Exhibit 10.4
CONTINUITY AGREEMENT
This Agreement (the
“Agreement”) is dated as of November 28, 2005 by
and between Tronox Incorporated, a Delaware corporation (the
“Company”), and Mary Mikkelson (the
“Executive”).
WHEREAS, the Company’s Board
of Directors considers the continued services of key executives of
the Company to be in the best interests of the Company and its
stockholders; and
WHEREAS, the Company’s Board
of Directors desires to assure, and has determined that it is
appropriate and in the best interests of the Company and its
stockholders to reinforce and encourage the continued attention and
dedication of key executives of the Company to their duties of
employment without personal distraction or conflict of interest in
circumstances which could arise from the occurrence of a change in
control of the Company; and
WHEREAS, the Company’s Board
of Directors has authorized the Company to enter into continuity
agreements with those key executives of the Company and any of its
respective subsidiaries (all of such entities, together with the
Company, are hereinafter referred to as an “Employer”),
such agreements to set forth the severance compensation which the
Company agrees under certain circumstances to pay such executives;
and
WHEREAS, the Executive is a key
executive of an Employer and has been designated as an executive to
be offered such a continuity compensation agreement with the
Company.
NOW, THEREFORE, in consideration of
the premises and the mutual covenants and agreements contained
herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and the
Executive agree as follows:
1.
Term . This Agreement shall become effective
on the date the Company first offers shares of its Class A
common stock in an initial public offering (the “Effective
Date”) and remain in effect until the third anniversary
thereof; provided , however , that this Agreement
shall automatically renew for an additional year on each successive
anniversary of the Effective Date, unless an Employer informs the
Executive, in writing, at least 180 days prior to the renewal date,
that this Agreement shall not be renewed. The foregoing shall
constitute the “Term” of this Agreement for purposes
hereof.
2.
Change in Control
. No compensation or other
benefit pursuant to Section 4 hereof shall be payable under
this Agreement unless and until either (i) a Change in Control
of the Company (as hereinafter defined) shall have occurred while
the Executive is employed by an Employer and the Executive’s
employment by an Employer thereafter shall have terminated in
accordance with Section 3 hereof or (ii) the
Executive’s employment by an Employer shall have terminated
in accordance with Section 3(a)(ii) hereof prior to the
occurrence of the Change in Control. Except as provided in
Section 2(e) hereof, for purposes of this Agreement, a
“Change
in Control” shall be deemed to have
occurred if, beginning on the Effective Date and before the end of
the Term of this Agreement:
(a)
any person (“Person”) as
defined in Section 3(a)(9) of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”), and as used
in Section 13(d) and 14(d) thereof, including a
“group” as defined in Section 13(d) of the
Exchange Act but excluding the Company and any subsidiary and any
employee benefit plan sponsored or maintained by the Company or any
subsidiary (including any trustee of such plan acting as trustee),
directly or indirectly, becomes the “beneficial owner”
(as defined in Rule 13d-3 under the Exchange Act), of
securities of the Company representing 25% or more of the combined
voting power of the Company’s then outstanding securities
(other than indirectly as a result of the Company’s
redemption of its securities); or
(b)
the consummation of any merger or
other business combination of the Company, sale of 50% or more of
the Company’s assets, liquidation or dissolution of the
Company or combination of the foregoing transactions (the
“Transactions”) other than a Transaction immediately
following which the shareholders of the Company and any trustee or
fiduciary of any Company employee benefit plan immediately prior to
the Transaction own at least 60% of the voting power, directly or
indirectly, of (A) the surviving corporation in any such
merger or other business combination; (B) the purchaser of or
successor to the Company’s assets; (C) both the
surviving corporation and the purchaser in the event of any
combination of Transactions; or (D) the parent company owning
100% of such surviving corporation, purchaser or both the surviving
corporation and the purchaser, as the case may be; or
(c)
within any twenty-four month period,
the persons who were directors immediately before the beginning of
such period (the “Incumbent Directors”) shall cease
(for any reason other than death) to constitute at least a majority
of the Board or the board of directors of a successor to the
Company. For this purpose, any director who was not a
director at the beginning of such period shall be deemed to be an
Incumbent Director if such director was elected to the Board by, or
on the recommendation of or with the approval of, at least
two-thirds of the directors who then qualified as Incumbent
Directors (so long as such director was not nominated by a person
who commenced or threatened to commence an election contest or
proxy solicitation by or on behalf of a Person (other than the
Board) or who has entered into an agreement to effect a Change in
Control or expressed an intention to cause such a Change in
Control); or
(d)
a majority of the members of the
Board of Directors in office immediately prior to a proposed
transaction determine by a written resolution that such proposed
transaction, if taken, will be deemed a Change in Control and such
proposed transaction is consummated.
