Change in Control



 

Exhibit 10.90

 

AMENDED AND RESTATED

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (the “Agreement”) is made and entered into as of June 1, 2002 (the “Effective Date”), and amended February 23, 2004, June 16, 2005, June 28, 2006, and December 26, 2007, by and between Robert E. Mellor (“Executive”), and Building Materials Holding Corporation, a Delaware corporation (the “Company”).

 

This Agreement is further amended and restated on February 19, 2008, in order to extend the term of the Agreement and to make certain other changes, all as set forth herein as follows:

 

WITNESSETH

 

WHEREAS, Executive is currently employed by the Company as its Chairman and Chief Executive Officer;

 

WHEREAS, Executive participates in the Severance Plan for Certain Executive Officers, Senior Management and Key Employees of the Company and its Subsidiaries, as amended from time to time (the “Severance Plan”); and

 

WHEREAS, the Company wishes to extend the duration of Executive's services and further clarify the terms and conditions of his employment by entering into this Agreement with Executive and Executive is willing to commit his services to the Company, on the terms and conditions set forth below.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, Executive and the Company hereto agree as follows:

 

1.

Term

 

This Agreement commenced on the Effective Date, and shall continue in effect for a period ending December 31, 2010, or, if this Agreement is extended, such later date as mutually agreed upon (the “Employment Term”).

 

2.

Employment

 

2.1 Engagement. The Company hereby employs Executive and Executive hereby agrees to be employed by the Company, subject to the terms and conditions herein set forth. During the Employment Term, Executive shall be employed as Chairman and Chief Executive Officer of the Company, and shall be responsible for the duties normally and customarily attendant to such offices. Executive shall render such other services and duties of an executive nature consistent with the duties of a senior executive officer of the Company as may from time to time be designated by the Board of Directors (the “Board”).

 

2.2 Exclusive Employment. During the Employment Term, Executive shall devote his full business time to his duties and responsibilities set forth in Section 2.1. Without limiting the generality of the foregoing, Executive shall not, without the prior written approval of the Board, during the Employment Term, render services of a business, professional or commercial nature to any other person, firm or corporation, whether for compensation or otherwise, except that Executive may engage in civic, philanthropic and community service activities so long as such activities do not materially interfere with Executive’s ability to comply with this Agreement and are not otherwise in conflict with the policies or interest of the Company, and Executive may serve on the board of directors of two companies without Company approval.

 

 

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3.

Compensation and General Benefits

 

3.1 Base Salary. During the term of this Agreement, the Company shall pay Executive a base salary in an annualized amount equal to eight hundred fifty thousand dollars ($850,000) (“Base Salary”) payable pro rata on the Company's regular payday, and subject to adjustment as hereinafter provided.

 

3.2 Salary Reviews. Executive's Base Salary shall be reviewed annually by the Compensation Committee of the Board for the purpose of considering increases thereof. In conducting this review, the Compensation Committee of the Board shall consider appropriate factors, including, without limitation, Executive's performance, the Company's financial condition and compensation afforded to senior executives of comparable corporations. The Base Salary shall not be decreased without the written consent of Executive.

 

3.3 Bonus.

 

(a) During the Employment Term, in addition to the Base Salary provided by Section 3.1, Executive will participate in the Company's Annual CEO Incentive Plan (the “Annual Bonus Plan”), pursuant to which Executive shall be eligible to receive additional incentive compensation on an annual basis based upon meeting targeted objectives as determined annually by the Compensation Committee of the Board. The range of the annual base bonus shall be 0% to 200% of Base Salary with the base bonus set at 100% of Base Salary if Executive meets the targeted objectives.

 

(b) During the Employment Term, in addition to the Base Salary and Annual Bonus Plan, Executive shall participate in the Company's Long-Term Incentive Plan (the “LTIP”) pursuant to which Executive shall be eligible to receive additional incentive compensation under the LTIP of from 0% to 160% of Base Salary based upon meeting targeted objectives determined for each three-year period in the LTIP and in accordance with its terms, with such participation set at 80% of Base Salary if the targeted objectives under the LTIP are met. Payments of awards under the LTIP shall be made in accordance with the terms set forth in the LTIP as amended from time to time.

 

3.4 Vacation. Executive shall be entitled to four weeks paid vacation in any fiscal year during the Employment Term in accordance with Company vacation and leave policies. Vacation time shall be planned and taken consistent with Executive's duties and obligations hereunder.

 

3.5 Other Benefits. During the Employment Term, Executive (and his spouse and dependents) shall be entitled to participate in the Company's executive perquisite plan, supplemental retirement plan, liability insurance, life insurance, disability insurance, dental insurance, hospitalization insurance, medical, accident, and other employee benefit plans from time to time adopted by the Company. The Company shall have the right to change insurance carriers and benefit plans as may be appropriate in light of future market conditions and shall have the right to purchase individual policies covering Executive if necessary.

 

 

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3.6 Stock Incentive Plans. Executive shall also be eligible to receive additional incentive compensation in the form of stock option or restricted stock grants. Review for any such grant shall be concurrent with Executive's annual salary review and shall be in the sole discretion of the Compensation Committee of the Board. For the avoidance of any doubt, the vesting of any stock option or restricted stock grant shall be governed by the award agreement pursuant to which such stock option or restricted stock grant was granted.

 

3.7 Reimbursement of Expenses. Upon submission of appropriate documentation in accordance with Company policy, the Company will promptly reimburse Executive for all reasonable business expenses incurred by Executive in pursuing the business of the Company, including, without limitation, expenditures for entertainment and travel.

 

4.

Confidential Information

 

During the term of this Agreement and forever thereafter, Executive agrees to keep confidential all information provided by the Company, excepting any such information as is already known to the public, and including any such information and material relating to any customer, vendor, licensor, licensee, or other party transacting business with the Company, and not to release, use, or disclose the same, except with the prior written permission of the Company (collectively, “Confidential Information”). Executive further covenants and agrees that every document, computer disk, computer software program, notation, record, diary, memorandum, development, investigation, or the like, and any method or manner of doing business, of the Company (or containing any Confidential Information) made or acquired by Executive during his employment, is and shall be the sole and exclusive property of the Company.

 

5.

Covenants of Executive.

 

5.1 Non-Compete. Executive agrees that, during the Employment Term he will not, directly or indirectly, engage in any business or activity competitive with the business activities of the Company. The foregoing shall not apply to passive investments by Executive of up to 5% of the outstanding stock of any publicly traded company or to service by Executive on boards of directors of companies as permitted under this Agreement, regardless of whether such company competes with the Company.

 

5.2 Solicitation of Employees. During the Employment Term and for a period of one year following a termination of employment for any reason, he shall not, directly or indirectly, individually, or together through any other person, firm, corporation or entity, solicit, recruit or encourage any employee of the Company to leave his or her employment with the Company and/or accept a position with another company, provided, however, that general solicitations not targeted to Company employees shall not be deemed to violate this Section 5.2.

 

 

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5.3 Solicitation of Customers and Suppliers. Executive agrees that, during the Employment Term and for a period of one year following a termination of employment for any reason, he shall not, directly or indirectly, individually, or together through any other person, firm, corporation or entity, use Confidential Information to (i) solicit the business of any material customers of or suppliers to the Company, or (ii) discourage any person or entity which is a customer of the Company from continuing its existing business or contractual relationship with the Company.

