CHANGE OF CONTROL EMPLOYMENT AGREEMENT

 

 

TABLE OF CONTENTS

 

				Page
ARTICLE I.		CERTAIN DEFINITIONS		1
ARTICLE II.		POST-CHANGE PERIOD		9
2.1		Position and Duties		9
2.2		Compensation		9
2.3		Stock Incentive Awards		12
2.4		Unfunded Deferred Compensation		12
ARTICLE III.		TERMINATION OF EMPLOYMENT		12
3.1		Disability		12
3.2		Death		13
3.3		Cause		13
3.4		Good Reason		15
ARTICLE IV.		COMPANY’S OBLIGATIONS UPON A TERMINATION OF EMPLOYMENT		16
4.1		If by Executive for Good Reason or by the Company Other Than for Cause or Disability		16
4.2		If by the Company for Cause		19
4.3		If by Executive Other Than for Good Reason		19
4.4		If by the Company for Disability		19
4.5		If Upon Death		20
4.6		Amount Contested		20
ARTICLE V.		CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY		21
5.1		Gross-up for Certain Taxes		21
5.2		Determination by Executive		22
5.3		Additional Gross-up Amounts		23
5.4		Gross-up Multiple		23
5.5		Opinion of Counsel		23
5.6		Amount Increased or Contested		24
5.7		Limitations on Gross-Up Payments		26
5.8		Refunds		26
ARTICLE VI.		EXPENSES AND INTEREST		27
6.1		Legal and Other Expenses		27
6.2		Interest		27
ARTICLE VII.		NO SET-OFF OR MITIGATION		27
7.1		No Set-off by Company		27
7.2		No Mitigation		28

 

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ARTICLE VIII.			RESTRICTIVE COVENANTS		28
8.1			Non-Competition		28
8.2			Non-Solicitation		29
8.3			Reasonableness of Restrictive Covenants		29
8.4			Right to Injunction; Survival of Undertakings		30
8.5			Non-Disparagement		30
ARTICLE IX.			NON-EXCLUSIVITY OF RIGHTS		31
9.1			Waiver of Certain Other Rights		31
9.2			Other Rights		31
ARTICLE X.			MISCELLANEOUS		31
10.1			No Assignability		31
10.2			Successors		31
10.3			Payments to Beneficiary		32
10.4			Non-Alienation of Benefits		32
10.5			No Deference		32
10.6			Severability		32
10.7			Amendments		32
10.8			Notices		32
10.9			Counterparts		33
10.10			Governing Law		33
10.11			Captions		33
10.12			Number and Gender		33
10.13			Tax Withholding		33
10.14			No Waiver		33
10.15			Joint and Several Liability		33
10.16			No Rights Prior to Effective Date		33
10.17			Six-month Delay		33
10.18			Interpretation to Avoid 409A Penalties		34
10.19			Entire Agreement		34

 

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THE ALLSTATE CORPORATION

 

AMENDED AND RESTATED

 

CHANGE OF CONTROL EMPLOYMENT AGREEMENT

 

The Allstate Corporation, a Delaware corporation (“ Allstate ”), Allstate Insurance Company, an Illinois insurance company (“ AIC ”), and                                                          (“ Executive ”) are parties to a Change of Control Employment Agreement (the “Original Agreement”) originally entered into on                     (the “Agreement Date”).  The Board of Directors approved the amendment and restatement of the Original Agreement on November 13, 2007 and the further amendment and restatement in the form of this Amended and Restated Agreement on November 11, 2008, such Amended and Restated Agreement to be effective on December 31, 2008, subject to Executive’s execution of this Amended and Restated Agreement.

 

To comply with the provisions of Section 409A of the Internal Revenue Code so as to avoid the imposition of excise taxes and penalties on the Executive under Section 409A and to amend certain provisions of the original Agreement, this Amended and Restated Agreement is entered into, to be effective as of December 31, 2008.

 

PURPOSES

 

On February 12, 1999 Allstate originally adopted Change of Control Employment Agreements, and on November 13, 2007 and November 11, 2008 approved certain changes to the terms of such Agreements. Allstate has determined that it is in the best interests of Allstate and its stockholders to assure that the Company will have the continued service of Executive. Allstate also believes it is imperative to reduce the distraction of Executive that would result from the personal uncertainties caused by a pending or threatened change of control of Allstate, to encourage Executive’s full attention and dedication to the Company, and to provide Executive with compensation and benefits arrangements upon a change of control that will satisfy the expectations of Executive and be competitive with those of similarly situated corporations. This Agreement is intended to accomplish these objectives.

