Exhibit 10.12
TIER I
[RETYPE ON ACCURIDE STATIONERY
AND DATE]
,
2008
Re:
Severance and Retention Agreement
Dear
:
Our Board of Directors believes that
it is in the best interests of Accuride Corporation
(“Accuride”) and its shareholders to take appropriate
steps to allay any concerns you may have about your future
employment opportunities with Accuride and its
“Affiliates” (as defined in Section 2(f)).
Accuride and its Affiliates are collectively referred to in this
Agreement as the “Company.” As a result, the
Board has decided to offer to you the special package of benefits
described below.
Please bear in mind that these
benefits are being offered only to a few selected employees and we
accordingly ask that you refrain from discussing this special
program with others. Please note that the special benefits
package described below will only be effective if you sign the
extra copy of this Severance and Retention Agreement (the
“Agreement”) which is enclosed and return it to me on
or before December 31, 2008. This Agreement supersedes
any other severance or change in control agreements entered into
previously by you and Accuride or any Affiliate, whether written or
oral.
1.
TERM OF AGREEMENT.
This Agreement is effective
immediately and will continue in effect until December 31,
2008 (the “Initial Term”). This Agreement will be
automatically renewed at the end of the Initial Term for additional
terms commencing on each January 1, and ending on the next
following December 31 (a “Renewal Term”), unless
either party serves notice on the other of its desire not to renew
this Agreement or of its desire to modify this Agreement.
Such notice must comply with Section 11 and be given at least
six months before the end of the Initial Term or the applicable
Renewal Term. If a Change in Control occurs during the
Initial Term or any Renewal Term, the scheduled expiration date of
the Initial Term or Renewal Term, as the case may be, shall be
extended for a term ending on the 18-month anniversary of the
Change in Control. The expiration of the term of this
Agreement will not reduce or diminish any liabilities that have
accrued prior to the expiration.
2.
BASIC SEVERANCE
BENEFIT .
(a)
Entitlement to Basic Severance Benefit . The Basic
Severance Benefit described below will be payable to you if you
terminate your employment with the Company for “Good
Reason” (as defined in Section 6) either prior to the
commencement of the “Protection Period” (as defined in
Section 2(d)) or following the close of the Protection
Period. The Basic Severance Benefit also will be payable to
you if prior to the commencement of the Protection Period or
following the close of the Protection Period, the Company
terminates your employment without “Cause” (as defined
in Section 7). If your employment is terminated by the
Company for Cause, by your voluntary termination without Good
Reason, or by your death or “Disability” (as defined in
Section 11(d)), no Basic Severance Benefit shall be payable
under this Agreement either upon that termination or at any time
thereafter (unless you are later reemployed and covered by a new
agreement).
(b)
Amount of Payments . The Basic Severance Benefit will
equal your annualized base salary at the rate in effect on the date
of your termination of employment minus the sum of any other
payments from the Company under any employment or other agreement,
plan, program or policy in the nature of severance in respect of
such termination, payable on or after the date of such
termination.
(c)
Timing of Payments . Except as provided in
Section 4, the Basic Severance Benefit will be paid in a
single lump sum payment within five business days following the
date on which the Release Agreement required pursuant to
Section 8 becomes irrevocable.
(d)
Protection Period. For purposes of this Agreement,
the term “Protection Period” shall mean the period
beginning with the date on which a Change in Control occurs and
ending 18 months after the Change in Control.
(e)
Transfers to Affiliates . In order to receive a Basic
Severance Benefit, you must terminate employment with the
“Company,” which, as noted above, refers collectively
to Accuride and all of its Affiliates. As a result, a
transfer to an Affiliate will not be treated as a termination of
employment for purposes of this Agreement. For purposes of
determining whether a transfer gives rise to Good Reason for your
termination of employment, a transfer shall be treated the same as
a reassignment within Accuride.
