SEVERANCE/CHANGE IN CONTROL
AGREEMENT
THIS
SEVERANCE/CHANGE IN CONTROL AGREEMENT (the “ Agreement
”), is made and entered into this 5 th day of March 2007, by and between
Hanesbrands Inc., a Maryland corporation (the “
Company ”), and Joia M. Johnson (“
Executive ”).
WHEREAS,
Executive is an employee of Company , Company
desires to foster the continuous employment of Executive and
has determined that appropriate steps should be taken to reinforce
and encourage the continued attention and dedication of
Executive to her duties free from distractions which could
arise in anticipation of an involuntary termination of employment
or a Change in Control of Company ;
NOW,
THEREFORE, in consideration of the mutual agreements herein set
forth, Company and Executive agree as
follows:
1. Term
and Nature of Agreement. This Agreement shall commence
on the date it is fully executed (“ Execution Date
”) by all parties and shall continue in effect unless the
Company gives at least eighteen (18) months prior
written notice that this Agreement will not be renewed. In
the event of such notice, this Agreement will expire on the
next anniversary of the Execution Date that is at least
eighteen (18) months after the date of such notice.
Notwithstanding the foregoing, if a Change in Control occurs
during any term of this Agreement , the term of this
Agreement shall be extended automatically for a period of
twenty-four (24) months after the end of the month in which
the Change in Control occurs. Except to the extent otherwise
provided, the parties intend for this Agreement to be
construed and enforced as an unfunded welfare benefit plan under
the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”) including without limitation the
jurisdictional provisions of ERISA.
2.
Involuntary Termination Benefits . Executive shall be
eligible for severance benefits upon an involuntary termination of
employment under the terms and conditions specified in this section
2.
(a)
Eligibility for Severance.
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(i)
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Eligible Terminations
. Subject to
subparagraph (a)(ii) below, Executive shall be eligible for
severance payments and benefits under this section 2 if her
employment terminates under one of the following
circumstances:
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(A)
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Executive’s
employment is terminated
involuntarily without Cause (defined in subparagraph
2(a)(ii)(A)); or
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(B)
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Executive terminates her employment at the
request of Company .
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(ii)
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Ineligible Terminations
. Notwithstanding
subparagraph (a)(i) next above, Executive shall not be
eligible for any severance payments or benefits under this section
2 if her employment terminates under any of the following
circumstances:
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(A)
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A
termination for Cause . For purposes of this
Agreement, “ Cause” means
Executive has been convicted of (or pled guilty or no
contest to) a felony or any crime involving fraud, embezzlement,
theft, misrepresentation of financial impropriety; has willfully
engaged in misconduct resulting in material harm to Company
; has willfully failed to substantially perform duties after
written notice; or is in willful violation of Company
policies resulting in material harm to Company ;
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(B)
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A
termination as the result of Disability. For purposes of
this Agreement “Disability” shall mean a
determination under Company’s disability plan covering
Executive that Executive is disabled;
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(C)
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A
termination due to death;
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(D)
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A
termination due to Retirement. For purposes of this
Agreement “Retirement” shall mean
Executive’s voluntary termination of employment on or
after Executive’s attainment of the normal retirement
age as defined in the Hanesbrands Inc. Pension and Retirement Plan
(the “ Retirement Plan” );
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(E)
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A
voluntary termination of employment other than at the request of
Company ;
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(F)
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A
termination following which Executive is immediately offered
and accepts new employment with Company , or becomes a
non-executive member of the Board;
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(G)
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The
transfer of Executive’s employment to a subsidiary or
affiliate of Company with her consent;
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(H)
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A
termination of employment that qualifies Executive to
receive severance payments or benefits under section 3 below
following a Change in Control ; or
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(I)
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Any
other termination of employment under circumstances not described
in subparagraph 2(a)(i).
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(iii)
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Characterization of
Termination .
The characterization of Executive’s termination shall
be made by the Committee (as defined in section 5 below)
which determination shall be final and binding.
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(iv)
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Termination Date
. For purposes of this
section 2, Executive’s “ Termination Date
” shall mean the date specified in the separation and release
agreement described under section 2(e) below.
