Exhibit 10.3
TIER III
,
200
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
,
200 . 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 Severance and Retention Agreement
dated
,
20 .)
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 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.
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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 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) 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 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) 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 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) 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 reimbursement payments the
Company has
4
agreed to make pursuant to Section 20 may
be subject to the requirements of Section 409A. To ensure that
the payments under 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 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.
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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 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
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.
(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;
(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.
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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
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