Exhibit 10.11
CHANGE IN CONTROL SEVERANCE
AGREEMENT
THIS AGREEMENT, effective as of
November 21, 2008, is made by and between CF Industries
Holdings, Inc., a Delaware corporation (the
“Company”), and Bert A. Frost (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
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;
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 . This Agreement shall become
effective upon execution, and the Term shall continue in effect
through December 31, 2009; provided , however , that
commencing on January 1, 2009 and each January 1 thereafter, the
Term shall automatically be extended for one additional year
unless, not later than September 30 of the preceding year, the
Company or the Executive shall have given notice not to extend the
Term; and further provided , however ,
that if a Change in Control shall have occurred during the Term,
the Term shall expire no earlier than twenty-four (24) months
beyond the month in which such Change in Control
occurred.
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. Except as
provided in Section 9.1 hereof, 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 (6) 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 to the
Executive through the Date of Termination at the rate in effect
immediately prior to the Date of Termination or, if higher, the
rate in effect immediately prior to the first occurrence of an
event or circumstance 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 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.
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6.
Severance Payments .
6.1
If the Executive’s employment is terminated following a
Change in Control and during the Term, 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, (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, or (iii) the Executive’s employment is
terminated by the Company without Cause or by the Executive for
Good Reason and such termination or the circumstance or event which
constitutes Good Reason is otherwise in connection with or in
anticipation of a Change in Control (whether or not a Change in
Control ever occurs).
(A)
In lieu of any further salary payments to the Executive for periods
subsequent to the Date of Termination and in lieu of any severance
benefit otherwise payable to the Executive, the Company shall pay
to the Executive a lump sum severance payment, in cash, equal to
two times the sum of (i) the Executive’s base salary as
in effect immediately prior to the Date of Termination or, if
higher, in effect immediately prior to the first occurrence of an
event or circumstance constituting Good Reason, 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 the Date of Termination occurs or, if higher,
the fiscal year in which the first event or circumstance
constituting Good Reason occurs.
(B)
For the twenty-four (24) month period immediately following the
Date of Termination, the Company shall arrange to provide the
Executive and his dependents life, disability, accident and health
insurance 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 after tax cost to the Executive than the after tax cost
to the Executive immediately prior to such date or occurrence;
provided , however , that, unless the Executive
consents to a different method, such health insurance benefits
shall be provided through a third-party insurer. Benefits
otherwise receivable by the Executive pursuant to this
Section 6.1(B) shall be reduced to the
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extent benefits of the same type are
received by or made available to the Executive during the
twenty-four (24) month period following the Executive’s
termination of employment (and any such benefits received by or
made available to the Executive shall be reported to the Company by
the Executive); provided , however , that the Company
shall reimburse the Executive for the excess, if any, of the after
tax 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)
In addition to the benefits to which the Executive is entitled
under each DC Pension Plan, the Company shall pay the Executive a
lump sum amount, in cash, equal to the sum of (1) the amount
that would have been contributed or allocated to each DC Pension
Plan by the Company on the Executive’s behalf (without regard
to whether such amount would be vested) during the two years
immediately following the Date of Termination, determined
(x) as if the Executive made the maximum permissible
contributions thereto during such period, (y) as if the
Executive earned compensation during such period at a rate equal to
the Executive’s compensation (as defined in the DC Pension
Plans) during the twelve (12) months immediately preceding the Date
of Termination or, if higher, during the twelve months immediately
prior to the first occurrence of an event or circumstance
constituting Good Reason, and (z) without regard to any
amendment to the DC Pension Plans 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 (2) all other amounts credited to the
Executive’s account under each DC Pension Plan to the extent
such amounts were unvested on the Date of Termination.
(D)
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, had the Executive’s employment
terminated at any time during the period of twenty-four (24) months
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. If
the operation of this Section 6.1(D) would result in
adverse tax consequences to the Executive as a result of the
Executive’s participation in the Company’s
post-retirement health care or life insurance plans, the Company
shall instead provide substantially similar benefits and coverage
through a third party insurer.
(E)
The Company shall provide the Executive with outplacement services
suitable to the Executive’s position for a period of
two
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years or, if earlier, until the
first acceptance by the Executive of an offer of
employment.
(F)
Notwithstanding any provision of any annual or long-term incentive
plan 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 fiscal year or other measuring period
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) a
pro rata portion to the Date of Termination of the aggregate value
of all contingent incentive compensation awards to the Executive
for all then uncompleted periods 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 greater,
based on actual results to Date of Termination), 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.
6.2
(A) Whether
or not the Executive becomes entitled to the Severance Payments, if
any of the payments or benefits received or to be received by the
Executive (including any payment or benefits received in connection
with a Change in Control or the Executive’s termination of
employment, whether pursuant to the terms of this Agreement or any
other plan, arrangement or agreement) (all such payments and
benefits, excluding the Gross-Up Payment, being hereinafter
referred to as the “Total Payments”) will be subject to
the Excise Tax, 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, and after taking into account the phase out of itemized
deductions and personal exemptions attributable to the Gross-Up
Payment, shall be equal to the Total Payments.
