EXHIBIT 10.19
CHANGE OF CONTROL AGREEMENT
THIS CHANGE OF CONTROL AGREEMENT (the
“Agreement”), made and entered into effective as of
August 20, 2007 (the “Effective Date”), by and
between Exterran Holdings, Inc., a Delaware corporation (the
“Company”), and
(“Executive”).
WHEREAS , the Company and Executive desire to enter into an
agreement regarding their respective rights and obligations in
connection with a Change of Control during the Term of this
Agreement;
THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Company and
Executive agree as follows:
1. Term. This Agreement
shall begin on the Effective Date and shall continue until
August 20, 2009; provided, however, that commencing on
August 20, 2008 and on each August 20 thereafter, the
term of this Agreement shall automatically be extended for one
additional year (such initial period, plus any extensions, plus, in
the event of Executive’s Qualifying Termination of Employment
for Good Reason, any additional time period necessitated by the
Company’s right to cure as set forth in the definition of
“Good Reason,” the “Term”), unless at least
90 days prior to such August 20 date the Board shall give
written notice to Executive that the Term of this Agreement shall
cease to be so extended. However, if a Change of Control shall
occur during the Term, the Term shall automatically continue in
effect for a period of 18 months plus, in the event of
Executive’s Qualifying Termination of Employment for Good
Reason, any additional time period necessitated by the
Company’s right to cure as set forth in the definition of
“Good Reason,” commencing on the date of such Change of
Control. This Agreement shall automatically terminate on
Executive’s termination of employment, except as provided in
the definition of “Protected Period.” Termination of
this Agreement shall not alter or impair any rights of Executive
arising under this Agreement on or prior to such termination.
2. Qualifying Termination of
Employment. If Executive incurs a Qualifying Termination of
Employment, Executive shall be entitled to the benefits provided in
Sections 3 and 4 hereof. If Executive’s employment
terminates for any reason other than for a Qualifying Termination
of Employment, then Executive shall not be entitled to any benefits
under this Agreement.
3. Benefits Upon a
Qualifying Termination of Employment.
(a) Lump Sum . Following
a Qualifying Termination of Employment, the Company shall pay to
Executive, within five business days after the Date of Termination
(or, if Code Section 409A is applicable to the payment, as soon as
such payment can be made without being subject to the additional
taxes and interest under Code Section 409A), an amount, in a
lump sum payment, equal to the sum of:
(i) The total of
(A) Executive’s earned but unpaid Base Salary through
the Date of Termination plus (B) Executive’s Target
Bonus for the current year (prorated to Date of Termination) plus
(C) any earned but unpaid
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Actual Bonus
for the prior year (if the prior year’s Actual Bonus has not
yet been calculated as of the Date of Termination such amount shall
be payable when calculated, but in no event later than
March 15th of the year following the Termination Year);
plus
(ii) Any portion of Executive’s
vacation pay accrued, but not used, for the Termination Year as of
the Date of Termination; plus
(iii) The product of
[two/three] multiplied by the sum of Executive’s Base
Salary and Target Bonus amount for the Termination Year (not
prorated); plus
(iv) An amount equal to the total of
the employer matching contributions that would have been credited
to Executive’s account under the 401(k) Plan and any other
deferred compensation plan of the Company (or any of its affiliated
companies) had Executive made the required amount of elective
deferrals or contributions to receive such maximum employer
matching contributions under the 401(k) Plan and any other deferred
compensation plan (and regardless of whether Executive actually
made any such elective deferrals or contributions) during the
12-month period immediately preceding the month of
Executive’s Date of Termination, multiplied by
[two/three] , such amount to be grossed up so that the
amount Executive actually receives after payment of any federal or
state taxes payable thereon equals the amount first described
above; plus
(iv) Amounts previously deferred by
Executive, if any, or earned but not paid, if any, under any
Company incentive and nonqualified deferred compensation plans or
programs as of the Date of Termination.
(b) Continuing Medical
Coverage. For a period of [two/three] years from
Executive’s Date of Termination, or such longer period as may
be provided by the terms of the appropriate medical and/or welfare
benefit plan, program, practice or policy, the Company shall
provide benefits to Executive and/or Executive’s eligible
dependents equal to those that would have been provided to them in
accordance with the plans, programs, practices and policies if
Executive’s employment had not been terminated; provided,
however, that with respect to any of such plans, programs,
practices or policies requiring an employee contribution, Executive
shall continue to pay the monthly employee contribution for same,
and provided further, that if Executive becomes employed by another
employer and is eligible to receive medical or other welfare
benefits under another employer-provided plan, the medical and
other welfare benefits described herein shall be secondary to those
provided under such other plan during such applicable period of
eligibility.
