This exhibit
amends and restates the agreement between KBW, Inc. and the
executive that was included as an exhibit to KBW Inc.’s
previously filed periodic reports with the Securities and Exchange
Commission. The agreement was amended and restated as set forth
below in order to comply with certain technical requirements of
Section 409A of the Internal Revenue Code.
AMENDED AND RESTATED CHANGE OF
CONTROL AGREEMENT
AGREEMENT,
dated as of the 31 st day of December, 2008 (this
“Agreement”), by and between KBW, Inc., a Delaware
corporation (the “Company”), and Mitchell B. Kleinman,
Executive Vice President and General Counsel (the
“Executive”).
WHEREAS,
the Board of Directors of the Company (the “Board”),
has determined that it is in the best interests of the Company and
its stockholders to assure that the Company will have the continued
dedication of the Executive, notwithstanding the possibility,
threat or occurrence of a Change of Control (as defined herein).
The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change
of Control and to encourage the Executive’s full attention
and dedication to the Company in the event of any threatened or
pending Change of Control, and to provide the Executive with
compensation and benefits arrangements upon a Change of Control
that ensure that the compensation and benefits expectations of the
Executive will be satisfied and that provide the Executive with
compensation and benefits arrangements that are competitive with
those of other corporations. Therefore, in order to accomplish
these objectives, the Board has caused the Company to enter into
this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED
AS FOLLOWS:
Section 1. Certain Definitions . (a)
“Effective Date” means the first date during the Change
of Control Period (as defined herein) on which a Change of Control
occurs. Notwithstanding anything in this Agreement to the contrary,
if a Change of Control occurs and if the Executive’s
employment with the Company is terminated prior to the date on
which the Change of Control occurs, and if it is reasonably
demonstrated by the Executive that such termination of employment
(1) was at the request of a third party that has taken steps
reasonably calculated to effect a Change of Control or
(2) otherwise arose in connection with or anticipation of a
Change of Control, then “Effective Date” means the date
immediately prior to the date of such termination of
employment.
(b)
“Change of Control Period” means the period commencing
on the date hereof and ending on the third anniversary of the date
hereof; provided , however , that, commencing on the
date one year after the date hereof, and on each annual anniversary
of such date (such date and each annual anniversary thereof, the
“Renewal Date”), unless previously terminated, the
Change of Control Period shall be automatically extended so as to
terminate three years from such Renewal Date, unless, at least
60 days prior to the Renewal Date, the Company shall give
notice to the Executive that the Change of Control Period shall not
be so extended.
The Change of
Control Period shall terminate upon termination of the
Executive’s employment with the Company if such termination
of employment occurs prior to the date on which a Change of Control
occurs, unless the Effective Date precedes or coincides with such
termination pursuant to clause (1) or (2) of
Section 1(a)
(c)
“Affiliated Company” means any company controlled by,
controlling or under common control with the Company.
(d)
“Change of Control” means:
(1) Any
individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”)) (a
“Person”) becomes the beneficial owner (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or more of either (A) the then-outstanding shares of
common stock of the Company (the “Outstanding Company Common
Stock”) or (B) 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, for purposes of this Section 1(d), the following
acquisitions shall not constitute a Change of Control: (i) any
acquisition directly from the Company, (ii) any acquisition by
the Company, (iii) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or
any Affiliated Company or (iv) any acquisition by any
corporation pursuant to a transaction that complies with
Sections 1(d)(3)(A), 1(d)(3)(B) and 1(d)(3)(C);
(2) Any
time at which 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 stockholders, 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
an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board;
(3) Consummation
of a reorganization, merger, statutory share exchange or
consolidation or similar transaction involving the Company or any
of its subsidiaries, a sale or other disposition of all or
substantially all of the assets of the Company, or the acquisition
of assets or stock of another entity by the Company or any of its
subsidiaries (each, a “Business Combination”), in each
case unless, following such Business Combination, (A) all or
substantially all of the individuals and entities that were the
beneficial owners of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more
than 50% of the then-outstanding shares of common stock (or, for a
non-corporate entity, equivalent securities) and the combined
voting power of the then-outstanding voting securities entitled to
vote generally in the election of directors (or, for a
non-corporate entity, equivalent governing body), as the case may
be, of the entity resulting from such Business Combination
(including, without limitation, an entity that, as a result of such
transaction, owns the Company or all or substantially all of
the
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Company’s
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership immediately
prior to such Business Combination of the Outstanding Company
Common Stock and the Outstanding Company Voting Securities, as the
case may be, (B) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit
plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the
then-outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting
power of the then-outstanding voting securities of such
corporation, except to the extent that such ownership existed prior
to the Business Combination, and (C) at least a majority of
the members of the board of directors (or, for a non-corporate
entity, equivalent governing body) of the entity resulting from
such Business Combination were members of the Incumbent Board at
the time of the execution of the initial agreement or of the action
of the Board providing for such Business Combination; or
(4) Approval
by the stockholders of the Company of a complete liquidation or
dissolution of the Company.
