UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
(Mark One)
(x) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 27, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to
__________________
Commission File Number 1-8544
APL LIMITED
(Exact name of registrant as specified in its charter)
Delaware 94-2911022
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1111 Broadway
Oakland, CA 94607
(Address of principal executive offices)
Registrant's telephone number: (510) 272-8000
______________
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TABLE OF CONTENTS
Page
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT 3-5
Item 11. EXECUTIVE COMPENSATION 5-12
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 12-14
Item 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS 14
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K 15
SIGNATURES 16
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EXPLANATORY NOTE: The Annual Meeting of Stockholders
originally scheduled for May 14, 1997 will be rescheduled to a
later date in order to solicit proxies for stockholder approval
of the Agreement and Plan of Merger, dated as of April 13,
1997, among APL Limited (the "company"), Neptune Orient Lines
Ltd and Neptune U.S.A., Inc., pursuant to which each
outstanding share of common stock of the company will be
converted into the right to receive $33.50 in cash, Neptune
U.S.A., Inc. will merge with and into the company, and the
company will become a wholly-owned subsidiary of Neptune Orient
Lines Ltd. A detailed proxy statement describing the proposed
merger and other business to be presented at the meeting will
be mailed prior to the rescheduled meeting. The company's Form
10-K, filed on March 5, 1997, incorporated certain information
from the proxy statement by reference and is hereby amended to
include the full text of that information.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following sets forth certain information with respect
to the directors of the company:
Charles S. Arledge (Age 61). Mr. Arledge became a director of
the company in July 1983. Mr. Arledge is a partner of Signal
Ventures, a private investment firm. He was Vice President,
Strategic Planning of Aerojet-General Corporation from 1986 to
1989.(a)(c)
John H. Barr (Age 67). Mr. Barr became a director of the
company in July 1983. He is a real estate developer of
industrial and mobile home parks.(b)(d)
Tully M. Friedman (Age 55). Mr. Friedman was elected as a
director of the company in April 1994. He is Chairman and
Chief Executive Officer of Tully M. Friedman & Company, LLC, a
San Francisco-based investment firm. He was a general partner
of Hellman & Friedman until March 31, 1997. Mr. Friedman is
currently on the Advisory Board of Tevecap, S.A., the Boards of
Directors of Levi Strauss & Co., Mattel, Inc., McKesson
Corporation, and a member of the Board of Representatives of
Falcon Holding Group, L.P.(a)
Joji Hayashi (Age 57). Mr. Hayashi became the Chairman of the
Board of Directors in October 1995. He was President and Chief
Executive Officer of American President Lines, Ltd. from May
1990 until October 1995. He has been a director of the company
since July 1983.
F. Warren Hellman (Age 62). Mr. Hellman became a director of
the company in November 1988. He is a general partner of Hellman
& Friedman, a San Francisco-based investment firm. Mr. Hellman
is also a director of Williams-Sonoma, Inc., Levi Strauss & Co.,
Franklin Resources, Inc., MobileMedia Corporation and numerous
private companies.(b)(d)
Toni Rembe (Age 60). Ms. Rembe has been a director of the
company since October 1993. She has been a partner in the law
firm of Pillsbury Madison & Sutro LLP since 1971, where she is
managing partner of the firm's Tax Group and a former member of
the Executive Committee. She is also a director of Pacific
Telesis Group, Potlatch Corporation and Transamerica
Corporation, and
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a Trustee and the President of both the van Loben Sels
Foundation and the American Conservatory Theater.(a)(c)
Timothy J. Rhein (Age 56). Mr. Rhein was named President and
Chief Executive Officer of the company in October 1995. He
served as the company's President and Chief Operating Officer
from July 1995 to October 1995. Prior to that, Mr. Rhein was
President and Chief Executive Officer of APL Land Transport
Services, Inc. from May 1990 to October 1995 and President and
Chief Operating Officer of American President Lines, Ltd. from
January 1987 to May 1990. He has been a director of the
company since July 1990.(d)
Forrest N. Shumway (Age 70). Mr. Shumway became a director of
the company in August 1987. He retired as Vice Chairman of the
Board of Allied-Signal Inc. in December 1987, a position he had
held since 1985. Mr. Shumway is also a director of
Transamerica Corporation, The Clorox Company and Aluminum
Company of America.(b)(c)(d)
G. Craig Sullivan (Age 57). Mr. Sullivan was elected as a
director of the company in April 1994. Mr. Sullivan has been
the Chairman of the Board and Chief Executive Officer of The
Clorox Company since July 1, 1992. Prior to that, he was The
Clorox Company's Vice Chairman and Chief Executive Officer (May-
June 1992) and Group Vice President (1989-1992).(b)(d)
Barry L. Williams (Age 52). Mr. Williams became a director of
the company in July 1983. He is President of Williams Pacific
Ventures Inc., a venture capital and real estate investment and
consulting firm. He was President of C.N. Flagg Power Inc., a
construction services company, from July 1988 until its sale in
July 1992, and a Managing Principal of Bechtel Investments,
Inc. until May 1987. He is also a director of Tenera, Inc.,
CH2M Hill Companies, Ltd., The USA Group, Inc., PG&E
Corporation, Simpson Manufacturing Company, Inc. and Newhall
Land and Farming Co., Inc.(a)(c)
(a) Member of the Audit Committee
(b) Member of the Compensation Committee
(c) Member of the Nominating Committee
(d) Member of the Executive Committee
The following sets forth certain information with respect
to the remaining executive officers of the company:
John G. Burgess (Age 52). Mr. Burgess was elected Executive
Vice President of the company in May 1995. He has also served
as Executive Vice President of American President Lines, Ltd.
since December 1992. Prior to that, he served as Executive
Vice President and Chief Operating Officer American President
Lines, Ltd. from May 1990 to November 1992.
Maryellen B. Cattani (Age 53). Ms. Cattani was elected
Executive Vice President of the company in March 1995. She has
also served as General Counsel and Secretary of the company
since July 1991 and as a Senior Vice President from July 1991
to March 1995. Prior to joining the company, she was a partner
in the law firm of Morrison & Foerster from 1989 to 1991.
L. Dale Crandall (Age 55). Mr. Crandall was elected Executive
Vice President and Chief Financial Officer of the company in
March 1995 and Treasurer of the company in September 1995.
Prior to that, Mr. Crandall was managing partner of Price
Waterhouse's Los Angeles office since 1990.
<PAGE>
Michael Goh (Age 47). Mr. Goh was elected Executive Vice
President of the company in April 1996. Prior to that, he
served as Senior Vice President of the company from March 1996
to April 1996, Senior Vice President of American President
Lines, Ltd. from January 1996 to March 1996 and in various
capacities with APL Land Transport Services, Inc., including
Senior Vice President from May 1992 to July 1994 and Vice
President from May 1989 to April 1992.
James S. Marston (Age 63). Mr. Marston was elected Executive
Vice President and Chief Information Officer of the company in
May 1995. He served as Senior Vice President and Chief
Information Officer of the company from September 1987 to May
1995.
William J. Stuebgen (Age 49). Mr. Stuebgen has served as Vice
President, Controller of the company since October 1990.
The executive officers of the company are elected by the
Board of Directors. Each officer holds office until his or her
successor has been duly elected and qualified, or until the
earliest of his or her death, resignation, retirement or
removal by the Board.
ITEM 11. EXECUTIVE COMPENSATION
Information is set forth below as to the compensation
awarded to, earned by or paid to the Chief Executive Officer of
the company, each of the four most highly compensated executive
officers of the company other than the Chief Executive Officer,
and the company's directors, for services rendered to the
company and its subsidiaries during the last three fiscal
years.
Summary Compensation Table
Annual Compensation Long-Term Compensation
Other Awards All
Annual Restricted Securities Other
Name and Compen- Stock Underlying Compen-
Principal Position Year Salary Bonus(1) sation Awards(2) Options sation
John G. Burgess 1996 $276,025 $138,120 $ 0 $2,092 0 $17,215
Executive Vice 1995 $275,810 $ 63,740 $ 0 $2,793 17,500 $17,263
President 1994 $275,810 $119,915 $8,283 $ 0 15,000 $17,093
L. Dale Crandall 1996 $365,200 $180,834 $ 0 $12,460 0 $ 94,320
Executive Vice (4)1995 $275,305 $ 92,837 $ 0 $ 3,129 80,000 $430,080
President, Chief
Financial Officer
and Treasurer
Joji Hayashi 1996 $365,040 $172,142 $ 0 $ 0 0 $23,257
Chairman of 1995 $365,040 $ 92,797 $ 0 $ 0 0 $23,214
the Board 1994 $365,040 $177,382 $12,220 $ 0 32,000 $22,977
James S. Marston 1996 $291,200 $131,084 $ 0 $ 0 0 $18,722
Executive Vice 1995 $291,200 $ 67,296 $ 0 $ 0 0 $19,466
President and Chief 1994 $291,200 $134,050 $12,961 $ 0 22,000 $19,170
Information Officer
Timothy J. Rhein 1996 $525,000 $324,097 $ 0 $56,159 60,000 $31,500
President and Chief 1995 $393,265 $155,000 $ 0 $13,629 30,000 $23,283
Executive Officer 1994 $365,040 $177,382 $13,809 $ 0 32,000 $22,847
<PAGE>
(1)
Under the Company's 1995 Stock Bonus Plan, certain of the
company's executives and key employees can elect to receive
all or any part of their bonuses in the form of phantom
shares. Messrs. Burgess, Crandall and Rhein designated that
$11,993, $70,822 and $319,087, respectively, of their
bonuses payable with respect to 1996, and $15,918, $17,829
and $77,490, respectively, of their bonuses payable with
respect to 1995, be credited to them in the form of phantom
shares.
(2) The amounts shown with respect to 1995 and 1996 represent
the value of premium phantom shares received under the 1995 Stock
Bonus Plan. Participants who elect to receive their bonuses in
the form of phantom shares receive a premium in the form of
additional phantom shares equal to 17.6% of the shares
representing their converted bonuses. Premium phantom shares
vest in two years, subject to earlier vesting in the event the
participant's employment terminates due to death or disability or
in the event of a change in control with respect to the company.
The term "change of control" has the same meaning in this plan as
in the 1989 Stock Incentive Plan. If the participant's
employment terminates in less than two years for any reason other
than death or disability, the premium phantom shares are
forfeited. Premium phantom shares carry a right to dividend
equivalents, which are converted into additional phantom shares.
The unvested premium phantom shares held by Messrs. Burgess,
Crandall and Rhein as of the end of fiscal 1996 had values of
$3,109, $3,483 and $15,170, respectively, based on the closing
price of the company's Common Stock on the New York Stock
Exchange on December 27, 1996. The premium phantom shares
accrued in fiscal 1996 were not credited to participants until
February 14, 1997. Accordingly, these units had no fiscal 1996
year-end value.
(3) During fiscal year 1996, the Company paid premiums on life
insurance for Messrs. Burgess, Crandall, Hayashi and Marston in
the amount of $653, $1,076, $1,355 and $2,068, respectively; made
matching contributions under the company's SMART Plan for
Messrs. Burgess, Crandall and Rhein in the amount of $4,780,
$9,000 and $9,000, respectively; made matching contributions
under the company's 1995 Deferred Compensation Plan for Messrs.
Burgess, Crandall, Hayashi, Marston and Rhein of $11,782,
$12,912, $21,902, $16,654, and $22,500, respectively; and forgave
$71,332 in principal and accrued interest on a loan made to Mr.
Crandall in 1995 in connection with the sale of his home in
Southern California, pursuant to his employment agreement.
(4)Mr. Crandall joined the company on March 31, 1995, and his
compensation is for the period from March 31 to December 29,
1995.
Information is provided below with respect to all stock
option grants to and exercises by the five executive officers
named in the Summary Compensation Table during fiscal year
1996.
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Option Grants in Last Fiscal Year
Individual Grants
Number of % of Total
Securities Options Grant
Underlying Granted to Exercise Date
Options Employees InPrice perExpiration Present
Name Granted(1)(2) Fiscal Year Share(1)
Date Value(3)
John G. Burgess 0 0% N/A N/A 0
L. Dale Crandall 0 0% N/A N/A 0
Joji Hayashi 0 0% N/A N/A 0
James S. Marston 0 0% N/A N/A 0
Timothy J. Rhein 10,000 6.8% $22.375 7/26/03 $ 81,209
50,000 34.0% $22.375 7/26/03 $406,047
(1) All options were granted with an exercise price at or above
fair market value. During fiscal year 1996, no stock
appreciation rights were awarded to any executive officer.
(2)These options become exercisable in installments based upon
achievement of specified targets for appreciation in the
value of the company's Common Stock. See "Compensation
Committee Report on Executive Compensation." On July 27,
1998, the options will vest as to 60% of the covered shares
if not otherwise vested, and on July 27, 2002, the options
will vest as to the remaining 40% if not otherwise vested.
In addition, the options will vest in full in the event of
the employee's death or disability or upon a "change in
control" of the company. As defined in the 1989 Stock
Incentive Plan, a "change in control" of the company occurs
when: (a) any person, entity or group becomes the beneficial
owner of at least 20% of the company's outstanding Common
Stock or of the combined voting power of the company's
outstanding securities, except by reason of (i) repurchases
of securities by the company or its employee benefit plans
and (ii) certain business combinations in which (1) the
company's prior stockholders continue to own a majority of
the successor entity's common stock and voting power in
substantially the same proportions as before the
combination, (2) no person or entity beneficially owns 20%
or more of the successor's common stock or voting power
except to the extent that such ownership existed before the
combination, and (3) the successor's board of directors
consists of at least a majority of the "Incumbent Board," as
described below; (b) the "Incumbent Board" ceases to
constitute a majority of the company's Board of Directors;
(c) a business combination occurs that does not meet the
requirements summarized in clause (ii) above; or (d) the
company's stockholders approve a complete liquidation or
dissolution of the company. As defined in the plan, the
"Incumbent Board" consists of those individuals who were
directors of the company on January 28, 1997, together with
any other directors whose election or nomination was
approved by a majority of the directors then comprising the
"Incumbent Board," subject to certain exceptions.
(3)"Grant Date Present Values" were determined based upon a
model that uses the Black-Scholes option pricing
methodology. These are estimated values based upon the
following arbitrary assumptions: stock price volatility
calculated using the daily stock prices for the 18-month
period prior to the valuation date; a risk-free interest
rate curve based on the
<PAGE>
interbank borrowing rate; exercise on the option expiration
date; and a future dividend yield of 1.72%. The actual
value, if any, that an executive ultimately realizes upon
the exercise of an option will be the difference between the
market price of the underlying shares and the option
exercise price on the date of exercise.
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values
Number of Value of
Securities Underlying Unexercised
Unexercised In-the-Money
Options at Fiscal Options at
Shares Year-End Fiscal Year-End
Acquired on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable
John G. Burgess 0 $0 34,580/ 55,000$144,045/$ 55,000
L. Dale Crandall 0 $0 0/ 80,000$ 0/$ 80,000
Joji Hayashi 0 $0 38,168/ 80,000$265,080/$ 80,000
James S. Marston 0 $0 23,300/ 55,000$164,707/$ 55,000
Timothy J. Rhein 0 $0 15,251/170,000$ 73,078/$140,000
Pension Plan Table
The following table illustrates the approximate retirement
income which may become payable under the APL Limited
Retirement Plan (the "Retirement Plan") (including the
supplemental benefits under the company's Excess-Benefit Plan
and 1995 Supplemental Executive Retirement Plan) to an employee
credited with the number of years of service shown, assuming
that benefits commence at age 65 and are payable in the normal
form (generally a joint and 50% survivor benefit).
Annual Retirement Income
5-Year Average Years of Service
Annual Compensation 15 20 25 30 35
$400,000 $120,000 $160,000 $180,000 $200,000 $200,000
$500,000 $150,000 $200,000 $225,000 $250,000 $250,000
$600,000 $180,000 $240,000 $270,000 $300,000 $300,000
$700,000 $210,000 $280,000 $315,000 $350,000 $350,000
$800,000 $240,000 $320,000 $360,000 $400,000 $400,000
$900,000 $270,000 $360,000 $405,000 $450,000 $450,000
The amounts shown in the table are subject to adjustment
for Social Security benefits. The credited years of service of
the executive officers of the company named in the Summary
Compensation Table are as follows: Mr. Burgess, 11 years; Mr.
Crandall, 2 years; Mr. Hayashi, 27 years; Mr. Marston, 9 years;
and Mr. Rhein, 29 years. The compensation covered by the
Retirement Plan, Excess-Benefit Plan and 1995 Supplemental
Executive Retirement Plan was $339,980, $458,037, $457,837,
$358,496 and $680,000 for Messrs. Burgess, Crandall, Hayashi,
Marston and Rhein, respectively, during 1996. Covered
compensation for any year is equal to the sum of the employee's
annual salary rate on June 1 and any cash bonus that the
employee receives or defers during the year. However, before
June 1, 1997, the compensation on which retirement income would
be determined is different from such amount because benefits
accruing before that date are based upon a five-year average of
the employee's compensation. Retirement benefits are
supplemented for Mr. Crandall under the terms of his employment
agreement. See "Employment Contracts, Termination of
Employment and Change-in-Control Arrangements and Certain
Transactions."
<PAGE>
Compensation of Directors
Directors who are not employees of the company receive an
annual retainer of $24,000, a fee of $1,000 per meeting when
attending Board or stockholder meetings and an additional fee
of $850 for each committee meeting attended. The Chairpersons
of the company's Audit and Compensation Committees each receive
an annual retainer of $3,000. All directors are reimbursed for
their reasonable expenses incurred in connection with the
company's business. A director may elect to defer receipt of
compensation earned as a director under a deferred compensation
plan and may elect to receive such compensation in the form of
Common Stock or phantom shares under the 1995 Stock Bonus Plan.
Under the Retirement Plan for Directors of APL Limited
(the "Retirement Plan for Directors"), directors who have never
been employees of the company are eligible to receive an
unfunded benefit if they complete five years of service as a
director or if they attain age 70 or become permanently and
totally disabled while serving as a director. The benefit is
equal to the amount of the annual retainer paid by the company
to its directors, as adjusted during the period that the
retired director is receiving the benefit, and is paid for a
period equal to the lesser of 10 years or one year for each
full or partial year of service as a director. A reduced
benefit for a director's surviving spouse is provided in the
event that the director dies before retirement or dies after
retirement but before expiration of his or her benefit. In
addition, the Retirement Plan for Directors provides for
mandatory retirement of a director not later than the date of
the annual meeting of stockholders of the company coinciding
with or next following his or her 70th birthday (72nd birthday
for individuals who were directors on September 15, 1992).
Under the 1992 Directors' Stock Option Plan, directors who
have never been company employees receive options to purchase
10,000 shares of Common Stock upon election or appointment to
the Board of Directors, and all non-employee directors receive
annual grants of options to purchase 2,000 shares of Common
Stock. These options have exercise prices equal to the fair
market value of the company's Common Stock on the grant date.
They vest in three equal annual installments and, if held for
at least six months, vest in full upon the non-employee
director's retirement, death or disability or a change in
control of the company. The term "change in control" has the
same definition in this plan as in the 1989 Stock Incentive
Plan (see above). As provided in the plan, Ms. Rembe and
Messrs. Arledge, Barr, Friedman, Hellman, Shumway, Sullivan and
Williams each received options to purchase 2,000 shares of
Common Stock in fiscal year 1996.
Employment Contracts, Termination of Employment and Change-in-
Control Arrangements and Certain Transactions
Messrs. Burgess, Crandall, Hayashi, Marston and Rhein are
employed at annual salaries of not less than $303,860,
$376,160, $380,000, $299,940 and $600,000, respectively, under
employment agreements that expire when they attain age 65.
These agreements may be terminated by either party for any
reason upon 30 days' notice. While the agreements remain in
effect, these individuals are entitled to receive their
salaries and to participate in the employee benefit and
compensation plans maintained by the company. If the company
terminates their employment without cause, specified
percentages of
<PAGE>
their base salaries (150% for Messrs. Burgess and Marston,
155% for Messrs. Crandall and Hayashi and 160% for Mr. Rhein),
and participation in all insurance and similar plans, will
continue for three years (but not beyond age 65) and the
applicable period will be counted as employment with the
company for purposes of determining the termination date of
options, vesting under the company's executive compensation
programs, including the 1989 Stock Incentive Plan and 1995
Stock Bonus Plan, and calculation of a supplemental retirement
benefit. In the event of such termination, Mr. Hayashi would
also be credited with service for purposes of calculating the
supplemental retirement benefit for a period during which he
was employed by the company in a seagoing position. These
agreements with Messrs. Burgess, Crandall, Hayashi, Marston and
Rhein also provide that the company will compensate them for
any amounts that they do not receive as a result of any
provision in any plan or agreement limiting payments which are
nondeductible by the company for federal income tax purposes on
account of Internal Revenue Code provisions relating to golden
parachute payments.
