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Exhibit 5
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BENJAMIN MOORE & CO.
SENIOR EXECUTIVE SEVERANCE PROTECTION PLAN
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WHEREAS, the Board of Directors (the "Board") of Benjamin Moore & Co.,
a New Jersey corporation (the "Company"), recognizes that the threat of an
unsolicited takeover or other change in control of the Company may occur which
could result in significant distractions of its senior executives because of the
uncertainties inherent in such a situation; and
WHEREAS, the Board has determined that it is essential and in the best
interest of the Company and its stockholders to be able to retain the services
of its senior executives in the event of a threat of a change in control of the
Company, and following any change in control, to ensure their continued
dedication and efforts in any such event without undue concern for their
personal financial and employment security.
NOW, THEREFORE, in order to fulfill the above purposes, the following
plan has been developed and is hereby adopted.
ARTICLE I
ESTABLISHMENT OF PLAN
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As of the Effective Date, the Company hereby establishes the Benjamin
Moore & Co. Senior Executive Severance Protection Plan (the "Plan") as set forth
in this document.
ARTICLE II
DEFINITIONS
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As used herein, the following words and phrases shall have the
following respective meanings unless the context clearly indicates otherwise.
2.1 "Accrued Compensation" means an amount which shall include all
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amounts earned or otherwise payable to a Participant as of the Participant's
Termination Date but not paid as of such Termination Date including (i) base
salary, (ii) reimbursement for reasonable and necessary expenses incurred by the
Participant on behalf of the Company during the period ending on the Termination
Date, (iii) vacation pay, and (iv) bonuses and incentive compensation.
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2.2 "Affiliate" means, with respect to any Person, any entity,
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directly or indirectly, controlled by, controlling or under common control with
such person or entity.
2.3 "Base Salary" means a Participant's annualized base salary,
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calculated at the greater of the rate in effect (i) immediately prior to a
Change in Control or (ii) as of the Participant's Termination Date.
2.4 "Board" means the Board of Directors of Benjamin Moore & Co.
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2.5 "Bonus Amount" means an amount equal to the greater of (A) a
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Participant's target bonus amount, if any, under all Short-Term Incentive Plans
for the fiscal year in which the Change in Control occurs or the fiscal year in
which the Participant's Termination Date occurs, whichever is greater or (B) the
highest bonus amount paid or payable to the Participant under all Short-Term
Incentive Plans in respect of any of the three fiscal years preceding the fiscal
year in which the Change in Control occurs.
2.6 "Cause" means (a) the conviction of a Participant of a felony or
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(b) the adoption in good faith of a resolution by at least three-fourths of the
Board that the Participant intentionally engaged in conduct which is
demonstrably and materially injurious to the Company and/or its Affiliates;
provided, however, that no termination of the Participant's employment shall be
for Cause as set forth in this Section 2.6(b) until (A) there shall have been
delivered to the Participant a copy of a written notice, signed by a duly
authorized officer of the Company, setting forth that the Participant was guilty
of the conduct set forth in this Section 2.6(b) and specifying the particulars
thereof in detail, and (B) the Participant shall have been provided an
opportunity to be heard in person by the Board (with the assistance of the
Participant's counsel if the Participant so desires).
No act, nor failure to act, on the Participant's part, shall be
considered "intentional" unless the Participant has acted, or failed to act,
with a lack of good faith and with a lack of reasonable belief that the
Participant's action or failure to act was in the best interest of the Company
and its Affiliates. Notwithstanding anything contained in the Plan to the
contrary, no failure to perform by the Participant after a notice of termination
is given to the Company by the Participant shall constitute Cause for purposes
of this Plan.
