EX-10.1 2 a07-16492_1ex10d1.htm EX-10.1
June 5, 2007
Mr. David A.
3310 Crestmoor Bay
Woodbury, Minnesota 55125
On behalf of the Board of Directors (the “Board”), I am pleased to offer you employment as Chairman, President and Chief Executive Officer of Carlisle Companies Incorporated (“Carlisle” or the “Company”) in Charlotte, North Carolina, as follows:
1. Duties. Your employment will commence on or about June 18, 2007, or as may be otherwise agreed (your “Employment Date”). You will report to the Board and be responsible for the operations and financial performance of the Company consistent with the duties and responsibilities set forth in the By-Laws of the Company, and have such other duties as the Board may reasonably determine. You have been elected Chairman of the Board, President and Chief Executive Officer of Carlisle.
2. Base Salary. Your starting salary will be $75,000 per month, payable in accordance with the Company’s regular payroll practices. Compensation is reviewed annually by the Compensation Committee of the Board, provided that your base salary and bonus potential will not be reduced.
3. Bonus. You will be eligible to earn an annual target bonus of 200% of your base salary actually paid during the year. For the 2007 calendar year, the Company agrees to pay you a minimum bonus of $1,500,000. Bonus payments are typically made in February based on the prior year’s performance and are determined by the Compensation Committee. Prior to commencement of each fiscal year of the Company, the Compensation Committee will establish performance criteria, goals and achievement levels for the award of the annual target bonus.
4. Stock Options. On your Employment Date, you will receive a 10-year non-qualified option (using the Company’s standard form of Nonqualified Stock Option Agreement as modified in the form attached hereto) to purchase 200,000 shares of the Company’s common stock at the closing price of the stock on your Employment Date. The options will vest as follows: (i) 66,667 option shares on your Employment Date, (ii) 66,667 option shares on the one-year anniversary of your Employment Date, and (iii) the remaining 66,666 option shares on the second anniversary of your Employment Date. Future stock option grants will be determined annually by the Compensation Committee. All option grants are subject to the terms and conditions of the Company’s Amended and Restated Executive Incentive Program (the “Program”). The Company, at its expense, will assist you with all necessary securities law filings in connection with all of your options and restricted stock.
5. Restricted Stock Grant. On your Employment Date, you will receive a grant of 100,000 “restricted” shares under the Program. This grant is being made to compensate you for the current incentive plan opportunity, retirement and other benefits with your current employer that you will be foregoing by accepting this position with Carlisle. The restriction on these shares will lapse and will be distributed to you as follows: (i) 20,000 shares on the one-year anniversary of your Employment Date, (ii) 20,000 shares on the second anniversary of your Employment Date, (iii) 20,000 shares on the third anniversary of your Employment Date, (iv) 20,000 shares on the fourth anniversary of your Employment Date, and (v) the remaining 20,000 shares on the fifth anniversary of your Employment Date; provided you continue to be employed by Carlisle on such distribution dates. The restriction will also lapse if your employment is involuntarily terminated for other than gross and willful misconduct or by death or disability, or is terminated by you for Good Reason. During the period of restriction, you will not be able to sell or otherwise dispose of the shares, but you will receive all dividends paid with respect to the shares.
6. Separation Pay. In the event that your employment is terminated involuntarily for other than gross and willful misconduct, or is terminated by you for Good Reason, you will be paid, on or before your last day of employment, a lump sum cash amount equal to two times the highest annual compensation (including base salary and bonus) paid or payable to you by the Company from either of the 2 years ending with the date of your date of termination. In addition, all stock options and restricted shares shall automatically vest, and such stock options shall continue to be exercisable for the remaining term thereof. The lump sum cash amount shall be paid on or before your last day of employment to the maximum extent permitted by Section 409A of the Internal Revenue Code and applicable regulations, with the remainder, if any, payable on the date that is the six month anniversary of such last day. For purposes of this letter, gross and willful misconduct includes (i) wrongful appropriation of Company funds, (ii) serious violation of Company policy that is not remedied by you within 30 days following written notification from the Board specifying with particularity such violation, (iii) breach of fiduciary duty or (iv) conviction of a felony. Gross and willful misconduct shall not include any action or inaction by you contrary to the direction of the Board with respect to any initiative, strategy or action of the Company, which action or inaction you reasonably believe is in the best interest of the Company. Your employment will be deemed to be terminated for “Good Reason” if you resign because of a reduction of your compensation (base salary and bonus potential), perquisites provided in this letter or benefits (other than reductions in benefits resulting from changes in Carlisle’s employee benefit programs affecting officers generally), or your responsibilities, duties or position (as Chairman of the Board, President and Chief Executive Officer of Carlisle) are diminished in any way, or you are required to relocate more than 50 miles outside of Charlotte, North Carolina. Notwithstanding the foregoing, in the event that on or after the fifth anniversary of your employment, you agree to transition your role to that of Chairman only, the Company shall be relieved of its obligation to provide you with any separation pay under this Paragraph 6.
