EXHIBIT 10.19
EXECUTIVE CHANGE-IN-CONTROL
SEVERANCE AGREEMENT
THIS EXECUTIVE CHANGE-IN-CONTROL
SEVERANCE AGREEMENT is made, entered into, and is effective as of
the16th day of July, 2008 (hereinafter referred to as the
“Effective Date”), by and between Mueller Water
Products, Inc. (the “Company”), a Delaware corporation,
and Mr. Evan L. Hart (the “Executive”).
Executive acknowledges and represents that any and all prior
agreements for change in control severance are terminated and
replaced entirely by this Agreement.
WHEREAS, the Executive is currently
employed by the Company and possesses considerable experience and
knowledge of the business and affairs of the Company concerning its
policies, methods, personnel, and operations; and
WHEREAS, the Company is desirous of
assuring insofar as possible, that it will continue to have the
benefit of the Executive’s services; and the Executive is
desirous of having such assurances; and
WHEREAS, the Company recognizes that
circumstances may arise in which a Change in Control of the Company
occurs, through acquisition or otherwise, thereby causing
uncertainty of employment without regard to the Executive’s
competence or past contributions. Such uncertainty may result in
the loss of the valuable services of the Executive to the detriment
of the Company and its shareholders; and
WHEREAS, both the Company and the
Executive are desirous that any proposal for a Change in Control or
acquisition will be considered by the Executive objectively and
with reference only to the business interests of the Company and
its shareholders; and
WHEREAS, the Executive will be in a
better position to consider the Company’s best interests if
the Executive is afforded reasonable security, as provided in this
Agreement, against altered conditions of employment which could
result from any such Change in Control or acquisition.
NOW, THEREFORE, in consideration of
the foregoing and of the mutual covenants and agreements of the
parties set forth in this Agreement, and of other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound,
agree as follows:
Article 1.
Definitions
Wherever used in this Agreement, the
following terms shall have the meanings set forth below and, when
the meaning is intended, the initial letter of the word is
capitalized:
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(a)
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“
Agreement ” means this Executive Change-in-Control
Severance Agreement.
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(b)
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“ Base
Salary ” means, at any time, the then regular annual rate
of pay which the Executive is receiving as annual salary, excluding
amounts: (i) received under short-term or long-term incentive
or other bonus plans, regardless of whether or not the amounts are
deferred, or (ii) designated by the Company as payment toward
reimbursement of expenses.
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(c)
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“
Beneficial Owner ” shall have the meaning ascribed to
such term in Rule 13d-3 of the General Rules and Regulations
under the Exchange Act.
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(d)
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“
Board ” means the Board of Directors of the
Company.
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(e)
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“
Cause ” shall be determined solely by the Committee in
the exercise of good faith and reasonable judgment, and shall mean
the occurrence of any one or more of the following:
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(i)
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The
Executive’s conviction or guilty plea of a felony or
conviction or guilty plea of any crime involving fraud or
dishonesty;
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(ii)
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The
Executive’s willful and continued refusal to perform the
duties of his or her position in all material respects (other than
any such failure resulting from the Executive’s incapacity
due to physical or mental illness), that continues for more than 15
business days after the Company gives the Executive written notice
of the failure, specifying what duties the Executive failed to
perform and an opportunity to cure;
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(iii)
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fraudulent
preparation of financial information of the Company; or
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(iv)
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The
Executive’s willful engagement in conduct that is
demonstrably and materially injurious to the Company, monetarily or
otherwise, provided that no act or failure to act on the
Executive’s part shall be deemed “willful” unless
done, or omitted to be done, by the Executive not in good faith and
without reasonable belief that the action or omission was in the
best interests of the Company.
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(f)
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“
Change in Control ” of the Company shall mean the
occurrence of any one (1) or more of the following
events:
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(i)
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Any Person
(other than the Company or any corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company, and
any trustee or other fiduciary holding securities under an employee
benefit plan of the Company or such proportionately owned
corporation) is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing more than
thirty percent (30%) of the combined voting power of the
Company’s then outstanding securities;
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(ii)
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During any
period of not more than thirty-six (36) consecutive months,
individuals who at the beginning of such period constitute the
Board of Directors of the Company, and any new director whose
election by the Board or nomination for election by the
Company’s stockholders was approved by a vote of at least a
majority (rounded up to the nearest whole number) of the directors
then still in office who either were directors at the beginning of
the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute at least
a majority thereof;
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(iii)
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The
consummation of a merger or consolidation of the Company with any
other corporation, other than: (i) a merger or
consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than sixty-six
and two-thirds percent (66-2/3%) of the combined voting power
of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation;
or (ii) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which
no Person acquires more than thirty percent (30%) of the
combined voting power of the Company’s then outstanding
securities; or
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(iv)
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The
Company’s stockholders approve a plan or an agreement for the
sale or disposition by the Company of all or substantially all of
the Company’s assets (or any transaction or series of
transactions having a similar effect).
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(g)
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“
Code ” means the Internal Revenue Code of 1986, as
amended.