2.7 "Change in Control" means:
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(1) An acquisition (other than directly from the Company) of any
voting securities of the Company (the "Voting Securities") by any "Person" (as
the term person is used for purposes of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended (the 1934 Act")) immediately after which such
Person has "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated
under the 1934 Act) of twenty-five percent (25%) or more of the combined voting
power of the Company's then outstanding Voting Securities; provided, however, in
determining whether a Change of Control has occurred, Voting Securities which
are
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acquired in a "Non-Control Acquisition" (as hereinafter defined) shall not
constitute an acquisition which would cause a Change of Control. A "Non-Control
Acquisition" shall mean an acquisition by (A) an employee benefit plan (or a
trust forming a part thereof) maintained by (i) the Company or (ii) any
corporation or other Person of which a majority of its voting power or its
voting equity securities or equity interest is owned, directly or indirectly, by
the Company (hereinafter for purposes of this Section 14, a "Subsidiary"), (B)
the Company or its Subsidiaries, (C) any Person in connection with a "Non-
Control Transaction" (as hereinafter defined), or (D) any individual who is a
member of the Incumbent Board or a relative of any such individual, or a group
(within the meaning of Rule 13(d)-5(b)(1) promulgated under the 1934 Act) of
which any such individual is a member.
(2) The individuals who, as of August 13, 1996 are members of the
Board of Directors (the "Incumbent Board"), cease for any reason to constitute
at least two-thirds of the members of the Board; provided, however, that if the
election, or nomination for election by the Company's common stockholders, of
any new director was approved by a vote of at least two-thirds of the Incumbent
Board, such a new director shall, for purposes of this Plan, be considered as a
member of the Incumbent Board; provided further, however, that no individual
shall be considered a member of the Incumbent Board if such individual initially
assumed office as a result of either an actual or threatened "Election Contest"
(as described in Rule 14a-11 promulgated under the 1934 Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board (a "Proxy Contest") including by reason of any agreement intended
to avoid or settle any Election Contest or Proxy Contest; or
(3) The consummation of:
(A) A merger, consolidation or reorganization with or into the
Company or in which securities of the Company are issued, unless such merger,
consolidation or reorganization is a "Non-Control Transaction." A "Non-Control
Transaction" is a merger, consolidation or reorganization with or into the
Company or in which securities of the Company are issued where
(i) the stockholders of the Company immediately before such
merger, consolidation or reorganization, own, directly or indirectly
immediately following such merger, consolidation or reorganization, at
least sixty percent (60%) of the combined voting power of the
outstanding voting securities of the corporation resulting from such
merger or consolidation or reorganization (the "Surviving
Corporation") in substantially the same proportion as their ownership
of the Voting Securities immediately before such merger, consolidation
or reorganization.
(ii) the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement providing for such
merger, consolidation or reorganization constitute at least two-thirds
of the
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members of the board of directors of the Surviving Corporation or a
corporation beneficially owning directly or indirectly fifty-one
percent (51%) or more of the Voting Securities of the Surviving
Corporation, and
(iii) no Person other than (A) the Company, (B) any Subsidiary,
(C) any employee benefit plan (or any trust forming a part thereof)
maintained immediately prior to such merger, consolidation or
reorganization by the Company or any Subsidiary, or any (D) Person
who, immediately prior to such merger, consolidation or reorganization
had Beneficial Ownership of twenty-five percent (25%) or more of the
then-outstanding Voting Securities owns, directly or indirectly,
twenty-five percent (25%) or more of the combined voting power of the
Surviving Corporation's then-outstanding voting securities:
(B) A complete liquidation or dissolution of the Company; or
(C) The sale or other disposition of all or substantially all of
the assets of the Company to any Person (other than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change of Control shall not be deemed
to occur solely because any Person (the "Subject Person") acquired Beneficial
Ownership of more than the permitted amount of the outstanding Voting Securities
as a result of the acquisition of Voting Securities by the Company which, by
reducing the number of Voting Securities outstanding, increases the proportional
number of shares Beneficially Owned by the Subject Persons, provided that if a
Change of Control would occur (but for the operation of this sentence) as a
result of the acquisition of Voting Securities by the Company, and after such
share acquisition by the Company, the Subject Person becomes the Beneficial
Owner of any additional Voting Securities which increases the percentage of the
then-outstanding Voting Securities Beneficially Owned by the Subject Person,
then a Change of Control shall occur.
Notwithstanding anything to the contrary contained herein, if the
employment of a Participant is terminated (i) at the request of a third party
who has indicated an intention or taken steps reasonably calculated to effect a
Change in Control and who effectuates a Change in Control or (ii) otherwise in
connection with, or in anticipation of, a Change in Control which actually
occurs, then for purposes of this Plan the date of a Change in Control with
respect to that Participant shall be deemed to be the date immediately prior to
the Participant's Termination Date.