(e)
The following events shall not
constitute a Change in Control under this Agreement and shall not
be considered in determining whether a Change in Control has
occurred:
(i)
the sale or purchase of the
Company’s Class A common stock in connection with the
initial public offering of such stock;
(ii)
the distribution to Kerr-McGee
shareholders of the shares of the Company’s Class B
common stock that Kerr-McGee owns subsequent to the Effective
Date;
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(iii)
Kerr-McGee Corporation exchanging
shares of the Company’s Class B common stock that it
owns subsequent to the completion of the initial public offering of
such stock with its shareholders in return for shares of Kerr-McGee
Corporation;
(iv)
any event that qualifies as a
“change in control” under the terms of any agreement
providing for continuity compensation under similar terms and
conditions as this Agreement if such agreement was entered into by
the Executive and Kerr-McGee Corporation before the Effective Date
of this Agreement and remains in effect on the date of the
qualifying event; or
(v)
if the Executive is not a party to
an agreement described in Section 2(e)(iv), above, any event
that would qualify as a “change in control” under the
terms of this Agreement if the term “Kerr-McGee
Corporation” were substituted for the term
“Company” in Section 2 hereof and this
Section 2(e) were disregarded.
3.
Termination of Employment;
Definitions .
(a)
Termination without Cause by the
Company or for Good Reason by the Executive .
(i) The Executive shall be
entitled to the compensation provided for in Section 4 hereof,
if within two years after a Change in Control, the
Executive’s employment by an Employer shall be terminated
(A) by an Employer for any reason other than (I) the
Executive’s Disability or Retirement, (II) the
Executive’s death or (III) for Cause, or (B) by the
Executive with Good Reason (all terms are as hereinafter defined),
unless such termination occurs with the Executive’s prior
written consent expressly waiving the rights provided
hereunder.
(ii) In addition, the
Executive shall be entitled to the compensation provided for in
Section 4 hereof if, (A) in the event that an agreement
is signed which, if consummated, would result in a Change of
Control and, within 12 months thereafter, the Executive is
terminated without Cause by the Company (other than on account of
Executive’s Death or Disability) or terminates employment
with Good Reason prior to the Change in Control, (B) such
termination is at the request or instigation of the acquiror or
merger partner or otherwise in connection with the anticipated
Change in Control, and (C) within said 12 month period, such
Change in Control actually occurs.
(b)
Disability
. For purposes of this
Agreement, “Disability” shall mean the
Executive’s absence from the full-time performance of the
Executive’s duties (as such duties existed immediately prior
to such absence) for 180 consecutive business days, when the
Executive is disabled as a result of incapacity due to physical or
mental illness.
(c)
Retirement
. For purposes of this
Agreement, “Retirement” shall mean the
Executive’s voluntary termination of employment pursuant to
late, normal or early retirement under a pension plan sponsored by
an Employer, as defined in such plan, but only if such retirement
occurs prior to a termination by an Employer without Cause or by
the Executive for Good Reason.
(d)
Cause . For purposes of this Agreement,
“Cause” shall mean:
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(i)
the willful and continued failure of
the Executive to perform substantially all of his or her duties
with an Employer (other than any such failure resulting from
incapacity due to physical or mental illness), after a written
demand for substantial performance is delivered to such Executive
by the Board of Directors (the “Board”) of the Company
which specifically identifies the manner in which the Board
believes that the Executive has not substantially performed his or
her duties;
(ii)
the willful engaging by the
Executive in gross misconduct which is materially and demonstrably
injurious to the Company or any Employer; or
(iii)
the conviction of, or plea of guilty
or nolo contendere to, a felony.
Termination of the Executive for
Cause shall be made by delivery to the Executive of a copy of a
resolution duly adopted by the affirmative vote of not less than a
three-fourths majority of the non-employee Directors of the Company
or of the ultimate parent of the entity which caused the Change in
Control (if the Company has become a subsidiary) at a meeting of
such Directors called and held for such purpose, after 30 days
prior written notice to the Executive specifying the basis for such
termination and the particulars thereof and a reasonable
opportunity for the Executive to cure or otherwise resolve the
behavior in question prior to such meeting, finding that in the
reasonable judgment of such Directors, the conduct or event set
forth in any of clauses (i) through (iii) above has
occurred and that such occurrence warrants the Executive’s
termination.
(e)
Good Reason
. For purposes of this
Agreement, “Good Reason” shall mean the occurrence,
within the Term of this Agreement, of any of the following without
the Executive’s written consent expressly waiving the rights
provided hereunder:
(i)
any material and adverse diminution
in the Executive’s duties or responsibilities with the
Company (or any affiliate thereof) from those in effect immediately
prior to the Change in Control;
(ii)
any reduction in the
Executive’s annual base salary or any adverse change in bonus
opportunity or participation in cash bonus programs in effect
immediately prior to the Change in Control;
(iii)
any requirement that Executive be
based at a location more than 35 miles from the location at which
the Executive was based immediately prior to the Change in Control
(or a substantial increase in the amount of travel Executive is
required to do because of a relocation of the executive
offices);
(iv)
any failure by the Company to obtain
from any successor to the Company an agreement reasonably
satisfactory to the Executive to assume and perform this Agreement,
as contemplated by Section 10(a) hereof; or
(v)
any amendment, reduction or
termination of any benefit plan, program or arrangement, which has
the effect of causing the Executive to have benefits which are not
substantially similar, in the aggregate, to those benefits provided
to the Executive immediately prior to the Change in
Control.
