AMERICAN EXPRESS SENIOR EXECUTIVE SEVERANCE PLAN
EFFECTIVE JANUARY 1, 1994
Generally
(As amended and restated through May 1, 2000)
AMERICAN EXPRESS SENIOR EXECUTIVE SEVERANCE PLAN
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TABLE OF CONTENTS
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Articles Page
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Introduction 1
ONE Definitions 2
TWO Participation 9
THREE Amount of Benefits 11
FOUR Method of Payment 18
FIVE Administration of the Plan 19
SIX Adopting Companies and Plan Mergers 21
SEVEN Amendment and Termination 21
EIGHT Financial Provisions 22
NINE Liability and Indemnification 22
TEN Miscellaneous 25
AMERICAN EXPRESS SENIOR EXECUTIVE SEVERANCE PLAN
INTRODUCTION
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The Board of Directors of American Express Company established the American
Express Senior Executive Severance Plan (hereinafter referred to as the "Plan")
effective as of January l, l994, to provide for severance benefits for certain
eligible executive officers of American Express Company and its participating
subsidiaries whose employment is terminated under certain conditions. Severance
benefits under the Plan are to be provided to such eligible executives in
exchange for a signed agreement that includes a release of all claims.
1
ARTICLE ONE
DEFINITIONS
1.1 "Administration Committee" means the Committee established and appointed
by the Board of Directors or by a committee of the Board of Directors.
1.2 "Affiliated Company" means any corporation which is a member of a
controlled group of corporations (determined in accordance with Section
4l4(b) of the Code) of which the Company is a member and any other trade
or business (whether or not incorporated) which is controlled by, or
under common control (determined in accordance with Section 4l4(c) of the
Code) with the Company, but which has not been admitted to participation
in the Plan.
1.3 "Base Salary" means the regular basic cash remuneration before deductions
for taxes and other items withheld, payable to an Employee for services
rendered to an Employing Company, but not including pay for bonuses,
incentive compensation, special pay, awards or commissions.
1.4 "Board of Directors" means the board of directors of the Company.
1.5 "Bonus" means annual incentive compensation paid to an Employee over and
above Base Salary earned and paid in cash or otherwise under any
executive bonus or sales incentive plan or program of an Employing
Company.
2
1.6 "Change in Control" means the happening of any of the following:
(a) Any individual, entity or group (a "Person") (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") becomes the beneficial owner (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more
of either (i) the then outstanding common shares of the Company (the
"Outstanding Company Common Shares") or (ii) the combined voting power of
the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that such beneficial ownership shall not
constitute a Change in Control if it occurs as a result of any of the
following acquisitions of securities: (i) any acquisition directly from
the Company, (ii) any acquisition by the Company or any corporation,
partnership, trust or other entity controlled by the Company (a
"Subsidiary"), (iii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any Subsidiary
or (iv) any acquisition by any corporation pursuant to a reorganization,
merger or consolidation, if, following such reorganization, merger or
consolidation, the conditions described in clauses (i), (ii) and (iii) of
subsection (c) of this "Change in Control" Section are satisfied.
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because any Person (the "Subject Person") became the
beneficial owner of 25% or more of the Outstanding Company Common Shares
or Outstanding Company Voting Securities as a result of the acquisition
of Outstanding Company Common Shares or Outstanding Company Voting
Securities by the Company which, by reducing the number of Outstanding
Company Common Shares or Outstanding Company Voting Securities, increases
the proportional number of shares beneficially owned by the Subject
Person; provided, that if a Change in Control would be deemed to have
occurred (but for the operation of this sentence) as a result of the
acquisition of Outstanding Company Common Shares or Outstanding Company
Voting Securities by the Company, and after such share acquisition by the
Company, the Subject Person becomes the beneficial owner of any
additional Outstanding Company Common Shares or Outstanding Company
Voting Securities which increases the percentage of the Outstanding
Company Common Shares or Outstanding Company Voting Securities
beneficially owned by the Subject Person, then a Change in Control shall
then be deemed to have occurred; or
3
(b) individuals who, as of the date hereof, constitute the board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election
by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either an actual or threatened
election contest or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board, including by
reason of agreement intended to avoid or settle any such actual or
threatened contest or solicitation; or
(c) The consummation of a reorganization, merger or consolidation, in
each case, unless, following such reorganization, merger or
consolidation, (i) more than 50% of, respectively, the then outstanding
shares of common stock of the corporation resulting from such
reorganization, merger or consolidation (or any parent thereof) and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Shares and Outstanding
Company Voting Securities immediately prior to such reorganization,
merger or consolidation, in substantially the same proportions as their
ownership immediately prior to such reorganization, merger or
consolidation of such Outstanding Company Common Shares and Outstanding
Company Voting Shares, as the case may be, (ii) no Person (excluding the
Company, any employee benefit plan (or related trust) of the Company, a
Subsidiary or such corporation resulting from such reorganization, merger
or consolidation or any parent or a subsidiary thereof, and any Person
beneficially owning, immediately prior to such reorganization, merger or
consolidation, directly or indirectly, 25% or more of the Outstanding
Company Common Shares or Outstanding Company Voting Securities, as the
case may be) beneficially owns, directly or indirectly, 25% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or consolidation
(or any parent thereof) or the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors and (iii) at least a majority of
the members of the board of directors of the corporation resulting from
such reorganization, merger or consolidation (or any parent thereof) were
members of the Incumbent Board at the time of the execution of the
initial agreement or action of the Board providing for such
reorganization, merger or consolidation; or
4
(d) The consummation of the sale, lease, exchange or other disposition of
all or substantially all of the assets of the Company, unless such assets
have been sold, leased, exchanged or disposed of to a corporation with
respect to which following such sale, lease, exchange or other
disposition (A) more than 50% of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting power
of the then outstanding voting securities of such corporation (or any
parent thereof) entitled to vote generally in the election of directors
is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Shares and
Outstanding Company Voting Securities immediately prior to such sale,
lease, exchange or other disposition in substantially the same
proportions as their ownership immediately prior to such sale, lease,
exchange or other disposition of such Outstanding Company Common Shares
and Outstanding Company Voting Shares, as the case may be, (B) no Person
(excluding the Company and any employee benefit plan (or related trust)
of the Company or a Subsidiary of such corporation or a subsidiary
thereof and any Person beneficially owning, immediately prior to such
sale, lease, exchange or other disposition, directly or indirectly, 25%
or more of the Outstanding Company Common Shares or Outstanding Company
Voting Securities, as the case may be) beneficially owns, directly or
indirectly, 25% or more of, respectively, the then outstanding shares of
common stock of such corporation (or any parent thereof) and the combined
voting power of the then outstanding voting securities of such
corporation (or any parent thereof) entitled to vote generally in the
election of directors and (C) at least a majority of the members of the
board of directors of such corporation (or any parent thereof) were
members of the Incumbent Board at the time of the execution of the
initial agreement or action of the Board providing for such sale, lease,
exchange or other disposition of assets of the Company; or
(e) Approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company.
1.7 "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
1.8 "Committee" means the Compensation and Benefits Committee of the Board of
Directors or any successor committee appointed by the Board of Directors.
1.9 "Company" means American Express Company, a New York corporation, its
successors and assigns.
1.10 "Comparable Position" means a job with the Company, an Employing Company,
an Affiliated Company or successor company at the same or higher Base
Salary as an Employee's current job and at a work location within
reasonable commuting distance from an Employee's home, as determined by
such Employee's Employing Company. For employees in the Employing
Company's international expatriate program, Comparable Position means a
job with an Employing Company, an Affiliated Company or successor company
at the same or higher Base Salary as an Employee's current job and at a
work location in the Employee's country of assignment, home country or
career base country.
5
1.11 "Completed Years of Service" means the number of full one year periods
that have transpired since the Employee's original date of hire or, in
the case of someone who has incurred a break in service as defined in the
American Express Retirement Plan, the adjusted date of hire, through the
Employee's last day of active employment with the Company. For employees
of American Express Tax and Business Services, "original date of hire"
shall mean the American Express Transition Date.
1.12 "Constructive Termination" means resignation or other employment
termination by an Employee from an Employing Company as a result of one
or more of the following without the Employee's written consent within
two years after a Change in Control:
(a) a reduction in Base Salary, except for across-the-board changes
similarly affecting all Employees of the Company and all Employees of any
Person in control of the Company, or any material reduction in the
aggregate of the Employee's annual and long term incentive opportunity,
in each case from that in effect immediately prior to the Change in
Control,
(b) the Employing Company's requirement that the Employee be based more
than 50 miles from the location at which the Employee was based
immediately prior to the Change in Control and which location is more
than 35 miles from the Employee's residence,
(c) the assignment to the Employee of any duties that are materially
inconsistent with the Employee's duties prior to the Change in Control,
or
(d) a significant reduction in the Employee's position, duties, or
responsibilities from those in effect prior to the Change in Control.
1.13 "Defined Termination" means a termination of employment of an Employee
within two years after a Change in Control that occurs as a result of
either:
(a) an Involuntary Termination, or
(b) a Constructive Termination.
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1.14 "Employee" means any person, at the senior executive level as defined by
the Administration Committee, paid through the payroll department of the
Employing Company (as opposed to the accounts payable department of the
Employing Company) and employed on a regular full-time basis (i.e., an
employee whose scheduled workweek is consistent with the standard
workweek schedule of a business unit or department) or regular part-time
basis (i.e., an employee who is scheduled to work at least 20 hours per
week, but fewer than the hours of a regular full-time employee) by an
Employing Company, who receives from an Employing Company a regular
stated compensation and an annual IRS Form W-2; provided, however, that
an Employing Company or operating business unit thereof, due to business,
marketplace or employee relations reasons, may, in its sole discretion,
by policy exclude from the definition of Employee under the Plan any
category or level of Employee employed in a non-exempt, exempt or
executive level position or in an initial probationary or trial period of
employment. The term "Employee" shall not include any person who has
entered into an independent contractor agreement , consulting agreement,
franchise agreement or any similar agreement with an Employing Company,
nor the employees of any such person, regardless of whether that person
(including his or her employees) is later found to be an employee by any
court of law or regulatory authority.
1.15 "Employing Company" means the Company and such of its subsidiaries and
affiliated companies and other trades or businesses as have adopted the
Plan and have been admitted to participation by the CBC or any one or
more of them, and any corporation or other entity succeeding to the
rights and assuming the obligations of any such company hereunder in the
manner described in Section 6.1.
1.16 "ERISA" means the Employee Retirement Income Security Act of l974, as
amended from time to time.
1.17 "Good Cause" means a discontinuance of an Employee's employment by an
Employing Company upon one of the following:
a. an Employee's willful and continued failure to adequately perform
substantially all of the Employee's duties with an Employing Company,
b. an Employee's willful engagement in conduct which is demonstrably and
materially injurious to an Employing Company or an affiliate thereof,
monetarily or otherwise, or
c. conviction of a felony by the Employee.
1.18 "Involuntary Termination" means any involuntary discontinuance of an
Employee's employment by an Employing Company for reasons other than Good
Cause within two years after a Change in Control.
1.19 "Leave of Absence" means the period during which an Employee is absent
from work pursuant to a leave of absence granted by an Employing Company.
1.20 "Plan" means the American Express Senior Executive Severance Plan, as set
forth herein and as hereafter amended from time to time.
1.21 "Plan Year" means calendar year 1994 and any subsequent calendar year.
1.22 "Predecessor Company" means any corporation or unincorporated entity
heretofore or hereafter merged or consolidated with or otherwise absorbed
by an Employing Company or any substantial part of the business of which
has been or shall be acquired by an Employing Company.