2.8 "Company" means Benjamin Moore & Co., a New Jersey corporation.
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2.9 "Compensation Committee" means the Compensation and Stock Option
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Plan Committee of the Board as such committee may be constituted from time to
time.
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2.10 "Disability" shall occur if, as a result of a Participant's
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physical or mental incapacity due to illness, accident or otherwise, a
Participant shall be unable to substantially perform his or her duties with the
Company for a period of at least six (6) consecutive months.
2.11 "Effective Date" means the date the Plan is approved by the Board
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or such other date as the Board shall designate in its resolution approving the
Plan.
2.12 "Eligible Employee" means each employee of the Company or any
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Affiliate who is designated as an Eligible Employee by the Compensation
Committee.
2.13 "Good Reason" means the occurrence after a Change in Control of
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any of the following events or conditions:
(a) a change in the Participant's status, title, position or
responsibilities (including reporting responsibilities) which, in the
Participant's reasonable judgment, represents an adverse change from his status,
title, position or responsibilities as in effect immediately prior thereto; or
the assignment to the Participant of any duties or responsibilities which, in
the Participant's reasonable judgment, are inconsistent with his status, title,
position or responsibilities;
(b) a reduction in the Participant's annual base salary below
the greater of the rate in effect (i) as of the date of the Change in Control or
(ii) on any date following the Change in Control;
(c) the relocation of the offices of the Company at which the
Participant is principally employed to a location more than twenty-five (25)
miles from the location of such offices immediately prior to the Change in
Control, or the Company's requiring the Participant to be based anywhere other
than such offices, except for required travel on the Company's business to an
extent substantially consistent with the Participant's business travel
obligations at the time of the Change in Control;
(d) the failure by the Company to pay to the Participant any
portion of the Participant's current compensation or to pay to the Participant
any portion of an installment of deferred compensation under any deferred
compensation program of the Company in which the Participant participated,
within seven (7) days of the date such compensation is due;
(e) the failure by the Company to continue in effect any
material compensation or benefit plan in which the Participant participated
immediately prior to the Change in Control, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan providing compensation
and benefits not materially less favorable than those provided to the
Participant immediately prior to the Change in Control) has been made with
respect to such plan, or the failure by the Company to continue the
Participant's participation therein (or in such substitute or alternative plan)
on a basis not materially less favorable, both in
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terms of the amount of benefits provided and the level of the Participant's
participation relative to other Participants, as existed immediately prior to
the Change in Control;
(f) the failure by the Company to continue to provide the
Participant with benefits substantially similar to those enjoyed by the
Participant under any pension, life insurance or death benefit, medical, health
and accident, or disability plan in which the Participant participated
immediately prior to the Change in Control, the taking of any action by the
Company which would directly or indirectly materially reduce any of such
benefits, or the failure by the Company to provide the Participant with the
number of paid vacation days to which the Participant is entitled by reason of
agreement or understanding with the Company or on the basis of years of service
with the Company in accordance with the normal vacation policy of the Company in
effect immediately prior to the Change in Control;
(g) the failure of the Company to obtain a satisfactory
agreement from any successor, enforceable by the Participant, to assume and
agree to honor and perform the Company's obligations under this Plan; or
(h) any purported termination of the Participant's employment by
the Company which is not effected pursuant to the requirements of Article V.
Any event described in Section 2.13(a) through (f) which occurs prior
to a Change in Control but which the Participant reasonably demonstrates (1) was
at the request of a third party, who has indicated an intention or taken steps
reasonably calculated to effect a Change in Control and who effectuates a Change
in Control or (2) otherwise arose in connection with, or in anticipation of, a
Change in Control which actually occurs, shall constitute Good Reason for
purposes of this Agreement notwithstanding that it occurred prior to a Change in
Control.
Notwithstanding the foregoing, no action by the Company shall give
rise to Good Reason if it results from the Participant's termination for Cause
or Disability.
2.14 "Participant" means an Eligible Employee who meets the
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eligibility requirements of Article III and whose participation in the Plan has
not ceased pursuant to Article III.