(f)
“Affiliate” Defined . For purposes of this
Agreement, the term “Affiliate” shall mean (i) any
member of a “controlled group of corporations” (within
the meaning of Section 414(b) of the Internal Revenue
Code of 1986 (the “Code”) as modified by
Section 415(h) of the Code) that includes Accuride as a
member of the group; and (ii) any member of a group of trades
or businesses under common control (within the meaning of
Section 414(c) of the Code as modified by
Section 415(h) of the Code) that includes Accuride as a
member of the group.
3.
CHANGE IN CONTROL
BENEFITS.
(a)
Entitlement to Change in Control Benefits . If your
employment with the Company is terminated by the Company without
Cause during the Protection Period, you will
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receive the “Change in Control
Benefits” described in this Section 3. The Change
in Control Benefits also will be payable if you terminate your
employment for Good Reason during the Protection Period.
The Change in Control Benefits will
not be payable if your employment is terminated for Cause, if you
voluntarily terminate your employment without Good Reason, or if
your employment is terminated by reason of your Disability or your
death. In addition, the Change in Control Benefits will not
be payable if your employment is terminated by you or the Company
for any or no reason prior to or following the Protection
Period.
In addition, as noted in
Section 2(e), a transfer to an Affiliate will not be treated
as a termination of employment for purposes of this
Agreement.
(b)
Change in Control Severance Payment . If you are
entitled to receive Change in Control Benefits, you will receive a
“Change in Control Severance Payment.” The
“Change in Control Severance Payment” is a lump sum
payment equal to the sum of: (i) 300% of your annualized base
salary as of the date on which a Change in Control occurs, plus
(ii) 300% of the applicable bonus or incentive compensation
paid or payable to you pursuant to the Accuride Incentive
Compensation Plan. The applicable bonus or incentive
compensation amount used for purposes of clause (ii) in
the preceding sentence shall be the greater of the following:
(i) the incentive compensation to which you would have been
entitled if the year were to end on the day on which the Change in
Control occurs, based upon an annualized figure determined using
performance up to that date; or (ii) the average of the actual
incentive compensation paid to you through the Accuride Incentive
Compensation Plan during the three years preceding the year of your
termination. The Change in Control Severance Payment shall be
reduced by the full amount of any payments to which you may be
entitled due to your termination pursuant to any other Company
severance policy, any agreement between you and the Company
providing for severance, or applicable law.
Except as otherwise provided in
Section 4, the Change in Control Severance Payment will be
paid in one lump sum within five business days following the date
on which the Release Agreement required pursuant to Section 8
becomes irrevocable.
(c)
Equity Awards . If you are entitled to receive Change
in Control Benefits, you also may be entitled to receive a benefit
pursuant to the Accuride Corporation 2005 Incentive Award
Plan. Refer to the Accuride Corporation 2005 Incentive Award
Plan for more details regarding the impact of a Change in Control
on awards made pursuant to that Plan.
(d)
Welfare Benefits . If you are entitled to receive
Change in Control Benefits, the Company shall arrange to provide
you, for an 18-month period following your termination of
employment, with disability, accident, dental and group health
insurance benefits substantially similar to those which you were
receiving immediately prior to your termination. The cost to
you of a particular type of benefit ( e.g. , dental
insurance) shall be not more than the cost to you of that
particular benefit immediately prior to your termination. The
Company may provide the health insurance benefit described under
this Section by paying a portion of the premiums you are
required to pay for continued health insurance coverage under the
Company’s health insurance plan pursuant to COBRA. The
amount paid by the Company will be equal to
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the difference between the total COBRA premium
and the amount you were required to pay for health insurance
immediately prior to your termination.
Your right to receive continued
health insurance benefits pursuant to COBRA shall commence upon the
termination of your employment and shall not be extended by your
rights under this Agreement.
Your right to receive all forms of
welfare benefits described under this paragraph (d) shall
terminate as soon as you become eligible to receive health care
benefits, without exclusion for preexisting conditions, from any
other employer.