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(h)
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“
Committee ” means the Compensation Committee of the
Board of Directors of the Company, or, if no Compensation Committee
exists, then the full Board of Directors of the Company, or a
committee of Board members, as appointed by the full Board to
administer this Agreement.
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(i)
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“
Company ” means Mueller Water Products, Inc., a
Delaware corporation (including any and all subsidiaries), or any
successor thereto as provided in Article 9 herein.
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(j)
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“
Disability ” or “ Disabled ” means
that Executive has been physically or mentally incapacitated so as
to render Executive incapable of performing the essential functions
of any substantial gainful activity, or Executive has received
income replacement benefits under a Company plan for at least three
months, and, in either instance, that incapacity is expected to
result in death or to last for a continuous period of at least 12
months. Executive’s receipt of disability benefits under the
Company’s long-term disability plan or receipt of Social
Security disability benefits shall be deemed conclusive evidence of
Disability for purposes of this Agreement.
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(k)
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“
Effective Date ” means the date this Agreement is
approved by the Board, or such other date as the Board shall
designate in its resolution approving this Agreement, and as
specified in the opening sentence of this Agreement.
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(l)
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“
Effective Date of Termination ” means the date on
which a Qualifying Termination occurs, as provided in
Section 2.2 herein, which triggers the payment of Severance
Benefits hereunder.
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(m)
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“
Exchange Act ” means the Securities Exchange Act of
1934, as amended.
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(n)
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“
Federal Funds Rate” shall mean the “Federal
Funds Rate” as issued in the Money Rates column of The Wall
Street Journal.
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(o)
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“ Good
Reason ” means, without the Executive’s express
written consent, the occurrence after a Change in Control of the
Company of any one (1) or more of the following to the extent
that there is, or would be if not corrected, a material negative
change in the Executive’s employment relationship with the
Company:
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(i)
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The assignment
of the Executive to duties materially inconsistent with the
Executive’s authorities, duties, responsibilities, and status
as an executive and/or officer of the Company, or a material
reduction or alteration in the nature or status of the
Executive’s authorities, duties, or responsibilities from
those in effect as of ninety (90) calendar days prior to the
Change in Control, other than an insubstantial and inadvertent act
that is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
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(ii)
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The
Company’s requiring the Executive to be based at a location
in excess of fifty (50) miles from the location of the
Executive’s principal job location or office immediately
prior to the Change in Control; except for required travel on the
Company’s business to an extent substantially consistent with
the Executive’s then present business travel
obligations;
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(iii)
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A reduction by
the Company of the Executive’s Base Salary in effect on the
Effective Date hereof, or as the same shall be increased from time
to time;
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(iv)
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The failure of the Company to
continue in effect any of the Company’s short- and long-term
incentive compensation plans, or employee benefit or retirement
plans, policies, practices, or other compensation arrangements in
which the Executive participates unless such failure to continue
the plan, policy, practice, or arrangement pertains to all plan
participants generally; or the failure by the Company to continue
the Executive’s participation therein on
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substantially the same basis,
both in terms of the amount of benefits provided and the level of
the Executive’s participation relative to other participants,
as existed immediately prior to the Change in Control of the
Company;
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(v)
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The failure of
the Company to obtain a satisfactory agreement from any successor
to the Company to assume and agree to perform the Company’s
obligations under this Agreement, as contemplated in Article 9
herein; and
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(vi)
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A material
breach of this Agreement by the Company which is not remedied by
the Company within ten (10) business days of receipt of
written notice of such breach delivered by the Executive to the
Company.
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Unless the Executive becomes
Disabled, the Executive’s right to terminate employment for
Good Reason shall not be affected by the Executive’s
incapacity due to physical or mental illness. The Executive’s
continued employment shall not constitute consent to, or a waiver
of rights with respect to, any circumstance constituting Good
Reason herein.
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(p)
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“
Notice of Termination ” shall mean a written notice
which shall indicate the specific termination provision in this
Agreement relied upon, and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination
of the Executive’s employment under the provision so
indicated.
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(q)
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“Notice of Termination for Good
Reason” shall mean
a notice that (i) indicates the specific termination provision
or provisions relied upon, (ii) sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for
Termination for Good Reason and (iii) indicates a date of
termination of employment. The failure by Executive to set forth in
the Notice of Termination for Good Reason any facts or
circumstances which contribute to the showing of Good Reason shall
not waive any right of Executive hereunder or preclude Executive
from asserting such fact or circumstance in enforcing his rights
hereunder. The Notice of Termination for Good Reason shall provide
for a date of termination of employment not less than thirty
(30) nor more than sixty (60) days after the date such
Notice of Termination for Good Reason is given, provided that in
the case of the events set forth in Article I, Section
(o) 6(b)(i) or (ii), the date may be not less than twenty
(20) days after the giving of such notice.
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(r)
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“
Person ” shall have the meaning ascribed to such term
in Section 3(a)(9) of the Exchange Act and used in Sections
13(d) and 14(d) thereof, including a “group” as defined
in Section 13(d).
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(s)
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“
Qualifying Termination ” means the Executive’s
“separation from service” (as such term is used in Code
Section 409A) upon any of the events described in
Section 2.2 herein, the occurrence of which triggers the
payment of Severance Benefits hereunder.