 

5.4 Compliance with Company Policies. Executive agrees that, during the Employment Term, he shall comply with the Company's employee manual and other policies and procedures reasonably established by the Company from time to time concerning matters such as management, supervision, recruiting, diversity, and sexual harassment.

 

5.5 Cooperation. For a period of one year following his termination of employment under this Agreement, Executive shall, upon Company’s reasonable request and in good faith and with his best efforts, subject to his reasonable availability, cooperate and assist Company in any dispute, controversy, or litigation in which Company may be involved and with respect to which Executive obtained knowledge while employed by the Company or any of its affiliates, successors, or assigns, including, but not limited to, his participation in any court or arbitration proceedings, giving of testimony, signing of affidavits, or such other personal cooperation as counsel for the Company shall request. Any such activities shall be scheduled, to the extent reasonably possible, to accommodate Executive’s business and personal obligations at the time. The Company shall pay Executive’s reasonable travel and incidental out-of-pocket expenses incurred in connection with any such cooperation, as well as the reasonable costs of an attorney Executive engages to advise him in connection with the foregoing.

 

5.6 Return of Business Records and Equipment. Upon termination of Executive's employment hereunder, Executive shall promptly return to the Company: (i) all documents, records, procedures, books, notebooks, and any other documentation in any form whatsoever, including but not limited to written, audio, video or electronic, containing any information pertaining to the Company which includes confidential information, including any and all copies of such documentation then in Executive's possession or control regardless of whether such documentation was prepared or compiled by Executive, Company, other employees of the Company, representatives, agents, or independent contractors, and (ii) all equipment or tangible personal property entrusted to Executive by the Company. Executive acknowledges that all such documentation, copies of such documentation, equipment, and tangible personal property are and shall at all times remain the sole and exclusive property of the Company.

 

6.

Covenants of the Company

 

6.1 Indemnification. In the event Executive is made, or threatened to be made, a party to any legal action or proceeding, by reason of the fact that Executive is or was an employee, director or officer of the Company or serves or served any other entity in any capacity at the Company's request, Executive shall be indemnified by the Company, and the Company shall pay Executive's related expenses when and as incurred, including but not limited to attorney fees, all to the fullest extent permitted by law.

 

 

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6.2 Change in Control. During the Employment Term, the Company shall continue in full force and effect with respect to Executive, the Severance Plan (or an applicable successor plan), as amended from time to time in accordance with the terms thereof. The Severance Plan shall control the compensation and benefits to be received by Executive in the event of a Change in Control (as defined in the Severance Plan). For the avoidance of any doubt, the vesting of any stock option or restricted stock grant shall be governed by the award agreement pursuant to which such stock option or restricted stock grant was granted.

 

6.3 Supplemental Retirement Program. The Company shall establish for Executive and make contributions to fund an additional defined contribution supplemental retirement program (the “SRIP”), designed to provide Executive with a retirement annuity, at age 65, in an amount, taken together with other pension, retirement and social security benefits to which Executive may be entitled at age 65, equal to the greater of: (i) 35% of his average compensation from Base Salary and Annual Bonus for the three years prior to Executive reaching age 65, or (ii) 40% of his average compensation from Base Salary and Annual Bonus for the three years prior to December 31, 2010 (which average shall in no event be less than his average compensation from Base Salary and Annual Bonus for the three years prior to Executive reaching age 65). The SRIP shall be based on the assumptions set forth on Schedule 1 to this Agreement. The annual contribution shall be calculated each year, and Executive acknowledges that the amount of the contribution will likely be different from the amounts shown in Schedule 1. Executive further acknowledges that the contribution will vary based on the performance of the Company and whether Executive meets or exceeds targeted bonus levels under the Annual Bonus Plan. LTIP participation shall not be included in calculating average compensation above.

 

7.

Compensation and Benefits Upon Termination.

 

7.1 Termination Upon Death. If Executive dies prior to the expiration of the Employment Term, the Company shall pay to Executive's estate, or other designated beneficiary(s) as shown in the records of the Company, any earned but unpaid Base Salary, a pro-rata amount of the annual bonus that Executive would be eligible to receive under the Company's Annual Bonus Plan for the year in which Executive's death occurs, LTIP benefits in accordance with the terms of the LTIP, accrued benefits under the SRIP and any other benefits that Executive is entitled to receive as of the Date of Termination under applicable benefit plans of the Company, less standard withholdings for tax and social security purposes. Except as required by law, after the Date of Termination, the Company shall have no obligation to make any other payment, including severance or other compensation, of any kind to Executive’s estate upon a termination of employment by death.

 

7.2 Termination Upon Disability. The Company may terminate Executive's employment in the event Executive suffers a Disability. In the event that Executive's employment is terminated pursuant to this Section 7.2, Executive shall receive payment for any earned and unpaid Base Salary, a pro-rata amount of the annual bonus that Executive would be eligible to receive under the Company's Annual Bonus Plan for the year in which such termination occurs, LTIP benefits in accordance with the terms of the LTIP, accrued benefits under the SRIP, and any other benefits that Executive is then entitled to receive under applicable benefit plans of the Company, less standard withholdings for tax and social security purposes. Except as required by law, after the Date of Termination, no other compensation of any kind or severance or other payment of any kind or payment in lieu of notice shall be payable by the Company to Executive upon a termination of employment for Disability.

 

 

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7.3 Voluntary Termination. Executive may voluntarily terminate his employment with the Company at any time upon 90 days' prior written notice. The Company may accelerate the termination of Executive's employment and the right to any further compensation to a date prior to the 90th day upon written notice thereof being delivered to Executive by the Company. In the event that Executive's employment is terminated under this Section 7.3, Executive shall receive payment for any earned and unpaid Base Salary, and benefits the Executive is entitled to receive under the employee benefit plans of the Company, but excluding bonuses otherwise payable under the Company's Annual Bonus Plan, less standard withholdings for tax and social security purposes, through the Date of Termination. Except as required by law, after the Date of Termination the Company shall have no further obligation to pay any compensation of any kind or severance payment of any kind nor to make any further payment in lieu of notice to Executive.

 

7.4 Termination for Cause. The Board may terminate Executive's employment with the Company at any time for Cause. In the event that Executive's employment is terminated under this Section 7.4, Executive shall receive payment for all earned but unpaid Base Salary, and benefits the Executive is then entitled to receive under the employee benefit plans of the Company, but excluding bonuses otherwise payable under the Company's Annual Bonus Plan, less standard withholdings for tax and social security purposes, through the Date of Termination. Except as required by law, after the Date of Termination the Company shall have no further obligation to pay any severance or compensation of any kind nor to make any payment in lieu of notice to Executive. Except as required by law, all benefits provided by the Company to Executive under this Agreement or otherwise shall cease as of the Date of Termination.

