year
in which the termination occurs, but excluding any benefits
(inclusive of any vested benefit under the SERP) that he has
a vested right at that time to receive. The Company and the
Executive thereafter shall have no further obligations under
this Agreement except as set forth in Sections 7 and 8.
5.6 TERMINATION FOR GOOD REASON. The Executive may terminate
this Agreement for Good Reason (as defined below) by giving
the Board of Directors thirty (30) days written notice of
intent to terminate, which notice sets forth the facts and
circumstances for the termination. Upon the expiration of
this thirty (30) day period, the termination by the
Executive is effective and the Company shall pay the
Executive the compensation and benefits provided for and
payable in accordance with and as set forth in Section 5.4
unless the provisions of Section 6 apply.
"Good Reason" means, without the Executive's written
consent, the occurrence of any of the following:
(a) The assignment of the Executive to duties
materially inconsistent with, or a reduction or
alteration in the nature or status of, the
Executive's authorities, duties, responsibilities
or status as an executive officer of the Company
from those in effect during the preceding year;
(b) The Company requires the Executive to be based at a
location which is more than fifty (50) miles from
the Executive's then current primary residence;
(c) A reduction by the Company in the Executive's Base
Salary or formula under which the Bonus is
determined; or
(d) The failure of the Company to obtain an agreement
from any successor to the Company to perform this
Agreement.
6. CHANGE IN CONTROL.
6.1 TERMINATION AFTER CHANGE OF CONTROL. In lieu of the
compensation and benefits provided in Sections 4 or 5, which
will be superseded and replaced by the provisions of this
Section 6, the following payments and benefits will be
provided to the Executive by the Company (in addition to any
compensation or benefits to which the Executive may
otherwise be entitled under any other agreement, plan or
arrangement with the Company, other than a plan, policy or
other arrangement providing for payments due to severance
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of employment) in the event of a Termination of Employment
(as defined below) during a Change of Control Period (as
defined below) of the Company:
(a) Lump Sum Cash Payment. On or before the
Executive's last day of employment with the Company
or any successor corporation or affiliate of the
successor corporation, the Company or any successor
corporation or affiliate of the successor
corporation will pay the Executive an amount equal
to the Executive's unpaid Base Salary for the
remainder of the year in which the Termination of
Employment occurs and a pro rata Bonus through the
date of Termination of Employment determined in
accordance with Section 5.1. but based on the
results of the year preceding the year in which the
Termination of Employment occurs. Also, on or
before the Executive's last day of employment with
the Company or any successor corporation or
affiliate of the successor corporation, the Company
or any successor corporation or affiliate of the
successor corporation will pay the Executive a lump
sum cash payment equal to three (3) times the
highest Annual Compensation (as defined below) for
any of the three (3) calendar years immediately
preceding the date of Termination of Employment.
(b) Accelerated Vesting and Supplemental Payments. All
rights, awards and benefits of the Executive
provided pursuant to this Agreement, the Plan, the
TRG Incentive Plan or other incentive plan, Stock
Units granted pursuant to this Agreement, any
deferred compensation plans (including the
Retirement Savings Opportunity Plan, Executive and
Director Deferred Compensation Plan and any
successor or replacements plans) and any incentive,
bonus, stock option, equity incentive, restricted
stock, insurance or split dollar insurance program,
relocation equity program, or other benefit plans
of the Company in which the Executive participates
prior to the Change of Control shall immediately
vest in full and the Executive shall receive the
amount of these rights, awards and benefits in a
cash lump sum payment or other form of compensation
as provided in accordance with the applicable
benefit, document or plan within thirty (30) days
of the date of Termination of Employment. To the
extent that any of the plans of the Company would
not under applicable law permit accelerated
vesting, the Executive will be paid supplementally
or receive equivalent payments by the Company in
the amount of additional benefits or payments that
would be payable if full vesting had taken place
under these plans as of the date of Termination of
Employment. All supplemental payments are provided
on an unfunded basis, are not intended to meet the
qualification requirements of Section 401 of the
Internal Revenue Code, and shall be payable solely
from the general assets of the Company or any
successor corporation or affiliate of the successor
corporation.
(c) Insurance and Other Special Benefits. The
Executive's participation in the life, accident and
health insurance, employee welfare benefit plans
(as defined in the Employee Retirement Income
Security Act of 1974), any supplemental early
retirement plan other than the SERP, split dollar
insurance program, personal health services
allowance, health or social club benefits, and any
other fringe benefits (the "Benefits") provided to
the Executive prior to the Change of Control shall
be continued or equivalent benefits provided by the
Company or any successor corporation or affiliate
of the successor corporation (the "Responsible
Company") at no cost to the Executive for a period
of three (3) years from the date of the Executive's
Termination of Employment. If for any reason the
Responsible Company is unable to continue the
Benefits as required by the preceding sentence, the
Responsible Company shall pay to the Executive a
lump
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sum cash payment equal to the value of the Benefits
which the Responsible Company is unable to provide.
(d) Relocation Assistance. Should the Executive move
his residence in order to pursue professional or
career opportunities within two (2) years after the
date of the Executive's Termination of Employment,
he will be reimbursed by the Responsible Company
for any expenses incurred in that relocation,
including taxes payable on the reimbursement, as
well as any reduction in value from the original
purchase price of the Executive's residence and
complete reimbursement for improvements to the
Executive's residence that occurred after the date
of the Executive's purchase of the residence.
Benefits under this paragraph will include
assistance in and payment of all costs and
commissions related to selling the Executive's
home, the payment of all moving costs, as well as
all other assistance and benefits which are
provided by the Company under its relocation plan
as in effect prior to the Change of Control.
(e) Stock Rights. All stock options, stock units, stock
appreciation rights, stock purchase rights,
restricted stock rights and any similar rights
which the Executive holds shall become fully vested
and be exercisable on the date of Termination of
Employment.
(f) Outplacement Assistance. The Executive shall be
reimbursed by the Responsible Company for the cost
of all outplacement services obtained by the
Executive within the two (2) year period after the
date of Termination of Employment provided the
total reimbursement shall be limited to an amount
equal to fifteen percent (15%) of the Executive's
Base Salary for the calendar year immediately
preceding the date of Termination of Employment.
Alternatively, the Executive, upon request, will
receive, in lieu of the foregoing reimbursement, a
cash payment equal to ten percent (10%) of the
Executive's Base Salary for the calendar year
immediately preceding the date of the Executive's
Termination of Employment.