 

ARTICLE I.

CERTAIN DEFINITIONS

 

As used in this Agreement, the terms specified below shall have the following meanings:

 

1.1                                “ Accrued Annual Bonus ” means the amount of any Annual Bonus earned and due to be paid but not yet paid to Executive as of the Executive’s Termination Date, other than amounts that Executive has elected to defer.

 

1.2                                “ Accrued Base Salary ” means the amount of Executive’s Base Salary that is accrued but unpaid as of the Executive’s Termination Date, other than amounts that Executive has elected to defer.

 

 

1.3                                “ Accrued LTIP Bonus ” means the amount of any LTIP Bonus earned and due to be paid but not yet paid to Executive as of the Executive’s Termination Date, other than amounts that Executive has elected to defer.

 

1.4                                “ Accrued Obligations ” means, as of any date, the sum of Executive’s Accrued Base Salary, Accrued Annual Bonus, Accrued LTIP Bonus, any accrued but unpaid vacation pay, and any other amounts and benefits that are then due to be paid or provided to Executive by the Company (other than pursuant to Sections 2.4 or 4.1(b) or any defined benefit or defined contribution plan of the Company, whether or not qualified under Section 401(a) of the Code), but have not yet been paid or provided (as applicable).

 

1.5                                “ Agreement Date ” — see the introductory paragraph of this Agreement.

 

1.6                                “ Agreement Term ” means the period commencing on the Agreement Date and ending on the third anniversary of the Agreement Date or, if later, such later date to which the Agreement Term is extended pursuant to the following sentence. Commencing on the second anniversary of the Agreement Date, the Agreement Term shall automatically be extended each day by one day to create a new one-year term until, at any time after the second anniversary of the Agreement Date, the Company delivers written notice (an “ Expiration Notice ”) to Executive that the Agreement shall expire on a date specified in the Expiration Notice (the “ Expiration Date ”) that is not less than 12 months after the date the Expiration Notice is delivered to Executive; provided, however, that if an Effective Date or an Imminent Control Change Date occurs before the Expiration Date specified in the Expiration Notice, then such Expiration Notice shall be void and of no further effect. “ Imminent Control Change Date ” means (i) any date on which a proposal or offer for a Change of Control is presented to Allstate’s stockholders generally or to any of Allstate’s directors or executive officers or is publicly announced (whether by advertisement, press release, press interview, public statement, SEC filing or otherwise) or (ii) any subsequent date as of which such proposal or offer for a Change of Control remains effective and has not expired or been revoked.

 

1.7                                “ AIC ” — see the introductory paragraph of this Agreement.

 

1.8                                “ Allstate ” — see the introductory paragraph of this Agreement.

 

1.9                                “ Annual Bonus ” — see Section 2.2(b).

 

1.10                          “ Annual Performance Period ” — see Section 2.2(b).

 

1.11                          “ Article ” means an article of this Agreement.

 

1.12                          “ Base Salary ” — see Section 2.2(a).

 

1.13                          “ Beneficiary ” — see Section 10.3.

 

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1.14                          “ Board ” means the Board of Directors of Allstate or, from and after the Effective Date of a Change of Control that gives rise to a Surviving Corporation, the Board of Directors of such Surviving Corporation.

 

1.15                          “ Bonus Plan ” — see Section 2.2(b).

 

1.16                          “ Cause ” — see Section 3.3(b).

 

1.17                          “ CEO ” means Chief Executive Officer.

