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EXHIBIT
10.16
BUCYRUS INTERNATIONAL,
INC.
KEY EXECUTIVE
EMPLOYMENT AND SEVERANCE AGREEMENT
THIS AGREEMENT, made and
entered into as of the 1 st day
of January, 2008, by and between BUCYRUS INTERNATIONAL, INC., a
Delaware corporation (“Company”), and Timothy W.
Sullivan (“Executive”).
WITNESSETH:
WHEREAS, the Executive is
employed by the Company as a key executive officer, and the
Executive’s services in such capacities are critical to the
continued successful conduct of the business of the
Company;
WHEREAS, the Company
recognizes that circumstances in which a change in control of the
Company occurs, through acquisition or otherwise, are highly
disruptive and will cause uncertainty about the Executive’s
future employment with the Company without regard to the
Executive’s competence or past contributions and that such
uncertainty may materially adversely affect the Company;
WHEREAS, the Company and the
Executive are desirous that any proposal for a change in control or
acquisition of the Company will be considered by the Executive
objectively, with reference only to the best interests of the
Company and its stockholders and without undue regard for the
Executive’s personal interests; and
WHEREAS, the Executive will
be in a better position to consider the Company’s and its
stockholders’ 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 hereinafter set forth, the parties hereto mutually
covenant and agree as follows:
1. Definitions
.
(a) Act . For purposes
of this Agreement, the term “Act” means the Securities
Exchange Act of 1934, as amended.
(b) Affiliate and
Associate . For purposes of this Agreement, the terms
“Affiliate” and “Associate” shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations of the Act. The term “409A
Affiliate” means each entity that is required to be included
in the Company’s controlled group of corporations within the
meaning of Section 414(b) of the Code, or that is under common
control with the Company within the meaning of Section 414(c)
of the Code; provided, however , that the phrase
“at least 50 percent” shall be used in place of the
phrase “at least 80 percent” each place it appears
therein or in the regulations thereunder.
(c) Beneficial Owner .
For purposes of this Agreement, a Person shall be deemed to be the
“Beneficial Owner” of any securities:
(i) which such Person or any
of such Person’s Affiliates or Associates has the right to
acquire (whether such right is exercisable immediately or only
after the passage of time) pursuant to any agreement, arrangement
or understanding, or upon the exercise of conversion rights,
exchange rights, rights, warrants or options, or otherwise;
provided , however , that a Person shall not be
deemed the Beneficial Owner of, or to beneficially own, securities
tendered pursuant to a tender or exchange offer made by or on
behalf of such Person or any of such Person’s Affiliates or
Associates until such tendered securities are accepted for
purchase;
(ii) which such Person or any
of such Person’s Affiliates or Associates, directly or
indirectly, has the right to vote or dispose of or has
“beneficial ownership” of (as determined pursuant to
Rule 13d-3 of the General Rules and Regulations under the Act),
including pursuant to any agreement, arrangement or understanding;
provided , however , that a Person shall not be
deemed the Beneficial Owner of, or to beneficially own, any
security under this subparagraph (ii) as a result of an
agreement, arrangement or understanding to vote such security if
the agreement, arrangement or understanding: (A) arises solely
from a revocable proxy or consent given to such Person in response
to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable rules and regulations under the Act
and (B) is not also then reportable on a Schedule 13D under
the Act (or any comparable or successor report); or
(iii) which are beneficially
owned, directly or indirectly, by any other Person with which such
Person or any of such Person’s Affiliates or Associates has
any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy as
described in Subsection 1(c)(ii) above) or disposing of any
voting securities of the Company.
(d) Cause .
“Cause” for termination by the Company of the
Executive’s employment after a Change in Control of the
Company (or prior to a Change in Control of the Company pursuant to
Section 2) shall, for purposes of this Agreement, be limited
to any of the following: (i) the engaging by the Executive in
intentional conduct not taken in good faith which has caused
demonstrable and serious financial injury to the Company, as
evidenced by a determination in a binding and final judgment, order
or decree of a court or administrative agency of competent
jurisdiction, in effect after exhaustion or lapse of all rights of
appeal, in an action, suit or proceeding, whether civil, criminal,
administrative or investigative; (ii) conviction of a felony
(as evidenced by binding and final judgment, order or decree of a
court of competent jurisdiction, in effect after exhaustion or
lapse of all rights of appeal) which substantially impairs the
Executive’s ability to perform his duties or
responsibilities; and (iii) continuing willful and
unreasonable refusal by the Executive to perform the
Executive’s duties or responsibilities (unless significantly
changed without the Executive’s consent).