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1.23 "Retirement" means early, normal or deferred retirement as defined in and
meeting the terms and conditions of the American Express Retirement Plan
or IDS Retirement Plan, as amended, or any successor plans.
1.24 "Separation Period" means the period of time over which an Employee
receives severance benefits under the Plan in biweekly or other
installment payments.
1.25 "Termination of Active Employment" means the date on which an Employee
ceases performing services for an Employing Company.
1.26 "Willful" means that an act or failure to act on an Employee's part is
done, or omitted to be done, by the Employee in a manner that is not in
good faith, and that is without reasonable belief that such action or
omission was in the best interests of an Employing Company.
1.27 The masculine pronoun shall be construed to mean the feminine and the
singular shall be construed to mean the plural, wherever appropriate
herein.
1.28 Headings in this document are for identification purposes only and do not
constitute a part of the Plan.
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ARTICLE TWO
PARTICIPATION
2.1 ELIGIBILITY FOR PARTICIPATION. Each Employee shall be eligible to
participate in the Plan in the event his employment is terminated by an
Employing Company for one of the following reasons:
2.1.1 Reduction in force;
2.1.2 Position elimination;
2.1.3 Office closing;
2.1.4 Poor performance;
2.1.5 Mutually satisfactory resignation;
2.1.6 Relocation of an employee's current position that does not meet
the definition of Comparable Position;
2.1.7 Defined Termination, as defined in Section 1.13, (applicable only
within two years after a Change in Control), and notwithstanding
any provision of Section 2.3.
The CBC may, in its discretion, grant participation eligibility to any
Employee or group of Employees employed in a business unit of the Company
or an Employing Company who terminate employment due to a sale of such
business unit not later than six months following such sale.
2.2 LIMITATIONS ON ELIGIBILITY. In the event an Employee who is otherwise
eligible for participation in the Plan is offered a Comparable Position
(whether the position is accepted or rejected by the Employee), he will
not be eligible to participate in the Plan. In addition, an Employee is
not eligible to participate in the Plan if the Employee accepts any
position in the Employing Company, an Affiliated Company or successor
company (regardless of whether it is a Comparable Position). An Employee
who is a member of the Company's Planning and Policy Committee and who
otherwise meets the eligibility criteria may only participate in the Plan
if approved by the CBC in advance.
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2.3 INELIGIBILITY FOR PARTICIPATION. An Employee is ineligible to participate
in the Plan in the event his employment by an Employing Company
terminates for a reason other than those enumerated in Section 2.1 above,
including, but not limited to, the following:
2.3.1 Voluntary resignation;
2.3.2 Failure to report for work;
2.3.3 Failure to return from leave;
2.3.4 Return from a Leave of Absence which extends beyond the policy
reinstatement period, if applicable, and no position is
available;
2.3.5 Excessive absenteeism or lateness;
2.3.6 Merger, acquisition, sale, transfer, outsourcing or reorganization
of all or part of the Employing Company where either (i) a
Comparable Position is offered with, or (ii) the Employee accepts
any position (regardless of whether it is a Comparable Position)
with, a Successor Company, whether affiliated or unaffiliated with
the Employing Company, including an outside contractor, and
whether or not the Successor Company adopts the plan.
2.3.7 Violation of a policy or procedure of the Employing Company,
insubordination, unwillingness to perform the duties of a
position, suspected dishonesty, or other misconduct;
2.3.8 Retirement, including the acceptance of any Employing Company
sponsored retirement incentive; provided, however, that in the
event an Employee is otherwise eligible for a severance pay
benefit in accordance with Section 2.1 above and also eligible for
Retirement, the Employee shall be eligible to participate in the
Plan in accordance with Article 3 below; or
2.3.9 Death.
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ARTICLE THREE
AMOUNT OF BENEFITS
3.1 AMOUNT OF BENEFITS. The severance benefit payable to an eligible
Employee under the Plan shall be based on his Completed Years of
Service with the Company, Employing Company or an Affiliated Company.
The formula for determining an Employee's severance benefit payment
shall be calculated by first adding together (i) the Employee's
annual Base Salary in effect immediately prior to the date of
Termination of Active Employment and (ii) the last annual Bonus
received by the Employee or approved by the CBC as of the date the
Employee signs the agreement required pursuant to section 3.5 of the
Plan. In the case of a recently hired Employee who has not yet
received a Bonus, the Employee's designated target Bonus may be used
as the subparagraph (ii) portion of the calculation above. The sum of
subparagraphs (i) and (ii) above shall then be divided by 52 to
calculate the weekly severance benefit. The amount of the total
severance benefit shall be determined according to the following
schedule:
For purposes of executive eligibility an Employing Company may define
eligibility in accordance with its policies and practice and may in its
discretion exclude defined levels of executives in accordance with subparagraph
1.14.
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3.2 LIMITATIONS ON AMOUNT OF SEVERANCE BENEFITS. The number of weeks of
severance benefits payable to any eligible Employee under the Plan shall
not exceed 104 weeks. Such benefits payable under the Plan shall be
inclusive of and offset by any other severance, redundancy or termination
payment made by an Employing Company, including, but not limited to, any
amounts paid pursuant to federal, state, local or foreign government
worker notification (e.g., Worker Adjustment and Retraining Notification
Act) or office closing requirements and any amounts owed the Employee
pursuant to a contract with Employing Company, unless the contract
specifically provides otherwise.
3.3 REEMPLOYMENT. In the event an Employee is reemployed by the Employing
Company or an Affiliated Company within the period covered by the
schedule of severance benefits in Section 3.1 above, the severance
benefits, if any, that are in excess of the number of weeks between the
Termination of Active Employment and the rehire date shall be repaid by
the Employee or withheld by the Employing Company, as the case may be. In
the further event an eligible Employee who is receiving severance
benefits under the Plan is later rehired by an Employing Company or an
Affiliated Company, and employment later terminates under conditions
making such Employee eligible for severance benefits under the Plan, the
amount of the second severance benefit will be based on such Employee's
rehire date and not the original date of employment; provided, however,
that any benefits withheld or repaid in accordance with the preceding
sentence shall be additionally paid to the terminating Employee. The
total amount of severance calculated pursuant to Section 3.3 shall not
exceed 78 weeks for Employees not on the Planning and Policy Committee or
104 weeks for Planning and Policy Committee members.
3.4 WITHHOLDING TAX. The Employing Company shall deduct from the amount of
any severance benefits payable under the Plan, any amount required to be
withheld by the Employing Company by reason of any law or regulation, for
the payment of taxes or otherwise to any federal, state, local or foreign
government. In determining the amount of any applicable tax, the
Employing Company shall be entitled to rely on the number of personal
exemptions on the official form(s) filed by the Employee with the
Employing Company for purposes of income tax withholding on regular
wages.
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3.5 REQUIREMENT OF SIGNED AGREEMENT. Receipt of severance benefits under the
Plan is conditioned upon the Employee signing an Agreement with the
Employee's Employing Company in a form satisfactory to the Company and in
accordance with the requirements of applicable law. The Agreement must
include a release of claims and may include whatever other terms the
Employing Company deems appropriate, including a restrictive covenant. If
the terms of the Agreement are found to be legally unenforceable, the
Employee must return any severance benefits paid pursuant to Section 3.1
of the Plan plus the value of any Long Term Incentive Awards which vested
during the Separation Period; provided, however, that in the event the
Employee has a Defined Termination, such restrictive covenants shall: (a)
be reasonable under the applicable facts and circumstances; (b) include
the following (i) non-solicitation of customers and employees; (ii)
confidentiality of business data; (iii) full release of claims; and (iv)
non-denigration of the Company and its affiliates, and their officers,
directors and agents and (c) not include any non-competition limitations.
Notwithstanding anything herein to the contrary, the Company shall, for a
period of two years and one day following a Change in Control, be
prohibited from entering into any agreement with an Employee, which
contains a more expansive Competitor List (as provided in Section 2 of
the Consent to the Application of Forfeiture and Detrimental Conduct
Provision to Incentive Compensation Plan Award) than that which was in
effect for such Employee immediately prior to the date of such Change in
Control.
3.6 MAJOR TRANSACTION.
(a) Section 3.6 shall apply in the event of a Major Transaction. A Major
Transaction shall mean a transaction described in either (1) or (2)
below:
(1) The consummation of a reorganization, merger or consolidation, in
each case, if, following such reorganization, merger or consolidation,
more than 50% but not more than 60% of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation (or any parent thereof) and the
combined voting power of the then outstanding voting securities of such
corporation (or any parent thereof) entitled to vote generally in the
election of directors is then beneficially owned, directly or indirectly,
by all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common Shares
and Outstanding Company Voting Securities immediately prior to such
reorganization, merger or consolidation, in substantially the same
proportions as their ownership immediately prior to such reorganization,
merger or consolidation of such Outstanding Company Common Shares and
Outstanding Company Voting Shares, as the case may be, but only if:
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(A) no Person (excluding the Company, any employee benefit plan (or
related trust) of the Company, a Subsidiary or such corporation resulting
from such reorganization, merger or consolidation or any parent or a
subsidiary thereof, and any Person beneficially owning, immediately prior
to such reorganization, merger or consolidation, directly or indirectly,
25% or more of the Outstanding Company Common Shares or Outstanding
Company Voting Securities, as the case may be) beneficially owns,
directly or indirectly, 25% or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation (or any parent thereof) or the
combined voting power of the then outstanding voting securities of such
corporation (or any parent thereof) entitled to vote generally in the
election of directors; and
(B) at least a majority of the members of the board of directors of the
corporation resulting from such reorganization, merger or consolidation
(or any parent thereof) were members of the Incumbent Board at the time
of the execution of the initial agreement or action of the Board
providing for such reorganization, merger or consolidation.
