Exhibit
10(g)
AMENDED
AND RESTATED
EMPLOYMENT
AGREEMENT
THIS
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “
Agreement ”), dated as of December 23, 2004, is made
and entered by and between The Gillette Company, a Delaware
corporation (together with its successors and assigns permitted
under this Agreement, the “ Company ”), and
James M. Kilts (the “ Executive ”).
W I
T N E S S E T H :
WHEREAS,
the Company and the Executive entered into an employment agreement
dated as of January 19, 2001, which was amended as of January 19,
2001 (“ Amendment No. 1 ”), and was further
amended as of August 27, 2002 (“ Amendment No. 2
”), August 6, 2003 (“ Amendment No. 3 ”),
and March 24, 2004 (“ Amendment No. 4 ”) (with
such amendments, the “ Existing Employment Agreement
”);
WHEREAS,
the Executive currently serves as the Chairman of the Board and
Chief Executive Officer of the Company; and
WHEREAS,
the Company and the Executive desire to amend and restate the
Existing Employment Agreement to integrate all such prior
amendments and to make certain further minor amendments, all as set
forth herein;
NOW,
THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the
receipt of which is mutually acknowledged, the Company and the
Executive (individually a “ Party ” and together
the “ Parties ”) agree as follows:
1.
Definitions.
(a). “ Affiliate ” of a specified person
or entity shall mean a person or entity that directly or indirectly
controls, is controlled by, or is under common control with the
person or entity specified.
(b) “ Base Salary ” shall mean the
annualized salary provided for in Section 4 below or any increased
salary granted to the Executive pursuant to Section 4.
(c) “ Board ” shall mean the Board
of Directors of the Company.
(d) “ Bonus Payment Amount ” shall
mean the amount actually paid to the Executive pursuant to Section
13 of the Company’s
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Incentive
Bonus Plan or any comparable provision of any successor annual
bonus plan.
(e) “ Cause ” shall mean:
(i) the Executive is convicted of, or pleads guilty or
nolo contendere to, a felony or of any crime
involving moral turpitude; or
(ii) the Executive is guilty of willful gross neglect
in carrying out his duties under this Agreement or of willful gross
misconduct that results, or could reasonably be expected to result,
in either case, in material harm to the business or reputation of
the Company, unless, in either case, the Executive acted, or failed
to act, in a good faith belief that such act or failure to act was
in, or not contrary to, the best interests of the
Company.
(f) “ Change of Control ” shall
mean
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the “
Exchange Act ”)) (a “ Person ”) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more of either (A) the
then-outstanding shares of common stock of the Company (the “
Outstanding Company Common Stock ”) or (B) the
combined voting power of the then-outstanding voting securities of
the Company entitled to vote generally in the election of directors
(the “ Outstanding Company Voting Securities ”);
provided, however, that, for purposes of this Section 1(f)(i), the
following acquisitions of Outstanding Company Common Stock or
Outstanding Company Voting Securities shall not constitute a Change
of Control: (i) any acquisition directly from the Company, (ii) any
acquisition by the Company, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or any Affiliated Company or (iv) any acquisition by any
corporation pursuant to a transaction that is excluded from Section
1(f)(iii) because it complies with Sections l(f)(iii)(A),
l(f)(iii)(B) and l(f)(iii)(C).
(ii) Individuals who, as of the date hereof, constitute
the Board (the “ Incumbent Board ”) cease for
any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for
election by the Company’s stockholders, was approved by a
vote of at least a majority of the directors then comprising the
Incumbent Board shall be
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considered
as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the
Board.
(iii) Consummation of a reorganization, merger,
consolidation or sale or other disposition of all or substantially
all of the assets of the Company (a “ Business
Combination ”), in each case, unless, following such
Business Combination, (A) all or substantially all of the
individuals and entities that were the beneficial owners of the
Outstanding Company Common Stock and the Outstanding Company Voting
Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of the
then-outstanding shares of common stock and the combined voting
power of the then-outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including,
without limitation, a corporation that, as a result of such
transaction, owns the Company or all or substantially all of the
Company’s assets either directly or through one or more
subsidiaries) in substantially the same proportions as their
ownership immediately prior to such Business Combination of the
Outstanding Company Common Stock and the Outstanding Company Voting
Securities, as the case may be, (B) no Person (excluding any
corporation resulting from such Business Combination or any
employee benefit plan (or related trust) of the Company or such
corporation resulting from such Business Combination) beneficially
owns, directly or indirectly, 20% or more of, respectively, the
then-outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting
power of the then-outstanding voting securities of such
corporation, except to the extent that such ownership existed prior
to the Business Combination, and (C) at least a majority of the
members of the board of directors of the corporation resulting from
such Business Combination were members of the Incumbent Board at
the time of the execution of the initial agreement or of the action
of the Board providing for such Business Combination; or
(iv) Approval by the stockholders of the Company of a
complete liquidation or dissolution of the Company.
