This Severance Agreement (this
“Agreement”), dated as of December 13, 2005, is
made between ABM Industries, Incorporated, a Delaware corporation
(the “Company”), and the individual executing this
Agreement as the Executive on the signature page (the
“Executive”).
A. The Executive is a senior
executive of the Company and has made and is expected to continue
to make major contributions to the short- and long-term
profitability, growth and financial strength of the
Company;
B. The Company recognizes that
the possibility of a Change in Control exists and that such
possibility, and the uncertainty it may create among management,
may result in the distraction or departure of management personnel,
to the detriment of the Company and its stockholders, including a
reduction of the value received by stockholders in a Change in
Control transaction;
C. The Company desires to assure
itself of both present and future continuity of management and to
establish fixed severance benefits for certain of its senior
executives, including the Executive, applicable in the event of a
Change in Control; and
D. The Company desires to
provide additional inducement for the Executive to continue to
remain in the employ of the Company.
Accordingly, the Company and the
Executive agree as follows:
1. Certain Defined Terms
. In addition to terms defined elsewhere herein, the following
terms have the following meanings when used in this Agreement with
initial capital letters:
(a)
“After-Tax Amount” means the amount to be received by
an Executive determined on an after-tax basis taking into account
the excise tax imposed pursuant to Section 4999 of the Code,
or any successor provision thereto, any tax imposed by any
comparable provision of state law and any applicable federal, state
and local income and employment taxes.
(b)
“Base Pay” means the Executive’s annual base
salary rate as in effect at the time a determination is required to
be made under Section 4;
(c)
“Board” means the Board of Directors of the Company;
any action of the Board herein contemplated will be valid if
adopted by a majority of the total number of directors then in
office or a majority of the Incumbent Directors and, for purposes
of interpreting, amending or waiving any portion of this Agreement,
may be
adopted by a majority of the Incumbent Directors by written action,
whether or not unanimous, or may be delegated by specific action of
the Board of Directors after the date hereof to any directorate
committee comprised solely of Incumbent Directors who are also
Independent Directors.
(d)
“Cause” means that, prior to any termination, the
Executive shall have:
(i)
been charged with a crime involving fraud, embezzlement or theft in
connection with Executive’s duties or in the course of
Executive’s employment with the Company or any Subsidiary or
been convicted of a felony;
(ii)
intentionally breached his fiduciary obligations to the Company or
any securities laws applicable to the Company; or
(iii)
committed intentional wrongful engagement in any Competitive
Activity;
and any such act shall have been demonstrably and materially
harmful to the Company. For purposes of this Agreement, no act or
failure to act on the part of the Executive will be deemed
“intentional” if it was due primarily to an error in
judgment or negligence, but will be deemed
“intentional” only if done or omitted to be done by the
Executive not in good faith and without reasonable belief that the
Executive’s action or omission was in the best interest of
the Company. Notwithstanding the foregoing, the Executive will not
be deemed to have been terminated for “Cause” hereunder
unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the Board at a meeting of the
Board called and held for such purpose, after reasonable notice to
the Executive and an opportunity for the Executive, together with
the Executive’s counsel (if the Executive chooses to have
counsel present at such meeting), to be heard before the Board,
finding that, in the good faith opinion of the Board after
consultation with outside counsel, there is clear and convincing
evidence that the Executive had committed an act constituting
“Cause” as herein defined and specifying the
particulars thereof in reasonable detail. Nothing herein will limit
the right of the Executive or Executive’s beneficiaries to
contest the validity or propriety of any such
determination.
(e)
“Change in Control” means that during the Term any of
the following events occurs:
(i) any
individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a
“Person”) (A) is or becomes the beneficial owner
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of more than 35% of the combined voting power of the
then-outstanding Voting Stock of the Company or succeeds in having
nominees as directors elected in an “election contest”
within the meaning of Rule 14a-12(c) under the Exchange Act
and (B) within 18 months after either such event,
individuals who were members of the Board of Directors of the
Company
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immediately prior to either such event cease to constitute a
majority of the members of the Board of Directors of the Company;
or
(ii) a
majority of the Board ceases to be comprised of Incumbent
Directors; or
(iii)
the consummation of a reorganization, merger, consolidation, plan
of liquidation or dissolution, recapitalization or sale or other
disposition of all or substantially all of the assets of the
Company or the acquisition of the stock or assets of another
corporation, or other transaction (each, a “Business
Transaction”), unless, in any such case, (A) no Person
(other than the Company, any entity resulting from such Business
Transaction or any employee benefit plan (or related trust)
sponsored or maintained by the Company, any Subsidiary or such
entity resulting from such Business Transaction) beneficially owns,
directly or indirectly, 35% or more of the combined voting power of
the then-outstanding shares of Voting Stock of the entity resulting
from such Business Transaction or, if it is such entity, the
Company and (B) at least one-half of the members of the Board
of Directors of the entity resulting from such Business Transaction
were Incumbent Directors at the time of the execution of the
initial agreement providing for such Business
Transaction.
