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Exhibit 10.11
Woodward Governor Company
Form of Transitional Compensation Agreement
TRANSITIONAL COMPENSATION AGREEMENT
THIS AGREEMENT, made and entered
into as of August 22, 2005 by and between Woodward Governor
Company, a Delaware corporation, (hereinafter called the
"Corporation") and Robert F. Weber, Jr. (hereinafter called the
"Executive").
WITNESSETH THAT:
WHEREAS, the Board of Directors of
the Corporation (the "Board") has determined that it is in the best
interests of the Corporation and its shareholders to assure that
the Corporation will have the continued dedication of the
Executive, despite the possibility, threat or occurrence of a
Change in Control (as defined below) of the Corporation; and
WHEREAS, the Board believes that
it is imperative to diminish the inevitable distraction of the
Executive which would result from the personal uncertainties and
risks created by a threatened or pending Change in Control and to
encourage the Executive’s full attention and dedication to
the business of the Corporation currently and in the event of any
threatened or pending Change in Control and to provide the
Executive with appropriate compensation and benefit protection upon
a Change in Control;
NOW, THEREFORE, the Corporation
and the Executive, each intending to be legally bound, hereby
mutually covenant and agree as follows:
1. Term . This Agreement
shall become effective upon the occurrence of a Change in Control
(as defined in Paragraph 4(d), below) (hereinafter called the
"Effective Date") and shall remain in effect for a term continuing
until the end of the twenty-fourth (24th) calendar month following
the month in which the Effective Date occurs; provided, however,
that, anything in this Agreement to the contrary notwithstanding,
if a Change in Control occurs and if the Executive’s
employment with the Corporation was terminated prior to the date on
which the Change in Control occurs, and if it is reasonably
demonstrated by the Executive that such termination of employment
(a) was at the request of a third party who was taking steps
reasonably calculated to effect a Change in Control or
(b) otherwise arose in connection with or anticipation of a
Change in Control, then
for all purposes of this Agreement the "Effective Date" shall
mean the date immediately prior to the date of such termination of
employment.
2. Employment . After
the Effective Date, the Corporation shall employ the Executive to,
and the Executive shall, exercise such authority and perform such
executive duties as are commensurate with the authority being
exercised and performed by the Executive during the ninety-day
period immediately prior to the Effective Date, which services
shall be performed at the location where the Executive was employed
immediately prior to the Effective Date. The Executive shall also
continue to serve as a member of the Board of Directors of the
Corporation, if serving as such as of the Effective Date. The
Executive shall devote substantially his entire time during
reasonable business hours (reasonable sick leave and vacations
excepted) and reasonable best efforts to fulfill faithfully and
responsibly his duties hereunder. During the period of employment
after the Effective Date, it shall not be a violation of this
Agreement for the Executive to serve on corporate, civic or
charitable boards or committees, or be involved in civic,
charitable or educational endeavors, or manage personal
investments, so long as such activities do not significantly
interfere with the performance of Executive’s
responsibilities as an employee of the Corporation hereunder. It is
expressly agreed and understood that to the extent any such
activities were conducted by the Executive prior to the Effective
Date, the continued conduct of such or similar activities
subsequent to the Effective Date shall not thereafter be deemed to
interfere with the performance of the Executive’s
responsibilities to the Corporation.
3. Compensation and
Benefits . For the Executive’s employment with the
Corporation after the Effective Date, the Executive shall be
compensated as follows:
(a) The
Executive shall receive an annual base salary at a rate not less
than the highest aggregate annual base salary and seniority-based
vacation plan amount paid or payable to the Executive by the
Corporation during the 24 month period immediately prior to
the Effective Date, to be paid in accordance the
Corporation’s regular payroll practices. Such amount, or such
greater annual base salary rate which may be paid or payable to the
Executive after the Effective Date, is hereinafter referred to as
the "Annual Base Salary."
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(b) The
Executive shall be eligible to participate on a reasonable basis in
the Corporation’s bonus and incentive compensation plans and
programs which provide opportunities to receive compensation which
are not less than opportunities provided by the Corporation for
executives with comparable annual base salary.
(c) The
Executive shall be entitled to receive executive and employee
benefits and perquisites which are not less than the executive and
employee benefits and perquisites provided by the Corporation to
executives with comparable duties or annual base salary.
4. Termination .
Unless earlier terminated in accordance with the following
provisions of this Paragraph 4, the Corporation shall continue
to employ the Executive and the Executive shall remain employed by
the Corporation from the Effective Date through the end of the term
of this Agreement as set forth in Paragraph 1, above.
Paragraph 6 hereof sets forth certain obligations of the
Corporation in the event that the Executive’s employment
hereunder is terminated prior to the expiration of such term.
Certain capitalized terms used in this Paragraph 4 and in
Paragraphs 5 and 6 hereof are defined in Paragraph 4(d),
below.