(g) “ Change of Control Effective Date
” shall mean the first date on which a Change of Control
occurs. Notwithstanding anything in
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this
Agreement to the contrary, if a Change of Control occurs and if the
Executive’s employment with the Company is terminated prior
to a Change of Control, and if it is reasonably demonstrated by the
Executive that such termination of employment (1) was at the
request of a third party that has taken steps reasonably calculated
to effect a Change of Control or (2) otherwise arose in connection
with or anticipation of a Change of Control, then “Change of
Control Effective Date” means the date immediately prior to
the date of such termination of employment.
(h) “ Commencement Date ” shall be
January 19, 2001.
(i) “ Disability ” shall mean the
Executive’s inability, due to physical or mental incapacity,
to substantially perform his duties and responsibilities under this
Agreement for a period of six consecutive months as determined by a
medical doctor selected by the Company and the Executive. If the
Parties cannot agree on a medical doctor, each Party shall select a
medical doctor and the two doctors shall select a third who shall
be the approved medical doctor for this purpose.
(j) “ Fair Market Value ”, when used
with respect to the value of a security on a particular date, shall
mean (A) the average of the high and low trading prices of the
security on the principal national securities exchange or national
market system on which the security is then listed or traded, in
each case during normal business hours on such date or, if such
date is not a trading day, on the most recent trading day that
precedes such date or (B) if the security is not listed or traded
on a national market system or national securities exchange as of
such date, then the value as agreed by the Parties, or in the
absence of such agreement, fair market value as determined by an
independent appraiser on a going forward basis, determined without
discount for transfer restrictions, lack of liquidity, minority
status, or similar factors. For purposes of this Section 1(j), an
“independent appraiser” is a nationally recognized,
independent investment banking or accounting firm that has relevant
appraisal experience and that is agreed upon by both
Parties.
(k) “ Good Reason ” shall mean the
occurrence of any of the following events without the prior written
consent of the Executive:
(i) a reduction in the Executive’s then current
Base Salary or target bonus opportunity as a percentage of Base
Salary;
(ii) the taking of any other action by the Company that
would diminish the incentive opportunities of the Executive as
required hereunder;
(iii) the taking of any action by the Company that
would significantly diminish the aggregate value of the
benefits
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(other
than an across-the-board reduction applicable to employees
generally) provided to the Executive under the Company’s
medical, health, accident, disability, life insurance, thrift and
retirement plans;
(iv) the failure to elect or reelect the Executive to
any of the positions described in Section 3 below or removal of him
from any such position;
(v) a material diminution in the Executive’s
duties or the assignment to the Executive of duties which are
materially inconsistent with his duties or which materially impair
the Executive’s ability to function as the Chairman and Chief
Executive Officer of the Company;
(vi) a change in the reporting structure so that the
Executive reports to someone other than the Board;
(vii) relocation of the Executive’s principal
place of employment to a location other than Boston, Massachusetts,
or, after the Change of Control Effective Date, requiring the
Executive to travel on Company business to a substantially greater
extent than required immediately prior to such Change of Control
Effective Date;
(viii) a material breach by the Company of any
provision of this Agreement or of any stock option or other equity
award agreement;
(ix) any purported termination of the Executive’s
employment by the Company that is not effected in accordance with
Section 14(b), Section 14(c) or Section 14(d) (relating,
respectively, to Disability, Cause or “without Cause”
terminations); or
(x) the failure of the Company to obtain the assumption
in writing of its obligation to perform this Agreement by any
successor to all or substantially all of the assets of the Company
within 15 days after a merger, consolidation, sale or similar
transaction.
After
the Change of Control Effective Date, any good faith determination
of Good Reason by the Executive shall be conclusive.