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(b)
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Severance Benefits
Payable . If
Executive is terminated under circumstances described in
subparagraph 2(a)(i), and not described in subparagraph 2(a)(ii),
then in lieu of any benefits payable under any other severance plan
of the Company of any type and in consideration of the
separation and release agreement and the covenants contained
herein, the following shall apply:
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(i)
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Executive shall receive continued payment of
her Base Salary (the “ Salary Portion of
Severance ”) during the “ Severance Period
”. The “ Severance Period” shall mean the
number of months determined by multiplying the number of
Executive’s full years of employment with
Company or any subsidiary or affiliate of Company
(including periods of employment with Sara Lee Corporation) by two;
provided, however, that in no event shall the Severance
Period be less than twelve months or more than twenty-four
months. “ Base Salary” shall mean the annual
salary in effect for Executive immediately prior to her
Termination Date. At the discretion of the Committee
, Executive may receive an additional salary portion in an
amount equal to as much as 100% of Executive’s target
bonus.
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(ii)
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Executive shall receive a pro-rata amount
(determined based upon the number of days from the first day of the
Company’s current fiscal year to Executive’s
Termination Date divided by the total number of days in the
applicable performance period) of:
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(A)
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The
annual incentive, if any, payable under the Annual Incentive
Plan in effect with respect to the fiscal year or Short
Year in which the Termination Date occurs based on
actual fiscal year performance (the “ Annual Incentive
Portion of Severance ”). In this Agreement, “
Short Year ” means an incentive period of less than 12
months duration occurring immediately subsequent to the
Company’s exit from the Sara Lee Corporation’s
controlled group of corporations (within the meaning of Section
1563(a) of the Code)). “ Annual Incentive Plan”
means the Hanesbrands Inc. annual incentive plan in which
Executive participates as of the Termination Date ;
and
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(B)
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The
long-term incentive payable under the Omnibus Plan in effect
on Executive’s Termination Date for any performance
period or cycle that is at least fifty (50) percent completed
prior to Executive’s Termination Date and which
relates to the period of her service prior to her Termination
Date . The “ Omnibus Plan” means the
Hanesbrands Inc. Omnibus Incentive Plan of 2006, as amended from
time to time, and any successor plan or plans. The long-term
incentive described in this section (“ Long-Term Cash
Incentive Plan ”) includes cash long-term incentives, but
does not include stock options, RSUs, or other equity
awards.
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Treatment of stock options, RSUs, or
other equity awards shall be determined pursuant to the
Executive’s award agreement(s). Executive shall
not be eligible for any new Annual Incentive Plan grants,
Long-Term Cash Incentive Plan grants, or any other grants of
stock options, RSUs, or other equity awards under the Omnibus
Plan during the Severance Period .
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(iii)
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Beginning on her Termination
Date , Executive shall be eligible to elect continued
coverage under the group medical and dental plan available to
similarly situated senior executives. If Executive elects
continuation coverage for medical coverage, dental coverage or
both, Company shall subsidize the premium charged during the
Severance Period so that the amount of such premium payable
by such Executive shall equal the amount payable by an
active executive of Company for similar coverage as adjusted
from time to time; provided, however, that Executive’s
right to COBRA continuation coverage under any such group health
plan shall be reduced by the number of months of medical and dental
coverage otherwise provided pursuant to this subparagraph. The
premium charged for any COBRA continuation coverage after the end
of the Severance Period shall be entirely at
Executive’s expense and shall be different
(greater) than the premium charged during the Severance
Period . Executive’s COBRA continuation coverage
shall terminate in accordance with the COBRA continuation of
coverage provisions under Company’s group medical and
dental plans. If Executive is eligible for early retirement
under the terms of the Retirement Plan (or would become
eligible if the Severance Period is considered as
employment), then, after exhausting any COBRA continuation coverage
under the group medical plan, Executive may elect to
participate in any retiree medical plan available to similarly
situated senior executives in accordance with the terms and
conditions of such plan in effect on and after Executive’s
Termination Date ; provided, that such retiree medical coverage
shall not be available to Executive unless she elects such
coverage within thirty (30) days following her Termination
Date . The premium charged for such retiree medical coverage
may be different (greater) than the premium charged an active
employee for similar coverage;
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(iv)
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Except as otherwise provided herein
or in the applicable plan , participation in all other
Company plans available to similarly situated senior
executives including but not limited to, qualified pension plans,
stock purchase plans, matching grant programs, 401(k) plans and
ESOPs, personal accident insurance, travel accident insurance,
short and long term disability insurance, and accidental death and
dismemberment insurance, shall cease on Executive’s
Termination Date . During the Severance Period, Company
shall continue to maintain life insurance covering Executive
under Company’s life insurance program. If
Executive is eligible for early retirement or becomes
eligible for early retirement during the Severance Period ,
then Company will continue to pay the premiums
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(or
prepay the entire premium) so that Executive has a paid-up
life insurance benefit equal to her annual salary on her
Termination Date .