2.15 "Plan" means the Benjamin Moore and Co., Inc. Senior Executive
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Severance Protection Plan.
2.16 "Pro-Rata Bonus" means, with respect to the fiscal year in which
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a Participant's Termination Date occurs, an amount equal to the Bonus Amount
multiplied by a fraction the numerator of which is the number of days that have
elapsed in such fiscal year through the Termination Date and the denominator of
which is 365.
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2.17 "Short-Term Incentive Plan" means any bonus or incentive
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compensation plan, policy, program or other arrangement pursuant to which awards
payable in cash are made to a Participant in respect of an award period of one
year or less.
2.18 "Severance Benefit" means the benefits payable in accordance with
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Article IV of the Plan.
2.19 "Termination Date" means the date of termination of a
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Participant's employment in accordance with the provisions of Article V.
ARTICLE III
ELIGIBILITY
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3.1 Participation. For purposes of this Plan (i) each individual who
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is an Eligible Employee as of the Effective Date shall automatically be a
Participant under this Plan as of the Effective Date, without further action and
(ii) each individual who becomes an Eligible Employee after the Effective Date
shall simultaneously become a Participant under this Plan as of the date he or
she becomes an Eligible Employee, without further action.
3.2 Duration of Participation. Any individual who is a Participant
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as of the occurrence of a Change in Control shall continue as a Participant
until the date on which the Participant has received the entire amount of the
Severance Benefit, if any, payable to such Participant under the Plan. Any
individual who, after becoming a Participant but before the occurrence of a
Change in Control, (i) ceases to be an Eligible Employee by reason of his or her
termination of employment with the Company or its Affiliates shall immediately
cease to be a Participant under this Plan, or (ii) is removed from participation
in the Plan by action of the Compensation Committee shall cease to be a
Participant under this Plan one (1) year following such action by the
Compensation Committee unless a Change in Control has occurred within such one
(1) year period in which event such attempted removal shall be null and void ab
initio; provided, however, that no removal of an Eligible Employee from
participation in the Plan by action of the Compensation Committee shall be
effective (A) if such action is taken (i) at the request of a third party who
has indicated an intention or taken steps reasonably calculated to effect a
Change in Control and who effectuates a Change in Control or (ii) otherwise in
connection with, or in anticipation of a Change in Control which actually
occurs, or (B) prior to the second anniversary of the Effective Date, any such
attempted removal from participation prior to the second anniversary of the
Effective Date or as described in clause A being null and void ab initio.
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ARTICLE IV
SEVERANCE BENEFITS
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4.1 Right to Severance Benefit. A Participant shall be entitled to
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receive from the Company a Severance Benefit in the amount provided in Section
4.2 if (i) a Change in Control has occurred and (ii) within the two (2) year
period commencing on the date of the Change in Control, the Participant's
employment with the Company and its Affiliates terminates for any reason other
than (A) Cause, (B) Disability, (C) the Participant's death or (D) a termination
initiated by the Participant without Good Reason.
4.2 Amount of Severance Benefit. If a Participant's employment is
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terminated in circumstances entitling him or her to a Severance Benefit as
provided in Section 4.1, such Participant shall be entitled to the following:
(a) the Company shall pay to the Participant all Accrued
Compensation within ten (10) days after the Participant's Termination Date;
(b) the Company shall pay to the Participant a Pro-Rata Bonus
within ten (10) days after the Participant's Termination Date;
(c) the Company shall pay to the Participant, as severance pay
and in lieu of any further salary and bonus for periods subsequent to the
Participant's Termination Date, in a single payment (without any discount for
accelerated payment) within ten (10) days after the Participant's Termination
Date, an amount in cash equal to the product of three (3) times the
Participant's Base Salary;
(d) for the three (3) year period commencing on the
Participant's Termination Date (the "Continuation Period"), the Company shall
continue on behalf of the Participant and his or her dependents and
beneficiaries (i) medical, health, vision, dental and prescription drug
benefits, (ii) long-term disability coverage and (iii) life insurance and other
death benefits coverage subject to the Participant paying any applicable
employee costs or premiums required under such plans. The coverages and benefits
(including deductibles, premiums or other employee costs, if any) provided under
this Section 4.2(d) during the Continuation Period shall be no less favorable to
the Participant and his or her beneficiaries than those provided to the
Participant immediately prior to the Change in Control or if greater, at any
time thereafter. The obligation under this Section 4.2(d) with respect to the
foregoing benefits shall be limited if the Participant obtains any such benefits
pursuant to a subsequent employer's benefit plans, in which case the Company may
reduce or eliminate the coverage and benefits it is required to provide the
Participant hereunder as long as the aggregate coverages and benefits of the
combined benefit plans is no less favorable to the Participant than the
coverages and benefits required to be provided hereunder. Any period during
which benefits are continued pursuant to this Section 4.2(d) shall be considered
to be in satisfaction of the Company's obligation to
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provide "continuation coverage" pursuant to Section 4980B of the Internal
Revenue Code of 1986, as amended, for that period and the period of coverage
required under said Section 4980B shall be reduced by the period during which
benefits were provided pursuant to this Section 4.2(d); and
(e) the Company shall pay or reimburse the Participant for the
costs, fees and expenses of outplacement assistance services (not to exceed
fifteen percent (15%) of the Participant's Base Salary) provided by an
outplacement agency selected by the Participant.