(l) “ Highest Annual Bonus ” shall
mean an amount equal to the product of (i) the Executive’s
Base Salary at the date of termination and (ii) the Highest Annual
Bonus Percentage.
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(m) “ Highest Annual Bonus Percentage
” shall mean the higher of (i) the Executive’s Recent
Annual Bonus Percentage and (ii) one-hundred percent
(100%).
(n) “ Pro Rata ” shall mean a
fraction, the numerator of which is the number of days that the
Executive was employed in the applicable performance period and the
denominator of which shall be the number of days in the applicable
performance period.
(o) “ Recent Annual Bonus Percentage
” shall mean the highest actual annual bonus percentage
awarded to the Executive under the Company’s annual incentive
plans, or any comparable bonus under any predecessor or successor
plan, for the last three full fiscal years (or such lesser number
of years that the Executive has been employed) prior to the Change
of Control Effective Date.
(p) “ Term of Employment ” shall
mean the period specified in Section 2 below (including any
extension as provided therein).
2.
Term of Employment.
(a) The Term of Employment began as of the Commencement
Date, and shall extend through January 19, 2006, with automatic
one-year extensions thereafter, unless either Party notifies the
other at least 90 days before such automatic extension that the
Term of Employment is not to so extend. Notwithstanding the
foregoing, the Term of Employment shall end on the date on which
the Executive’s employment is earlier terminated by either
Party in accordance with the provisions of Section 14.
3.
Position, Duties and Responsibilities.
(a) The Executive shall serve as the Chairman of the
Board and Chief Executive Officer of the Company and shall, subject
to the following sentence, be responsible for the general
management of the affairs of the Company. The Executive assumed his
responsibilities as Chief Executive Officer effective February 12,
2001. The Executive shall be a member of the Board during the Term
of Employment and the Board shall designate the Executive as its
Chairman. The Executive, in carrying out his duties under this
Agreement, shall report to the Board. During the Term of
Employment, the Executive shall devote substantially all of his
business time and attention to the business and affairs of the
Company.
(b) Nothing herein shall preclude the Executive from
(i) serving on the boards of directors of a reasonable number of
other corporations with the concurrence of the Board (which
approval shall not be unreasonably withheld), (ii) serving on the
boards of a reasonable number of trade associations and/or
charitable organizations, (iii) engaging in charitable activities
and community affairs, and (iv) managing
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his
personal investments and affairs, provided that such activities set
forth in this Section 3(b) do not conflict or materially interfere
with the effective discharge of his duties and responsibilities
under Section 3(a).
4.
Base Salary.
During
the Term of Employment, the Executive shall be paid a Base Salary,
payable in accordance with the regular payroll practices of the
Company, of $1 million per year. The Base Salary shall be reviewed
annually for any increase in the discretion of the Personnel
Committee of the Board.
5.
Annual Incentive Award.
During
the Term of Employment, the Executive shall have a target bonus
opportunity each year equal to 100% of Base Salary, payable in that
amount if the performance goals established for the relevant year
are met. If such performance goals are exceeded, the Executive
shall receive a larger amount of up to 200% of Base Salary. For the
year 2001, Executive’s minimum award shall be equal to
target, determined on a Pro Rata basis. The performance goals for
each year shall be established by the Personnel Committee in
consultation with the Executive. The Executive shall be paid his
annual incentive awards no later than the date other senior
executives of the Company are paid their annual incentive awards
and in no event later than 90 days following the last day of the
fiscal year in respect of which the annual incentive award is being
paid. The Company may, but shall not be required to, implement the
foregoing pursuant to a shareholder-approved bonus plan or
arrangement that satisfies the requirements for exemption from the
limitation on deductibility imposed by Section 162(m) of the
Internal Revenue Code of 1986, as amended (the “ Code
”) that is set forth in Section 162(m)(4)(C) of the
Code.
Notwithstanding
the foregoing, for each fiscal year of the Company which ends in
the two-year period following the Change in Control Effective Date,
the Executive’s award shall be not less than the amount
determined by multiplying his Base Salary for such year by the
Recent Annual Bonus Percentage.
6.
Sign-on Arrangements.
(a) Cash Sign-on Bonus. Following the Commencement
Date, the Company paid the Executive a cash bonus of
$250,000.