(2) The consummation of the sale, lease, exchange or other disposition of
all or substantially all of the assets of the Company to a corporation
with respect to which following such sale, lease, exchange or other
disposition more than 50% but not more than 60% of, respectively, the
then outstanding shares of common stock of such corporation (or any
parent thereof) and the combined voting power of the then outstanding
voting securities of such corporation (or any parent thereof) entitled to
vote generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Shares and Outstanding Company Voting
Securities immediately prior to such sale, lease, exchange or other
disposition in substantially the same proportions as their ownership
immediately prior to such sale, lease, exchange or other disposition of
such Outstanding Company Common Shares and Outstanding Company Voting
Shares, as the case may be, but only if:
(A) no Person (excluding the Company and any employee benefit plan (or
related trust) of the Company or a Subsidiary of such corporation or a
subsidiary thereof and any Person beneficially owning, immediately prior
to such sale, lease, exchange or other disposition, directly or
indirectly, 25% or more of the Outstanding Company Common Shares or
Outstanding Company Voting Securities, as the case may be) beneficially
owns, directly or indirectly, 25% or more of, respectively, the then
outstanding shares of common stock of such corporation (or any parent
thereof) and the combined voting power of the then outstanding voting
securities of such corporation (or any parent thereof) entitled to vote
generally in the election of directors; and
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(B) at least a majority of the members of the board of directors of such
corporation (or any parent thereof) were members of the Incumbent Board
at the time of the execution of the initial agreement or action of the
Board providing for such sale, lease, exchange or other disposition of
assets of the Company. (b) If all or any portion of the payments or
benefits to which the Employee will be entitled under the Plan, either
alone or together with other payments or benefits which the Employee
receives or is entitled to receive directly or indirectly from the
Company or any of its subsidiaries or any other person or entity that
would be treated as a payor of parachute payments as hereinafter defined,
under any other plan, agreement or arrangement, would constitute a
"parachute payment" within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code") or any successor provision
thereto and regulations or other guidance thereunder (except that "2.95"
shall be used instead of "3" under Section 280G(b)(2)(A)(ii) of the Code
or any successor provision thereto), such payment or benefits provided to
the Employee under this Plan, and any other payments or benefits which
the Employee receives or is entitled to receive directly or indirectly
from the Company or any of its subsidiaries or any other person or entity
that would be treated as a payor of parachute payments as hereinafter
defined, under any other plan, agreement or arrangement which would
constitute a parachute payment, shall be reduced (but not below zero) as
described below to the extent necessary so that no portion thereof would
constitute such a parachute payment as previously defined (except that
"2.95" shall be used instead of "3" under Section 280G(b)(2)(A)(ii) of
the Code or any successor provision thereto). Whether payments or
benefits to the Employee would constitute a "parachute payment", whether
such payments or benefits are to be reduced pursuant to the first
sentence of this paragraph, and the extent to which they are to be so
reduced, will be determined by the firm serving, immediately prior to the
Major Transaction, as the Company's independent auditors, or if that firm
refuses to serve, by another qualified firm, whether or not serving as
independent auditors, designated by the Administration Committee (the
"Firm"). The Firm will be paid reasonable compensation by the Company for
such services. If the Firm concludes that its determination is
inconsistent with a final determination of a court or the Internal
Revenue Service, the Firm shall, based on such final determination,
redetermine whether the amount payable to the Employee should have been
reduced and, if applicable, the amount of any such reduction. If the Firm
determines that a lesser payment should have been made to the Employee,
then an amount equal to the amount of the excess of the earlier payment
over the redetermined amount (the "Excess Amount") will be deemed for all
purposes to be a loan to the Employee made on the date of the Employee's
receipt of such Excess Amount, which the Employee will have an obligation
to repay to the Company on the fifth business day after demand, together
with interest on such amount at the lowest applicable Federal rate (as
defined in Section 1274(d) of the Code or any successor provision
thereto), compounded semi-annually (the "Section 1274 Rate") from the
date of the Employee's receipt of such Excess Amount until the date of
such repayment (or such lesser rate (including zero) as may be designated
by the Firm such that the Excess Amount and such interest will not be
treated as a parachute payment as previously defined). If the Firm
determines that a greater payment should have been made to the Employee,
within fifteen business days of such determination, the Company will pay
to the Employee the amount of the deficiency, together with interest
thereon from the date such amount should have been paid to the date of
such payment, at the Section 1274 Rate (or such lesser rate (including
zero) as may be designated by the Firm such that the amount of such
deficiency and such interest will not be treated as a parachute payment
as previously defined). If a reduction is to be made pursuant to this
paragraph, the Firm will have the right to determine which payments and
benefits will be reduced, either those under this Plan alone or such
other payments or benefits which the Employee receives or is entitled to
receive directly or indirectly from the Company or any of its
subsidiaries or any other person or entity that would be treated as a
payor of parachute payments as previously defined, under any other plan,
agreement or arrangement.
15
3.7 EXCISE TAX.
(a) Section 3.7 shall apply in the event of a Change in Control, as
defined in Section 1.6 hereof.
(b) In the event that any payment or benefit received or to be received
by an Employee hereunder in connection with a Change in Control or
termination of such Employee's employment (such payments and benefits,
excluding Gross-Up Payment (as hereinafter defined), being hereinafter
referred to collectively as the "Payments"), will be subject to the
excise tax (the "Excise Tax") referred to in Section 4999 of the Code,
then (i) in the case of an Employee who is classified in Band 70 (or its
equivalent) or above immediately prior to such Change in Control (a "Tier
1 Employee"), the Company shall pay to such Tier 1 Employee, within five
days after receipt by such Tier 1 Employee of the written statement
referred to in paragraph (d) below, an additional amount (the "Gross-Up
Payment") such that the net amount retained by such Tier 1 Employee,
after deduction of any Excise Tax on the Payments and any federal, state
and local income and employment taxes and Excise Tax upon the Gross-Up
Payment, shall be equal to the Payments, and (ii) in the case of a Tier 1
Employee (in the event clause (i) above does not apply) and in the case
of any other Employee, the Payments shall be reduced to the extent
necessary so that no portion of the Payments is subject to the Excise Tax
but only if (A) the net amount of all Total Payments (as hereinafter
defined), as so reduced (and after subtracting the net amount of federal,
state and local income and employment taxes on such reduced Total
Payments), is greater than or equal to (B) the net amount of such Total
Payments without any such reduction (but after subtracting the net amount
of federal, state and local income and employment taxes on such Total
Payments and the amount of Excise Tax to which an Employee would be
subject in respect of such unreduced Total Payments); provided, however,
that the Employee may elect in writing to have other components of his or
her Total Payments reduced prior to any reduction in the Payments
hereunder.
(c) For purposes of determining whether the Payments will be subject to
the Excise Tax, the amount of such Excise Tax and whether any Payments
are to be reduced hereunder: (i) all payments and benefits received or to
be received by an Employee in connection with such Change in Control or
the termination of such Employee's employment, whether pursuant to the
terms of this Plan or any other plan, arrangement or agreement with the
Company, any Person (as such term is defined in Section 1.6) whose
actions result in such Change in Control or any Person affiliated with
the Company or such Person (all such payments and benefits, excluding the
Gross-Up Payment and any similar gross-up payment to which a Tier 1
Employee may be entitled under any such other plan, arrangement or
agreement, being hereinafter referred to as the "Total Payments"), shall
be treated as "parachute payments" (within the meaning of section
280G(b)(2) of the Code) unless, in the opinion of the accounting firm
which was, immediately prior to the Change in Control, the Company's
independent auditor, or if that firm refuses to serve, by another
qualified firm, whether or not serving as independent auditors,
designated by the Administration Committee (the "Auditor"), such payments
or benefits (in whole or in part) do not constitute parachute payments,
including by reason of section 280G(b)(2)(A) or section 280G(b)(4)(A) of
the Code; (ii) no portion of the Total Payments the receipt or enjoyment
of which the Employee shall have waived at such time and in such manner
as not to constitute a "payment" within the meaning of section 280G(b) of
the Code shall be taken into account; (iii) all "excess parachute
payments" within the meaning of section 280G(b)(l) of the Code shall be
treated as subject to the Excise Tax unless, in the opinion of the
Auditor, such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered (within the
meaning of section 280G(b)(4)(B) of the Code) in excess of the Base
Amount (within the meaning of section 280G(b)(3) of the Code) allocable
to such reasonable compensation, or are otherwise not subject to the
Excise Tax; and (iv) the value of any noncash benefits or any deferred
payment or benefit shall be determined by the Auditor in accordance with
the principles of sections 280G(d)(3) and (4) of the Code and regulations
or other guidance thereunder. For purposes of determining the amount of
the Gross-Up Payment in respect of a Tier 1 Employee and whether any
Payments in respect of a Employee (other than a Tier 1 Employee) shall be
reduced, the Employee shall be deemed to pay federal income tax at the
highest marginal rate of federal income taxation (and state and local
income taxes at the highest marginal rate of taxation in the state and
locality of such Employee's residence, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state
and local taxes) in the calendar year in which the Gross-Up Payment is to
be made (in the case of a Tier 1 Employee) or in which the Payments are
made (in the case of an Employee other than a Tier 1 Employee). The
Auditor will be paid reasonable compensation by the Company for its
services.
16
(d) In the event that the Excise Tax is finally determined to be less
than the amount taken into account hereunder in calculating the Gross-Up
Payment, then an amount equal to the amount of the excess of the earlier
payment over the redetermined amount (the "Excess Amount") will be deemed
for all purposes to be a loan to the Tier 1 Employee made on the date of
the Tier 1 Employee's receipt of such Excess Amount, which the Tier 1
Employee will have an obligation to repay to the Company on the fifth
business day after demand, together with interest on such amount at the
lowest applicable Federal rate (as defined in Section 1274(d) of the Code
or any successor provision thereto), compounded semi-annually (the
"Section 1274 Rate") from the date of the Tier 1 Employee's receipt of
such Excess Amount until the date of such repayment (or such lesser rate
(including zero) as may be designated by the Auditor such that the Excess
Amount and such interest will not be treated as a parachute payment as
previously defined). In the event that the Excise Tax is finally
determined to exceed the amount taken into account hereunder in
calculating the Gross-Up Payment (including by reason of any payment the
existence or amount of which cannot be determined at the time of the
Gross-Up Payment), within five business days of such determination, the
Company will pay to the Tier 1 Employee an additional amount, together
with interest thereon from the date such additional amount should have
been paid to the date of such payment, at the Section 1274 Rate (or such
lesser rate (including zero) as may be designated by the Auditor such
that the amount of such deficiency and such interest will not be treated
as a parachute payment as previously defined). The Tier 1 Employee and
the Company shall each reasonably cooperate with the other in connection
with any administrative or judicial proceedings concerning the amount of
any Gross-Up Payment.
(e) As soon as practicable following a Change in Control, the Company
shall provide to each Tier 1 Employee and to each other Employee with
respect to whom it is proposed that Payments be reduced, a written
statement setting forth the manner in which the Total Payments in respect
of such Tier 1 Employee or other Employee were calculated and the basis
for such calculations, including, without limitation, any opinions or
other advice the Company has received from the Firm or other advisors or
consultants (and any such opinions or advice which are in writing shall
be attached to the statement).
17
ARTICLE FOUR
METHOD OF PAYMENT
4.1 PAYMENT. A severance benefit under the Plan may be payable in biweekly or
other installments at the sole discretion of the Employing Company;
provided, however, that in the event the Employee has a Defined
Termination, the severance benefit under the Plan will be paid within
fifteen days after the date of such Change in Control. Notwithstanding
anything in this Plan to the contrary, if the Employee's employment
terminates within two years following a Change in Control and if the
Employee receives lump sum severance, the Employee shall continue to be
eligible to receive benefits under the Company's medical and dental plans
for the applicable period as if the Employee were paid severance in
installments, such benefits to be substantially identical to the benefits
provided immediately prior to the Change in Control.
4.2 INACTIVE EMPLOYMENT STATUS. During the Separation Period (where severance
benefits are paid in biweekly or other installments) the Employee
receiving such payments will remain in an inactive employment status
until receipt of such payments is completed, at which time employment
will be terminated. During the Separation Period, certain other employee
benefits may be continued, payment for which shall be deducted from such
severance payments in accordance with the Employee's previously elected
benefit coverage. During the Separation Period, the Company reserves the
right to continue other programs such as Long Term Incentive Awards and
Perquisites in accordance with its policies, which may be changed or
terminated from time to time. Nothing in this paragraph shall create a
contract to provide such benefits.
4.3 LIMITATIONS ON SEVERANCE PAYMENTS. In no event shall the period of time
during which an Employee receives severance payments exceed 104 weeks.
Nothing in this Section shall affect the total number of weeks payable
under the Plan pursuant to Section 3.1, including, but not limited to,
the 104-week maximum payment.
4.4 DEATH. In the event an Employee dies before full receipt of severance
benefits payable under the Plan, the remaining severance benefits will be
paid to the legal representative of such Employee's estate in a lump sum
as soon as practicable after receipt of notice of such death and evidence
satisfactory to the Company of the payment or provision for the payment
of any estate, transfer, inheritance or death taxes which may be payable
with respect thereto.