(c) Awards. All stock
options, restricted stock, restricted stock units, or other awards
based in common stock of the Company, and all common units, unit
appreciation rights, unit options and other awards based in common
units representing limited partner interests of the Partnership,
and all cash-based incentive awards held by Executive and
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not previously
vested shall be 100% vested (except with respect to (i) an
award that is subject to Code Section 409A if such
acceleration would result in the imposition of applicable taxes and
interest under Code Section 409A and (ii) awards
denominated in or relating to common units of the Partnership that,
by their terms, continue to vest following a termination of
employment without cause or for good reason). Notwithstanding the
terms of any Company (or affiliate) plan or agreement between the
Company (or affiliate) and Executive to the contrary, the
accelerated vesting of all stock options, restricted stock,
restricted stock units, or other awards required pursuant to the
terms of this Section 3(c) shall govern.
(d) Interest. If any
payment due under the terms of this Agreement is not timely made by
the Company, its successors or assigns, interest shall accrue on
such payment at the highest maximum legal rate permissible under
applicable law from the date such payment first became due through
the date it is paid.
(e) Release.
Notwithstanding anything in this Agreement to the contrary, no
payment shall be made or benefits provided pursuant to this
Agreement unless Executive signs and returns to the Company within
50 days following the date of a Qualifying Termination of
Employment, and does not revoke within seven days thereafter, a
complete release and waiver, in exchange for the severance payments
described in Section 3(a) above, among other items, of all claims
for liability and damages in any way related to Executive’s
employment against the Company, its affiliates, their directors,
officers, employees and agents, and their employee benefit plans
and fiduciaries and agents of such plans in a form provided by the
Company.
(f) Severance Offset .
Any cash severance payments provided under Section 3(a) shall be
offset or reduced by the amount of any cash severance amounts
payable to Executive under any other individual agreement the
Company or an affiliate may have with Executive or any severance
plan or program maintained by the Company or any affiliate for
employees in general.
(g) Code Section 409A
Matters.
(i) This Agreement is intended to
comply with Code Section 409A and any ambiguous provisions
will be construed in a manner that is compliant with or exempt from
the application of Code Section 409A. If a provision of the
Agreement would result in the imposition of applicable taxes and
interest under Code Section 409A, such provision may be
reformed to avoid imposition of such taxes and interest and no
action taken to comply with Code Section 409A shall be deemed
to adversely affect any rights or benefits of Executive
hereunder.
(ii) All reimbursements and in-kind
benefits provided pursuant to this Agreement shall be made in
accordance with Treasury Regulations Section 1.409A-3(i)(1)(iv)
such that any reimbursements or in-kind benefits will be deemed
payable at a specified time or on a fixed schedule relative to a
permissible payment event. Specifically, (A) the amounts
reimbursed and in-kind benefits under this Agreement, other than
with respect to medical benefits provided under
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Section 3(b), during Executive’s taxable year may not
affect the amounts reimbursed or in-kind benefits provided in any
other taxable year, (B) the reimbursement of an eligible
expense shall be made on or before the last day of
Executive’s taxable year following the taxable year in which
the expense was incurred, and (C) the right to reimbursement
or an in-kind benefit is not subject to liquidation or exchange for
another benefit.
(iii) If the Company determines,
pursuant to policies adopted by the Board, that Executive is a
“specified employee” within the meaning of Code
Section 409A as of the date of his Date of Termination, no
distributions or benefits that are subject to Code
Section 409A shall be made under this Agreement before the
date that is six months and two days after Executive’s Date
of Termination (or, if earlier, the date of Executive’s
death). In addition, in the event of a payment delayed under this
Section 3(g)(iii), the Company agrees to pay to Executive, as
of the date it makes the delayed payment, simple interest on such
delayed amount at the applicable Federal rate provided for in Code
Section 7872(f)(2)(A), based on the number of days the payment
was delayed. If Executive disagrees with the Company’s
determination that Code Section 409A requires such six-month
delay with respect to a payment or benefit, such payment or benefit
can be made prior to such delayed payment date if Executive agrees
in writing (in the form approved by the Company) that should the
IRS subsequently assert that some or all of the payments or
benefits made pursuant to this Agreement do not comply with the
requirements of Code Section 409A, then (i) Executive agrees
that he is solely responsible for all taxes, excise taxes,
penalties and interest resulting from such determination, and that
he will not seek contribution, reimbursement or any other recovery
from the Company or any of its affiliates, officers, employees or
directors for any taxes, excise taxes, interest or penalties paid
or due or any costs he incurs in challenging such position of the
IRS, and (ii) Executive will reimburse, and hold the Company,
its affiliates, officers, employees or directors harmless for, any
costs, including attorneys fees and costs of court, penalties or
fees, that it may incur in connection with a later determination
that the payments made pursuant to this Agreement are covered by
Code Section 409A and were not properly reported as
such.
4. Certain Additional
Payments by the Company.