Section 2. Employment Period . The Company
hereby agrees to continue the Executive in its employ, subject to
the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on the third
anniversary of the Effective Date (the “Employment
Period”). The Employment Period shall terminate upon the
Executive’s termination of employment for any
reason.
Section 3. Terms of Employment . (a)
Position and Duties . (1) During the Employment
Period, (A) the Executive’s position (including status,
offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and
assigned at any time during the 120-day period immediately
preceding the Effective Date and (B) the Executive’s
services shall be performed at the headquarters of the Company
located in the City of New York or at any other such headquarters
location less than 25 miles from the office where the Executive was
employed immediately preceding the Effective Date.
(2) During
the Employment Period, and excluding any periods of vacation and
sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business
hours to the business and affairs of the Company and, to the extent
necessary to discharge the responsibilities assigned to the
Executive hereunder, to use the Executive’s reasonable best
efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period, it shall not be a
violation of this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or committees,
(B) deliver lectures, fulfill speaking engagements or teach at
educational institutions and (C) manage personal investments,
so long as such activities do not significantly interfere with the
performance of the Executive’s responsibilities as an
employee of the Company in accordance with this Agreement. It is
expressly understood and agreed that, to the extent that any such
activities have been conducted by the Executive prior to the
Effective Date, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto)
subsequent to the Effective Date shall not thereafter be deemed to
interfere with the performance of the Executive’s
responsibilities to the Company.
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(b)
Compensation . (1) Base Salary . During
the Employment Period, the Executive shall receive an annual base
salary (the “Annual Base Salary”) at an annual rate at
least equal to 12 times the highest monthly base salary paid or
payable, including any base salary that has been earned but
deferred, to the Executive by the Company and the Affiliated
Companies in respect of the 12-month period immediately preceding
the month in which the Effective Date occurs. The Annual Base
Salary shall be paid at such intervals as the Company pays
executive salaries generally. During the Employment Period, the
Annual Base Salary shall be reviewed at least annually, beginning
no more than 12 months after the last salary increase awarded
to the Executive prior to the Effective Date. Any increase in the
Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. The Annual Base
Salary shall not be reduced after any such increase and the term
“Annual Base Salary” shall refer to the Annual Base
Salary as so increased.
(2)
Annual Bonus . In addition to the Annual Base Salary,
the Executive shall be awarded, for each fiscal year ending during
the Employment Period, an annual bonus (the “Annual
Bonus”) in cash at least equal to the Executive’s
highest bonus earned under the Company’s Annual Incentive
Plan, as in effect from time to time, or any comparable bonus under
any predecessor or successor plan, for the last three full fiscal
years prior to the Effective Date (or for such lesser number of
full fiscal years prior to the Effective Date for which the
Executive was eligible to earn such a bonus, and annualized in the
case of any pro rata bonus earned for a partial fiscal year) (the
“Recent Annual Bonus”). (If the Executive has not been
eligible to earn such a bonus for any period prior to the Effective
Date, the “Recent Annual Bonus” shall mean the
Executive’s target annual bonus for the year in which the
Effective Date occurs.) Each such Annual Bonus shall be paid no
later than two and a half months after the end of the fiscal year
for which the Annual Bonus is awarded, unless the Executive shall
elect to defer the receipt of such Annual Bonus pursuant to an
arrangement that meets the requirements of Section 409A of the
Internal Revenue Code of 1986, as amended (the
“Code”).