(b) Stock Option Grant. As of the Commencement Date the
Company granted the Executive a ten-year option to purchase two
million shares of The Gillette Company common stock, in the form
attached hereto as Exhibit A.
7.
Additional Long-Term Incentive Awards.
(a) Stock Options.
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(i) The Executive received a stock option grant of
650,000 shares in 2001, 700,000 shares in 2002, and one million
shares in 2003. The grants were made pursuant to The Gillette
Company 1971 Stock Option Plan (the “ Plan ”)
and, except as provided in this Agreement, shall be controlled by
the terms and conditions of the Plan.
(ii) On January 2, 2004, pursuant to Amendment No. 3,
the Company granted the Executive, under the Plan, a ten-year
option to purchase one million shares (the “ January 2,
2004 Options ”). The January 2, 2004 Options shall vest
annually in one third segments over a three year period, such that
the first segment vests on January 19, 2005, the second segment
vests on January 19, 2006, and the final segment vests on January
19, 2007. The grant was made pursuant to the Plan and, except as
provided in this Agreement, shall be controlled by the terms and
conditions of the Plan.
(iii) On June 17, 2004, pursuant to Amendment No. 4,
the Company granted the Executive a ten year option to purchase one
million shares (the “ 2004 Equity Award ”). The
grant was made pursuant to The Gillette Company 2004 Long-Term
Incentive Plan (the “ 2004 Plan ”) and has the
terms and conditions set forth in Exhibit B attached
hereto.
(b) Other Stock-based Awards.
(i)
(A) On August 6, 2003, pursuant to Amendment No. 3, the
Company awarded the Executive one million stock appreciation
rights, based upon the difference between the Fair Market Value of
the Company’s common stock on June 19, 2003 and January 2,
2004. On January 2, 2004, pursuant to Amendment No. 3, the value of
the stock appreciation rights was automatically converted into
108,480.1762 Stock Units (“ SUs ”) and credited
to a Stock Unit account for the Executive on the books of the
Company.
Each time a dividend is paid on the
Company’s common stock having a record date on or after
January 2, 2004, the Company shall make additional credits to the
Executive’s SU account calculated by multiplying the dividend
amount per share of the Company’s common stock by the number
of SUs credited to the Executive’s account as of the record
date of the dividend and dividing
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the
result by the Fair Market Value as of the dividend payment
date.
(B) The value of the Executive’s SU account shall
be paid to the Executive in cash in a single lump sum on the
“Payment Date” which shall be the earlier of (A) the
date one year from the date of his termination of employment or (B)
a Change of Control. The payment shall equal the Fair Market Value
of the SUs credited to his account on the Payment Date. If such
date does not fall on a business day on which the Company’s
common stock is traded on the NYSE, such calculation shall be made
using the Fair Market Value as of the next business day on which
the Company’s common stock is traded on the NYSE.
(C) Notwithstanding the above, the Executive shall be
entitled to receive the dollar value of the SUs held in his account
only if he remains employed by the Company through January 19, 2005
unless prior to such date there is (x) a Change of Control or (y) a
termination of employment which is initiated by the Company without
Cause, initiated by the Executive for Good Reason, or as a result
of Death or Disability. In the event the Executive’s
employment is terminated by the Company with Cause or by the
Executive voluntarily without Good Reason prior to January 19,
2005, the SUs shall be cancelled and no payment shall be made by
the Company pursuant to this Section 7(b). In the event of the
Executive’s death prior to the payment of the award, the
value of his SU account shall be paid to his estate on the one year
anniversary of his death.
(ii) Unless the Executive's employment is terminated
prior to June 30, 2005 by reason of Termination for Cause,
resignation without Good Reason, Disability or Death, no later than
June 30, 2005 the Company will grant the Executive, under the Plan,
the 2004 Plan or any successor plan, a long-term equity opportunity
consisting of options to purchase shares of common stock of the
Company and/or such other equity awards as may be permitted under
such plan in such amount and upon such terms as shall be determined
by the Board of Directors of the Company taking into consideration
the long term incentive compensation opportunities for the
comparable long term cycle of chief executive officers of peer
group companies (the “2005 Equity Award”). If the
Executive's employment is terminated prior to January 19, 2006 due
to termination by the Company for Cause or
9
resignation
without Good Reason, the 2005 Equity Award shall be
cancelled.