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(c)
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Payment of Severance
. The Salary Portion
of Severance shall be paid in accordance with
Company’s payroll schedule, unless the
Committee shall elect to pay the Salary Portion of
Severance in a lump sum payment or a combination of regular
payments and a lump sum payment. Any lump sum payment shall be made
as soon as practicable following the Termination Date , but
in no event later than the fifteenth day of the third month after
the date of termination), unless Company reasonably
determines that Section 409A of the United States Internal
Revenue Code of 1986, as amended, and any successors thereto (the
“Code” ) will result in the imposition of
additional tax on account of such payment before the expiration of
the six-month period described in Section 409A(a)(2)(B)(i) in
which case, all missed payments will be paid on the date that is
six (6) months and one (1) day following the date of
Executive’s separation from service (as defined in
Code Section 409A) or, if earlier, the date of death of
Executive (the “ Delayed Payment Date ”).
The Annual Incentive Portion of Severance , if any, shall be
paid in cash on the same date the active participants under the
Annual Incentive Plan are paid. The Long-Term Cash
Incentive Plan payout, if any, shall be paid in the same form
and on the same date the active participants under the Omnibus
Plan are paid. All payments hereunder shall be reduced by such
amount as Company (or any subsidiary or affiliate of
Company ) may be required under all applicable federal,
state, local or other laws or regulations to withhold or pay over
with respect to such payment.
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(d)
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Termination of Benefits
. Notwithstanding any
provisions in this Agreement to the contrary, all rights to
receive or continue to receive severance payments and benefits
under this section 2 shall cease on the earliest of: (i) the
date Executive breaches any of the covenants in the
separation and release agreement described in section 2(e); or
(ii) the date Executive becomes reemployed by
Company or any of its subsidiaries or affiliates.
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(e)
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Separation and Release
Agreement .
No benefits under this section 2 shall be payable to
Executive until Executive and Company have
executed a separation and release agreement and the payment of
severance benefits under this section 2 shall be subject to the
terms and conditions of the separation and release
agreement.
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(f)
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Death of Executive
.
In the event that
Executive shall die prior to the payment in full of any
benefits described above as payable to Executive for
Involuntary Termination , payments of such benefits shall
cease on the date of Executive’s death.
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3.
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Change in Control
Benefits .
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(a)
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Eligibility for Change in Control
Benefits .
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(i)
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Eligible Terminations
. If (A) within
three (3) months preceding a Change in Control , the
Executive’s employment is terminated by the
Company at the request of a third party in contemplation of
a Change in Control , (B) within twenty-four
(24) months following a Change in Control, Executive
’s employment is terminated by Company other than on
account of Executive’s death, disability or retirement
and other than for Cause, or (C) within twenty-four
(24) months following a Change in Control Executive
voluntarily terminates her employment for Good Reason,
Executive shall be entitled to the Change in Control
benefits as described in section 3(b) below.
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(ii)
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Good Reason . For purposes of this section 3,
“Good Reason” means the occurrence of any one or
more of the following (without Executive’s written
consent after a Change in Control ):
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(A)
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A
material adverse change in Executive’s duties or
responsibilities;
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(B)
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A
reduction in Executive’s annual base salary except for
any reduction of not more than ten (10) percent applicable to
all senior executives;
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(C)
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A
material reduction in Executive’s level of
participation in any of Company’s short- and/or
long-term incentive compensation plans, or employee benefit or
retirement plans, policies, practices or arrangements in which
Executive participates except for any reduction applicable
to all senior executives;
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(D)
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The
failure of any successor to Company to assume and agree to
perform this Agreement ;
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(E)
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Company’s
requiring
Executive to be based at an office location which is at
least fifty (50) miles from her office location at the time of
the Change in Control ;
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The
existence of Good Reason shall not be affected by
Executive’s temporary incapacity due to physical or
mental illness not constituting a Disability .