(3)
Incentive, Savings and Retirement Plans . During the
Employment Period, the Executive shall be entitled to participate
in all cash incentive, equity incentive, savings and retirement
plans, practices, policies, and programs applicable generally to
other peer executives of the Company and the Affiliated Companies,
but in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with
respect to both regular and special incentive opportunities, to the
extent, if any, that such distinction is applicable), savings
opportunities and retirement benefit opportunities, in each case,
less favorable, in the aggregate, than the most favorable of those
provided by the Company and the Affiliated Companies for the
Executive under such plans, practices, policies and programs as in
effect at any time during the 120-day period immediately preceding
the Effective Date or, if more favorable to the Executive, those
provided generally at any time after the Effective Date to other
peer executives of the Company and the Affiliated
Companies.
(4)
Welfare Benefit Plans . During the Employment Period,
the Executive and/or the Executive’s family, as the case may
be, shall be eligible for participation in and shall receive all
benefits under welfare benefit plans, practices, policies and
programs provided by the Company and the Affiliated Companies
(including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel
accident insurance plans and programs) to the extent applicable
generally to other peer executives of the Company and
the
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Affiliated
Companies, but in no event shall such plans, practices, policies
and programs provide the Executive with benefits that are less
favorable, in the aggregate, than the most favorable of such plans,
practices, policies and programs in effect for the Executive at any
time during the 120-day period immediately preceding the Effective
Date or, if more favorable to the Executive, those provided
generally at any time after the Effective Date to other peer
executives of the Company and the Affiliated Companies.
(5)
Expenses . During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for all
reasonable expenses incurred by the Executive in accordance with
the Company’s policies.
(6)
Office and Support Staff . During the Employment
Period, the Executive shall be entitled to an office or offices of
a size and with furnishings and other appointments and with
secretarial and support staff, no less favorable than that provided
similarly situated executives of the Company.
(7)
Vacation . During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with the
most favorable plans, policies, programs and practices of the
Company and the Affiliated Companies as in effect for the Executive
at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer
executives of the Company and the Affiliated Companies.
(8)
Indemnification and D&O Insurance . During the
Employment Period and for seven (7) years following the Date of
Termination (as defined herein), the Company shall provide the
Executive with indemnification and directors’ and
officers’ liability insurance coverage as in effect at any
time during the 120-day period immediately preceding the Effective
Date, or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer
executives, or directors, of the Company and the Affiliated
Companies.
Section 4. Termination of Employment . (a)
Death or Disability . The Executive’s
employment shall terminate automatically if the Executive dies
during the Employment Period. If the Company determines in good
faith that the Disability (as defined herein) of the Executive has
occurred during the Employment Period (pursuant to the definition
of “Disability”), it may give to the Executive written
notice in accordance with Section 11(b) of its intention to
terminate the Executive’s employment. In such event, the
Executive’s employment with the Company shall terminate
effective on the 30th day after receipt of such notice by the
Executive (the “Disability Effective Date”),
provided that, within the 30 days after such receipt,
the Executive shall not have returned to full-time performance of
the Executive’s duties. “Disability” means the
absence of the Executive from the Executive’s duties with the
Company on a full-time basis for 180 consecutive business days as a
result of incapacity due to mental or physical illness that is
determined to be total and permanent by a physician selected by the
Company or its insurers and acceptable to the Executive or the
Executive’s legal representative. The foregoing to the
contrary notwithstanding, if the Executive’s employment would
otherwise be considered to have terminated by reason of the
Executive’s death or Disability, but circumstances described
in clause (1), (2), (3), (4) or (5) of Section 4(c)
(definition of Good Reason) occurred on or before the date of the
Executive’s death or the
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Executive’s Disability Effective Date, as
the case may be, the Executive’s employment with the Company
shall be deemed to have been terminated by the Executive for Good
Reason.
(b)
Cause . The Company may terminate the
Executive’s employment during the Employment Period with or
without Cause. “Cause” means:
(1) the willful
and continued failure substantially to perform the
Executive’s duties (as contemplated by
Section 3(a)(1)(A)) with the Company or any Affiliated Company
(other than as a result of physical or mental illness or injury or
following the Executive’s delivery of a Notice of Termination
for Good Reason), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief
Executive Officer of the Company that specifically identifies the
manner in which the Board or the Chief Executive Officer of the
Company believes that the Executive has not substantially performed
the Executive’s duties;
(2) illegal
conduct or gross misconduct by the Executive, in either case that
is willful and results in material and demonstrable damage to the
business or reputation of the Company; or
(3) conviction of,
or plea of guilty or nolo contendere to, a charge of commission of
a felony.
