Exhibit 10.16
CHANGE IN CONTROL AGREEMENT
AGREEMENT,
dated as of the first day of February, 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
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
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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.
(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
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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 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.
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(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 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:
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(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.
(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
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(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.
(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
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death or
Disability, the date of death of the Executive or the Disability
Effective Date, as the case may be.
(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 sum of the amounts described in
subclauses (i) through (iii), the “Accrued
Obligations”);
(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)&nbs
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