HEI Exhibit 10.11
CHANGE IN CONTROL
AGREEMENT
THIS AGREEMENT, dated as of
[ ]
(the “Effective Date”), is made by and between Hawaiian
Electric Industries, Inc., a Hawaii corporation (the
“Company”), and
[ ]
(the “Executive”).
WHEREAS, the Company considers it
essential to the best interests of its stockholders to foster the
continued employment of key management personnel; and
WHEREAS, the Board recognizes that,
as is the case with many publicly held corporations, the
possibility of a Change in Control exists and that such
possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of
management personnel to the detriment of the Company and its
stockholders; and
WHEREAS, the Board has determined
that appropriate steps should be taken to reinforce and encourage
the continued attention and dedication of members of the
Company’s management, including the Executive, to their
assigned duties without distraction in the face of potentially
disturbing circumstances arising from the possibility of a Change
in Control; [and
WHEREAS, the Executive currently is
party to a Change-in-Control Agreement (the “Existing CIC
Agreement”) with the Company; and
WHEREAS, the Company and the
Executive intend for the Existing CIC Agreement to cease to be of
any force or effect as of the date hereof;]
NOW, THEREFORE, in consideration of
the premises and the mutual covenants herein contained, the Company
and the Executive hereby agree as follows:
1. Defined Terms . The
definitions of capitalized terms used in this Agreement are
provided in the last Section hereof.
2. Term of Agreement . The
Term of this Agreement shall commence on the Effective Date and
shall continue in effect through the second anniversary of the
Effective Date; provided , however , that commencing
on the first anniversary of the Effective Date, and on each
anniversary of the Effective Date thereafter, the Term shall
automatically be extended for one additional year unless, not later
than 90 days prior to each such date, the Company or the Executive
shall have given notice not to extend the Term; and provided
, further , that if a Change in Control shall have occurred
during the Term, the Term shall expire no earlier than 24 months
beyond the date on which such Change in Control occurred.
[Effective as of the Effective Date, the Existing CIC Agreement
shall terminate and shall cease to be of any further force or
effect and the Executive waives all rights that may have accrued
thereunder.]
3. Company’s Covenants
Summarized . In order to induce the Executive to remain in the
employ of the Company and in consideration of the Executive’s
covenants set forth in Section 4 hereof, the Company agrees,
under the conditions described herein, to pay the Executive the
Severance Payments and the other payments and benefits described
herein. No Severance Payments shall be payable under this Agreement
unless there shall have been (or,
under the terms of the second sentence of
Section 6.1 hereof, there shall be deemed to have been) a
termination of the Executive’s employment with the Company
following a Change in Control and during the Term. This Agreement
shall not be construed as creating an express or implied contract
of employment and, except as otherwise agreed in writing between
the Executive and the Company, the Executive shall not have any
right to be retained in the employ of the Company.
4. The Executive’s
Covenants . The Executive agrees that, subject to the terms and
conditions of this Agreement, in the event of a Potential Change in
Control during the Term, the Executive will remain in the employ of
the Company until the earliest of (i) a date which is six
months from the date of such Potential Change in Control,
(ii) the date of a Change in Control, (iii) the date of
termination by the Executive of the Executive’s employment
for Good Reason or by reason of death, Disability or Retirement, or
(iv) the termination by the Company of the Executive’s
employment for any reason.
5. Compensation Other Than
Severance Payments .
5.1 Following a Change in Control
and during the Term, during any period that the Executive fails to
perform the Executive’s full time duties with the Company as
a result of incapacity due to physical or mental illness, the
Company shall pay the Executive’s full salary to the
Executive at the rate in effect at the commencement of any such
period, together with all compensation and benefits payable to the
Executive under the terms of any compensation or benefit plan,
program or arrangement maintained by the Company during such period
(other than any disability plan), until the Executive’s
employment is terminated by the Company for Disability.
5.2 If the Executive’s
employment shall be terminated for any reason following a Change in
Control and during the Term, the Company shall pay the
Executive’s full salary (determined without regard to any
reduction constituting Good Reason) to the Executive through the
Date of Termination together with all compensation and benefits
payable to the Executive through the Date of Termination under the
terms of the Company’s compensation and benefit plans,
programs or arrangements as in effect immediately prior to the Date
of Termination or, subject to execution of a release of claims in
accordance with Section 6.6 of this Agreement, as in effect
immediately prior to the first occurrence of an event or
circumstance constituting Good Reason if more favorable to the
Executive.