18
ARTICLE FIVE
ADMINISTRATION OF THE PLAN
5.1 POWERS OF THE EMPLOYING COMPANY. The Employing Company shall have such
powers, authorities and discretion as are necessary or appropriate in
order to carry out its duties under the Plan, including, but not limited
to, the power:
5.1.1 To obtain such information as it shall deem necessary or
appropriate in order to carry out its duties under the Plan;
5.1.2 To make determinations with respect to the grounds for termination
of employment of any Employee; and
5.1.3 To establish and maintain necessary records.
5.2 EMPLOYING COMPANY AUTHORITY. Nothing contained in the Plan shall be
deemed to qualify, limit or alter in any manner the Employing Company's
sole and complete authority and discretion to establish, regulate,
determine or modify at any time, the terms and conditions of employment,
including, but not limited to, levels of employment, hours of work, the
extent of hiring and employment termination, when and where work shall be
done, marketing of its products, or any other matter related to the
conduct of its business or the manner in which its business is to be
maintained or carried on, in the same manner and to the same extent as if
the Plan were not in existence.
5.3 ADMINISTRATION COMMITTEE DUTIES AND POWERS. The Administration Committee
shall be responsible for the general administration and interpretation of
the Plan and the proper execution of its provisions and shall have full
discretion to carry out its duties. The Administration Committee shall be
the "Administrator" of the Plan and shall be, in its capacity as
Administrator, a "Named Fiduciary," as such terms are defined or used in
ERISA. For the purposes of carrying out its duties as Administrator, the
Administration Committee may, in its sole discretion, allocate its
responsibilities under the Plan among its members, and may, in its sole
discretion, designate persons other than members of the Administration
Committee to carry out such of its responsibilities under the Plan as it
may deem fit. In addition to the powers of the Administration Committee
specified elsewhere in the Plan, the Administration Committee shall have
all discretionary powers necessary to discharge its duties under the
Plan, including, but not limited to, the following discretionary powers
and duties:
5.3.1 To interpret or construe the Plan, and resolve ambiguities,
inconsistencies and omissions;
19
5.3.2 To make and enforce such rules and regulations and prescribe the
use of such forms as it deems necessary or appropriate for the
efficient administration of the Plan; and
5.3.3 To decide all questions on appeal concerning the Plan and the
eligibility of any person to participate in the Plan.
5.4 DETERMINATIONS. The determination of the Administration Committee as to
any question involving the general administration and interpretation or
construction of the Plan shall be within its sole discretion and shall be
final, conclusive and binding on all persons, except as otherwise
provided herein or by law.
5.5 CLAIMS REVIEW PROCEDURE. Consistent with the requirements of ERISA and
the regulations thereunder as promulgated by the Secretary of Labor from
time to time, the following claims review procedure shall be followed
with respect to the denial of severance benefits to any Employee:
5.5.1 Within thirty (30) days from the date of an Employee's termination
of active Employment, the Employing Company shall furnish such
Employee either an agreement offering severance benefits under the
Plan or notice of such Employee's ineligibility for or denial of
severance benefits, either in whole or in part. Such notice from
the Employing Company will be in writing and sent to the Employee
or the legal representatives of his estate stating the reasons for
such ineligibility or denial and, if applicable, a description of
additional information that might cause a reconsideration by the
Administration Committee or its delegate of the decision and an
explanation of the Plan's claims review procedure. In the event
such notice is not furnished within thirty (30) days, any claim
for severance benefits shall be deemed denied and the Employee
shall be permitted to proceed to Section 5.5.2 below.
5.5.2 Within sixty (60) days after receiving notice of such denial or
ineligibility or within ninety (90) days after employment
termination if no notice is received, the Employee, the legal
representatives of his estate or a duly authorized representative
may then submit to the Administration Committee a written request
for a review of such decision of denial.
5.5.3 The Administration Committee will review the claim and within
sixty (60) days (or one hundred twenty (120) days in special
circumstances) provide a written response to the appeal setting
forth specific reasons for such decision. In the event the
decision on review is not furnished within such time period, the
claim shall be deemed denied.
20
ARTICLE SIX
ADOPTING COMPANIES AND PLAN MERGERS
6.1 ADOPTING COMPANIES. Any corporation which succeeds to the business and
assets of the Company or any part of its operations, may by appropriate
resolution adopt the Plan and shall thereupon succeed to such rights and
assume such obligations hereunder as the Company and said corporation
shall have agreed upon in writing. Any corporation which succeeds to the
business of any Employing Company other than the Company, or any part of
the operations of such Employing Company, may by appropriate resolution
adopt the Plan and shall thereupon succeed to such rights and assume such
obligations hereunder as such Employing Company and said corporation
shall have agreed upon in writing; provided, however, that such adoption
and the terms thereof agreed upon in such writing have been approved by
the Company.
ARTICLE SEVEN
AMENDMENT AND TERMINATION
7.1 RIGHT TO AMEND OR TERMINATE. The Company reserves the right, by action of
the Board of Directors or the CBC, to amend or terminate this Plan in
whole or in part at any time and from time to time, and any amendment or
effective date of termination may be given retroactive effect. The
foregoing sentence to the contrary notwithstanding, for a period of two
years and one day after the date of an occurrence of a Major Transaction
or a Change in Control, neither the Board of Directors nor the Committee
may terminate this Plan or amend this Plan in a manner that is
detrimental to the rights of any participant of the Plan without his or
her written consent.
7.2 TERMINATION BY AN EMPLOYING COMPANY. Any Employing Company other than the
Company may withdraw from participation in the Plan at any time by
delivering to the Administration Committee written notification to that
effect signed by such Employing Company's chief executive officer or his
delegate. Withdrawal by any Employing Company pursuant to this paragraph
or complete discontinuance of severance benefits under the Plan by any
Employing Company other than the Company, shall constitute termination of
the Plan with respect to such Employing Company. The foregoing sentence
to the contrary notwithstanding, neither the Board of Directors nor the
Committee may terminate this Plan or amend this Plan in a manner that is
detrimental to the rights of any participant of the Plan without his
written consent (i) with respect to the provisions of the Plan which
become applicable upon a Change in Control, and (ii) with respect to all
provisions of the Plan for a period of two years and one day after the
date of a Change in Control.
7.3 LIMITATION ON BENEFITS. In the event any Employing Company withdraws from
participation or the Company terminates the Plan as provided in this
Article Seven, no Employee shall be entitled to receive benefits
hereunder for Employment either before or after such action.
21
ARTICLE EIGHT
FINANCIAL PROVISIONS
8.1 FUNDING. All severance benefits payable under the Plan shall be payable
and provided for solely from the general assets of the Employing Company
in accordance with the Plan, at the time such severance benefits are
payable, unless otherwise determined by the Employing Company. The
Employing Company shall not be required to establish any special or
separate fund or to make any other segregation of assets to assure the
payment of any severance benefits under the Plan.
ARTICLE NINE
LIABILITY AND INDEMNIFICATION
9.1 STANDARD OF CONDUCT. To the extent permitted by ERISA and other
applicable law, no member (which term, as used in this Article Nine,
shall include any employee of any Employing Company designated to carry
out any responsibility of the Administration Committee pursuant to
Section 5.3 above) of the Administration Committee shall be liable for
anything done or omitted to be done by him in connection with the Plan,
unless the member failed to act (1) in good faith and (2) for a purpose
which such member reasonably believed to be in accordance with the intent
of the Plan. The Company or Employing Company as applicable hereby
indemnifies each person made, or threatened to be made, a party to an
action or proceeding, whether civil or criminal, or against whom any
claim or demand is made, by reason of the fact that he, his testator or
intestate, was or is a member of the Administration Committee, against
judgments, fines, amounts paid in settlement and reasonable expenses
(including attorney's fees) actually and necessarily incurred as a result
of such action or proceeding, or any appeal therein, or as a result of
such claim or demand, if such member of the Administration Committee
acted in good faith for a purpose which he reasonably believed to be in
accordance with the intent of the Plan and, in criminal actions or
proceedings, in addition, had no reasonable cause to believe that his
conduct was unlawful.
22
9.2 PRESUMPTION OF GOOD FAITH. The termination of any such civil or criminal
action or proceeding or the disposition of any such claim or demand, by
judgment, settlement, conviction or upon a plea of nolo contendere, or
its equivalent, shall not in itself create a presumption that any such
member of the Administration Committee did not act (1) in good faith and
(2) for a purpose which he reasonably believed to be in accordance with
the intent of the Plan.
9.3 SUCCESSFUL DEFENSE. A person who has been wholly successful, on the
merits or otherwise, in the defense of a civil or criminal action or
proceeding or claim or demand of the character described in Section 9.1
above shall be entitled to indemnification as authorized in such Section
9.1.
9.4 UNSUCCESSFUL DEFENSE. Except as provided in Section 9.3 above, any
indemnification under Sections 9.1 and 9.2 above, unless ordered by a
court of competent jurisdiction, shall be made by the Company only if
authorized in the specific case:
9.4.1 By the Board of Directors acting by a quorum consisting of
directors who are not parties to such action, proceeding, claim or
demand, upon a finding that the member of the Administration
Committee has met the standard of conduct set forth in Section 9.1
above; or
9.4.2 If a quorum under Section 9.4.1 above is not obtainable with due
diligence:
9.4.2.1 By the Board of Directors upon the opinion in writing of
independent legal counsel (who may be counsel to any
Employing Company) that indemnification is proper in the
circumstances because the standard of conduct set forth
in Section 9.1 above has been met by such member of the
Administration Committee; or
9.4.2.2 By the shareholders of the Company upon a finding that
the member of the Administration Committee has met the
standard of conduct set forth in such Section 9.1 above.
23
9.5 ADVANCE PAYMENTS. Expenses incurred in defending a civil or criminal
action or proceeding or claim or demand may be paid by the Company or
Employing Company as applicable in advance of the final disposition of
such action or proceeding, claim or demand, if authorized in the manner
specified in Section 9.4 above, except that, in view of the obligation of
repayment set forth in Section 9.6 below, there need be no finding or
opinion that the required standard of conduct has been met.
9.6 REPAYMENT OF ADVANCE PAYMENTS. All expenses incurred in defending a civil
or criminal action or proceeding, claim or demand, which are advanced by
the Company or Employing Company as applicable under Section 9.5 above
shall be repaid in case the person receiving such advance is ultimately
found, under the procedures set forth in this Article Nine, not to be
entitled to indemnification or, where indemnification is granted, to the
extent the expenses so advanced by the Company exceed the indemnification
to which he is entitled.
9.7 RIGHT TO INDEMNIFICATION. Notwithstanding the failure of the Company or
Employing Company as applicable to provide indemnification in the manner
set forth in Section 9.4 or 9.5 above, and despite any contrary
resolution of the Board of Directors or of the shareholders in the
specific case, if the member of the Administration Committee has met the
standard of conduct set forth in Section 9.1 above, the person made or
threatened to be made a party to the action or proceeding or against whom
the claim or demand has been made, shall have the legal right to
indemnification from the Company or Employing Company as applicable as a
matter of contract by virtue of this Plan, it being the intention that
each such person shall have the right to enforce such right of
indemnification against the Company or Employing Company as applicable in
any court of competent jurisdiction.
24
ARTICLE TEN
MISCELLANEOUS
10.1 NO RIGHT TO CONTINUED EMPLOYMENT. Nothing in the Plan shall be construed
as giving any Employee the right to be retained in the employ of any
Employing Company or any right to any payment whatsoever, except to the
extent of the severance benefits provided for by the Plan. Each Employing
Company expressly reserves the right to dismiss any Employee at any time
and for any reason without liability for the effect which such dismissal
might have upon him as a participant of the Plan.
10.2 CONSTRUCTION. This Plan shall be governed by and construed in accordance
with the substantive laws but not the choice of law rules of the state of
New York, except to the extent that such laws have been superseded by
federal law.
10.3 EXPENSES OF THE PLAN. The expenses of establishment and administration of
the Plan shall be paid by the Employing Companies. Any expenses paid by
the Company pursuant to this Section 10.3 and indemnification under
Article Nine shall be subject to reimbursement by the other Employing
Companies of their proportionate shares of such expenses and
indemnification, as determined by the Administration Committee in its
sole discretion.