 

1.18                          “ Change of Control ” means, except as otherwise provided at the end of this Section, the occurrence of any one or more of the following:

 

(a)                                   ( Voting Power)  any Person or group (as such term is defined in Treasury Regulation Section 1.409A-3(i)(5)(v)(B)), other than a Subsidiary or any employee benefit plan (or any related trust) of Allstate or any of its Subsidiaries, acquires or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person of Persons, ownership of stock of Allstate possessing 30% or more of the combined voting power of all Voting Securities of Allstate (such a Person or group that is not a Similarly Owned Company (as defined below), a “ More than 30% Owner ”), except that no Change of Control shall be deemed to have occurred solely by reason of such ownership by a corporation with respect to which both more than 70% of the common stock of such corporation and Voting Securities representing more than 70% of the combined voting power of the Voting Securities of such corporation are then owned, directly or indirectly, by the Persons who were the direct or indirect owners of the common stock and Voting Securities of Allstate immediately before such acquisition in substantially the same proportions as their ownership, immediately before such acquisition, of the common stock and Voting Securities of Allstate, as the case may be (a “ Similarly Owned Company ”); or

 

(b)                                  (Majority Ownership)  any Person or group (as such term is defined in Treasury Regulation Section 1.409A-3(i)(5)(v)(B)), other than a Subsidiary or any employee benefit plan (or any related trust) of Allstate or any of its Subsidiaries, acquires ownership of more than 50% of the voting power of all Voting Securities of Allstate or of the total fair market value of the stock of Allstate (such a Person or group that is not a Similarly Owned Company, a “ Majority Owner ”), except that no Change of Control shall be deemed to have occurred solely by reason of such ownership by a Similarly Owned Company ; or

 

(c)                                   (Board Composition)   a majority of the members of the Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of the appointment or election (“ Board Turnover ”); or

 

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(d)                                  (Reorganization)   the consummation of a merger, reorganization, consolidation, or similar transaction, or of a plan or agreement for the sale or other disposition of all or substantially all of the consolidated assets of Allstate, or a plan of liquidation of Allstate (any of the foregoing, a “ Reorganization Transaction ”) that, does not qualify as an Exempt Reorganization Transaction.

 

Notwithstanding anything contained herein to the contrary: (i) no transaction or event shall constitute a Change of Control for purposes of this Agreement unless the transaction or event constituting the Change of Control also constitutes a change in the ownership of a corporation (as defined in Treasury Regulation Section 1.409A-3(i)(5)(v)), a change in effective control of a corporation (as defined in Treasury Regulation Section 1.409A-3(i)(5)(vi)) or a change in the ownership of a substantial portion of the assets of a corporation (as defined in Treasury Regulation Section 1.409A-3(i)(5)(vii)); and (ii) no sale or disposition of one or more Subsidiaries (“Sale Subsidiary”) or the assets thereof shall constitute a Change of Control for purposes of this Agreement if the investments in and advances by Allstate and its Subsidiaries (other than the Sale Subsidiaries) to such Sale Subsidiary as of immediately prior to the sale or disposition determined in accordance with Generally Accepted Accounting Principles (“GAAP”) (but after intercompany eliminations and net of the effect of intercompany reinsurance) are less than 51% of the Consolidated Total Shareholders’ Equity of Allstate as of immediately prior to the sale or disposition. Consolidated Total Shareholders’ Equity means, at any date, the total shareholders’ equity of Allstate and its Subsidiaries at such date, as reported in the consolidated financial statements prepared in accordance with GAAP.

 

1.19                          “ Code ” means the Internal Revenue Code of 1986, as amended. Any reference to any section of the Code shall also refer to any successor provision.

 

1.20                          “ Company ” means Allstate, AIC and each of Allstate’s other Subsidiaries.

 

1.21                          “ Company Certificate ” — see Section 5.1(b).

 

1.22                          “ Company Counsel Opinion ” — see Section 5.5.

 

1.23                          “ Competitive Business ” means as of any date (including during the one-year period commencing on the Termination Date) any corporation or other Person (and any branch, office or operation thereof) that engages in, or proposes to engage in:

 

(a)                                   the underwriting, reinsurance, marketing or sale of (i) any form of insurance of any kind that the Company as of such date does, or proposes to, underwrite, reinsure, market or sell (any such form of insurance, an “ Allstate Insurance Product ”) or (ii) any other form of insurance that is marketed or sold in competition with any Allstate Insurance Product, or

 

(b)                                  any other business that as of such date is a direct and material competitor of the Company;

 

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and that is located (i) anywhere in the United States, or (ii) anywhere outside of the United States where the Company is then engaged in, or proposes to engage in, any of such activities.

 

1.24                          “ Consummation Date ” means the date on which a Reorganization Transaction is consummated.

 

1.25                          “ Disability ” — see Section 3.1(b).