4.3 Mitigation. The Participant shall not be required to mitigate
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the amount of any payment or benefit provided for in this Plan by seeking other
employment or otherwise and no such payment or benefit shall be offset or
reduced by the amount of any compensation or benefits provided to the
Participant in any subsequent employment, except to the extent provided in
Section 4.2(d).
4.4 Other Benefits; Non-Exclusivity of Rights. Nothing in this Plan
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shall prevent or limit the Participant's continuing or future participation in
any benefit, bonus, incentive or other plan or program provided by the Company
or any of its Affiliates and for which the Participant may qualify, nor shall
anything herein limit or reduce such rights as any Participant may have under
any other agreements with the Company or any of its Affiliates; provided,
however, that to the extent the Participant may be entitled under any such other
plan, program or agreement or pursuant to any applicable law or regulation to
benefits of the types enumerated in Section 4.2, the provision of such benefits
pursuant to such other plan, program or agreement or in satisfaction of such
legal requirement shall count toward the Company's obligation to provide the
enumerated benefits pursuant to this Plan, it being the intention of this Plan
to provide the enumerated benefits at least at the level specified herein, but
not to provide such benefits on a duplicative basis. Nothing herein shall be
deemed to limit, supersede or restrict any rights that any Participant may have
to accelerated vesting of any right or benefit under change in control
provisions of any plan, program, agreement or otherwise.
ARTICLE V
TERMINATION OF EMPLOYMENT
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5.1 Termination by Company for Cause. Following a Change of Control,
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any purported termination by the Company of a Participant's employment for Cause
shall be communicated by written notice of termination to the Participant.
Written notice of termination to the Participant shall include (i) the specific
facts and circumstances which the Company asserts constitute Cause, (ii) the
Participant's Termination Date, which date shall be not less than five (5)
business days from the date the written notice of termination is given to the
Participant, and (iii) a specific reference to Section 2.6 and to this Section
of the Plan. A copy of this Plan shall be delivered to the Participant with
such notice of termination and, if applicable, a certified
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copy of the Board resolution referred to in Section 2.6(b). No facts or
circumstances other than those set forth in the written notice of termination
given to the Participant by the Company as the facts and circumstances
constituting Cause may be relied upon by the Company thereafter as Cause for
such termination. Any termination of a Participant's employment by the Company
other than in accordance with a written notice of termination as required by
this Section 5.1 shall not be a termination for Cause.
5.2 Termination by Company for Disability. Following a Change in
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Control, any termination by the Company of a Participant's employment for
Disability shall be in accordance with the following procedure. If as a result
of Disability, a Participant shall have been absent from the performance of his
or her duties with the Company for six (6) consecutive months, and the
Participant is unable to return to his or her duties (on the same basis, full-
time or part-time, as the case may be, as the Participant was working
immediately prior to such absence) even with reasonable accommodations on the
part of the Company, the Company may give the Participant written notice of a
proposed termination of the Participant's employment for Disability. Such
notice shall state that the Participant shall be terminated for Disability
unless the Participant returns to the performance of his or her duties by a date
stated in such notice, which shall be not less than thirty (30) days after the
receipt of such notice by the Participant. Such termination shall be effective
as a termination for Disability if, and only if, the Company has made all
reasonable accommodations required to permit the Participant to return to work
and the Participant has not returned to the performance of his or her duties (on
the same basis, full-time or part-time, as the case may be, as the Participant
was working immediately prior to such absence) prior to the date therefor stated
in such notice, in which case such date shall be the Termination Date.