7. Change of Control. On your Employment Date, you will be entitled to participate in the Company’s Executive Severance Program providing for benefits in the event of “change of control” defined generally as an acquisition of 20% or more of the outstanding voting shares of the Company or a change in the majority of the Company’s Board of Directors. As more fully described in your Executive Severance Agreement, in the event of a termination of your employment for any reason (either voluntary or involuntary, other than as a consequence of your death, disability or normal retirement) within three years of a “change in control,” you shall be entitled to three years compensation, including bonus, retirement benefits equal to the benefits that you would have received had you completed three additional years of employment, continuation of all life, accident, health, savings and other fringe benefits for three years, and relocation assistance. In addition, all stock options and restricted shares would automatically vest upon a “change of control” and such stock options shall continue to be exercisable for the remaining term thereof. The compensation and benefits payable under this Paragraph 7 shall be reduced by the compensation and benefits otherwise payable under Paragraph 6 above.
8. Employee Benefit Plans. You will be entitled to participate in all employee benefit plans, from time to time in effect, and generally available for Carlisle’s senior executives, subject to plan terms and applicable Company policies. Currently, the Company offers its executives group health and dental plans, life insurance, travel/accident, long-term disability insurance and a 401(k) plan. Carlisle will also reimburse you for reasonable tax preparation and financial planning expenses as well as the cost of an annual executive physical examination at the Mayo Clinic.
9. Pension Benefit. Carlisle agrees to amend its supplemental pension plan to provide you with the currently projected pension benefit payable to you at retirement under your existing pension program. Such amendment shall be in a form mutually agreeable to you and Carlisle and shall be completed and approved within 60 days after the date hereof. As we discussed, you have agreed to consider remaining employed until age 65. The benefit payable under Carlisle’s supplemental pension plan will be reduced by the actual benefit payable to you under your current pension program. The supplemental benefit will vest at the rate of 20% on each of the first five anniversaries of your Employment Date, or will vest at 100% upon the involuntary termination of your employment for other than gross and willful misconduct, or the termination of your employment by you for Good Reason. If you retire prior to age 65, your supplemental pension benefit will be actuarially reduced for early commencement using the same actuarial factors and methods as are used at such time for similar pension reductions under Carlisle’s employee pension plan. The benefit is payable entirely from the supplemental pension plan, which is unfunded and a general obligation of Carlisle.
10. Retiree Medical. Following your retirement at age 65 or the involuntary termination of your employment for other than gross and willful misconduct, or the termination of your employment by you for Good Reason, Carlisle will provide you medical and dental coverage for the life of you and your wife at the monthly premium rate then in effect for Carlisle’s senior executives.
11. Relocation Package. With respect to your relocation, Carlisle will reimburse you for the closing costs attributable to the sale of your home in Woodbury, Minnesota, including customary brokerage costs as well as the closing costs attributable to the purchase of a home in the Charlotte area. Carlisle will also provide temporary living accommodations in Charlotte until you purchase your new home. In addition to the foregoing, on July 2 Carlisle will pay you $100,000 for additional relocation assistance. If you are not able to sell your home in Woodbury, Minnesota by August 15, 2007, at your option, the Company will purchase your home at the then fair market thereof, determined by an independent appraiser mutually agreed to by you and the Company.
12. Club Membership and Dues. Carlisle will pay (or reimburse you) for membership in a golf and country club of your choice in the Charlotte area as well as monthly or annual dues thereafter.
13. Attorney’s Fees. Carlisle will reimburse you for the reasonable fees of your attorneys in connection with your consideration of this offer and review of the amendment to Carlisle’s supplemental pension plan described in Paragraph 9 above.