Executive’s retirement shall constitute a waiver of
her rights with respect to any circumstance constituting Good
Reason . Executive’s continued employment shall
not constitute a waiver of her rights with respect to any
circumstances which may constitute Good Reason ; provided,
however, that Executive may not rely on any particular
action or event described in clause (A) through (E) above
as a basis for terminating her employment for Good Reason
unless she delivers a Notice of Termination based on that
action or event within six months after its
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occurrence and Company has
failed to correct the circumstances cited by Executive as
constituting Good Reason within thirty (30) days of
receiving the Notice of Termination .
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(iii)
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Change in Control.
For purposes of this
Agreement , a “Change in Control” will
occur:
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(A)
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Upon the acquisition by any
individual, entity or group, including any Person (as
defined in the United States Securities Exchange Act of 1934, as
amended (the “Exchange Act”)), of beneficial ownership
(as defined in Rule 13d-3 promulgated under the Exchange Act),
directly or indirectly, of twenty (20) percent or more of the
combined voting power of the then outstanding capital stock of
Company that by its terms may be voted on all matters
submitted to stockholders of Company generally (“
Voting Stock ”); provided, however, that the following
acquisitions shall not constitute a Change in Control
:
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1)
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Any
acquisition directly from Company (excluding any acquisition
resulting from the exercise of a conversion or exchange privilege
in respect of outstanding convertible or exchangeable securities
unless such outstanding convertible or exchangeable securities were
acquired directly from Company );
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2)
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Any
acquisition by Company ;
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3)
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Any
acquisition by an employee benefit plan (or related trust)
sponsored or maintained by Company or any corporation
controlled by Company ; or
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4)
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Any
acquisition by any corporation pursuant to a reorganization, merger
or consolidation involving Company , if, immediately after
such reorganization, merger or consolidation, each of the
conditions described in clauses (1), (2) and (3) of
subparagraph 3(a)(iii)(B) below shall be satisfied; and provided
further that, for purposes of clause (2) immediately above, if
(i) any Person (other than Company or any
employee benefit plan (or related trust) sponsored or maintained by
Company or any corporation controlled by Company )
shall become the beneficial owner of twenty (20) percent or
more of the Voting Stock by reason of an acquisition of
Voting Stock by Company , and (ii) such Person
shall, after such acquisition by Company , become the
beneficial owner of any additional shares of the Voting
Stock and such beneficial ownership is publicly
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announced, then such additional
beneficial ownership shall constitute a Change in Control ;
or
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(B)
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Upon the consummation of a
reorganization, merger or consolidation of Company , or a
sale, lease, exchange or other transfer of all or substantially all
of the assets of Company ; excluding, however, any such
reorganization, merger, consolidation, sale, lease, exchange or
other transfer with respect to which, immediately after
consummation of such transaction:
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1)
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All
or substantially all of the beneficial owners of the Voting
Stock of Company outstanding immediately prior to such
transaction continue to beneficially own, directly or indirectly
(either by remaining outstanding or by being converted into voting
securities of the entity resulting from such transaction), more
than fifty (50) percent of the combined voting power of the
voting securities of the entity resulting from such transaction
(including, without limitation, Company or an entity which
as a result of such transaction owns Company or all or
substantially all of Company ‘s property or assets,
directly or indirectly) (the “ Resulting Entity
”) outstanding immediately after such transaction, in
substantially the same proportions relative to each other as their
ownership immediately prior to such transaction; and
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2)
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No
Person (other than any Person that beneficially
owned, immediately prior to such reorganization, merger,
consolidation, sale or other disposition, directly or indirectly,
Voting Stock representing twenty (20) percent or more
of the combined voting power of Company’s then
outstanding securities) beneficially owns, directly or indirectly,
twenty (20) percent or more of the combined voting power of
the then outstanding securities of the Resulting Entity ;
and
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3)
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At
least a majority of the members of the board of directors of the
entity resulting from such transaction were members of the board of
directors of Company (the “ Board ”) at
the time of the execution of the initial agreement or action of the
Board authorizing such reorganization, merger,
consolidation, sale or other disposition; or
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(C)
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Upon the consummation of a plan of
complete liquidation or dissolution of Company ;
or
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(D)
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When the Initial Directors
cease for any reason to constitute at least a majority of the
Board . For this purpose, an “ Initial Director
” shall mean those individuals serving as the directors of
Company immediately after Company ceased to be
wholly-owned by Sara Lee Corporation; provided, however, that any
individual who becomes a director of Company at or after the
first annual meeting of stockholders of Company whose
election, or nomination for election by the Company’s
stockholders, was approved by the vote of at least a majority of
the Initial Directors then comprising the Board (or
by the nominating committee of the Board , if such committee
is comprised of Initial Directors and has such authority)
shall be deemed to have been an Initial Director ; and
provided further, that no individual shall be deemed to be an
Initial Director if such individual initially was elected as
a director of Company as a result of: (1) an actual or
threatened solicitation by a Person (other than the
Board ) made for the purpose of opposing a solicitation by
the Board with respect to the election or removal of
directors; or (2) any other actual or threatened solicitation
of proxies or consents by or on behalf of any Person (other
than the Board ).