 

7.5 Termination Without Cause. The Company may, at any time and without prior written notice, terminate Executive without Cause. In the event that Executive's employment with the Company is terminated without Cause, Executive shall receive payment for all earned but unpaid Base Salary, and benefits the Executive is then entitled to receive under benefit plans of the Company, if any, less standard withholdings for tax and social security purposes, through the Date of Termination. In addition, provided that Executive executes a release of claims against the Company (in a form reasonably satisfactory to the Company) and such release becomes effective, Executive shall receive (i) within 75 days payment in a lump sum of an amount equal to the then current Base Salary through December 31, 2010; (ii) payment of the amount of the Annual Bonus that Executive would be eligible to receive under the Company's Bonus Plan for the year in which the termination occurs; (iii) payment of amounts accrued under the LTIP in accordance with the terms of the LTIP; (iv) assuming Executive is eligible and elects COBRA, payment on Executive's behalf of monthly continuation premiums for health insurance under Federal or State COBRA for a period of 18 months following the Date of Termination; (v) acceleration of the vesting of a portion of any unvested stock options in the amount that would have become vested on or before December 31, 2010; (vi) payment to Executive’s account under the SRIP of the annual contribution to the SRIP for the calendar year in which the termination occurs; and (vii) payment of an additional contribution to the SRIP in an amount necessary to ensure that the anticipated target benefit provided to Executive under the SRIP (i.e. the greater of 35% of his average compensation from Base Salary and Annual Bonus for the three years prior to Executive reaching age 65 or 40% of his average compensation from Base Salary and Annual Bonus for the last three years prior to December 31, 2010 (which average compensation shall in no event be less than his average compensation from Base Salary and Annual Bonus for the three years prior to Executive reaching age 65)) is fully funded as of the date of such termination. No other compensation of any kind or severance or other payment of any kind shall be payable by the Company to Executive after such Date of Termination. Except as specifically provided in this Section 7.5 and except as required by law, all benefits provided by the Company to Executive under this Agreement or otherwise shall cease as of the Date of Termination.

 

 

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7.6 Termination for Good Reason. Notwithstanding anything in this Section 7 to the contrary, Executive may voluntarily terminate his employment with the Company and receive the benefits detailed in Section 7.5 (as if there had been a termination by the Company without Cause) upon or within 180 days following the occurrence of an event constituting Good Reason, subject to, as applicable, Executive’s execution of the effective release of claims described in Section 7.5.

 

7.7 Termination Following a Change in Control. If the employment of Executive is terminated within the period commencing 3 months prior to a Change in Control and ending 3 years following a Change in Control, the provisions of this Section 7 shall not apply and all payments shall be made in accordance with the provisions of the Severance Plan, except that in the event such termination occurs as a result of a termination of employment by the Company without Cause or by Executive for Good Reason, provided that Executive executes a release of claims against the Company (in a form reasonably satisfactory to the Company) and such release becomes effective, Executive shall also be entitled to (i) payment of the annual contribution to the SRIP for the calendar year in which the termination occurs and (ii) payment of an additional contribution to the SRIP in an amount necessary to ensure that the anticipated target benefit provided to Executive under the SRIP (i.e. the greater of 35% of his average compensation from Base Salary and Annual Bonus for the three years prior to Executive reaching age 65 or 40% of his average compensation from Base Salary and Annual Bonus for the last three years prior to December 31, 2010 (which average compensation shall in no event be less than his average compensation from Base Salary and Annual Bonus for the three years prior to Executive reaching age 65)) is fully funded as of the date of such termination. For the avoidance of any doubt, the vesting of any stock option or restricted stock grant shall be governed by the award agreement pursuant to which such stock option or restricted stock grant was granted.

 

7.8 Certain Definitions. For purposes of this Agreement, the following term shall have the meanings set forth below.

 

(a) Cause” shall mean that Executive shall: (i) commit an act of fraud, embezzlement or misappropriation involving the Company; (ii) be convicted by a court of competent jurisdiction of, or enter a plea of guilty of no contest to, any felony involving moral turpitude or dishonesty; (iii) commit an act, or fail to commit an act, involving the Company which amounts to, or with the passage of time would amount to, willful misconduct, gross negligence or a breach of this Agreement and which results or will result in material harm to the Company, if such act is not corrected within 30 days following receipt written notice thereof from the Company; or (iv) willfully fail to perform the responsibilities and duties specified herein for a period of 30 days following receipt of written notice from the Company which specifically describes past instances of willful failure of performance; provided that in the case of (iv) above, during the 30-day period following receipt of such notice, Executive shall be given the opportunity to take reasonable steps to cure any such claimed past failure of performance; provided, however, that Executive shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for the purpose (after reasonable notice to Executive and an opportunity for Executive, together with Executive 's counsel, to be heard before the Board), finding that in the good faith opinion of the Board Executive was guilty of the conduct set forth above and specifying the particulars thereof in detail. Notwithstanding the foregoing, Executive shall have the right to contest his termination for Cause (for purposes of this Agreement) by arbitration in accordance with the provisions of this Agreement.

 

 

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(b) Date of Termination” shall mean (i) if Executive is terminated by the Company for Disability, thirty (30) days after written notice of such termination is given to Executive (provided that Executive shall not have returned to the performance of his duties on a full-time basis during such 30-day period); (ii) if Executive's employment is terminated by the Company for any other reason, the date on which a written notice of termination is given, provided that, in the case of a termination for Cause, Executive shall not have cured the matter or matters stated in the notice of termination within the 30-day notice period provided in Section 7.8(a) above; (iii) if Executive terminates employment for Good Reason, the date of Executive's resignation, provided that the notice and cure provisions in Section 7.8(d) have been complied with; (iv) if Executive terminates employment for other than Good Reason, the date specified in Executive's notice in compliance with Section 7.3; or (v) in the event of Executive's death, the date of death.

 

(c) Disability” shall mean a physical or mental disability that renders Executive unable, as determined in good faith by a licensed physician, to perform the essential functions of his position, even with reasonable accommodation, for 180 days within any 12-month period. The Company and Executive or his legal representative shall use their best efforts to agree on the physician to determine disability. If they cannot agree within ten (10) days after the first party makes a written proposal stating the name of a physician, then the other party shall select a physician within 10 days and within 10 days thereafter the two physicians shall select a third physician. All such physicians must be board certified in the medical area giving rise to the alleged disability. The determination of the third physician shall be final and binding. If one party fails to select a physician within the 10-day period, the physician named by the other party shall make the determination of disability.

 

 

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(d) Good Reason” shall mean Executive's resignation from employment within 180 days after the occurrence of one of the following events enumerated in this Section 7.8(d) without Executive’s express written consent, provided, however, that Executive must provide written notice to the Company within ninety (90) days after the occurrence of the event allegedly constituting Good Reason, and the Company shall have thirty (30) days after such notice is given to cure:

 

(i) a change of Executive's title as Chairman and Chief Executive Officer or a material reduction in Executive's responsibilities or the assignment to Executive by the Company of duties inconsistent with his position as Chairman and Chief Executive Officer;

 

(ii) a material reduction in his Base Salary or target bonus opportunity under the Annual Bonus Plan or a material reduction in the benefits provided under other employee benefit plans described in this Agreement;

 

(iii) a relocation to any place more than twenty-five (25) miles from the office regularly occupied by Executive, except for reasonably required travel by Executive on the Company's business;

 

(iv) any material breach by the Company of any provision of this Agreement or any other material agreement between the Company or any subsidiary and Executive; or

 

(v) the failure by the Company or by any successor or assign of the Company (whether by operation of law or otherwise, including any surviving company in a merger or similar transaction involving the Company), within ten business days following a Change in Control, to deliver to Executive an agreement expressly reaffirming its obligations under or agreeing to assume and comply with the obligations of the Company under this Agreement.