14. Vacation. You will be entitled to four weeks of vacation per year.
15. Make-Whole Provision. Notwithstanding any provisions hereof or in any other plan, agreement or program referenced herein or otherwise maintained by the Company (the “Other Plans”), any payments or benefits to which you may become entitled hereunder or under the Other Plans shall not be reduced due to the application of Sections 280G and 4999 of the Internal Revenue Code (collectively, the “Code Sections”).
16. 409A Savings Clause. Carlisle agrees to propose such changes to this Agreement as may be required to comply with Section 409A of the Internal Revenue Code, provided that any such change shall not reduce your compensation or benefits hereunder and must otherwise be acceptable to you.
To accept this offer, please sign a copy of this letter and return it to me.
Dave, we are delighted at the prospect of you joining Carlisle.
NONQUALIFIED STOCK OPTION AGREEMENT
This Agreement (the “Agreement”) is made as of (the “Date of Grant”) by and between Carlisle Companies Incorporated, a Delaware corporation (the “Company”) and (the “Optionee”).
1. Grant of Option Right. Subject to and upon the terms, conditions and restrictions set forth in this Agreement and in the Company’s Executive Incentive Program (the “Program”), the Company hereby grants to the Optionee as of the Date of Grant an option (the “Option Right”) to purchase Common Shares, at the price of $ per share (the “Option Price”). This Option Right is intended to be a nonqualified stock option and shall not be treated as an “incentive stock option” within the meaning of that term under Section 422 of the Code.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its behalf by its duly authorized officer and the Optionee has also executed this Agreement in duplicate, as of the day and year first above written.
The undersigned hereby acknowledges receipt of an executed original of this Agreement and accepts the award of the Option Right granted thereunder on the terms and conditions set forth herein and in the Program.
RESTRICTED SHARE AGREEMENT
This Agreement (the “Agreement”) is made as of (the “Date of Grant”) by and between Carlisle Companies Incorporated (the “Company”) and (the “Grantee”).
1. Grant of Restricted Shares. Subject to and upon the terms, conditions and restrictions set forth in this Agreement and in the Company’s Executive Incentive Program (the “Program”), the Company hereby grants to the Grantee as of the Date of Grant Common Shares as Restricted Shares (the “Restricted Shares”). The Restricted Shares shall be fully paid and nonassessable and shall be represented by a certificate or certificates registered in the Grantee’s name, endorsed with an appropriate legend referring to the restrictions hereinafter set forth.
2. Restrictions on Transfer of Restricted Shares. The Restricted Shares may not be sold, exchanged, assigned, transferred, pledged, encumbered or otherwise disposed of by the Grantee, except to the Company, until the Restricted Shares have become nonforfeitable as provided in Section 3 hereof; provided, however, that the Grantee’s rights with respect to such Common Shares may be transferred by will or pursuant to the laws of descent and distribution. Any purported transfer or encumbrance in violation of the provisions of this Section 2 shall be void, and the other party to any such purported transaction shall not obtain any rights to or interest in such Common Shares.
3. Vesting of Restricted Shares. The Restricted Shares shall become nonforfeitable on if the Grantee shall have remained in the continuous employ of the Company and its Subsidiaries until such date. Subject to the terms of the Program and notwithstanding the preceding sentence, all of the Restricted Shares shall immediately become nonforfeitable if, prior to the date the Restricted Shares become fully nonforfeitable pursuant to the preceding sentence, and while the Grantee is in the employ of the Company and its Subsidiaries, (a) the Grantee dies, (b) the Grantee’s Disability occurs, (c) the Grantee’s Retirement occurs, (d) the involuntary termination of the Grantee by the Company for other than gross or willful misconduct, (e) the termination by the Grantee for “Good Reason” (as defined in the Employment Agreement between the Company and the Grantee dated June , 2007), or (f) a Change in Control occurs.
4. Forfeiture of Shares. The Restricted Shares shall be forfeited if the Grantee ceases to be continuously employed by the Company and its Subsidiaries prior to the date the Restricted Shares become fully nonforfeitable pursuant to Section 3. In the event of a forfeiture, the certificate(s) representing the Restricted Shares covered by this Agreement shall be canceled.