5.3 Termination by Participant for Good Reason. Following a Change
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in Control, a Participant having Good Reason shall have the right to terminate
his or her employment without prior notice to the Company, and shall not be
required to give any notice in order to perfect his or her rights under this
Plan upon a termination for Good Reason, except as provided in this Section 5.3.
Within thirty (30) days after receipt by the Participant of (a) a written
request by the Company for a statement of any facts and circumstances relied
upon by the Participant as constituting Good Reason for such termination, which
request shall specifically refer to this Section and to Section 2.14,
accompanied by (b) a copy of this Plan, the Participant shall (if the
Participant has not already done so) provide the Company with a written
statement setting forth in reasonable detail all facts and circumstances relied
upon by the Participant as constituting Good Reason for such termination. The
Participant shall have the right to amend and supplement such statement (or any
statement provided prior to such notice) until thirty (30) days after receipt of
such request from the Company; and no facts or circumstances not set forth in
such statement, as the same may be amended and supplemented as provided herein,
may be relied upon by the Participant thereafter as Good Reason for such
termination.
5.4 Other Terminations. Any termination, other than for Cause,
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Disability or Good Reason, shall not require any particular procedures.
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ARTICLE VI
LIMITATION ON SEVERANCE BENEFITS
6.1 Reduction of Payments In Certain Cases. Notwithstanding anything
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contained in the Plan to the contrary, if, but for the provisions of this
Section 6.1, the Severance Benefit provided to a Participant, and any other
payment or benefit that was provided to a Participant in connection with a
"change in control" as defined in Section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), would be subject to the excise tax (the "Excise
Tax") imposed under Section 4999 of the Code, the Severance Benefit shall be
reduced by an amount of no more than $25,000 if, following such reduction, no
portion of the Severance Benefit or such other payments or benefits would be
subject to the Excise Tax.
6.2 Gross-Up for Excise Tax. In the event that the Severance
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Benefit, and any other payment or benefit that was provided to a Participant in
connection with a "change in control" as defined in Section 280G of the Code
would give rise to an Excise Tax after giving effect to the reduction set forth
in Section 6.1, then such reduction shall not apply and the Participant shall be
entitled to an additional cash payment (the "Gross-Up Payment") in an amount
that will place the Participant in the same after-tax economic position that the
Participant would have enjoyed if the Excise Tax had not applied to the payment
or benefit.
6.3 Determinations. Subject to the provisions of this Section 6.3,
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all determinations required under this Article VI, including whether a Gross-Up
Payment is required, the amount of the Payments constituting excess parachute
payments, and the amount of the Gross-Up Payment, shall be made at the Company's
expense by an accounting firm selected by the Company from among the six largest
accounting firms in the United States (the "Accounting Firm"), which shall
provide detailed supporting calculations both to the Participant and the Company
within fifteen days of any date reasonably requested by the Participant or the
Company on which a determination under this Article VI is necessary or
advisable. The Company shall pay the Participant in cash the initial Gross-Up
Payment within 5 business days of the receipt by the Participant and the Company
of the Accounting Firm's determination. If the Accounting Firm determines that
no Excise Tax is payable by the Participant, the Company shall cause the
Accounting Firm to provide the Participant with an opinion that the Accounting
Firm has substantial authority under the Code and the applicable regulations not
to report an Excise Tax on his or her federal income tax return. Any
determination by the Accounting Firm shall be binding upon the Participant and
the Company. If the initial Gross-Up Payment is insufficient to completely place
the Participant in the same after-tax economic position that the Participant
would have enjoyed if the Excise Tax had not applied to the Payments
(hereinafter an "Underpayment"), the Company, after exhausting its remedies
under Section 6.4 below, shall promptly pay the Participant in cash an
additional Gross-Up Payment in respect of the Underpayment.