25
EFFECTIVE JANUARY 1, 1994
Generally
(As amended and restated through May 1, 2000)
AMERICAN EXPRESS SENIOR EXECUTIVE SEVERANCE PLAN
------------------------------------------------
TABLE OF CONTENTS
-----------------
Articles Page
-------- ----
Introduction 1
ONE Definitions 2
TWO Participation 9
THREE Amount of Benefits 11
FOUR Method of Payment 18
FIVE Administration of the Plan 19
SIX Adopting Companies and Plan Mergers 21
SEVEN Amendment and Termination 21
EIGHT Financial Provisions 22
NINE Liability and Indemnification 22
TEN Miscellaneous 25
AMERICAN EXPRESS SENIOR EXECUTIVE SEVERANCE PLAN
INTRODUCTION
------------
The Board of Directors of American Express Company established the American
Express Senior Executive Severance Plan (hereinafter referred to as the "Plan")
effective as of January l, l994, to provide for severance benefits for certain
eligible executive officers of American Express Company and its participating
subsidiaries whose employment is terminated under certain conditions. Severance
benefits under the Plan are to be provided to such eligible executives in
exchange for a signed agreement that includes a release of all claims.
1
ARTICLE ONE
DEFINITIONS
1.1 "Administration Committee" means the Committee established and appointed
by the Board of Directors or by a committee of the Board of Directors.
1.2 "Affiliated Company" means any corporation which is a member of a
controlled group of corporations (determined in accordance with Section
4l4(b) of the Code) of which the Company is a member and any other trade
or business (whether or not incorporated) which is controlled by, or
under common control (determined in accordance with Section 4l4(c) of the
Code) with the Company, but which has not been admitted to participation
in the Plan.
1.3 "Base Salary" means the regular basic cash remuneration before deductions
for taxes and other items withheld, payable to an Employee for services
rendered to an Employing Company, but not including pay for bonuses,
incentive compensation, special pay, awards or commissions.
1.4 "Board of Directors" means the board of directors of the Company.
1.5 "Bonus" means annual incentive compensation paid to an Employee over and
above Base Salary earned and paid in cash or otherwise under any
executive bonus or sales incentive plan or program of an Employing
Company.
2
1.6 "Change in Control" means the happening of any of the following:
(a) Any individual, entity or group (a "Person") (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") becomes the beneficial owner (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more
of either (i) the then outstanding common shares of the Company (the
"Outstanding Company Common Shares") or (ii) the combined voting power of
the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that such beneficial ownership shall not
constitute a Change in Control if it occurs as a result of any of the
following acquisitions of securities: (i) any acquisition directly from
the Company, (ii) any acquisition by the Company or any corporation,
partnership, trust or other entity controlled by the Company (a
"Subsidiary"), (iii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any Subsidiary
or (iv) any acquisition by any corporation pursuant to a reorganization,
merger or consolidation, if, following such reorganization, merger or
consolidation, the conditions described in clauses (i), (ii) and (iii) of
subsection (c) of this "Change in Control" Section are satisfied.
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because any Person (the "Subject Person") became the
beneficial owner of 25% or more of the Outstanding Company Common Shares
or Outstanding Company Voting Securities as a result of the acquisition
of Outstanding Company Common Shares or Outstanding Company Voting
Securities by the Company which, by reducing the number of Outstanding
Company Common Shares or Outstanding Company Voting Securities, increases
the proportional number of shares beneficially owned by the Subject
Person; provided, that if a Change in Control would be deemed to have
occurred (but for the operation of this sentence) as a result of the
acquisition of Outstanding Company Common Shares or Outstanding Company
Voting Securities by the Company, and after such share acquisition by the
Company, the Subject Person becomes the beneficial owner of any
additional Outstanding Company Common Shares or Outstanding Company
Voting Securities which increases the percentage of the Outstanding
Company Common Shares or Outstanding Company Voting Securities
beneficially owned by the Subject Person, then a Change in Control shall
then be deemed to have occurred; or
3
(b) individuals who, as of the date hereof, constitute the board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election
by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either an actual or threatened
election contest or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board, including by
reason of agreement intended to avoid or settle any such actual or
threatened contest or solicitation; or
(c) The consummation of a reorganization, merger or consolidation, in
each case, unless, following such reorganization, merger or
consolidation, (i) more than 50% of, respectively, the then outstanding
shares of common stock of the corporation resulting from such
reorganization, merger or consolidation (or any parent thereof) and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Shares and Outstanding
Company Voting Securities immediately prior to such reorganization,
merger or consolidation, in substantially the same proportions as their
ownership immediately prior to such reorganization, merger or
consolidation of such Outstanding Company Common Shares and Outstanding
Company Voting Shares, as the case may be, (ii) no Person (excluding the
Company, any employee benefit plan (or related trust) of the Company, a
Subsidiary or such corporation resulting from such reorganization, merger
or consolidation or any parent or a subsidiary thereof, and any Person
beneficially owning, immediately prior to such reorganization, merger or
consolidation, directly or indirectly, 25% or more of the Outstanding
Company Common Shares or Outstanding Company Voting Securities, as the
case may be) beneficially owns, directly or indirectly, 25% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or consolidation
(or any parent thereof) or the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors and (iii) at least a majority of
the members of the board of directors of the corporation resulting from
such reorganization, merger or consolidation (or any parent thereof) were
members of the Incumbent Board at the time of the execution of the
initial agreement or action of the Board providing for such
reorganization, merger or consolidation; or
4
(d) The consummation of the sale, lease, exchange or other disposition of
all or substantially all of the assets of the Company, unless such assets
have been sold, leased, exchanged or disposed of to a corporation with
respect to which following such sale, lease, exchange or other
disposition (A) more than 50% of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting power
of the then outstanding voting securities of such corporation (or any
parent thereof) entitled to vote generally in the election of directors
is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Shares and
Outstanding Company Voting Securities immediately prior to such sale,
lease, exchange or other disposition in substantially the same
proportions as their ownership immediately prior to such sale, lease,
exchange or other disposition of such Outstanding Company Common Shares
and Outstanding Company Voting Shares, as the case may be, (B) no Person
(excluding the Company and any employee benefit plan (or related trust)
of the Company or a Subsidiary of such corporation or a subsidiary
thereof and any Person beneficially owning, immediately prior to such
sale, lease, exchange or other disposition, directly or indirectly, 25%
or more of the Outstanding Company Common Shares or Outstanding Company
Voting Securities, as the case may be) beneficially owns, directly or
indirectly, 25% or more of, respectively, the then outstanding shares of
common stock of such corporation (or any parent thereof) and the combined
voting power of the then outstanding voting securities of such
corporation (or any parent thereof) entitled to vote generally in the
election of directors and (C) at least a majority of the members of the
board of directors of such corporation (or any parent thereof) were
members of the Incumbent Board at the time of the execution of the
initial agreement or action of the Board providing for such sale, lease,
exchange or other disposition of assets of the Company; or
(e) Approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company.
1.7 "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
1.8 "Committee" means the Compensation and Benefits Committee of the Board of
Directors or any successor committee appointed by the Board of Directors.
1.9 "Company" means American Express Company, a New York corporation, its
successors and assigns.
1.10 "Comparable Position" means a job with the Company, an Employing Company,
an Affiliated Company or successor company at the same or higher Base
Salary as an Employee's current job and at a work location within
reasonable commuting distance from an Employee's home, as determined by
such Employee's Employing Company. For employees in the Employing
Company's international expatriate program, Comparable Position means a
job with an Employing Company, an Affiliated Company or successor company
at the same or higher Base Salary as an Employee's current job and at a
work location in the Employee's country of assignment, home country or
career base country.
5
1.11 "Completed Years of Service" means the number of full one year periods
that have transpired since the Employee's original date of hire or, in
the case of someone who has incurred a break in service as defined in the
American Express Retirement Plan, the adjusted date of hire, through the
Employee's last day of active employment with the Company. For employees
of American Express Tax and Business Services, "original date of hire"
shall mean the American Express Transition Date.
1.12 "Constructive Termination" means resignation or other employment
termination by an Employee from an Employing Company as a result of one
or more of the following without the Employee's written consent within
two years after a Change in Control:
(a) a reduction in Base Salary, except for across-the-board changes
similarly affecting all Employees of the Company and all Employees of any
Person in control of the Company, or any material reduction in the
aggregate of the Employee's annual and long term incentive opportunity,
in each case from that in effect immediately prior to the Change in
Control,
(b) the Employing Company's requirement that the Employee be based more
than 50 miles from the location at which the Employee was based
immediately prior to the Change in Control and which location is more
than 35 miles from the Employee's residence,
(c) the assignment to the Employee of any duties that are materially
inconsistent with the Employee's duties prior to the Change in Control,
or
(d) a significant reduction in the Employee's position, duties, or
responsibilities from those in effect prior to the Change in Control.
1.13 "Defined Termination" means a termination of employment of an Employee
within two years after a Change in Control that occurs as a result of
either:
(a) an Involuntary Termination, or
(b) a Constructive Termination.
6
1.14 "Employee" means any person, at the senior executive level as defined by
the Administration Committee, paid through the payroll department of the
Employing Company (as opposed to the accounts payable department of the
Employing Company) and employed on a regular full-time basis (i.e., an
employee whose scheduled workweek is consistent with the standard
workweek schedule of a business unit or department) or regular part-time
basis (i.e., an employee who is scheduled to work at least 20 hours per
week, but fewer than the hours of a regular full-time employee) by an
Employing Company, who receives from an Employing Company a regular
stated compensation and an annual IRS Form W-2; provided, however, that
an Employing Company or operating business unit thereof, due to business,
marketplace or employee relations reasons, may, in its sole discretion,
by policy exclude from the definition of Employee under the Plan any
category or level of Employee employed in a non-exempt, exempt or
executive level position or in an initial probationary or trial period of
employment. The term "Employee" shall not include any person who has
entered into an independent contractor agreement , consulting agreement,
franchise agreement or any similar agreement with an Employing Company,
nor the employees of any such person, regardless of whether that person
(including his or her employees) is later found to be an employee by any
court of law or regulatory authority.
1.15 "Employing Company" means the Company and such of its subsidiaries and
affiliated companies and other trades or businesses as have adopted the
Plan and have been admitted to participation by the CBC or any one or
more of them, and any corporation or other entity succeeding to the
rights and assuming the obligations of any such company hereunder in the
manner described in Section 6.1.
1.16 "ERISA" means the Employee Retirement Income Security Act of l974, as
amended from time to time.
1.17 "Good Cause" means a discontinuance of an Employee's employment by an
Employing Company upon one of the following:
a. an Employee's willful and continued failure to adequately perform
substantially all of the Employee's duties with an Employing Company,
b. an Employee's willful engagement in conduct which is demonstrably and
materially injurious to an Employing Company or an affiliate thereof,
monetarily or otherwise, or
c. conviction of a felony by the Employee.
1.18 "Involuntary Termination" means any involuntary discontinuance of an
Employee's employment by an Employing Company for reasons other than Good
Cause within two years after a Change in Control.
1.19 "Leave of Absence" means the period during which an Employee is absent
from work pursuant to a leave of absence granted by an Employing Company.
1.20 "Plan" means the American Express Senior Executive Severance Plan, as set
forth herein and as hereafter amended from time to time.
1.21 "Plan Year" means calendar year 1994 and any subsequent calendar year.
1.22 "Predecessor Company" means any corporation or unincorporated entity
heretofore or hereafter merged or consolidated with or otherwise absorbed
by an Employing Company or any substantial part of the business of which
has been or shall be acquired by an Employing Company.
7
1.23 "Retirement" means early, normal or deferred retirement as defined in and
meeting the terms and conditions of the American Express Retirement Plan
or IDS Retirement Plan, as amended, or any successor plans.