5. Dividend, Voting and Other Rights. Except as otherwise provided herein, from and after the Date of Grant, the Grantee shall have all of the rights of a stockholder with respect to the Restricted Shares, including the right to vote the Restricted Shares and receive any dividends that may be paid thereon; provided, however, that any additional Common Shares or other securities that the Grantee may become entitled to receive pursuant to a stock dividend, stock split, combination of shares, recapitalization, merger, consolidation, separation or
reorganization or any other change in the capital structure of the Company shall be subject to the same restrictions as the Restricted Shares covered by this Agreement. The Grantee acknowledges that the Restricted Shares are being acquired for investment and that the Grantee has no current intention to transfer, sell or otherwise dispose of such shares, except as permitted by the Program and in compliance with Applicable Laws.
6. Retention of Stock Certificate(s) by the Company. The certificate(s) representing the Restricted Shares shall be held in custody by the Company, together with a stock power endorsed in blank by the Grantee with respect thereto, until those shares have become nonforfeitable in accordance with Section 3 of this Agreement. The Grantee hereby irrevocably appoints any officer of the Company as his or her attorney-in-fact to transfer the Restricted Shares to the Company in the event of the forfeiture of such shares.
7. No Employment Contract. Nothing contained in this Agreement shall confer upon the Grantee any right with respect to continuance of employment by the Company and its Subsidiaries, nor limit or affect in any manner the right of the Company and its Subsidiaries to terminate the employment or adjust the compensation of the Grantee.
8. Taxes and Withholding. To the extent that the Company shall be required to withhold any federal, state, local or other taxes in connection with the issuance or vesting of the Restricted Shares, and the amounts available to the Company for such withholding are insufficient, the Grantee shall pay such taxes or make provisions that are satisfactory to the Company for the payment thereof.
9. Amendments. Subject to the terms of the Program, the Board may modify this Agreement upon written notice to the Grantee. Any amendment to the Program shall be deemed to be an amendment to this Agreement to the extent that the amendment is applicable hereto. Any waiver of any term or condition or breach of this Agreement shall not be a waiver of any other term or condition or of the same term or condition.
10. Severability. In the event that one or more of the provisions of this Agreement shall be invalidated for any reason by a court of competent jurisdiction, any provision so invalidated shall be deemed to be separable from the other provisions hereof, and the remaining provisions hereof shall continue to be valid and fully enforceable.
11. Relation to Program. This Agreement is subject to the terms and conditions of the Program. This Agreement and the Program contain the entire agreement and understanding of the parties with respect to the subject matter contained in this Agreement, and supersede all prior communications, representations and negotiations in respect thereto. In the event of any inconsistency between the provisions of this Agreement and the Program, the Program shall govern. Capitalized terms used herein without definition shall have the meanings assigned to them in the Program. The Compensation Committee acting pursuant to the Program, as constituted from time to time, shall, except as expressly provided otherwise herein, have the right to determine any questions which arise in connection with the grant of Restricted Shares.
12. Successors and Assigns. Without limiting Section 2 hereof, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, administrators,
heirs, legal representatives and assigns of the Grantee, and the successors and assigns of the Company.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its behalf by its duly authorized officer and the Grantee has also executed this Agreement in duplicate, as of the day and year first above written.
The undersigned hereby acknowledges receipt of an executed original of this Agreement and accepts the award of Restricted Shares granted thereunder on the terms and conditions set forth herein and in the Program.
EX-10.4 2 a2191110zex-10_4.htm EXHIBIT 10.4
AMENDED AND RESTATED
EXECUTIVE SEVERANCE AGREEMENT
This Amended and Restated Executive Severance Agreement (“Agreement”) is between Carlisle Companies Incorporated, a Delaware corporation (the “Corporation”), and (“Executive”).
The Corporation entered into an Executive Severance Agreement with Executive dated as of , (the “Current Agreement”) to (i) encourage Executive to continue in his position if the Corporation receives any proposal from a third person concerning a possible business combination with, or acquisition of equity securities of the Corporation, (ii) call upon Executive to receive such proposals, assist in the assessment of such proposals and advise management and the Board of Directors of the Corporation as to whether such proposals would be in the best interests of the Corporation and its stockholders and take such other actions as the Board of Directors might determine to be appropriate and (iii) assure that the Corporation will have the continued dedication of Executive and the availability of his advice and counsel notwithstanding the possibility, threat or occurrence of a bid to take over control of the Corporation.
The Current Agreement is subject to the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (“Code”), and must be amended no later than December 31, 2008 to comply with the requirements of that Code Section.
The Board of Directors of the Corporation believes that the best way to amend the Current Agreement to comply with Code Section 409A is to amend and restate the Current Agreement in its entirety.
