EXHIBIT 10.3
TERMINATION
PROTECTION AGREEMENT
This Agreement
(“Agreement”) is an amendment and restatement made this
day of
,
of the agreement made
,
between Esterline Technologies Corporation, a Delaware corporation,
with its principal offices at 500 108 th
Avenue N.E., Suite
1500, Bellevue, Washington 98004 (the “Company”) and
(the “Executive”).
WHEREAS, the Board
of Directors of the Company (the “Board”) determined it
is appropriate to encourage the continued attention and dedication
of Company executives to their assigned duties without distraction
in circumstances arising from a possible change in control of the
Company; and
WHEREAS, the Company
and Executive deem it appropriate to address the requirements of
Code Section 409A; and
WHEREAS, the
Executive is willing to enter into this Agreement for the purposes
and on the terms and conditions described below;
NOW, THEREFORE, the
parties agree as follows:
1.
Definitions.
1.1 “Cause”
shall mean: (a) the willful and continued failure by the
Executive to substantially perform his or her duties and
obligations to the Company (other than any such failure resulting
from illness, sickness, or physical or mental incapacity) which
failure continues after the Company has given notice to the
Executive; or (b) the willful engaging by the Executive in
misconduct that is significantly injurious to the Company,
monetarily or otherwise. For purposes of this definition, no act,
or failure to act, on the Executive’s part shall be
considered “willful” unless done, or omitted to be
done, by the Executive in bad faith and without reasonable belief
that his or her action or omission was in the best interests of the
Company.
1.2 “Change
in Control Event” shall mean the first to occur of the
following events:
(a) an acquisition
by any individual, entity or group (within the meaning of
Section 13(d)(3) of the Exchange Act) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 30% or more of either (1) the then outstanding shares
of common stock of the Company or (2) the combined voting
power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors, excluding,
however, the following (i) any acquisition directly from the
Company, other than an acquisition by virtue of the exercise of a
conversion privilege where the security being so converted was not
acquired directly from the Company by the party exercising the
conversion privilege, (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 Related
Company, or (iv) a Related Party Transaction; or
(b) a change in the
composition of the Board during any two-year period such that the
individuals who, as of the beginning of such two-year period,
constitute the Board (the “Incumbent Board”) cease for
any reason to constitute at least a majority of the Board;
provided, however, that for purposes of this definition, any
individual who becomes a member of the Board subsequent to the
beginning of the two-year period, whose election, or nomination for
election by the Company’s shareholders, was approved by a
vote of at least two-thirds of those individuals who are members of
the Board and who were also members of the Incumbent Board (or
deemed to be such pursuant to this proviso) shall be considered as
though such individual were a member of the Incumbent Board; and
provided further, however, that any such individual whose initial
assumption of office occurs as a result of or in connection with an
actual or threatened solicitation of proxies or consents by or on
behalf of an Entity other than the Board shall not be considered a
member of the Incumbent Board.
1.3 “Code”
shall mean the Internal Revenue Code of 1986, as
amended.
1.4 “Contract
Period” shall mean the twenty-four (24) month period
beginning on the Effective Date.
1.5 “Disability”
shall mean any physical or mental condition for which the Executive
would be eligible to receive benefits under the disability
insurance provisions of (a) the Social Security Act or
(b) the Company’s long-term disability
program.
1.6 “Effective
Date” shall mean the day preceding a Change in Control
Event.
1.7 “Equity
Incentive Plan” shall mean the Esterline Technologies
Corporation 2004 Equity Incentive Plan, as amended from time to
time.
1.8 “Exchange
Act” shall mean the Securities Exchange Act of 1934, as
amended.
1.9 “Fringe
Benefit Program” shall mean any employee benefit plan,
program, or arrangement, including, without limitation, employee
benefit plans within the meaning of the Employee Retirement Income
Security Act of 1974, as amended, but excluding the Equity
Incentive Plan and any nonqualified deferred compensation plan or
other incentive compensation plan.
1.10 “Final
Fiscal Period” shall mean the number of days the Executive
was employed by the Company during the Fiscal Year in which the
Executive’s Termination Date occurs.
1.11 “Fiscal
Year” shall mean the twelve (12)-month period ending on
October 31.
1.12 “Good
Reason” shall mean:
(a) A material
diminution in the Executive’s authority, duties or
responsibilities, including, for example, assignment to the
Executive of duties inconsistent with, or the reduction of powers
or functions associated with, his or her positions, duties,
responsibilities and status with the Company immediately prior to
the Effective Date, or removal of the Executive from or any failure
to re-elect the Executive to any material positions or offices the
Executive held immediately prior to the Effective Date, except in
connection with the termination of the Executive’s employment
by the Company for Cause or for Disability, or a material
negative
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change in the
employment relationship such as the failure to maintain a working
environment conducive to the performance of the Executives’
duties or the effective exercise of the powers or functions
associated with the Executive’s position, responsibilities
and status with Company immediately prior to the Effective Date;
or
(b) The
Company’s material breach of the covenants set forth in the
third sentence of Section 2; or
(c) The
Company’s mandatory transfer of the Executive to another
geographic location, without the Executive’s consent, outside
of a twenty (20) mile radius from the Executive’s
current location, except for required travel on the Company’s
business to an extent substantially consistent with the
Executive’s business travel obligations prior to the
Effective Date; or
(d) Failure by the
Company to obtain an assumption of the obligations of the Company
to perform this Agreement by any successor, as provided in
Section 7.1.