As of January 28, 1997, the company entered into
additional employment agreements with the officers named in the
Summary Compensation Table. Under these agreements, each of
these officers has agreed to remain employed by the company for
a specified period after a change in control of the company
(each, an "Employment Period"). The agreements also protect
these officers against certain material reductions in
compensation, benefits, titles and duties, and against material
changes in their office locations, following a change in
control. So long as each such officer remains employed with
the company during his Employment Period, he will be entitled
to receive an amount equal to his annual salary (annualized
from his highest monthly salary during the 12 months prior to
the change of control) and annual bonus, and certain other
benefits. In addition, if such officer resigns for good reason
(including a resignation due to a material reduction in
compensation, benefits, title or duties or a material
relocation and a resignation within a specified time period)
during his Employment Period, or such officer's employment is
terminated other than for cause or disability during that
period, then the company will be obligated to pay a lump-sum
amount equal to up to three times such officer's annual base
salary and bonus plus the value of certain retirement benefits
and other payments foregone due to the termination or
resignation. Such officer will also be entitled to continued
employee benefits for a specified period. If it is determined
that any payment made to an officer pursuant to his agreement
would subject him to an excise tax pursuant to the Internal
Revenue Code, the company will also be obligated to pay the
officer an additional amount sufficient to put him in the same
after-tax position that he would have been in, had no excise
tax been imposed. The term "change in control" has the same
meaning in these agreements as in the 1989 Stock Incentive
Plan, as described above.
The company has also agreed to provide Mr. Crandall with
an unfunded supplemental retirement benefit equal to the
difference between the amount of the pension benefits actually
paid under the company's qualified and non-qualified defined
benefit pension plans and the amount of a hypothetical pension
benefit. If Mr. Crandall's employment terminates after he
reaches age 65, the hypothetical pension benefit will be equal
to 40% of his highest five-year average annual compensation
(subject to adjustment for Social Security benefits). If his
employment terminates before he reaches age 65, the
hypothetical pension benefit will be equal to the greater of
(i) $12,500 per
<PAGE>
month (subject to cost-of-living increases not to exceed
three percent per year) or (ii) 40% of his highest five-year
average annual compensation, prorated based upon his length of
service with the company (subject to adjustment for Social
Security benefits). This hypothetical benefit for termination
prior to age 65 will also be reduced by the amount of any
retirement benefit that Mr. Crandall receives from his prior
employer. If Mr. Crandall is not otherwise eligible for
retiree health insurance coverage from the company when his
employment terminates, the company will provide coverage
comparable to the coverage then being provided to its retiring
employees. Mr. Crandall will be required to contribute to the
cost of this coverage on the same basis as retiring employees.
To assist him in the sale of his home in Southern California,
the company made a loan in the amount of $400,000 to
Mr. Crandall in fiscal 1995 which bears interest at the prime
rate and is payable in annual installments of $50,000 over
eight years commencing in March 1996. Payment of the first
installment and accrued interest was forgiven in 1996, and
payment of the next four installments and accrued interest will
be forgiven as they become due, provided Mr. Crandall continues
to be employed by the company (or is treated as being so
employed under his employment agreement), or in the event that
his employment terminates due to disability.
Long-Term Incentive Program
The performance stock options discussed above will vest
based upon the company's achievement of the stock price targets
set forth below.
Vested
Percentage of
Time Period Stock Price Target Original Option
July 27, 1996 to $33.563 33 1/3%
July 26, 1997 $36.919 66 2/3%
$42.513 100 %
July 27, 1997 to $35.800 33 1/3%
July 26, 1998 $38.038 66 2/3%
$42.513 100 %
July 27, 1998 none 60 %
July 27, 1998 to Total return on the company's
July 26, 2002 Common Stock 100 %
(appreciation plus dividends) since date
of grant is
at least 100% total return of median
company in S&P 500 Index for
same period.
July 27, 2002 none 100 %
Before July 27, 1998, no portion of the options will vest
unless the total return on the company's Common Stock from the
date of grant to the potential vesting date has been at least
75% of the total return of the median company in the S&P 500
Index for the same period. This minimum requirement applies in
addition to the targets in the table above. These options will
also vest in full upon a "change in control" of the company, as
defined above.
<PAGE>
Performance Graph
The following graph compares the cumulative total return
on the company's Common Stock with a comparable return on the
indicated indices for the last five fiscal years. The total
return on the company's Common Stock is determined based on the
change in the price of the Common Stock and assumes
reinvestment of all dividends and an original investment of
$100. The total returns on the indicated indices also assume
reinvestment of dividends and an original investment in each
index of $100 on December 27, 1991.
Total Return to Stockholders
December 27 December 25 December 31 December 30 December 29 December 27
1991 1992 1993 1994 1995 1996
APL Limited 100 95.40 142.63 127.80 118.28 123.57
S&P
Transportation100 108.66 129.34 108.44 151.10 172.90
S&P 500 Index 100 107.62 118.46 120.03 165.13 203.05
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Stock Ownership of Directors and Executive Officers
The following table sets forth, as of December 31, 1996,
the number of shares of Common Stock beneficially owned by the
directors and nominees named above, the executive officers
listed in the Summary Compensation Table and the directors and
executive officers of the company as a group. Except as
otherwise indicated, and subject to applicable community
property laws, each person has sole investment and voting power
with respect to the shares shown. Ownership information is
based upon information furnished by the respective individuals
and contained in the company's records.
<PAGE>
Number of
Common Shares
Beneficially Percent of
Name Owned(1) Class
John G. Burgess 38,351 *
L. Dale Crandall 0 *
Joji Hayashi 44,682 *
James S. Marston 36,826 *
Timothy J. Rhein 15,251 *
Charles S. Arledge 19,914 *
John H. Barr 45,784 *
Tully M. Friedman 2,036,030(2) 8.29%
F. Warren Hellman 2,042,697(2) 8.31%
Toni Rembe 12,999 *
Forrest N. Shumway 19,999 *
G. Craig Sullivan 8,332 *
Barry L. Williams 4,528 *
All directors and executive officers
as a group (17 persons including
the 13 named above) 2,343,855 9.45%
* Less than 1%.
(1)Includes shares of Common Stock which may be acquired
pursuant to the exercise of options exercisable on December
31, 1996 or within 60 days thereafter, as follows: Mr.
Burgess, 34,580; Mr. Hayashi, 38,168; Mr. Marston, 23,300;
Mr. Rhein, 15,251; Mr. Arledge, 13,999; Mr. Barr, 13,999;
Mr. Friedman, 7,332; Mr. Hellman, 13,999; Ms. Rembe, 11,999;
Mr. Shumway, 13,999; Mr. Sullivan, 7,332; Mr. Williams,
3,333; and all directors and executive officers as a group,
244,451. Also includes shares attributable to accounts
under the company's SMART Plan as of December 31, 1996, as
follows: Mr. Hayashi, 1,717; Mr. Marston, 990; and all
directors and executive officers as a group, 6,189.
(2)Includes an aggregate of 2,028,698 shares of Common Stock
held by Hellman & Friedman Capital Partners, a California
Limited Partnership, Hellman & Friedman Capital Partners
International (BVI), APC Partners, L.P. and H&F Redwood
Partners, L.P. Messrs. Hellman and Friedman are directors
and officers of each of the corporate general partners of
such partnerships. Messrs. Hellman and Friedman each
beneficially owns 50% of the stock of each such corporation
and share investment and voting power with respect to the
shares of Common Stock held by the above-named partnerships.
Messrs. Hellman and Friedman disclaim beneficial ownership
of these shares. The address of Mr. Hellman is c/o Hellman
& Friedman, One Maritime Plaza, 12th Floor, San Francisco,
CA 94111. Mr. Friedman's address is c/o Tully M. Friedman &
Company, LLC, One Maritime Plaza, Suite 1000, San Francisco,
CA 94111.
Each of the following stockholders has advised the company
under the rules of the Securities and Exchange Commission that
it is the beneficial owner of more than 5% of the Common Stock
of the company. The following information is furnished as of
December 31, 1996 with respect to any person known by the
company to be the beneficial owner of more than 5% of the
outstanding shares of the Common Stock of the company. Except
as otherwise indicated, the named beneficial owner has sole
voting and investment power with respect to the shares shown.
<PAGE>
Certain Beneficial Ownership of Securities
Number of Shares Percent of
Name and Address of Beneficial Owner Beneficially Owned Class(1)
Hellman & Friedman Capital Partners(2) 1,263,996
APC Partners, L.P.(2) 653,833
8.25%
Hellman & Friedman Capital Partners
International (BVI)(2) 68,227
H&F Redwood Partners, L.P.(2) 42,642
Franklin Resources 3,118,165 12.68%
777 Mariner's Island Blvd.
San Mateo, CA
Pioneering Management 1,278,100 5.20%
60 State Street
Boston, MA
Primecap Management 1,599,800 6.50%
225 South Lake Avenue
Pasadena, CA
Trimark Investment Management 2,340,000 9.52%
One First Canadian Place
Ontario, Canada
(1) All percentages are given as of March 17, 1997, based on
24,590,789 shares of Common Stock outstanding.
(2)The voting and dispositive powers with respect to the shares
of Common Stock held by Hellman & Friedman Capital Partners,
a California Limited Partnership, Hellman & Friedman Capital
Partners International (BVI), APC Partners, L.P., and H&F
Redwood Partners, L.P. (the "H&F Group") are indirectly
controlled by Hellman & Friedman Capital Management, Inc.,
H&F Capital Management International, Inc., APC
Administrators, Inc. and H&F Redwood Investors, Inc.,
respectively. A trust of which Mr. F. Warren Hellman is a
trustee and a beneficiary and a trust of which Mr. Tully M.
Friedman is a trustee and a beneficiary each owns 50% of the
stock of each such corporation. As a result, Messrs.
Hellman and Friedman could be deemed to beneficially own
100% of the 2,028,698 shares of the Common Stock of the
company owned by the H&F Group. Messrs. Hellman and
Friedman disclaim such beneficial ownership. The address of
Mr. Hellman is c/o Hellman & Friedman, One Maritime Plaza,
12th Floor, San Francisco, CA 94111. Mr. Friedman's address
is c/o Tully M. Friedman & Company, LLC, One Maritime Plaza,
Suite 1000, San Francisco, CA 94111.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The law firm of Pillsbury Madison & Sutro LLP, of which
Ms. Rembe is a partner, provides legal services to the company.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a) Documents filed as part of this report:
3.Exhibits required by Item 601 of Regulation S-K
The following documents are exhibits to this Form 10-K
Exhibit No. Description of Document
2.2* Agreement and Plan of Merger, dated as of April 13, 1997,
by and among Neptune Orient Lines Ltd, Neptune U.S.A.,
Inc. and APL Limited incorporated by reference to the
identically numbered exhibit to the Form 8-K (File No. 1-
8544), dated April 13, 1997 and filed on April 14, 1997.
10.71 Employment Agreement between the company and John G.
Burgess dated January 28, 1997.**
10.72 Employment Agreement between the company and Maryellen B.
Cattani dated January 28, 1997.**
10.73 Employment Agreement between the company and L. Dale
Crandall dated January 28, 1997.**
10.74 Employment Agreement between the company and Michael Goh
dated January 28, 1997.**
10.75 Employment Agreement between the company and Joji Hayashi
dated January 28, 1997.**
10.76 Employment Agreement between the company and James S.
Marston dated January 28, 1997.**
10.77 Employment Agreement between the company and Timothy J.
Rhein dated January 28, 1997.**
* Incorporated by Reference
** Denotes management contract or compensatory plan.
Pursuant to Item 601 (b)(4)(iii)(A) of Regulation S-K,
certain instruments defining the rights of holders of the long-
term debt of the company and its consolidated subsidiaries have
not been filed because the amount of securities authorized
under each such instrument does not exceed ten percent of the
total assets of the company and its subsidiaries on a
consolidated basis. A copy of any such instrument will be
furnished to the Commission upon request.
(b) Reports on Form 8-K during the fourth quarter:
No current report on Form 8-K was filed during the fourth
quarter of the fiscal year for which this report on Form
10-K is filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, the registrant has
duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
APL LIMITED (Registrant)
By /s/William J. Stuebgen
William J. Stuebgen
Vice President,
Controller and
Chief Accounting Officer
April 18, 1997
EMPLOYMENT AGREEMENT
AGREEMENT by and between APL Limited, a
Delaware corporation (the "Company"), and John G.
Burgess (the "Executive"), dated as of the 28th day of
January, 1997.
The Board of Directors of the Company (the
"Board"), has determined that it is in the best
interests of the Company and its shareholders to assure
that the Company will have the continued dedication of
the Executive, notwithstanding the possibility, threat
or occurrence of a Change of Control (as defined below)
of the Company. The Board believes it is imperative to
diminish the inevitable distraction of the Executive by
virtue of the personal uncertainties and risks created
by a pending or threatened Change of Control and to
encourage the Executive's full attention and dedication
to the Company currently and in the event of any
threatened or pending Change of Control, and to provide
the Executive with compensation and benefits
arrangements upon a Change of Control which ensure that
the compensation and benefits expectations of the
Executive will be satisfied and which are competitive
with those of other corporations. Therefore, in order
to accomplish these objectives, the Board has caused
the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS
FOLLOWS:
1. Certain Definitions. (a) The "Effective
Date" shall mean the first date during the Change of
Control Period (as defined in Section 1(b)) on which a
Change of Control (as defined in Section 2) occurs.
Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if
the Executive's employment with the Company is
terminated prior to the date on which the Change of
Control occurs, and if it is reasonably demonstrated by
the Executive that such termination of employment (i)
was at the request of a third party who has taken steps
reasonably calculated to effect a Change of Control or
(ii) otherwise arose in connection with or anticipation
of a Change of 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.
(b) The "Change of Control Period" shall mean
the period commencing on the date hereof and ending on
the third anniversary of the date hereof; provided,
however, that commencing on the date one year after the
date hereof, and on each annual anniversary of such
date (such date and each annual anniversary thereof
shall be hereinafter referred to as the "Renewal
Date"), unless previously terminated, the Change of
Control Period shall be automatically extended so as to
terminate three years from such Renewal Date, unless at
least 60 days prior to the Renewal Date the Company
shall give notice to the Executive that the Change of
Control Period shall not be so extended.
2. Change of Control. For the purpose of
this Agreement, a "Change of Control" shall mean:
(a) The acquisition by any individual, entity
or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock
of the Company (the "Outstanding Company Common Stock")
or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled
to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided,
however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change of
Control: (i) any acquisition of such shares by the
Company, (ii) any acquisition of such shares by any
employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled
by the Company or (iii) any acquisition of such shares
by any corporation pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of subsection
(c) of this Section 2; or
(b) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for
any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming
a director subsequent to the date hereof whose
election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent
Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or
threatened election contest 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; or
(c) Consummation of a reorganization, merger
or consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a
"Business Combination"), in each case, unless,
following such Business Combination, (i) all or
substantially all of the individuals and entities who
were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then
outstanding shares of common stock and the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of
directors, as the case may be, of the corporation
resulting from such Business Combination (including,
without limitation, a corporation which as a result of
such transaction owns the Company or all or sub
stantially all of the Company's assets either directly
or through one or more subsidiaries) in substantially
the same proportions as their ownership, immediately
prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (ii) no Person
(excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related
trust) of the Company or such corporation resulting
from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively,
the then outstanding shares of common stock of the
corporation resulting from such Business Combination or
the combined voting power of the then outstanding
voting securities of such corporation except to the
extent that such ownership existed prior to the
Business Combination and (iii) at least a majority of
the members of the board of directors of the
corporation 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
Company of a complete liquidation or dissolution of the
Company.
3. Employment Period. The Company hereby
agrees to continue the Executive in its employ, and the
Executive hereby agrees to remain in the employ of the
Company subject to the terms and conditions of this
Agreement, for the period commencing on the Effective
Date and ending on the third anniversary of such date
(the "Employment Period").
4. Terms of Employment. (a) Position and
Duties. (i) During the Employment Period, (A) the
Executive's position (including status, offices, titles
and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all
material respects with the most significant of those
held, exercised and assigned at any time during the 120-
day period immediately preceding the Effective Date and
(B) the Executive's services shall be performed at the
location where the Executive was employed immediately
preceding the Effective Date or any office or location
less than 35 miles from such location.
(ii) During the Employment Period, and
excluding any periods of vacation and sick leave to
which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal
business hours to the business and affairs of the
Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder,
to use the Executive's reasonable best efforts to
perform faithfully and efficiently such
responsibilities. During the Employment Period it
shall not be a violation of this Agreement for the
Executive to (A) serve on corporate, civic or
charitable boards or committees, (B) deliver lectures,
fulfill speaking engagements or teach at educational
institutions and (C) manage personal investments, so
long as such activities do not significantly interfere
with the performance of the Executive's
responsibilities as an employee of the Company in
accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such
activities have been conducted by the Executive prior
to the Effective Date, the continued conduct of such
activities (or the conduct of activities similar in
nature and scope thereto) subsequent to the Effective
Date shall not thereafter be deemed to interfere with
the performance of the Executive's responsibilities to
the Company.
(b) Compensation. (i) Base Salary. During
the Employment Period, the Executive shall receive an
annual base salary ("Annual Base Salary"), which shall
be paid at a monthly rate, at least equal to twelve
times the highest monthly base salary paid or payable,
including any base salary which has been earned but
deferred, to the Executive by the Company and its
affiliated companies in respect of the twelve-month
period immediately preceding the month in which the
Effective Date occurs. During the Employment Period,
the Annual Base Salary shall be reviewed no more than
12 months after the last salary increase awarded to the
Executive prior to the Effective Date and thereafter at
least annually. Any increase in Annual Base Salary
shall not serve to limit or reduce any other obligation
to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and
the term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so
increased. As used in this Agreement, the term
"affiliated companies" shall include any company
controlled by, controlling or under common control with
the Company.
(ii) Annual Bonus. In addition to
Annual Base Salary, the Executive shall be awarded, for
each fiscal year ending during the Employment Period,
an annual bonus (the "Annual Bonus") in cash at least
equal to the Executive's target bonus under the
Company's annual bonus program, or any comparable bonus
under any predecessor or successor plan for the year
prior to the year in which the Effective Date occurs
(the "Target Bonus"). Each such Annual Bonus shall be
paid no later than the end of the third month of the
fiscal year next following the fiscal year for which
the Annual Bonus is awarded, unless the Executive shall
elect to defer the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement
Plans. During the Employment Period, the Executive
shall be entitled to participate in all incentive,
savings and retirement plans, practices, policies and
programs applicable generally to other peer executives
of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and
programs provide the Executive with incentive
opportunities (measured with respect to both regular
and special incentive opportunities, to the extent, if
any, that such distinction is applicable), savings
opportunities and retirement benefit opportunities, in
each case, less favorable, in the aggregate, than the
most favorable of those provided by the Company and its
affiliated companies for the Executive under such
plans, practices, policies and programs as in effect at
any time during the 120-day period immediately
preceding the Effective Date or if more favorable to
the Executive, those provided generally at any time
after the Effective Date to other peer executives of
the Company and its affiliated companies.
(iv) Welfare Benefit Plans. During the
Employment Period, the Executive and/or the Executive's
family, as the case may be, shall be eligible for
participation in and shall receive all benefits under
welfare benefit plans, practices, policies and programs
provided by the Company and its affiliated companies
(including, without limitation, medical, prescription,
dental, disability, employee life, group life,
accidental death and travel accident insurance plans
and programs) to the extent applicable generally to
other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices,
policies and programs provide the Executive with
benefits which are less favorable, in the aggregate,
than the most favorable of such plans, practices,
policies and programs in effect for the Executive at
any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to
the Executive, those provided generally at any time
after the Effective Date to other peer executives of
the Company and its affiliated companies.
(v) Expenses. During the Employment
Period, the Executive shall be entitled to receive
prompt reimbursement for all reasonable expenses
incurred by the Executive in accordance with the most
favorable policies, practices and procedures of the
Company and its affiliated companies in effect for the
Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer
executives of the Company and its affiliated companies.
(vi) Fringe Benefits. During the
Employment Period, the Executive shall be entitled to
fringe benefits, including, without limitation, tax and
financial planning services, payment of club dues, and,
if applicable, use of an automobile and payment of
related expenses, in accordance with the most favorable
plans, practices, programs and policies of the Company
and its affiliated companies in effect for the
Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer
executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During
the Employment Period, the Executive shall be entitled
to an office or offices of a size and with furnishings
and other appointments, and to exclusive personal
secretarial and other assistance, at least equal to the
most favorable of the foregoing provided to the
Executive by the Company and its affiliated companies
at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to
the Executive, as provided generally at any time
thereafter with respect to other peer executives of the
Company and its affiliated companies.
(viii) Vacation. During the Employment
Period, the Executive shall be entitled to paid
vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its
affiliated companies as in effect for the Executive at
any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the
Company and its affiliated companies.
5. Termination of Employment. (a) Death or
Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the
Employment Period. If the Company determines in good
faith that the Disability of the Executive has occurred
during the Employment Period (pursuant to the
definition of Disability set forth below), it may give
to the Executive written notice in accordance with
Section 12(b) of this Agreement of its intention to
terminate the Executive's employment. In such event,
the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of
such notice by the Executive (the "Disability Effective
Date"), provided that, within the 30 days after such
receipt, the Executive shall not have returned to full-
time performance of the Executive's duties. For
purposes of this Agreement, "Disability" shall mean the
absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180
consecutive business days as a result of incapacity due
to mental or physical illness which is determined to be
total and permanent by a physician selected by the
Company or its insurers and acceptable to the Executive
or the Executive's legal representative.
(b) Cause. The Company may terminate the
Executive's employment during the Employment Period for
Cause. For purposes of this Agreement, "Cause" shall
mean:
(i) the willful and continued failure of the
Executive to perform substantially the Executive's
duties with the Company or one of its affiliates
(other than any such failure resulting from
incapacity due to physical or mental illness),
after a written demand for substantial performance
is delivered to the Executive by the Board or the
Chief Executive Officer of the Company which
specifically identifies the manner in which the
Board or Chief Executive Officer believes that the
Executive has not substantially performed the
Executive's duties, or
(ii) the willful engaging by the Executive in
illegal conduct or gross misconduct which is
materially and demonstrably injurious to the
Company.