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(e) Change in Control of
the Company . For purposes of this Agreement, a “Change
in Control of the Company” shall be deemed to have occurred
if:
(i) any Person (other than
the Company or any trustee or other fiduciary holding securities
under an employee benefit plan of the Company) is or becomes the
Beneficial Owner, directly or indirectly, of securities of the
Company representing one-third (33 1/3%) or more of the combined
voting power of the Company’s then outstanding voting
securities;
(ii) the following
individuals cease for any reason to constitute a majority of the
number of directors then serving: individuals who, as of the date
of this Agreement, constitute the Board of Directors of the Company
and any new director (other than a director whose initial
assumption of office is in connection with an actual or threatened
election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Company)
whose appointment or election by the Board of Directors of the
Company or nomination for election by the Company’s
stockholders was approved or recommended by a vote of at least
two-thirds (2/3) of the directors then still in office who
either were directors as of the date of this Agreement or whose
appointment, election or nomination for election was previously so
approved or recommended;
(iii) there is consummated a
merger or consolidation of the Company or any direct or indirect
subsidiary of the Company with any other corporation, other than a
merger or consolidation immediately following which the individuals
who comprise the Board of Directors of the Company immediately
prior thereto constitute at least a majority of the Board of
Directors of the Company, the entity surviving such merger or
consolidation or, if the Company or the entity surviving such
merger is then a subsidiary, the ultimate parent thereof;
or
(iv) the stockholders of the
Company approve a plan of complete liquidation of the Company or
there is consummated an agreement for the sale or disposition by
the Company of all or substantially all of the Company’s
assets (or any transaction having a similar effect), other than a
sale or disposition by the Company of all or substantially all of
the Company’s assets to an entity, immediately following
which the individuals who comprise the Board of Directors of the
Company immediately prior thereto constitute at least a majority of
the board of directors of the entity to which such assets are sold
or disposed of or, if such entity is a subsidiary, the ultimate
parent thereof.
Notwithstanding the foregoing, a Change
in Control of the Company shall not be deemed to have occurred by
virtue of the consummation of any transaction or series of
integrated transactions immediately following which the holders of
the Stock immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate
ownership in an entity which owns all or substantially all of the
assets of the Company immediately following such transaction or
series of transactions.
(f) Code . For
purposes of this Agreement, the term “Code” means the
Internal Revenue Code of 1986, including any amendments thereto or
successor tax codes thereof.
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(g) Covered
Termination . For purposes of this Agreement, the term
“Covered Termination” means any termination of the
Executive’s employment where the Termination Date is any date
on or on or after a Change in Control of the Company (except as
provided in Section 2) and prior to the end of the Employment
Period, and the termination constitutes a Separation from
Service.
(h) Discretionary
Termination . For purposes of this Agreement,
“Discretionary Termination” means the determination by
the Executive at any time during the thirty (30)-day period after
the first anniversary of the occurrence of a Change in Control of
the Company, as evidenced by the Executive’s delivery to the
Company of a Notice of Termination during such period, to terminate
this Agreement and his employment hereunder for any reason
whatsoever in his sole discretion, with or without good faith and
regardless of whether the Company is then attempting to terminate
the Executive for any reason, including for Cause.
(i) Employment Period
. For purposes of this Agreement, the term “Employment
Period” means the period commencing on the date of a Change
in Control of the Company and ending at 11:59 p.m. Milwaukee
time on the third anniversary of such date.