6.2 DEFINITIONS.
(a) A "Change of Control" shall take place on the date
of the earlier to occur of any of the following
events:
(i) The acquisition by any person, other than
the Company or any employee benefit plan
of the Company, of beneficial ownership of
20% or more of the combined voting power
of the Company's then outstanding voting
securities;
(ii) The first purchase under a tender offer or
exchange offer, other than an offer by the
Company or any employee benefit plans of
the Company, pursuant to which shares of
common stock have been purchased;
(iii) During any period of two (2) consecutive
years, individuals who at the beginning of
such period constitute the Board of
Directors of the Company cease for any
reason to constitute at least a majority
thereof, unless the election or the
nomination for the election by
stockholders of the Company of each new
director was approved by a vote of at
least
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two-thirds (2/3) of the directors then
still in office who were directors at the
beginning of the period; or
(iv) Approval by stockholders of the Company of
a merger, consolidation, liquidation or
dissolution of the Company, or the sale of
all or substantially all of the assets of
the Company, other than a merger
transaction in which the Company is the
surviving entity and the shareholders of
the Company immediately prior to the
merger will hold a majority of the Common
Stock of the Company following the merger.
(b) "Annual Compensation" shall mean the sum of the
Base Salary paid and earned, the Bonus paid or
earned, even though paid in a subsequent year, to
the Executive, vested and unvested, and all amounts
and the cash value of any restricted stock credited
or paid to the Executive, vested and unvested,
under any incentive compensation or other benefit
or compensation plans of the Company in which the
Executive participates, during a calendar year
(including The Xxxxxx Group, Inc. Incentive Plan or
the 2002 Equity Incentive Plan).
(c) A "Termination of Employment" shall take place in
the event that (a) the Executive terminates his
employment with the Company for Good Reason (as
defined in Section 5.6) during a Change of Control
Period but prior to the consummation of the
transaction constituting a Change of Control, (b)
the Executive terminates his employment with the
Company, the successor corporation and all
affiliates of the successor corporation coincident
with or during the three (3) year period after the
consummation of the transaction constituting a
Change of Control for any reason other than as a
consequence of death or disability, or (c) the
Executive's employment is terminated during a
Change of Control Period by the Company, the
successor corporation or affiliate of the successor
corporation for any reason other than as a
consequence of death or disability.
(d) A "Change of Control Period" shall mean the period
of time commencing with the date of a Change of
Control or on which the Company becomes aware of or
enters into any discussions or negotiations that
could involve a Change of Control or a proposed
transaction which could result in a Change of
Control, and ending on the first to occur of: (a)
three (3) years after the effective date of the
Change of Control, or (b) the date on which the
proposed Change of Control is no longer discussed
or proposed and is determined not to occur or be
consummated or effected.
6.3 CERTAIN ADDITIONAL PAYMENTS.
(a) Gross-Up Payment Amount.
Notwithstanding anything in this Agreement to the
contrary, in the event it shall be determined that
any payment or distribution by the Company to or
for the benefit of the Executive, whether paid,
payable, distributed or distributable pursuant to
this Agreement or otherwise (a "Payment") would be
subject to the excise tax imposed by Section 4999
of the Internal Revenue Code of 1986 (the "Code")
(or any successor provision) or any interest or
penalties with respect to such excise tax (such
excise tax, together with any such interest and
penalties, are collectively referred to in this
Agreement as the "Excise Tax"), then the
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Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an
amount such that after the payment by the Executive
of all taxes (including any interest or penalties
imposed with respect to such taxes), including any
Excise Tax, imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payment.
(b) Determinations.
Subject to the provisions of Section 6.3(c), all
determinations required to be made under this
Section 6.3, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in
arriving at such determination, shall be made by a
nationally recognized certified public accounting
firm designated by the Executive (the "Accounting
Firm"), which shall provide detailed supporting
calculations both to the Company and the Executive
within fifteen (15) business days of the receipt of
notice from the Executive that there has been a
Payment, or such earlier time as is requested by
the Company. Any Gross-Up Payment, as determined
pursuant to this Section 6.3, shall be paid by the
Company to the Executive within five (5) days of
the receipt of the Accounting Firm's determination.
All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any determination
by the Accounting Firm shall be binding upon the
Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of
the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible
that Gross-Up Payments that will not have been made
by the Company should have been made
("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that
the Company exhausts its remedies pursuant to
Section 6.3(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company
to or for the benefit of the Executive.
(c) IRS Claims.
The Executive shall notify the Company in writing
of any claim by the Internal Revenue Service that,
if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification
shall be given as soon as practicable but no later
than ten (10) business days after the Executive is
informed in writing of such claim and shall apprise
the Company of the nature of such claim and the
date on which such claim is requested to be paid.
The Executive shall not pay such claim prior to the
expiration of the thirty (30) day period following
the date on which the Executive gives such notice
to the Company (or such shorter period ending on
the date that any payment of taxes with respect to
such claim is due). If the Company notifies the
Executive in writing prior to the expiration of
such period that it desires to contest such claim,
the Executive shall:
(i) give the Company any information
reasonably requested by the Company
relating to such claim,
(ii) take such action in connection with
contesting such claim as the Company shall
reasonably request in writing from time to
time,
12
including, without limitation, accepting
legal representation with respect to such
claim by an attorney reasonably selected
by the Company,
(iii) cooperate with the Company in good faith
in order effectively to contest such
claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall
bear and pay directly all costs and
expenses (including additional interest
and penalties) incurred in connection with
such contest and shall indemnify and hold
the Executive harmless, on an after-tax
basis, for any Excise Tax or income tax
(including interest and penalties with
respect thereto) imposed as a result of
such representation and payment of costs
and expenses. Without limitation on the
foregoing provisions of this Section, the
Company shall control all proceedings
taken in connection with such contest and,
at its sole option, may pursue or forgo
any and all administrative appeals,
proceedings, hearings and conferences with
the taxing authority in respect of such
claim and may, at its sole option, either
direct the Executive to pay the tax
claimed and xxx for a refund or contest
the claim in any permissible manner, and
the Executive agrees to prosecute such
contest to a determination before any
administrative tribunal, in a court of
initial jurisdiction and in one or more
appellate courts, as the Company shall
determine; provided, however, that if the
Company directs the Executive to pay such
claim and xxx for a refund, the Company
shall advance the amount of such payment
to the Executive, on an interest-free
basis and shall indemnify and hold the
Executive harmless, on an after-tax basis,
from any Excise Tax or income tax
(including interest or penalties with
respect thereto) imposed with respect to
such advance or with respect to any
imputed income with respect to such
advance; and further provided that any
extension of the statute of limitations
relating to payment of taxes for the
taxable year of the Executive with respect
to which such contested amount is claimed
to be due is limited solely to such
contested amount. Furthermore, the
Company's control of the contest shall be
limited to issues with respect to which a
Gross-Up Payment would be payable
hereunder and the Executive shall be
entitled to settle or contest, as the case
may be, any other issue raised by the
Internal Revenue Service or any other
taxing authority.