For purposes of this provision, no act or failure to
act, on the part of the Executive, shall be considered
"willful" unless it is done, or omitted to be done, by
the Executive in bad faith or without reasonable belief
that the Executive's action or omission was in the best
interests of the Company. Any act, or failure to act,
based upon authority given pursuant to a resolution
duly adopted by the Board or upon the instructions of
the Chief Executive Officer or a senior officer of the
Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or
omitted to be done, by the Executive in good faith and
in the best interests of the Company. The cessation of
employment of the Executive shall not be deemed to be
for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly
adopted by the affirmative vote of not less than three-
quarters of the entire membership of the Board at a
meeting of the Board called and held for such purpose
(after reasonable notice is provided to the Executive
and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding
that, in the good faith opinion of the Board, the
Executive is guilty of the conduct described in
subparagraph (i) or (ii) above, and specifying the
particulars thereof in detail.
(c) Good Reason. The Executive's employment
may be terminated by the Executive for Good Reason.
For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to the Executive of any
duties inconsistent in any respect with the
Executive's position (including status, offices,
titles and reporting requirements), authority,
duties or responsibilities as contemplated by
Section 4(a) of this Agreement, or any other action
by the Company which results in a diminution in
such position, authority, duties or
responsibilities, excluding for this purpose an
isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the
Company promptly after receipt of notice thereof
given by the Executive;
(ii) any failure by the Company to comply
with any of the provisions of Section 4(b) of this
Agreement, other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith
and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive
to be based at any office or location other than as
provided in Section 4(a)(i)(B) hereof or the
Company's requiring the Executive to travel on
Company business to a substantially greater extent
than required immediately prior to the Effective
Date;
(iv) any purported termination by the
Company of the Executive's employment otherwise
than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply
with and satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by the Executive
shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a termination by the
Executive for any reason during the 30-day period
immediately following the first anniversary of the
Effective Date shall be deemed to be a termination for
Good Reason for all purposes of this Agreement.
(d) Notice of Termination. Any termination
by the Company for Cause, or by the Executive for Good
Reason, shall be communicated by Notice of Termination
to the other party hereto given in accordance with
Section 12(b) 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) to the
extent applicable, 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) if the Date of
Termination (as defined below) is other than the date
of receipt of such notice, specifies the termination
date (which date shall be not more than thirty days
after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes
to a showing of Good Reason or Cause shall not waive
any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or
the Company, respectively, from asserting such fact or
circumstance in enforcing the Executive's or the
Company's rights hereunder.
(e) Date of Termination. "Date of
Termination" means (i) if the Executive's employment is
terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the
Notice of Termination or any later date specified
therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for
Cause or Disability, the Date of Termination shall be
the date on which the Company notifies the Executive of
such termination and (iii) if the Executive's
employment is terminated by reason of death or
Disability, the Date of Termination shall be the date
of death of the Executive or the Disability Effective
Date, as the case may be.
6. Obligations of the Company upon
Termination. (a) Good Reason; Other Than for Cause,
Death or Disability. If, during the Employment Period,
the Company shall terminate the Executive's employment
other than for Cause or Disability or the Executive
shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in
a lump sum in cash within 30 days after the Date of
Termination the aggregate of the following amounts:
A. the sum of (1) the Executive's Annual
Base Salary through the Date of Termination to
the extent not theretofore paid, (2) the
product of (x) the higher of (I) the Target
Bonus and (II) the Annual Bonus paid or
payable, including any bonus or portion
thereof which has been earned but deferred
(and annualized for any fiscal year consisting
of less than twelve full months or during
which the Executive was employed for less than
twelve full months), for the most recently
completed fiscal year during the Employment
Period, if any (such higher amount being
referred to as the "Highest Annual Bonus") and
(y) a fraction, the numerator of which is the
number of days in the current fiscal year
through the Date of Termination, and the
denominator of which is 365 and (3) any
compensation previously deferred by the
Executive (together with any accrued interest
or earnings thereon) and any accrued vacation
pay, in each case to the extent not
theretofore paid (the sum of the amounts
described in clauses (1), (2), and (3) shall
be hereinafter referred to as the "Accrued
Obligations"); and
B. the amount equal to the product of
(1) three and (2) the sum of (x) the
Executive's Annual Base Salary and (y) the
Highest Annual Bonus; and
C. an amount equal to the excess of (a)
the actuarial equivalent of the benefit under
the Company's qualified defined benefit
retirement plan (the "Retirement Plan")
(utilizing actuarial assumptions no less
favorable to the Executive than those in
effect under the Company's Retirement Plan
immediately prior to the Effective Date), and
any excess or supplemental retirement plan in
which the Executive participates (together,
the "SERP") which the Executive would receive
if the Executive's employment continued for
three years after the Date of Termination
assuming for this purpose that all accrued
benefits are fully vested, and, assuming that
the Executive's compensation in each of the
three years is that required by Section
4(b)(i) and Section 4(b)(ii), over (b) the
actuarial equivalent of the Executive's actual
benefit (paid or payable), if any, under the
Retirement Plan and the SERP as of the Date of
Termination;
(ii) for three years after the Executive's
Date of Termination, or such longer period as may
be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall
continue benefits to the Executive and/or the
Executive's family at least equal to those which
would have been provided to them in accordance with
the plans, programs, practices and policies
described in Section 4(b)(iv) of this Agreement if
the Executive's employment had not been terminated
or, if more favorable to the Executive, as in
effect generally at any time thereafter with
respect to other peer executives of the Company and
its affiliated companies and their families,
provided, however, that if the Executive becomes
reemployed with another employer and is eligible to
receive medical or other welfare benefits under an
other employer provided plan, the medical and other
welfare benefits described herein shall be
secondary to those provided under such other plan
during such applicable period of eligibility. For
purposes of determining eligibility (but not the
time of commencement of benefits) of the Executive
for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive
shall be considered to have remained employed until
three years after the Date of Termination and to
have retired on the last day of such period;
(iii) the Company shall, at its sole expense
as incurred, provide the Executive with
outplacement services the scope and provider of
which shall be selected by the Executive in his
sole discretion; and
(iv) to the extent not theretofore paid or
provided, the Company shall timely pay or provide
to the Executive any other amounts or benefits
required to be paid or provided or which the
Executive is eligible to receive under any plan,
program, policy or practice or contract or
agreement of the Company and its affiliated
companies (such other amounts and benefits shall be
hereinafter referred to as the "Other Benefits").
(b) Death. If the Executive's employment is
terminated by reason of the Executive's death during
the Employment Period, this Agreement shall terminate
without further obligations to the Executive's legal
representatives under this Agreement, other than for
payment of Accrued Obligations and the timely payment
or provision of Other Benefits. Accrued Obligations
shall be paid to the Executive's estate or beneficiary,
as applicable, in a lump sum in cash within 30 days of
the Date of Termination. With respect to the provision
of Other Benefits, the term Other Benefits as utilized
in this Section 6(b) shall include, without limitation,
and the Executive's estate and/or beneficiaries shall
be entitled to receive, benefits at least equal to the
most favorable benefits provided by the Company and
affiliated companies to the estates and beneficiaries
of peer executives of the Company and such affiliated
companies under such plans, programs, practices and
policies relating to death benefits, if any, as in
effect with respect to other peer executives and their
beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more
favorable to the Executive's estate and/or the
Executive's beneficiaries, as in effect on the date of
the Executive's death with respect to other peer
executives of the Company and its affiliated companies
and their beneficiaries.
(c) Disability. If the Executive's
employment is terminated by reason of the Executive's
Disability during the Employment Period, this Agreement
shall terminate without further obligations to the
Executive, other than for payment of Accrued
Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to
the Executive in a lump sum in cash within 30 days of
the Date of Termination. With respect to the provision
of Other Benefits, the term Other Benefits as utilized
in this Section 6(c) shall include, and the Executive
shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least
equal to the most favorable of those generally provided
by the Company and its affiliated companies to disabled
executives and/or their families in accordance with
such plans, programs, practices and policies relating
to disability, if any, as in effect generally with
respect to other peer executives and their families at
any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to
the Executive and/or the Executive's family, as in
effect at any time thereafter generally with respect to
other peer executives of the Company and its affiliated
companies and their families.
(d) Cause; Other than for Good Reason. If
the Executive's employment shall be terminated for
Cause during the Employment Period, this Agreement
shall terminate without further obligations to the
Executive other than the obligation to pay to the
Executive (x) his Annual Base Salary through the Date
of Termination, (y) the amount of any compensation
previously deferred by the Executive, and (z) Other
Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates
employment during the Employment Period, excluding a
termination for Good Reason, this Agreement shall
terminate without further obligations to the Executive,
other than for Accrued Obligations and the timely
payment or provision of Other Benefits. In such case,
all Accrued Obligations shall be paid to the Executive
in a lump sum in cash within 30 days of the Date of
Termination.
7. Non-exclusivity of Rights. Nothing in
this Agreement shall prevent or limit the Executive's
continuing or future participation in any plan,
program, policy or practice provided by the Company or
any of its affiliated companies and for which the
Executive may qualify, nor, subject to Section 12(f),
shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or
agreement with the Company or any of its affiliated
companies. Amounts which are vested benefits or which
the Executive is otherwise entitled to receive under
any plan, policy, practice or program of or any
contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such
plan, policy, practice or program or contract or
agreement except as explicitly modified by this
Agreement.
8. Full Settlement. The Company's obligation
to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall
not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action
which the Company may have against the Executive or
others. In no event shall the Executive be obligated
to seek other employment or take any other action by
way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement
and such amounts shall not be reduced whether or not
the Executive obtains other employment. The Company
agrees to pay as incurred, to the full extent permitted
by law, all legal fees and expenses which the Executive
may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company, the
Executive or others of the validity or enforceability
of, or liability under, any provision of this Agreement
or any guarantee of performance thereof (including as a
result of any contest by the Executive about the amount
of any payment pursuant to this Agreement), plus in
each case interest on any delayed payment at the
applicable Federal rate provided for in Section
7872(f)(2)(A) of the Internal Revenue Code of 1986, as
amended (the "Code").
9. Certain Additional Payments by the
Company.
(a) Anything in this Agreement to the
contrary notwithstanding and except as set forth below,
in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of
the Executive (whether paid or payable or distributed
or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard
to any additional payments required under this
Section 9) (a "Payment") would be subject to the excise
tax imposed by Section 4999 of the Code or any interest
or penalties are incurred by the Executive with respect
to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the
Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including
any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes
(and any interest and penalties imposed with respect
thereto) and Excise Tax imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-
Up Payment equal to the Excise Tax imposed upon the
Payments. Notwithstanding the foregoing provisions of
this Section 9(a), if it shall be determined that the
Executive is entitled to a Gross-Up Payment, but that
the Payments do not exceed 110% of the greatest amount
(the "Reduced Amount") that could be paid to the
Executive such that the receipt of Payments would not
give rise to any Excise Tax, then no Gross-Up Payment
shall be made to the Executive and the Payments, in the
aggregate, shall be reduced to the Reduced Amount.
(b) Subject to the provisions of
Section 9(c), all determinations required to be made
under this Section 9, including whether and when a
Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made by Arthur
Andersen & Co. or such other certified public
accounting firm as may be designated by the Executive
(the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the
Executive within 15 business days of the receipt of
notice from the Executive that there has been a
Payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is
serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the
Executive shall appoint another nationally recognized
accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely
by the Company. Any Gross-Up Payment, as determined
pursuant to this Section 9, shall be paid by the
Company to the Executive within five days of the
receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the
Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with
the calculations required to be made hereunder. In the
event that the Company exhausts its remedies pursuant
to Section 9(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to
or for the benefit of the Executive.
(c) The Executive shall notify the Company in
writing of any claim by the Internal Revenue Service
that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification
shall be given as soon as practicable but no later than
ten business days after the Executive is informed in
writing of such claim and shall apprise the Company of
the nature of such claim and the date on which such
claim is requested to be paid. The Executive shall not
pay such claim prior to the expiration of the 30-day
period following the date on which it gives such notice
to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such
claim is due). If the Company notifies the Executive
in writing prior to the expiration of such period that
it desires to contest such claim, the Executive shall:
(i) give the Company any information
reasonably requested by the Company relating to
such claim,
(ii) take such action in connection with
contesting such claim as the Company shall
reasonably request in writing from time to time,
including, without limitation, accepting legal
representation with respect to such claim by an
attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith
in order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional
interest and penalties) incurred in connection with
such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with
respect thereto) imposed as a result of such
representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this
Section 9(c), the Company shall control all proceedings
taken in connection with such contest and, at its sole
option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at
its sole option, either direct the Executive to pay the
tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees 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 Executive to pay such claim and
sue for a refund, the Company shall advance the amount
of such payment to the Executive, on an interest-free
basis and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with
respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to
such advance; and further provided that any extension
of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to be
due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall
be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the Executive
shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of
an amount advanced by the Company pursuant to
Section 9(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive
shall (subject to the Company's complying with the
requirements of Section 9(c)) promptly pay to the
Company the amount of such refund (together with any
interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant
to Section 9(c), a determination is made that the
Executive shall not be entitled to any refund with
respect to such claim and the Company does not notify
the Executive in writing of its intent to contest such
denial of refund prior to the expiration of 30 days
after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the
amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be
paid.
10. Confidential Information. The Executive
shall hold in a fiduciary capacity for the benefit of
the Company all secret or confidential information,
knowledge or data relating to the Company or any of its
affiliated companies, and their respective businesses,
which shall have been obtained by the Executive during
the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive
or representatives of the Executive in violation of
this Agreement). After termination of the Executive's
employment with the Company, the Executive shall not,
without the prior written consent of the Company or as
may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge
or data to anyone other than the Company and those
designated by it. In no event shall an asserted
violation of the provisions of this Section 10
constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this
Agreement.
11. Successors. (a) This Agreement is
personal to the Executive and without the prior written
consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent
and distribution. This Agreement shall inure to the
benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit
of and be binding upon the Company and its successors
and assigns.
(c) The Company will require any successor
(whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the
same manner and to the same extent that the Company
would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid
which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
12. Miscellaneous. (a) This Agreement shall
be governed by and construed in accordance with the
laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this
Agreement are not part of the provisions hereof and
shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written
agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications
hereunder shall be in writing and shall be given by
hand delivery to the other party or by registered or
certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
John G. Burgess
29 Harrington Road
Moraga, CA 94556
If to the Company:
APL Limited
1111 Broadway
Oakland, CA 94607
Attention: General Counsel
or to such other address as either party shall have
furnished to the other in writing in accordance
herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the
validity or enforceability of any other provision of
this Agreement.
(d) The Company may withhold from any amounts
payable under this Agreement such Federal, state, local
or foreign taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure
to insist upon strict compliance with any provision of
this Agreement or the failure to assert any right the
Executive or the Company may have hereunder, including,
without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to
Section 5(c)(i)-(v) of this Agreement, shall not be
deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.
(f) The Executive and the Company acknowledge
that, except as may otherwise be provided under any
other written agreement between the Executive and the
Company, the employment of the Executive by the Company
is "at will" and, subject to Section 1(a) hereof, prior
to the Effective Date, the Executive's employment
and/or this Agreement may be terminated by either the
Executive or the Company at any time prior to the
Effective Date, in which case the Executive shall have
no further rights under this Agreement. From and after
the Effective Date this Agreement shall supersede any
other agreement between the parties with respect to the
subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto
set the Executive's hand and, pursuant to the
authorization from its Board of Directors, the Company
has caused these presents to be executed in its name on
its behalf, all as of the day and year first above
written.
/s/ John G. Burgess
John G. Burgess
APL LIMITED
By: /s/ Timothy J. Rhein
EMPLOYMENT AGREEMENT
AGREEMENT by and between APL Limited, a
Delaware corporation (the "Company"), and Maryellen B.
Cattani (the "Executive"), dated as of the 28th day of
January, 1997.
The Board of Directors of the Company (the
"Board"), has determined that it is in the best
interests of the Company and its shareholders to assure
that the Company will have the continued dedication of
the Executive, notwithstanding the possibility, threat
or occurrence of a Change of Control (as defined below)
of the Company. The Board believes it is imperative to
diminish the inevitable distraction of the Executive by
virtue of the personal uncertainties and risks created
by a pending or threatened Change of Control and to
encourage the Executive's full attention and dedication
to the Company currently and in the event of any
threatened or pending Change of Control, and to provide
the Executive with compensation and benefits
arrangements upon a Change of Control which ensure that
the compensation and benefits expectations of the
Executive will be satisfied and which are competitive
with those of other corporations. Therefore, in order
to accomplish these objectives, the Board has caused
the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS
FOLLOWS:
1. Certain Definitions. (a) The "Effective
Date" shall mean the first date during the Change of
Control Period (as defined in Section 1(b)) on which a
Change of Control (as defined in Section 2) occurs.
Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if
the Executive's employment with the Company is
terminated prior to the date on which the Change of
Control occurs, and if it is reasonably demonstrated by
the Executive that such termination of employment (i)
was at the request of a third party who has taken steps
reasonably calculated to effect a Change of Control, or
(ii) otherwise arose in connection with or anticipation
of a Change of 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.
(b) The "Change of Control Period" shall mean
the period commencing on the date hereof and ending on
the third anniversary of the date hereof; provided,
however, that commencing on the date one year after the
date hereof, and on each annual anniversary of such
date (such date and each annual anniversary thereof
shall be hereinafter referred to as the "Renewal
Date"), unless previously terminated, the Change of
Control Period shall be automatically extended so as to
terminate three years from such Renewal Date, unless at
least 60 days prior to the Renewal Date the Company
shall give notice to the Executive that the Change of
Control Period shall not be so extended.
2. Change of Control. For the purpose of
this Agreement, a "Change of Control" shall mean:
(a) The acquisition by any individual, entity
or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock
of the Company (the "Outstanding Company Common Stock")
or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled
to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided,
however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change of
Control: (i) any acquisition of such shares by the
Company, (ii) any acquisition of such shares by any
employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled
by the Company or (iii) any acquisition of such shares
by any corporation pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of subsection
(c) of this Section 2; or
(b) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for
any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming
a director subsequent to the date hereof whose
election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent
Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or
threatened election contest 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; or
(c) Consummation of a reorganization, merger
or consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a
"Business Combination"), in each case, unless,
following such Business Combination, (i) all or
substantially all of the individuals and entities who
were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then
outstanding shares of common stock and the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of
directors, as the case may be, of the corporation
resulting from such Business Combination (including,
without limitation, a corporation which as a result of
such transaction owns the Company or all or
substantially all of the Company's assets either
directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be, (ii) no
Person (excluding any corporation resulting from such
Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation
resulting from such Business Combination) beneficially
owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common
stock of the corporation resulting from such Business
Combination or the combined voting power of the then
outstanding voting securities of such corporation
except to the extent that such ownership existed prior
to the Business Combination and (iii) at least a
majority of the members of the board of directors of
the corporation 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
Company of a complete liquidation or dissolution of the
Company.
3. Employment Period. The Company hereby
agrees to continue the Executive in its employ, and the
Executive hereby agrees to remain in the employ of the
Company subject to the terms and conditions of this
Agreement, for the period commencing on the Effective
Date and ending on the third anniversary of such date
(the "Employment Period").
4. Terms of Employment. (a) Position and
Duties. (i) During the Employment Period, (A) the
Executive's position (including status, offices, titles
and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all
material respects with the most significant of those
held, exercised and assigned at any time during the 120-
day period immediately preceding the Effective Date and
(B) the Executive's services shall be performed at the
location where the Executive was employed immediately
preceding the Effective Date or any office or location
less than 35 miles from such location.
(ii) During the Employment Period, and
excluding any periods of vacation and sick leave to
which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal
business hours to the business and affairs of the
Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder,
to use the Executive's reasonable best efforts to
perform faithfully and efficiently such
responsibilities. During the Employment Period it
shall not be a violation of this Agreement for the
Executive to (A) serve on corporate, civic or
charitable boards or committees, (B) deliver lectures,
fulfill speaking engagements or teach at educational
institutions and (C) manage personal investments, so
long as such activities do not significantly interfere
with the performance of the Executive's
responsibilities as an employee of the Company in
accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such
activities have been conducted by the Executive prior
to the Effective Date, the continued conduct of such
activities (or the conduct of activities similar in
nature and scope thereto) subsequent to the Effective
Date shall not thereafter be deemed to interfere with
the performance of the Executive's responsibilities to
the Company.
(b) Compensation. (i) Base Salary. During
the Employment Period, the Executive shall receive an
annual base salary ("Annual Base Salary"), which shall
be paid at a monthly rate, at least equal to twelve
times the highest monthly base salary paid or payable,
including any base salary which has been earned but
deferred, to the Executive by the Company and its
affiliated companies in respect of the twelve-month
period immediately preceding the month in which the
Effective Date occurs. During the Employment Period,
the Annual Base Salary shall be reviewed no more than
12 months after the last salary increase awarded to the
Executive prior to the Effective Date and thereafter at
least annually. Any increase in Annual Base Salary
shall not serve to limit or reduce any other obligation
to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and
the term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so
increased. As used in this Agreement, the term
"affiliated companies" shall include any company
controlled by, controlling or under common control with
the Company.
