Exhibit 10.3
TIER III
,
20
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
,
20 . 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 (including but
not limited to the Change in Control Agreement dated
,
and the Severance Agreement dated
,
200 ).
1.
TERM OF AGREEMENT.
This Agreement is effective
immediately and will continue in effect until December 31,
2007 (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 Benefits 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 eighteen (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 a “controlled group of
corporations” (within the meaning of Section 414(b) of
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.
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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 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
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) 100% of your annualized base
salary as of the date on which a Change in Control occurs, plus
(ii) 100% 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 a 12-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
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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 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)
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 (e) shall be paid within
30 days following your termination of employment.
(f)
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.
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 Internal
Revenue Code of 1986 (the “Code”), as described in
Prop. Treas. Reg. § 1.409A-1(b)(4). The Company
also intends that the Change in Control Severance Payment provided
by Section 3(b) and the retirement and savings plan forfeiture
payment provided by Section 3(e) (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 no later than March 15 of the year following the year in
which your Separation from Service occurs. If it is
administratively impracticable to make all payments by the relevant
March 15 and such impracticability was unforeseeable as of the
date of this Agreement, the payments shall be made as soon as
reasonably practicable following the applicable March 15 but
not later than the following December 31. In addition,
payments may be delayed in accordance with regulations issued
pursuant to Section 409A.
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The Company believes that all other
benefits provided or expenses reimbursed pursuant to this Agreement
either do not provide for the deferral of compensation as
determined in accordance with Prop. Treas. Reg. §1.409A-1(b)
or qualify as excepted welfare benefits under Prop. Treas. Reg.
§1.409A-1(a)(5).
(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 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 “Key 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 Prop. Treas. Reg. §1.409A-1(b), benefits which
qualify as excepted welfare benefits pursuant to Prop. Treas. Reg.
§1.409A-1(a)(5), 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 the termination of your employment with
Accuride and all Affiliates due to death, retirement or other
reasons. 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)
Key Employee Defined
. For purposes of this
Agreement, your status as a “Key Employee” will be
redetermined for each calendar year. You will be treated as a
“Key Employee” for a particular year if at any time
during the 12 month period ending on the August 31 prior to
the beginning of the year you met the requirements of
Section 416(i)(1)(A)(i), (ii) or (iii) of the Code (applied in
accordance with regulations issued pursuant to Section 409A of
the Code and disregarding Section 416(i)(5) of the
Code). If another entity merges with or into or otherwise
becomes part of the same controlled group of corporations as
Accuride so as to be treated as a single service recipient under
Prop. Treas. Reg. §1.409A-1(g), and you were an employee of
Accuride or the other entity and you were a “Key
Employee” of either Accuride or the other entity immediately
before the merger or other transaction, you will be treated as a
Key Employee for purposes of this Agreement until the first day of
the year that begins after the August 31 next following the
merger.
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(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
Prop. Treas. Reg. §1.409A-3(e), 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 . If
the Compensation Committee determines in the exercise of its
discretion that neither the short-term deferral exception nor any
other exception to the requirements of Section 409A is
available, this Agreement (or the portion that does not qualify for
any exception) shall be operated in compliance with Section 409A
and each provision of the Agreement shall be interpreted, to the
extent possible, to comply with Section 409A.
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
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:
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(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.
For purposes of this Agreement,
“Good Reason” shall have different meanings depending
on whether the termination of employment occurs during a Protection
Period.
(a)
Outside of Protection
Period . If the
termination of employment occurs prior to the beginning of or after
the close of a Protection Period, “Good Reason” shall
mean (i) a material adverse change in the nature of your job duties
without your consent; or (ii) a material reduction in the rate
of your base cash compensation, other than in connection with and
consistent with a general program in which the compensation of one
or more categories of management of the Company (or any of its
Affiliates) is systematically reduced.
(b)
During Protection
Period . If the
termination of employment occurs during a Protection Period,
“Good Reason” shall mean the occurrence (without your
prior express written consent) of any one of the following acts, or
failures to act, unless, in the case of any act or failure to act
described in clauses (i), (iv), or (v) below, such act or failure
to act is corrected by the Company prior to the date of termination
specified in the Notice of Termination given by you in respect
thereof:
(i)
A significant change in your title,
duties or responsibilities from those which are in effect
immediately prior to the Change in Control which then results in a
diminution in your position with the Company, provided, that any
change resulting from the Company no longer being a publicly traded
company shall not be considered Good Reason;
(ii)
A material reduction in your annual
base salary or annual bonus opportunity as in effect as of the
Change in Control unless such reduction is in connection with
a
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