(d) Refunds.
If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 6.3(c),
the Executive becomes entitled to receive any
refund with respect to such claim, the Executive
shall (subject to the Company's complying with the
requirements of such Section) promptly pay to the
Company the amount of such refund (together with
any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company
pursuant to Section 6.3(c), a determination is made
that the Executive shall not be entitled to any
refund with respect to such claim and the Company
does not notify the Executive in writing of its
intent to contest such denial of refund prior to
the expiration of thirty (30) days after such
determination, then such advance shall be forgiven
and shall not be required to
13
be repaid and the amount of such advance shall
offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.
7. PROPRIETARY INFORMATION.
7.1 DISCLOSURE OF INFORMATION. The Executive recognizes that he
has access to and knowledge of certain confidential and
proprietary information of the Company which is essential to
the performance of his duties under this Agreement. The
Executive will not, during or after the term of his
employment by the Company, in whole or in part, disclose
such information to any person, firm, corporation,
association or other entity for any reason or purpose
whatsoever, nor shall he make use of any such information
for his own purposes.
7.2 COVENANTS REGARDING OTHER EMPLOYEES. During the term of this
Agreement and the Restrictive Period, the Executive agrees
not to attempt to induce any employee of the Company to
terminate his or her employment with the Company, accept
employment with any competitor of the Company, or interfere
in a similar manner with the business of the Company.
7.3 SPECIFIC PERFORMANCE. The parties recognize that the Company
will have no adequate remedy at law for breach of the
requirements of this Section 7 and, in the event of such
breach, the Company and the Executive agree that, in
addition to the right to seek monetary damages, the Company
will be entitled to a decree of specific performance,
mandamus, or other appropriate remedy to enforce performance
of these requirements.
8. INDEMNIFICATION. The Company covenants and agrees to indemnify and
hold harmless the Executive fully, completely and absolutely against
any and all actions, suits, proceedings, claims, demands, judgments,
costs, expenses (including reasonable attorney's fees), losses and
damages resulting from the Executive's good faith performance of his
duties under this Agreement subject to the requirements and
limitations imposed by the Company's Articles of Incorporation and
By-Laws and applicable law.
9. ASSIGNMENT.
9.1 ASSIGNMENT BY COMPANY. This Agreement may be assigned or
transferred to, and shall be binding upon and inure to the
benefit of, any successor of the Company, and any successor
or affiliate of a successor shall be deemed substituted for
all purposes of the "Company" under the terms of this
Agreement. As used in this Agreement, the term "successor"
shall mean any person, firm, corporation or business entity
or affiliate of the foregoing which at any time, whether by
merger, purchase or otherwise acquires all or substantially
all of the assets or the business of the Company.
Notwithstanding such assignment, the Company shall remain
jointly and severally liable for all obligations hereunder.
9.2 ASSIGNMENT BY EXECUTIVE. The services to be provided by the
Executive to the Company are personal to the Executive and
the Executive's duties may not be assigned by the Executive.
This Agreement shall, however, 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 amounts payable to the Executive remain
outstanding, all such amounts shall be paid to the
Executive's designee, estate or beneficiaries.
14
10. DISPUTE RESOLUTION. Either the Executive or the Company may elect to
have any good faith dispute or controversy arising under or in
connection with this Agreement settled by arbitration by providing
written notice of such election to the other party specifying the
nature of the dispute to be arbitrated. If arbitration is selected,
such proceeding shall be conducted before a panel of three (3)
arbitrators sitting in a location agreed to by the Company and the
Executive within fifty (50) miles from the location of the
Executive's principal place of employment in accordance with the
rules of the American Arbitration Association. Judgment may be
entered on the award of or decision made by the arbitrators in any
court having competent jurisdiction. To the extent that the
Executive prevails in any litigation or arbitration seeking to
enforce the provisions of this Agreement, the Executive is entitled
to reimbursement by the Company of all expenses of such litigation or
arbitration, including any legal fees and expenses and any costs and
disbursements.
11. MISCELLANEOUS.
11.1 ENTIRE AGREEMENT. This Agreement supersedes any prior
agreements or understandings, oral or written, between the
Executive and the Company with respect to the subject matter
hereof, including the Amended and Restated Employment
Agreement dated as of April 21, 1999, and constitutes the
entire agreement of the parties with respect thereto.
11.2 MODIFICATION. This Agreement shall not be varied, altered,
modified, cancelled, changed or in any way amended except by
mutual agreement of the parties in a written instrument
executed by the parties or their legal representatives.
11.3 SEVERABILITY. In the event that any provision or portion of
this Agreement shall be determined to be invalid or
unenforceable for any reason, the remaining provisions of
this Agreement shall be unaffected and shall remain in full
force and effect.
11.4 TAX WITHHOLDING. The Company may withhold all Federal,
state, city or other taxes required pursuant to any law or
governmental regulation or ruling.
11.5 BENEFICIARIES. The Executive may designate one or more
persons or entities as the primary and/or contingent
beneficiaries of any amounts to be received under this
Agreement. Such designation must be in a signed writing
acceptable to the Board of Directors, the Company or
designees of the Board or Company. The Executive may change
such designation at any time.
11.6 BOARD COMMITTEE. Any action taken or determination made by
the Board of Directors under this Agreement may be taken or
made by the Compensation Committee or any other Committee of
the Board of Directors.
11.7 GOVERNING LAW. To the extent not preempted by Federal law,
the provisions of this Agreement shall be construed and
enforced in accordance with the laws of the State of
Maryland.
11.8 NOTICE. Any notices, requests, demands or other
communications required by or provided for in this Agreement
shall be sufficient if in writing and sent by registered or
certified mail to the Executive at the last address he has
filed in writing with the Company or, in the case of the
Company, at its principal office.
IN WITNESS WHEREOF, the Executive and the Company have executed this Agreement
as of the date first above written.
15
THE XXXXXX GROUP, INC. EXECUTIVE:
By: /s/ Xxxxxx X. Xxxxxx /s/ R. Xxxx Xxxxxx
----------------------------------------- -----------------------------------
Xxxxxx X. Xxxxxx, Chairman R. Xxxx Xxxxxx
Compensation Committee of the
Board of Directors
By: /s/ Xxxxxx X. Xxxxxxx III
-------------------------------------------------
Xxxxxx X. Xxxxxxx III, Senior Vice President
Attest: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Xxxxxxx X. Xxxxxx, Secretary
16
Exhibit A
THE XXXXXX GROUP, INC.