(e)
Outplacement Services . If you are entitled to receive
Change in Control Benefits, the Company will provide you with
senior executive outplacement services. The Company will
select the firm to provide outplacement services. The senior
executive outplacement services shall be provided at a time, and on
a schedule, designated by the Company. Nevertheless, in no
event will the senior outplacement services continue beyond
December 31 of the second calendar year following the calendar
year in which your Separation from Service occurs.
(f)
Financial Planning Benefits . If you are entitled to
receive Change in Control Benefits, the Company also will provide
you with a tax and financial planning services stipend. The
stipend will be in an amount determined pursuant to Company
policies and will be based on your officer classification as of the
date on which the Change in Control occurs. The stipend shall
be paid at the same time as, and along with, the Change in Control
Severance Payment.
(g)
Mayo Executive Physical Program . If you are entitled
to receive Change in Control Benefits, the Company will, for a
period of 12 months following your termination of employment,
continue to allow you to participate in the Mayo Executive Physical
Program and cover all regularly authorized expenses associated
therewith, including, without limitation, travel, meals, lodging
and fees. In order to be reimbursed, all such expenses must
be submitted promptly and no reimbursements will be made following
the December 31 of the second calendar year following the
calendar year in which your Separation from Service
occurs.
(h)
Retirement and Savings Plan . If you are entitled to
receive Change in Control Benefits, the Company shall make a
payment to you equal to 110% of the amount of any forfeitures that
you experience as a result of your termination of employment under
any of the Company’s pension or profit sharing plans.
If you experience a forfeiture under the Accuride Retirement Plan,
the amount of the Company’s payment shall be equal to 110% of
your unvested “Cash Balance Account” (as defined in the
Accuride Retirement Plan, as it may be amended from time to
time). The additional 10% payment provided for in this
paragraph is to compensate you for the loss of the opportunity to
defer taxes through a rollover of the forfeited amounts.
Except as otherwise provided in Section 4, the payment called
for by this paragraph (h) shall be paid within 30 days
following your termination of employment.
(i)
No Allowance in Lieu of Benefits . You may not elect
to receive cash or any other allowance in lieu of any welfare
benefits provided by this Section.
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4.
COMPLIANCE WITH
SECTION 409A; REQUIRED DELAY IN PAYMENTS.
(a)
409A Compliance Strategy . The Company intends that
the Basic Severance Benefit provided pursuant to Section 2
will comply with the short-term deferral exception to the
requirements of Section 409A of the Code, as described in
Treas. Reg. § 1.409A-1(b)(4). The Company also
intends that the Change in Control Severance Payment provided by
Section 3(b), the financial planning stipend provided by
Section 3(f), and the retirement and savings plan forfeiture
payment provided by Section 3(h) (collectively the
“Cash Change in Control Payments”) will comply with the
short-term deferral exception. In order to meet the
requirements of the short-term deferral exception, despite any
other provision of this Agreement to the contrary, the Basic
Severance Benefit and all Cash Change in Control Payments due
pursuant to this Agreement shall be paid at the times stated in
Section 2 or Section 3 and in no event later than
March 15 of the year following the year in which your
Separation from Service occurs. Payments may be delayed only
in accordance with regulations issued pursuant to
Section 409A. The Company intends that the Welfare
Benefits provided by Section 3(d), the Outplacement Services
provided by Section 3(e) and the right to continued
participation in the Mayo Executive Physical Program provided by
Section 3(g) will comply with the exception to
Section 409A for reimbursements and certain other separation
payments, as described in Treas. Reg. §
1.409A-1(b)(9)(v)(B). The Company has concluded that the
gross-up payment provided under Section 10(f) and the
reimbursement payments the Company has agreed to make pursuant to
Section 20 may be subject to the requirements of
Section 409A. To ensure that the payments under
Section 10(f) and Section 20 comply with
Section 409A, the payments are payable at a specified time or
pursuant to a fixed schedule within the meaning of Treas. Reg.
§ 1.409A-3(i)(1)(iv).
