SEVERANCE/CHANGE
IN CONTROL AGREEMENT
THIS SEVERANCE/CHANGE IN CONTROL AGREEMENT (the “
Agreement ”), is made and entered into this
18th day
of December 2008, by and between Hanesbrands Inc. , a
Maryland corporation (the “ Company ”), and
William J. Nictakis (“ 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 his 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.
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(a)
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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 his 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 his 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 his 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 his 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
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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 be entitled to receive his Base Salary (the “
Salary Portion of Severance ”) during the “
Severance Period, ” payable as provided in section
2(c). 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 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 his
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 under the Annual Incentive Plan.
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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 and
based on actual performance and achievement of any performance
goals) 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 in which the
Termination Date occurs based on actual fiscal year
performance (the “ Annual Incentive Portion of
Severance ”). “ 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 his service
prior to his 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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Such amounts shall be payable as provided in section 2(c).
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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(ii)
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Beginning on his 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, he shall pay the entire COBRA premium
charged for such continuation coverage during the S everance
Period ; provided, however, that during the Severance Period
Company shall reimburse Executive for that portion of
the COBRA premium paid that exceeds the amount payable by an active
executive of Company for similar coverage, as adjusted from
time to time. Such reimbursement shall be made to Executive
on the 20
th
day of each calendar month during the Severance Period, or
within ten (10) business days thereafter. The amount eligible
for reimbursement under this subparagraph in any calendar year
shall not affect any amounts eligible for reimbursement to be
provided in any other calendar year. In addition,
Executive’s right to reimbursement hereunder shall not
be subject to liquidation or exchange for any other benefit. E
xecutive’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 continuation coverage
after the end of the Severance Period shall be entirely at
Executive’s expense and shall be the actuarially
determined cost of the continuation coverage as determined by an
actuary selected by the Company (in accordance with the
requirements under COBRA, to the extent applicable).
Executive shall not be entitled to reimbursement of any
portion of the premium charged for such coverage after the end of
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 he or she elects
such coverage within thirty (30) days following his
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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(iii)
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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,
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shall
cease on Executive’s Termination Date . During the
Severance Period, Company shall continue to maintain life
insurance covering Executive under Company’s
Executive Life Insurance Plan in accordance with its terms. 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 (or prepay
the entire premium) so that Executive has a paid-up life
insurance benefit equal to his annual salary on his Termination
Date .
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(c)
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Payment of Severance
.
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(i)
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Salary Portion.
The Salary Portion of Severance shall be paid as
follows:
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(A)
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That portion of the Salary Portion of Severance that exceeds
the “S eparation Pay Limit,” if any ,
shall be paid to Executive in a lump sum payment 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
the termination of Executive’s employment. The
“Separation Pay Limit ” shall mean two
(2) times the lesser of (1) the sum of
Executive’s annualized compensation based upon the
annual rate of pay for services provided to Company for the
calendar year immediately preceding the calendar year in which the
Termination Date occurs (adjusted for any increase during
that calendar year that was expected to continue indefinitely if
Executive had not terminated employment); and (2) the
maximum dollar amount of compensation that may be taken into
account under a tax-qualified retirement plan under Code
Section 401(a)(17) for the year in which the Termination
Date occurs. The payment to be made to Executive
pursuant to this subparagraph (A) is intended to be exempt
from Code Section 409A (as defined in section 15) under the
exemption found in Regulation Section 1.409A-(b)(4) for
short-term deferrals.
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(B)
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The remaining portion of the Salary Portion of Severance
shall be paid during the Severance Period in accordance with
Company’s payroll schedule, unless the
Committee shall elect to pay the remaining 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 paid
to Executive 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 the termination of
Executive’s employment. Notwithstanding the foregoing,
in no event shall such remaining portion of the Salary Portion
of Severance be paid to Executive later than
December 31 of the second calendar year following the calendar
year in which Executive’s Termination Date occurs. The
payments(s) to be made to Executive pursuant to this
subparagraph (B) are intended to be
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exempt
from Code Section 409A (as defined in section 15) under
the exemption found in
Regulation Section 1.409A-(b)(9)(iii) for separation pay
plans (i.e., the so-called “two times” pay
exemption).
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(ii)
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Incentive Portion.
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.
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(iii)
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Withholding.
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 unless Executive and Company have
executed a separation and release agreement within forty-five
(45) days following the Termination Date 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.
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 his 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
any reduction of not more than ten (10) percent;
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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 ; or
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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 his 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
his rights with respect to any circumstance constituting Good
Reason . Executive’s continued employment shall
not constitute a waiver of his 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 his employment for Good Reason
unless he delivers a Notice of Termination based on that
action or event within ninety (90) days after its 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 ”);
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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 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
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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
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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, Executive shall be entitled to receive the following
amounts, payable as provided in section 3(j):
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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 average annual incentive calculated over
the three (3) fiscal years immediately preceding the year in which
the Change in Control occurs; 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 life insurance, personal accident insurance,
travel accident insurance and accidental death and dismemberment
insurance
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coverages
which insurance coverages shall be provided at the same levels and
the same costs in effect immediately prior to the Change in
Control. Beginning on his 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, he shall
pay the entire COBRA premium charged for such continuation coverage
during the CIC S everance Period ; provided, however,
that during the CIC Severance Period, Company shall
reimburse Executive for that portion of the COBRA premium
paid that exceeds the amount payable by an active executive of
Company for similar coverage, as adjusted from time to time.
Such reimbursement shall be made to Executive on the
20 th
day of
each calendar month during the CIC Severance Period, or
within ten (1
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