1.24 "Separation Period" means the period of time over which an Employee
receives severance benefits under the Plan in biweekly or other
installment payments.
1.25 "Termination of Active Employment" means the date on which an Employee
ceases performing services for an Employing Company.
1.26 "Willful" means that an act or failure to act on an Employee's part is
done, or omitted to be done, by the Employee in a manner that is not in
good faith, and that is without reasonable belief that such action or
omission was in the best interests of an Employing Company.
1.27 The masculine pronoun shall be construed to mean the feminine and the
singular shall be construed to mean the plural, wherever appropriate
herein.
1.28 Headings in this document are for identification purposes only and do not
constitute a part of the Plan.
8
ARTICLE TWO
PARTICIPATION
2.1 ELIGIBILITY FOR PARTICIPATION. Each Employee shall be eligible to
participate in the Plan in the event his employment is terminated by an
Employing Company for one of the following reasons:
2.1.1 Reduction in force;
2.1.2 Position elimination;
2.1.3 Office closing;
2.1.4 Poor performance;
2.1.5 Mutually satisfactory resignation;
2.1.6 Relocation of an employee's current position that does not meet
the definition of Comparable Position;
2.1.7 Defined Termination, as defined in Section 1.13, (applicable only
within two years after a Change in Control), and notwithstanding
any provision of Section 2.3.
The CBC may, in its discretion, grant participation eligibility to any
Employee or group of Employees employed in a business unit of the Company
or an Employing Company who terminate employment due to a sale of such
business unit not later than six months following such sale.
2.2 LIMITATIONS ON ELIGIBILITY. In the event an Employee who is otherwise
eligible for participation in the Plan is offered a Comparable Position
(whether the position is accepted or rejected by the Employee), he will
not be eligible to participate in the Plan. In addition, an Employee is
not eligible to participate in the Plan if the Employee accepts any
position in the Employing Company, an Affiliated Company or successor
company (regardless of whether it is a Comparable Position). An Employee
who is a member of the Company's Planning and Policy Committee and who
otherwise meets the eligibility criteria may only participate in the Plan
if approved by the CBC in advance.
9
2.3 INELIGIBILITY FOR PARTICIPATION. An Employee is ineligible to participate
in the Plan in the event his employment by an Employing Company
terminates for a reason other than those enumerated in Section 2.1 above,
including, but not limited to, the following:
2.3.1 Voluntary resignation;
2.3.2 Failure to report for work;
2.3.3 Failure to return from leave;
2.3.4 Return from a Leave of Absence which extends beyond the policy
reinstatement period, if applicable, and no position is
available;
2.3.5 Excessive absenteeism or lateness;
2.3.6 Merger, acquisition, sale, transfer, outsourcing or reorganization
of all or part of the Employing Company where either (i) a
Comparable Position is offered with, or (ii) the Employee accepts
any position (regardless of whether it is a Comparable Position)
with, a Successor Company, whether affiliated or unaffiliated with
the Employing Company, including an outside contractor, and
whether or not the Successor Company adopts the plan.
2.3.7 Violation of a policy or procedure of the Employing Company,
insubordination, unwillingness to perform the duties of a
position, suspected dishonesty, or other misconduct;
2.3.8 Retirement, including the acceptance of any Employing Company
sponsored retirement incentive; provided, however, that in the
event an Employee is otherwise eligible for a severance pay
benefit in accordance with Section 2.1 above and also eligible for
Retirement, the Employee shall be eligible to participate in the
Plan in accordance with Article 3 below; or
2.3.9 Death.
10
ARTICLE THREE
AMOUNT OF BENEFITS
3.1 AMOUNT OF BENEFITS. The severance benefit payable to an eligible
Employee under the Plan shall be based on his Completed Years of
Service with the Company, Employing Company or an Affiliated Company.
The formula for determining an Employee's severance benefit payment
shall be calculated by first adding together (i) the Employee's
annual Base Salary in effect immediately prior to the date of
Termination of Active Employment and (ii) the last annual Bonus
received by the Employee or approved by the CBC as of the date the
Employee signs the agreement required pursuant to section 3.5 of the
Plan. In the case of a recently hired Employee who has not yet
received a Bonus, the Employee's designated target Bonus may be used
as the subparagraph (ii) portion of the calculation above. The sum of
subparagraphs (i) and (ii) above shall then be divided by 52 to
calculate the weekly severance benefit. The amount of the total
severance benefit shall be determined according to the following
schedule:
For purposes of executive eligibility an Employing Company may define
eligibility in accordance with its policies and practice and may in its
discretion exclude defined levels of executives in accordance with subparagraph
1.14.
11
3.2 LIMITATIONS ON AMOUNT OF SEVERANCE BENEFITS. The number of weeks of
severance benefits payable to any eligible Employee under the Plan shall
not exceed 104 weeks. Such benefits payable under the Plan shall be
inclusive of and offset by any other severance, redundancy or termination
payment made by an Employing Company, including, but not limited to, any
amounts paid pursuant to federal, state, local or foreign government
worker notification (e.g., Worker Adjustment and Retraining Notification
Act) or office closing requirements and any amounts owed the Employee
pursuant to a contract with Employing Company, unless the contract
specifically provides otherwise.
3.3 REEMPLOYMENT. In the event an Employee is reemployed by the Employing
Company or an Affiliated Company within the period covered by the
schedule of severance benefits in Section 3.1 above, the severance
benefits, if any, that are in excess of the number of weeks between the
Termination of Active Employment and the rehire date shall be repaid by
the Employee or withheld by the Employing Company, as the case may be. In
the further event an eligible Employee who is receiving severance
benefits under the Plan is later rehired by an Employing Company or an
Affiliated Company, and employment later terminates under conditions
making such Employee eligible for severance benefits under the Plan, the
amount of the second severance benefit will be based on such Employee's
rehire date and not the original date of employment; provided, however,
that any benefits withheld or repaid in accordance with the preceding
sentence shall be additionally paid to the terminating Employee. The
total amount of severance calculated pursuant to Section 3.3 shall not
exceed 78 weeks for Employees not on the Planning and Policy Committee or
104 weeks for Planning and Policy Committee members.
3.4 WITHHOLDING TAX. The Employing Company shall deduct from the amount of
any severance benefits payable under the Plan, any amount required to be
withheld by the Employing Company by reason of any law or regulation, for
the payment of taxes or otherwise to any federal, state, local or foreign
government. In determining the amount of any applicable tax, the
Employing Company shall be entitled to rely on the number of personal
exemptions on the official form(s) filed by the Employee with the
Employing Company for purposes of income tax withholding on regular
wages.
12
3.5 REQUIREMENT OF SIGNED AGREEMENT. Receipt of severance benefits under the
Plan is conditioned upon the Employee signing an Agreement with the
Employee's Employing Company in a form satisfactory to the Company and in
accordance with the requirements of applicable law. The Agreement must
include a release of claims and may include whatever other terms the
Employing Company deems appropriate, including a restrictive covenant. If
the terms of the Agreement are found to be legally unenforceable, the
Employee must return any severance benefits paid pursuant to Section 3.1
of the Plan plus the value of any Long Term Incentive Awards which vested
during the Separation Period; provided, however, that in the event the
Employee has a Defined Termination, such restrictive covenants shall: (a)
be reasonable under the applicable facts and circumstances; (b) include
the following (i) non-solicitation of customers and employees; (ii)
confidentiality of business data; (iii) full release of claims; and (iv)
non-denigration of the Company and its affiliates, and their officers,
directors and agents and (c) not include any non-competition limitations.
Notwithstanding anything herein to the contrary, the Company shall, for a
period of two years and one day following a Change in Control, be
prohibited from entering into any agreement with an Employee, which
contains a more expansive Competitor List (as provided in Section 2 of
the Consent to the Application of Forfeiture and Detrimental Conduct
Provision to Incentive Compensation Plan Award) than that which was in
effect for such Employee immediately prior to the date of such Change in
Control.
3.6 MAJOR TRANSACTION.
(a) Section 3.6 shall apply in the event of a Major Transaction. A Major
Transaction shall mean a transaction described in either (1) or (2)
below:
(1) The consummation of a reorganization, merger or consolidation, in
each case, if, following such reorganization, merger or consolidation,
more than 50% but not more than 60% of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation (or any parent thereof) and the
combined voting power of the then outstanding voting securities of such
corporation (or any parent thereof) entitled to vote generally in the
election of directors is then beneficially owned, directly or indirectly,
by all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common Shares
and Outstanding Company Voting Securities immediately prior to such
reorganization, merger or consolidation, in substantially the same
proportions as their ownership immediately prior to such reorganization,
merger or consolidation of such Outstanding Company Common Shares and
Outstanding Company Voting Shares, as the case may be, but only if:
13
(A) no Person (excluding the Company, any employee benefit plan (or
related trust) of the Company, a Subsidiary or such corporation resulting
from such reorganization, merger or consolidation or any parent or a
subsidiary thereof, and any Person beneficially owning, immediately prior
to such reorganization, merger or consolidation, directly or indirectly,
25% or more of the Outstanding Company Common Shares or Outstanding
Company Voting Securities, as the case may be) beneficially owns,
directly or indirectly, 25% or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation (or any parent thereof) or the
combined voting power of the then outstanding voting securities of such
corporation (or any parent thereof) entitled to vote generally in the
election of directors; and
(B) at least a majority of the members of the board of directors of the
corporation resulting from such reorganization, merger or consolidation
(or any parent thereof) were members of the Incumbent Board at the time
of the execution of the initial agreement or action of the Board
providing for such reorganization, merger or consolidation.