(a)
Death or Disability . The Executive’s employment shall
terminate immediately as of the Date of Termination in the event of
the Executive’s death or in the event that the Executive
becomes disabled. The Executive will be deemed to be disabled upon
the earlier of (i) the end of a six (6)-consecutive month
period during which, by reason of physical or mental injury or
disease, the Executive has been unable to perform substantially all
of his usual and customary duties under this Agreement or
(ii) the date that a reputable physician selected by the
Board, and as to whom the Executive has no reasonable objection,
determines in writing that the Executive will, by reason of
physical or mental injury or disease, be unable to perform
substantially all of the Executive’s usual and customary
duties under this Agreement for a period of at least six
(6) consecutive months. If any question arises as to whether
the Executive is disabled, upon reasonable request therefor by the
Board, the Executive shall submit to reasonable medical examination
for the purpose of determining the existence, nature and extent of
any such disability. The Board
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shall promptly give the Executive written notice of any such
determination of the Executive’s disability and of any
decision of the Board to terminate the Executive’s employment
by reason thereof. Until the Date of Termination for disability,
the base salary payable to the Executive shall be reduced
dollar-for-dollar by the amount of any disability benefits paid to
the Executive in accordance with any disability policy or program
of the Corporation.
(b)
Discharge for Cause . In accordance with the procedures
hereinafter set forth, the Board may discharge the Executive from
his employment hereunder for Cause. Any discharge of the Executive
for Cause shall be communicated by a Notice of Termination to the
Executive given in accordance with Paragraph 14 of this
Agreement. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon,
(ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive’s employment under the provision so indicated and
(iii) specifies the termination date, which may be as early as
the date of the giving of such notice. No purported termination of
the Executive’s employment for Cause shall be effective
without a Notice of Termination.
(c)
Termination for Other Reasons . The Corporation may
discharge the Executive without Cause by giving written notice to
the Executive in accordance with Paragraph 14 at least fifteen
(15) days prior to the Date of Termination. The Executive may
resign from his employment, without liability to the Corporation,
by giving written notice to the Corporation in accordance with
Paragraph 14 at least fifteen (15) days prior to the Date
of Termination.
(d)
Definitions . For purposes of this Agreement, the following
capitalized terms shall have the meanings set forth below:
(i) "Accrued
Obligations" shall mean, as of the Date of Termination, the sum of
(A) the Executive’s base salary through the Date of
Termination to the extent not theretofore paid, (B) the amount
of any bonus, incentive compensation, deferred compensation and
other cash compensation accrued by the Executive as of the Date of
Termination to the extent not theretofore paid and (C) any vacation
pay, expense
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reimbursements and other cash entitlements accrued by the
Executive as of the Date of Termination to the extent not
theretofore paid. For the purpose of this Paragraph 4(d)(i),
amounts shall be deemed to accrue ratably over the period during
which they are earned, but no discretionary compensation shall be
deemed earned or accrued until it is specifically approved by the
Board or the Compensation Committee in accordance with the
applicable plan, program or policy.
(ii) "Cause"
shall mean: (A) the Executive’s commission of an act
materially and demonstrably detrimental to the financial condition
and/or goodwill of the Corporation or any of its subsidiaries,
which act constitutes gross negligence or willful misconduct by the
Executive in the performance of his material duties to the
Corporation or any of its subsidiaries, or (B) the
Executive’s commission of any material act of dishonesty or
breach of trust resulting or intended to result in material
personal gain or enrichment of the Executive at the expense of the
Corporation or any of its subsidiaries, or (C) the
Executive’s conviction of a felony involving moral turpitude,
but specifically excluding any conviction based entirely on
vicarious liability. No act or failure to act will be considered
"willful" unless it is done, or omitted to be done, by the
Executive in bad faith or without reasonable belief that his action
or omission was in the best interests of the Corporation. In
addition, no act or omission will constitute Cause unless
(A) a resolution finding that Cause exists has been approved
by a majority of all of the members of the Board at a meeting at
which the Executive is allowed to appear with his legal counsel and
(B) the Corporation has given detailed written notice thereof
to the Executive and, where remedial action is feasible, he then
fails to remedy the act or omission within a reasonable time after
receiving such notice.