 

1.26                          “ Disability Effective Date ” — see Section 3.1.

 

1.27                          “ Effective Date ” means the date on which a Change of Control first occurs during the Agreement Term.

 

1.28                          “ Exchange Act ” means the Securities Exchange Act of 1934.

 

1.29                          “ Excise Taxes ” — see Section 5.1.

 

1.30                          “ Executive Counsel Opinion ” — see Section 5.5.

 

1.31                          “ Executive’s Gross-Up Determination ” — see Section 5.2(a).

 

1.32                          “ Exempt Reorganization Transaction ” means a Reorganization Transaction that fails to result in (a) any Person or group (as such term is defined in Treasury Regulation Section 1.409A-3(i)(5)(v)(B)) becoming a More than 30% Owner or a Majority Owner, (b) Board Turnover, or (c) a sale or disposition to any Person or group (as such term is defined in Treasury Regulation Section 1.409A-3(i)(5)(v)(B))of the assets of Allstate that have a total Gross Fair Market Value (as defined below) equal to at least forty percent (40%) of the total Gross Fair Market Value of all of the assets of Allstate immediately before such transaction. “ Gross Fair Market Value” means the value of the assets of Allstate, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

 

1.33                          “ Good Reason ” — see Section 3.4(b).

 

1.34                          “ Gross-up Multiple ” — see Section 5.4.

 

1.35                          “ Gross-up Payment ” — see Section 5.1.

 

1.36                          “ including ” means including without limitation.

 

1.37                          “ IRS ” means the Internal Revenue Service.

 

1.38                          “ IRS Claim ” — see Section 5.6.

 

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1.39                          “ Legal and Other Expenses ” — see Section 6.1(a).

 

1.40                          “ LTIP ” means the Allstate Long-Term Executive Incentive Compensation Plan (or any successor plan).

 

1.41                          “ LTIP Award ” means an incentive compensation opportunity granted under the LTIP.

 

1.42                          “ LTIP Bonus ” means the amount paid or earned in respect of an LTIP Award.

 

1.43                          “ LTIP Performance Period ” means any performance period designated in accordance with any LTIP approved by the Board or any committee of the Board.

 

1.44                          “ LTIP Target Award ” means, in respect of any LTIP Award, the amount that Executive would have been entitled to receive for the LTIP Performance Period corresponding to such LTIP Award if the performance goals established pursuant to such LTIP Award were achieved at the 100% level as of the end of the LTIP Performance Period.

 

1.45                          “ Lump Sum Value ” of an annuity payable pursuant to a defined benefit plan means, as of a specified date, the present value of such annuity, as determined, as of such date, under generally accepted actuarial principles using (i) the applicable interest rate, mortality tables and other methods and assumptions under Code Section 417(e) as published by the IRS and used for determining the value of an immediate annuity on the Termination Date or (ii) if such interest rate and mortality assumptions are no longer published by the IRS, the interest rate and mortality assumptions determined in a manner as similar as practicable to the manner by which the Code Section 417(e) interest rate and mortality assumptions were determined immediately prior to the IRS’s cessation of publication of such assumptions; provided, however, that if such defined benefit plan provides for a lump sum distribution and such lump-sum distribution either (x) is the only payment method available under such plan or (y) provides for a greater amount than the Lump Sum Value of the Maximum Annuity available under such plan, then “Lump Sum Value” shall mean such lump sum amount.

 

1.46                          “ Maximum Annuity ” means, in respect of a defined benefit plan (whether or not qualified under Section 401(a) of the Code), an annuity computed in whatever manner permitted under such plan (including frequency of annuity payments, attained age (whether determined as of a current date or as of a future date upon the commencement of annuity payments), and nature of surviving spouse benefits, if any) that yields the greatest Lump Sum Value.

 

1.47                          “ More than 30% Owner ” — see paragraph (a) of the definition of “Change of Control.”

 

1.48                          “ Notice of Consideration ” — see Section 3.3(c).

 

1.49                          “ Non-Qualified Plan ” — see Section 2.4.

 

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1.62                            “ Section ” means, unless the context otherwise requires, a section of this Agreement.

 

1.63                            “ SERP ” means a supplemental executive retirement Plan that is a Non-Qualified Plan.

