Exhibit 10.11
CHANGE IN CONTROL/SEVERANCE AGREEMENT
THIS AGREEMENT, dated July 15,
2007, is made by and between Guaranty Financial Group Inc., a
Delaware corporation (the “Company”), Temple-Inland
Inc., a Delaware corporation (“Temple-Inland”), and
«First_Name» «Last_Name» (the
“Executive”).
WHEREAS, the Executive currently is
employed by and a party to a Change in Control Agreement (the
“Existing CIC Agreement”) with Temple-Inland;
WHEREAS, Temple-Inland has determined
that it is appropriate, desirable and in the best interests of
Temple-Inland and its stockholders to effect (i) a spinoff to
the Temple-Inland stockholders of the stock of the Company,
(ii) a spinoff to the Temple-Inland stockholders of a
subsidiary holding Temple-Inland’s real estate operations,
and (iii) a sale of Temple-Inland’s timberland holdings
to an unrelated third party;
WHEREAS, the Company considers it
essential to the best interests of its stockholders to foster the
continued employment of key management personnel following the
effective time of the spinoff of the Company (the
“Separation”);
WHEREAS, effective as of the
Separation, the parties intend for the Existing CIC Agreement to
cease to be of any force or effect;
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 (i) to ensure that the
Executive receive the protections afforded under the Existing CIC
Agreement for the two-year period beginning on the date of the
Separation and (ii) thereafter 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 following such two-year period;
NOW, THEREFORE, in consideration of
the premises and the mutual covenants herein contained, the
Company, Temple-Inland (solely for purposes of Section 6.1(C)
hereof and the last sentence of Section 2 hereof) 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 date of the Separation (the
“Effective Date”) and shall continue in effect through
the second anniversary of the Effective Date (such two-year period,
the “Initial Term”); 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 month in 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 a termination of the Executive’s
employment during the Initial Term by the Company without Cause or
by the Executive with Good Reason or 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 and within
two years after 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 of 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 During the Initial Term or
otherwise 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 during the Initial
Term or otherwise following a Change in Control and during the
Term, the Company shall pay the Executive’s full salary to
the Executive through the Date of Termination at the
Executive’s then current salary (determined without regard to
any reduction constituting Good Reason) 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, if more favorable
to the Executive, as in effect immediately prior to the first
occurrence of an event or circumstance constituting Good
Reason.
5.3 If the Executive’s
employment shall be terminated for any reason during the Initial
Term and otherwise 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, if more favorable to the
Executive, as in effect immediately prior to the occurrence of the
first event or circumstance constituting Good Reason.
5.4 For the two-year period
commencing immediately following a Change in Control and during the
Initial Term, 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 (or,
during the Initial Term, immediately after the Separation), 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 (or, during the Initial Term, immediately
after the Separation) on the basis of the Executive’s years
of service with the Company, (B) to timely pay to the
Executive any portion of the Executive’s current
compensation, or timely pay to the Executive any material portion
of an installment of deferred compensation 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 (or, during the Initial
Term, immediately after the Separation), exclusive of any across
the board reductions affecting all similarly situated
employees.
6. Severance Payments.
6.1 If the Executive’s
employment is terminated either during the Initial Term or
otherwise following a Change in Control and within two
(2) years after a Change in Control (provided that such
termination of employment
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constitutes a “separation from service” within the
meaning of Section 409A of the Code), in either event 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”) and Section 6.2, 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 his 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 two (2) 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 (including, if the Date of Termination occurs within
three years after the Effective Date, salary paid in respect of
employment by Temple-Inland or its Affiliates during such
three-year period) 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 greatest actual
annual bonus in respect of any of the three preceding fiscal years
(including as applicable, with respect to years ending at or before
the Effective Date, annual bonuses paid by Temple-Inland)).
(B) For the two-year period
immediately following the Date of Termination, the Company shall
arrange to provide the Executive and his dependents life,
accidental death and dismemberment, medical and dental benefits
substantially similar to those provided to the Executive and his
dependents immediately prior to the Date of Termination or, if more
favorable to the Executive, those provided to the Executive and his
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 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 two-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 either the Company or
Temple-Inland held by the Executive as of the Date of Termination
and each stock option to acquire common stock of the Company or
Temple-Inland and each stock appreciation right in respect of
either the Company or Temple-Inland 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. The Company also shall cause the subsidiary holding
Temple-Inland’s real estate operations to provide that
vesting shall accelerate and restrictions shall lapse on all
unvested or restricted equity or equity-based awards in respect of
such company held by the Executive as of the Date of Termination
and that each stock option to acquire common stock of such company
and each stock appreciation right in respect of such 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.
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(D) For purposes of determining the
amount of any benefit payable to the Executive and the
Executive’s right to any benefit otherwise payable under a
Pension Plan, and except to the extent it would result in a
duplication of benefits under Section 6.1(E) hereof, the
Executive shall be treated as if he had accumulated (after the Date
of Termination) twenty-four (24) 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.