 

7.9 Code Section 409A. Notwithstanding anything herein to the contrary, to the extent that the Board determines, in its sole discretion, (a) at the time of Executive’s termination of employment with the Company, he is a “specified employee” as defined in Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and (b) that any payment or benefit to be provided under Section 7 to or for the benefit of Executive would be subject to the additional tax imposed under Section 409A(a)(1)(B) of the Code or a successor or comparable provision if paid at the time such payments and benefits are otherwise required under this Agreement, the commencement of such payments and/or benefits shall be delayed until the earlier of (i) the date that is six months following the Date of Termination or (ii) the date of Executive's death; provided, however, that an amount equal to the lesser of two times (x) annual compensation or (y) the limit under Code Section 401(a)(17) shall not be subject to the delay described in the previous clause and instead shall be paid out as otherwise scheduled.

 

8.         Warranties and Representations. Executive hereby represents and warrants to the Company that he is not now under any obligation of a contractual or quasi-contractual nature known to him that is inconsistent or in conflict with this Agreement or that would prevent, limit or impair the performance by Executive of his obligations hereunder; and has been or has had the opportunity to be represented by legal counsel in the preparation, negotiation, execution and delivery of this Agreement and understands fully the terms and provisions hereof.

 

 

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9.

Notices

 

All notices required or permitted to be given by either party hereunder shall be in writing and shall be deemed sufficiently given if mailed by registered or certified mail, or personally delivered to the party entitled thereto at the address stated below, or to such changed address as the addressee may have given by a similar notice:

 

To the Company:

Building Materials Holding Corporation

Four Embarcadero Center, Suite 3200

San Francisco, California 94111

Attn: Chairman of the Compensation Committee

Fax: (415) 627-9119

 

 

With a Copy to:

Building Materials Holding Corporation

720 Park Blvd., Suite 200

P.O. Box 7006

Boise, Idaho, 83707

Fax: (208) 331-4477

Attention: Paul Street, Esq.

 

 

To Executive:

Robert E. Mellor

Building Materials Holding Corporation

Four Embarcadero Center, Suite 3200

San Francisco, California 94111

Telecopier: (415) 627-9119

 

10.

General Provisions

 

10.1 Waiver. No waiver by any party hereto of any failure of any other party to keep or perform any covenant or condition of this Agreement shall be deemed to be a waiver of any preceding or succeeding breach of the same, or any other covenant or condition.

 

10.2 Amendments. No provision of this Agreement may be amended, modified or waived unless such amendment, modification or waiver shall be agreed to in writing and signed by Executive and a duly authorized officer of the Company.

 

10.3 Severability. The provisions of this Agreement are severable and in the event that a court of competent jurisdiction determines that any provision of this Agreement is in violation of any law or public policy, in whole or in part, only the portions of this Agreement that violate such law or public policy shall be stricken. All portions of this Agreement that do not violate any statute or public policy shall not be affected thereby and shall continue in full force and effect. Further, any court order striking any portion of this Agreement shall modify the stricken terms as narrowly as possible to give as much effect as possible to the intentions of the parties under this Agreement.

 

 

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10.4 Assignment. No right to or interest in any payments shall be assignable by either party; provided; however, that this provision shall not preclude Executive from designating one or more beneficiaries to receive any amount that may be payable after his death and shall not preclude his executor or administrator from assigning any right hereunder to the person or persons entitled hereto. Further, the Company may assign this Agreement: (a) to an affiliate so long as such affiliate assumes the Company's obligations hereunder, or (b) in connection with a merger or consolidation involving the Company or a sale of substantially all its assets or shares to the surviving corporation or purchaser as the case may be so long as such assignee assumes the Company's obligations hereunder.

 

10.5 Successors and Assigns. This Agreement and the obligations of the Company and Executive hereunder shall be binding upon and shall be assumed by their respective successors including, without limitation, any corporation or corporations acquiring the Company, whether by merger, consolidation, sale or otherwise.

 

10.6 Governing Law. The validity, interpretation, performance, and enforcement of this Agreement shall be governed by the laws of the State of California without regard to the principles of conflict of laws thereof.

 

10.7 Attorney's Fees and Costs. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs, and necessary disbursements in addition to any other relief to which that party may be entitled. This provision shall be construed as applicable to the entire contract.

 

10.8 No Representation. No officer, employee or representative of the Company has any authority to make any representation or promise in connection with this Agreement or the subject matter hereto which is not contained herein, and Executive agrees that he has not executed this Agreement in reliance upon any such representation or promise.

 

10.9 Interpretation of Agreement. Each of the parties has been represented by counsel in the negotiation and preparation of this Agreement. The parties agree that this Agreement is to be construed as jointly drafted. Accordingly, this Agreement will be construed according to the fair meaning of its language, and the rule of construction that ambiguities are to be resolved against the drafting party will not be employed in the interpretation of this Agreement.

 

10.10 Headings. The headings of sections and subsections are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement.

 

10.11 Entire Agreement. This document constitutes the entire understanding and Agreement of the parties with respect to the subject matter of this Agreement, and any and all prior agreements, understandings and representations are hereby terminated and cancelled in their entirety and are of no further force or effect.

 

 

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10.12 Counterparts. This Agreement may be executed in two or more counterparts with the same effect as if the signatures to all such counterparts was upon the same instrument, and all such counterparts shall constitute but one instrument.

 

10.13 No Mitigation of Damages. Executive shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise, nor shall the amount of any payment provided for under this Agreement be reduced by any compensation earned by Executive as a result of employment by another employer or by retirement benefits after the Date of Termination, except as specifically provided hereunder. The provisions of this Agreement, and any payment provided for hereunder, shall not reduce any amounts otherwise payable, or in any way diminish the Executive's then existing rights, or rights which would accrue solely as a result of the passage of time, under any Company benefit plan or other contract, plan or arrangement.