Now, therefore, the Corporation and Executive agree that the Current Agreement is amended and restated in its entirety to read as follows:
In the event a third person begins a tender or exchange offer, circulates a proxy to stockholders, or takes other steps to effect a Change of Control of the Corporation (as defined below), Executive agrees that he will not voluntarily leave the employ of the Corporation, and will render the services contemplated in the recitals to this Agreement until the third person has abandoned or terminated his efforts to effect a Change of Control or until a Change of Control has occurred.
In the event of Executive’s Separation from Service (as defined below) for any reason (either voluntary or involuntary, other than as a consequence of his death or disability, or of his retirement at or after his attainment of age sixty-five (65)) within three (3) years after a Change of Control of the Corporation (as defined below) the Corporation will provide:
A. Cash Payment. On or before Executive’s last day of employment with the Corporation, the Corporation will pay to Executive as compensation for services rendered to the Corporation a lump sum cash amount (subject to any applicable payroll or other taxes required to be withheld) equal to three (3) times the highest annual compensation (including base salary and annual cash bonus) paid or payable to Executive by the Corporation for any of the three (3) years ending with the date of Executive’s Separation from Service; provided, however, in the event there are fewer than thirty-six (36) whole or partial months remaining from the date of Executive’s Separation from Service to the date he will attain age sixty-five (65), the amount of such cash payment will be reduced by multiplying it by a fraction the numerator of which is the number of whole or partial months so remaining to the date he would attain age sixty-five (65) and the denominator of which is thirty-six (36).
B. Stock Options and Restricted Stock. Any outstanding but unexercised stock options held by Executive under any of the Corporation’s equity compensation plans and programs will be immediately exercisable, and any unvested restricted stock held by Executive under any of the Corporation’s equity compensation plans and programs will be immediately vested and free of all restrictions. In addition all such stock options will continue to be exercisable for the remaining original term thereof.
C. Special Retirement Benefits. Executive will be eligible to receive “Special Retirement Benefits” so that the total retirement benefits he receives will approximate the retirement benefits he would have received had he continued in the employ of the Corporation for three (3) years following his Separation from Service (or until the date he will attain age sixty-five (65), whichever is earlier). These benefits will include all ancillary benefits, such as early retirement, supplemental retirement and survivor rights and benefits available at retirement. If Executive’s credited service with the Corporation plus three (3) years would result in vested benefits and/or eligibility for ancillary benefits under the Corporation’s pension plans, the amount payable to the Executive or his beneficiaries shall equal the excess of the amount specified in paragraph (i) over that in (ii) below:
(i) The benefits that would be paid to the Executive or his beneficiaries, if the three (3) years (or period to the date he will attain age sixty-five (65), if less) following his Separation from Service are added to his credited service under the Corporation’s pension plan, and his earnings during such period are equal to the amount of the cash payment specified in Paragraph A;
(ii) The benefit that is payable to the Executive or his beneficiaries under the Corporation’s pension plans.
The Special Retirement Benefits are provided on an unfunded basis and are not intended to meet the qualification requirements of Section 401 of the Code. The Special Retirement Benefits shall be payable solely from the general assets of the Corporation or its appropriate affiliate.
D. Other Provisions.
(i) Insurance and Other Special Benefits. Executive’s participation in the life, accident and health insurance plans of the Corporation, and in fringe benefits provided the Executive prior to the Change of Control or his Separation from Service, shall be continued, or equivalent benefits provided, by the Corporation, at no direct cost to him, for a period of three (3) years from the date of his Separation from Service (or until he attains age sixty-five (65), whichever is sooner).
(ii) Relocation Assistance. Should the Executive move his residence in order to pursue other business opportunities within two (2) years of his Separation from Service, he will be reimbursed for any expenses incurred in that relocation (including taxes payable on the reimbursement) which are not reimbursed by another employer. Benefits under this provision will include the assistance in selling the Executive’s home which was customarily provided by the Corporation to transferred executives prior to the Change of Control.
(iii) Incentive Compensation. Any awards previously made to the Executive under any long-term incentive programs of the Corporation and not previously paid shall immediately vest on the date of his Separation from Service and shall be paid on that date and included as compensation in the year paid.
(iv) Savings and Other Plans. The Executive’s participation in any applicable savings, retirement, profit sharing, stock option, and/or restricted stock plan of the Corporation or any of its subsidiaries shall continue only through his Separation from Service. Any terminating distribution and/or vested rights under such Plans shall be governed by the terms of those respective Plans.