(b)
Delay in Payments . Prior to making any payments
pursuant to this Agreement, the Accuride Compensation Committee
will determine, on the basis of any regulations, rulings or other
available guidance and the advice of counsel, whether the
short-term deferral exception, the separation pay exception or any
other exception to the requirements of Section 409A is
available. If the Compensation Committee concludes that no
exception is available, no payments will be made prior to your
Separation from Service. In addition, if you are a
“Specified Employee” (as defined in
paragraph (d)), and the Compensation Committee concludes that
no exception to the requirements of Section 409A is available,
no payments shall be made to you prior to the first business day
following the date which is six months after your Separation from
Service. Any amounts that would have been paid during the six
months following your Separation from Service will be paid on the
first business day following the expiration of the six month period
without interest thereon. The provisions of this paragraph
apply to all amounts due pursuant to this Agreement, other than
amounts that do not constitute a deferral of compensation within
the meaning of Treas. Reg. §1.409A-1(b) or other amounts
or benefits that are not subject to the requirements of
Section 409A.
(c)
Separation from Service Defined . For purposes of this
Agreement, the term “Separation from Service” means
(1) the termination of your employment with Accuride and all
Affiliates due to death, retirement or other reasons, or (2) a
permanent reduction in the level of bona fide services you provide
to Accuride and all Affiliates to an amount that is no more than
20% of the average level of bona fide services you provided to
Accuride and all
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Affiliates in the immediately preceding 36
months (or the entire time period during which you provided
services to Accuride and all Affiliates if you have been providing
such services for less than 36 months), with the level of bona fide
service calculated in accordance with Treas. Reg. §
1.409A-1(h)(1)(ii). Your employment relationship is treated
as continuing while you are on military leave, sick leave, or other
bona fide leave of absence (if the period of such leave does not
exceed six months, or if longer, so long as your right to
reemployment with Accuride or an Affiliate is provided either by
statute or contract). If your period of leave exceeds six
months and your right to reemployment is not provided either by
statute or by contract, the employment relationship is deemed to
terminate on the first day immediately following the expiration of
such six month period. Whether a termination of employment
has occurred will be determined based on all of the facts and
circumstances and in accordance with regulations issued by the
United States Treasury Department pursuant to Section 409A of
the Code if the Company concludes that Section 409A is
applicable.
(d)
Specified Employee Defined . For purposes of this
Agreement, the term “Specified Employee” means certain
officers and highly compensated employees of the Company as defined
in Treas. Reg. § 1.409A-1(i), and as determined in
accordance with such procedures as may be adopted from time to time
by Accuride. The identification date for determining whether
any employee is a Specified Employee during any calendar year shall
be the September 1 preceding the commencement of such calendar
year.
(e)
Miscellaneous Payment Provisions . If payment is not
made, in whole or in part, due to a dispute between you and the
Company, the payments shall be made in accordance with Treas. Reg.
§1.409A-3(g), as applicable.
(f)
Ban on Acceleration or Deferral . Under no
circumstances may the time or schedule of any payment made or
benefit provided pursuant to this Agreement be accelerated or
subject to a further deferral except as otherwise permitted or
required pursuant to regulations and other guidance issued pursuant
to Section 409A of the Code.
(g)
No Elections . You do not have any right to make any
election regarding the time or form of any payment due under this
Agreement.
(h)
Compliant Operation and Interpretation . This
Agreement shall be operated in compliance with Section 409A or
an exception thereto and each provision of this Agreement shall be
interpreted, to the extent possible, to comply with
Section 409A or to qualify for an exception
thereto.
5.
CHANGE IN CONTROL
DEFINED.