(c) Change of Control. Upon the occurrence of a Change
of Control, all outstanding options held by the Executive which are
not yet exercisable shall become immediately exercisable and all
other equity awards shall vest and become non-forfeitable,
redeemable and/or otherwise free of restrictions.
(d) Ongoing Long-Term Incentive Awards. The Executive
shall be eligible to participate in any long-term incentive program
that may hereafter be made available to other senior-level
executives generally; provided, that the Executive’s
participation therein shall take into account the grants to him
pursuant to this Section 7.
8.
Stock Purchase.
The
Executive bought $1 million in The Gillette Company common stock
with his own funds from the Company on the Commencement Date, at a
price per share equal to the Fair Market Value on the Commencement
Date, and agreed to hold these shares for a period of no less than
three years.
9.
Employee Benefit Programs.
During
the Term of Employment, the Executive shall be entitled to
participate in all employee pension and welfare benefit plans,
programs and arrangements made available to the Company’s
senior-level executives or to its employees generally on the same
terms and conditions as other senior-level executives, as such
plans, programs or arrangements may be in effect from time to time,
including, without limitation, pension, profit sharing, savings,
estate preservation and other retirement plans or programs, 401(k),
medical, dental, hospitalization, short-term and long-term
disability plans, accidental death and dismemberment protection,
travel accident insurance, and all other pension or retirement
plans or programs and employee welfare benefit plans or programs
that may be sponsored by the Company from time to time, including
any plans or programs that supplement the above-listed types of
plans or programs, whether funded or unfunded; provided, however,
that the Executive shall not participate in any of the
Company’s executive or group life insurance programs and, in
lieu thereof and substitution therefor, the Company shall pay the
premium cost of the certain term life insurance policies (nos.
MH0003676 and MH0003677 each issued as of December 28, 1999 by Old
Line Life Insurance Co. of America) covering the Executive and his
spouse during the Term of Employment or until the sooner
termination of such policies. The Executive’s participation
shall be based on, and the calculation of all benefits shall be
based on, the assumptions that the Executive has met all
service-period and other requirements for such participation. The
Executive shall be entitled to six weeks paid vacation per calendar
year of employment. The Executive agrees to cooperate with
any
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required
eligibility procedures with respect to such plans, programs and
arrangements, including without limitation customary medical
underwriting procedures.
10.
Supplemental Pension.
(a) Following any termination of his employment with
the Company other than by the Company for Cause or as a result of
his death, the Executive shall be entitled to receive a
supplemental pension benefit with annual payments equal to five
percent (5%) of his Average Final Annual Compensation (as defined
below) multiplied by his full and partial years of service with the
Company (including any additional years of credited service
pursuant to Sections 14(d) and 15(c)); provided however, that the
maximum annual pension to which the Executive shall be entitled
shall be 50% of his Average Final Annual Compensation. For this
purpose, “ Average Final Annual Compensation ”
shall be defined as the Executive’s average cash compensation
for the 36 consecutive months of highest cash compensation or such
shorter period as the Executive has been employed by the Company,
if the Executive has been employed for less than 36 months with the
Company. Cash compensation shall include all salary and bonuses
earned in respect of such 36-month period, regardless of when paid.
The supplemental pension shall be fully vested and shall be paid
monthly with the first payment to be made at the beginning of the
first month following the termination of the Executive’s
employment hereunder. The Executive’s entitlement to the
supplemental pension benefit (apart from the determination of the
amount of the benefit as set forth in the first sentence) shall
apply without regard to the period of the Executive’s
employment with the Company.
(b) If the Executive should die with a spouse surviving
him after he has commenced receiving a benefit under this Section
10 (or would have commenced receiving a benefit but for the offset
provided under Section 10(c)), the spouse’s benefit, payable
monthly, shall be determined in accordance with an election to be
made by the Executive prior to the commencement of the supplemental
pension benefit. The post-retirement benefit provided the spouse
shall result in the normal actuarial discount applied to a joint
and survivor benefit pursuant to the Company’s tax-qualified
pension plan.