 

10.14 Dispute Resolution and Binding Arbitration. Executive and the Company agree that in the event a dispute arises concerning or relating to Executive's employment with the Company, or any termination therefrom, such dispute shall be submitted to binding arbitration in accordance with the employment arbitration rules of Judicial Arbitration and Mediation Services (“JAMS”) by a single impartial arbitrator experienced in employment law selected as follows: if the Company and Executive are unable to agree upon an impartial arbitrator within ten (10) days of a request for arbitration, the parties shall request a panel of employment arbitrators from JAMS and alternatively strike names until a single arbitrator remains. The arbitration shall take place in San Francisco, California, and both Executive and the Company agree to submit to the jurisdiction of the arbitrator selected in accordance with JAMS' rules and procedures. Executive and the Company further agree that arbitration as provided for in this section will be the exclusive and binding remedy for any such dispute and will be used instead of any court action, which is hereby expressly waived, except for any request by either party hereto for temporary or preliminary injunctive relief pending arbitration in accordance with applicable law, or an administrative claim with an administrative agency. The parties further agree that the award of the arbitrator shall be final and binding on both parties. The arbitrator shall have discretion to award monetary and other damages, or no damages, and to fashion such other relief as the arbitrator deems appropriate. The Company will be responsible for paying any filing fees and costs of the arbitration proceeding itself (for example, arbitrators' fees, conference room, transcripts), but each party shall be responsible for its own attorneys' fees. THE COMPANY AND EXECUTIVE ACKNOWLEDGE AND AGREE THAT BY AGREEING TO ARBITRATE, THEY ARE WAIVING ANY RIGHT TO BRING AN ACTION AGAINST THE OTHER IN A COURT OF LAW, EITHER STATE OR FEDERAL, AND ARE WAIVING THE RIGHT TO HAVE CLAIMS AND DAMAGES, IF ANY, DETERMINED BY A JURY.

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year set forth below.

 

                    

 

BUILDING MATERIALS HOLDING CORPORATION

Robert E. Mellor

 

 

 

 

 

 

By:

            

 

 

 

Title:

            

Date:

             

 

Date:

                  

 

 

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EX-10.70 5 v111286_ex10-70.htm

Exhibit 10.70

 

BUILDING MATERIALS HOLDING CORPORATION

 

Change in Control Severance Plan for Officers

 

Effective May 1, 2008

 

This Severance Plan (the "Plan") was adopted by the Compensation Committee of the Board of Directors of Building Materials Holding Corporation, a Delaware corporation (the "Company") on April, 28, 2008 for the benefit of certain executive officers, senior management and key employees of the Company and its subsidiaries. The effective date of the Plan is May 1, 2008 ("Effective Date"). The Plan supersedes and replaces the Severance Plan for Certain Executive Officers, Senior Management and Key Employees of the Company and its Subsidiaries ("Prior Plan"). The Prior Plan shall terminate effective as of April 30, 2008 and shall have no force or effect thereafter.

 

 

1.

Purpose

 

The Company desires to attract and retain well-qualified officers who are an integral part of the management of the Company and to encourage continuity of management. The principal purposes of the Plan are (i) to provide an incentive to the Designated Employees (as defined below) to remain in the employ of the Company, notwithstanding uncertainty and job insecurity which may be created by an actual or prospective Change in Control, (ii) to encourage the Designated Employees' full attention and dedication to the Company currently and in the event of an actual or prospective Change in Control, and (iii) to provide an incentive for the Designated Employees to be objective concerning any potential Change in Control and to fully support any Change in Control transaction approved by the Board of Directors.

 

 

2.

Definitions

 

Terms not otherwise defined in the Plan shall have the meanings set forth in this Section 2.

 

(a)        Cash Compensation. "Cash Compensation" shall mean the sum of (i) the highest annual base salary paid to the Designated Employee for the three (3) fiscal years immediately preceding the fiscal year in which the Notice of Termination is given and (ii) the highest cash bonus paid to the Designated Employee under the Company's bonus program for the three (3) fiscal years immediately preceding the fiscal year in which the Notice of Termination is given. In determining the amount set forth under (ii) above, if a Designated Employee has received a cash bonus with respect to a portion of a fiscal year that is one of the three (3) fiscal years immediately preceding the fiscal year in which the Notice of Termination is given, that amount shall be annualized.

 

(b)        Cause. For purposes of the Plan only, "Cause" shall mean: (i) the conviction by a court of competent jurisdiction of, or entry of a plea of guilty or of no contest to, any felony involving moral turpitude or dishonesty, (ii) a willful dereliction of duty or intentional and malicious conduct contrary to the best interests of the Company or its business if such dereliction of duty or misconduct is not corrected within thirty (30) days after written notice thereof from the Company, or (iii) a refusal to perform reasonable services customarily performed by such Designated Employee (other than by reason of a Disability) if such refusal is not corrected within thirty (30) days after written notice thereof from the Company; provided, however, that the Designated Employee shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to the Designated Employee a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Company's Board of Directors at a meeting of the Board called and held for the purpose (after reasonable notice to the Designated Employee and an opportunity for the Designated Employee, together with the Designated Employee's counsel, to be heard before the Board), finding that in the good faith opinion of the Board the Designated Employee was guilty of the conduct set forth above and specifying the particulars thereof in detail. Notwithstanding the foregoing, the Designated Employee shall have the right to contest his termination for Cause (for purposes of this Agreement) by arbitration in accordance with the provisions of the Plan.

 







(c)        Change in Control. A "Change in Control" of the Company shall be deemed to have occurred if (i) there shall be consummated (x) any consolidation, merger or similar reorganization or other transaction involving the Company, other than a transaction in which those persons that are holders of the Company's Common Stock immediately prior to the transaction both (I) each have the same proportionate ownership of common stock of the Company or voting equity securities of another surviving entity in the transaction (when compared to all other holders of the Company's Common Stock immediately prior to the transaction) immediately after the transaction and (II) in the aggregate possess beneficial ownership (as determined in accordance with Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended ("Exchange Act")) of at least a majority of the common stock of the Company or the voting equity securities of another surviving entity immediately after the transaction, or (y) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the business and/or assets of the Company, or (ii) the stockholders of the Company approve a plan or proposal for the liquidation or dissolution of the Company, or (iii) any "person" (as defined in Sections 13(d) and 14(d) of the Exchange Act, including any group), shall become the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of thirty-five (35%) percent or more of the Company's outstanding Common Stock, or (iv) if for any reason a majority of the Board is not comprised of "Continuing Directors," where a "Continuing Director" of the Corporation as of any date means a member of the Board who (x) was a member of the Board two years prior to such date and at all times through such date or (y) was nominated for election or elected to the Board with the affirmative vote of at least two-thirds (2/3rds) of the directors who were Continuing Directors at the time of such nomination or election; provided, however, that no individual initially elected or nominated as a director of the Corporation as a result of an actual or threatened election contest with respect to directors or any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board shall be deemed to be a Continuing Director.

 

(d)        Code. "Code" shall refer to the Internal Revenue Code of 1986 and the regulations promulgated thereunder, as amended from time to time.

 

(e)        Designated Employees. "Designated Employees" shall refer to those employees of the Company and its subsidiaries who hold the title of Vice President or above.

 




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(f)        Good Reason. A Designated Employee's termination of employment with the Company shall be deemed for "Good Reason" if any of the following events occur without the Designated Employee's express written consent and the Designated Employee provides his Notice of Termination upon or within one hundred eighty (180) days after such event occurring; provided, however, that the Designated Employee must have previously provided written notice to the Company within ninety (90) days after the occurrence of the event allegedly constituting Good Reason, and the Company shall have thirty (30) days after such notice is given to cure:

 

(i)   The assignment to the Designated Employee by the Company of duties materially inconsistent with, or a material alteration in the nature or status of, the Designated Employee's responsibilities immediately prior to a Change in Control of the Company (or thereafter if such duties and responsibilities change following a Change in Control with the Designated Employee's consent), other than any such alteration primarily attributable to the fact that the Company's securities are no longer publicly traded;

 

(ii)   A material reduction by the Company in the Designated Employee's annual base salary or annual cash bonus opportunity as in effect immediately prior to a Change in Control of the Company or as in effect thereafter if such base salary and/or bonus opportunity has been increased;

 

(iii)   Relocation to any place more than twenty-five (25) miles from the office regularly occupied by the Designated Employee prior to the time of a Change in Control; or

 

(iv)   Any material breach by the Company of any provision of the Plan or any material agreement between the Company or any subsidiary and the Designated Employee.