(2) The consummation of the sale, lease, exchange or other disposition of
all or substantially all of the assets of the Company to a corporation
with respect to which following such sale, lease, exchange or other
disposition more than 50% but not more than 60% of, respectively, the
then outstanding shares of common stock of such corporation (or any
parent thereof) and the combined voting power of the then outstanding
voting securities of such corporation (or any parent thereof) entitled to
vote generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Shares and Outstanding Company Voting
Securities immediately prior to such sale, lease, exchange or other
disposition in substantially the same proportions as their ownership
immediately prior to such sale, lease, exchange or other disposition of
such Outstanding Company Common Shares and Outstanding Company Voting
Shares, as the case may be, but only if:
(A) no Person (excluding the Company and any employee benefit plan (or
related trust) of the Company or a Subsidiary of such corporation or a
subsidiary thereof and any Person beneficially owning, immediately prior
to such sale, lease, exchange or other disposition, directly or
indirectly, 25% or more of the Outstanding Company Common Shares or
Outstanding Company Voting Securities, as the case may be) beneficially
owns, directly or indirectly, 25% or more of, respectively, the then
outstanding shares of common stock of such corporation (or any parent
thereof) and the combined voting power of the then outstanding voting
securities of such corporation (or any parent thereof) entitled to vote
generally in the election of directors; and
14
(B) at least a majority of the members of the board of directors of such
corporation (or any parent thereof) were members of the Incumbent Board
at the time of the execution of the initial agreement or action of the
Board providing for such sale, lease, exchange or other disposition of
assets of the Company. (b) If all or any portion of the payments or
benefits to which the Employee will be entitled under the Plan, either
alone or together with other payments or benefits which the Employee
receives or is entitled to receive directly or indirectly from the
Company or any of its subsidiaries or any other person or entity that
would be treated as a payor of parachute payments as hereinafter defined,
under any other plan, agreement or arrangement, would constitute a
"parachute payment" within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code") or any successor provision
thereto and regulations or other guidance thereunder (except that "2.95"
shall be used instead of "3" under Section 280G(b)(2)(A)(ii) of the Code
or any successor provision thereto), such payment or benefits provided to
the Employee under this Plan, and any other payments or benefits which
the Employee receives or is entitled to receive directly or indirectly
from the Company or any of its subsidiaries or any other person or entity
that would be treated as a payor of parachute payments as hereinafter
defined, under any other plan, agreement or arrangement which would
constitute a parachute payment, shall be reduced (but not below zero) as
described below to the extent necessary so that no portion thereof would
constitute such a parachute payment as previously defined (except that
"2.95" shall be used instead of "3" under Section 280G(b)(2)(A)(ii) of
the Code or any successor provision thereto). Whether payments or
benefits to the Employee would constitute a "parachute payment", whether
such payments or benefits are to be reduced pursuant to the first
sentence of this paragraph, and the extent to which they are to be so
reduced, will be determined by the firm serving, immediately prior to the
Major Transaction, as the Company's independent auditors, or if that firm
refuses to serve, by another qualified firm, whether or not serving as
independent auditors, designated by the Administration Committee (the
"Firm"). The Firm will be paid reasonable compensation by the Company for
such services. If the Firm concludes that its determination is
inconsistent with a final determination of a court or the Internal
Revenue Service, the Firm shall, based on such final determination,
redetermine whether the amount payable to the Employee should have been
reduced and, if applicable, the amount of any such reduction. If the Firm
determines that a lesser payment should have been made to the Employee,
then an amount equal to the amount of the excess of the earlier payment
over the redetermined amount (the "Excess Amount") will be deemed for all
purposes to be a loan to the Employee made on the date of the Employee's
receipt of such Excess Amount, which the Employee will have an obligation
to repay to the Company on the fifth business day after demand, together
with interest on such amount at the lowest applicable Federal rate (as
defined in Section 1274(d) of the Code or any successor provision
thereto), compounded semi-annually (the "Section 1274 Rate") from the
date of the Employee's receipt of such Excess Amount until the date of
such repayment (or such lesser rate (including zero) as may be designated
by the Firm such that the Excess Amount and such interest will not be
treated as a parachute payment as previously defined). If the Firm
determines that a greater payment should have been made to the Employee,
within fifteen business days of such determination, the Company will pay
to the Employee the amount of the deficiency, together with interest
thereon from the date such amount should have been paid to the date of
such payment, at the Section 1274 Rate (or such lesser rate (including
zero) as may be designated by the Firm such that the amount of such
deficiency and such interest will not be treated as a parachute payment
as previously defined). If a reduction is to be made pursuant to this
paragraph, the Firm will have the right to determine which payments and
benefits will be reduced, either those under this Plan alone or such
other payments or benefits which the Employee receives or is entitled to
receive directly or indirectly from the Company or any of its
subsidiaries or any other person or entity that would be treated as a
payor of parachute payments as previously defined, under any other plan,
agreement or arrangement.
15
3.7 EXCISE TAX.
(a) Section 3.7 shall apply in the event of a Change in Control, as
defined in Section 1.6 hereof.
(b) In the event that any payment or benefit received or to be received
by an Employee hereunder in connection with a Change in Control or
termination of such Employee's employment (such payments and benefits,
excluding Gross-Up Payment (as hereinafter defined), being hereinafter
referred to collectively as the "Payments"), will be subject to the
excise tax (the "Excise Tax") referred to in Section 4999 of the Code,
then (i) in the case of an Employee who is classified in Band 70 (or its
equivalent) or above immediately prior to such Change in Control (a "Tier
1 Employee"), the Company shall pay to such Tier 1 Employee, within five
days after receipt by such Tier 1 Employee of the written statement
referred to in paragraph (d) below, an additional amount (the "Gross-Up
Payment") such that the net amount retained by such Tier 1 Employee,
after deduction of any Excise Tax on the Payments and any federal, state
and local income and employment taxes and Excise Tax upon the Gross-Up
Payment, shall be equal to the Payments, and (ii) in the case of a Tier 1
Employee (in the event clause (i) above does not apply) and in the case
of any other Employee, the Payments shall be reduced to the extent
necessary so that no portion of the Payments is subject to the Excise Tax
but only if (A) the net amount of all Total Payments (as hereinafter
defined), as so reduced (and after subtracting the net amount of federal,
state and local income and employment taxes on such reduced Total
Payments), is greater than or equal to (B) the net amount of such Total
Payments without any such reduction (but after subtracting the net amount
of federal, state and local income and employment taxes on such Total
Payments and the amount of Excise Tax to which an Employee would be
subject in respect of such unreduced Total Payments); provided, however,
that the Employee may elect in writing to have other components of his or
her Total Payments reduced prior to any reduction in the Payments
hereunder.
(c) For purposes of determining whether the Payments will be subject to
the Excise Tax, the amount of such Excise Tax and whether any Payments
are to be reduced hereunder: (i) all payments and benefits received or to
be received by an Employee in connection with such Change in Control or
the termination of such Employee's employment, whether pursuant to the
terms of this Plan or any other plan, arrangement or agreement with the
Company, any Person (as such term is defined in Section 1.6) whose
actions result in such Change in Control or any Person affiliated with
the Company or such Person (all such payments and benefits, excluding the
Gross-Up Payment and any similar gross-up payment to which a Tier 1
Employee may be entitled under any such other plan, arrangement or
agreement, being hereinafter referred to as the "Total Payments"), shall
be treated as "parachute payments" (within the meaning of section
280G(b)(2) of the Code) unless, in the opinion of the accounting firm
which was, immediately prior to the Change in Control, the Company's
independent auditor, or if that firm refuses to serve, by another
qualified firm, whether or not serving as independent auditors,
designated by the Administration Committee (the "Auditor"), such payments
or benefits (in whole or in part) do not constitute parachute payments,
including by reason of section 280G(b)(2)(A) or section 280G(b)(4)(A) of
the Code; (ii) no portion of the Total Payments the receipt or enjoyment
of which the Employee shall have waived at such time and in such manner
as not to constitute a "payment" within the meaning of section 280G(b) of
the Code shall be taken into account; (iii) all "excess parachute
payments" within the meaning of section 280G(b)(l) of the Code shall be
treated as subject to the Excise Tax unless, in the opinion of the
Auditor, such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered (within the
meaning of section 280G(b)(4)(B) of the Code) in excess of the Base
Amount (within the meaning of section 280G(b)(3) of the Code) allocable
to such reasonable compensation, or are otherwise not subject to the
Excise Tax; and (iv) the value of any noncash benefits or any deferred
payment or benefit shall be determined by the Auditor in accordance with
the principles of sections 280G(d)(3) and (4) of the Code and regulations
or other guidance thereunder. For purposes of determining the amount of
the Gross-Up Payment in respect of a Tier 1 Employee and whether any
Payments in respect of a Employee (other than a Tier 1 Employee) shall be
reduced, the Employee shall be deemed to pay federal income tax at the
highest marginal rate of federal income taxation (and state and local
income taxes at the highest marginal rate of taxation in the state and
locality of such Employee's residence, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state
and local taxes) in the calendar year in which the Gross-Up Payment is to
be made (in the case of a Tier 1 Employee) or in which the Payments are
made (in the case of an Employee other than a Tier 1 Employee). The
Auditor will be paid reasonable compensation by the Company for its
services.
16
(d) In the event that the Excise Tax is finally determined to be less
than the amount taken into account hereunder in calculating the Gross-Up
Payment, then an amount equal to the amount of the excess of the earlier
payment over the redetermined amount (the "Excess Amount") will be deemed
for all purposes to be a loan to the Tier 1 Employee made on the date of
the Tier 1 Employee's receipt of such Excess Amount, which the Tier 1
Employee will have an obligation to repay to the Company on the fifth
business day after demand, together with interest on such amount at the
lowest applicable Federal rate (as defined in Section 1274(d) of the Code
or any successor provision thereto), compounded semi-annually (the
"Section 1274 Rate") from the date of the Tier 1 Employee's receipt of
such Excess Amount until the date of such repayment (or such lesser rate
(including zero) as may be designated by the Auditor such that the Excess
Amount and such interest will not be treated as a parachute payment as
previously defined). In the event that the Excise Tax is finally
determined to exceed the amount taken into account hereunder in
calculating the Gross-Up Payment (including by reason of any payment the
existence or amount of which cannot be determined at the time of the
Gross-Up Payment), within five business days of such determination, the
Company will pay to the Tier 1 Employee an additional amount, together
with interest thereon from the date such additional amount should have
been paid to the date of such payment, at the Section 1274 Rate (or such
lesser rate (including zero) as may be designated by the Auditor such
that the amount of such deficiency and such interest will not be treated
as a parachute payment as previously defined). The Tier 1 Employee and
the Company shall each reasonably cooperate with the other in connection
with any administrative or judicial proceedings concerning the amount of
any Gross-Up Payment.
(e) As soon as practicable following a Change in Control, the Company
shall provide to each Tier 1 Employee and to each other Employee with
respect to whom it is proposed that Payments be reduced, a written
statement setting forth the manner in which the Total Payments in respect
of such Tier 1 Employee or other Employee were calculated and the basis
for such calculations, including, without limitation, any opinions or
other advice the Company has received from the Firm or other advisors or
consultants (and any such opinions or advice which are in writing shall
be attached to the statement).
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ARTICLE FOUR
METHOD OF PAYMENT
4.1 PAYMENT. A severance benefit under the Plan may be payable in biweekly or
other installments at the sole discretion of the Employing Company;
provided, however, that in the event the Employee has a Defined
Termination, the severance benefit under the Plan will be paid within
fifteen days after the date of such Change in Control. Notwithstanding
anything in this Plan to the contrary, if the Employee's employment
terminates within two years following a Change in Control and if the
Employee receives lump sum severance, the Employee shall continue to be
eligible to receive benefits under the Company's medical and dental plans
for the applicable period as if the Employee were paid severance in
installments, such benefits to be substantially identical to the benefits
provided immediately prior to the Change in Control.
4.2 INACTIVE EMPLOYMENT STATUS. During the Separation Period (where severance
benefits are paid in biweekly or other installments) the Employee
receiving such payments will remain in an inactive employment status
until receipt of such payments is completed, at which time employment
will be terminated. During the Separation Period, certain other employee
benefits may be continued, payment for which shall be deducted from such
severance payments in accordance with the Employee's previously elected
benefit coverage. During the Separation Period, the Company reserves the
right to continue other programs such as Long Term Incentive Awards and
Perquisites in accordance with its policies, which may be changed or
terminated from time to time. Nothing in this paragraph shall create a
contract to provide such benefits.
4.3 LIMITATIONS ON SEVERANCE PAYMENTS. In no event shall the period of time
during which an Employee receives severance payments exceed 104 weeks.
Nothing in this Section shall affect the total number of weeks payable
under the Plan pursuant to Section 3.1, including, but not limited to,
the 104-week maximum payment.
4.4 DEATH. In the event an Employee dies before full receipt of severance
benefits payable under the Plan, the remaining severance benefits will be
paid to the legal representative of such Employee's estate in a lump sum
as soon as practicable after receipt of notice of such death and evidence
satisfactory to the Company of the payment or provision for the payment
of any estate, transfer, inheritance or death taxes which may be payable
with respect thereto.
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ARTICLE FIVE
ADMINISTRATION OF THE PLAN
5.1 POWERS OF THE EMPLOYING COMPANY. The Employing Company shall have such
powers, authorities and discretion as are necessary or appropriate in
order to carry out its duties under the Plan, including, but not limited
to, the power:
5.1.1 To obtain such information as it shall deem necessary or
appropriate in order to carry out its duties under the Plan;
5.1.2 To make determinations with respect to the grounds for termination
of employment of any Employee; and
5.1.3 To establish and maintain necessary records.
5.2 EMPLOYING COMPANY AUTHORITY. Nothing contained in the Plan shall be
deemed to qualify, limit or alter in any manner the Employing Company's
sole and complete authority and discretion to establish, regulate,
determine or modify at any time, the terms and conditions of employment,
including, but not limited to, levels of employment, hours of work, the
extent of hiring and employment termination, when and where work shall be
done, marketing of its products, or any other matter related to the
conduct of its business or the manner in which its business is to be
maintained or carried on, in the same manner and to the same extent as if
the Plan were not in existence.