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(t)
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“
Severance Benefits ” mean the payment of severance
compensation as provided in Section 2.3 herein.
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Article 2. Severance
Benefits
2.1 Right to Severance
Benefits . The Executive
shall be entitled to receive from the Company Severance Benefits as
described in Section 2.3 herein, if there has been a Change in
Control of the Company and if, within twenty-four
(24) calendar months thereafter, the Executive’s
employment with the Company shall end for any reason specified in
Section 2.2 herein as being a Qualifying
Termination.
The Executive shall not be entitled
to receive Severance Benefits if he is terminated for Cause, or if
his employment with the Company ends due to death, Disability,
voluntary normal retirement (as defined under the then established
rules of the Company’s tax-qualified retirement plan), or due
to a voluntary termination of employment for reasons other than as
specified in Section 2.2(b) herein.
If benefits are triggered hereunder,
and under another Company-related severance plan or program, the
benefits under this Agreement shall be paid under the terms hereof,
and any duplicative benefits under such other plan or program shall
be forfeited.
2.2 Qualifying
Termination . The
occurrence of any one of the following events within twenty-four
(24) calendar months after a Change in Control of the Company
shall trigger the payment of Severance Benefits to the Executive
under this Agreement:
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(a)
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The
Company’s involuntary termination of the Executive’s
employment without Cause; and
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(b)
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The
Executive’s voluntary employment termination for Good
Reason.
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For purposes of this Agreement, a
Qualifying Termination shall not include a termination of
employment by reason of death, Disability, or voluntary normal
retirement (as such term is defined under the then established
rules of the Company’s tax-qualified retirement plan), the
Executive’s voluntary termination for reasons other than as
specified in Section 2.2(b) herein, or the Company’s
involuntary termination for Cause.
2.3 Description of Severance
Benefits . In the event
the Executive becomes entitled to receive Severance Benefits, as
provided in Sections 2.1 and 2.2 herein, the Company shall pay
to the Executive and provide him with the following Severance
Benefits:
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(a)
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A lump-sum
amount equal to the Executive’s unpaid Base Salary, accrued
vacation pay, unreimbursed business expenses, and all other items
earned by and owed to the Executive through and including the
Effective Date of Termination.
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(b)
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A lump-sum
amount equal to the Executive’s annual bonus award earned as
of the Effective Date of Termination, based on actual year-to-date
performance, as determined at the Committee’s discretion
(excluding any special bonus payments). This payment will be in
lieu of any other payment to be made to the Executive under the
annual bonus plan in which the Executive is then participating for
the plan year.
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(c)
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An aggregate amount equal to
one and one-half (1.5) multiplied by the sum of the following:
(i) the higher of: (A) the Executive’s annual rate
of Base Salary in effect upon the Effective Date of Termination, or
(B) the Executive’s annual rate of Base Salary in effect
on the date of the Change in Control; and (ii) the average of
the actual annual bonus earned (whether or not deferred) by the
Executive under the annual bonus plan (excluding any special bonus
payments) in which the Executive participated in the three
(3) years preceding the year in which the Executive’s
Effective Date of Termination occurs. If the Executive has less
than three (3) years of annual bonus participation preceding
the year in which the Executive’s Effective Date of
Termination occurs, then the Executive’s annual target bonus
established under the annual bonus plan in which the Executive is
then participating for the bonus plan year in which the
Executive’s Effective Date of Termination occurs shall be
used for each year that the Executive did not participate in the
annual bonus plan, up to a maximum of three (3) years, to
calculate the three (3) year average bonus payment. Payments
shall be made in eighteen (18) monthly installments. The first
installment shall be equal to 1 / 18 th
of the aggregate
amount, and shall be paid within sixty (60) days following the
Effective Date of Termination, and subsequent installments shall be
paid on the last business day of each succeeding month; provided
that Executive’s entitlement to each such installment shall
be contingent upon execution (and non-revocation) by Executive of a
release as described in Section 10.1 before the payment date
under this Agreement for each such installment. Each monthly
installment thereafter shall increase by a percentage equal to
1/12 th of the Federal Funds rate in
effect on the last day of the month preceding payment. All payments
are subject to applicable taxes.
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(d)
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A lump-sum
amount equal to one-half (.5) multiplied by the sum of the
following: (i) the higher of: (A) the Executive’s
annual rate of Base Salary in effect upon the Effective Date of
Termination, or (B) the Executive’s annual rate of Base
Salary in effect on the date of the Change in Control; and
(ii) the average of the actual annual bonus earned (whether or
not deferred) by the Executive under the annual bonus plan
(excluding any special bonus payments) in which the Executive
participated in the three (3) years preceding the year in
which the Executive’s Effective Date of Termination occurs.
If the Executive has less than three (3) years of annual bonus
participation preceding the year in which the Executive’s
Effective Date of Termination occurs, then the Executive’s
annual target bonus established under the annual bonus plan in
which the Executive is then participating for the bonus plan year
in which the Executive’s Effective Date of Termination occurs
shall be used for each year that the Executive did n
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