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Exhibit 10.1
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement (the "Agreement") is entered
into effective as of December 8, 2006 by and between
STANCORP FINANCIAL GROUP, INC., an Oregon corporation (the
"Company"), having its principal place of business at 1100 SW Sixth
Avenue, Portland, Oregon 97204, and <<NAME>>
("Executive"), whose address is <<ADDRESS>>.
RECITALS
A. The Company is a public company. The Company recognizes that,
as is the case with many publicly held corporations, the
possibility of a change of control may exist, and that such
possibility, and the uncertainty and questions it may raise among
management, may result in the departure or distraction of key
management personnel to the detriment of the Company.
B. It is in the best interests of the Company that key
management personnel, including Executive, continue to be employed
by the Company or a subsidiary of the Company, perform the
responsibilities of their positions without undue distraction and
exercise their judgment without bias or concern due to their
personal circumstances.
C. Accordingly, the Company has determined that appropriate
steps should be taken to reinforce and encourage the continued
attention and dedication of key members of the Company’s
management to their assigned duties without distraction resulting
from the possibility of a change of control of the Company.
D. To induce Executive to remain employed by the Company or a
subsidiary of the Company in the face of uncertainties and a
possible change of control, this Agreement, which has been approved
by the Board of Directors of the Company (the "Board"), sets forth
the severance benefits that the Company will provide to Executive
in the event that Executive’s employment is terminated
subsequent to a "Change of Control" under the circumstances
described below. Capitalized terms not otherwise defined in this
Agreement have the meanings given to such terms in
Section 10.
AGREEMENT
THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements set forth below, the parties agree
as follows:
1. Employment Relationship . Executive is currently
employed by the Company or by a subsidiary of the Company, as
<<TITLE>>. Executive and the Company acknowledge that
the Company or the subsidiary of the Company employing Executive
(the "Employing Subsidiary") may terminate Executive’s
employment for any or no reason at any time, subject to the
obligation (if any) of the Company to provide the severance
benefits specified in this Agreement in accordance with the terms
hereof.
2. Release of Claims . In consideration
for and as a condition precedent to receiving the severance
benefits outlined in this Agreement, Executive agrees to execute a
Release in the form attached as Exhibit A (the "Release").
Executive promises to execute and deliver the Release to the
Company within the later of (a) 45 days after the date
Executive receives the Release or (b) the last day of
Executive’s active employment. Any payments required under
this Agreement will be payable only after receipt by the Company of
a signed Release from Executive.
3. Term and Termination of Agreement. This Agreement
shall commence effective as of December 8, 2006 (the
"Effective Date") and shall continue in effect through
December 31, 2007 (the "Expiration Date"); provided,
however, that commencing on January 1, 2008, and each
January 1 thereafter, the term of this Agreement shall
automatically be extended for one additional year unless, not later
than September 30 of the preceding year, the Company shall
have given notice that it does not wish to extend this Agreement;
further provided, that no such notice may be given during
the pendency of a potential Change of Control, as defined in
Section 10.2; further provided, that if a Change of
Control shall have occurred during the original or extended term of
this Agreement, this Agreement shall continue in effect for a
period of 24 months beyond the month in which such Change of
Control occurred.
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3.1 Notwithstanding the foregoing, this Agreement shall
terminate immediately if:
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3.1.1 Executive voluntarily terminates employment with the
Company or the Employing Subsidiary other than for Good Reason;
3.1.2 Executive’s employment by the Company or the
Employing Subsidiary is terminated by reason of Executive’s
death, Disability or voluntary retirement under any of the
Company’s retirement plans; or
3.1.3 the Company or the Employing Subsidiary terminates
Executive’s employment prior to a Change of Control.
3.2 The Company may terminate this Agreement during
Executive’s employment, if, prior to a Change of Control,
Executive ceases to hold Executive’s current position with
the Company or the Employing Subsidiary (other than as a result of
a promotion).
3.3 If a Change of Control shall have occurred at any time after
the first anniversary of the Effective Date, this Agreement shall
continue in effect for a period of 24 months beyond the month in
which such Change of Control occurred.
3.4 If on or before the Expiration Date, the Company has entered
into an agreement or announced publicly its intent to enter into an
agreement the consummation of which would constitute a Change of
Control, this Agreement shall continue in effect for 24 months
beyond the effective date of the Change of Control.