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(iv)
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Termination Date.
For purposes of this
section 3, “ Termination Date ” shall mean the
date specified in the Notice of Termination as the date on
which the conditions giving rise to Executive’s
termination were first met.
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(b)
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Change in Control
Benefits . In the event Executive
becomes entitled to receive benefits under this section 3, the
following shall apply:
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(i)
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In
consideration of Executive’s covenant in section 4
below, Company shall pay Executive :
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(A)
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A
lump sum payment equal to the unpaid portion of
Executive’s annual Base Salary and vacation
accrued through the Termination Date ;
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(B)
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A
lump sum payment equal to Executive’s prorated
Annual Incentive Plan payment (as determined in accordance
with subparagraph 2(b)(ii)(A) above;
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(C)
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A
lump sum payment equal to Executive’s prorated
Long-Term Cash Incentive Plan payment(as determined in
accordance with subparagraph 2(b)(ii)(B) above; and
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(D)
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A
lump sum payment equal to two times the sum of (1)
Executive’s annual Base Salary ; and
(2) the greater of (i) Executive’s target annual
incentive (as defined in the Annual Incentive Plan ) for the
year in which the Change in Control occurs and (ii)
Executive’s
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average annual
incentive calculated over the three fiscal years immediately
preceding the year in which the Change in Control occurs
(including for this purpose any annual incentive received from Sara
Lee Corporation); and (3) an amount equal to the
Company matching contribution to the defined contribution
plan in which Executive is participating at the
Termination Date (currently 4%).
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Treatment of stock options, RSUs, or
other equity awards shall be determined pursuant to the
Executive’s award agreement(s). Executive shall
not be eligible for any new Annual Incentive Plan grants,
Long-Term Cash Incentive Plan grants, or any other grants of
stock options, RSUs, or other equity awards under the Omnibus
Plan with respect to the CIC Severance Period as defined
immediately below.
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(ii)
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For
a period of 24 months following Executive’s
Termination Date (the “ CIC Severance Period
”), Executive shall have the right to elect
continuation of the health insurance, life insurance, personal
accident insurance, travel accident insurance and accidental death
and dismemberment insurance coverages which insurance coverages
shall be provided at the same levels and the same costs in effect
immediately prior to the Change in Control ; provided,
however, that Executive’s right to COBRA continuation
coverage under any group health plan shall be reduced by the number
of months of coverage otherwise provided pursuant to this
subparagraph. The premium charged for any COBRA continuation
coverage after the end of the CIC Severance Period shall be
entirely at Executive’s expense and may be different
(greater) than the premium charged during the CIC Severance
Period . Executive’s COBRA continuation coverage
shall terminate in accordance with the COBRA continuation of
coverage provisions under Company’s group medical and
dental plans. If Executive is eligible for early retirement
under the terms of the Retirement Plan (or would become
eligible if the Severance Period is considered as
employment), then, after exhausting any COBRA continuation coverage
under the group medical plan, Executive may elect to
participate in any retiree medical plan available to similarly
situated senior executives in accordance with the terms and
conditions of such plan in effect on and after Executive’s
Termination Date ; provided, that such retiree medical coverage
shall not be available to Executive unless she elects such
coverage within thirty (30) days following her Termination
Date . The premium charged for such retiree medical coverage
may be different from the premium charged an active employee for
similar coverage;
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(iii)
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If
the aggregate benefits accrued by Executive as of the
Termination Date under the savings and retirement plans
sponsored by Company are not fully vested pursuant to the
terms of the applicable plan(s), the difference between the
benefits Executive is entitled to receive under such plans
and
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