(j) Good Reason . For
purposes of this Agreement, the Executive shall have a “Good
Reason” for termination of employment after a Change in
Control of the Company in the event of:
(i) any breach of this
Agreement by the Company, including specifically any breach by the
Company of its agreements contained in Sections 4, 5, 6 or 9
hereof;
(ii) the removal of the
Executive from, or any failure to reelect the Executive to, any of
the positions held with the Company and its subsidiaries on the
date of the Change in Control of the Company or any other positions
with the Company and its subsidiaries to which the Executive shall
thereafter be elected or assigned, except in the event that such
removal or failure to reelect relates to the termination by the
Company of the Executive’s employment for Cause or by reason
of disability pursuant to Section 12 hereof;
(iii) a good faith
determination by the Executive that there has been a significant
adverse change, without the Executive’s written consent
(which may be denied or withheld for any reason whatsoever at
Executive’s discretion), in the Executive’s working
conditions or status with the Company or its subsidiaries from such
working conditions or status in effect immediately prior to the
Change in Control of the Company, including but not limited to
(A) a significant change in the nature or scope of the
Executive’s authority, powers, functions, duties or
responsibilities, or (B) a reduction in the level of support
services, staff, secretarial and other assistance, office space
and/or accoutrements; or
(iv) failure by the Company
to timely obtain the Agreement referred to in Section 17(a)
hereof as provided therein.
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(k) Person . For
purposes of this Agreement, the term “Person” shall
mean any individual, firm, partnership, corporation or other
entity, including any successor (by merger or otherwise) of such
entity, or a group of any of the foregoing acting in
concert.
(l) Securities Act .
For purposes of this Agreement, the term “Securities
Act” means the Securities Act of 1933, as amended.
(m) Separation from
Service . For purposes of this Agreement, the term
“Separation from Service” means the date on which the
Executive terminates employment from the Company and its 409A
Affiliate. For purposes of this Agreement, the Executive’s
termination of employment shall occur when the Company and
Executive reasonably anticipate that no further services will be
performed by the Executive for the Company and its 409A Affiliates
or that the level of bona fide services the Executive will perform
as an employee of the Company and its 409A Affiliates will
permanently decrease to no more than twenty percent (20%) of
the average level of bona fide services performed by the Executive
(whether as an employee or independent contractor) for the Company
and its 409A Affiliates over the immediately preceding thirty-six
(36)-month period (or such lesser period of services).
Notwithstanding the foregoing, if Executive takes a leave of
absence for purposes of military leave, sick leave or other bona
fide leave of absence, the Executive will not be deemed to have
incurred a termination of employment for the first six
(6) months of the leave of absence, or if longer, for so long
as the Executive’s right to reemployment is provided either
by statute or by contract, including this Agreement;
provided that if the leave of absence is due to a
medically determinable physical or mental impairment that can be
expected to result in death or last for a continuous period of not
less than six (6) months, where such impairment causes the
Executive to be unable to perform the duties of his or her position
of employment or any substantially similar position of employment,
the leave may be extended for up to twenty-nine (29) months
without causing a termination of employment. Notwithstanding the
foregoing, for purposes of determining when severance amounts and
other benefits due under this Agreement will be paid or begin to be
paid, if the Executive continues to provide services to the Company
or its 409A Affiliates after terminating employment, the date of
the Executive’s Separation from Service will be determined in
accordance with Code Section 409A.
(n) Specified Employee
. For purposes of this Agreement, the Executive will be a
“Specified Employee” if the Executive is a key employee
(as defined in Code Section 416(i) but without regard to Code
Section 416(i)(5)) of the Company or an affiliate of the
Company (within the meaning of Code Section 414(b) or (c)) any
of the stock of which is publicly traded on an established
securities market or otherwise, as determined at the time of the
Executive’s Separation from Service. The Executive is a key
employee under Code Section 416(i) if the Executive meets the
requirements of Code Section 416(i)(1)(A)(i), (ii) or
(iii), applied in accordance with the regulations under Code
Section 416, but disregarding Code Section 416(i)(5), at
any time during the 12-month period ending on an identification
date. For purposes of determining whether the Executive is a key
employee, compensation shall mean wages within the meaning of Code
Section 3401(a) but determined without regard to any rules
that limit the amount of remuneration included in wages based on
the nature or location of the employment or services performed. If
the Executive is a key employee as of an identification date, the
Executive is treated as a key employee for the 12-month period
beginning on the first day of the fourth month following the
identification date. The identification date for this Agreement
shall be September 30 of each year, such that if the Executive
satisfies the foregoing requirements for key employee status as of
September 30 of a year, the Executive shall be treated as a
key employee for the following calendar year.