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6.4 Procedures. The Participant shall notify the Company in writing
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of any claim by the Internal Revenue Service that, if successful, would require
the payment by the Company of a Gross-Up Payment. Such notice shall be given as
soon as practicable after the Participant knows of such claim and shall apprise
the Company of the nature of the claim and the date on which the claim is
requested to be paid. The Participant agrees not to pay the claim until the
expiration of the thirty-day period following the date on which the Participant
notifies the Company, or such shorter period ending on the date the taxes with
respect to such claim are due (the "Notice Period"). If the Company notifies the
Participant in writing prior to the expiration of the Notice Period that it
desires to contest the claim, the Participant shall: (i) give the Company any
information reasonably requested by the Company relating to the claim; (ii) take
such action in connection with the claim as the Company may reasonably request,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company and reasonably
acceptable to the Participant; (iii) cooperate with the Company in good faith in
contesting the claim; and (iv) permit the Company to participate in any
proceedings relating to the claim. The Participant shall permit the Company to
control all proceedings related to the claim and, at its option, permit the
Company to pursue or forgo any and all administrative appeals, proceedings,
hearings, and conferences with the taxing authority in respect of such claim. If
requested by the Company, the Participant agrees either to pay the tax claimed
and sue for a refund or to contest the claim in any permissible manner and to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts as the
Company shall determine; provided, however, that, if the Company directs the
Participant to pay such claim and pursue a refund, the Company shall advance the
amount of such payment to the Participant on an after-tax and interest-free
basis (the "Advance"). The Company's control of the contest related to the claim
shall be limited to the issues related to the Gross-Up Payment and the
Participant shall be entitled to settle or contest, as the case may be, any
other issues raised by the Internal Revenue Service or other taxing authority.
If the Company does not notify the Participant in writing prior to the end of
the Notice Period of its desire to contest the claim, the Company shall pay the
Participant in cash an additional Gross-Up Payment in respect of the excess
parachute payments that are the subject of the claim, and the Participant agrees
to pay the amount of the Excise Tax that is the subject of the claim to the
applicable taxing authority in accordance with applicable law.
6.5 Repayments. If, after receipt by the Participant of an Advance,
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the Participant becomes entitled to a refund with respect to the claim to which
such Advance relates, the Participant shall pay the Company the amount of the
refund (together with any interest paid or credited thereon after Taxes
applicable thereto). If, after receipt by the Participant of an Advance, a
determination is made that the Participant shall not be entitled to any refund
with respect to the claim and the Company does not promptly notify the
Participant of its intent to contest the denial of refund, then the amount of
the Advance shall not be required to be repaid by the Participant and the amount
thereof shall offset the amount of the additional Gross-Up Payment then owing to
the Participant.
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6.6 Further Assurances. The Company shall indemnify the Participant
------------------
and hold the Participant harmless, on an after-tax basis, from any costs,
expenses, penalties, fines, interest or other liabilities ("Losses") incurred by
the Participant with respect to the exercise by the Company of any of its rights
under this Article VI, including, without limitation, any Losses related to the
Company's decision to contest a claim or any imputed income to the Participant
resulting from any Advance or action taken on the Participant's behalf by the
Company hereunder. The Company shall pay all legal fees and expenses incurred
under this Article VI, and shall promptly reimburse the Participant for the
reasonable expenses incurred by the Participant in connection with any actions
taken by the Company or required to be taken by the Participant hereunder. The
Company shall also pay all of the fees and expenses of the Accounting Firm,
including, without limitation, the fees and expenses related to the opinion
referred to in Section 6.3.
ARTICLE VII
SUCCESSORS TO COMPANY
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7.1 This Plan shall be binding upon the Company, its successors and
assigns and the Company shall require any successor or assign to expressly
assume and agree to perform this Plan in the same manner and to the same extent
that the Company would be required to perform it if no such succession or
assignment had taken place. The term "Company" as used herein shall include
such successors and assigns. The term "successors and assigns" as used herein
shall mean a corporation or other entity acquiring all or substantially all the
assets and business of the Company whether by operation of law or otherwise.