(c) Notwithstanding the foregoing, the supplemental
pension benefit (including a spouse’s benefit) determined in
accordance with this Section 10 shall be offset (but not below
zero) by any pension benefit (including a survivor’s benefit)
or long-term disability benefit received by the Executive (or
pension or survivor benefit received by the spouse) under any of
the Company’s defined benefit pension or long-term disability
benefit plans but shall not be offset by any other pension or
retirement benefit paid by any prior employer of the
Executive.
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11.
Perquisites.
The
Executive shall be entitled to perquisites on the same basis as
provided to other senior level executives and, in any event, shall
be entitled to have the Company provide the following:
(a) a car and driver for business purposes, including
commutation, as provided in Section 13, and as needed or required
for security purposes;
(b) reimbursement of tax and financial counseling fees
under the terms of the Company’s Senior Executive Financial
Planning Program; provided, however, that beginning in 2004 the
maximum reimbursement for such fees shall be $25,000 per
year;
(c) a residential security system;
(d) membership and annual fees for two luncheon clubs;
and
(e) an annual physical by the doctor of his choice,
including gross-up for any tax liabilities the Executive incurs in
respect to the provision of such annual physical.
12.
Aircraft Travel.
For
security purposes, the Executive shall be required to use, at
Company expense, private aircraft for travel in North America
including, without limitation, his weekly commutation as provided
in Section 13. Outside North America he shall be entitled to first
class air travel.
13.
Reimbursement of Business and Other Expenses; Commutation;
Relocation.
The
Executive is authorized to incur reasonable expenses in connection
with carrying out his duties and responsibilities under this
Agreement and the Company shall promptly reimburse him for all such
expenses incurred in connection with carrying out the business of
the Company, subject to documentation in accordance with the
Company’s policy. The Company paid legal fees and expenses of
$100,000 that were incurred by the Executive in connection with the
negotiation and implementation of the Executive’s employment
arrangements with the Company, including, without limitation,
gross-up for any tax liabilities the Executive incurred with
respect to such payments.
The
Executive shall be under no obligation to relocate his personal
residence to the Boston area. The Company shall provide and
maintain for the Executive a 2-room apartment with full hotel
services in the Boston area mutually acceptable to the Company and
the Executive and pay any costs associated with
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the
Executive’s weekly commuting from Boston to the
Executive’s residence in Rye, New York including, without
limitation, gross-up for any tax liabilities Executive incurs with
respect to commutation costs.
In
the event the Executive relocates from the New York area to the
Boston area, the Company will pay all costs associated with his
relocation, including, without limitation, gross-up for any tax
liabilities Executive incurs with respect to such relocation
payments or reimbursements.
14.
Termination of Employment.
(a) Termination Due to Death. In the event that the
Executive’s employment hereunder is terminated due to his
death, his estate or his beneficiaries, as the case may be, shall
be entitled to the following:
(i) Base Salary through the date of his
death;
(ii) a Pro-Rata annual incentive award for the year in
which the Executive’s death occurs based on the target bonus
for the year of termination, payable promptly following his
death;
(iii) full vesting of all outstanding stock options
with exercise periods (a) for all outstanding stock options granted
prior to the year 2002, equal to the lesser of one year and the
remainder of their originally scheduled terms, (b) for all
outstanding stock options granted in the year 2002 or 2003, equal
to the lesser of three years and the remainder of their originally
scheduled terms and (c) for the January 2, 2004 Option, the 2004
Equity Award and the 2005 Equity Award, in which case such
termination shall be treated as a retirement, for the remainder of
their originally scheduled terms; and all other equity awards shall
vest and become non-forfeitable, redeemable and/or otherwise free
of restrictions.