(f)
“Code” means the Internal Revenue Code of 1986, as
amended.
(g)
“Competitive Activity” means the Executive’s
participation, without the written consent signed by an officer of
the Company and authorized by the Board, in the management of any
business enterprise if (i) such enterprise engages in
substantial and direct competition with the Company and such
enterprise’s sales of any product or service competitive with
any product or service of the Company amounted to 10% of such
enterprise’s net sales for its most recently completed fiscal
year and if the Company’s net sales of said product or
service amounted to 10% of the Company’s net sales for its
most recently completed fiscal year or (ii) the primary
business done or intended to be done by such enterprise is in
direct competition with the business of providing facility services
in any geographic market in which the Company operates.
“Competitive Activity” will not include the mere
ownership of securities in any such enterprise and the exercise of
rights appurtenant thereto, if such ownership is less than 5% of
the outstanding voting securities or units of such
enterprise.
(h)
“Employee Benefits” means the benefits and service
credit for benefits as provided under any and all employee
retirement income and welfare benefit policies, plans, programs or
arrangements in which the Executive is entitled to participate,
including without limitation any stock option, performance share,
performance unit, stock purchase, stock appreciation, savings,
pension, supplemental executive retirement, or other retirement
income or welfare benefit, deferred compensation, incentive
compensation, group or other life, health, medical/hospital or
other insurance (whether funded by actual insurance or self-insured
by the Company or a Subsidiary), disability, salary continuation,
expense reimbursement and other
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employee benefit policies, plans, programs or arrangements that may
now exist or any equivalent successor policies, plans, programs or
arrangements that may be adopted hereafter by the Company or a
Subsidiary, providing benefits and service credit for benefits at
least as great in the aggregate as are payable thereunder
immediately prior to a Change in Control.
(i)
“ERISA” means the Employee Retirement Income Security
Act of 1976, as amended
(j)
“Excess Parachute Payment” means a payment that creates
an obligation for Executive to pay excise taxes under
Section 280G of the Code or any successor provision
thereto.
(k)
“Exchange Act” means the Securities Exchange Act of
1934, as amended.
(l)
“Good Reason” means the occurrence of one or more of
the following events:
(i)
Failure to elect or reelect or otherwise to maintain the Executive
in the office or the position he had with the Company immediately
prior to a Change in Control, or a substantially equivalent or
better office or position than that which he had with the Company
immediately prior to the Change in Control, in either such case
with the Company, any legal successor to the Company or, if the
Company merges with or into another entity with substantial
operations, with respect to the business of the Company and its
Subsidiaries substantially as conducted immediately prior to the
Change in Control;
(ii)
Failure of the Company to remedy any of the following within 10
calendar days after receipt by the Company of written notice
thereof from the Executive: (A) A significant adverse change
in the nature or scope of the authorities, powers or functions
attached to the position with the Company which the Executive held
immediately prior to the Change in Control, (B) a reduction in
the Executive’s Base Pay, (C) a reduction in the
Executive’s Incentive Pay Opportunity or Incentive Pay
Target, or (D) the termination or denial of the
Executive’s rights to Employee Benefits or a reduction in the
scope or value thereof, unless such termination or reduction
referred to in clauses (B), (C) or (D) applies on a
substantially similar basis to all executives of the Company and
its parent entities;
(iii)
The liquidation, dissolution, merger, consolidation or
reorganization of the Company or the transfer of all or
substantially all of its business and/or assets, unless the
successor or successors (by liquidation, merger, consolidation,
reorganization, transfer or otherwise) to which all or
substantially all of its business and/or assets have been
transferred (by operation of law or otherwise) assumed all duties
and obligations of the Company under this Agreement pursuant to
Section 11(a);
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(iv) If
the Executive’s principal residence at the time in question
is within 35 miles of the Company’s headquarters or the
headquarters of the Subsidiary that is Executive’s employer,
the Company requires the Executive to have Executive’s
principal location of work changed to any location that is in
excess of 50 miles from such residence without Executive’s
prior written consent; or
(v)
Without limiting the generality or effect of the foregoing, any
material breach of this Agreement or any Other Employment Agreement
(as defined in Section 6) by the Company or any successor
thereto which is not remedied by the Company within 10 calendar
days after receipt by the Company of written notice from the
Executive of such breach.
A termination of employment by the Executive for one of the reasons
set forth in clauses (i) — (v), above, will not constitute
“Good Reason” unless, within the 60-day period
immediately following the occurrence of such Good Reason event, the
Executive has given written notice to the Company specifying in
reasonable detail the event or events relied upon for such
termination and the Company has not remedied such event or events
within 10 days of the receipt of such notice. The Company and
the Executive may mutually waive in writing any of the foregoing
provisions with respect to an event or events that otherwise would
constitute Good Reason.