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If, in the transaction
constituting a Change in Control of the Company, the Company is
merged with or acquired by another entity, and immediately
following the Change in Control of the Company the stock of either
the Company or the acquirer or successor in such transaction is
publicly traded on an established securities market or otherwise,
then for the period between the date of such transaction and the
next specified employee effective date of the acquirer or survivor,
the acquirer or survivor shall combine the lists of the specified
employees of each entity participating in the transaction and
re-order the list to identify the top 50 key employees (as well as
1% and 5% owners that are considered key employees) in accordance
with Treasury Regulations §1.409A-1(i)(6)(i).
(o) Stock . For
purposes of this Agreement, the term “Stock” means
shares of the Class A common stock, par value $.01 per share,
of the Company.
(p) Termination Date .
For purposes of this Agreement, except as otherwise provided in
Section 10(b) and Section 17(a) hereof, the term
“Termination Date” means (i) if the
Executive’s employment is terminated by the Executive’s
death, then the date of death; (ii) if the Executive’s
employment is terminated by reason of voluntary early retirement,
as agreed in writing by the Company and the Executive, then the
date of such early retirement which is set forth in such written
agreement; (iii) if the Executive’s employment is
terminated by reason of disability pursuant to Section 12
hereof, then the earlier of thirty (30) days after the Notice
of Termination is given or one day prior to the end of the
Employment Period; (iv) if the Executive’s employment is
terminated by the Executive voluntarily (other than for Good
Reason, but including a Discretionary Termination), then the date
the Notice of Termination is given; and (v) if the
Executive’s employment is terminated by the Company (other
than by reason of disability pursuant to Section 12 hereof) or
by the Executive for Good Reason, then the earlier of thirty
(30) days after the Notice of Termination is given or one day
prior to the end of the Employment Period. Notwithstanding the
foregoing,
(A) If termination is by the
Company for Cause pursuant to Section 1(d)(iii) of this
Agreement and if the Executive has substantially cured the conduct
constituting such Cause as described by the Company in its Notice
of Termination within such thirty (30) day or shorter period,
then the Executive’s employment hereunder shall continue as
if the Company had not delivered its Notice of Termination and
there shall be no Termination Date arising out of such
Notice.
(B) If the Company shall give
a Notice of Termination for Cause or by reason of disability and
the Executive in good faith notifies the Company that a dispute
exists concerning such attempted termination within the fifteen
(15)-day period following receipt thereof, then the Executive may
elect to continue his employment during the pendency of such
dispute and the Termination Date shall be determined under this
paragraph. If the Executive so elects and it is thereafter
determined that Cause or disability (as the case may be) did exist,
the Termination Date shall be the earlier of (1) the date on
which the dispute is finally determined, either (x) by mutual
written agreement of the parties or (y) in accordance with
Section 22 hereof, (2) the date of the Executive’s
death, or (3) one day prior to the end of the Employment
Period. If the
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Executive so elects and it is
thereafter determined that Cause or disability (as the case may be)
did not exist, then the employment of the Executive hereunder shall
continue after such determination as if the Company had not
delivered its Notice of Termination and there shall be no
Termination Date arising out of such Notice.
(C) If the Executive shall in
good faith give a Notice of Termination for Good Reason and the
Company in good faith notifies the Executive that a dispute exists
concerning such attempted termination within the fifteen (15)-day
period following receipt thereof, then the Executive may elect to
continue his employment during the pendency of such dispute and the
Termination Date shall be determined under this paragraph. If the
Executive so elects and it is thereafter determined that Good
Reason did exist, the Termination Date shall be the earlier of
(1) the date on which the dispute is finally determined,
either (x) by mutual written agreement of the parties or
(y) in accordance with Section 22 hereof, (2) the
date of the Executive’s death or (3) one day prior to
the end of the Employment Period. If the Executive so elects and it
is thereafter determined that Good Reason did not exist, then the
employment of the Executive hereunder shall continue after such
determination as if the Executive had not delivered the Notice of
Termination asserting Good Reason and there shall be no Termination
Date arising out of such Notice. In either case, this Agreement
continues, until the Termination Date, if any, as if the Executive
had not delivered the Notice of Termination except that, if it is
finally determined that Good Reason did exist, the Executive shall
in no case be denied the benefits described in Sections 8(b)
and 9 hereof (including a Termination Payment) based on events
occurring after the Executive delivered his Notice of
Termination.