Xxxxxx Supplemental Executive Retirement Plan
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EFFECTIVE JULY 1, 2002
THE XXXXXX GROUP, INC.
Xxxxxx Supplemental Executive Retirement Plan
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TABLE OF CONTENTS
PAGE
----
ARTICLE 1 DEFINITIONS...........................................................1
ARTICLE 2 VESTING...............................................................3
2.1 VESTING IN BENEFITS...................................................3
ARTICLE 3 BENEFITS..............................................................3
3.1 ELIGIBILITY FOR BENEFITS..............................................3
3.2 DEATH BENEFIT.........................................................4
3.3 FORMS OF PAYMENT; ELECTIONS...........................................4
3.4 WITHDRAWAL ELECTION...................................................4
3.5 COMMITTEE DISCRETION..................................................5
3.6 WITHHOLDING AND PAYROLL TAXES.........................................5
ARTICLE 4 TERMINATION, AMENDMENT OR MODIFICATION OF THE AGREEMENT...............5
4.1 TERMINATION OR AMENDMENT..............................................5
4.2 TERMINATION OF AGREEMENT..............................................5
ARTICLE 5 OTHER BENEFITS AND AGREEMENTS.........................................5
5.1 COORDINATION WITH OTHER BENEFITS......................................5
ARTICLE 6 ADMINISTRATION OF THIS AGREEMENT......................................5
6.1 COMMITTEE DUTIES......................................................5
6.2 ADMINISTRATION UPON CHANGE IN CONTROL.................................6
6.3 AGENTS................................................................6
6.4 BINDING EFFECT OF DECISIONS...........................................6
6.5 INDEMNITY OF COMMITTEE................................................7
6.6 COMPANY INFORMATION...................................................7
ARTICLE 7 CLAIMS PROCEDURES.....................................................7
7.1 PRESENTATION OF CLAIM.................................................7
7.2 NOTIFICATION OF DECISION..............................................7
7.3 REVIEW OF A DENIED CLAIM..............................................8
7.4 DECISION ON REVIEW....................................................8
7.5 LEGAL ACTION..........................................................9
7.6 NAMED FIDUCIARY.......................................................9
ARTICLE 8 BENEFICIARY DESIGNATION...............................................9
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8.1 BENEFICIARY...........................................................9
8.2 BENEFICIARY DESIGNATION; CHANGE; SPOUSAL CONSENT......................9
8.3 ACKNOWLEDGEMENT.......................................................9
8.4 NO BENEFICIARY DESIGNATION............................................9
8.5 DOUBT AS TO BENEFICIARY...............................................9
8.6 DISCHARGE OF OBLIGATIONS.............................................10
ARTICLE 9 TRUST................................................................10
9.1 ESTABLISHMENT OF THE TRUST...........................................10
9.2 INTERRELATIONSHIP OF THE AGREEMENT AND THE TRUST.....................10
9.3 DEPOSITS TO THE TRUST................................................10
ARTICLE 10 MISCELLANEOUS........................................................10
10.1 STATUS OF AGREEMENT..................................................10
10.2 UNSECURED GENERAL CREDITOR...........................................11
10.3 COMPANY'S LIABILITY..................................................11
10.4 NONASSIGNABILITY.....................................................11
10.5 FURNISHING INFORMATION...............................................11
10.6 TERMS................................................................11
10.7 CAPTIONS.............................................................11
10.8 GOVERNING LAW........................................................11
10.9 VALIDITY.............................................................11
10.10 NOTICE...............................................................12
10.11 SUCCESSORS...........................................................12
10.12 SPOUSE'S INTEREST....................................................12
10.13 INCOMPETENT..........................................................12
10.14 COURT ORDER..........................................................12
10.15 DISTRIBUTION IN THE EVENT OF TAXATION................................12
10.16 LEGAL FEES TO ENFORCE RIGHTS AFTER CHANGE IN CONTROL.................13
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THE XXXXXX GROUP, INC.
XXXXXX SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
THIS XXXXXX SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (this "Agreement")
is entered into as of July 1, 2002 between the Xxxxxx Group, Inc. (the
"Company") and R. Xxxx Xxxxxx (the "Participant").
RECITALS
A. The Participant is the Chief Executive Officer of the Company, and
the Company desires to have the continued services and counsel of the
Participant.
B. The purpose of this Agreement is to provide specified benefits to the
Participant as more fully described below.
AGREEMENT
NOW THEREFORE, it is mutually agreed as follows:
ARTICLE 1
DEFINITIONS
For purposes hereof, unless otherwise clearly apparent from the
context, the following phrases or terms shall have the following indicated
meanings:
1.1 "Beneficiary" shall mean one or more persons, trusts, estates or
other entities, designated, in accordance with Article 8, that are
entitled to receive the Participant's benefits under this Agreement
upon the Participant's death.
1.2 "Beneficiary Designation Form" shall mean the form established from
time to time by the Committee that the Participant completes, signs
and returns to the Committee to designate a Beneficiary.
1.3 "Change in Control" shall mean the first to occur of any of the
following events:
(a) The acquisition by any person, other than the Company or any
employee benefit plan of the Company, of beneficial
ownership of 20% or more of the combined voting power of the
Company's then outstanding voting securities;
(b) The first purchase under a tender offer or exchange offer,
other than an offer by the Company or any employee benefit
plans of the Company, pursuant to which shares of common
stock have been purchased;
(c) During any period of two consecutive years, individuals who
at the beginning of such period constitute the Board of
Directors of the Company cease for any reason to constitute
at least a majority thereof, unless the election or
nomination for the election by
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stockholders of the Company of each new director was
approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of
such period; or
(d) Approval by stockholders of the Company of a merger,
consolidation, liquidation or dissolution of the Company, or
the sale of all or substantially all of the assets of the
Company.
1.4 "Claimant" shall have the meaning set forth in Section 7.1.
1.5 "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
1.6 "Committee" shall mean the committee described in Article 7.
1.7 "Company" shall mean The Xxxxxx Group, Inc., a Maryland corporation.
1.8 "Compensation Committee" shall mean the Compensation Committee of the
Board of Directors of the Company.
1.9 "Death Benefit" shall mean the Participant's unpaid Vested SERP
Benefit (i) payable in equal annual installments over the remaining
number of years and in the same amounts as such benefit would have
been paid to the Participant had the Participant survived, or (ii)
the present value equivalent of such benefit stream payable in a lump
sum, calculated using an 8% discount rate.