A termination of
employment by the Executive shall not be deemed to be “with
Good Reason” unless the Executive shall have provided notice
to the Company of the Good Reason conduct or event within 90 days
of its occurrence and the Company had a 30-day opportunity after
such notice to cure such conduct or event.
1.13 “Minimum
Base Salary” shall mean the Executive’s annual rate of
salary on the Effective Date, payable monthly, increased by ten
(10)% per annum compounded annually on each anniversary of the
Executive’s most recent raise.
1.14 “Minimum
Total Compensation” shall mean a sum equal to the
Executive’s aggregate gross cash compensation (excluding
Non-Recurring Compensation) paid to the Executive by the Company
during the twenty-four (24) month period ending on the
Effective Date, divided by two (2).
1.15 “Non-Recurring
Compensation” shall mean amounts received by the Executive
(a) under any nonqualified deferred compensation plan or
arrangement or, (b) as the result of the exercise or receipt
of stock appreciation rights, stock options or other equity-based
compensation.
1.16 “Related
Company” shall have the meaning given such term under the
Equity Incentive Plan.
1.17 “Related
Party Transaction” shall have the meaning given such term
under the Equity Incentive Plan
1.18 “Termination
Date” shall mean the effective date of the Executive’s
“separation from service” (as that term is defined
under Code Section 409A) from the Company. For purposes of
determining whether a “separation from service” under
Code Section 409A has occurred, a “separation from
service” is deemed to include a reasonably anticipated
permanent reduction in the level of services performed by the
Executive to less than fifty percent (50%) of the average
level of services performed by the Executive during the immediately
preceding 12-month period (or period of service if less than 12
months).
2.
Scope of Agreement. This Agreement shall apply with respect
to any termination of employment of the Executive that occurs
during the Contract Period. It shall not apply to any
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termination of the
Executive’s employment that occurs other than during the
Contract Period. In addition, during the Contract Period, the
Company shall (i) pay the Executive a monthly base salary at
least equal to the then applicable Minimum Base Salary;
(ii) pay the Executive, within seventy-five (75) days
following the end of a Fiscal Year, compensation with respect to
each such Fiscal Year ending after the Effective Date in an amount
at least equal to the Minimum Total Compensation; and
(iii) neither by act nor omission, in its capacity as a plan
administrator or otherwise, adversely affect the Executive’s
participation in any Fringe Benefit Program in effect on the
Effective Date, or materially reduce the value of his or her
benefits under any such program, including benefits under any
Company car allowance and vacation policy.
3.
Termination During Contract Period.
3.1
General. During the Contract Period and subject to any
employment agreement between the Company and the Executive, the
Company shall have the right to terminate the Executive’s
employment with the Company for any reason or for no reason, and
the Executive may terminate his or her employment with the Company
for any reason or for no reason. In the event of any such
termination of employment, the Executive shall be entitled to such
compensation, if any, as provided for in this Agreement.
3.2
Without Cause or For Good Reason. In the event the
Executive’s employment with the Company is terminated during
the Contract Period by the Company without Cause, or by the
Executive with Good Reason, then the Executive shall be entitled to
the compensation and benefits provided in
Section 4.
3.3
Other Than For Good Reason. In the event the Executive
terminates his or her employment with the Company during the
Contract Period for any reason other than for Good Reason, the
Executive shall not be entitled to any compensation under this
Agreement, other than the Executive’s accrued but unpaid
salary and accrued but unused vacation through his or her
Termination Date.
3.4
For Cause, Disability, or Death. In the event the
Executive’s employment with the Company is terminated by the
Company during the Contract Period for Cause or for Disability, or
if the Executive’s employment with the Company is terminated
as the result of the Executive’s death, neither the Executive
nor his or her beneficiary, as the case may be, shall be entitled
to receive any compensation or benefits under this Agreement other
than the Executive’s accrued but unpaid salary and accrued
but unused vacation through his or her Termination Date.
4.
Compensation and Benefits Upon Termination by the Company
Without Cause or by Executive for Good Reason.
4.1 If
the conditions set forth in Section 3.2 are satisfied, the
Executive shall be entitled to receive the following compensation
and benefits:
(a) a pro rata
amount of the Minimum Total Compensation, calculated as follows:
the Minimum Total Compensation multiplied by a fraction, the
numerator of which is the Final Fiscal Period and the denominator
of which is 365, with the product thereof reduced (but not below
zero) by the base salary and car allowance previously paid to the
Executive with respect to his/her employment during the Final
Fiscal Period;
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(b)