(v) Continuing Obligations. The Executive shall retain in confidence any confidential information known to him concerning the Corporation and its business so long as such information is not publicly disclosed.
E. Definition of Change of Control. For the purpose of this Agreement, a “Change of Control” shall be deemed to have taken place if:
(i) any third person, including a “group” as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, acquires shares of the Corporation having 20% or more of the total number of votes that may be cast for the election of Directors of the Corporation; or
(ii) as the result of any cash tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transactions, the persons who were directors of the Corporation before the transaction shall cease to constitute a majority of the Board of Directors of the Corporation or any successor to the Corporation.
F. Definition of Separation from Service. For the purpose of this Agreement, “Separation from Service” means the termination of Executive’s employment with the Corporation (including its subsidiaries), provided such termination also constitutes a separation from service under Section 409A of the Code.
G. Certain Additional Payments by the Corporation.
(i) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Corporation to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Paragraph G) (a “Payment”) would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Paragraph G(i), if it shall be determined that Executive is entitled to a Gross-Up Payment, but the Parachute Value of Payments (as defined below) does not exceed 115% of the Safe Harbor Amount (as defined below), then no Gross-Up Payment shall be made to Executive and the Agreement Payments (as defined below), in the aggregate, shall be reduced (but not below zero) such that the Parachute Value of all Payments equals the Safe Harbor Amount, determined in such a manner as to maximize the Value of all Payments (as defined below) actually made to Executive.
(ii) Subject to the provisions of Paragraph G(iii), all determinations required to be made under this Paragraph G, 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 Ernst & Young LLP or such other certified public accounting firm reasonably acceptable to the Corporation as may be designated by Executive (the “Accounting Firm”) which shall provide detailed supporting calculations both to the Corporation and Executive within 15 business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Corporation. All fees and expenses of the Accounting Firm shall be borne solely by the Corporation. Any determination by the Accounting Firm shall be binding upon the Corporation and 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 which will not have been made by the Corporation should have been made (an “Underpayment”), consistent with the calculations required to be made hereunder. In the event that the Corporation exhausts its remedies pursuant to Paragraph G(iii) and 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 paid by the Corporation to or for the benefit of Executive in a single lump sum in cash within ten (10) days of the Accounting Firm’s determination and disclosure to the Corporation of the Underpayment.
(iii) Executive shall notify the Corporation in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Corporation of a Gross-Up Payment (or an additional Gross-Up Payment). Such notification shall be given as soon as practicable but no later than ten business days after Executive is informed in writing of such claim and shall apprise the Corporation 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 it gives such notice to the Corporation (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Corporation notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall:
(A) give the Corporation any information reasonably requested by the Corporation relating to such claim,
(B) take such action in connection with contesting such claim as the Corporation shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Corporation,
(C) cooperate with the Corporation in good faith in order effectively to contest such claim, and
(D) permit the Corporation to participate in any proceedings relating to such claim;
provided, however, that the Corporation 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 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 of the foregoing provisions of this Paragraph G(iii), the Corporation shall control all proceedings taken in connection with such contest (to the extent applicable to the Excise Tax and the Gross-Up Payment) 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 Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and 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 Corporation shall determine; provided, however, that if the Corporation directs Executive to pay such claim and sue for a refund, the Corporation shall advance the amount of such payment to Executive, on an interest-free basis and shall indemnify and hold 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
Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Corporation’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and 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.
(iv) If, after the receipt by Executive of an amount advanced by the Corporation pursuant to Paragraph G(iii), Executive becomes entitled to receive any refund with respect to such claim, Executive shall (subject to the Corporation’s complying with the requirements of Paragraph G(iii)) promptly pay to the Corporation the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Corporation pursuant to Paragraph G(iii), a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Corporation does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.
(v) Subject to Paragraph H, the Corporation shall pay any Gross-Up Payment due to Executive no later than the due date for the payment of the Excise Tax giving rise to such Gross-Up Payment or, if earlier, the close of Executive’s taxable year next following Executive’s taxable year in which the Excise Tax giving rise to such Gross-Up Payment is remitted to the Internal Revenue Service or any other applicable taxing authority.
(vi) The following terms shall have the following meanings for purposes of this Paragraph G:
“Agreement Payment” means a Payment paid or payable pursuant to this Agreement (disregarding this Paragraph G) and any payment.