1.10 "Election Form" shall mean the form upon which the Participant elects
the manner of distribution of his SERP Benefit and Death Benefit, and
shall be made in such form as the Committee may require, including
thereon a power of attorney from the Participant's community property
spouse, if any, authorizing the Participant to act on behalf of such
spouse in making the election and agreeing to be irrevocably bound by
any such act with respect to any community property interest under
this Agreement.
1.11 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
1.12 "Retirement" shall mean the voluntary or involuntary termination of
the Participant's employment with the Company for any reason other
than death.
1.13 "SERP Benefit" shall mean a benefit in the amount of (i) $2,400,000
per annum, payable in annual installments for a period of 15 years,
or (ii) the present value equivalent of such benefit stream payable
in a lump sum, calculated using an 8% discount rate.
1.14 "Termination of Employment Without Cause" shall mean an involuntary
termination of the Participant's employment with the Company other
than by reason of the Participant's (i) willful and continued failure
to perform the material duties of his position after receiving notice
of such failure and being given reasonable opportunity to cure such
failure; (ii) willful misconduct which is demonstrably and materially
injurious to the Company; or (iii) conviction of a felony. No act or
failure to act on the part of the Participant shall be considered
"willful" unless it is done or omitted to be done in bad faith or
without reasonable belief that the action or omission was in the best
interest of the Company.
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1.15 "Trust" shall mean the trust established pursuant to that certain
Master Trust Agreement, dated as of _____________, 2002, between the
Company and the trustee named therein, as amended from time to time.
1.16 "Vested SERP Benefit" shall mean the Participant's SERP Benefit
multiplied by the applicable vesting percentage set forth in Article
2 of this Agreement.
ARTICLE 2
VESTING
2.1 VESTING IN BENEFITS.
(a) GENERAL. The Participant shall vest in his SERP Benefit
according to the following vesting schedule, provided that
he is continuously employed with the Company from July 1,
2002, through the specified date of vesting:
------------------------------------------------------------
DATE OF VESTING VESTING PERCENTAGE
------------------------------------------------------------
December 31, 2002 0%
------------------------------------------------------------
December 31, 2003 20%
------------------------------------------------------------
December 31, 2004 40%
------------------------------------------------------------
December 31, 2005 60%
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December 31, 2006 80%
------------------------------------------------------------
December 31, 2007 100%
------------------------------------------------------------
(b) SPECIAL. Notwithstanding anything to the contrary in this
Section 2.1, the Participant shall immediately become 100%
vested (if he is not already vested in accordance with the
above vesting schedule) in the SERP Benefit upon the
occurrence of a Change in Control or if he experiences a
Termination of Employment Without Cause.
ARTICLE 3
BENEFITS
3.1 ELIGIBILITY FOR BENEFITS.
(a) SERP BENEFIT. Upon Retirement, the Participant shall be
eligible to receive his Vested SERP Benefit.
(b) COMMENCEMENT OF SERP BENEFIT. The payment of the
Participant's Vested SERP Benefit shall commence within
sixty (60) days of the later of (i) January 1, 2008, or (ii)
the date of the Participant's Retirement.
3.2 DEATH BENEFIT.
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(a) DEATH BENEFIT. In the event of the Participant's death
before Retirement, or after Retirement but before the
Participant's Vested SERP Benefit has been paid in full, the
Participant's Beneficiary shall receive a Death Benefit.
(b) COMMENCEMENT OF DEATH BENEFIT. The Death Benefit shall be
paid to the Participant's Beneficiary no later than sixty
(60) days after the date on which the Committee is provided
with proof that is satisfactory to the Committee of the
Participant's death.
3.3 FORMS OF PAYMENT; ELECTIONS. The Participant shall elect on an
Election Form to have his (i) SERP Benefit paid in a lump sum or in
equal annual installments for fifteen (15) years, and (ii) Death
Benefit paid in a lump sum or in equal annual installments over the
remaining number of years and in the same amounts as such benefit
would have been paid to the Participant had the Participant survived.
The Participant may change his initial elections or any subsequent
elections by submitting new Election Forms to the Committee, provided
that any such Election Forms are submitted to and accepted by the
Committee in its sole discretion at least one (1) year prior to the
date on which the payment of the applicable benefit commences. The
Election Forms most recently accepted by the Committee shall govern
the payout of the Participant's SERP Benefit and Death Benefit. If
the Participant does not make an election with respect to the form of
payment of his SERP Benefit or if his initial election is not
submitted in a taxable year prior to the taxable year in which the
date of his Retirement falls, then such benefits shall be payable in
fifteen (15) equal annual installments. Similarly, if the Participant
does not make an election with respect to the form of payment of his
Death Benefit, then such benefits shall be paid in a lump sum.
3.4 WITHDRAWAL ELECTION. On or after the date that payments commence
under this Agreement, the Participant, or his Beneficiary, as the
case may be, may elect to receive all or a percentage of the
Participant's remaining unpaid Vested SERP Benefit payments or Death
Benefit payments, in a lump sum, less a penalty as described below.
The lump sum payment shall be equal to (i) the present value of the
applicable percentage of the Participant's remaining unpaid Vested
SERP Benefit payments or Death Benefit payments, calculated using an
8% discount rate, less (ii) a penalty equal to 10% of the amount
computed under clause (i) (the net amount shall be referred to as the
"Benefit Amount"). The Participant, or his Beneficiary, shall make
this election by giving the Committee advance written notice of the
election in a form determined from time to time by the Committee. The
Participant, or his Beneficiary, shall be paid the Benefit Amount
within sixty (60) days of the election date. In the event that a
Participant elects to receive less than 100% of his remaining unpaid
Vested SERP Benefit payments or Death Benefit payments as a
distribution under this Section, any remaining annual installments
payable pursuant to Article 3 shall be adjusted accordingly.
3.5 COMMITTEE DISCRETION. Upon the request of the Participant, the
Committee, in its sole discretion and consistent with its established
procedures and rules, may consider other forms of benefit payments,
or the timing of benefit payments, as it deems necessary and prudent
under the circumstances.
3.6 WITHHOLDING AND PAYROLL TAXES. The Company shall withhold from any
and all benefits made under this Article 3, all federal, state and
local income, employment and other taxes required to
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be withheld by the Company in connection with the benefits hereunder,
in amounts to be determined in the sole discretion of the Company.
ARTICLE 4
TERMINATION, AMENDMENT OR MODIFICATION OF THE AGREEMENT
4.1 TERMINATION OR AMENDMENT. This Agreement may be terminated or
amended only by a written agreement executed by the Company and the
Participant.