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(iii) A
"Change in Control" shall be deemed to have occurred if:
(A) Any
"person" (as defined in Section 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), excluding
for this purpose the Corporation or any subsidiary of the
Corporation, or any employee benefit plan of the Corporation or any
subsidiary of the Corporation, or any person or entity organized,
appointed or established by the Corporation for or pursuant to the
terms of such plan which acquires beneficial ownership of voting
securities of the Corporation, is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act) directly or
indirectly of securities of the Corporation representing fifteen
percent (15%) or more of the combined voting power of the
Corporation’s then outstanding securities; provided, however,
that no Change in Control shall be deemed to have occurred
(1) as the result of an acquisition of securities of the
Corporation by the Corporation which, by reducing the number of
voting securities outstanding, increases the direct or indirect
beneficial ownership interest of any person to fifteen percent
(15%) or more of the combined voting power of the
Corporation’s then outstanding securities, but any subsequent
increase in the direct or indirect beneficial ownership interest of
such a person in the Corporation shall be deemed a Change in
Control, or (2) as a result of the acquisition directly from
the Corporation of securities of the Corporation representing less
than 50% of the voting power of the Corporation, or (3) if the
Board of Directors of the Corporation determines in good faith that
a person who has become the beneficial owner directly or indirectly
of securities of the Corporation representing fifteen percent (15%)
or more of the combined voting power of the Corporation’s
then outstanding securities has inadvertently reached that level of
ownership interest, and if such person divests as promptly as
practicable a sufficient amount of securities of the Corporation so
that the person no longer has a direct or indirect beneficial
ownership interest in fifteen percent (15%) or more of the combined
voting power of the Corporation’s then outstanding
securities; or
(B)
During any period of two (2) consecutive years (not including
any period prior to the Effective Date of this Agreement),
individuals who at the beginning of such two-year period constitute
the Board of
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Directors of the Corporation and any new director or directors
(except for any director designated by a person who has entered
into an agreement with the Corporation to effect a transaction
described in subparagraph (A), above, or subparagraph (C), below)
whose election by the Board or nomination for election by the
Corporation’s shareholders was approved by a vote of at least
two-thirds of the directors then still in office who either were
directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any
reason to constitute at least a majority of the Board (such
individuals and any such new directors being referred to as the
"Incumbent Board"); or
(C) Consummation
of (1) an agreement for the sale or disposition of the
Corporation or all or substantially all of the Corporation’s
assets, (2) a plan of merger or consolidation of the
Corporation with any other corporation, or (3) a similar
transaction or series of transactions involving the Corporation
(any transaction described in parts (1) through (3) of
this subparagraph (C) being referred to as a "Business
Combination"), in each case unless after such a Business
Combination (x) the shareholders of the Corporation
immediately prior to the Business Combination continue to own,
directly or indirectly, more than fifty-one percent (51%) of the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors of the new
(or continued) entity (including, but not by way of limitation, an
entity which as a result of such transaction owns the Corporation
or all or substantially all of the Corporation’s former
assets either directly or through one or more subsidiaries)
immediately after such Business Combination, in substantially the
same proportion as their ownership of the Corporation immediately
prior to such Business Combination, and (y) at least a
majority of the members of the board of directors of the entity
resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such
Business Combination; or
(D) Approval
by the shareholders of the Corporation of a complete liquidation or
dissolution of the Corporation.
(iv)
"Date of Termination" shall mean (A) in the event of a
discharge of the Executive by the Board for Cause,
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the date specified in such Notice of Termination, (B) in
the event of a discharge of the Executive without Cause or a
resignation by the Executive, the date specified in the written
notice to the Executive (in the case of discharge) or the
Corporation (in the case of resignation), which date shall be no
less than fifteen (15) days from the date of such written
notice, (C) in the event of the Executive’s death, the
date of the Executive’s death, and (D) in the event of
termination of the Executive’s employment by reason of
disability pursuant to Paragraph 4(a), the date the Executive
receives written notice of such termination.
(v)
"Good Reason" shall mean any of the following without the written
consent of the Executive: (A)(1) assignment of duties inconsistent
with the Executive’s position, authority, duties or
responsibilities referred to in Paragraph 2, or any action by
the Corporation which results in a substantial diminution of such
position, authority, duties or responsibilities, other than an
isolated, insubstantial and inadvertent action not taken in bad
faith and which is remedied by the Corporation promptly after
receipt of notice thereof given by the Executive, or (2) if
applicable, removal or other failure to continue Executive as a
member of the Board as required by Paragraph 2, (B) any
reduction in Executive’s Annual Base Salary, or bonus or
incentive opportunities from those referred to in Paragraph 3(a) or
3(b), other than an isolated, insubstantial and inadvertent
reduction not made in bad faith and which is remedied by the
Corporation promptly after receipt of notice thereof given by the
Executive, or (C) a relocation of Executive to an office
location more than 30 miles from the location referred to in
Paragraph 2, or (D) failure by the Corporation to provide
Executive with the executive or employee benefits and perquisities
referred to in Paragraph 3(c), other than an isolated,
insubstantial and inadvertent reduction not made in bad faith and
which is remedied by the Corporation promptly after receipt of
notice thereof given by the Executive, or (E) failure by any
successor to enter into the assumption of and agreement to perform
this Agreement referred to in Paragraph 13. For purposes of
this Paragraph 4(d)(v), any good faith determination by the
Executive that one of t
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