September 15,
2009
Mr. James D.
Donlon, III
[Address
Redacted]
Dear
Jim:
This letter
confirms our mutual understanding of your employment as Executive
Vice President of ArvinMeritor, Inc. (“Company”). This
letter agreement sets forth our mutual agreement with respect to
your continued employment and termination of employment from the
Company.
Effective
Date
This agreement
is effective as of September 15, 2009.
Prior
Agreement
This agreement
supersedes and replaces the agreement dated April 12, 2005 between
you and the Company (the “Prior Agreement”).
Commitment
Period
During the
period from September 15, 2009 through January 15, 2010 (the
“Commitment Period”), subject to earlier termination as
provided in this agreement, you will continue to be employed by the
Company as Executive Vice President of the Company. You will
continue to report to the Chairman, President and Chief Executive
Officer of the Company and will continue to be based in Troy,
Michigan. During the Commitment Period, you will use your best
efforts to effectuate a definitive agreement to sell or prepare for
sale certain segments of the Company’s Light Vehicles Systems
business. You agree to devote your full time and efforts to perform
faithfully and efficiently the responsibilities assigned to you by
the Chairman, President and Chief Executive Officer of the
Company.
Base
Salary
You will
continue to receive your current monthly base salary of $52,787 in
accordance with Company payroll practices. In the event that the
Board approves the reinstatement of full base salaries for officers
of the Company, your monthly base salary will be increased to
$58,650 commencing prospectively as of the date specified in such
approval.
Annual
Incentive Plans
You will be
eligible to fully participate on a non-prorated basis in the
Company’s annual Incentive Compensation Plan (ICP) for Fiscal
Year 2009 (October 1, 2008 to September 30, 2009) and on a
pro-rated basis consistent with those of comparable executives for
Fiscal Year 2010 (October 1, 2009 to September 30, 2010). Your ICP
target award is 65% of your annual base salary ($703,800). Actual
award payments will be in accordance with the terms of the
Incentive Compensation Plan and may be adjusted to reflect Company
performance and your individual performance as approved by the
Committee.
Long-Term
Incentives
As discussed
with you, the Board’s Compensation and Management Development
Committee has approved the following:
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(i)
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FY2007 –
2009 Effective December 1, 2009, full and immediate vesting of all
outstanding Restricted Shares granted (18,500 plus accumulated
dividends). You also remain eligible for a cash Performance Plan
award, if any, with a target amount of $500,000, payable in
December, 2009 and potential vesting on December 1, 2009 of 18,500
Performance Shares, both in accordance with the terms of such plan,
subject to approval by the Board’s Compensation and
Management Development Committee;
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(ii)
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FY2008 –
2010 Effective January 16, 2010, full and immediate vesting of all
outstanding Shares granted (52,000 plus accumulated dividends). You
also remain eligible for a Cash Performance Plan award, if any,
with a target amount of $500,000, payable in December, 2010 in
accordance with the terms of such plan, subject to approval by the
Board’s Compensation and Management Development Committee;
and
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(iii)
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FY2009 –
2011 Effective January 16, 2010, full and immediate vesting of all
outstanding Shares granted (129,000). You also remain eligible for
a cash Performance Plan award, if any, with a target amount of
$500,000, payable in December 2011 in accordance with the terms of
such plan, subject to approval by the Board’s Compensation
and Management Development Committee.
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Notwithstanding
the foregoing regarding potential December payment dates, as set
forth above, the Board’s Compensation and Management
Development Committee has the right to change said payment dates,
but only to the extent said changes comply with Section
409A.
Benefits
You will be
eligible to participate in all employee retirement and health and
welfare benefit plans maintained by the Company and offered to all
full time employees of the Company, including medical, disability,
life insurance and vacation, to the extent permitted by the terms
of the plans and by the law, subject to the Company’s rights
to amend or terminate such plans as set forth in those
plans.
As an officer
of the Company, you will continue to be eligible for the following
additional benefits, in accordance with the terms of the policies
providing such benefits, subject to the Company’s rights to
modify or terminate such benefits:
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Financial
Counseling Allowance
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Personal
Excess Liability Coverage
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Termination of
Employment
If your
employment with the Company is not sooner terminated pursuant to
this agreement as specified below, your employment with the Company
will be terminated by the Company without Cause effective as of
January 16, 2010 (the “Termination Date”). However, in
no event will your employment be terminated by the Company without
Cause prior to January 16, 2010.
Severance
Benefits
If you incur a
separation from service with the Company within the meaning of
Section 409A (as defined below) (“Separation from
Service”), you will be eligible for certain severance
benefits as follows:
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By the Company
Without Cause.
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Any accrued
and unpaid salary and vacation pay through your date of Separation
from Service with the Company (“Accrued Obligations”)
paid within thirty (30) days following your Separation from Service
or such earlier date as may be required by law.
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Monthly
severance pay equal to $58,650 for a period of 24
months
(“Severance Period”) payable in
accordance with the following paragraphs.
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Your separation
pay will be paid in equal semi-monthly installments beginning with
the first payroll cycle that includes the Release Effective Date
(as defined hereinafter). You will receive any amount due for the
period from the date of your Separation from Service through the
Release Effective Date in a lump sum within one week of the Release
Effective Date.
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Notwithstanding
the foregoing, if you are a “specified employee” within
the meaning of Section 409A of the Internal Revenue Code of 1986,
as amended and the final regulations thereunder (“Section
409A), you will be required to wait to receive any portion of your
severance pay that is not exempt from Section 409A.
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A portion of
your severance pay may be exempt from Section 409A pursuant to
Treasury Regulation Section 1.409A-1(b)(9)(iii). The amount that is
exempt under Section 409A is the amount of separation pay that does
not exceed two times the lesser of (1) your annualized compensation
determined in accordance with Section 409A regulations and (2) the
maximum amount that may be taken into account under IRC Section
401(a)(17) for the year in which you separate from service (the
“409A Exempt Amount”).
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Any portion of
your severance pay that is not exempt under the Section 409A, that
would otherwise have been paid during the first six (6) months
following your Separation from Service, will be paid in a lump sum
the first payroll cycle following the six-month anniversary of your
Separation from Service.
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The balance of
your severance pay that is not exempt under the Section 409A
exemption will be paid in equal semi-monthly payments beginning
with the later of (1) the first payroll cycle after the payroll
cycle in which the 409A Exempt Amount has been completely paid and
(2) the first payroll cycle after your six-month anniversary of
your Separation from Service.
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Pro-rata
annual incentive bonus participation for the then-current fiscal
year (FY2010), based on the time
actually worked, paid after the end of the fiscal year, in
accordance with the terms of the Incentive Compensation
Plan.
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