4.2 TERMINATION OF AGREEMENT. Unless otherwise modified pursuant to
Section 4.1 above, this Agreement shall terminate upon the full
payment of the Participant's Vested SERP Benefit or Death Benefit in
accordance with Article 3.
ARTICLE 5
OTHER BENEFITS AND AGREEMENTS
5.1 COORDINATION WITH OTHER BENEFITS. The benefits provided for the
Participant under this Agreement are in addition to any other
benefits available to such Participant under any other plan or
program for employees of the Company. This Agreement shall supplement
and shall not supersede, modify or amend any other such plan or
program except as may otherwise be expressly provided.
ARTICLE 6
ADMINISTRATION OF THE AGREEMENT
6.1 COMMITTEE DUTIES. This Agreement shall be administered by a
Committee, which shall consist of the Compensation Committee, or such
committee as the Compensation Committee shall appoint. The Committee
shall have the discretion and authority to (i) make, amend, interpret
and enforce all appropriate rules and regulations for the
administration of this Agreement, (ii) make benefit entitlement
determinations, and (iii) decide or resolve any and all questions
including interpretations of this Agreement, as may arise in
connection with the Agreement.
6.2 ADMINISTRATION UPON CHANGE IN CONTROL. For purposes of this
Agreement, the Committee shall be the "Administrator" at all times
prior to the occurrence of a Change in Control. Upon and after the
occurrence of a Change in Control, the "Administrator" shall be an
independent third party selected by the Compensation Committee of the
Board of Directors of the Company, as such committee was constituted
prior to the Change in Control. The Administrator shall have the
discretionary power to determine all questions arising in connection
with the administration of the Agreement and the interpretation of
the Agreement and Trust including, but not limited to benefit
entitlement determinations; provided, however, upon and after the
occurrence of a Change in Control, the Administrator shall have no
power to direct the investment of Trust assets or select any
investment manager or custodial firm for the Trust. Upon and after
the occurrence of a Change in Control, the Company must: (1) pay all
reasonable administrative expenses and fees of the Administrator; (2)
indemnify the Administrator against any costs, expenses and
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liabilities including, without limitation, attorney's fees and
expenses arising in connection with the performance of the
Administrator hereunder, except with respect to matters resulting
from the gross negligence or willful misconduct of the Administrator
or its employees or agents; and (3) supply full and timely
information to the Administrator on all matters relating to the
Agreement, the Trust, the Participant and his Beneficiaries, the
Participant's benefits under this Agreement, the date and
circumstances of the Participant's termination of employment or
death, and such other pertinent information as the Administrator may
reasonably require. Upon and after a Change in Control, the
Administrator may be terminated (and a replacement appointed) only
with the approval of the Compensation Committee of the Board of
Directors of the Company, as such committee was constituted prior to
a Change in Control. Upon and after a Change in Control, the
Administrator may not be terminated by the Company. If the
Administrator resigns or is removed and no successor is appointed and
approved by the Compensation Committee of the Board of Directors of
the Company, as such committee was constituted prior to a Change in
Control, the Participant may apply to a court of competent
jurisdiction for appointment of a successor third-party
administrator.
6.3 AGENTS. In the administration of this Agreement, the Committee may
employ agents and delegate to them such administrative duties as it
sees fit, (including acting through a duly appointed representative),
and may from time to time consult with counsel who may be counsel to
the Company.
6.4 BINDING EFFECT OF DECISIONS. The decision or action of the Committee
with respect to any question arising out of or in connection with the
administration, interpretation and application of the Agreement and
the rules and regulations promulgated hereunder shall be final and
conclusive and binding upon all persons having any interest in the
Agreement.
6.5 INDEMNITY OF COMMITTEE. The Company shall indemnify and hold harmless
the members of the Committee against any and all claims, losses,
damages, expenses or liabilities arising from any action or failure
to act with respect to this Agreement, except in the case of willful
misconduct by the Committee or any of its members.
6.6 COMPANY INFORMATION. To enable the Committee to perform its
functions, the Company shall supply full and timely information to
the Committee on all matters relating to the compensation of the
Participant, the date and circumstances of the Participant's
termination of employment or death, and such other pertinent
information as the Committee may reasonably require.
ARTICLE 7
CLAIMS PROCEDURES
7.1 PRESENTATION OF CLAIM. The Participant or his Beneficiary (such
Participant or Beneficiary being referred to below as a "Claimant")
may deliver to the Committee a written claim for a determination with
respect to the amounts distributable to such Claimant pursuant to
this Agreement. If such a claim relates to the contents of a notice
received by the Claimant, the claim must be made within sixty (60)
days after such notice was received by the Claimant. All other
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claims must be made within 180 days of the date on which the event
that caused the claim to arise occurred. The claim must state with
particularity the determination desired by the Claimant.
7.2 NOTIFICATION OF DECISION. The Committee shall consider a Claimant's
claim within a reasonable time, but no later than ninety (90) days
after receiving the claim. If the Committee determines that special
circumstances require an extension of time for processing the claim,
written notice of the extension shall be furnished to the Claimant
prior to the termination of the initial ninety (90) day period. In no
event shall such extension exceed a period of ninety (90) days from
the end of the initial period. The extension notice shall indicate
the special circumstances requiring an extension of time and the date
by which the Committee expects to render the benefit determination.
The Committee shall notify the Claimant in writing:
(a) that the Claimant's requested determination has been made,
and that the claim has been allowed in full; or
(b) that the Committee has reached a conclusion contrary, in
whole or in part, to the Claimant's requested determination,
and such notice must set forth in a manner calculated to be
understood by the Claimant:
(i) the specific reason(s) for the denial of the claim,
or any part of it;
(ii) specific reference(s) to pertinent provisions of
the Agreement upon which such denial was based;
(iii) a description of any additional material or
information necessary for the Claimant to perfect
the claim, and an explanation of why such material
or information is necessary;
(iv) an explanation of the claim review procedure set
forth in Section 7.3 below; and
(v) a statement of the Claimant's right to bring a
civil action under ERISA Section 502(a) following
an adverse benefit determination on review.
7.3 REVIEW OF A DENIED CLAIM. On or before sixty (60) days after
receiving a notice from the Committee that a claim has been denied,
in whole or in part, a Claimant (or the Claimant's duly authorized
representative) may file with the Committee a written request for a
review of the denial of the claim. The Claimant (or the Claimant's
duly authorized representative):
(a) may, upon request and free of charge, have reasonable access
to, and copies of, all documents, records and other
information relevant to the claim for benefits;
(b) may submit written comments or other documents; and/or
(c) may request a hearing, which the Committee, in its sole
discretion, may grant.