For purposes of
this Section 4(b), no act, or failure to act, on the part of
the Executive shall be considered “willful” unless it
is done, or omitted to be done, by the Executive in bad faith or
without reasonable belief that the Executive’s action or
omission was in the best interests of the Company. Any act, or
failure to act, based upon authority (A) given pursuant to a
resolution duly adopted by the Board, or if the Company is not the
ultimate parent corporation of the Affiliated Companies and is not
publicly-traded, the board of directors of the ultimate parent of
the Company (the “Applicable Board”), (B) upon the
instructions of the Chief Executive Officer of the Company or a
senior officer of the Company or (C) based upon the advice of
counsel for the Company, shall be conclusively presumed to be done,
or omitted to be done, by the Executive in good faith and in the
best interests of the Company. The cessation of employment of the
Executive shall not be deemed to be for Cause unless and until
(I) the Executive has been given notice in reasonable detail
by the Company of the existence of the circumstances claimed to
constitute Cause within ninety (90) days following the initial
existence of such circumstances, and given an opportunity of thirty
(30) days to cure, and such circumstances remain uncured at
the end of such thirty (30)-day period, and (II) there shall
have been delivered to the Executive a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters of
the entire membership of the Applicable Board (excluding the
Executive, if the Executive is a member of the Applicable Board) at
a meeting of the Applicable Board called and held for such purpose
(after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel for the
Executive, to be heard before the Applicable Board), finding that,
in the good faith opinion of the board, the Executive is guilty of
the conduct described in Section 4(b)(1), (2) or (3), and
specifying the particulars thereof in detail.
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(c)
Good Reason . The Executive’s employment may be
terminated by the Executive for Good Reason or by the Executive
voluntarily without Good Reason. “Good Reason”
means:
(1) the
assignment to the Executive of any duties materially inconsistent
in any respect with the Executive’s position (including
status, offices, titles and reporting requirements), authority,
duties or responsibilities as contemplated by Section 3(a), or
any other material diminution in such position, authority, duties
or responsibilities (whether or not occurring solely as a result of
the Company’s ceasing to be a publicly traded
entity);
(2) any
material failure by the Company to comply with any of the
provisions of Section 3(b);
(3) the
Company’s requiring the Executive (i) to be based at any
office or location other than as provided in
Section 3(a)(1)(B), (ii) to be based at a location other
than the principal executive offices of the Company if the
Executive was employed at such location immediately preceding the
Effective Date, or (iii) to travel on Company business to a
substantially greater extent than required immediately prior to the
Effective Date;
(4) any
purported termination by the Company of the Executive’s
employment otherwise than as expressly permitted by this Agreement;
or
(5) any
failure by the Company to comply with and satisfy
Section 10(c).
The
Executive’s employment shall not be deemed to have been
terminated by the Executive for Good Reason unless he has provided
the Company with written notice of the existence of the
circumstances claimed to constitute Good Reason within ninety
(90) days following the initial existence of such
circumstances, and the Company has not remedied such circumstances
within thirty (30) days of its receipt of such notice from the
Executive. The Executive’s mental or physical incapacity
following the occurrence of an event described above in clauses
(1) through (5) shall not affect the Executive’s
ability to terminate employment for Good Reason.
(d)
Notice of Termination . Any termination by the
Company for Cause, or by the Executive for Good Reason, shall be
communicated by Notice of Termination to the other party hereto
given in accordance with Section 11(b). “Notice of
Termination” means a written notice that (1) indicates the
specific termination provision in this Agreement relied upon,
(2) to the extent applicable, sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of the Executive’s employment under the provision
so indicated, and (3) if the Date of Termination is other than
the date of receipt of such notice, specifies the Date of
Termination (which Date of Termination shall be not more than
30 days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of Termination
any fact or circumstance that contributes to a showing of Good
Reason or Cause shall not waive any right of the Executive or the
Company, respectively, hereunder or preclude the Executive or the
Company, respectively, from asserting such fact or circumstance in
enforcing the Executive’s or the Company’s respective
rights hereunder.