5.3 If the Executive’s
employment shall be terminated for any reason following a Change in
Control and during the Term, the Company shall pay to the Executive
the Executive’s normal post termination compensation and
benefits as such payments become due. Such post termination
compensation and benefits shall be determined under, and paid in
accordance with, the Company’s retirement, insurance and
other compensation or benefit plans, programs and arrangements as
in effect immediately prior to the Date of Termination or, subject
to execution of a release of claims in accordance with
Section 6.6 of this Agreement, as in effect immediately prior
to the occurrence of the first event or circumstance constituting
Good Reason if more favorable to the Executive.
2
5.4 For the two-year period
commencing immediately following a Change in Control, the Company
agrees (A) to provide the Executive with benefits
substantially similar to the material benefits provided to the
Executive under any of the Company’s executive compensation
(including bonus, equity or incentive compensation), pension,
savings, life insurance, medical, health and accident, or
disability plans in which the Executive was participating
immediately prior to the Change in Control and to provide the
Executive with a number of vacation days that would be no less
favorable to the Executive than the number determined in accordance
with the vacation policy in effect immediately prior to the Change
in Control on the basis of the Executive’s years of service
with the Company, (B) to timely pay to the Executive the
Executive’s current compensation and any installments of
deferred compensation due under any deferred compensation program
of the Company, and (C) not to take any other action that
would directly or indirectly deprive the Executive of any material
fringe benefit enjoyed by the Executive immediately prior to the
Change in Control (in each case except for across the board changes
similarly affecting all senior executives of the Company and all
senior executives of any Person in control of the
Company).
6. Severance Payments
.
6.1 If the Executive’s
employment is terminated following a Change in Control and within
two (2) years after a Change in Control (provided that such
termination of employment constitutes a “separation from
service” within the meaning of Section 409A of the
Code), other than (A) by the Company for Cause, (B) by
reason of death or Disability, or (C) by the Executive without
Good Reason, then the Company shall pay the Executive the amounts,
and provide the Executive the benefits, described in this
Section 6.1 (“Severance Payments”), in addition to
any payments and benefits to which the Executive is entitled under
Section 5 hereof. For purposes of this Agreement, the
Executive’s employment shall be deemed to have been
terminated following a Change in Control by the Company without
Cause or by the Executive with Good Reason, if (i) the
Executive’s employment is terminated by the Company without
Cause prior to a Change in Control (whether or not a Change in
Control ever occurs) and such termination was at the request or
direction of a Person who has entered into an agreement with the
Company the consummation of which would constitute a Change in
Control, or (ii) the Executive terminates her employment for
Good Reason prior to a Change in Control (whether or not a Change
in Control ever occurs) and the circumstance or event which
constitutes Good Reason occurs at the request or direction of such
Person. For purposes of any determination regarding the
applicability of the immediately preceding sentence, any position
taken by the Executive shall be presumed to be correct unless the
Company establishes to the Board by clear and convincing evidence
that such position is not correct.
(A) In lieu of any further salary
payments to the Executive for periods subsequent to the Date of
Termination, the Company shall pay to the Executive a lump sum
severance payment, in cash, equal to
[ ]
times the sum of (i) the Executive’s highest base salary
as in effect during the three-year period ending immediately prior
to the Date of Termination and (ii) the Executive’s
target annual bonus pursuant to any annual bonus or incentive plan
maintained by the Company in respect of the fiscal year in which
occurs the Date of Termination (or, if higher, the actual bonus in
respect of any of the three preceding fiscal years). The amount
payable pursuant to this Section 6.1(A) shall be reduced by
the amount of any cash severance or
3
salary continuation benefit paid or payable to
the Executive under any other plan, policy or program of the
Company or any written employment agreement between the Executive
and the Company.
(B) For the
[ ]-year
period immediately following the Date of Termination, the Company
shall arrange to provide the Executive and her dependents life,
short-term disability, long-term disability, travel accident,
accidental death and dismemberment, medical, dental and other
health and welfare benefits substantially similar to those provided
to the Executive and her dependents immediately prior to the Date
of Termination or, if more favorable to the Executive, those
provided to the Executive and her dependents immediately prior to
the first occurrence of an event or circumstance constituting Good
Reason, at no greater cost to the Executive than the cost to the
Executive immediately prior to such date or occurrence;
provided , however , that such health and welfare
benefits shall be provided through an arrangement that, as
applicable, satisfies the requirements of Sections 105 and 106 of
the Code. To the extent that health and welfare benefits of the
same type are received by or made available to the Executive during
the
[ ]-year
period following the Executive’s Date of Termination (which
such benefits received by or made available to the Executive shall
be reported by the Executive to the insurance company or other
appropriate party in accordance with any applicable coordination of
benefits provisions), the benefits otherwise receivable by the
Executive pursuant to this Section 6.1(B) shall be made
secondary to such benefits; provided , however , that
the Company shall reimburse the Executive for the excess, if any,
of the cost of such benefits to the Executive over such cost
immediately prior to the Date of Termination or, if more favorable
to the Executive, the first occurrence of an event or circumstance
constituting Good Reason.