5.3 ADMINISTRATION COMMITTEE DUTIES AND POWERS. The Administration Committee
shall be responsible for the general administration and interpretation of
the Plan and the proper execution of its provisions and shall have full
discretion to carry out its duties. The Administration Committee shall be
the "Administrator" of the Plan and shall be, in its capacity as
Administrator, a "Named Fiduciary," as such terms are defined or used in
ERISA. For the purposes of carrying out its duties as Administrator, the
Administration Committee may, in its sole discretion, allocate its
responsibilities under the Plan among its members, and may, in its sole
discretion, designate persons other than members of the Administration
Committee to carry out such of its responsibilities under the Plan as it
may deem fit. In addition to the powers of the Administration Committee
specified elsewhere in the Plan, the Administration Committee shall have
all discretionary powers necessary to discharge its duties under the
Plan, including, but not limited to, the following discretionary powers
and duties:
5.3.1 To interpret or construe the Plan, and resolve ambiguities,
inconsistencies and omissions;
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5.3.2 To make and enforce such rules and regulations and prescribe the
use of such forms as it deems necessary or appropriate for the
efficient administration of the Plan; and
5.3.3 To decide all questions on appeal concerning the Plan and the
eligibility of any person to participate in the Plan.
5.4 DETERMINATIONS. The determination of the Administration Committee as to
any question involving the general administration and interpretation or
construction of the Plan shall be within its sole discretion and shall be
final, conclusive and binding on all persons, except as otherwise
provided herein or by law.
5.5 CLAIMS REVIEW PROCEDURE. Consistent with the requirements of ERISA and
the regulations thereunder as promulgated by the Secretary of Labor from
time to time, the following claims review procedure shall be followed
with respect to the denial of severance benefits to any Employee:
5.5.1 Within thirty (30) days from the date of an Employee's termination
of active Employment, the Employing Company shall furnish such
Employee either an agreement offering severance benefits under the
Plan or notice of such Employee's ineligibility for or denial of
severance benefits, either in whole or in part. Such notice from
the Employing Company will be in writing and sent to the Employee
or the legal representatives of his estate stating the reasons for
such ineligibility or denial and, if applicable, a description of
additional information that might cause a reconsideration by the
Administration Committee or its delegate of the decision and an
explanation of the Plan's claims review procedure. In the event
such notice is not furnished within thirty (30) days, any claim
for severance benefits shall be deemed denied and the Employee
shall be permitted to proceed to Section 5.5.2 below.
5.5.2 Within sixty (60) days after receiving notice of such denial or
ineligibility or within ninety (90) days after employment
termination if no notice is received, the Employee, the legal
representatives of his estate or a duly authorized representative
may then submit to the Administration Committee a written request
for a review of such decision of denial.
5.5.3 The Administration Committee will review the claim and within
sixty (60) days (or one hundred twenty (120) days in special
circumstances) provide a written response to the appeal setting
forth specific reasons for such decision. In the event the
decision on review is not furnished within such time period, the
claim shall be deemed denied.
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ARTICLE SIX
ADOPTING COMPANIES AND PLAN MERGERS
6.1 ADOPTING COMPANIES. Any corporation which succeeds to the business and
assets of the Company or any part of its operations, may by appropriate
resolution adopt the Plan and shall thereupon succeed to such rights and
assume such obligations hereunder as the Company and said corporation
shall have agreed upon in writing. Any corporation which succeeds to the
business of any Employing Company other than the Company, or any part of
the operations of such Employing Company, may by appropriate resolution
adopt the Plan and shall thereupon succeed to such rights and assume such
obligations hereunder as such Employing Company and said corporation
shall have agreed upon in writing; provided, however, that such adoption
and the terms thereof agreed upon in such writing have been approved by
the Company.
ARTICLE SEVEN
AMENDMENT AND TERMINATION
7.1 RIGHT TO AMEND OR TERMINATE. The Company reserves the right, by action of
the Board of Directors or the CBC, to amend or terminate this Plan in
whole or in part at any time and from time to time, and any amendment or
effective date of termination may be given retroactive effect. The
foregoing sentence to the contrary notwithstanding, for a period of two
years and one day after the date of an occurrence of a Major Transaction
or a Change in Control, neither the Board of Directors nor the Committee
may terminate this Plan or amend this Plan in a manner that is
detrimental to the rights of any participant of the Plan without his or
her written consent.
7.2 TERMINATION BY AN EMPLOYING COMPANY. Any Employing Company other than the
Company may withdraw from participation in the Plan at any time by
delivering to the Administration Committee written notification to that
effect signed by such Employing Company's chief executive officer or his
delegate. Withdrawal by any Employing Company pursuant to this paragraph
or complete discontinuance of severance benefits under the Plan by any
Employing Company other than the Company, shall constitute termination of
the Plan with respect to such Employing Company. The foregoing sentence
to the contrary notwithstanding, neither the Board of Directors nor the
Committee may terminate this Plan or amend this Plan in a manner that is
detrimental to the rights of any participant of the Plan without his
written consent (i) with respect to the provisions of the Plan which
become applicable upon a Change in Control, and (ii) with respect to all
provisions of the Plan for a period of two years and one day after the
date of a Change in Control.
7.3 LIMITATION ON BENEFITS. In the event any Employing Company withdraws from
participation or the Company terminates the Plan as provided in this
Article Seven, no Employee shall be entitled to receive benefits
hereunder for Employment either before or after such action.
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ARTICLE EIGHT
FINANCIAL PROVISIONS
8.1 FUNDING. All severance benefits payable under the Plan shall be payable
and provided for solely from the general assets of the Employing Company
in accordance with the Plan, at the time such severance benefits are
payable, unless otherwise determined by the Employing Company. The
Employing Company shall not be required to establish any special or
separate fund or to make any other segregation of assets to assure the
payment of any severance benefits under the Plan.
ARTICLE NINE
LIABILITY AND INDEMNIFICATION
9.1 STANDARD OF CONDUCT. To the extent permitted by ERISA and other
applicable law, no member (which term, as used in this Article Nine,
shall include any employee of any Employing Company designated to carry
out any responsibility of the Administration Committee pursuant to
Section 5.3 above) of the Administration Committee shall be liable for
anything done or omitted to be done by him in connection with the Plan,
unless the member failed to act (1) in good faith and (2) for a purpose
which such member reasonably believed to be in accordance with the intent
of the Plan. The Company or Employing Company as applicable hereby
indemnifies each person made, or threatened to be made, a party to an
action or proceeding, whether civil or criminal, or against whom any
claim or demand is made, by reason of the fact that he, his testator or
intestate, was or is a member of the Administration Committee, against
judgments, fines, amounts paid in settlement and reasonable expenses
(including attorney's fees) actually and necessarily incurred as a result
of such action or proceeding, or any appeal therein, or as a result of
such claim or demand, if such member of the Administration Committee
acted in good faith for a purpose which he reasonably believed to be in
accordance with the intent of the Plan and, in criminal actions or
proceedings, in addition, had no reasonable cause to believe that his
conduct was unlawful.
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9.2 PRESUMPTION OF GOOD FAITH. The termination of any such civil or criminal
action or proceeding or the disposition of any such claim or demand, by
judgment, settlement, conviction or upon a plea of nolo contendere, or
its equivalent, shall not in itself create a presumption that any such
member of the Administration Committee did not act (1) in good faith and
(2) for a purpose which he reasonably believed to be in accordance with
the intent of the Plan.
9.3 SUCCESSFUL DEFENSE. A person who has been wholly successful, on the
merits or otherwise, in the defense of a civil or criminal action or
proceeding or claim or demand of the character described in Section 9.1
above shall be entitled to indemnification as authorized in such Section
9.1.
9.4 UNSUCCESSFUL DEFENSE. Except as provided in Section 9.3 above, any
indemnification under Sections 9.1 and 9.2 above, unless ordered by a
court of competent jurisdiction, shall be made by the Company only if
authorized in the specific case:
9.4.1 By the Board of Directors acting by a quorum consisting of
directors who are not parties to such action, proceeding, claim or
demand, upon a finding that the member of the Administration
Committee has met the standard of conduct set forth in Section 9.1
above; or
9.4.2 If a quorum under Section 9.4.1 above is not obtainable with due
diligence:
9.4.2.1 By the Board of Directors upon the opinion in writing of
independent legal counsel (who may be counsel to any
Employing Company) that indemnification is proper in the
circumstances because the standard of conduct set forth
in Section 9.1 above has been met by such member of the
Administration Committee; or
9.4.2.2 By the shareholders of the Company upon a finding that
the member of the Administration Committee has met the
standard of conduct set forth in such Section 9.1 above.
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9.5 ADVANCE PAYMENTS. Expenses incurred in defending a civil or criminal
action or proceeding or claim or demand may be paid by the Company or
Employing Company as applicable in advance of the final disposition of
such action or proceeding, claim or demand, if authorized in the manner
specified in Section 9.4 above, except that, in view of the obligation of
repayment set forth in Section 9.6 below, there need be no finding or
opinion that the required standard of conduct has been met.
9.6 REPAYMENT OF ADVANCE PAYMENTS. All expenses incurred in defending a civil
or criminal action or proceeding, claim or demand, which are advanced by
the Company or Employing Company as applicable under Section 9.5 above
shall be repaid in case the person receiving such advance is ultimately
found, under the procedures set forth in this Article Nine, not to be
entitled to indemnification or, where indemnification is granted, to the
extent the expenses so advanced by the Company exceed the indemnification
to which he is entitled.
9.7 RIGHT TO INDEMNIFICATION. Notwithstanding the failure of the Company or
Employing Company as applicable to provide indemnification in the manner
set forth in Section 9.4 or 9.5 above, and despite any contrary
resolution of the Board of Directors or of the shareholders in the
specific case, if the member of the Administration Committee has met the
standard of conduct set forth in Section 9.1 above, the person made or
threatened to be made a party to the action or proceeding or against whom
the claim or demand has been made, shall have the legal right to
indemnification from the Company or Employing Company as applicable as a
matter of contract by virtue of this Plan, it being the intention that
each such person shall have the right to enforce such right of
indemnification against the Company or Employing Company as applicable in
any court of competent jurisdiction.
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ARTICLE TEN
MISCELLANEOUS
10.1 NO RIGHT TO CONTINUED EMPLOYMENT. Nothing in the Plan shall be construed
as giving any Employee the right to be retained in the employ of any
Employing Company or any right to any payment whatsoever, except to the
extent of the severance benefits provided for by the Plan. Each Employing
Company expressly reserves the right to dismiss any Employee at any time
and for any reason without liability for the effect which such dismissal
might have upon him as a participant of the Plan.
10.2 CONSTRUCTION. This Plan shall be governed by and construed in accordance
with the substantive laws but not the choice of law rules of the state of
New York, except to the extent that such laws have been superseded by
federal law.
10.3 EXPENSES OF THE PLAN. The expenses of establishment and administration of
the Plan shall be paid by the Employing Companies. Any expenses paid by
the Company pursuant to this Section 10.3 and indemnification under
Article Nine shall be subject to reimbursement by the other Employing
Companies of their proportionate shares of such expenses and
indemnification, as determined by the Administration Committee in its
sole discretion.
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