7.4 DECISION ON REVIEW. The Committee shall render its decision on
review promptly, and no later than sixty (60) days after the
Committee receives the Claimant's written request for a review of the
denial of the claim. If the Committee determines that special
circumstances require an extension of time for processing the claim,
written notice of the extension shall be furnished to the Claimant
prior to the termination of the initial sixty (60) day period. In no
event shall such
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extension exceed a period of sixty (60) days from the end of the
initial period. The extension notice shall indicate the special
circumstances requiring an extension of time and the date by which
the Committee expects to render the benefit determination. In
rendering its decision, the Committee shall take into account all
comments, documents, records and other information submitted by the
Claimant relating to the claim, without regard to whether such
information was submitted or considered in the initial benefit
determination. The decision must be written in a manner calculated to
be understood by the Claimant, and it must contain:
(a) specific reasons for the decision;
(b) specific reference(s) to the pertinent Agreement provisions
upon which the decision was based;
(c) a statement that the Claimant is entitled to receive, upon
request and free of charge, reasonable access to and copies
of, all documents, records and other information relevant
(as defined in applicable ERISA regulations) to the
Claimant's claim for benefits; and
(d) a statement of the Claimant's right to bring a civil action
under ERISA Section 502(a).
7.5 LEGAL ACTION. A Claimant's compliance with the foregoing provisions
of this Article 7 is a mandatory prerequisite to a Claimant's right
to commence any legal action with respect to any claim for benefits
under this Agreement.
7.6 NAMED FIDUCIARY. The Committee shall be the named fiduciary, within
the meaning of ERISA, with respect to this Agreement solely for
purposes of this Article 7.
ARTICLE 8
BENEFICIARY DESIGNATION
8.1 BENEFICIARY. The Participant shall have the right, at any time, to
designate his Beneficiary(ies) (both primary as well as contingent)
to receive any benefits payable under the Agreement to a beneficiary
upon the Participant's death. The Beneficiary designated under this
Agreement may be the same as or different from the Beneficiary
designation under any other plan of the Company in which the
Participant participates.
8.2 BENEFICIARY DESIGNATION; CHANGE; SPOUSAL CONSENT. The Participant
shall designate his Beneficiary by completing and signing the
Beneficiary Designation Form, and returning it to the Committee or
its designated agent. The Participant shall have the right to change
a Beneficiary by completing, signing and otherwise complying with the
terms of the Beneficiary Designation Form and the Committee's rules
and procedures, as in effect from time to time. If the Participant
names someone other than his or her spouse as a Beneficiary and if
the Committee requires that spousal consent be obtained with respect
to the Participant, a spousal consent, in the form designated by the
Committee, must be signed by the Participant's spouse and returned to
the Committee. Upon the acceptance by the Committee of a new
Beneficiary Designation Form, all Beneficiary designations previously
filed shall be cancelled. The Committee shall be entitled to rely on
the last Beneficiary Designation Form filed by the Participant and
accepted by the Committee prior to his death.
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8.3 ACKNOWLEDGMENT. No designation or change in designation of a
Beneficiary shall be effective until received, accepted and
acknowledged in writing by the Committee or its designated agent.
8.4 NO BENEFICIARY DESIGNATION. If the Participant fails to designate a
Beneficiary as provided in Sections 8.2 and 8.3 above or, if all
designated Beneficiaries predecease the Participant or die prior to
complete distribution of the Participant's benefits, then the
Participant's spouse shall be the designated Beneficiary. If the
Participant has no surviving spouse, the benefits remaining under the
Agreement shall be payable to the executor or personal representative
of the Participant's estate.
8.5 DOUBT AS TO BENEFICIARY. If the Committee has any doubt as to the
proper Beneficiary to receive payments pursuant to this Agreement,
the Committee shall have the right, exercisable in its discretion, to
cause the Company to withhold such payments until this matter is
resolved to the Committee's satisfaction.
8.6 DISCHARGE OF OBLIGATIONS. The payment of benefits under this
Agreement to a Beneficiary shall fully and completely discharge the
Company and the Committee from all further obligations under this
Agreement with respect to the Participant, and this Agreement shall
terminate upon such full payment of benefits.
ARTICLE 9
TRUST
9.1 ESTABLISHMENT OF THE TRUST. In order to provide assets from which to
fulfill the obligations to the Participant and his beneficiaries
under the Agreement, the Company shall establish a Trust by a trust
agreement with a third party, the trustee, to which the Company may,
in its discretion, contribute cash or other property, including
securities issued by the Company, to provide for the benefit payments
under the Agreement.
9.2 INTERRELATIONSHIP OF THE AGREEMENT AND THE TRUST. The provisions of
this Agreement shall govern the rights of the Participant to receive
distributions. The provisions of the Trust shall govern the rights of
the Company, the Participant and the creditors of the Company to the
assets transferred to the Trust. The Company shall at all times
remain liable to carry out its obligations under the Agreement. The
Company's obligations under the Agreement may be satisfied with Trust
assets distributed pursuant to the terms of the Trust, and any such
distribution shall reduce the Company's obligations under this
Agreement.
9.3 DEPOSITS TO THE TRUST. The Company shall deposit into the Trust an
amount of cash or, in its discretion, other assets, including if
desirable securities issued by the Company, equal to $3.4 million per
annum for the five (5) year period commencing July 1, 2002.
Immediately before the closing of any transaction constituting a
Change of Control, the Company shall deposit into the Trust such
amount of cash and other assets, if any, sufficient in amount to
cause the total value of the assets held in such Trust at that time
to equal the present value of the SERP Benefit calculated using an 8%
discount rate.
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ARTICLE 10
MISCELLANEOUS
10.1 STATUS OF AGREEMENT. This Agreement is intended to be a plan that is
not qualified within the meaning of Code Section 401(a) and that is
"unfunded and is maintained by an employer primarily for the purpose
of providing deferred compensation for a select group of management
or highly compensated employees" within the meaning of ERISA Sections
201(2), 301(a)(3) and 401(a)(1). This Agreement shall be administered
and interpreted to the extent possible in a manner consistent with
that intent.
10.2 UNSECURED GENERAL CREDITOR. The Participant and his Beneficiaries,
successors and assigns shall have no legal or equitable rights,
interests or claims in any property or assets of the Company. Any and
all of the Company's assets shall be, and remain, the general,
unpledged unrestricted assets of the Company.
10.3 COMPANY'S LIABILITY. The Company's liability for the payment of
benefits shall be defined only by this Agreement, as entered into
between the Company and the Participant.