 

1.64                            “ Stock Options ” means stock options, stock appreciation rights (including limited stock appreciation rights), or similar awards.

 

1.65                            “ Subsidiary ” means any corporation, business trust, limited liability company or partnership with respect to which Allstate owns, directly or indirectly, Voting Securities representing more than 50% of the aggregate voting power of the then-outstanding Voting Securities.

 

1.66                            “ Surviving Corporation ” means the corporation resulting from a Reorganization Transaction or, if securities representing at least 50% of the aggregate Voting Power of such resulting corporation are directly or indirectly owned by another corporation, such other corporation.

 

1.67                            “ Target Annual Bonus ” as of any date means the amount equal to the product of Base Salary determined as of such date multiplied by the percentage of such Base Salary to which Executive would have been entitled immediately prior to such date under any Bonus Plan for the Annual Performance Period for which the Annual Bonus is awarded if the performance goals established pursuant to such Bonus Plan were achieved at the 100% level as of the end of the Annual Performance Period.

 

1.68                            “ Taxes ” means federal, state, local and other income, employment and other taxes.

 

1.69                            “ Termination Date ” means the date of the receipt of the Notice of Termination by Executive (if such Notice is given by the Company) or by the Company (if such Notice is given by Executive), or any later date, not more than 15 days after the giving of such Notice, specified in such Notice; provided, however, that:

 

(a)                                   if Executive’s employment is terminated by reason of death or Disability, the Termination Date shall be the date of Executive’s death or the Disability Effective Date (as defined in Section 3.1(a)), as applicable; and

 

(b)                                  if no Notice of Termination is given, the Termination Date shall be the last date on which Executive is employed by the Company.

 

1.70                            “ Termination of Employment ” means any termination of Executive’s employment with the Company, whether such occurs by reason of (a) the initiative of any Company or Executive or (b) the death of Executive; provided that such termination is also a “separation from service” within the meaning of Treasury Regulation 1.409A-1(h).

 

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1.71                            “ Voting Securities ” of a corporation means securities of such corporation that are entitled to vote generally in the election of directors of such corporation.

 

ARTICLE II.
POST-CHANGE PERIOD

 

2.1                                  Position and Duties .

 

(a)                                   During the Post-Change Period, (x) Executive’s authority, responsibilities (not including reporting responsibilities), and duties shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 90-day period immediately before the Effective Date and (y) Executive’s services shall be performed at the location where Executive was employed immediately before the Effective Date or any other location which does not constitute a material geographic change from the former location.

 

(b)                                  During the Post-Change Period (except during any periods of vacation to which Executive is entitled and any authorized sick, disability or other leave of absence), Executive shall devote Executive’s full attention and time to the business and affairs of the Company and, to the extent necessary to discharge the duties assigned to Executive in accordance with this Agreement, to use Executive’s best efforts to perform such duties.  During the Post-Change Period, Executive may (i) serve on corporate, civic or charitable boards or committees, (ii) deliver lectures, fulfill speaking engagements or teach at educational institutions and (iii) manage personal investments, so long as such activities are consistent with the Policies of the Company at the Effective Date and do not significantly interfere with the performance of Executive’s duties under this Agreement.  To the extent that any such activities have been conducted by Executive immediately prior to the Effective Date and were consistent with the Policies of the Company at the Effective Date, the continued conduct of such activities (or activities similar in nature and scope) after the Effective Date shall not be deemed to interfere with the performance of Executive’s duties under this Agreement.

 

2.2                                  Compensation .

 

(a)                                   Base Salary .  During the Post-Change Period, the Company shall pay or cause to be paid to Executive an annual base salary in cash, which shall be paid in a manner consistent with the Company’s payroll practices in effect immediately before the Effective Date, at an annual rate not less than 12 times the highest monthly base salary paid or payable to Executive by the Company in respect of the 12-month period immediately before the Effective Date (such annual rate salary, the “ Base Salary ”).  During the Post-Change Period, the Base Salary shall be reviewed at least annually and shall be increased at any time and from time to time as shall be substantially consistent with increases in base salary awarded to other peer executives of the Company. Any increase in Base Salary shall not limit or

 

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reduce any other obligation of the Company to Executive under this Agreement.  After any such increase, the Base Salary shall not be reduced and “Base Salary” shall thereafter refer to the increased amount.