(ii) Annual Bonus. In addition to
Annual Base Salary, the Executive shall be awarded, for
each fiscal year ending during the Employment Period,
an annual bonus (the "Annual Bonus") in cash at least
equal to the Executive's target bonus under the
Company's annual bonus program, or any comparable bonus
under any predecessor or successor plan for the year
prior to the year in which the Effective Date occurs
(the "Target Bonus"). Each such Annual Bonus shall be
paid no later than the end of the third month of the
fiscal year next following the fiscal year for which
the Annual Bonus is awarded, unless the Executive shall
elect to defer the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement
Plans. During the Employment Period, the Executive
shall be entitled to participate in all incentive,
savings and retirement plans, practices, policies and
programs applicable generally to other peer executives
of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and
programs provide the Executive with incentive
opportunities (measured with respect to both regular
and special incentive opportunities, to the extent, if
any, that such distinction is applicable), savings
opportunities and retirement benefit opportunities, in
each case, less favorable, in the aggregate, than the
most favorable of those provided by the Company and its
affiliated companies for the Executive under such
plans, practices, policies and programs as in effect at
any time during the 120-day period immediately
preceding the Effective Date or if more favorable to
the Executive, those provided generally at any time
after the Effective Date to other peer executives of
the Company and its affiliated companies.
(iv) Welfare Benefit Plans. During the
Employment Period, the Executive and/or the Executive's
family, as the case may be, shall be eligible for
participation in and shall receive all benefits under
welfare benefit plans, practices, policies and programs
provided by the Company and its affiliated companies
(including, without limitation, medical, prescription,
dental, disability, employee life, group life,
accidental death and travel accident insurance plans
and programs) to the extent applicable generally to
other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices,
policies and programs provide the Executive with
benefits which are less favorable, in the aggregate,
than the most favorable of such plans, practices,
policies and programs in effect for the Executive at
any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to
the Executive, those provided generally at any time
after the Effective Date to other peer executives of
the Company and its affiliated companies.
(v) Expenses. During the Employment
Period, the Executive shall be entitled to receive
prompt reimbursement for all reasonable expenses
incurred by the Executive in accordance with the most
favorable policies, practices and procedures of the
Company and its affiliated companies in effect for the
Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer
executives of the Company and its affiliated companies.
(vi) Fringe Benefits. During the
Employment Period, the Executive shall be entitled to
fringe benefits, including, without limitation, tax and
financial planning services, payment of club dues, and,
if applicable, use of an automobile and payment of
related expenses, in accordance with the most favorable
plans, practices, programs and policies of the Company
and its affiliated companies in effect for the
Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer
executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During
the Employment Period, the Executive shall be entitled
to an office or offices of a size and with furnishings
and other appointments, and to exclusive personal
secretarial and other assistance, at least equal to the
most favorable of the foregoing provided to the
Executive by the Company and its affiliated companies
at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to
the Executive, as provided generally at any time
thereafter with respect to other peer executives of the
Company and its affiliated companies.
(viii) Vacation. During the Employment
Period, the Executive shall be entitled to paid
vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its
affiliated companies as in effect for the Executive at
any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the
Company and its affiliated companies.
5. Termination of Employment. (a) Death or
Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the
Employment Period. If the Company determines in good
faith that the Disability of the Executive has occurred
during the Employment Period (pursuant to the
definition of Disability set forth below), it may give
to the Executive written notice in accordance with
Section 12(b) of this Agreement of its intention to
terminate the Executive's employment. In such event,
the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of
such notice by the Executive (the "Disability Effective
Date"), provided that, within the 30 days after such
receipt, the Executive shall not have returned to full-
time performance of the Executive's duties. For
purposes of this Agreement, "Disability" shall mean the
absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180
consecutive business days as a result of incapacity due
to mental or physical illness which is determined to be
total and permanent by a physician selected by the
Company or its insurers and acceptable to the Executive
or the Executive's legal representative.
(b) Cause. The Company may terminate the
Executive's employment during the Employment Period for
Cause. For purposes of this Agreement, "Cause" shall
mean:
(i) the willful and continued failure of the
Executive to perform substantially the Executive's
duties with the Company or one of its affiliates
(other than any such failure resulting from
incapacity due to physical or mental illness),
after a written demand for substantial performance
is delivered to the Executive by the Board or the
Chief Executive Officer of the Company which
specifically identifies the manner in which the
Board or Chief Executive Officer believes that the
Executive has not substantially performed the
Executive's duties, or
(ii) the willful engaging by the Executive in
ilegal conduct or gross misconduct which is
materially and demonstrably injurious to the
Company.
For purposes of this provision, no act or failure to
act, on the part of the Executive, shall be considered
"willful" unless it is done, or omitted to be done, by
the Executive in bad faith or without reasonable belief
that the Executive's action or omission was in the best
interests of the Company. Any act, or failure to act,
based upon authority given pursuant to a resolution
duly adopted by the Board or upon the instructions of
the Chief Executive Officer or a senior officer of the
Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or
omitted to be done, by the Executive in good faith and
in the best interests of the Company. The cessation of
employment of the Executive shall not be deemed to be
for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly
adopted by the affirmative vote of not less than three-
quarters of the entire membership of the Board at a
meeting of the Board called and held for such purpose
(after reasonable notice is provided to the Executive
and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding
that, in the good faith opinion of the Board, the
Executive is guilty of the conduct described in
subparagraph (i) or (ii) above, and specifying the
particulars thereof in detail.
(c) Good Reason. The Executive's employment
may be terminated by the Executive for Good Reason.
For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to the Executive of any
duties inconsistent in any respect with the
Executive's position (including status, offices,
titles and reporting requirements), authority,
duties or responsibilities as contemplated by
Section 4(a) of this Agreement, or any other action
by the Company which results in a diminution in
such position, authority, duties or
responsibilities, excluding for this purpose an
isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the
Company promptly after receipt of notice thereof
given by the Executive;
(ii) any failure by the Company to comply
with any of the provisions of Section 4(b) of this
Agreement, other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith
and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive
to be based at any office or location other than as
provided in Section 4(a)(i)(B) hereof or the
Company's requiring the Executive to travel on
Company business to a substantially greater extent
than required immediately prior to the Effective
Date;
(iv) any purported termination by the
Company of the Executive's employment otherwise
than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply
with and satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by the Executive
shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a termination by the
Executive for any reason during (a) the 30-day period
immediately following the Effective Date (the "First
Period") or (b) the 30-day period immediately following
the first anniversary of the Effective Date (the
"Second Period") shall be deemed to be a termination
for Good Reason for all purposes of this Agreement.
(d) Notice of Termination. Any termination
by the Company for Cause, or by the Executive for Good
Reason, shall be communicated by Notice of Termination
to the other party hereto given in accordance with
Section 12(b) 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) to the
extent applicable, 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) if the Date of
Termination (as defined below) is other than the date
of receipt of such notice, specifies the termination
date (which date shall be not more than thirty days
after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes
to a showing of Good Reason or Cause shall not waive
any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or
the Company, respectively, from asserting such fact or
circumstance in enforcing the Executive's or the
Company's rights hereunder.
(e) Date of Termination. "Date of
Termination" means (i) if the Executive's employment is
terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the
Notice of Termination or any later date specified
therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for
Cause or Disability, the Date of Termination shall be
the date on which the Company notifies the Executive of
such termination and (iii) if the Executive's
employment is terminated by reason of death or
Disability, the Date of Termination shall be the date
of death of the Executive or the Disability Effective
Date, as the case may be.
6. Obligations of the Company upon
Termination. (a) Good Reason; Other Than for Cause,
Death or Disability. If, during the Employment Period,
the Company shall terminate the Executive's employment
other than for Cause or Disability or the Executive
shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in
a lump sum in cash within 30 days after the Date of
Termination the aggregate of the following amounts:
A. the sum of (1) the Executive's Annual
Base Salary through the Date of Termination to
the extent not theretofore paid, (2) the
product of (x) the higher of (I) the Target
Bonus and (II) the Annual Bonus paid or
payable, including any bonus or portion
thereof which has been earned but deferred
(and annualized for any fiscal year consisting
of less than twelve full months or during
which the Executive was employed for less than
twelve full months), for the most recently
completed fiscal year during the Employment
Period, if any (such higher amount being
referred to as the "Highest Annual Bonus") and
(y) a fraction, the numerator of which is the
number of days in the current fiscal year
through the Date of Termination, and the
denominator of which is 365 and (3) any
compensation previously deferred by the
Executive (together with any accrued interest
or earnings thereon) and any accrued vacation
pay, in each case to the extent not
theretofore paid (the sum of the amounts
described in clauses (1), (2), and (3) shall
be hereinafter referred to as the "Accrued
Obligations"); and
B. the amount equal to the product of
(1) three and (2) the sum of (x) the
Executive's Annual Base Salary and (y) the
Highest Annual Bonus; and
C. an amount equal to the excess of (a)
the actuarial equivalent of the benefit under
the Company's qualified defined benefit
retirement plan (the "Retirement Plan")
(utilizing actuarial assumptions no less
favorable to the Executive than those in
effect under the Company's Retirement Plan
immediately prior to the Effetive Date), and
any excess or supplemental retirement plan in
which the Executive participates (together,
the "SERP") which the Executive would receive
if the Executive's employment continued for
three years after the Date of Termination
assuming for this purpose that all accrued
benefits are fully vested, and, assuming that
the Executive's compensation in each of the
three years is that required by Section
4(b)(i) and Section 4(b)(ii), over (b) the
actuarial equivalent of the Executive's actual
benefit (paid or payable), if any, under the
Retirement Plan and the SERP as of the Date of
Termination;
(ii) for three years after the Executive's
Date of Termination, or such longer period as may
be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall
continue benefits to the Executive and/or the
Executive's family at least equal to those which
would have been provided to them in accordance with
the plans, programs, practices and policies
described in Section 4(b)(iv) of this Agreement if
the Executive's employment had not been terminated
or, if more favorable to the Executive, as in
effect generally at any time thereafter with
respect to other peer executives of the Company and
its affiliated companies and their families,
provided, however, that if the Executive becomes
reemployed with another employer and is eligible to
receive medical or other welfare benefits under
another employer provided plan, the medical and
other welfare benefits described herein shall be
secondary to those provided under such other plan
during such applicable period of eligibility. For
purposes of determining eligibility (but not the
time of commencement of benefits) of the Executive
for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive
shall be considered to have remained employed until
three years after the Date of Termination and to
have retired on the last day of such period;
(iii) the Company shall, at its sole expense
as incurred, provide the Executive with
outplacement services the scope and provider of
which shall be selected by the Executive in his
sole discretion; and
(iv) to the extent not theretofore paid or
provided, the Company shall timely pay or provide
to the Executive any other amounts or benefits
required to be paid or provided or which the
Executive is eligible to receive under any plan,
program, policy or practice or contract or
agreement of the Company and its affiliated
companies (such other amounts and benefits shall be
hereinafter referred to as the "Other Benefits");
provided, however, that in the case of a termination by
the Executive during the First Period, the reference in
clause (i)B(1) above to three shall be changed to two
and the references in clauses (i)C and (ii) above to
three years shall be changed to two years.
(b) Death. If the Executive's employment is
terminated by reason of the Executive's death during
the Employment Period, this Agreement shall terminate
without further obligations to the Executive's legal
representatives under this Agreement, other than for
payment of Accrued Obligations and the timely payment
or provision of Other Benefits. Accrued Obligations
shall be paid to the Executive's estate or beneficiary,
as applicable, in a lump sum in cash within 30 days of
the Date of Termination. With respect to the provision
of Other Benefits, the term Other Benefits as utilized
in this Section 6(b) shall include, without limitation,
and the Executive's estate and/or beneficiaries shall
be entitled to receive, benefits at least equal to the
most favorable benefits provided by the Company and
affiliated companies to the estates and beneficiaries
of peer executives of the Company and such affiliated
companies under such plans, programs, practices and
policies relating to death benefits, if any, as in
effect with respect to other peer executives and their
beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more
favorable to the Executive's estate and/or the
Executive's beneficiaries, as in effect on the date of
the Executive's death with respect to other peer
executives of the Company and its affiliated companies
and their beneficiaries.
(c) Disability. If the Executive's
employment is terminated by reason of the Executive's
Disability during the Employment Period, this Agreement
shall terminate without further obligations to the
Executive, other than for payment of Accrued
Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to
the Executive in a lump sum in cash within 30 days of
the Date of Termination. With respect to the provision
of Other Benefits, the term Other Benefits as utilized
in this Section 6(c) shall include, and the Executive
shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least
equal to the most favorable of those generally provided
by the Company and its affiliated companies to disabled
executives and/or their families in accordance with
such plans, programs, practices and policies relating
to disability, if any, as in effect generally with
respect to other peer executives and their families at
any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to
the Executive and/or the Executive's family, as in
effect at any time thereafter generally with respect to
other peer executives of the Company and its affiliated
companies and their families.
(d) Cause; Other than for Good Reason. If
the Executive's employment shall be terminated for
Cause during the Employment Period, this Agreement
shall terminate without further obligations to the
Executive other than the obligation to pay to the
Executive (x) his Annual Base Salary through the Date
of Termination, (y) the amount of any compensation
previously deferred by the Executive, and (z) Other
Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates
employment during the Employment Period, excluding a
termination for Good Reason, this Agreement shall
terminate without further obligations to the Executive,
other than for Accrued Obligations and the timely
payment or provision of Other Benefits. In such case,
all Accrued Obligations shall be paid to the Executive
in a lump sum in cash within 30 days of the Date of
Termination.
7. Non-exclusivity of Rights. Nothing in
this Agreement shall prevent or limit the Executive's
continuing or future participation in any plan,
program, policy or practice provided by the Company or
any of its affiliated companies and for which the
Executive may qualify, nor, subject to Section 12(f),
shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or
agreement with the Company or any of its affiliated
companies. Amounts which are vested benefits or which
the Executive is otherwise entitled to receive under
any plan, policy, practice or program of or any
contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such
plan, policy, practice or program or contract or
agreement except as explicitly modified by this
Agreement.
8. Full Settlement. The Company's obligation
to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall
not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action
which the Company may have against the Executive or
others. In no event shall the Executive be obligated
to seek other employment or take any other action by
way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement
and such amounts shall not be reduced whether or not
the Executive obtains other employment. The Company
agrees to pay as incurred, to the full extent permitted
by law, all legal fees and expenses which the Executive
may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company, the
Executive or others of the validity or enforceability
of, or liability under, any provision of this Agreement
or any guarantee of performance thereof (including as a
result of any contest by the Executive about the amount
of any payment pursuant to this Agreement), plus in
each case interest on any delayed payment at the
applicable Federal rate provided for in Section
7872(f)(2)(A) of the Internal Revenue Code of 1986, as
amended (the "Code").
9. Certain Additional Payments by the
Company.
(a) Anything in this Agreement to the
contrary notwithstanding and except as set forth below,
in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of
the Executive (whether paid or payable or distributed
or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard
to any additional payments required under this Sec
tion 9) (a "Payment") would be subject to the excise
tax imposed by Section 4999 of the Code or any interest
or penalties are incurred by the Executive with respect
to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the
Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including
any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes
(and any interest and penalties imposed with respect
thereto) and Excise Tax imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-
Up Payment equal to the Excise Tax imposed upon the
Payments. Notwithstanding the foregoing provisions of
this Section 9(a), if it shall be determined that the
Executive is entitled to a Gross-Up Payment, but that
the Payments do not exceed 110% of the greatest amount
(the "Reduced Amount") that could be paid to the
Executive such that the receipt of Payments would not
give rise to any Excise Tax, then no Gross-Up Payment
shall be made to the Executive and the Payments, in the
aggregate, shall be reduced to the Reduced Amount.
(b) Subject to the provisions of
Section 9(c), all determinations required to be made
under this Section 9, including whether and when a
Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made by Arthur
Andersen & Co. or such other certified public
accounting firm as may be designated by the Executive
(the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the
Executive within 15 business days of the receipt of
notice from the Executive that there has been a
Payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is
serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the
Executive shall appoint another nationally recognized
accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely
by the Company. Any Gross-Up Payment, as determined
pursuant to this Section 9, shall be paid by the
Company to the Executive within five days of the
receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the
Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with
the calculations required to be made hereunder. In the
event that the Company exhausts its remedies pursuant
to Section 9(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to
or for the benefit of the Executive.
(c) The Executive shall notify the Company in
writing of any claim by the Internal Revenue Service
that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification
shall be given as soon as practicable but no later than
ten business days after the Executive is informed in
writing of such claim and shall apprise the Company of
the nature of such claim and the date on which such
claim is requested to be paid. The Executive shall not
pay such claim prior to the expiration of the 30-day
period following the date on which it gives such notice
to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such
claim is due). If the Company notifies the Executive
in writing prior to the expiration of such period that
it desires to contest such claim, the Executive shall:
(i) give the Company any information
reasonably requested by the Company relating to
such claim,
(ii) take such action in connection with
contesting such claim as the Company shall
reasonably request in writing from time to time,
including, without limitation, accepting legal
representation with respect to such claim by an
attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith
in order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional
interest and penalties) incurred in connection with
such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with
respect thereto) imposed as a result of such
representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this
Section 9(c), the Company shall control all proceedings
taken in connection with such contest and, at its sole
option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at
its sole option, either direct the Executive to pay the
tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees 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 Executive to pay such claim and
sue for a refund, the Company shall advance the amount
of such payment to the Executive, on an interest-free
basis and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with
respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to
such advance; and further provided that any extension
of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to be
due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall
be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the Executive
shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of
an amount advanced by the Company pursuant to
Section 9(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive
shall (subject to the Company's complying with the
requirements of Section 9(c)) promptly pay to the
Company the amount of such refund (together with any
interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant
to Section 9(c), a determination is made that the
Executive shall not be entitled to any refund with
respect to such claim and the Company does not notify
the Executive in writing of its intent to contest such
denial of refund prior to the expiration of 30 days
after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the
amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be
paid.
10. Confidential Information. The Executive
shall hold in a fiduciary capacity for the benefit of
the Company all secret or confidential information,
knowledge or data relating to the Company or any of its
affiliated companies, and their respective businesses,
which shall have been obtained by the Executive during
the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive
or representatives of the Executive in violation of
this Agreement). After termination of the Executive's
employment with the Company, the Executive shall not,
without the prior written consent of the Company or as
may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge
or data to anyone other than the Company and those
designated by it. In no event shall an asserted
violation of the provisions of this Section 10
constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this
Agreement.
11. Successors. (a) This Agreement is
personal to the Executive and without the prior written
consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent
and distribution. This Agreement shall inure to the
benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit
of and be binding upon the Company and its successors
and assigns.
(c) The Company will require any successor
(whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the
same manner and to the same extent that the Company
would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid
which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
12. Miscellaneous. (a) This Agreement shall
be governed by and construed in accordance with the
laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this
Agreement are not part of the provisions hereof and
shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written
agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications
hereunder shall be in writing and shall be given by
hand delivery to the other party or by registered or
certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
Maryellen B. Cattani
224 Hillside Avenue
Piedmont, CA 94611
If to the Company:
APL Limited
1111 Broadway
Oakland, CA 94607
Attention: General Counsel
or to such other address as either party shall have
furnished to the other in writing in accordance
herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the
validity or enforceability of any other provision of
this Agreement.
(d) The Company may withhold from any amounts
payable under this Agreement such Federal, state, local
or foreign taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure
to insist upon strict compliance with any provision of
this Agreement or the failure to assert any right the
Executive or the Company may have hereunder, including,
without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to
Section 5(c)(i)-(v) of this Agreement, shall not be
deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.
(f) The Executive and the Company acknowledge
that, except as may otherwise be provided under any
other written agreement between the Executive and the
Company, the employment of the Executive by the Company
is "at will" and, subject to Section 1(a) hereof, prior
to the Effective Date, the Executive's employment
and/or this Agreement may be terminated by either the
Executive or the Company at any time prior to the
Effective Date, in which case the Executive shall have
no further rights under this Agreement. From and after
the Effective Date this Agreement shall supersede any
other agreement between the parties with respect to the
subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto
set the Executive's hand and, pursuant to the
authorization from its Board of Directors, the Company
has caused these presents to be executed in its name on
its behalf, all as of the day and year first above
written.
/s/ Maryellen B. Cattani
Maryellen B. Cattani
APL LIMITED
By: Timothy J. Rhein
EMPLOYMENT AGREEMENT
AGREEMENT by and between APL Limited, a
Delaware corporation (the "Company"), and L. Dale
Crandall (the "Executive"), dated as of the 28th day of
January, 1997.
The Board of Directors of the Company (the
"Board"), has determined that it is in the best
interests of the Company and its shareholders to assure
that the Company will have the continued dedication of
the Executive, notwithstanding the possibility, threat
or occurrence of a Change of Control (as defined below)
of the Company. The Board believes it is imperative to
diminish the inevitable distraction of the Executive by
virtue of the personal uncertainties and risks created
by a pending or threatened Change of Control and to
encourage the Executive's full attention and dedication
to the Company currently and in the event of any
threatened or pending Change of Control, and to provide
the Executive with compensation and benefits
arrangements upon a Change of Control which ensure that
the compensation and benefits expectations of the
Executive will be satisfied and which are competitive
with those of other corporations. Therefore, in order
to accomplish these objectives, the Board has caused
the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS
FOLLOWS:
1. Certain Definitions. (a) The "Effective
Date" shall mean the first date during the Change of
Control Period (as defined in Section 1(b)) on which a
Change of Control (as defined in Section 2) occurs.
Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if
the Executive's employment with the Company is
terminated prior to the date on which the Change of
Control occurs, and if it is reasonably demonstrated by
the Executive that such termination of employment (i)
was at the request of a third party who has taken steps
reasonably calculated to effect a Change of Control or
(ii) otherwise arose in connection with or anticipation
of a Change of 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.