10.4 NONASSIGNABILITY. Neither the Participant nor any other person shall
have any right to commute, sell, assign, transfer, pledge,
anticipate, mortgage or otherwise encumber, transfer, hypothecate or
convey in advance of actual receipt, the amounts, if any, payable
hereunder, or any part thereof, which are, and all rights to which
are, expressly declared to be, unassignable and non-transferable. No
part of the amounts payable shall, prior to actual payment, be
subject to seizure or sequestration for the payment of any debts,
judgments, alimony or separate maintenance owed by the Participant or
any other person, nor be transferable by operation of law in the
event of the Participant's or any other person's bankruptcy or
insolvency.
10.5 FURNISHING INFORMATION. The Participant or his Beneficiary will
cooperate with the Committee by furnishing any and all information
requested by the Committee and take such other actions as may be
requested in order to facilitate the administration of this Agreement
and the payments of benefits hereunder, including but not limited to
taking such physical examinations as the Committee may deem
necessary.
10.6 TERMS. Whenever any words are used herein in the masculine, they
shall be construed as though they were in the feminine in all cases
where they would so apply; and wherever any words are used herein in
the singular or in the plural, they shall be construed as though they
were used in the plural or the singular, as the case may be, in all
cases where they would so apply.
10.7 CAPTIONS. The captions of the articles, sections and paragraphs of
this Agreement are for convenience only and shall not control or
affect the meaning or construction of any of its provisions.
10.8 GOVERNING LAW. Subject to ERISA, the provisions of this Agreement
shall be construed and interpreted according to the internal laws of
the State of Maryland without regard to its conflict of laws
principles.
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10.9 VALIDITY. In case any provision of this Agreement shall be illegal or
invalid for any reason, said illegality or invalidity shall not
affect the remaining parts hereof, but this Agreement shall be
construed and enforced as if such illegal and invalid provision had
never been inserted herein.
10.10 NOTICE. Any notice or filing required or permitted to be given to the
Committee under this Agreement shall be sufficient if in writing and
hand-delivered, or sent by registered or certified mail, to the
address below:
SERP Committee
The Xxxxxx Group, Inc.
00000 Xxxx Xxxxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxx 00000
Such notice shall be deemed given as of the date of delivery or, if
delivery is made by mail, as of the date shown on the postmark on the
receipt for registration or certification.
Any notice or filing required or permitted to be given to the
Participant under this Agreement shall be sufficient if in writing
and hand-delivered, or sent by mail, to the last known address of the
Participant.
10.11 SUCCESSORS. The provisions of this Agreement shall bind and inure to
the benefit of the Company and its successors and assigns and the
Participant and his Beneficiary.
10.12 SPOUSE'S INTEREST. The interest in the benefits hereunder of a spouse
of the Participant who has predeceased the Participant shall
automatically pass to the Participant and shall not be transferable
by such spouse in any manner, including but not limited to such
spouse's will, nor shall such interest pass under the laws of
intestate succession.
10.13 INCOMPETENT. If the Committee determines in its discretion that a
benefit under this Agreement is to be paid to a minor, a person
declared incompetent or to a person incapable of handling the
disposition of that person's property, the Committee may direct
payment of such benefit to the guardian, legal representative or
person having the care and custody of such minor, incompetent or
incapable person. The Committee may require proof of minority,
incompetency, incapacity or guardianship, as it may deem appropriate
prior to distribution of the benefit. Any payment of a benefit shall
be a payment for the account of the Participant and the Participant's
Beneficiary, as the case may be, and shall be a complete discharge of
any liability under the Agreement for such payment amount.
10.14 COURT ORDER. The Committee is authorized to make any payments
directed by court order in any action in which the Committee has been
named as a party.
10.15 DISTRIBUTION IN THE EVENT OF TAXATION.
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(a) IN GENERAL. If, for any reason, all or any portion of the
Participant's benefit under this Agreement becomes taxable
to the Participant prior to receipt, the Participant may
petition the Committee for a distribution of that portion of
his or her benefit that has become taxable. Upon the grant
of such a petition, which grant shall not be unreasonably
withheld, the Company shall distribute to the Participant
immediately available funds in an amount equal to the
taxable portion of his or her benefit (which amount shall
not exceed the Participant's unpaid Vested SERP Benefit
under the Agreement). If the petition is granted, the tax
liability distribution shall be made within ninety (90) days
of the date when the Participant's petition is granted. Such
a distribution shall affect and reduce the benefits to be
paid under this Agreement.
(b) TRUST. If the Trust terminates in accordance with its terms
and benefits are distributed from the Trust to the
Participant or his Beneficiary in accordance therewith, the
Participant's benefits under this Agreement shall be reduced
to the extent of such distributions.
10.16 LEGAL FEES TO ENFORCE RIGHTS AFTER CHANGE IN CONTROL. The Company is
aware that upon the occurrence of a Change in Control, the Board or
the board of directors of the Company (which might then be composed
of new members) or a shareholder of the Company or of any successor
corporation or affiliate of a successor corporation might then cause
or attempt to cause the Company or such successor to refuse to comply
with its obligations under the Agreement and might cause or attempt
to cause the Company to institute, or may institute, litigation
seeking to deny the Participant the benefits intended under the
Agreement. In these circumstances, the purpose of the Agreement could
be frustrated. Accordingly, if, following a Change in Control, it
should appear to the Participant that the Company or any successor
corporation has failed to comply with any of its obligations under
the Agreement or any agreement thereunder or, if the Company or any
other person takes any action to declare the Agreement void or
unenforceable or institutes any litigation or other legal action
designed to deny, diminish or to recover from the Participant the
benefits intended to be provided, then the Company irrevocably
authorizes such Participant to retain counsel of his choice at the
expense of the Company to represent such Participant in connection
with the initiation or defense of any litigation or other legal
action, whether by or against the Company or any director, officer,
shareholder, other person or entity affiliated with the Company or
any successor corporation or affiliate of a successor corporation
thereto in any jurisdiction.
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IN WITNESS WHEREOF, the parties have executed this Agreement effective as of
the date and year indicated below.
"Company"
The Xxxxxx Group, Inc., a Maryland corporation
By: /s/ Xxxxxx X. Xxxxxxx, III
--------------------------------
Xxxxxx X. Xxxxxxx, III
Senior Vice President
Attest: /s/ Xxxxxxxx X. Xxxxxx
---------------------------------
Xxxxxxx X. Xxxxxx
Secretary
Date: August 26, 2002
--------------------------------
"Participant"
R. Xxxx Xxxxxx
/s/ R. Xxxx Xxxxxx
-----------------------------------------
Date: August 26, 2002
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