“Change in Control”
means and includes each of the following:
(a)
A transaction or series of transactions (other than an offering of
Stock to the general public through a registration statement filed
with the Securities and Exchange Commission) whereby any
“person” or related “group” of
“persons” (as such terms are used in Sections
13(d) and 14(d)(2) of the Exchange Act) (other than
Accuride, any of its Affiliates, an employee benefit plan
maintained by Accuride or any of its Affiliates, or a
“person” that, prior to such transaction, directly or
indirectly controls, is controlled by, or is under common
control
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with, Accuride) directly or indirectly acquires
beneficial ownership (within the meaning of Rule 13d-3 under
the Exchange Act) of securities of Accuride possessing more than
35% of the total combined voting power of Accuride’s
securities outstanding immediately after such acquisition;
or
(b)
During any period of two consecutive
years, individuals who, at the beginning of such period, constitute
the Board of Directors together with any new
director(s) (other than a director designated by a person who
shall have entered into an agreement with Accuride to effect a
transaction described in paragraphs (a) or (c) of
this Section 5) whose election by the Board of Directors or
nomination for election by Accuride’s stockholders was
approved by a vote of a majority of the directors then still in
office who either were directors at the beginning of the two-year
period or whose election or nomination for election was previously
so approved, cease for any reason to constitute a majority thereof;
or
(c)
The consummation by Accuride
(whether directly involving Accuride or indirectly involving
Accuride through one or more intermediaries) of (x) a merger,
consolidation, reorganization, or business combination or
(y) a sale or other disposition of all or substantially all of
Accuride’s assets in any single transaction or series of
related transactions or (z) the acquisition of assets or stock
of another entity, in each case other than a
transaction:
(i)
Which results in Accuride’s voting securities outstanding
immediately before the transaction continuing to represent (either
by remaining outstanding or by being converted into voting
securities of Accuride or the person that, as a result of the
transaction, controls, directly or indirectly, Accuride or owns,
directly or indirectly, all or substantially all of
Accuride’s assets or otherwise succeeds to the business of
Accuride (Accuride or such person, the “Successor
Entity”)) directly or indirectly, at least a majority of the
combined voting power of the Successor Entity’s outstanding
voting securities immediately after the transaction, and
(ii)
After which no person or group beneficially owns voting securities
representing 50% or more of the combined voting power of the
Successor Entity; provided, however, that no person or group shall
be treated for purposes of this Section 5(c)(ii) as
beneficially owning 50% or more of the combined voting power of the
Successor Entity solely as a result of the voting power held in
Accuride prior to the consummation of the transaction;
or
(d)
Accuride’s stockholders
approve a liquidation or dissolution of Accuride.
The Compensation Committee shall
determine whether a Change in Control of Accuride has occurred
under the above definition, and the date of the occurrence of such
Change in Control and any incidental matters relating
thereto.
6.
GOOD REASON
DEFINED.
(a)
Definition of Good
Reason . For
purposes of this Agreement, “Good Reason” means a
termination of your employment with the Company following the
occurrence of one or more of the following circumstances (without
your prior express written consent):
(i)
a material diminution in your total annual compensation;
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(ii)
a material diminution in your authority, duties or
responsibilities;
(iii)
a material change in the geographic location of your principal
office; or
(iv)
any other action or inaction that constitutes a material breach by
the Company of this Agreement.
(b)
Notice of Termination
. If you elect to terminate
your employment for Good Reason, you must provide the Company with
a Notice of Termination (in compliance with Section 11) which
sets forth the existence of the Good Reason condition described in
paragraphs (i) through (iv) above within 60 days of the
initial existence of the condition.
(c)
Opportunity to Cure
. Notwithstanding anything to
the contrary, the existence of one of the circumstances described
in paragraphs (i) through (iv) above will not constitute
Good Reason if, within 30 days after you give the Company Notice of
Termination which sets forth the existence of the Good Reason
condition described in paragraphs (i) through (iv), the
Company has fully corrected such condition.
7.
CAUSE DEFINED.
For purposes of this Agreement,
“Cause” shall mean (a) your continued willful
failure, neglect or refusal to perform your duties with respect to
the Company or its Affiliates which continues beyond ten days after
a written demand for substantial performance is delivered to you by
the Company; (b) conduct by you involving (i) dishonesty,
fraud, or breach of trust in connection with your employment or
(ii) conduct which would be a reasonable basis for an
indictment for a felony or for a misdemeanor involving moral
turpitude; (c