(E) In addition to the benefits to
which the Executive is entitled under any defined contribution
Pension 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 contributed thereto or credited thereunder by the Company
on the Executive’s behalf during the two (2) years
immediately following the Date of Termination (but not including as
amounts that would have been contributed or credited an amount
equal to the amount of any reduction in base salary, bonus or other
compensation that would have occurred in connection with such
contribution or credit), 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
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 Effective Date
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 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, and (ii) 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, of any
individual and corporate performance goals established with respect
to such award, multiplied 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 (or if such fraction is greater than 1 / 2 , multiplied by one (1)).
(G) 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 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
(including, if the Date of Termination occurs within three years
after the Effective Date, salary paid in respect of employment by
Temple-Inland or its Affiliates during such three-year period), and
the greatest 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
highest actual annual bonus in respect of any of the three
preceding fiscal years (including as applicable, with respect to
years ending at or before the Effective Date, annual bonuses paid
by Temple-Inland)), 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(G) be made after the end of the calendar year
following the calendar year in which the expenses were
incurred.
(H) For the two-year period
immediately following the Date of Termination, the Company shall
provide the Executive with perquisites (such as any use of a
Company provided automobile, club membership fee reimbursements,
income tax preparation and financial advisory services) 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
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of perquisites
to which the Executive is entitled under this Section 6.1(H)
for any taxable year of the Executive affect the amount of
perquisites to which the Executive is entitled under this
Section 6.1(H) for any other taxable year.
6.2 Excise Tax Gross-Up.
(A) Whether or not the Executive
becomes entitled to the Severance Payments, if any payment or
benefit received or to be received by the Executive 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 with the
Company, any Person whose actions result in a Change in Control or
any Person affiliated with the Company or such Person) (all such
payments and benefits, including the Severance Payments, being
hereinafter called “Total Payments”) will be subject
(in whole or part) to the Excise Tax, then, subject to the
provisions of subsection (B) of this Section 6.2, the
Company shall pay to the Executive an additional amount (the
“Gross-Up Payment”) such that the net amount retained
by the Executive, after deduction of any Excise Tax on the Total
Payments and any federal, state and local income and employment
taxes and Excise Tax upon the Gross-Up Payment, shall be equal to
the Total Payments.
(B) In the event that the amount of
the Total Payments does not exceed 110% of the largest amount that
would result in no portion of the Total Payments being subject to
the Excise Tax (the “Safe Harbor”), then subsection
(A) of this Section 6.2 shall not apply and the noncash
Severance Payments shall first be reduced (if necessary, to zero),
and the cash Severance Payments shall thereafter be reduced (if
necessary, to zero) so that the amount of the Total Payments is
equal to the Safe Harbor; provided, however, that, to the extent
permitted by Section 409A of the Code, the Executive may elect
to have the cash Severance Payments reduced (or eliminated) prior
to any reduction of the noncash Severance Payments.
(C) For purposes of determining
whether any of the Total Payments will be subject to the Excise Tax
and the amount of such Excise Tax, (i) all of 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 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”), such other payments or benefits (in whole
or in part) do not constitute parachute payments, including by
reason of Section 280G(b)(4)(A) of the Code, (ii) 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 Tax Counsel, 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 allocable to such reasonable compensation, or are otherwise
not subject to the Excise Tax, and (iii) 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. Prior to the
payment date set forth in Section 6.3 hereof, the Company
shall provide the Executive with its calculation of the amounts
referred to in this Section 6.2(C) and such supporting
materials as are reasonably necessary for the Executive to evaluate
the Company’s calculations. If the Executive disputes the
Company’s calculations (in whole or in part), the reasonable
opinion of Tax Counsel with respect to the matter in dispute shall
prevail.
(D) (I) In
the event that (1) amounts are paid to the Executive pursuant
to Section 6.2(A), (2) there is a Final Determination that the
Excise Tax is less than the amount taken into account hereunder in
calculating the Gross-Up Payment, and (3) after giving effect to
such Final Determination, the Severance Payments are to be reduced
pursuant to Section 6.2(B), the Executive shall repay to the
Company, within five (5) business days following the date of
the Final Determination, the Gross-Up Payment, the amount of the
reduction in the Severance Payments, plus interest on the amount of
such repayments at 120% of the rate provided in
Section 1274(b)(2)(B) of the Code.
(II) In the event that
(1) amounts are paid to the Executive pursuant to
Section 6.2(A), (2) there is a Final Determination that
the Excise Tax is less than the amount taken into account hereunder
in calculating the Gross-Up Payment, and (3) after giving effect to
such Final Determination, the Severance Payments are not to be
reduced pursuant to Section 6.2(B), the
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Executive shall
repay to the Compa
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