“Net After-Tax Amount” of a Payment means the Value of a Payment net of all taxes imposed on the Executive with respect thereto under Sections 1 and 4999 of the Code and applicable state and local law, determined by applying the highest marginal rates that are expected to apply to Executive’s taxable income for the taxable year in which the Payment is made.
“Parachute Value” of a Payment means the present value, as of the date of the change of control for purposes of Section 280G of the Code, of the portion of such Payment that constitutes a “parachute payment” under Section 280G(b)(2), as determined by the Accounting Firm for purposes of determining whether and to what extent the Excise Tax will apply to such Payment.
“Safe Harbor Amount” means the maximum Parachute Value of all Payments that Executive can receive without any Payments being subject to the Excise Tax.
“Value” of a Payment shall mean the economic present value of a Payment as of the date of the change of control for purposes of Section 280G of the Code, as determined by the Accounting Firm using the discount rate required by Section 280G(d)(4) of the Code.
E. Compliance with Code Section 409A. Notwithstanding anything in this Agreement to the contrary, if any amount or benefit that the Corporation determines would constitute non-exempt “deferred compensation” for purposes of Section 409A of the Code would otherwise be payable or distributable under
this Agreement by reason of Executive’s Separation from Service, then to the extent necessary to comply with Code Section 409A:
(i) if the payment or distribution is payable in a lump sum, Executive’s right to receive payment or distribution of such non-exempt deferred compensation will be delayed until the earlier of Executive’s death or the first day of the seventh month following the Executive’s Separation from Service; and
(ii) if the payment or distribution is payable over time, the amount of such non-exempt deferred compensation that would otherwise be payable during the six (6) month period immediately following Executive’s Separation from Service will be accumulated and Executive’s right to receive payment or distribution of such accumulated amount will be delayed until the earlier of Executive’s death or the first day of the seventh month following Executive’s Separation from Service and paid on the earlier of such dates, without interest, and the normal payment or distribution schedule for any remaining payments or distributions will commence.
To the extent any expense reimbursement or in-kind benefit to which Executive is or may be entitled to receive under this Agreement constitutes non-exempt “deferred compensation” for purposes of Section 409A of the Code, then (i) such reimbursement shall be paid to Executive as soon as administratively practicable after Executive submits a valid claim for reimbursement, but in no event later than the last day of Executive’s taxable year following the taxable year in which the expense was incurred, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during any taxable year of Executive shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year of Executive, and (iii) Executive’s right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit.
(i) Indemnification. If litigation shall be brought to enforce or interpret any provision contained in this Agreement, the Corporation indemnifies the Executive for his reasonable attorney fees and disbursements incurred in such litigation, and agrees to pay pre-judgement interest on any money judgment obtained by the Executive calculated at the prime interest rate in effect from time to time from the date that payment(s) to him should have been made under this Agreement.
(ii) Payment Obligations Absolute. Except as provided in Paragraph I(vi), upon the occurrence of a Change of Control, the Corporation’s obligation to pay Executive the compensation and to make the arrangements provided in this Agreement shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Corporation may have against him or anyone else. All amounts payable by the Corporation under this Agreement shall be paid without notice or demand. Except as expressly provided in this Agreement, the Corporation waives all rights which it may now have or may hereafter have conferred upon it, by statute or otherwise, to terminate, cancel or rescind this Agreement in whole or in part. Every payment made under this Agreement by the Corporation shall be final and the Corporation will not seek to recover all or any part of such payment from Executive or anyone else who may be entitled to the payments for any reason whatsoever.
(iii) Successors. This Agreement shall be binding upon and inure to the benefit of Executive and his estate, and the Corporation and any successor of the Corporation, but neither this Agreement nor any rights arising hereunder may be assigned or pledged by Executive.
(iv) Severability. Any provision in this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating or affecting the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
(v) Controlling Law. This Agreement shall in all respects be governed by, and construed in accordance with, the laws of the State of Delaware.
(vi) Modification or Termination. At any time prior to a Change of Control, the Board of Directors of the Corporation may, in its absolute discretion, and without the consent of the Executive, amend, modify or terminate this Agreement upon written notice tot he Executive. The Board may also terminate this Agreement at any time with respect to the Executive if the Executive is directly or indirectly affiliated (as defined in Rule 12b-2 of the Securities Exchange Act of 1934) with the “group” which has consummated a Change of Control under Paragraph E(i)
The parties have executed this Agreement as of December 31, 2008.