(C) Vesting shall accelerate and
restrictions shall lapse on all unvested or restricted equity or
equity-based awards in respect of the Company held by the Executive
as of the Date of Termination and each stock option to acquire
common stock of the Company and each stock appreciation right in
respect of the Company held by the Executive as of the Date of
Termination shall remain exercisable following the Date of
Termination for the full term of such option or stock appreciation
right.
(D) In addition to the benefits to
which the Executive is entitled under any Pension Plan that is a
defined benefit plan, the Company shall pay the Executive a lump
sum amount, in cash, equal to the sum of (i) the amount that
would have been accrued thereunder determined (A) as if the
Executive had accumulated (after the Date of Termination)
[ ]
additional months of service credit thereunder and had been
credited during such period with compensation at the highest rate
in effect during the three-year period ending immediately prior to
the Date of Termination, and (B) without regard to any
amendment to the Pension Plan made subsequent to a Change in
Control and on or prior to the Date of Termination, which amendment
adversely affects in any manner the computation of benefits
thereunder, and (ii) the excess, if any, of (A) the
Executive’s accrued benefit under the Pension Plan as of the
Date of Termination over (B) the portion of such account
balance that is nonforfeitable under the terms of the Pension
Plan.
(E) In addition to the benefits to
which the Executive is entitled under any Pension Plan that is a
defined contribution or individual account plan, the Company shall
pay the Executive a lump sum amount, in cash, equal to the sum of
(i) the amount that would have been
4
contributed thereto or credited thereunder by
the Company on the Executive’s behalf during the
[ ]
years immediately following the Date of Termination, determined
(x) as if the Executive made the maximum permissible
contributions thereto or credits thereunder during such period,
(y) as if the Executive earned compensation during such period
at a rate equal to the Executive’s highest rate of
compensation (as defined in the applicable Pension Plan) during the
three-year period ending immediately prior to the Date of
Termination, and (z) without regard to any amendment to the
Pension Plan made subsequent to the Change in Control and on or
prior to the Date of Termination, which amendment adversely affects
in any manner the computation of benefits thereunder, and
(ii) the excess, if any, of (x) the Executive’s
account balance under the Pension Plan as of the Date of
Termination over (y) the portion of such account balance that
is nonforfeitable as of the Date of Termination under the terms of
the Pension Plan.
(F) Notwithstanding any provision of
any annual or long-term incentive plan (exclusive of equity-based
plans) to the contrary, the Company shall pay to the Executive a
lump sum amount, in cash, equal to the sum of (i) any unpaid
incentive compensation which has been allocated or awarded to the
Executive for a completed bonus cycle preceding the Date of
Termination under any such plan and which, as of the Date of
Termination, is contingent only upon the continued employment of
the Executive to a subsequent date, (ii) if the Date of
Termination occurs before the end of the first half of the
then-current bonus cycle under the applicable plan, a pro rata
portion to the Date of Termination of the aggregate value of all
contingent incentive compensation awards to the Executive for the
uncompleted period under any such plan, calculated as to each such
award by multiplying the award that the Executive would have earned
on the last day of the performance award period, assuming the
achievement, at the target level (or if higher, at the then
projected actual final level), of the individual and corporate
performance goals established with respect to such award, by the
fraction obtained by dividing the number of full months and any
fractional portion of a month during such performance award period
through the Date of Termination by the total number of months
contained in such performance award period, and (iii) if the
Date of Termination occurs after the end of the first half of the
then-current bonus cycle but before the end of such bonus cycle
under the applicable plan, the full aggregate value of all
contingent incentive compensation awards to the Executive for the
uncompleted period under any such plan assuming the achievement, at
the target level (or if higher, at the then projected actual final
level), of the individual and corporate performance goals
established with respect to such award.