 

(g)        Independent Director. "Independent Director" shall have the meaning ascribed to such term in the Company's Rights Plan as initially adopted by the Board of Directors.

 

(h)        Specified Employee. "Specified Employee" shall have the meaning ascribed to such term in Section 409A of the Code.

 

 

3.

Beneficiaries

 

Each of the Designated Employees shall be a beneficiary of the Plan and entitled to receive the Benefits set forth herein.

 

 

4.

Termination in Connection with Change in Control

 

(a)        Termination of Employment. If a Change in Control of the Company shall have occurred while the Designated Employee is still an employee of the Company, the Designated Employee shall be entitled to the compensation provided in Section 5 upon the subsequent termination, within one (1) year of such Change in Control, of the Designated Employee's employment with the Company unless such termination is as a result of (i) the Designated Employee's death; (ii) the Designated Employee's Disability (as defined in Section 4(b) below); (iii) the Designated Employee's retirement in accordance with the Company's retirement policies; (iv) the Designated Employee's termination by the Company for Cause; or (v) the Designated Employee's decision to terminate his employment with the Company other than for Good Reason. In addition, if, prior to a Change in Control, (A) the Designated Employee's employment with the Company shall be terminated other than as a result of one of the circumstances enumerated in Section 4(a)(i) through (v), and, (B) either (I) within one (1) month following the date of such termination of employment, a Change in Control shall occur or (II) the events causing the termination occurred at the direction of a person acquiring control of the Company in a Change in Control, then the Designated Employee shall be entitled to the compensation provided in Section 5, which compensation shall be reduced by any other severance compensation previously paid to the Designated Employee in respect of such termination of employment.

 




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(b)        Disability. If, as a result of the Designated Employee's incapacity due to physical or mental illness, the Designated Employee shall have been absent from his duties with the Company on a full-time basis for six (6) months and the Company thereafter gives the Designated Employee thirty (30) days' written notice of its intention to terminate his employment, upon the expiration of such thirty (30) day period the Company may terminate the Designated Employee's employment for "Disability" if the Designated Employee shall not have returned to the full-time performance of the Designated Employee's duties.

 

(c)        Notice of Termination. Any termination of the Designated Employee's employment by the Company or the Designated Employee hereunder shall be communicated by a Notice of Termination given to the other party. For purposes of the Plan, a "Notice of Termination" shall mean a written notice which shall indicate whether or not the termination is as a result of any of the situations enumerated in Section 4(a)(i) through (v) above and which sets forth in reasonable detail the facts and circumstances claimed to provide a basis for asserting that the termination of the Designated Employee's employment is or is not under the provision so indicated.

 

(d)        Date of Termination. "Date of Termination" shall mean (i) if the Designated Employee is terminated by the Company for Disability, thirty (30) days after the Notice of Termination is given to the Designated Employee (provided that the Designated Employee shall not have returned to the performance of the Designated Employee's duties on a full-time basis during such thirty (30) day period) or (ii) if the Designated Employee's employment is terminated by the Company for any other reason or by the Designated Employee, the date on which a Notice of Termination is given.

 

 

5.

Severance Compensation upon Termination of Employment

 

If the Designated Employee's employment with the Company shall be terminated either (1) within one (1) month before (or earlier if the termination occurs at the direction of a person acquiring control of the Company in a Change in Control) or (2) upon or within one (1) year after a Change in Control, other than as a result of one of the circumstances enumerated in Section 4(a)(i) through (v) of the Plan, then the Company shall, subject to the execution and non-revocation of a release of claims by the Designated Employee in the form set forth on Exhibit A hereto:

 

(a)        Pay to the Designated Employee as severance pay in a lump sum, in cash, on or before the tenth day following the Date of Termination, an amount equal to the Designated Employee's Cash Compensation times the multiple specified on Schedule A attached hereto and incorporated by reference herein ("Schedule A");

 




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(b)        Arrange to provide the Designated Employee for a period of eighteen (18) months starting from the Date of Termination with health and life insurance substantially similar (including the cost to the Designated Employee) to those insurance benefits which the Designated Employee was receiving immediately prior to either (A) the Change in Control or (B) the Notice of Termination, as elected by the Designated Employee. Benefits to which the Designated Employee otherwise is entitled pursuant to this Section 5(b) shall be reduced to the extent comparable benefits are actually received by the Designated Employee during such eighteen (18) month period from a subsequent employer or through self-employment, and any such benefits actually received by the Designated Employee shall be reported by him to the Company;

 

(c)        Pay to the Designated Employee a single lump sum payment, on or before the tenth (10th) day following the Date of Termination, equal to the excess of (x) over (y), where (x) is equal to the lump sum present value of the pension benefit that the Designated Employee would receive under any pension plan which is or has been maintained by the Company and in which the Designated Employee is or was a participant (the "Pension Plan"), at his earliest benefit commencement date under the Pension Plan computed by increasing his actual number of years of credited service performed as of the Date of Termination, or, if earlier, the termination of the Pension Plan, by the number of years specified on Schedule A, and (y) is equal to the lump sum present value of the pension benefit actually payable to the Designated Employee on his earliest benefit commencement date under the Pension Plan based on the actual number of years of credited service performed as of the Designated Employee's Date of Termination, or, if earlier, the termination of the Pension Plan. The foregoing lump sum present value amounts shall be computed using the actuarial factors under the Pension Plan in effect on the Designated Employee's Date of Termination or, if earlier, the termination of the Pension Plan;

 

(d)        Pay to the Designated Employee, on or before the tenth (10th) day following the Date of Termination, an amount equal to the Designated Employee's target bonus opportunity for the year in which the Date of Termination occurs under the Company's annual cash-based incentive compensation plan, prorated by multiplying such amount by a fraction, the numerator of which shall be the actual number of days that have elapsed during such year prior to the Date of Termination, and the denominator of which shall be three hundred sixty-five (365); and

 

(e)        Pay to the Designated Employee, on or before the tenth (10th) day following the Date of Termination, any gross-up amounts as calculated under Section 6 of the Plan.

