Exhibit 10.7
CONTINUITY AGREEMENT
This Agreement (the
“Agreement”) is dated as of November 28, 2005 by
and between Tronox Incorporated, a Delaware corporation (the
“Company”), and Gregory E. Thomas (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
Section