(b) The "Change of Control Period" shall mean
the period commencing on the date hereof and ending on
the third anniversary of the date hereof; provided,
however, that commencing on the date one year after the
date hereof, and on each annual anniversary of such
date (such date and each annual anniversary thereof
shall be hereinafter referred to as the "Renewal
Date"), unless previously terminated, the Change of
Control Period shall be automatically extended so as to
terminate three years from such Renewal Date, unless at
least 60 days prior to the Renewal Date the Company
shall give notice to the Executive that the Change of
Control Period shall not be so extended.
2. Change of Control. For the purpose of
this Agreement, a "Change of Control" shall mean:
(a) The acquisition by any individual, entity
or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock
of the Company (the "Outstanding Company Common Stock")
or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled
to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided,
however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change of
Control: (i) any acquisition of such shares by the
Company, (ii) any acquisition of such shares by any
employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled
by the Company or (iii) any acquisition of such shares
by any corporation pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of subsection
(c) of this Section 2; or
(b) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for
any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming
a director subsequent to the date hereof whose
election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent
Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or
threatened election contest 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; or
(c) Consummation of a reorganization, merger
or consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a
"Business Combination"), in each case, unless,
following such Business Combination, (i) all or
substantially all of the individuals and entities who
were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then
outstanding shares of common stock and the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of
directors, as the case may be, of the corporation
resulting from such Business Combination (including,
without limitation, a corporation which as a result of
such transaction owns the Company or all or sub
stantially all of the Company's assets either directly
or through one or more subsidiaries) in substantially
the same proportions as their ownership, immediately
prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (ii) no Person
(excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related
trust) of the Company or such corporation resulting
from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively,
the then outstanding shares of common stock of the
corporation resulting from such Business Combination or
the combined voting power of the then outstanding
voting securities of such corporation except to the
extent that such ownership existed prior to the
Business Combination and (iii) at least a majority of
the members of the board of directors of the
corporation 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
Company of a complete liquidation or dissolution of the
Company.
3. Employment Period. The Company hereby
agrees to continue the Executive in its employ, and the
Executive hereby agrees to remain in the employ of the
Company subject to the terms and conditions of this
Agreement, for the period commencing on the Effective
Date and ending on the third anniversary of such date
(the "Employment Period").
4. Terms of Employment. (a) Position and
Duties. (i) During the Employment Period, (A) the
Executive's position (including status, offices, titles
and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all
material respects with the most significant of those
held, exercised and assigned at any time during the 120-
day period immediately preceding the Effective Date and
(B) the Executive's services shall be performed at the
location where the Executive was employed immediately
preceding the Effective Date or any office or location
less than 35 miles from such location.
(ii) During the Employment Period, and
excluding any periods of vacation and sick leave to
which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal
business hours to the business and affairs of the
Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder,
to use the Executive's reasonable best efforts to
perform faithfully and efficiently such
responsibilities. During the Employment Period it
shall not be a violation of this Agreement for the
Executive to (A) serve on corporate, civic or
charitable boards or committees, (B) deliver lectures,
fulfill speaking engagements or teach at educational
institutions and (C) manage personal investments, so
long as such activities do not significantly interfere
with the performance of the Executive's
responsibilities as an employee of the Company in
accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such
activities have been conducted by the Executive prior
to the Effective Date, the continued conduct of such
activities (or the conduct of activities similar in
nature and scope thereto) subsequent to the Effective
Date shall not thereafter be deemed to interfere with
the performance of the Executive's responsibilities to
the Company.
(b) Compensation. (i) Base Salary. During
the Employment Period, the Executive shall receive an
annual base salary ("Annual Base Salary"), which shall
be paid at a monthly rate, at least equal to twelve
times the highest monthly base salary paid or payable,
including any base salary which has been earned but
deferred, to the Executive by the Company and its
affiliated companies in respect of the twelve-month
period immediately preceding the month in which the
Effective Date occurs. During the Employment Period,
the Annual Base Salary shall be reviewed no more than
12 months after the last salary increase awarded to the
Executive prior to the Effective Date and thereafter at
least annually. Any increase in Annual Base Salary
shall not serve to limit or reduce any other obligation
to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and
the term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so
increased. As used in this Agreement, the term
"affiliated companies" shall include any company
controlled by, controlling or under common control with
the Company.
(ii) Annual Bonus. In addition to
Annual Base Salary, the Executive shall be awarded, for
each fiscal year ending during the Employment Period,
an annual bonus (the "Annual Bonus") in cash at least
equal to the Executive's target bonus under the
Company's annual bonus program, or any comparable bonus
under any predecessor or successor plan for the year
prior to the year in which the Effective Date occurs
(the "Target Bonus"). Each such Annual Bonus shall be
paid no later than the end of the third month of the
fiscal year next following the fiscal year for which
the Annual Bonus is awarded, unless the Executive shall
elect to defer the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement
Plans. During the Employment Period, the Executive
shall be entitled to participate in all incentive,
savings and retirement plans, practices, policies and
programs applicable generally to other peer executives
of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and
programs provide the Executive with incentive
opportunities (measured with respect to both regular
and special incentive opportunities, to the extent, if
any, that such distinction is applicable), savings
opportunities and retirement benefit opportunities, in
each case, less favorable, in the aggregate, than the
most favorable of those provided by the Company and its
affiliated companies for the Executive under such
plans, practices, policies and programs as in effect at
any time during the 120-day period immediately
preceding the Effective Date or if more favorable to
the Executive, those provided generally at any time
after the Effective Date to other peer executives of
the Company and its affiliated companies.
(iv) Welfare Benefit Plans. During the
Employment Period, the Executive and/or the Executive's
family, as the case may be, shall be eligible for
participation in and shall receive all benefits under
welfare benefit plans, practices, policies and programs
provided by the Company and its affiliated companies
(including, without limitation, medical, prescription,
dental, disability, employee life, group life,
accidental death and travel accident insurance plans
and programs) to the extent applicable generally to
other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices,
policies and programs provide the Executive with
benefits which are less favorable, in the aggregate,
than the most favorable of such plans, practices,
policies and programs in effect for the Executive at
any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to
the Executive, those provided generally at any time
after the Effective Date to other peer executives of
the Company and its affiliated companies.
(v) Expenses. During the Employment
Period, the Executive shall be entitled to receive
prompt reimbursement for all reasonable expenses
incurred by the Executive in accordance with the most
favorable policies, practices and procedures of the
Company and its affiliated companies in effect for the
Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer
executives of the Company and its affiliated companies.
(vi) Fringe Benefits. During the
Employment Period, the Executive shall be entitled to
fringe benefits, including, without limitation, tax and
financial planning services, payment of club dues, and,
if applicable, use of an automobile and payment of
related expenses, in accordance with the most favorable
plans, practices, programs and policies of the Company
and its affiliated companies in effect for the
Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer
executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During
the Employment Period, the Executive shall be entitled
to an office or offices of a size and with furnishings
and other appointments, and to exclusive personal
secretarial and other assistance, at least equal to the
most favorable of the foregoing provided to the
Executive by the Company and its affiliated companies
at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to
the Executive, as provided generally at any time
thereafter with respect to other peer executives of the
Company and its affiliated companies.
(viii) Vacation. During the Employment
Period, the Executive shall be entitled to paid
vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its
affiliated companies as in effect for the Executive at
any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the
Company and its affiliated companies.
5. Termination of Employment. (a) Death or
Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the
Employment Period. If the Company determines in good
faith that the Disability of the Executive has occurred
during the Employment Period (pursuant to the
definition of Disability set forth below), it may give
to the Executive written notice in accordance with
Section 12(b) of this Agreement of its intention to
terminate the Executive's employment. In such event,
the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of
such notice by the Executive (the "Disability Effective
Date"), provided that, within the 30 days after such
receipt, the Executive shall not have returned to full-
time performance of the Executive's duties. For
purposes of this Agreement, "Disability" shall mean the
absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180
consecutive business days as a result of incapacity due
to mental or physical illness which is determined to be
total and permanent by a physician selected by the
Company or its insurers and acceptable to the Executive
or the Executive's legal representative.
(b) Cause. The Company may terminate the
Executive's employment during the Employment Period for
Cause. For purposes of this Agreement, "Cause" shall
mean:
(i) the willful and continued failure of the
Executive to perform substantially the Executive's
duties with the Company or one of its affiliates
(other than any such failure resulting from
incapacity due to physical or mental illness),
after a written demand for substantial performance
is delivered to the Executive by the Board or the
Chief Executive Officer of the Company which
specifically identifies the manner in which the
Board or Chief Executive Officer believes that the
Executive has not substantially performed the
Executive's duties, or
(ii) the willful engaging by the Executive in
illegal conduct or gross misconduct which is
materially and demonstrably injurious to the
Company.
For purposes of this provision, no act or failure to
act, on the part of the Executive, shall be considered
"willful" unless it is done, or omitted to be done, by
the Executive in bad faith or without reasonable belief
that the Executive's action or omission was in the best
interests of the Company. Any act, or failure to act,
based upon authority given pursuant to a resolution
duly adopted by the Board or upon the instructions of
the Chief Executive Officer or a senior officer of the
Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or
omitted to be done, by the Executive in good faith and
in the best interests of the Company. The cessation of
employment of the Executive shall not be deemed to be
for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly
adopted by the affirmative vote of not less than three-
quarters of the entire membership of the Board at a
meeting of the Board called and held for such purpose
(after reasonable notice is provided to the Executive
and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding
that, in the good faith opinion of the Board, the
Executive is guilty of the conduct described in
subparagraph (i) or (ii) above, and specifying the
particulars thereof in detail.
(c) Good Reason. The Executive's employment
may be terminated by the Executive for Good Reason.
For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to the Executive of any
duties inconsistent in any respect with the
Executive's position (including status, offices,
titles and reporting requirements), authority, du
ties or responsibilities as contemplated by Section
4(a) of this Agreement, or any other action by the
Company which results in a diminution in such posi
tion, authority, duties or responsibilities,
excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in
bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by
the Executive;
(ii) any failure by the Company to comply
with any of the provisions of Section 4(b) of this
Agreement, other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith
and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive
to be based at any office or location other than as
provided in Section 4(a)(i)(B) hereof or the
Company's requiring the Executive to travel on
Company business to a substantially greater extent
than required immediately prior to the Effective
Date;
(iv) any purported termination by the
Company of the Executive's employment otherwise
than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply
with and satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by the Executive
shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a termination by the
Executive for any reason during the 30-day period
immediately following the first anniversary of the
Effective Date shall be deemed to be a termination for
Good Reason for all purposes of this Agreement.
(d) Notice of Termination. Any termination
by the Company for Cause, or by the Executive for Good
Reason, shall be communicated by Notice of Termination
to the other party hereto given in accordance with
Section 12(b) 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) to the
extent applicable, 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) if the Date of
Termination (as defined below) is other than the date
of receipt of such notice, specifies the termination
date (which date shall be not more than thirty days
after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes
to a showing of Good Reason or Cause shall not waive
any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or
the Company, respectively, from asserting such fact or
circumstance in enforcing the Executive's or the
Company's rights hereunder.
(e) Date of Termination. "Date of
Termination" means (i) if the Executive's employment is
terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the
Notice of Termination or any later date specified
therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for
Cause or Disability, the Date of Termination shall be
the date on which the Company notifies the Executive of
such termination and (iii) if the Executive's
employment is terminated by reason of death or
Disability, the Date of Termination shall be the date
of death of the Executive or the Disability Effective
Date, as the case may be.
6. Obligations of the Company upon
Termination. (a) Good Reason; Other Than for Cause,
Death or Disability. If, during the Employment Period,
the Company shall terminate the Executive's employment
other than for Cause or Disability or the Executive
shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in
a lump sum in cash within 30 days after the Date of
Termination the aggregate of the following amounts:
A. the sum of (1) the Executive's Annual
Base Salary through the Date of Termination to
the extent not theretofore paid, (2) the
product of (x) the higher of (I) the Target
Bonus and (II) the Annual Bonus paid or
payable, including any bonus or portion
thereof which has been earned but deferred
(and annualized for any fiscal year consisting
of less than twelve full months or during
which the Executive was employed for less than
twelve full months), for the most recently
completed fiscal year during the Employment
Period, if any (such higher amount being
referred to as the "Highest Annual Bonus") and
(y) a fraction, the numerator of which is the
number of days in the current fiscal year
through the Date of Termination, and the
denominator of which is 365 and (3) any
compensation previously deferred by the
Executive (together with any accrued interest
or earnings thereon) and any accrued vacation
pay, in each case to the extent not
theretofore paid (the sum of the amounts
described in clauses (1), (2), and (3) shall
be hereinafter referred to as the "Accrued
Obligations"); and
B. the amount equal to the product of
(1) three and (2) the sum of (x) the
Executive's Annual Base Salary and (y) the
Highest Annual Bonus; and
C. an amount equal to the excess of (a)
the actuarial equivalent of the benefit under
the Company's qualified defined benefit
retirement plan (the "Retirement Plan")
(utilizing actuarial assumptions no less
favorable to the Executive than those in
effect under the Company's Retirement Plan
immediately prior to the Effective Date), and
any excess or supplemental retirement plan in
which the Executive participates (together,
the "SERP") which the Executive would receive
if the Executive's employment continued for
three years after the Date of Termination
assuming for this purpose that all accrued
benefits are fully vested, and, assuming that
the Executive's compensation in each of the
three years is that required by Section
4(b)(i) and Section 4(b)(ii), over (b) the
actuarial equivalent of the Executive's actual
benefit (paid or payable), if any, under the
Retirement Plan and the SERP as of the Date of
Termination;
(ii) for three years after the Executive's
Date of Termination, or such longer period as may
be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall
continue benefits to the Executive and/or the
Executive's family at least equal to those which
would have been provided to them in accordance with
the plans, programs, practices and policies
described in Section 4(b)(iv) of this Agreement if
the Executive's employment had not been terminated
or, if more favorable to the Executive, as in
effect generally at any time thereafter with
respect to other peer executives of the Company and
its affiliated companies and their families,
provided, however, that if the Executive becomes
reemployed with another employer and is eligible to
receive medical or other welfare benefits under
another employer provided plan, the medical and
other welfare benefits described herein shall be
secondary to those provided under such other plan
during such applicable period of eligibility. For
purposes of determining eligibility (but not the
time of commencement of benefits) of the Executive
for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive
shall be considered to have remained employed until
three years after the Date of Termination and to
have retired on the last day of such period;
(iii) the Company shall, at its sole expense
as incurred, provide the Executive with
outplacement services the scope and provider of
which shall be selected by the Executive in his
sole discretion; and
(iv) to the extent not theretofore paid or
provided, the Company shall timely pay or provide
to the Executive any other amounts or benefits
required to be paid or provided or which the
Executive is eligible to receive under any plan,
program, policy or practice or contract or
agreement of the Company and its affiliated
companies (such other amounts and benefits shall be
hereinafter referred to as the "Other Benefits").
(b) Death. If the Executive's employment is
terminated by reason of the Executive's death during
the Employment Period, this Agreement shall terminate
without further obligations to the Executive's legal
representatives under this Agreement, other than for
payment of Accrued Obligations and the timely payment
or provision of Other Benefits. Accrued Obligations
shall be paid to the Executive's estate or beneficiary,
as applicable, in a lump sum in cash within 30 days of
the Date of Termination. With respect to the provision
of Other Benefits, the term Other Benefits as utilized
in this Section 6(b) shall include, without limitation,
and the Executive's estate and/or beneficiaries shall
be entitled to receive, benefits at least equal to the
most favorable benefits provided by the Company and
affiliated companies to the estates and beneficiaries
of peer executives of the Company and such affiliated
companies under such plans, programs, practices and
policies relating to death benefits, if any, as in
effect with respect to other peer executives and their
beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more
favorable to the Executive's estate and/or the
Executive's beneficiaries, as in effect on the date of
the Executive's death with respect to other peer
executives of the Company and its affiliated companies
and their beneficiaries.
(c) Disability. If the Executive's
employment is terminated by reason of the Executive's
Disability during the Employment Period, this Agreement
shall terminate without further obligations to the
Executive, other than for payment of Accrued
Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to
the Executive in a lump sum in cash within 30 days of
the Date of Termination. With respect to the provision
of Other Benefits, the term Other Benefits as utilized
in this Section 6(c) shall include, and the Executive
shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least
equal to the most favorable of those generally provided
by the Company and its affiliated companies to disabled
executives and/or their families in accordance with
such plans, programs, practices and policies relating
to disability, if any, as in effect generally with
respect to other peer executives and their families at
any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to
the Executive and/or the Executive's family, as in
effect at any time thereafter generally with respect to
other peer executives of the Company and its affiliated
companies and their families.
(d) Cause; Other than for Good Reason. If
the Executive's employment shall be terminated for
Cause during the Employment Period, this Agreement
shall terminate without further obligations to the
Executive other than the obligation to pay to the
Executive (x) his Annual Base Salary through the Date
of Termination, (y) the amount of any compensation
previously deferred by the Executive, and (z) Other
Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates
employment during the Employment Period, excluding a
termination for Good Reason, this Agreement shall
terminate without further obligations to the Executive,
other than for Accrued Obligations and the timely
payment or provision of Other Benefits. In such case,
all Accrued Obligations shall be paid to the Executive
in a lump sum in cash within 30 days of the Date of
Termination.
7. Non-exclusivity of Rights. Nothing in
this Agreement shall prevent or limit the Executive's
continuing or future participation in any plan,
program, policy or practice provided by the Company or
any of its affiliated companies and for which the
Executive may qualify, nor, subject to Section 12(f),
shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or
agreement with the Company or any of its affiliated
companies. Amounts which are vested benefits or which
the Executive is otherwise entitled to receive under
any plan, policy, practice or program of or any
contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such
plan, policy, practice or program or contract or
agreement except as explicitly modified by this
Agreement.
8. Full Settlement. The Company's obligation
to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall
not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action
which the Company may have against the Executive or
others. In no event shall the Executive be obligated
to seek other employment or take any other action by
way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement
and such amounts shall not be reduced whether or not
the Executive obtains other employment. The Company
agrees to pay as incurred, to the full extent permitted
by law, all legal fees and expenses which the Executive
may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company, the
Executive or others of the validity or enforceability
of, or liability under, any provision of this Agreement
or any guarantee of performance thereof (including as a
result of any contest by the Executive about the amount
of any payment pursuant to this Agreement), plus in
each case interest on any delayed payment at the
applicable Federal rate provided for in Section
7872(f)(2)(A) of the Internal Revenue Code of 1986, as
amended (the "Code").
9. Certain Additional Payments by the
Company.
(a) Anything in this Agreement to the
contrary notwithstanding and except as set forth below,
in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of
the Executive (whether paid or payable or distributed
or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard
to any additional payments required under this
Section 9) (a "Payment") would be subject to the excise
tax imposed by Section 4999 of the Code or any interest
or penalties are incurred by the Executive with respect
to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the
Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including
any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes
(and any interest and penalties imposed with respect
thereto) and Excise Tax imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-
Up Payment equal to the Excise Tax imposed upon the
Payments. Notwithstanding the foregoing provisions of
this Section 9(a), if it shall be determined that the
Executive is entitled to a Gross-Up Payment, but that
the Payments do not exceed 110% of the greatest amount
(the "Reduced Amount") that could be paid to the
Executive such that the receipt of Payments would not
give rise to any Excise Tax, then no Gross-Up Payment
shall be made to the Executive and the Payments, in the
aggregate, shall be reduced to the Reduced Amount.
(b) Subject to the provisions of
Section 9(c), all determinations required to be made
under this Section 9, including whether and when a
Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made by Arthur
Andersen & Co. or such other certified public
accounting firm as may be designated by the Executive
(the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the
Executive within 15 business days of the receipt of
notice from the Executive that there has been a
Payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is
serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the
Executive shall appoint another nationally recognized
accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely
by the Company. Any Gross-Up Payment, as determined
pursuant to this Section 9, shall be paid by the
Company to the Executive within five days of the
receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the
Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with
the calculations required to be made hereunder. In the
event that the Company exhausts its remedies pursuant
to Section 9(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to
or for the benefit of the Executive.
(c) The Executive shall notify the Company in
writing of any claim by the Internal Revenue Service
that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification
shall be given as soon as practicable but no later than
ten business days after the Executive is informed in
writing of such claim and shall apprise the Company of
the nature of such claim and the date on which such
claim is requested to be paid. The Executive shall not
pay such claim prior to the expiration of the 30-day
period following the date on which it gives such notice
to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such
claim is due). If the Company notifies the Executive
in writing prior to the expiration of such period that
it desires to contest such claim, the Executive shall:
(i) give the Company any information
reasonably requested by the Company relating to
such claim,
(ii) take such action in connection with
contesting such claim as the Company shall
reasonably request in writing from time to time,
including, without limitation, accepting legal
representation with respect to such claim by an
attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith
in order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional
interest and penalties) incurred in connection with
such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with
respect thereto) imposed as a result of such
representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this
Section 9(c), the Company shall control all proceedings
taken in connection with such contest and, at its sole
option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at
its sole option, either direct the Executive to pay the
tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees 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 Executive to pay such claim and
sue for a refund, the Company shall advance the amount
of such payment to the Executive, on an interest-free
basis and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with
respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to
such advance; and further provided that any extension
of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to be
due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall
be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the Executive
shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of
an amount advanced by the Company pursuant to
Section 9(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive
shall (subject to the Company's complying with the
requirements of Section 9(c)) promptly pay to the
Company the amount of such refund (together with any
interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant
to Section 9(c), a determination is made that the
Executive shall not be entitled to any refund with
respect to such claim and the Company does not notify
the Executive in writing of its intent to contest such
denial of refund prior to the expiration of 30 days
after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the
amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be
paid.