 

Notwithstanding the foregoing, in the event that the multiples set forth on Schedule A for any Designated Employee are greater than the number of full years remaining until such Designated Employee's agreed upon retirement date or normal retirement age of sixty-five (65), the multiples shall be automatically reduced to the greatest of (i) the number of years and/or partial years (measured by months) remaining until said Designated Employee's retirement date; (ii) the number of years left until the completion of the term of employment for the Designated Employee under an employment agreement, if any; or (iii) one year. In addition, following the expiration of the health insurance continuation provided under Section 5(b), each Designated Employee who, at the time of his termination of employment, was an officer of the Company shall be eligible to participate in the Company's health care plan, either on an individual basis or family basis to include his dependent spouse, until such time as he becomes eligible to participate in the BMHC Retirement Health Care Plan ("Retiree Health Care Plan"), subject to such Designated Employee's payment of one-half of the applicable COBRA premiums and recognition of taxable income with respect to any remaining unpaid premium necessary to avoid taxation of the Designated Employee under Section 105(h) of the Code. If a Designated Employee who, at the time of his termination of employment, was an officer of the Company shall be eligible and elects to participate in the Retiree Health Care Plan in accordance with its terms and conditions, such Designated Employee shall only be required to pay one-half of the applicable premium under the Retiree Health Care Plan and recognition of taxable income with respect to any remaining unpaid premium necessary to avoid taxation of the Designated Employee under Section 105(h) of the Code.

 




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It is the Company's intention that each of the payments or benefits provided under Sections 5(a), 5(c), 5(d) and 5(e) be paid on or before March 15th of the year after the year in which they are earned (i.e., the short-term deferral period described in Treasury regulations section 1.409A-1(b)(4)). However, notwithstanding anything herein to the contrary, to the extent that the Board of Directors of the Company determines, in its sole discretion, that any payments or benefits to be provided hereunder to or for the benefit of a Designated Employee who is also a Specified Employee would be subject to the additional tax imposed under Section 409A(a)(1)(B) of the Code or any other taxes or penalties imposed under Section 409A of the Code or a successor or comparable provision (the "Section 409A Taxes"), the commencement of such payments and/or benefits shall be delayed until the date that is six months following the Date of Termination or such earlier date that, as determined by the Company, is sufficient to avoid the imposition of Section 409A Taxes (such date is referred to herein as the "Distribution Date"). In the event that the Board of Directors determines that the commencement of any of the benefits to be provided under Section 5(b) are to be delayed pursuant to the preceding sentence, the Company shall require the Designated Employee to bear the full cost of such benefits until the Distribution Date at which time the Company shall reimburse the Designated Employee for all such costs. If any payments or benefits are delayed pursuant to this paragraph, such delayed payments or benefits, when paid or reimbursed, shall be increased by an amount equal to interest on such payments or reimbursements for the period between the Date of Termination and the applicable Distribution Date at a rate equal to the prime rate in effect as of the Date of Termination plus one point (for this purpose, the prime rate will be based on the rate published from time to time in The Wall Street Journal).

 

 

6.

Gross-up Payments

 

(a)        Gross-up in Benefits For "Parachute Payment". In the event that, as a result of payments in the nature of compensation to or for the benefit of a Designated Employee under this Plan or otherwise in connection with a Change in Control, any state, local or federal taxing authority imposes any taxes on the Designated Employee that would not be imposed but for the occurrence of a Change in Control, including any excise tax under Section 4999 of the Code and any successor or comparable provision (other than ordinary income and employment taxes imposed on such payments), then, in addition to the benefits provided for under Sections 5(a) through (d) and Section 6(b), the Company (including any successor to the Company) shall pay to the Designated Employee at the time any such amounts are paid an amount equal to the amount of any such tax imposed or to be imposed on the Designated Employee (the amount of any such payment, the "Parachute Tax Reimbursement"). In addition, the Company (including any successor to the Company) shall "gross up" such Parachute Tax Reimbursement by paying to the Designated Employee at the same time an additional amount equal to the aggregate amount of any additional taxes (whether income taxes, excise taxes, special taxes, additional taxes, employment taxes or otherwise) that are or will be payable by the Designated Employee as a result of the Parachute Tax Reimbursement being paid or payable to the Designated Employee and/or as a result of the additional amounts paid or payable to the Designated Employee pursuant to this sentence, such that after payment of such additional taxes the Designated Employee shall have been paid on an after-tax basis an amount equal to the Parachute Tax Reimbursement. It is the intention of the Company that payment of the Parachute Tax Reimbursement be made within the time period specified in Treasury regulations section 1.409A-3(i)(1)(v).

 




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(b)        Gross-up in Benefits For Additional Taxes under Section 409A of the Code. In the event that, as a result of payments to or for the benefit of a Designated Employee under this Plan, the Designated Employee is subject to the Section 409A Taxes, then, in addition to the benefits provided for under Sections 5(a) through (d) or otherwise (including Section 6(a)), the Company (including any successor to the Company) shall pay to the Designated Employee at the time any such amounts are paid an amount equal to the amount of any such Section 409A Tax imposed or to be imposed on the Designated Employee (the amount of any such payment, the "Section 409A Tax Reimbursement"). In addition, the Company (including any successor to the Company) shall "gross up" such Section 409A Tax Reimbursement by paying to the Designated Employee at the same time an additional amount equal to the aggregate amount of any additional taxes (whether income taxes, excise taxes, special taxes, additional taxes, employment taxes or otherwise) that are or will be payable by the Designated Employee as a result of the Section 409A Tax Reimbursement being paid or payable to the Designated Employee and/or as a result of the additional amounts paid or payable to the Designated Employee pursuant to this sentence, such that after payment of such additional taxes the Designated Employee shall have been paid on an after-tax basis an amount equal to the Section 409A Tax Reimbursement.

 

 

7.

Arbitration

 

The Company and, by accepting participation in the Plan, each Designated Employee agree that any and all disputes or controversies arising out of or relating to the Plan, including, without limitation, any claim of fraud or the general validity or enforceability of the Plan, shall be governed by the laws of the State of California, without giving effect to its conflict of laws provisions, and shall be submitted to binding arbitration in accordance with the employment arbitration rules of Judicial Arbitration and Mediation Services ("JAMS") by a single impartial arbitrator experienced in employment law selected as follows: if the Company and the applicable Designated Employee are unable to agree upon an impartial arbitrator within ten (10) days of a request for arbitration, the parties shall request a panel of employment arbitrators from JAMS and alternative strike names until a single arbitrator remains. The arbitration shall be conducted in the city where the Designated Employee's principal office was maintained prior to his termination of employment, applying the laws of the State of California, and the Company and, by accepting participation in the Plan, each Designated Employee agree to submit to the jurisdiction of the arbitrator selected in accordance with JAMS' rules and procedures. All fees and expenses of any arbitration, including the Designated Employee's reasonable legal fees and costs, are to be advanced by the Company. The Company and, by accepting participation in the Plan, each Designated Employee further agree that arbitration as provided in this Section 7 shall be the exclusive and binding remedy for any such dispute and will be used instead of any court action, which is hereby expressly waived, except for any request by either party hereto for temporary or preliminary injunctive relief pending arbitration in accordance with applicable law, or an administrative claim with an administrative agency, and that the award of the arbitrator, which shall include a determination based on relative success on the merits as to whom shall bear the Designated Employee's legal fees, shall be final and binding on both parties, and nonappealable. The arbitrator shall have discretion to award monetary and other damages, or no damages, and to fashion such other relief as the arbitrator deems appropriate. The Company will be responsible for paying any filing fees and costs of the arbitration proceeding itself (for example, arbitrators' fees, conference room, transcripts), but, except as set forth in this Section 7, each party shall be responsible for its own attorneys' fees. THE COMPANY AND EACH DESIGNATED EMPLOYEE ACKNOWLEDGE AND AGREE THAT BY AGREEING TO ARBITRATE, THEY ARE WAIVING ANY RIGHT TO BRING AN ACTION AGAINST THE OTHER IN A COURT OF LAW, EITHER STATE OR FEDERAL, AND ARE WAIVING THE RIGHT TO HAVE CLAIMS AND DAMAGES, IF ANY, DETERMINED BY A JURY.