(B)
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 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
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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. For purposes of determining the amount of the Gross-Up
Payment, the Executive shall be deemed to pay federal income tax at
the highest marginal rate of federal income taxation in the
calendar year in which the Gross-Up Payment is to be made and state
and local income taxes at the highest marginal rate of taxation in
the state and locality of the Executive’s residence on the
Date of Termination (or if there is no Date of Termination, then
the date on which the Gross-Up Payment is calculated for purposes
of this Section 6.2), net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state
and local taxes.
(C)
In the event that the Excise Tax is finally determined to be less
than the amount taken into account hereunder in calculating the
Gross-Up Payment, the Executive shall repay to the Company, within
five (5) business days following the time that the amount of
such reduction in the Excise Tax is finally determined, the portion
of the Gross-Up Payment attributable to such reduction (plus that
portion of the Gross-Up Payment attributable to the Excise Tax and
federal, state and local income and employment taxes imposed on the
Gross-Up Payment being repaid by the Executive), to the extent that
such repayment results in a reduction in the Excise Tax and a
dollar-for-dollar reduction in the Executive’s taxable income
and wages for purposes of federal, state and local income and
employment taxes, plus interest on the amount of such repayment at
120% of the rate provided in section 1274(b)(2)(B) of the
Code. In the event that the Excise Tax is determined to
exceed the amount taken into account hereunder in calculating the
Gross-Up Payment (including by reason of any payment the existence
or amount of which cannot be determined at the time of the Gross-Up
Payment), the Company shall make an additional Gross-Up Payment in
respect of such excess (plus any interest, penalties or additions
payable by the Executive with respect to such excess) within five
(5) business days following the time that the amount of such
excess is finally determined. The Executive and the Company
shall each reasonably cooperate with the other in connection with
any administrative or judicial proceedings concerning the existence
or amount of liability for Excise Tax with respect to the Total
Payments.
6.3
The payments provided in subsections (A), (C) and (F) of
Section 6.1 hereof and in Section 6.2 hereof shall be
made not later than the fifth day following the date upon which the
revocation period for the release described in Section 6.6
expires (or, with respect to the payment described in
Section 6.2, if there is no Date of Termination, then the date
on which the Gross-Up Payment is calculated for purposes of
Section 6.2 hereof); provided , however , that
if the amounts of such payments cannot be finally determined on or
before such day, the Company shall pay to the Executive on such day
an estimate, as determined in good faith by the Executive or, in
the case of payments under Section 6.2 hereof, in accordance
with Section 6.2 hereof, of the minimum amount of such
payments to which the Executive is clearly entitled and shall pay
the remainder of such payments (together with interest on the
unpaid remainder (or
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on all such payments to the extent the Company
fails to make such payments when due) at 120% of the rate provided
in section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined but in no event later than the thirtieth
(30th) day after the Date of Termination. In the event that
the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall
constitute a loan by the Company to the Executive, payable on the
fifth (5th) business day after demand by the Company (together with
interest at 120% of the rate provided in section
1274(b)(2)(B) of the Code). At the time that payments
are made under this Agreement, the Company shall provide the
Executive with a written statement setting forth the manner in
which such payments were calculated and the basis for such
calculations including, without limitation, any opinions or other
advice the Company has received from Tax Counsel, the Auditor or
other advisors or consultants (and any such opinions or advice
which are in writing shall be attached to the statement) . In
the event necessary to comply with the provisions of
Section 409A of the Code and the guidance issued thereunder,
(a) reimbursements to Executive as a result of the operation
of Section 6.1(B) hereof shall be made not later than the
end of the calendar year following the year in which the
reimbursable expense is incurred and (b) if Executive is a
“specified employee” (within the meaning of
Section 409A(a)(2)(B)(i) of the Code), any reimbursements
to Executive as a result of the operation of 6.1(B) hereof
with respect to a reimbursable event within the first six months
following the Date of Termination shall be made as soon as
practicable following the date which is six months and one day
following the Date of Termination (subject to clause (a) of
this sentence).
6.4
The Company also shall pay to the Executive all legal fees and
expenses incurred by the Executive in disputing in good faith any
issue hereunder relating to the termination of the
Executive’s employment, in seeking in good faith to obtain or
enforce any benefit or right provided by this Agreement or in
connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any
payment or benefit provided hereunder. Such payments shall be
made within five (5) business days after delivery of the
Executive’s written requests for payment accompanied with
such evidence of fees and expenses incurred as the Company
reasonably may require. The Executive’s reimbursement
rights described in this Section 6.4 shall remain in effect
for the Executive’s lifetime, provided, that, in order for
the Executive to be entitled to reimbursement hereunder, the
Executive must submit the written reimbursement request described
above within 180 days following the date upon which the applicable
expense is incurred.
6.5
The Executive agrees that prior to and following the Date of
Termination, he shall retain