(D) Except as provided in
Paragraphs (B) and (C) above and other than a
Discretionary Termination (which cannot be subject to dispute by
the Company), if the party receiving the Notice of Termination in
good faith notifies the other party that a dispute exists
concerning the termination within the fifteen (15)-day period
following receipt thereof and it is finally determined pursuant to
a legally binding settlement or final and nonappealable judgment or
other binding decision that the reason asserted in such Notice of
Termination did not exist, then (1) if such Notice was
delivered by the Executive, the Executive will be deemed to have
voluntarily terminated his employment and (2) if delivered by
the Company, the Company will be deemed to have terminated the
Executive other than by reason of death, disability or Cause. In
the event clause (2) applies, all amounts owed to the
Executive under this Agreement shall be paid promptly following the
execution of the legally binding settlement or issuance of the
final and nonappealable judgment or other binding
decision.
(E) If the termination is
described in Section 2 hereof, then the Termination Date shall
be the date of the Executive’s termination of employment from
the Company.
2. Termination or
Cancellation Prior to Change in Control . The Company shall
retain the right to terminate the employment of the Executive at
any time prior to a Change in Control of the Company, subject to
the terms and conditions of any other then existing written
employment arrangement or agreement between the Executive and the
Company; provided , however , that if the
Executive’s employment is terminated by the Company, other
than by reason
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of (i) death, (ii) disability
in accordance with Section 12 hereof, or (iii) Cause, at
any time after Board of Directors’ authorized negotiations
are commenced between the Company and another Person which
ultimately lead to a Change in Control of the Company, then the
Executive shall be entitled to receive at the earlier to occur of
the closing or the effective date of such Change in Control of the
Company all Accrued Benefits (to the extent not theretofore paid)
and a Termination Payment, including benefits under
Section 8(b) hereof, as if such termination of employment was
a Covered Termination under Section 8 hereof. Other than as
set forth above or as provided in Section 17 hereof, in the
event the Executive’s employment is terminated prior to a
Change in Control of the Company, this Agreement shall be
terminated and canceled and of no further force and effect and any
and all rights and obligations of the parties hereunder shall
cease.
3. Employment Period .
If a Change in Control of the Company occurs when the Executive is
employed by the Company, then the Company will continue thereafter
to employ the Executive during the Employment Period, and the
Executive will remain in the employ of the Company, in accordance
with and subject to the terms and provisions of this Agreement
(including, without limitation, the Executive’s right to
exercise a Discretionary Termination), and the terms of this
Agreement shall expressly supersede the terms and conditions of any
other then existing employment arrangement or agreement between the
Company and the Executive.
4. Duties . During the
Employment Period, the Executive shall, in the same capacities and
positions held by the Executive at the time immediately prior to
the Change in Control of the Company or in such other capacities
and positions as may be agreed to by the Company and the Executive
in writing, devote the Executive’s commercially reasonable
efforts and business time, attention and skill during normal
business hours to the business and affairs of the Company, as such
business and affairs now exist and as they may hereafter be
conducted, all consistent with the Company’s and the
Executive’s practices immediately prior to the Change in
Control of the Company. During the Employment Period, it shall not
be a violation of this Agreement for the Executive to
(A) serve on corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill speaking engagements
or teach at educational institutions and/or (C) manage
personal investments, so long as such activities do not
significantly interfere with the performance of the
Executive’s responsibilities as an employee of the Company in
accordance with this Agreement. It is expressly understood and
agreed that, to the extent that any such activities have been
conducted by the Executive prior to the Change in Control of the
Company, the continued conduct of such activities (or the conduct
of activities similar in nature and scope thereto) subsequent to
the Change in Control of the Company shall not thereafter be deemed
to interfere with the performance of the Executive’s
responsibilities to the Company hereunder. The services which are
to be performed by the Executive hereunder are to be rendered in
the same metropolitan area in which the Executive was employed
immediately prior to the time of such Change in Control of the
Company, or in such other place or places as shall be mutually
agreed upon in writing by the Executive and the Company from time
to time.
5. Compensation .
During the Employment Period, the Executive shall be compensated as
follows:
(a) The Executive shall
receive, at such intervals and in accorda
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