(G) If the Executive would have
become entitled to benefits under the Company’s
post-retirement health care or life insurance plans, as in effect
immediately prior to the Date of Termination or, if more favorable
to the Executive, as in effect immediately prior to the first
occurrence of an event or circumstance constituting Good Reason (in
either case, if any), had the Executive’s employment
terminated at any time within
[ ]
years after the Date of Termination, the Company shall provide such
post-retirement health care or life insurance benefits to the
Executive and the Executive’s dependents commencing on the
later of (i) the date on which such coverage would have first
become available and (ii) the date on which benefits described
in subsection (B) of this Section 6.1
terminate.
(H) The Company shall reimburse the
Executive for expenses incurred for outplacement services suitable
to the Executive’s position for a period of one (1) year
following the Date of Termination (or, if earlier, until the first
acceptance by the Executive of an offer of
5
employment) in an amount not exceeding 15% of
the sum of the Executive’s highest annual base rate of salary
as in effect during the three-year period ending immediately prior
to the Date of Termination, which payment shall be made as soon as
practicable but in any event within thirty (30) business days
following the date of request for reimbursement. Subject to the
foregoing, in no event shall any payment described in this
Section 6.1(H) be made after the end of the calendar year
following the calendar year in which the expenses were
incurred.
(I) For the
[ ]-year
period immediately following the Date of Termination, the Company
shall provide the Executive with her customary perquisites (such as
any use of a Company provided automobile, club membership fee
reimbursements, income tax preparation and financial advisory
services) in each case on the same terms and conditions that were
applicable immediately prior to the Date of Termination or, if more
favorable, immediately prior to the first occurrence of an event or
circumstance constituting Good Reason, provided that in no event
shall the amount of perquisites to which the Executive is entitled
under this Section 6.1(I) for any taxable year of the
Executive affect the amount of perquisites to which the Executive
is entitled under this Section 6.1(I) for any other taxable
year.
6.2 (A) Notwithstanding any other
provisions of this Agreement, in the event that any payment or
benefit received or to be received by the Executive (including any
payment or benefit received or to be received in connection with a
Change in Control or the termination of the Executive’s
employment, whether pursuant to the terms of this Agreement or any
other plan, arrangement or agreement) (all such payments and
benefits, including the Severance Payments, being hereinafter
referred to as the “Total Payments”) would not be
deductible (in whole or part), by the Company, an affiliate or
Person making such payment or providing such benefit as a result of
Section 280G of the Code, then, to the extent necessary to
make such portion of the Total Payments deductible (and after
taking into account any reduction in the Total Payments provided by
reason of Section 280G of the Code in such other plan,
arrangement or agreement), the cash Severance Payments shall first
be reduced (if necessary, to zero), and all other Severance
Payments shall thereafter be reduced (if necessary, to zero);
provided , however , that, to the extent permitted by
Section 409A of the Code, the Executive may elect to have the
noncash Severance Payments reduced (or eliminated) prior to any
reduction of the cash Severance Payments.
(B) For purposes of this limitation,
(i) no portion of the Total Payments the receipt or enjoyment
of which the Executive 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, (ii) no portion of the Total Payments shall be taken
into account which, in the opinion of tax counsel (“Tax
Counsel”) reasonably acceptable to the Executive and selected
by the accounting firm which was, immediately prior to the Change
in Control, the Company’s independent auditor (the
“Auditor”), does not constitute a “parachute
payment” within the meaning of Section 280G(b)(2) of the
Code, including by reason of Section 280G(b)(4)(A) of the
Code, (iii) the Severance Payments shall be reduced only to
the extent necessary so that the Total Payments (other than those
referred to in clauses (i) or (ii)) in their entirety
constitute reasonable compensation for services actually rendered
within the meaning of Section 280G(b)(4)(B) of the Code or are
otherwise not subject to disallowance as deductions by reason of
Section 280G of the Code, in the opinion of Tax Counsel, and
(iv) the value of any noncash benefit or any
6
deferred payment or benefit included in the
Total Payments shall be determined by the Auditor in accordance
with the principles of Sections 280G(d)(3) and (4) of the
Code.
(C) If it is established pursuant to
a Final Determination that, notwithstanding the good faith of the
Executive and the Company in applying the terms of this
Section 6.2, the Total Payments paid to or for the
Executive’s benefit are in an amount that would result in any
portion of such Total Payments being subject to the Excise Tax,
then, if such repayment would result in (i) no portion of the
remaining Total Payments being subject to the Excise Tax and
(ii) a dollar-for-dollar reduction in the Executive’s
taxable income and wages for purposes of federal, state and local
income and employment taxes, the E