 

(b)                                  Annual Bonus .  The Company shall also pay or cause to be paid to Executive a bonus (the “ Annual Bonus ”), which shall not be less than the Target Annual Bonus determined as of the Effective Date, for each Annual Performance Period that ends during the Post-Change Period.  “ Annual Performance Period ” means each period designated in accordance with any annual bonus arrangement or Plan (a “ Bonus Plan ”) that is based on performance and approved by the Board or any committee of the Board, or in the absence of any Bonus Plan or any such designated period of time, each calendar year.

 

(c)                                   LTIP Bonus .  The Company shall also:

 

(i)                                      pay or cause to be paid to Executive an LTIP Bonus equal to the LTIP Target Award for each LTIP Award for which an LTIP Performance Period is in effect as of the Effective Date; and

 

(ii)                                   throughout the Post-Change Period, grant LTIP Awards to Executive as follows:

 

(1)                                   LTIP Awards shall be granted no less frequently than is contemplated by the terms of the LTIP and the Company’s practices thereunder, as such terms and practices are in effect immediately prior to the Effective Date;

 

(2)                                   each such LTIP Award shall provide for the payment of a percentage of Executive’s Base Salary in effect at the beginning of the Performance Period applicable to such LTIP Award that is no less than the average of the Target LTIP Percentages (as defined below) for all of Executive’s LTIP Awards outstanding immediately prior to the Effective Date; and

 

(3)                                   the target performance goals established for each such LTIP Award shall be substantially comparable to the target performance goals under Executive’s LTIP Awards outstanding on the Effective Date;

 

“ Target LTIP Percentage ” means, in respect of any LTIP Award, the percentage of Executive’s Base Salary (determined as of the beginning of the applicable LTIP Performance Period) that Executive would be entitled to receive after the completion of the applicable LTIP Performance Period if the performance goals applicable to such LTIP Award as of the date immediately prior to the Effective Date were achieved at the 100% level.

 

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(d)                                  Incentive, Savings and Retirement Plans .  Executive shall also be entitled to participate during the Post-Change Period in all cash and equity incentive (including long-term incentives), savings and retirement Plans applicable to other peer executives of the Company, but in no event shall such Plans provide Executive with incentive (including long-term incentives), savings and retirement benefits during the Post-Change Period that are materially less valuable or have terms materially less favorable, in the aggregate, than the most valuable and favorable of those provided by the Company for Executive under such Plans as in effect at any time during the 90-day period immediately before the Effective Date.

 

(e)                                   Welfare Benefit Plans .  During the Post-Change Period, Executive and Executive’s family shall be eligible to participate in, and receive all benefits under, welfare benefit Plans provided by the Company (including medical, prescription, dental, disability, salary continuance, individual life, group life, dependent life, accidental death and travel accident insurance Plans) and applicable to other peer executives of the Company and their families, but in no event shall such Plans provide benefits during the Post-Change Period that are materially less favorable, in the aggregate, than the most favorable of those provided to Executive under such Plans as in effect at any time during the 90-day period immediately before the Effective Date.

 

(f)                                     Fringe Benefits .  During the Post-Change Period, Executive shall be entitled to fringe benefits in accordance with the most favorable Plans applicable to peer executives of the Company, but in no event shall such Plans provide fringe benefits that are materially less favorable, in the aggregate, than the most favorable of those provided by the Company to Executive under such Plans in effect at any time during the 90-day period immediately before the Effective Date.

 

(g)                                  Expenses .  During the Post-Change Period, Executive shall be entitled to prompt reimbursement of all reasonable employment-related expenses incurred by Executive upon the Company’s receipt of accountings in accordance with the most favorable Policies applicable to peer executives of the Company, but in no event shall such Policies be materially less favorable, in the aggregate, than the most favorable of those provided by the Company for Executive under such Policies in effect at any time during the 90-day period immediately before the Effective Date.

 

(h)                                  Office and Support Staff .  During the Post-Change Period, Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to secretarial and other assistance in accordance with the most favorable Policies applicable to peer executives of the Company, but in no event shall such Policies be materially less favorable, in the aggregate, than the most favorable of those provided by the Company for Executive under such Policies in effect at any time during the 90-day period immediately before the Effective Date.