(a) Anything in this Agreement to the
contrary notwithstanding and except as set forth below, in the
event it shall be determined that any payment or distribution in
the nature of compensation (within the meaning of Code
Section 280G(b)(2)) by the Company to or for the benefit of
Executive (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under
this Section 4) (a “Payment”) would be subject to
the excise tax imposed by Code Section 4999 or any interest or
penalties are incurred by Executive with respect to such excise tax
(such excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the “Excise
Tax”), then Executive shall be entitled to receive an
additional payment (a “Gross-Up Payment”) in an amount
such that after payment by Executive of all taxes
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(including any
interest or penalties imposed with respect to such taxes),
including without limitation, any income taxes (and any interest
and penalties imposed with respect thereto) and Excise Tax imposed
upon the Gross-Up Payment, Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
Notwithstanding the foregoing provisions of this Section 4(a),
if it shall be determined that Executive is entitled to a Gross-Up
Payment, but that Executive, after taking into account the Payments
and the Gross-Up Payment, would not receive a net after-tax benefit
of at least $1,000 (taking into account both income taxes and any
Excise Tax) as compared to the net after-tax proceeds to Executive
resulting from an elimination of the Gross-Up Payment and a
reduction of the Payments, in the aggregate, to an amount (the
“Reduced Amount”) such that the receipt of Payments
would not give rise to any Excise Tax, then no Gross-Up Payment
shall be made to Executive and the Payments, in the aggregate,
shall be reduced to the Reduced Amount.
(b) Subject to the provisions of
Section 4(c), all determinations required to be made under
this Section 4, including whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination shall
be made by Deloitte & Touche LLP or, as provided below, such
other certified public accounting firm as may be designated by
Executive (the “Accounting Firm”) which shall provide
detailed supporting calculations both to the Company and Executive
within 15 business days after the receipt of notice from Executive
that there has been a Payment, or such earlier time as is requested
by the Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting
the Change of Control, Executive shall appoint another nationally
recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 4, shall be paid by the
Company to Executive within five days after the receipt of the
Accounting Firm’s determination. Any determination by the
Accounting Firm shall be binding upon the Company and Executive. As
a result of the uncertainty in the application of Code
Section 4999 at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments
which will not have been made by the Company should have been made
(“Underpayment”), consistent with the calculations
required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 4(c) and Executive
thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that
has occurred and any such Underpayment shall be promptly paid by
the Company to or for the benefit of Executive.
(c) Executive shall notify the
Company in writing of any claim by the IRS that, if successful,
would require the payment by the Company of the Gross-Up Payment
(or an additional Gross-Up Payment) in the event the IRS seeks
higher payment. Such notification shall be given as soon as
practicable, but no later than ten business days after Executive is
informed in writing of such claim, and shall apprise the Company of
the nature of such claim and the date on which such claim is
requested to be paid. Executive shall not pay such claim prior to
the expiration of the 30-day period following the date on
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which he gives
such notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is due).
If the Company notifies Executive in writing prior to the
expiration of such period that it desires to contest such claim,
Executive shall:
(i) Give the Company any information
reasonably requested by the Company relating to such claim;
(ii) Take such action in connection
with contesting such claim as the Company shall reasonably request
in writing from time to time, including without limitation,
accepting legal representation with respect to such claim by an
attorney reasonably selected by the Company;
(iii) Cooperate with the Company in
good faith in order to effectively contest such claim; and
(iv) Permit the Company to
participate in any proceedings relating to such claim;
provided,
however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in
connection with such costs and shall indemnify and hold Executive
harmless, on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto) imposed as
a result of such representation and payment of costs and expenses.
Without limitation of the foregoing provisions of this
Section 4(c), the Company shall control all proceedings taken
in connection with such contest and, at its sole option, may pursue
or forego any and all administrative appeals, proceedings, hearings
and conferences with the taxing authority in respect of such claim
and may, at its sole option, either direct Executive to pay the tax
claimed and sue for a refund or contest the claim in any
permissible manner, and Executive agrees to prosecute such contest
to determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company
directs Executive to pay such claim and sue for a refund, the
Company shall provide the amount of such payment to Executive as an
additional payment (“Supplemental Payment”) (subject to
Section 4(d)), and shall indemnify and hold Executive
harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with
respect to such payment or with respect to any imputed income with
respect to such payment; and further provided that any extension of
the statute of limitations relating to payment of taxes for the
taxable year of Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company’s control of the contest
shall be limited to issues with respect to which a Gross-Up Payment
or Supplemental Payment would be payable hereunder and Executive
shall be entitled to settle or contest, as the case may be, any
other issues raised by the IRS or any other taxing authority.
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(d) If, after the receipt by
Executive of an amount advanced by the Company pursuant to
Section 4(c), Executive becomes entitled to receive any refund
with respect to such claim, Executive shall (subject to the
Company’s complying with the requirements of
Section 4(c)) promptly pay to the Company the amount of such
refund (together with any in
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