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Notwithstanding the foregoing, in
the event Executive provides the Company with a Notice of
Termination (as defined below) referencing this Section 3(e),
the Company shall have 30 days thereafter in which to cure or
resolve the behavior otherwise constituting Good Reason. Any
good faith determination by Executive that Good Reason exists shall
be presumed correct and shall be binding upon the
Company.
(f)
Notice of Termination
. Any purported termination of
the Executive’s employment (other than on account of
Executive’s death) with an Employer, if such termination
occurs after the occurrence of a Change in Control or under
circumstances specified under Section 3(a)(ii) above,
shall be communicated by a Notice of Termination to the Executive,
if such termination is by an Employer, or to an Employer, if such
termination is by the Executive. For purposes of this
Agreement, “Notice of Termination” shall mean a written
notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of the Executive’s employment under the
provisions so indicated. For purposes of this
Agreement, no purported termination of Executive’s employment
with an Employer shall be effective without such a Notice of
Termination having been given.
4.
Compensation Upon Termination
After a Change in Control .
Subject to Section 9 hereof, if
within two years of a Change in Control, the Executive’s
employment by an Employer shall be terminated in accordance with
Section 3(a) (the “Termination”), the
Executive shall be entitled to the following payments and
benefits:
(a)
Severance . The Company shall pay or cause to be
paid to the Executive a cash severance amount equal to
(i) three (3) times the sum of (A) the
Executive’s annual base salary on the date of the Change in
Control (or, if higher, the annual base salary in effect
immediately prior to the giving of the Notice of Termination) and
(B) the higher of: (x) the average of the actual bonuses
earned by the Executive in respect of the three years prior to the
year in which the Change in Control occurs under the
Company’s incentive award program, or (y) the
Executive’s target bonus for the year of Termination, plus
(ii) in lieu of continuation of any of the Executive’s
perquisites as provided to the Executive prior to the Change in
Control (or, if greater, at the time of Termination), a cash
payment equal to 7 percent of the Executive’s annual base
salary as in effect on the date of the Change in Control for each
of the three (3) years following the date of
Termination. This cash severance amount shall be payable in a
lump sum.
(b)
Additional Payments and
Benefits . The
Executive shall also be entitled to:
(i)
a lump sum cash payment equal to the
sum of (A) the Executive’s accrued but unpaid annual
base salary through the date of Termination, (B) the unpaid
portion, if any, of bonuses previously earned by the Executive
pursuant to the Company’s Executive incentive award program,
plus the pro rata portion of the bonus to be paid for the year in
which the date of Termination occurs (calculated through the date
of Termination), (C) an amount, if any, equal to compensation
previously deferred (excluding any qualified plan deferral) and any
accrued vacation pay, in each case, in full satisfaction of
Executive’s rights thereto, and (D) an amount, if any,
equal to the value of the number of performance units that the
Executive would have earned if the performance period for such
performance units had ended on the date of the Change in Control
or, if greater, the target number of performance units under the
award.
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(ii)
a lump sum cash payment equal to the
aggregate sum of (A) additional pension contributions in an
amount equal to the Company’s contributions under the
Company’s 401(k) plan, profit sharing or other savings
pension plans (or such other qualified and nonqualified defined
contribution pension plans as then in effect) for the three
(3) year period following the date of Termination (the
“Separation Period”) (based on assumed rates of
Executive’s contributions at the level of participation in
effect as of the last date Executive was permitted to participate);
and (B) the difference between the discounted present value
(i.e., lump sum value) of the annuity benefit the Executive is
entitled to receive under the Company’s qualified and
nonqualified defined benefit retirement programs in which the
Executive is a participant calculated through the date of
Termination and the discounted present value (i.e., lump sum value)
of the annuity benefit the Executive would be entitled to receive
under such retirement programs calculated after adding an
additional five years of credit to age and service up to a maximum
of age 65 as if the executive had been paid at the rate used to
calculate the payments under Section 4(a), provided that the
additional credits added with respect to each retirement program
shall not exceed five years when added to any additional credits
already provided by the terms of the such programs in respect of
the Termination covered hereby.
(iii)
continued medical, dental, vision,
and life insurance coverage (excluding accident, death, and
disability insurance) for the Executive and the Executive’s
eligible dependents or, to the extent such coverage is not
commercially available, such other arrangements reasonably
acceptable to the Executive, on the same basis as in effect prior
to the Change in Control or the Executive’s Termination,
whichever is deemed to provide for more substantial benefits, for a
period ending on the earlier of (A) the end of the Separation
Period or (B) the commencement of comparable coverage by the
Executive with a subsequent employer;
(iv)
unless it would adversely affect the
Company’s ability to use pooling of interest accounting in a
Change in Control transaction in which such accounting is intended
to be used, immediate 100% vesting of all outstanding stock
options, stock appreciation rights and restricted stock granted or
issued by any Employer to the extent not previously vested on or
following the Change of Control; and
(v)
all other accrued or vested benefits
in accordance with the terms of the applicable plan (with an offset
for any amounts paid under Section 4(b)(i)(C),
above).
All lump sum payments under this
Secti