 




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8.

Mitigation of Damages; Effect of Plan

 

(a)        The Designated Employee shall not be required to mitigate damages or the amount of any payment provided for under the Plan by seeking other employment or otherwise, nor shall the amount of any payment provided for under the Plan be reduced by any compensation earned by the Designated Employee as a result of employment by another employer or by retirement benefits after the Date of Termination, or otherwise, except to the extent provided in Section 5(b) above.

 

(b)        The provisions of the Plan, and any payment provided for hereunder, shall not reduce any amounts otherwise payable, or in any way diminish the Designated Employee's then existing rights, or rights which would accrue solely as a result of the passage of time, under any Benefit Plan, employment agreement or other contract, plan or arrangement.

 

 

9.

Funding Upon Change in Control

 

(a)        Prior to the occurrence of a Change in Control, the Board of Directors of the Company shall have the discretion to direct the Company to fund, to the extent it has not done so, a sum equal to the present value on the date of the Change in Control (determined using an interest rate equal to the short-term applicable federal rate (with annual compounding) established under Section 1274(d) of the Code for the month in which the Change in Control occurs) of any amounts that are or would reasonably be expected to become payable to the Designated Employees under the Plan (including a good faith estimate of expenses of the trust in the event that the Company does not timely pay such expenses) by establishing and irrevocably funding a trust for the benefit of the Designated Employees. The trustee of such trust shall be instructed to pay out any such amounts as and to the extent such amounts become payable in accordance with the terms of the Plan.

 




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(b)        The trust established under this Section 9 shall be a grantor trust described in Section 671 of the Code. The Company shall be solely responsible for and shall directly pay all fees and expenses of the trust; provided, however, in the event that the Company does not pay all of the fees and expenses of the trust, the trustee shall have the authority to pay such fees from the assets of the trust.

 

(c)        Any payments of severance or other benefits by the trust established pursuant to this Section 9 shall, to the extent thereof, discharge the Company's obligation to pay severance and other benefits under the Plan, it being the intent of the Company that the assets in such trust be held for the purpose of discharging any obligation of the Company to pay severance and other benefits under the Plan.

 

(d)        The trust established under this Section 9 shall not terminate until the date on which all payments and benefits to be funded out of the trust have been satisfied and discharged in full. Upon termination of the trust any assets remaining in the trust shall be returned to the Company.

 

 

10.

Term; Amendments; No Effect on Employment Prior to Change in Control; Agreements Incorporated by Reference

 

(a)        The Plan shall initially remain in effect until April 30, 2010, and shall automatically renew for successive one-year periods running from May 1 to April 30 unless prior to a Change in Control and prior to four (4) months or more before the applicable automatic renewal date, action is taken by the Board of Directors of the Company to terminate the Plan effective as of a renewal date. The Plan may also be amended from time to time by the Board of Directors of the Company; provided, however, that such amendments (other than amendments that are (i) intended to ensure compliance with applicable law or (ii) are favorable to the Designated Employees) may only be adopted prior to a Change in Control and shall only be effective on and after the applicable renewal date, in both cases unless agreed to and approved by the Designated Employee. Notwithstanding the foregoing, the Plan shall terminate eighteen (18) months after a Change in Control and shall terminate as to any Designated Employee participating in the Plan upon the termination of the Designated Employee's employment with the Company based on death, Disability (as defined in Section 3(b)), mandatory retirement or Cause (as defined in Section 1(b)) or by the Designated Employee other than for Good Reason (as defined in Section 1(f)). Termination or amendment of the Plan shall not affect any obligation of the Company under the Plan which has accrued and is unpaid as of the effective date of the termination or amendment. Unless and until a Change in Control shall have occurred, a Designated Employee shall not have any vested rights under the Plan.

 

(b)        Nothing in the Plan shall confer upon the Designated Employee any right to continue in the employ of the Company prior to a Change in Control of the Company or shall interfere with or restrict in any way the rights of the Company, which are hereby expressly reserved, to discharge the Designated Employee at any time prior to the date of a Change in Control of the Company for any reason whatsoever, with or without cause.

 




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(c)        Notwithstanding anything herein to the contrary, the Board of Directors of the Company may, in its sole discretion, amend the Plan (which amendment shall be effective upon its adoption or at such other time designated by the Board of Directors) at any time prior to a Change in Control as may be necessary to avoid the imposition of the additional tax under Section 409A(a)(1)(B) of the Code; provided, however, that any such amendment shall be implemented in such a manner as to preserve, to the greatest extent possible, the terms and conditions of the Plan as in existence immediately prior to any such amendment.

 

(d)        Any agreement entered into by the Company and a Designated Employee, including any employment agreement, that either (i) explicitly makes reference to this Plan or (ii) confers rights or provides benefits to a Designated Employee upon such Designated Employee's termination of employment with the Company (a "Designated Employee Agreement") shall be incorporated herein by reference to the extent that the terms of such Designated Employee Agreement pertain to this Plan and/or the circumstances under which payments and/or benefits are provided under this Plan. To the extent that such Designated Employee Agreement provides for rights or benefits to the Designated Employee under this Plan that are more favorable than the rights or benefits actually provided for hereunder, the terms of such Designated Employee Agreement shall govern.  

 

(e)        In the event that any Designated Employee Agreement confers rights or provides benefits that are of the same type as the rights or benefits conferred or provided for under this Plan (without giving effect to Section 10(d) hereof) and, but for the provisions of this Section 10(e) would also be provided under this Plan (without giving effect to Section 10(d) hereof) such that the conferral of such rights or the provision of such benefits pursuant to both the Designated Employee Agreement and this Plan (without giving effect to Section 10(d) hereof) would result in the Designated Employee receiving rights or benefits that are duplicative in nature (the "Duplicative Rights"), then the Duplicative Rights provided for under the Designated Employee Agreement will offset any Duplicative Rights that would otherwise be provided hereunder.

 

 

11.

Administration of Plan

 

The Plan shall be administered by the Compensation Committee (the "Committee"), which has authority to construe and interpret the terms of the Plan and to determine the eligibility for, and amount of, benefits due under the Plan. All such interpretations and determinations of the Committee shall be final and binding upon all parties and persons affected thereby. The Committee may appoint one or more individuals and delegate such of its powers and duties as it deems desirable to any such individual(s).

 




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SCHEDULE A

 

Effective May 1, 2008

 

      

Category

     

        

Multiple for
Cash
Compensation
Under

Section 5(a)

Years for
Pension
Benefit Under

Section 5(c)

I

Senior Executive Officers*

3

3

    

    

II

Admin Vice Presidents - Other Officers

2

2

    

    

III

Operations Vice Presidents & Other Key Employees

1

1

     

    

 

* Plan benefits for certain Senior Executive Officers are subject to Employment Agreements