(b) Termination Due to Disability. In the event that
the Executive’s employment hereunder is terminated by either
Party hereto due to the Executive’s Disability, he shall be
entitled to the following:
(i) Disability benefits provided in accordance with the
long-term disability program in effect for senior executives at the
Company; provided, however, in no event shall such benefits provide
the Executive less than 50% of his then Base Salary to age
65;
(ii) Base Salary through the end of the month before
the month in which Disability benefits commence;
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(iii) a Pro-Rata annual incentive award for the year in
which the termination occurs based on the target bonus for the year
of termination, payable promptly following the termination of his
employment;
(iv) full vesting of all outstanding stock options with
exercise periods (a) with respect to all outstanding stock options
granted prior to the year 2002, equal to the lesser of one year and
the remainder of their originally scheduled terms, (b) with respect
to all stock options granted in the year 2002 or 2003, equal to the
lesser of three years and the remainder of their originally
scheduled terms and (c) for the January 2, 2004 Option, the 2004
Equity Award and the 2005 Equity Award, in which case such
termination shall be treated as a retirement, for the remainder of
their originally scheduled terms; all other equity awards shall
vest and become non-forfeitable, redeemable and/or otherwise free
of restrictions; and
(v) continued participation in all medical, dental,
vision and hospitalization insurance coverage and benefits and in
all other employee welfare benefit plans or programs in which he
was participating on the date of the termination of his employment
for a period of 24 months following such date, on the same terms
and conditions as if he had remained employed by the Company;
provided that to the extent that the Company’s plans do not
permit continuation of the Executive’s participation
throughout such period, the Company shall provide the Executive, no
less frequently than quarterly in advance, with an amount which,
after taxes, is sufficient for him to purchase equivalent
benefits.
In
no event shall a termination of the Executive’s employment
hereunder for Disability occur until the Party terminating his
employment gives written notice to the other Party in accordance
with Section 28 below.
(c) Termination by the Company for Cause.
(i) A termination for Cause shall not take effect
unless the provisions of this subclause (i) are complied with. The
Executive shall be given written notice by the Board of the
intention to terminate him for Cause, such notice (A) to state in
detail the particular act or acts or failure or failures to act
that constitute the grounds on which the proposed termination for
Cause is based and (B) to be given within 60 days of the
Board’s learning of such act or acts or failure or failures
to act. In the event the proposed termination is based on subclause
(ii) of Section 1(e) above, the Executive shall have ten calendar
days after the date that such written notice has been given to the
Executive in which
14
to
cure such conduct. If he fails to cure such conduct, the Executive
shall then be entitled to a hearing before the Board, and,
thereafter, upon a determination by affirmative vote of no fewer
than three-quarters of the members of the Board that Cause exists,
he shall be terminated for Cause.
(ii) In the event the Company terminates the
Executive’s employment hereunder for Cause:
(A) he shall be entitled to Base Salary through the
date of the termination; and
(B) all stock options shall be forfeited.
(d) Termination without Cause or Termination for Good
Reason.
In
the event (x) the Executive’s employment hereunder is
terminated by the Company without Cause, other than due to
Disability or death, or (y) the Executive terminates his employment
for Good Reason hereunder at his initiative within 60 days
following the occurrence of a Good Reason which has not been cured
by the Company within 20 calendar days of receipt of notice thereof
from the Executive, the Executive shall be entitled to the
following benefits:
(i) Base Salary through the date of
termination;
(ii) a Pro-Rata annual incentive award for the year of
termination, based on the target bonus for such year, payable
promptly following such termination;
(iii) a lump sum payment in an amount equal to two
times the Executive’s Base Salary, determined as provided in
the last sentence of this Section 14(d), payable promptly following
such termination;
(iv) a lump sum payment in an amount equal to two times
the Executive’s target annual incentive award for the year of
termination, payable promptly following such
termination;
(v) all outstanding stock options shall become fully
vested and exercisable and such termination shall be treated as a
retirement and, in the case of stock options granted prior to the
year 2002, shall remain exercisable for a period equal to the
lesser of the remainder of their originally scheduled terms and
five years and in the case of stock options granted in the year
2002 or thereafter, such stock options shall remain exercisable for
the remainder of their originally scheduled terms; all other
equity
15
awards
shall vest and become non-forfeitable, redeemable and/or otherwise
free of restrictions;
(vi) two additional years of service for the purpose of
determining the supplemental pension benefit pursuant to Section
10; provided, however, that the total number of years of service
taken into account in determining such benefit shall in no event
exceed ten (10); and
(vii) continued participation in all medical, dental,
vision and hospitalization insurance coverage and benefits and in
all other employee and senior-level executive welfare benefit
plans, programs and arrangements in which he was participating on
the date of the termination of his employment, on the same terms
and conditions as if he had remained employed by the Company, for a
period equal to 24 months following the termination of his
employment; provided, however, that if the Executive becomes
re-employed with another employer and is eligible to receive
medical or other welfare benefits under another employer-provided
plan, the medical and other welfare benefits described above shall
be secondary to those provided under such other plan during such
applicable period of eligibility, provided that, to the extent that
t