4. Duties. The Executive shall cooperate with the Company
and the Employing Subsidiary and shall promptly and fully perform
such duties and discharge such responsibilities on a full-time
basis as may reasonably be assigned by the Company or the Employing
Subsidiary to Executive from time to time.
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5. Termination Following Change of Control
. If any of the events described in Section 10.2 constituting
a Change of Control of the Company shall have occurred, Executive
shall be entitled to the benefits provided for in this
Section 5 upon the subsequent termination of Executive’s
employment within 24 months after a Change of Control unless such
termination is (a) because of Executive’s death,
Disability or voluntary retirement under any of the Company’s
retirement plans, (b) by the Company or the Employing
Subsidiary for Cause, or (c) by Executive other than for Good
Reason. If Executive’s employment with the Company or the
Employing Subsidiary is terminated for any reason and subsequently
a Change of Control of the Company occurs, Executive shall not be
entitled to any benefits under this Agreement.
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5.1 As severance pay and in lieu of any other compensation for
periods subsequent to the Termination Date, as defined in
Section 10.5, the Company shall pay Executive an amount in
cash equal to three times the sum of (a) Executive’s
annual base salary in effect at the time the Change of Control
occurs and (b) the incentive compensation payable to Executive
under the Company’s Short Term Incentive Plan at the target
bonus for the year in which the Change of Control occurs;
provided , however, that for this purpose the sum of annual
base salary and incentive compensation shall not exceed the greater
of (x) the sum of Executive’s annual base salary for
2006 plus Executive’s target bonus for 2006, or
(y) $500,000.
5.2 For the eighteen-month period commencing with the
Termination Date, the Company shall arrange to provide Executive
with group health, dental and life insurance benefits substantially
similar to those which Executive was receiving immediately prior to
the Change of Control, and paid for by the Company or the Employing
Subsidiary and the Executive in the same manner as immediately
prior to the Change of Control. Notwithstanding the foregoing, the
Company or the Employing Subsidiary shall not provide any benefit
otherwise receivable by Executive pursuant to this Section 5.2
to the extent that a similar benefit is actually received by
Executive from a subsequent employer during such eighteen-month
period, and any such benefit actually received by Executive shall
be promptly reported by Executive to the Company.
5.3 All benefits to which Executive is entitled under the
Company’s Defined Benefit Retirement Plan, the Senior
Officers Deferred Compensation Plan, Senior Officers Supplemental
Retirement Plan and any other retirement or deferred compensation
plan shall immediately vest.
5.4 All outstanding stock options held by Executive under all
stock option and stock incentive plans of the Company shall become
immediately vested and exercisable in full and all outstanding
stock options shall remain exercisable until the earlier of
(a) the first anniversary of the Termination Date (or, with
respect to any incentive stock option, the date that is three
months after the Termination Date) or (b) the option
expiration date as set forth in the applicable option
agreement.
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5.5 The Company shall pay Executive an amount in
cash equal to the target bonus payable to Executive under any cash
long term incentive plan in operation immediately prior to the
Change of Control, which amount shall be prorated based on the
number of months of operation prior to the Change of Control ;
except, that if Executive received payment under such plan
before the Termination Date, then Executive shall not receive any
payment under this Section 5.5.
5.6 Notwithstanding anything in this Agreement to the contrary,
whether or not Executive becomes entitled to any benefits under
this Section 5, if any of the benefits under this
Section 5 or any other payment or benefit received or to be
received by Executive in connection with a Change of Control of the
Company (collectively, "Severance Payments") will be subject to the
tax (the "Excise Tax") imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code") (or any similar tax
that may hereafter be imposed), and if the total Severance Payments
are less than or equal to 115% of the Capped Benefit (as defined
below), the benefits payable under this Section 5 shall be
reduced by an amount equal to the difference between the Capped
Benefit and the total Severance Payments. The "Capped Benefit"
shall equal the total Severance Payments, reduced by the amount
necessary to prevent any portion of the Severance Payments from
being a "parachute payment" as defined in Section 280G(b)(2)
of the Code. The Capped Benefit would therefore equal 2.99
multiplied by Executive’s applicable "base amount" as defined
in Section 280G(b)(3) of the Code. If the Capped Benefit
applies, the Company shall provide Executive with a reasonable
opportunity to request which of the benefits payable under this
Section 5 shall be reduced. If the total Severance Payments
are more than 115% of the Capped Benefit, the benefits payable
under this Section 5 shall not be reduced and the Company
shall pay to Executive at the time specified in Section 8 an
additional amount (the "Gross-Up Payment") such that the net amount
retained by Executive, after deduction of any Excise Tax on the
Severance Payments and any federal, state and local income tax and
Excise Tax upon the payment provided for by this subsection (i.e.,
upon the components of the Gross-Up Payment), shall be equal to the
Severance Payments.