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(e)
Date of Termination . “Date of
Termination” means (1) if the Executive’s
employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of
Termination or any later date specified in the Notice of
Termination, (which date shall not be more than 30 days after
the giving of such notice), as the case may be, (2) if the
Executive’s employment is terminated by the Company other
than for Cause or Disability, the date on which the Company
notifies the Executive of such termination, (3) if the
Executive resigns without Good Reason, the date on which the
Executive notifies the Company of such termination, and (4) if
the Executive’s employment is terminated by reason of death
or Disability, the date of death of the Executive or the Disability
Effective Date, as the case may be. Notwithstanding the foregoing,
in no event shall the Date of Termination occur until the Executive
experiences a “separation from service” within the
meaning of Section 409A of the Code, and the date on which
such separation from service takes place shall be the “Date
of Termination.”
(f)
Compensation During Dispute . With respect to any
termination of the Executive’s employment during the
Employment Period, if within fifteen (15) days after any
Notice of Termination is given, or, if later, prior to the Date of
Termination, the party receiving such Notice of Termination
notifies the other party that a dispute exists concerning the
termination, the Company shall continue to pay the Executive the
full compensation in effect when the notice giving rise to the
dispute was given (including, but not limited to, Annual Base
Salary) and continue the Executive as a participant in all
compensation, benefit and insurance plans in which the Executive
was participating when the notice giving rise to the dispute was
given, until the earlier of (i) the date on which the
Employment Period ends or (ii) the date on which the dispute
is finally resolved, either by mutual written agreement of the
parties or by a final judgment, order or decree of an arbitrator or
a court of competent jurisdiction (which is not appealable or with
respect to which the time for appeal therefrom has expired and no
appeal has been perfected); provided , however , that
this Section 4(f) shall be applicable in the event of a notice of
dispute given by the Executive only if such notice is given in good
faith and the Executive pursues the resolution of such dispute with
reasonable diligence. Amounts paid under this Section 4(f) are in
addition to other amounts due under this Agreement and shall not,
for example, be offset against or reduce any amounts otherwise due
under Section 5(a) hereof.
Section 5. Obligations of the Company upon
Termination . (a) Good Reason; Other Than for Cause, Death
or Disability . If, during the Employment Period, the
Company terminates the Executive’s employment other than for
Cause, death or Disability or the Executive terminates employment
for Good Reason:
(1) the
Company shall pay to the Executive, in a lump sum in cash within
30 days after the Date of Termination, the aggregate of the
following amounts:
(A) the sum of
(i) the Executive’s Annual Base Salary and any accrued
vacation pay through the Date of Termination, (ii) the
Executive’s Annual Bonus for the fiscal year immediately
preceding the fiscal year in which the Date of Termination occurs
if such bonus has not been paid as of the Date of Termination, and
(iii) the Executive’s business expenses that have not
been reimbursed by the Company as of the Date of Termination that
were incurred by the Executive prior to the Date of Termination in
accordance with the applicable Company policy (the
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sum of the
amounts described in subclauses (i) through (iii), the
“Accrued Obligations”); provided , that
notwithstanding the foregoing, if the Executive has made an
irrevocable election under any deferred compensation arrangement
subject to Section 409A of the Code to defer any portion of the
Annual Base Salary or Annual Bonus described in clause (i) or
clause (iii) above, then for all purposes of this Section 5
(including, without limitation, Sections 5(b) through 5(d)), such
deferral election, and the terms of the applicable arrangement
shall apply to the same portion of the amount described in such
clause (i) or clause (iii), and such portion shall not be
considered as part of the “Accrued Obligations” but
shall instead be an “Other Benefit” (as defined
below);
(B) the product of
(x) the higher of (I) the Recent Annual Bonus and
(II) the Annual Bonus paid or payable, including any bonus or
portion thereof that has been earned but deferred (and annualized
for any fiscal year consisting of less than 12 full months or
during which the Executive was employed for less than 12 full
months), for the most recently completed fiscal year during the
Employment Period, if any (such higher amount, the “Highest
Annual Bonus”) and (y) a fraction, the numerator of
which is the number of days in the current fiscal year through the
Date of Termination and the denominator of which is 365;
and
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