(m)
“Incumbent Directors” means the individuals who, as of
the date hereof, are Directors of the Company and any individual
becoming a Director subsequent to the date hereof whose election,
nomination for election by the Company’s shareholders or
appointment was approved by a vote of at least two-thirds of the
then Incumbent Directors (either by a specific vote or by approval
of the proxy statement of the Company in which such person is named
as a nominee for director, without objection to such nomination);
provided, however, that an individual shall not be an Incumbent
Director if such individual’s election or appointment to the
Board occurs as a result of an actual or threatened election
contest (as described in Rule 14a-12(c) of the Exchange Act)
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.
(n)
“Incentive Pay” means compensation in addition to Base
Pay determined by reference to one or more performance measures,
whether payable in cash, securities or otherwise.
(o)
“Incentive Pay Opportunity” means the maximum amount of
Incentive Pay that the Executive would receive pursuant to any
Incentive Pay Plan in existence immediately prior to a Change in
Control (disregarding the effects of the Change in Control,
including without limitation increased depreciation or
amortization, financing expense and transaction costs), assuming
satisfaction of all thresholds or other conditions thereto
established (i) prior to the Change in Control or (ii) after
the Change in Control either (A) with the Executive’s
specific prior written approval or (B) by action of a committee of
the Board comprised solely of Independent Directors.
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(p)
“Incentive Pay Plan” means any plan, program, agreement
or arrangement (excluding employee stock options, restricted stock
or other rights the value of which is determined solely by
reference to the value of the Company’s common
stock).
(q)
“Incentive Pay Target” means the amount or value of
Incentive Pay the Executive would have received assuming that the
Incentive Pay Plans in effect immediately prior to the Change in
Control continue unchanged and are satisfied at the target level
and, if applicable, any conditions to entitlement to payment at the
target level thereunder that are not measured by the
Company’s results of operation are satisfied at the target
level.
(r)
“Independent Directors” means directors who qualify as
“independent” directors under then-applicable New York
Stock Exchange rules applicable to compensation committees (whether
or not the Company’s securities continue to be listed for
trading thereon).
(s)
“Other Agreement” means an agreement, contract or
understanding (including any option or equity plan or agreement)
other than this Agreement, heretofore or hereafter entered into by
the Executive with the Company or any Subsidiary.
(t)
“Retirement Plans” means the benefit plans of the
Company that are intended to be qualified under Section 401(a) of
the Code and any supplemental executive retirement benefit plan or
any other plan that is a successor thereto as such Retirement Plans
were in effect immediately prior to the Change in Control and if
the Executive was a participant in such Retirement Plan immediately
prior to the Change in Control.
(u)
“Severance Period” means the period of time commencing
on the date of the first occurrence of a Change in Control and
continuing until the earlier of (i) the second anniversary of
the occurrence of the Change in Control and (ii) the
Executive’s death.
(v)
“Subsidiary” means an entity in which the Company
directly or indirectly beneficially owns 50% or more of the
outstanding Voting Stock.
(w)
“Term” means the period commencing as of the date
hereof and expiring on the close of business on December 31,
2008; provided, however, that (i) commencing on
January 1, 2009 and each January 1 thereafter, the term of
this Agreement will automatically be extended for an additional
year unless, not later than September 30 of the immediately
preceding year, the Company or the Executive shall have given
notice that it or the Executive, as the case may be, does not wish
to have the Term extended; (ii) if a Change in Control occurs
during the Term, the Term will expire on the last day of the
Severance Period; and (iii) subject to Section 3(c), if,
prior to a Change in Control, the Executive ceases for any reason
to be a full-time employee of the Company, thereupon without
further action the Term shall be deemed to have expired and this
Agreement will immediately terminate and be of no further
effect.
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(x)
“Termination Date” means the date on which the
Executive’s employment is terminated (the effective date of
which will be the date of termination, or such other date that may
be specified by the Executive if the termination is pursuant to
Section 3(b)).
(y)
“Voting Stock” means securities entitled to vote
generally in the election of directors.
(z)
“Welfare Benefits” means Employee Benefits that are
provided under any “welfare plan” (within the meaning
of Section 3(1) of ERISA) of the Company, and fringe benefits
and other perquisites of employment, such as car allowances, club
dues, financial planning and product discounts.
2. Operation of
Agreement . This Agreement will be effective and binding
immediately upon its execution, but, anything in this Agreement to
the contrary notwithstanding, except as provided in
Section 3(c), this Agreement will not be operative unless and
until a Change in Control occurs. Upon the occurrence of a Change
in Control at any time during the Term, without further action,
this Agreement will become immediately operative.
3. Termination Following a
Change in Control . (a) In the event of the occurrence of
a Change in Control, the Executive’s employment may be
terminated by the Company during the Severance Period (or pursuant
to Section 3(c)) and the Executive will be entitled to the
benefits provided by Section 4 unless such termination is the
result of the occurrence of one or more of the following
events:
(i) The
Executive’s death;
(ii) if
the Executive becomes permanently disabled
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