10. Confidential Information. The Executive
shall hold in a fiduciary capacity for the benefit of
the Company all secret or confidential information,
knowledge or data relating to the Company or any of its
affiliated companies, and their respective businesses,
which shall have been obtained by the Executive during
the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive
or representatives of the Executive in violation of
this Agreement). After termination of the Executive's
employment with the Company, the Executive shall not,
without the prior written consent of the Company or as
may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge
or data to anyone other than the Company and those
designated by it. In no event shall an asserted
violation of the provisions of this Section 10
constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this
Agreement.
11. Successors. (a) This Agreement is
personal to the Executive and without the prior written
consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent
and distribution. This Agreement shall inure to the
benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit
of and be binding upon the Company and its successors
and assigns.
(c) The Company will require any successor
(whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the
same manner and to the same extent that the Company
would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid
which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
12. Miscellaneous. (a) This Agreement shall
be governed by and construed in accordance with the
laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this
Agreement are not part of the provisions hereof and
shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written
agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications
hereunder shall be in writing and shall be given by
hand delivery to the other party or by registered or
certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
L. Dale Crandall
105 King Avenue
Piedmont, CA 94610
If to the Company:
APL Limited
1111 Broadway
Oakland, CA 94607
Attention: General Counsel
or to such other address as either party shall have
furnished to the other in writing in accordance
herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the
validity or enforceability of any other provision of
this Agreement.
(d) The Company may withhold from any amounts
payable under this Agreement such Federal, state, local
or foreign taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure
to insist upon strict compliance with any provision of
this Agreement or the failure to assert any right the
Executive or the Company may have hereunder, including,
without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to
Section 5(c)(i)-(v) of this Agreement, shall not be
deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.
(f) The Executive and the Company acknowledge
that, except as may otherwise be provided under any
other written agreement between the Executive and the
Company, the employment of the Executive by the Company
is "at will" and, subject to Section 1(a) hereof, prior
to the Effective Date, the Executive's employment
and/or this Agreement may be terminated by either the
Executive or the Company at any time prior to the
Effective Date, in which case the Executive shall have
no further rights under this Agreement. From and after
the Effective Date this Agreement shall supersede any
other agreement between the parties with respect to the
subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto
set the Executive's hand and, pursuant to the
authorization from its Board of Directors, the Company
has caused these presents to be executed in its name on
its behalf, all as of the day and year first above
written.
/s/ L. Dale Crandall
L. Dale Crandall
APL LIMITED
By: /s/ Timothy J. Rhein
EMPLOYMENT AGREEMENT
AGREEMENT by and between APL Limited, a
Delaware corporation (the "Company"), and Pek Yang Goh
(the "Executive"), dated as of the 28th day of January,
1997.
The Board of Directors of the Company (the
"Board"), has determined that it is in the best
interests of the Company and its shareholders to assure
that the Company will have the continued dedication of
the Executive, notwithstanding the possibility, threat
or occurrence of a Change of Control (as defined below)
of the Company. The Board believes it is imperative to
diminish the inevitable distraction of the Executive by
virtue of the personal uncertainties and risks created
by a pending or threatened Change of Control and to
encourage the Executive's full attention and dedication
to the Company currently and in the event of any
threatened or pending Change of Control, and to provide
the Executive with compensation and benefits
arrangements upon a Change of Control which ensure that
the compensation and benefits expectations of the
Executive will be satisfied and which are competitive
with those of other corporations. Therefore, in order
to accomplish these objectives, the Board has caused
the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS
FOLLOWS:
1. Certain Definitions. (a) The "Effective
Date" shall mean the first date during the Change of
Control Period (as defined in Section 1(b)) on which a
Change of Control (as defined in Section 2) occurs.
Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if
the Executive's employment with the Company is
terminated prior to the date on which the Change of
Control occurs, and if it is reasonably demonstrated by
the Executive that such termination of employment (i)
was at the request of a third party who has taken steps
reasonably calculated to effect a Change of Control or
(ii) otherwise arose in connection with or anticipation
of a Change of 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.
(b) The "Change of Control Period" shall mean
the period commencing on the date hereof and ending on
the third anniversary of the date hereof; provided,
however, that commencing on the date one year after the
date hereof, and on each annual anniversary of such
date (such date and each annual anniversary thereof
shall be hereinafter referred to as the "Renewal
Date"), unless previously terminated, the Change of
Control Period shall be automatically extended so as to
terminate three years from such Renewal Date, unless at
least 60 days prior to the Renewal Date the Company
shall give notice to the Executive that the Change of
Control Period shall not be so extended.
2. Change of Control. For the purpose of
this Agreement, a "Change of Control" shall mean:
(a) The acquisition by any individual, entity
or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock
of the Company (the "Outstanding Company Common Stock")
or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled
to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided,
however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change of
Control: (i) any acquisition of such shares by the
Company, (ii) any acquisition of such shares by any
employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled
by the Company or (iii) any acquisition of such shares
by any corporation pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of subsection
(c) of this Section 2; or
(b) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for
any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming
a director subsequent to the date hereof whose
election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent
Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or
threatened election contest 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; or
(c) Consummation of a reorganization, merger
or consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a
"Business Combination"), in each case, unless,
following such Business Combination, (i) all or
substantially all of the individuals and entities who
were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then
outstanding shares of common stock and the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of
directors, as the case may be, of the corporation
resulting from such Business Combination (including,
without limitation, a corporation which as a result of
such transaction owns the Company or all or
substantially all of the Company's assets either
directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be, (ii) no
Person (excluding any corporation resulting from such
Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation
resulting from such Business Combination) beneficially
owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common
stock of the corporation resulting from such Business
Combination or the combined voting power of the then
outstanding voting securities of such corporation
except to the extent that such ownership existed prior
to the Business Combination and (iii) at least a
majority of the members of the board of directors of
the corporation 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
Company of a complete liquidation or dissolution of the
Company.
3. Employment Period. The Company hereby
agrees to continue the Executive in its employ, and the
Executive hereby agrees to remain in the employ of the
Company subject to the terms and conditions of this
Agreement, for the period commencing on the Effective
Date and ending on the third anniversary of such date
(the "Employment Period").
4. Terms of Employment. (a) Position and
Duties. (i) During the Employment Period, (A) the
Executive's position (including status, offices, titles
and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all
material respects with the most significant of those
held, exercised and assigned at any time during the 120-
day period immediately preceding the Effective Date and
(B) the Executive's services shall be performed at the
location where the Executive was employed immediately
preceding the Effective Date or any office or location
less than 35 miles from such location.
(ii) During the Employment Period, and
excluding any periods of vacation and sick leave to
which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal
business hours to the business and affairs of the
Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder,
to use the Executive's reasonable best efforts to
perform faithfully and efficiently such
responsibilities. During the Employment Period it
shall not be a violation of this Agreement for the
Executive to (A) serve on corporate, civic or
charitable boards or committees, (B) deliver lectures,
fulfill speaking engagements or teach at educational
institutions and (C) manage personal investments, so
long as such activities do not significantly interfere
with the performance of the Executive's
responsibilities as an employee of the Company in
accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such
activities have been conducted by the Executive prior
to the Effective Date, the continued conduct of such
activities (or the conduct of activities similar in
nature and scope thereto) subsequent to the Effective
Date shall not thereafter be deemed to interfere with
the performance of the Executive's responsibilities to
the Company.
(b) Compensation. (i) Base Salary. During
the Employment Period, the Executive shall receive an
annual base salary ("Annual Base Salary"), which shall
be paid at a monthly rate, at least equal to twelve
times the highest monthly base salary paid or payable,
including any base salary which has been earned but
deferred, to the Executive by the Company and its
affiliated companies in respect of the twelve-month
period immediately preceding the month in which the
Effective Date occurs. During the Employment Period,
the Annual Base Salary shall be reviewed no more than
12 months after the last salary increase awarded to the
Executive prior to the Effective Date and thereafter at
least annually. Any increase in Annual Base Salary
shall not serve to limit or reduce any other obligation
to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and
the term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so in
creased. As used in this Agreement, the term
"affiliated companies" shall include any company
controlled by, controlling or under common control with
the Company.
(ii) Annual Bonus. In addition to
Annual Base Salary, the Executive shall be awarded, for
each fiscal year ending during the Employment Period,
an annual bonus (the "Annual Bonus") in cash at least
equal to the Executive's target bonus under the
Company's annual bonus program, or any comparable bonus
under any predecessor or successor plan for the year
prior to the year in which the Effective Date occurs
(the "Target Bonus"). Each such Annual Bonus shall be
paid no later than the end of the third month of the
fiscal year next following the fiscal year for which
the Annual Bonus is awarded, unless the Executive shall
elect to defer the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement
Plans. During the Employment Period, the Executive
shall be entitled to participate in all incentive,
savings and retirement plans, practices, policies and
programs applicable generally to other peer executives
of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and
programs provide the Executive with incentive
opportunities (measured with respect to both regular
and special incentive opportunities, to the extent, if
any, that such distinction is applicable), savings
opportunities and retirement benefit opportunities, in
each case, less favorable, in the aggregate, than the
most favorable of those provided by the Company and its
affiliated companies for the Executive under such
plans, practices, policies and programs as in effect at
any time during the 120-day period immediately
preceding the Effective Date or if more favorable to
the Executive, those provided generally at any time
after the Effective Date to other peer executives of
the Company and its affiliated companies.
(iv) Welfare Benefit Plans. During the
Employment Period, the Executive and/or the Executive's
family, as the case may be, shall be eligible for
participation in and shall receive all benefits under
welfare benefit plans, practices, policies and programs
provided by the Company and its affiliated companies
(including, without limitation, medical, prescription,
dental, disability, employee life, group life,
accidental death and travel accident insurance plans
and programs) to the extent applicable generally to
other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices,
policies and programs provide the Executive with
benefits which are less favorable, in the aggregate,
than the most favorable of such plans, practices,
policies and programs in effect for the Executive at
any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to
the Executive, those provided generally at any time
after the Effective Date to other peer executives of
the Company and its affiliated companies.
(v) Expenses. During the Employment
Period, the Executive shall be entitled to receive
prompt reimbursement for all reasonable expenses
incurred by the Executive in accordance with the most
favorable policies, practices and procedures of the
Company and its affiliated companies in effect for the
Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer
executives of the Company and its affiliated companies.
(vi) Fringe Benefits. During the
Employment Period, the Executive shall be entitled to
fringe benefits, including, without limitation, tax and
financial planning services, payment of club dues, and,
if applicable, use of an automobile and payment of
related expenses, in accordance with the most favorable
plans, practices, programs and policies of the Company
and its affiliated companies in effect for the
Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer
executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During
the Employment Period, the Executive shall be entitled
to an office or offices of a size and with furnishings
and other appointments, and to exclusive personal
secretarial and other assistance, at least equal to the
most favorable of the foregoing provided to the
Executive by the Company and its affiliated companies
at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to
the Executive, as provided generally at any time
thereafter with respect to other peer executives of the
Company and its affiliated companies.
(viii) Vacation. During the Employment
Period, the Executive shall be entitled to paid
vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its
affiliated companies as in effect for the Executive at
any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the
Company and its affiliated companies.
5. Termination of Employment. (a) Death or
Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the
Employment Period. If the Company determines in good
faith that the Disability of the Executive has occurred
during the Employment Period (pursuant to the
definition of Disability set forth below), it may give
to the Executive written notice in accordance with
Section 12(b) of this Agreement of its intention to
terminate the Executive's employment. In such event,
the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of
such notice by the Executive (the "Disability Effective
Date"), provided that, within the 30 days after such
receipt, the Executive shall not have returned to full-
time performance of the Executive's duties. For
purposes of this Agreement, "Disability" shall mean the
absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180
consecutive business days as a result of incapacity due
to mental or physical illness which is determined to be
total and permanent by a physician selected by the
Company or its insurers and acceptable to the Executive
or the Executive's legal representative.
(b) Cause. The Company may terminate the
Executive's employment during the Employment Period for
Cause. For purposes of this Agreement, "Cause" shall
mean:
(i) the willful and continued failure of the
Executive to perform substantially the Executive's
duties with the Company or one of its affiliates
(other than any such failure resulting from
incapacity due to physical or mental illness),
after a written demand for substantial performance
is delivered to the Executive by the Board or the
Chief Executive Officer of the Company which
specifically identifies the manner in which the
Board or Chief Executive Officer believes that the
Executive has not substantially performed the
Executive's duties, or
(ii) the willful engaging by the Executive in
illegal conduct or gross misconduct which is
materially and demonstrably injurious to the
Company.
For purposes of this provision, no act or failure to
act, on the part of the Executive, shall be considered
"willful" unless it is done, or omitted to be done, by
the Executive in bad faith or without reasonable belief
that the Executive's action or omission was in the best
interests of the Company. Any act, or failure to act,
based upon authority given pursuant to a resolution
duly adopted by the Board or upon the instructions of
the Chief Executive Officer or a senior officer of the
Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or
omitted to be done, by the Executive in good faith and
in the best interests of the Company. The cessation of
employment of the Executive shall not be deemed to be
for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly
adopted by the affirmative vote of not less than three-
quarters of the entire membership of the Board at a
meeting of the Board called and held for such purpose
(after reasonable notice is provided to the Executive
and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding
that, in the good faith opinion of the Board, the
Executive is guilty of the conduct described in
subparagraph (i) or (ii) above, and specifying the
particulars thereof in detail.
(c) Good Reason. The Executive's employment
may be terminated by the Executive for Good Reason.
For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to the Executive of any
duties inconsistent in any respect with the
Executive's position (including status, offices,
titles and reporting requirements), authority,
duties or responsibilities as contemplated by
Section 4(a) of this Agreement, or any other action
by the Company which results in a diminution in
such position, authority, duties or
responsibilities, excluding for this purpose an
isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the
Company promptly after receipt of notice thereof
given by the Executive;
(ii) any failure by the Company to comply
with any of the provisions of Section 4(b) of this
Agreement, other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith
and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive
to be based at any office or location other than as
provided in Section 4(a)(i)(B) hereof or the
Company's requiring the Executive to travel on
Company business to a substantially greater extent
than required immediately prior to the Effective
Date;
(iv) any purported termination by the
Company of the Executive's employment otherwise
than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply
with and satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by the Executive
shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a termination by the
Executive for any reason during the 30-day period
immediately following the first anniversary of the
Effective Date shall be deemed to be a termination for
Good Reason for all purposes of this Agreement.
(d) Notice of Termination. Any termination
by the Company for Cause, or by the Executive for Good
Reason, shall be communicated by Notice of Termination
to the other party hereto given in accordance with
Section 12(b) 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) to the
extent applicable, 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) if the Date of
Termination (as defined below) is other than the date
of receipt of such notice, specifies the termination
date (which date shall be not more than thirty days
after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes
to a showing of Good Reason or Cause shall not waive
any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or
the Company, respectively, from asserting such fact or
circumstance in enforcing the Executive's or the
Company's rights hereunder.
(e) Date of Termination. "Date of
Termination" means (i) if the Executive's employment is
terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the
Notice of Termination or any later date specified
therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for
Cause or Disability, the Date of Termination shall be
the date on which the Company notifies the Executive of
such termination and (iii) if the Executive's
employment is terminated by reason of death or
Disability, the Date of Termination shall be the date
of death of the Executive or the Disability Effective
Date, as the case may be.
6. Obligations of the Company upon
Termination. (a) Good Reason; Other Than for Cause,
Death or Disability. If, during the Employment Period,
the Company shall terminate the Executive's employment
other than for Cause or Disability or the Executive
shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in
a lump sum in cash within 30 days after the Date of
Termination the aggregate of the following amounts:
A. the sum of (1) the Executive's Annual
Base Salary through the Date of Termination to
the extent not theretofore paid, (2) the
product of (x) the higher of (I) the Target
Bonus and (II) the Annual Bonus paid or
payable, including any bonus or portion
thereof which has been earned but deferred
(and annualized for any fiscal year consisting
of less than twelve full months or during
which the Executive was employed for less than
twelve full months), for the most recently
completed fiscal year during the Employment
Period, if any (such higher amount being
referred to as the "Highest Annual Bonus") and
(y) a fraction, the numerator of which is the
number of days in the current fiscal year
through the Date of Termination, and the
denominator of which is 365 and (3) any
compensation previously deferred by the
Executive (together with any accrued interest
or earnings thereon) and any accrued vacation
pay, in each case to the extent not
theretofore paid (the sum of the amounts
described in clauses (1), (2), and (3) shall
be hereinafter referred to as the "Accrued
Obligations"); and
B. the amount equal to the product of
(1) three and (2) the sum of (x) the
Executive's Annual Base Salary and (y) the
Highest Annual Bonus; and
C. an amount equal to the excess of (a)
the actuarial equivalent of the benefit under
the Company's qualified defined benefit
retirement plan (the "Retirement Plan")
(utilizing actuarial assumptions no less
favorable to the Executive than those in
effect under the Company's Retirement Plan
immediately prior to the Effective Date), and
any excess or supplemental retirement plan in
which the Executive participates (together,
the "SERP") which the Executive would receive
if the Executive's employment continued for
three years after the Date of Termination
assuming for this purpose that all accrued
benefits are fully vested, and, assuming that
the Executive's compensation in each of the
three years is that required by Section
4(b)(i) and Section 4(b)(ii), over (b) the
actuarial equivalent of the Executive's actual
benefit (paid or payable), if any, under the
Retirement Plan and the SERP as of the Date of
Termination;
(ii) for three years after the Executive's
Date of Termination, or such longer period as may
be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall
continue benefits to the Executive and/or the
Executive's family at least equal to those which
would have been provided to them in accordance with
the plans, programs, practices and policies
described in Section 4(b)(iv) of this Agreement if
the Executive's employment had not been terminated
or, if more favorable to the Executive, as in
effect generally at any time thereafter with
respect to other peer executives of the Company and
its affiliated companies and their families,
provided, however, that if the Executive becomes
reemployed with another employer and is eligible to
receive medical or other welfare benefits under
another employer provided plan, the medical and
other welfare benefits described herein shall be
secondary to those provided under such other plan
during such applicable period of eligibility. For
purposes of determining eligibility (but not the
time of commencement of benefits) of the Executive
for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive
shall be considered to have remained employed until
three years after the Date of Termination and to
have retired on the last day of such period;
(iii) the Company shall, at its sole expense
as incurred, provide the Executive with
outplacement services the scope and provider of
which shall be selected by the Executive in his
sole discretion; and
(iv) to the extent not theretofore paid or
provided, the Company shall timely pay or provide
to the Executive any other amounts or benefits
required to be paid or provided or which the
Executive is eligible to receive under any plan,
program, policy or practice or contract or
agreement of the Company and its affiliated
companies (such other amounts and benefits shall be
hereinafter referred to as the "Other Benefits").
(b) Death. If the Executive's employment is
terminated by reason of the Executive's death during
the Employment Period, this Agreement shall terminate
without further obligations to the Executive's legal
representatives under this Agreement, other than for
payment of Accrued Obligations and the timely payment
or provision of Other Benefits. Accrued Obligations
shall be paid to the Executive's estate or beneficiary,
as applicable, in a lump sum in cash within 30 days of
the Date of Termination. With respect to the provision
of Other Benefits, the term Other Benefits as utilized
in this Section 6(b) shall include, without limitation,
and the Executive's estate and/or beneficiaries shall
be entitled to receive, benefits at least equal to the
most favorable benefits provided by the Company and
affiliated companies to the estates and beneficiaries
of peer executives of the Company and such affiliated
companies under such plans, programs, practices and
policies relating to death benefits, if any, as in
effect with respect to other peer executives and their
beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more
favorable to the Executive's estate and/or the
Executive's beneficiaries, as in effect on the date of
the Executive's death with respect to other peer
executives of the Company and its affiliated companies
and their beneficiaries.
(c) Disability. If the Executive's
employment is terminated by reason of the Executive's
Disability during the Employment Period, this Agreement
shall terminate without further obligations to the
Executive, other than for payment of Accrued
Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to
the Executive in a lump sum in cash within 30 days of
the Date of Termination. With respect to the provision
of Other Benefits, the term Other Benefits as utilized
in this Section 6(c) shall include, and the Executive
shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least
equal to the most favorable of those generally provided
by the Company and its affiliated companies to disabled
executives and/or their families in accordance with
such plans, programs, practices and policies relating
to disability, if any, as in effect generally with
respect to other peer executives and their families at
any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to
the Executive and/or the Executive's family, as in
effect at any time thereafter generally with respect to
other peer executives of the Company and its affiliated
companies and their families.
(d) Cause; Other than for Good Reason. If
the Executive's employment shall be terminated for
Cause during the Employment Period, this Agreement
shall terminate without further obligations to the
Executive other than the obligation to pay to the
Executive (x) his Annual Base Salary through the Date
of Termination, (y) the amount of any compensation
previously deferred by the Executive, and (z) Other
Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates
employment during the Employment Period, excluding a
termination for Good Reason, this Agreement shall
terminate without further obligations to the Executive,
other than for Accrued Obligations and the timely
payment or provision of Other Benefits. In such case,
all Accrued Obligations shall be paid to the Executive
in a lump sum in cash within 30 days of the Date of
Termination.