 

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(i)                                      Vacation .  During the Post-Change Period, Executive shall be entitled to paid vacation in accordance with the most favorable Policies applicable to peer executives of the Company, but in no event shall such Policies be materially less favorable, in the aggregate, than the most favorable of those provided by the Company for Executive under such Policies in effect at any time during the 90-day period immediately before the Effective Date.

 

2.3                                  Stock Incentive Awards .  On the Effective Date of a Change of Control (i) all of Executive’s unvested Stock Options then outstanding (whether granted before or after the Agreement Date) shall immediately become fully vested and exercisable, and (ii) all of Executive’s Restricted Shares then outstanding shall immediately become fully vested and nonforfeitable.  This Section amends all award agreements dated as of any date before the Agreement Date.  Accordingly, all provisions of such award agreements relating to a change of control of the Company, including all grants of limited stock appreciation rights, are hereby cancelled effective as of the Agreement Date.

 

2.4                                  Unfunded Deferred Compensation .  On the Effective Date of a Change of Control, Executive shall become fully vested in all benefits previously accrued under any deferred compensation Plan (including a SERP) that is not qualified under Section 401(a) of the Code (a “ Non-Qualified Plan ”).  Within five business days after the Effective Date of a Change of Control, the Company shall pay to Executive a lump-sum cash amount equal to:

 

(a)                                   the sum of the Lump-Sum Values of all Maximum Annuities that are payable pursuant to all defined benefit Non-Qualified Plans, plus

 

(b)                                  the sum of Executive’s account balances under all defined contribution Non-Qualified Plans.

 

To the extent that, if, for any reason, any portion of such Non-Qualified Plan benefit is not so paid, the Company shall pay Executive in lieu thereof a lump-sum cash payment equal to such unpaid portion within the five-business day period specified in the preceding sentence.

 

ARTICLE III.
TERMINATION OF EMPLOYMENT

 

                                                3.1                                  Disability .

 

(a)                                   During the Post-Change Period, the Company may terminate Executive’s employment because of Executive’s Disability by giving Executive or his legal representative, as applicable, (i) written notice in accordance with Section 10.8 of the Company’s intention to terminate Executive’s employment pursuant to this Section and (ii) a certification of Executive’s Disability by a physician selected by the Company or its insurers, subject to the consent of Executive or Executive’s legal representative, which consent shall not be

 

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unreasonably withheld or delayed.  Executive’s employment shall terminate effective on the 30th day (the “ Disability Effective Date ”) after Executive’s receipt of such notice unless, before the Disability Effective Date, Executive shall have resumed the full-time performance of Executive’s duties.

 

(b)                                  “ Disability ” means any medically determinable physical or mental impairment of an Executive that:

 

(i)                                      has lasted for a continuous period of not less than (x) six months or (y) such longer period, if any, that is available to Executive under the Company’s Policies relating to the continuation of employee status after the onset of disability, as such Policies are in effect when Disability is determined, but in no event shall such Policies be materially less favorable to the Executive than the most favorable of such Policies in effect for peer executives at any time during the 90-day period immediately before the Effective Date,

 

(ii)                                   can be expected to be permanent or of indefinite duration, and

 

(iii)                                renders Executive unable to perform the duties required under this Agreement.

 

3.2                                  Death .  Executive’s employment shall terminate automatically upon Executive’s death during the Post-Change Period.

 

3.3                                  Cause .

 

(a)                                   During the Post-Change Period, the Company may terminate Executive’s employment for Cause solely in accordance with all of the substantive and procedural provisions of this Section.

 

(b)                                  “ Cause ” means any one or more of the following:

 

(i)                                     Executive’s conviction of a felony or other crime involving fraud, dishonesty or moral turpitude;

 

(ii)                                 Executive’s willful or reckless material misconduct in the performance of Executive’s duties;

 

(iii)                              Executive’s habitual neglect of duties; or

 

(iv)                               Executive’s willful or intentional breach of this Agreement;

 

provided, however, that for purposes of clauses (ii), (iii), and (iv), Cause shall not include any one or more of the following:

 

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(1)                                   bad judgment or negligence;

 

(2)                                   any act or omission believed by Executive in good faith to have been in or not opposed to the interest of the Company (without intent of Executive to gain, directly or indirectly, a profit to which Executive was not legally entitled);

 

(3)                                   any act