7.2 Neither this Plan nor any right or interest hereunder shall be
assignable or transferable by a Participant or his or her beneficiaries or legal
representatives, except by will or by the laws of descent and distribution.
This Plan shall inure to the benefit of and be enforceable by a Participant's
legal personal representative.
ARTICLE VIII
DURATION, AMENDMENT AND PLAN TERMINATION
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8.1 Duration. This Plan shall continue in effect until terminated in
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accordance with Section 8.2.
8.2 Amendment and Termination. Prior to a Change in Control, the
-------------------------
Plan may be amended or modified in any respect, and may be terminated, by
resolution adopted by three-fourths of the Board; provided, however, that no
such amendment, modification or termination, which would adversely affect the
benefits or protections hereunder of any individual who is a Participant as of
the date such amendment, modification or termination is adopted shall be
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<PAGE>
effective as it relates to such individual (i) prior to the second anniversary
of the Effective Date and (ii) unless no Change in Control occurs within one (1)
year after such adoption, any such attempted amendment, modification or
termination adopted prior to the second anniversary of the Effective Date or
within one (1) year prior to a Change in Control being null and void ab initio
as it relates to all individuals who were Participants prior to such adoption;
provided, further, however, that the Plan may not be amended, modified or
terminated, (i) at the request of a third party who has indicated an intention
or taken steps to effect a Change in Control and who effectuates a Change in
Control or (ii) otherwise in connection with, or in anticipation of, a Change in
Control which actually occurs, any such attempted amendment, modification or
termination being null and void ab initio. From and after the occurrence of a
Change in Control, the Plan may not be amended or modified in any manner that
would in any way adversely affect the benefits or protections provided hereunder
to any individual who is a Participant in the Plan on the date the Change in
Control occurs and (ii) may not be terminated until the later of (a) the second
anniversary of the Change in Control or (b) the date that all Participants who
have become entitled to a Severance Benefit hereunder shall have received such
payments in full.
8.3 Form of Amendment. Any amendment or termination of the Plan
-----------------
shall be effected by a written instrument signed by a duly authorized officer or
officers of the Company, certifying that the amendment or termination has been
approved by the Board.
8.4 Pooling of Interests Savings Clause. In the event that the
-----------------------------------
Company becomes a party to a transaction that is intended to qualify for
"pooling of interests" accounting treatment and, but for one or more of the
provisions of Article VI of this Plan would so qualify, then this Plan shall be
interpreted so as to preserve such accounting treatment, and to the extent that
any provision of Article VI of the Plan would disqualify the transaction from
pooling of interests accounting treatment, then such provision shall be null and
void. All determinations to be made in connection with the preceding sentence
shall be made by the independent accounting firm whose opinion with respect to
"pooling of interests" treatment is required as a condition to the Company's
consummation of such transaction.
ARTICLE IX
MISCELLANEOUS
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9.1 Legal Fees and Expenses. The Company shall pay all legal fees
-----------------------
and related expenses (including the costs of experts, evidence and counsel)
reasonably incurred by a Participant as they become due as a result of (a) the
Participant's contesting or disputing in good faith his or her termination of
employment or (b) the Participant seeking to obtain or enforce any right or
benefit provided by this Plan or by any other plan or arrangement maintained by
the Company under which the Participant is or may be entitled to receive
benefits upon or following his or her termination of employment; provided,
however, that the circumstances set forth in clauses (a) and (b) occurred on or
after a Change in Control.
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<PAGE>
9.2 Employment Status. This Plan does not constitute a contract of
-----------------
employment or impose on the Company any obligation to retain any Participant as
an employee or to change any employment policies of the Company.
9.3 Validity and Severability. The invalidity or unenforceability of
-------------------------
any provision of the Plan shall not affect the validity or enforceability of any
other provision of the Plan, which shall remain in full force and effect, and
any prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
9.4 Settlement of Claims. The Company's obligation to make the
--------------------
payments provided for in this Plan and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, defense, recoupment, or other right which
the Company may have against a Participant or others.
9.5 Governing Law. The validity, interpretation, construction and
-------------
performance of the Plan shall in all respects be governed by the laws of the
State of New Jersey, without giving effect to the conflict of law principles
thereof.
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