7. Non-exclusivity of Rights. Nothing in
this Agreement shall prevent or limit the Executive's
continuing or future participation in any plan,
program, policy or practice provided by the Company or
any of its affiliated companies and for which the
Executive may qualify, nor, subject to Section 12(f),
shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or
agreement with the Company or any of its affiliated
companies. Amounts which are vested benefits or which
the Executive is otherwise entitled to receive under
any plan, policy, practice or program of or any
contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such
plan, policy, practice or program or contract or
agreement except as explicitly modified by this
Agreement.
8. Full Settlement. The Company's obligation
to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall
not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action
which the Company may have against the Executive or
others. In no event shall the Executive be obligated
to seek other employment or take any other action by
way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement
and such amounts shall not be reduced whether or not
the Executive obtains other employment. The Company
agrees to pay as incurred, to the full extent permitted
by law, all legal fees and expenses which the Executive
may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company, the
Executive or others of the validity or enforceability
of, or liability under, any provision of this Agreement
or any guarantee of performance thereof (including as a
result of any contest by the Executive about the amount
of any payment pursuant to this Agreement), plus in
each case interest on any delayed payment at the
applicable Federal rate provided for in Section
7872(f)(2)(A) of the Internal Revenue Code of 1986, as
amended (the "Code").
9. Certain Additional Payments by the
Company.
(a) Anything in this Agreement to the
contrary notwithstanding and except as set forth below,
in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of
the Executive (whether paid or payable or distributed
or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard
to any additional payments required under this
Section 9) (a "Payment") would be subject to the excise
tax imposed by Section 4999 of the Code or any interest
or penalties are incurred by the Executive with respect
to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the
Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including
any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes
(and any interest and penalties imposed with respect
thereto) and Excise Tax imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-
Up Payment equal to the Excise Tax imposed upon the
Payments. Notwithstanding the foregoing provisions of
this Section 9(a), if it shall be determined that the
Executive is entitled to a Gross-Up Payment, but that
the Payments do not exceed 110% of the greatest amount
(the "Reduced Amount") that could be paid to the
Executive such that the receipt of Payments would not
give rise to any Excise Tax, then no Gross-Up Payment
shall be made to the Executive and the Payments, in the
aggregate, shall be reduced to the Reduced Amount.
(b) Subject to the provisions of
Section 9(c), all determinations required to be made
under this Section 9, including whether and when a
Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made by Arthur
Andersen & Co. or such other certified public
accounting firm as may be designated by the Executive
(the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the
Executive within 15 business days of the receipt of
notice from the Executive that there has been a
Payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is
serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the
Executive shall appoint another nationally recognized
accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely
by the Company. Any Gross-Up Payment, as determined
pursuant to this Section 9, shall be paid by the
Company to the Executive within five days of the
receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the
Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with
the calculations required to be made hereunder. In the
event that the Company exhausts its remedies pursuant
to Section 9(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to
or for the benefit of the Executive.
(c) The Executive shall notify the Company in
writing of any claim by the Internal Revenue Service
that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification
shall be given as soon as practicable but no later than
ten business days after the Executive is informed in
writing of such claim and shall apprise the Company of
the nature of such claim and the date on which such
claim is requested to be paid. The Executive shall not
pay such claim prior to the expiration of the 30-day
period following the date on which it gives such notice
to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such
claim is due). If the Company notifies the Executive
in writing prior to the expiration of such period that
it desires to contest such claim, the Executive shall:
(i) give the Company any information
reasonably requested by the Company relating to
such claim,
(ii) take such action in connection with
contesting such claim as the Company shall
reasonably request in writing from time to time,
including, without limitation, accepting legal
representation with respect to such claim by an
attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith
in order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional
interest and penalties) incurred in connection with
such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with
respect thereto) imposed as a result of such
representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this
Section 9(c), the Company shall control all proceedings
taken in connection with such contest and, at its sole
option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at
its sole option, either direct the Executive to pay the
tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees 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 Executive to pay such claim and
sue for a refund, the Company shall advance the amount
of such payment to the Executive, on an interest-free
basis and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with
respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to
such advance; and further provided that any extension
of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to be
due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall
be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the Executive
shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of
an amount advanced by the Company pursuant to
Section 9(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive
shall (subject to the Company's complying with the
requirements of Section 9(c)) promptly pay to the
Company the amount of such refund (together with any
interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant
to Section 9(c), a determination is made that the
Executive shall not be entitled to any refund with
respect to such claim and the Company does not notify
the Executive in writing of its intent to contest such
denial of refund prior to the expiration of 30 days
after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the
amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be
paid.
10. Confidential Information. The Executive
shall hold in a fiduciary capacity for the benefit of
the Company all secret or confidential information,
knowledge or data relating to the Company or any of its
affiliated companies, and their respective businesses,
which shall have been obtained by the Executive during
the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive
or representatives of the Executive in violation of
this Agreement). After termination of the Executive's
employment with the Company, the Executive shall not,
without the prior written consent of the Company or as
may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge
or data to anyone other than the Company and those
designated by it. In no event shall an asserted
violation of the provisions of this Section 10
constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this
Agreement.
11. Successors. (a) This Agreement is
personal to the Executive and without the prior written
consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent
and distribution. This Agreement shall inure to the
benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit
of and be binding upon the Company and its successors
and assigns.
(c) The Company will require any successor
(whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the
same manner and to the same extent that the Company
would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid
which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
12. Miscellaneous. (a) This Agreement shall
be governed by and construed in accordance with the
laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this
Agreement are not part of the provisions hereof and
shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written
agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications
hereunder shall be in writing and shall be given by
hand delivery to the other party or by registered or
certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
Pek Yang Goh
Flat F
9th Floor
Grenville House
1-3 Magazine Gap Road
Hong Kong
If to the Company:
APL Limited
1111 Broadway
Oakland, CA 94607
Attention: General Counsel
or to such other address as either party shall have
furnished to the other in writing in accordance
herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the
validity or enforceability of any other provision of
this Agreement.
(d) The Company may withhold from any amounts
payable under this Agreement such Federal, state, local
or foreign taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure
to insist upon strict compliance with any provision of
this Agreement or the failure to assert any right the
Executive or the Company may have hereunder, including,
without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to
Section 5(c)(i)-(v) of this Agreement, shall not be
deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.
(f) The Executive and the Company acknowledge
that, except as may otherwise be provided under any
other written agreement between the Executive and the
Company, the employment of the Executive by the Company
is "at will" and, subject to Section 1(a) hereof, prior
to the Effective Date, the Executive's employment
and/or this Agreement may be terminated by either the
Executive or the Company at any time prior to the
Effective Date, in which case the Executive shall have
no further rights under this Agreement. From and after
the Effective Date this Agreement shall supersede any
other agreement between the parties with respect to the
subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto
set the Executive's hand and, pursuant to the
authorization from its Board of Directors, the Company
has caused these presents to be executed in its name on
its behalf, all as of the day and year first above
written.
/s/ Pek Yang Goh
Pek Yang Goh
APL LIMITED
By: Timothy J. Rhein
EMPLOYMENT AGREEMENT
AGREEMENT by and between APL Limited, a
Delaware corporation (the "Company"), and Joji
Hayashi(the "Executive"), dated as of the 28th day of
January, 1997.
The Board of Directors of the Company (the
"Board"), has determined that it is in the best
interests of the Company and its shareholders to assure
that the Company will have the continued dedication of
the Executive, notwithstanding the possibility, threat
or occurrence of a Change of Control (as defined below)
of the Company. The Board believes it is imperative to
diminish the inevitable distraction of the Executive by
virtue of the personal uncertainties and risks created
by a pending or threatened Change of Control and to
encourage the Executive's full attention and dedication
to the Company currently and in the event of any
threatened or pending Change of Control, and to provide
the Executive with compensation and benefits
arrangements upon a Change of Control which ensure that
the compensation and benefits expectations of the
Executive will be satisfied and which are competitive
with those of other corporations. Therefore, in order
to accomplish these objectives, the Board has caused
the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS
FOLLOWS:
1. Certain Definitions. (a) The "Effective
Date" shall mean the first date during the Change of
Control Period (as defined in Section 1(b)) on which a
Change of Control (as defined in Section 2) occurs.
Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if
the Executive's employment with the Company is
terminated prior to the date on which the Change of
Control occurs, and if it is reasonably demonstrated by
the Executive that such termination of employment was
required by a third party who has taken steps
reasonably calculated to effect a Change of 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.
(b) The "Change of Control Period" shall mean
the period commencing on the date hereof and ending on
July 1, 1998.
2. Change of Control. For the purpose of
this Agreement, a "Change of Control" shall mean:
(a) The acquisition by any individual, entity
or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock
of the Company (the "Outstanding Company Common Stock")
or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled
to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided,
however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change of
Control: (i) any acquisition of such shares by the
Company, (ii) any acquisition of such shares by any
employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled
by the Company or (iii) any acquisition of such shares
by any corporation pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of subsection
(c) of this Section 2; or
(b) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for
any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming
a director subsequent to the date hereof whose
election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent
Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or
threatened election contest 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; or
(c) Consummation of a reorganization, merger
or consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a
"Business Combination"), in each case, unless,
following such Business Combination, (i) all or
substantially all of the individuals and entities who
were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then
outstanding shares of common stock and the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of
directors, as the case may be, of the corporation
resulting from such Business Combination (including,
without limitation, a corporation which as a result of
such transaction owns the Company or all or
substantially all of the Company's assets either
directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be, (ii) no
Person (excluding any corporation resulting from such
Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation
resulting from such Business Combination) beneficially
owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common
stock of the corporation resulting from such Business
Combination or the combined voting power of the then
outstanding voting securities of such corporation
except to the extent that such ownership existed prior
to the Business Combination and (iii) at least a
majority of the members of the board of directors of
the corporation 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
Company of a complete liquidation or dissolution of the
Company.
3. Employment Period. The Company hereby
agrees to continue the Executive in its employ, and the
Executive hereby agrees to remain in the employ of the
Company subject to the terms and conditions of this
Agreement, for the period commencing on the Effective
Date and ending on July 1, 1998 (the "Employment
Period").
4. Terms of Employment. (a) Position and
Duties. (i) During the Employment Period, (A) the
Executive's position (including status, offices, titles
and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all
material respects with the most significant of those
held, exercised and assigned at any time during the 120-
day period immediately preceding the Effective Date and
(B) the Executive's services shall be performed at the
location where the Executive was employed immediately
preceding the Effective Date or any office or location
less than 35 miles from such location.
(ii) During the Employment Period, and
excluding any periods of vacation and sick leave to
which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal
business hours to the business and affairs of the
Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder,
to use the Executive's reasonable best efforts to
perform faithfully and efficiently such
responsibilities. During the Employment Period it
shall not be a violation of this Agreement for the
Executive to (A) serve on corporate, civic or
charitable boards or committees, (B) deliver lectures,
fulfill speaking engagements or teach at educational
institutions and (C) manage personal investments, so
long as such activities do not significantly interfere
with the performance of the Executive's
responsibilities as an employee of the Company in
accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such
activities have been conducted by the Executive prior
to the Effective Date, the continued conduct of such
activities (or the conduct of activities similar in
nature and scope thereto) subsequent to the Effective
Date shall not thereafter be deemed to interfere with
the performance of the Executive's responsibilities to
the Company.
(b) Compensation. (i) Base Salary. During
the Employment Period, the Executive shall receive an
annual base salary ("Annual Base Salary"), which shall
be paid at a monthly rate, at least equal to twelve
times the highest monthly base salary paid or payable,
including any base salary which has been earned but
deferred, to the Executive by the Company and its
affiliated companies in respect of the twelve-month
period immediately preceding the month in which the
Effective Date occurs. During the Employment Period,
the Annual Base Salary shall be reviewed no more than
12 months after the last salary increase awarded to the
Executive prior to the Effective Date and thereafter at
least annually. Any increase in Annual Base Salary
shall not serve to limit or reduce any other obligation
to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and
the term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so in
creased. As used in this Agreement, the term
"affiliated companies" shall include any company
controlled by, controlling or under common control with
the Company.
(ii) Annual Bonus. In addition to
Annual Base Salary, the Executive shall be awarded, for
each fiscal year ending during the Employment Period,
an annual bonus (the "Annual Bonus") in cash at least
equal to the Executive's target bonus under the
Company's annual bonus program, or any comparable bonus
under any predecessor or successor plan for the year
prior to the year in which the Effective Date occurs
(the "Target Bonus"). Each such Annual Bonus shall be
paid no later than the end of the third month of the
fiscal year next following the fiscal year for which
the Annual Bonus is awarded, unless the Executive shall
elect to defer the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement
Plans. During the Employment Period, the Executive
shall be entitled to participate in all incentive,
savings and retirement plans, practices, policies and
programs applicable generally to other peer executives
of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and
programs provide the Executive with incentive
opportunities (measured with respect to both regular
and special incentive opportunities, to the extent, if
any, that such distinction is applicable), savings
opportunities and retirement benefit opportunities, in
each case, less favorable, in the aggregate, than the
most favorable of those provided by the Company and its
affiliated companies for the Executive under such
plans, practices, policies and programs as in effect at
any time during the 120-day period immediately
preceding the Effective Date or if more favorable to
the Executive, those provided generally at any time
after the Effective Date to other peer executives of
the Company and its affiliated companies.
(iv) Welfare Benefit Plans. During the
Employment Period, the Executive and/or the Executive's
family, as the case may be, shall be eligible for
participation in and shall receive all benefits under
welfare benefit plans, practices, policies and programs
provided by the Company and its affiliated companies
(including, without limitation, medical, prescription,
dental, disability, employee life, group life,
accidental death and travel accident insurance plans
and programs) to the extent applicable generally to
other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices,
policies and programs provide the Executive with
benefits which are less favorable, in the aggregate,
than the most favorable of such plans, practices,
policies and programs in effect for the Executive at
any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to
the Executive, those provided generally at any time
after the Effective Date to other peer executives of
the Company and its affiliated companies.
(v) Expenses. During the Employment
Period, the Executive shall be entitled to receive
prompt reimbursement for all reasonable expenses
incurred by the Executive in accordance with the most
favorable policies, practices and procedures of the
Company and its affiliated companies in effect for the
Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer
executives of the Company and its affiliated companies.
(vi) Fringe Benefits. During the
Employment Period, the Executive shall be entitled to
fringe benefits, including, without limitation, tax and
financial planning services, payment of club dues, and,
if applicable, use of an automobile and payment of
related expenses, in accordance with the most favorable
plans, practices, programs and policies of the Company
and its affiliated companies in effect for the
Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer
executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During
the Employment Period, the Executive shall be entitled
to an office or offices of a size and with furnishings
and other appointments, and to exclusive personal
secretarial and other assistance, at least equal to the
most favorable of the foregoing provided to the
Executive by the Company and its affiliated companies
at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to
the Executive, as provided generally at any time
thereafter with respect to other peer executives of the
Company and its affiliated companies.
(viii) Vacation. During the Employment
Period, the Executive shall be entitled to paid
vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its
affiliated companies as in effect for the Executive at
any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the
Company and its affiliated companies.
5. Termination of Employment. (a) Death or
Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the
Employment Period. If the Company determines in good
faith that the Disability of the Executive has occurred
during the Employment Period (pursuant to the
definition of Disability set forth below), it may give
to the Executive written notice in accordance with
Section 12(b) of this Agreement of its intention to
terminate the Executive's employment. In such event,
the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of
such notice by the Executive (the "Disability Effective
Date"), provided that, within the 30 days after such
receipt, the Executive shall not have returned to full-
time performance of the Executive's duties. For
purposes of this Agreement, "Disability" shall mean the
absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180
consecutive business days as a result of incapacity due
to mental or physical illness which is determined to be
total and permanent by a physician selected by the
Company or its insurers and acceptable to the Executive
or the Executive's legal representative.
(b) Cause. The Company may terminate the
Executive's employment during the Employment Period for
Cause. For purposes of this Agreement, "Cause" shall
mean:
(i) the willful and continued failure of the
Executive to perform substantially the Executive's
duties with the Company or one of its affiliates
(other than any such failure resulting from
incapacity due to physical or mental illness),
after a written demand for substantial performance
is delivered to the Executive by the Board or the
Chief Executive Officer of the Company which
specifically identifies the manner in which the
Board or Chief Executive Officer believes that the
Executive has not substantially performed the
Executive's duties, or
(ii) the willful engaging by the Executive in
illegal conduct or gross misconduct which is
materially and demonstrably injurious to the
Company.
For purposes of this provision, no act or failure to
act, on the part of the Executive, shall be considered
"willful" unless it is done, or omitted to be done, by
the Executive in bad faith or without reasonable belief
that the Executive's action or omission was in the best
interests of the Company. Any act, or failure to act,
based upon authority given pursuant to a resolution
duly adopted by the Board or upon the instructions of
the Chief Executive Officer or a senior officer of the
Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or
omitted to be done, by the Executive in good faith and
in the best interests of the Company. The cessation of
employment of the Executive shall not be deemed to be
for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly
adopted by the affirmative vote of not less than three-
quarters of the entire membership of the Board at a
meeting of the Board called and held for such purpose
(after reasonable notice is provided to the Executive
and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding
that, in the good faith opinion of the Board, the
Executive is guilty of the conduct described in
subparagraph (i) or (ii) above, and specifying the
particulars thereof in detail.
(c) Good Reason. The Executive's employment
may be terminated by the Executive for Good Reason.
For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to the Executive of any
duties inconsistent in any respect with the
Executive's position (including status, offices,
titles and reporting requirements), authority,
duties or responsibilities as contemplated by
Section 4(a) of this Agreement, or any other action
by the Company which results in a diminution in
such position, authority, duties or
responsibilities, excluding for this purpose an
isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the
Company promptly after receipt of notice thereof
given by the Executive;
(ii) any failure by the Company to comply
with any of the provisions of Section 4(b) of this
Agreement, other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith
and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive
to be based at any office or location other than as
provided in Section 4(a)(i)(B) hereof or the
Company's requiring the Executive to travel on
Company business to a substantially greater extent
than required immediately prior to the Effective
Date;
(iv) any purported termination by the
Company of the Executive's employment otherwise
than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply
with and satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by the Executive
shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a termination by the
Executive for any reason prior to July 1, 1998 shall be
deemed to be a termination for Good Reason for all
purposes of this Agreement.
(d) Notice of Termination. Any termination
by the Company for Cause, or by the Executive for Good
Reason, shall be communicated by Notice of Termination
to the other party hereto given in accordance with
Section 12(b) 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) to the
extent applicable, 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) if the Date of
Termination (as defined below) is other than the date
of receipt of such notice, specifies the termination
date (which date shall be not more than thirty days
after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes
to a showing of Good Reason or Cause shall not waive
any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or
the Company, respectively, from asserting such fact or
circumstance in enforcing the Executive's or the
Company's rights hereunder.
(e) Date of Termination. "Date of
Termination" means (i) if the Executive's employment is
terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the
Notice of Termination or any later date specified
therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for
Cause or Disability, the Date of Termination shall be
the date on which the Company notifies the Executive of
such termination and (iii) if the Executive's
employment is terminated by reason of death or
Disability, the Date of Termination shall be the date
of death of the Executive or the Disability Effective
Date, as the case may be.
6. Obligations of the Company upon
Termination. (a) Good Reason; Other Than for Cause,
Death or Disability. If, during the Employment Period,
the Company shall terminate the Executive's employment
other than for Cause or Disability or the Executive
shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in
a lump sum in cash within 30 days after the Date of
Termination the aggregate of the following amounts:
A. the sum of (1) the Executive's Annual
Base Salary through the Date of Termination to
the extent not theretofore paid, (2) the
product of (x) the higher of (I) the Target
Bonus and (II) the Annual Bonus paid or
payable, including any bonus or portion
thereof which has been earned but deferred
(and annualized for any fiscal year consisting
of less than twelve full months or during
which the Executive was employed for less than
twelve full months), for the most recently
completed fiscal year during the Employment
Period, if any (such higher amount being
referred to as the "Highest Annual Bonus") and
(y) a fraction, the numerator of which is the
number of days in the current fiscal year
through the Date of Termination, and the
denominator of which is 365 and (3) any
compensation previously deferred by the
Executive (together with any accrued interest
or earnings thereon) and any accrued vacation
pay, in each case to the extent not
theretofore paid (the sum of the amounts
described in clauses (1), (2), and (3) shall
be hereinafter referred to as the "Accrued
Obligations"); and
B. the amount equal to the product of
(1) three and (2) the sum of (x) the
Executive's Annual Base Salary and (y) the
Highest Annual Bonus; and
C. an amount equal to the excess of (a)
the actuarial equivalent of the benefit under
the Company's qualified defined benefit
retirement plan (the "Retirement Plan")
(utilizing actuarial assumptions no less
favorable to the Executive than those in
effect under the Company's Retirement Plan
immediately prior to the Effective Date), and
any excess or supplemental retirement plan in
which the Executive participates (together,
the "SERP") which the Executive would receive
if the Executive's employment continued for
three years after the Date of Termination
assuming for this purpose that all accrued
benefits are fully vested, and, assuming that
the Executive's compensation in each of the
three years is that required by Section
4(b)(i) and Section 4(b)(ii), over (b) the
actuarial equivalent of the Executive's actual
benefit (paid or payable), if any, under the
Retirement Plan and the SERP as of the Date of
Termination;
(ii) for three years after the Executive's
Date of Termination, or such longer period as may
be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall
continue benefits to the Executive and/or the
Executive's family at least equal to those which
would have been provided to them in accordance with
the plans, programs, practices and policies
described in Section 4(b)(iv) of this Agreement if
the Executive's employment had not been terminated
or, if more favorable to the Executive, as in
effect generally at any time thereafter with
respect to other peer executives of the Company and
its affiliated companies and their families,
provided, however, that if the Executive becomes
reemployed with another employer and is eligible to
receive medical or other welfare benefits under an
other employer provided plan, the medical and other
welfare benefits described herein shall be
secondary to those provided under such other plan
during such applicable period of eligibility. For
purposes of determining eligibility (but not the
time of commencement of benefits) of the Executive
for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive
shall be considered to have remained employed until
three years after the Date of Termination and to
have retired on the last day of such period;
(iii) the Company shall, at its sole expense
as incurred, provide the Executive with
outplacement services the scope and provider of
which shall be selected by the Executive in his
sole discretion; and
(iv) to the extent not theretofore paid or
provided, the Company shall timely pay or provide
to the Executive any other amounts or benefits
required to be paid or provided or which the
Executive is eligible to receive under any plan,
program, policy or practice or contract or
agreement of the Company and its affiliated
companies (such other amounts and benefits shall be
hereinafter referred to as the "Other Benefits").