For purposes of determining whether any amounts will be subject
to the Excise Tax and the amount of such Excise Tax, (a) all
amounts representing the Severance Payments shall be treated as
"parachute payments" within the meaning of Section 280G(b)(2)
of the Code, and all "excess parachute payments" within the meaning
of Section 280G(b)(1) of the Code shall be treated as subject
to the Excise Tax, unless in the opinion of tax counsel selected by
the Company’s independent auditors and acceptable to
Executive, the Severance Payments (in whole or in part) do not
constitute parachute payments, or such excess parachute payments
(in whole or in part) represent reasonable compensation for
services actually rendered within the meaning of
Section 280G(b)(4) of the Code in excess of the base amount
within the meaning of Section 280G(b)(3) of the Code, or are
otherwise not subject to the Excise Tax, (b) the amount of the
Severance Payments which shall be treated as subject to the Excise
Tax shall be equal to the lesser of (1) the total amount of
the Severance Payments or (2) the amount of excess parachute
payments within the meaning of Section 280G(b)(1) of the Code
(after applying clause (a), above), and (c) the value of any
non-cash benefits or any deferred payment or benefit shall be
determined by the Company’s independent auditors in
accordance with the principles of Sections 280G(d)(3) and
(4) of the Code. For purposes of determining whether the
Capped Benefit applies, any non-cash benefits or deferred payments
or benefits included in the total Severance Payments shall be given
the same values as provided for in the immediately preceding
sentence.
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For purposes of determining the amount of the
Gross-Up Payment, Executive shall be deemed to pay federal income
taxes 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 Executive’s residence
on the Termination Date, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state
and local taxes.
In the event that the Excise Tax is subsequently determined to
be less than the amount taken into account hereunder at the time of
termination of Executive’s employment, Executive shall repay
to the Company at the time that the amount of such reduction in
Excise Tax is finally determined the portion of the Gross-Up
Payment attributable to such reduction (plus the portion of the
Gross-Up Payment attributable to the Excise Tax and federal and
state and local income tax imposed on the Gross-Up Payment being
repaid by Executive if such repayment results in a reduction in
Excise Tax and/or a federal and state and local income tax
deduction) plus interest on the amount of such repayment at 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 at the time of the termination of
Executive’s employment (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
payable with respect to such excess) at the time that the amount of
such excess is finally determined.
6. Conditions on Eligibility for Severance Benefits.
Executive shall not be eligible to receive the benefits provided
for in Section 5 if any of the following applies:
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6.1 Executive fails to execute and deliver the Release in the
time period set forth in Section 2, or, if applicable,
Executive executes and later revokes the Release within the
revocation period; or
6.2 Executive fails to comply with Section 12 hereof.
7. Tax Withholding; Subsequent Employment .
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7.1 All compensation, benefits and payments provided for in this
Agreement shall be paid after any withholding for taxes or other
charges and authorized deductions required (or permitted) to be
withheld by the Company or the Employing Subsidiary, including but
not limited to any federal income taxes, any applicable state
taxes, FICA, Medicare and any similar state or federal taxes or
required state or federal withholdings.
7.2 Except as provided in Section 5.2, the amount of any
payment or benefit provided for in this Agreement shall not be
reduced, offset or subject to recovery by the Company by reason of
any compensation earned by Executive as the result of employment by
another employer after termination.
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8. Payments. All amounts to be paid by the
Company to Executive pursuant to Section 5 shall be made not
later than thirty days following the Termination Date; provided,
however, that if the amounts of such payments cannot be fully
determined on or before such date, the Company shall pay to
Executive on such day an estimate, as determined in good faith by
the Company, of the minimum amount of such payments and shall pay
the remainder of such payments (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code) as soon as
reasonably practicable after the amount
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