(b) Death. If the Executive's employment is
terminated by reason of the Executive's death during
the Employment Period, this Agreement shall terminate
without further obligations to the Executive's legal
representatives under this Agreement, other than for
payment of Accrued Obligations and the timely payment
or provision of Other Benefits. Accrued Obligations
shall be paid to the Executive's estate or beneficiary,
as applicable, in a lump sum in cash within 30 days of
the Date of Termination. With respect to the provision
of Other Benefits, the term Other Benefits as utilized
in this Section 6(b) shall include, without limitation,
and the Executive's estate and/or beneficiaries shall
be entitled to receive, benefits at least equal to the
most favorable benefits provided by the Company and
affiliated companies to the estates and beneficiaries
of peer executives of the Company and such affiliated
companies under such plans, programs, practices and
policies relating to death benefits, if any, as in
effect with respect to other peer executives and their
beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more
favorable to the Executive's estate and/or the
Executive's beneficiaries, as in effect on the date of
the Executive's death with respect to other peer
executives of the Company and its affiliated companies
and their beneficiaries.
(c) Disability. If the Executive's
employment is terminated by reason of the Executive's
Disability during the Employment Period, this Agreement
shall terminate without further obligations to the
Executive, other than for payment of Accrued
Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to
the Executive in a lump sum in cash within 30 days of
the Date of Termination. With respect to the provision
of Other Benefits, the term Other Benefits as utilized
in this Section 6(c) shall include, and the Executive
shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least
equal to the most favorable of those generally provided
by the Company and its affiliated companies to disabled
executives and/or their families in accordance with
such plans, programs, practices and policies relating
to disability, if any, as in effect generally with
respect to other peer executives and their families at
any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to
the Executive and/or the Executive's family, as in
effect at any time thereafter generally with respect to
other peer executives of the Company and its affiliated
companies and their families.
(d) Cause; Other than for Good Reason. If
the Executive's employment shall be terminated for
Cause during the Employment Period, this Agreement
shall terminate without further obligations to the
Executive other than the obligation to pay to the
Executive (x) his Annual Base Salary through the Date
of Termination, (y) the amount of any compensation
previously deferred by the Executive, and (z) Other
Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates
employment during the Employment Period, excluding a
termination for Good Reason, this Agreement shall
terminate without further obligations to the Executive,
other than for Accrued Obligations and the timely
payment or provision of Other Benefits. In such case,
all Accrued Obligations shall be paid to the Executive
in a lump sum in cash within 30 days of the Date of
Termination.
7. Non-exclusivity of Rights. Nothing in
this Agreement shall prevent or limit the Executive's
continuing or future participation in any plan,
program, policy or practice provided by the Company or
any of its affiliated companies and for which the
Executive may qualify, nor, subject to Section 12(f),
shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or
agreement with the Company or any of its affiliated
companies. Amounts which are vested benefits or which
the Executive is otherwise entitled to receive under
any plan, policy, practice or program of or any
contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such
plan, policy, practice or program or contract or
agreement except as explicitly modified by this
Agreement.
8. Full Settlement. The Company's obligation
to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall
not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action
which the Company may have against the Executive or
others. In no event shall the Executive be obligated
to seek other employment or take any other action by
way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement
and such amounts shall not be reduced whether or not
the Executive obtains other employment. The Company
agrees to pay as incurred, to the full extent permitted
by law, all legal fees and expenses which the Executive
may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company, the
Executive or others of the validity or enforceability
of, or liability under, any provision of this Agreement
or any guarantee of performance thereof (including as a
result of any contest by the Executive about the amount
of any payment pursuant to this Agreement), plus in
each case interest on any delayed payment at the
applicable Federal rate provided for in Section
7872(f)(2)(A) of the Internal Revenue Code of 1986, as
amended (the "Code").
9. Certain Additional Payments by the
Company.
(a) Anything in this Agreement to the
contrary notwithstanding and except as set forth below,
in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of
the Executive (whether paid or payable or distributed
or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard
to any additional payments required under this
Section 9) (a "Payment") would be subject to the excise
tax imposed by Section 4999 of the Code or any interest
or penalties are incurred by the Executive with respect
to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the
Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including
any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes
(and any interest and penalties imposed with respect
thereto) and Excise Tax imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-
Up Payment equal to the Excise Tax imposed upon the
Payments. Notwithstanding the foregoing provisions of
this Section 9(a), if it shall be determined that the
Executive is entitled to a Gross-Up Payment, but that
the Payments do not exceed 110% of the greatest amount
(the "Reduced Amount") that could be paid to the
Executive such that the receipt of Payments would not
give rise to any Excise Tax, then no Gross-Up Payment
shall be made to the Executive and the Payments, in the
aggregate, shall be reduced to the Reduced Amount.
(b) Subject to the provisions of
Section 9(c), all determinations required to be made
under this Section 9, including whether and when a
Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made by Arthur
Andersen & Co. or such other certified public
accounting firm as may be designated by the Executive
(the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the
Executive within 15 business days of the receipt of
notice from the Executive that there has been a
Payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is
serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the
Executive shall appoint another nationally recognized
accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely
by the Company. Any Gross-Up Payment, as determined
pursuant to this Section 9, shall be paid by the
Company to the Executive within five days of the
receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the
Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with
the calculations required to be made hereunder. In the
event that the Company exhausts its remedies pursuant
to Section 9(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to
or for the benefit of the Executive.
(c) The Executive shall notify the Company in
writing of any claim by the Internal Revenue Service
that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification
shall be given as soon as practicable but no later than
ten business days after the Executive is informed in
writing of such claim and shall apprise the Company of
the nature of such claim and the date on which such
claim is requested to be paid. The Executive shall not
pay such claim prior to the expiration of the 30-day
period following the date on which it gives such notice
to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such
claim is due). If the Company notifies the Executive
in writing prior to the expiration of such period that
it desires to contest such claim, the Executive shall:
(i) give the Company any information
reasonably requested by the Company relating to
such claim,
(ii) take such action in connection with
contesting such claim as the Company shall
reasonbly request in writing from time to time,
including, without limitation, accepting legal
representation with respect to such claim by an
attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith
in order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional
interest and penalties) incurred in connection with
such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with
respect thereto) imposed as a result of such
representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this
Section 9(c), the Company shall control all proceedings
taken in connection with such contest and, at its sole
option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at
its sole option, either direct the Executive to pay the
tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees 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 Executive to pay such claim and
sue for a refund, the Company shall advance the amount
of such payment to the Executive, on an interest-free
basis and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with
respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to
such advance; and further provided that any extension
of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to be
due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall
be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the Executive
shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of
an amount advanced by the Company pursuant to
Section 9(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive
shall (subject to the Company's complying with the
requirements of Section 9(c)) promptly pay to the
Company the amount of such refund (together with any
interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant
to Section 9(c), a determination is made that the
Executive shall not be entitled to any refund with
respect to such claim and the Company does not notify
the Executive in writing of its intent to contest such
denial of refund prior to the expiration of 30 days
after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the
amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be
paid.
10. Confidential Information. The Executive
shall hold in a fiduciary capacity for the benefit of
the Company all secret or confidential information,
knowledge or data relating to the Company or any of its
affiliated companies, and their respective businesses,
which shall have been obtained by the Executive during
the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive
or representatives of the Executive in violation of
this Agreement). After termination of the Executive's
employment with the Company, the Executive shall not,
without the prior written consent of the Company or as
may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge
or data to anyone other than the Company and those
designated by it. In no event shall an asserted
violation of the provisions of this Section 10
constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this
Agreement.
11. Successors. (a) This Agreement is
personal to the Executive and without the prior written
consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent
and distribution. This Agreement shall inure to the
benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit
of and be binding upon the Company and its successors
and assigns.
(c) The Company will require any successor
(whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the
same manner and to the same extent that the Company
would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid
which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
12. Miscellaneous. (a) This Agreement shall
be governed by and construed in accordance with the
laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this
Agreement are not part of the provisions hereof and
shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written
agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications
hereunder shall be in writing and shall be given by
hand delivery to the other party or by registered or
certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
Joji Hayashi
4443 Deer Field Way
Danville, CA 94506
If to the Company:
APL Limited
1111 Broadway
Oakland, CA 94607
Attention: General Counsel
or to such other address as either party shall have
furnished to the other in writing in accordance
herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the
validity or enforceability of any other provision of
this Agreement.
(d) The Company may withhold from any amounts
payable under this Agreement such Federal, state, local
or foreign taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure
to insist upon strict compliance with any provision of
this Agreement or the failure to assert any right the
Executive or the Company may have hereunder, including,
without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to
Section 5(c)(i)-(v) of this Agreement, shall not be
deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.
(f) The Executive and the Company acknowledge
that, except as may otherwise be provided under any
other written agreement between the Executive and the
Company, the employment of the Executive by the Company
is "at will" and, subject to Section 1(a) hereof, prior
to the Effective Date, the Executive's employment
and/or this Agreement may be terminated by either the
Executive or the Company at any time prior to the
Effective Date, in which case the Executive shall have
no further rights under this Agreement. From and after
the Effective Date this Agreement shall supersede any
other agreement between the parties with respect to the
subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto
set the Executive's hand and, pursuant to the
authorization from its Board of Directors, the Company
has caused these presents to be executed in its name on
its behalf, all as of the day and year first above
written.
/s/ Joji Hayashi
Joji Hayashi
APL LIMITED
By: /s/ Timothy J. Rhine
EMPLOYMENT AGREEMENT
AGREEMENT by and between, APL Limited a
Delaware corporation (the "Company"), and James S.
Marston (the "Executive"), dated as of the 28th day of
January, 1997.
The Board of Directors of the Company (the
"Board"), has determined that it is in the best
interests of the Company and its shareholders to assure
that the Company will have the continued dedication of
the Executive, notwithstanding the possibility, threat
or occurrence of a Change of Control (as defined below)
of the Company. The Board believes it is imperative to
diminish the inevitable distraction of the Executive by
virtue of the personal uncertainties and risks created
by a pending or threatened Change of Control and to
encourage the Executive's full attention and dedication
to the Company currently and in the event of any
threatened or pending Change of Control, and to provide
the Executive with compensation and benefits
arrangements upon a Change of Control which ensure that
the compensation and benefits expectations of the
Executive will be satisfied and which are competitive
with those of other corporations. Therefore, in order
to accomplish these objectives, the Board has caused
the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS
FOLLOWS:
1. Certain Definitions. (a) The "Effective
Date" shall mean the first date during the Change of
Control Period (as defined in Section 1(b)) on which a
Change of Control (as defined in Section 2) occurs.
Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if
the Executive's employment with the Company is
terminated prior to the date on which the Change of
Control occurs, and if it is reasonably demonstrated by
the Executive that such termination of employment (i)
was at the request of a third party who has taken steps
reasonably calculated to effect a Change of Control, or
(ii) otherwise arose in connection with or anticipation
of a Change of 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.
(b) The "Change of Control Period" shall mean
the period commencing on the date hereof and ending on
the first anniversary of the date hereof.
2. Change of Control. For the purpose of
this Agreement, a "Change of Control" shall mean:
(a) The acquisition by any individual, entity
or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock
of the Company (the "Outstanding Company Common Stock")
or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled
to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided,
however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change of
Control: (i) any acquisition of such shares by the
Company, (ii) any acquisition of such shares by any
employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled
by the Company or (iii) any acquisition of such shares
by any corporation pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of subsection
(c) of this Section 2; or
(b) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for
any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming
a director subsequent to the date hereof whose
election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent
Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or
threatened election contest 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; or
(c) Consummation of a reorganization, merger
or consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a
"Business Combination"), in each case, unless,
following such Business Combination, (i) all or
substantially all of the individuals and entities who
were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then
outstanding shares of common stock and the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of
directors, as the case may be, of the corporation
resulting from such Business Combination (including,
without limitation, a corporation which as a result of
such transaction owns the Company or all or
substantially all of the Company's assets either
directly or through one or more subsidiaries) in sub
stantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be, (ii) no
Person (excluding any corporation resulting from such
Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation
resulting from such Business Combination) beneficially
owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common
stock of the corporation resulting from such Business
Combination or the combined voting power of the then
outstanding voting securities of such corporation
except to the extent that such ownership existed prior
to the Business Combination and (iii) at least a
majority of the members of the board of directors of
the corporation 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
Company of a complete liquidation or dissolution of the
Company.
3. Employment Period. The Company hereby
agrees to continue the Executive in its employ, and the
Executive hereby agrees to remain in the employ of the
Company subject to the terms and conditions of this
Agreement, for the period commencing on the Effective
Date and ending on the 31st day immediately following
the first anniversary of the Effective Date (the
"Employment Period").
4. Terms of Employment. (a) Position and
Duties. (i) During the Employment Period, (A) the
Executive's position (including status, offices, titles
and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all
material respects with the most significant of those
held, exercised and assigned at any time during the 120-
day period immediately preceding the Effective Date and
(B) the Executive's services shall be performed at the
location where the Executive was employed immediately
preceding the Effective Date or any office or location
less than 35 miles from such location.
(ii) During the Employment Period, and
excluding any periods of vacation and sick leave to
which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal
business hours to the business and affairs of the
Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder,
to use the Executive's reasonable best efforts to
perform faithfully and efficiently such
responsibilities. During the Employment Period it
shall not be a violation of this Agreement for the
Executive to (A) serve on corporate, civic or
charitable boards or committees, (B) deliver lectures,
fulfill speaking engagements or teach at educational
institutions and (C) manage personal investments, so
long as such activities do not significantly interfere
with the performance of the Executive's
responsibilities as an employee of the Company in
accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such
activities have been conducted by the Executive prior
to the Effective Date, the continued conduct of such
activities (or the conduct of activities similar in
nature and scope thereto) subsequent to the Effective
Date shall not thereafter be deemed to interfere with
the performance of the Executive's responsibilities to
the Company.
(b) Compensation. (i) Base Salary. During
the Employment Period, the Executive shall receive an
annual base salary ("Annual Base Salary"), which shall
be paid at a monthly rate, at least equal to twelve
times the highest monthly base salary paid or payable,
including any base salary which has been earned but
deferred, to the Executive by the Company and its
affiliated companies in respect of the twelve-month
period immediately preceding the month in which the
Effective Date occurs. During the Employment Period,
the Annual Base Salary shall be reviewed no more than
12 months after the last salary increase awarded to the
Executive prior to the Effective Date and thereafter at
least annually. Any increase in Annual Base Salary
shall not serve to limit or reduce any other obligation
to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and
the term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so
increased. As used in this Agreement, the term
"affiliated companies" shall include any company
controlled by, controlling or under common control with
the Company.
(ii) Annual Bonus. In addition to
Annual Base Salary, the Executive shall be awarded, for
each fiscal year ending during the Employment Period,
an annual bonus (the "Annual Bonus") in cash at least
equal to the Executive's target bonus under the
Company's annual bonus program, or any comparable bonus
under any predecessor or successor plan for the year
prior to the year in which the Effective Date occurs
(the "Target Bonus"). Each such Annual Bonus shall be
paid no later than the end of the third month of the
fiscal year next following the fiscal year for which
the Annual Bonus is awarded, unless the Executive shall
elect to defer the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement
Plans. During the Employment Period, the Executive
shall be entitled to participate in all incentive,
savings and retirement plans, practices, policies and
programs applicable generally to other peer executives
of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and
programs provide the Executive with incentive
opportunities (measured with respect to both regular
and special incentive opportunities, to the extent, if
any, that such distinction is applicable), savings
opportunities and retirement benefit opportunities, in
each case, less favorable, in the aggregate, than the
most favorable of those provided by the Company and its
affiliated companies for the Executive under such
plans, practices, policies and programs as in effect at
any time during the 120-day period immediately
preceding the Effective Date or if more favorable to
the Executive, those provided generally at any time
after the Effective Date to other peer executives of
the Company and its affiliated companies.
(iv) Welfare Benefit Plans. During the
Employment Period, the Executive and/or the Executive's
family, as the case may be, shall be eligible for
participation in and shall receive all benefits under
welfare benefit plans, practices, policies and programs
provided by the Company and its affiliated companies
(including, without limitation, medical, prescription,
dental, disability, employee life, group life,
accidental death and travel accident insurance plans
and programs) to the extent applicable generally to
other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices,
policies and programs provide the Executive with
benefits which are less favorable, in the aggregate,
than the most favorable of such plans, practices,
policies and programs in effect for the Executive at
any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to
the Executive, those provided generally at any time
after the Effective Date to other peer executives of
the Company and its affiliated companies.
(v) Expenses. During the Employment
Period, the Executive shall be entitled to receive
prompt reimbursement for all reasonable expenses
incurred by the Executive in accordance with the most
favorable policies, practices and procedures of the
Company and its affiliated companies in effect for the
Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer
executives of the Company and its affiliated companies.
(vi) Fringe Benefits. During the
Employment Period, the Executive shall be entitled to
fringe benefits, including, without limitation, tax and
financial planning services, payment of club dues, and,
if applicable, use of an automobile and payment of
related expenses, in accordance with the most favorable
plans, practices, programs and policies of the Company
and its affiliated companies in effect for the
Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer
executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During
the Employment Period, the Executive shall be entitled
to an office or offices of a size and with furnishings
and other appointments, and to exclusive personal
secretarial and other assistance, at least equal to the
most favorable of the foregoing provided to the
Executive by the Company and its affiliated companies
at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to
the Executive, as provided generally at any time
thereafter with respect to other peer executives of the
Company and its affiliated companies.
(viii) Vacation. During the Employment
Period, the Executive shall be entitled to paid
vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its
affiliated companies as in effect for the Executive at
any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the
Company and its affiliated companies.
5. Termination of Employment. (a) Death or
Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the
Employment Period. If the Company determines in good
faith that the Disability of the Executive has occurred
during the Employment Period (pursuant to the
definition of Disability set forth below), it may give
to the Executive written notice in accordance with
Section 12(b) of this Agreement of its intention to
terminate the Executive's employment. In such event,
the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of
such notice by the Executive (the "Disability Effective
Date"), provided that, within the 30 days after such
receipt, the Executive shall not have returned to full-
time performance of the Executive's duties. For
purposes of this Agreement, "Disability" shall mean the
absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180
consecutive business days as a result of incapacity due
to mental or physical illness which is determined to be
total and permanent by a physician selected by the
Company or its insurers and acceptable to the Executive
or the Executive's legal representative.
(b) Cause. The Company may terminate the
Executive's employment during the Employment Period for
Cause. For purposes of this Agreement, "Cause" shall
mean:
(i) the willful and continued failure of the
Executive to perform substantially the Executive's
duties with the Company or one of its affiliates
(other than any such failure resulting from
incapacity due to physical or mental illness),
after a written demand for substantial performance
is delivered to the Executive by the Board or the
Chief Executive Officer of the Company which
specifically identifies the manner in which the
Board or Chief Executive Officer believes that the
Executive has not substantially performed the
Executive's duties, or
(ii) the willful engaging by the Executive in
illegal conduct or gross misconduct which is
materially and demonstrably injurious to the
Company.
For purposes of this provision, no act or failure to
act, on the part of the Executive, shall be considered
"willful" unless it is done, or omitted to be done, by
the Executive in bad faith or without reasonable belief
that the Executive's action or omission was in the best
interests of the Company. Any act, or failure to act,
based upon authority given pursuant to a resolution
duly adopted by the Board or upon the instructions of
the Chief Executive Officer or a senior officer of the
Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or
omitted to be done, by the Executive in good faith and
in the best interests of the Company. The cessation of
employment of the Executive shall not be deemed to be
for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly
adopted by the affirmative vote of not less than three-
quarters of the entire membership of the Board at a
meeting of the Board called and held for such purpose
(after reasonable notice is provided to the Executive
and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding
that, in the good faith opinion of the Board, the
Executive is guilty of the conduct described in
subparagraph (i) or (ii) above, and specifying the
particulars thereof in detail.
(c) Good Reason. The Executive's employment
may be terminated by the Executive for Good Reason.
For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to the Executive of any
duties inconsistent in any respect with the
Executive's position (including status, offices,
titles and reporting requirements), authority, du
ties or responsibilities as contemlated by Section
4(a) of this Agreement, or any other action by the
Company which results in a diminution in such
position, authority, duties or responsibilities,
excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in
bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by
the Executive;
(ii) any failure by the Company to comply
with any of the provisions of Section 4(b) of this
Agreement, other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith
and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive
to be based at any office or location other than as
provided in Section 4(a)(i)(B) hereof or the
Company's requiring the Executive to travel on
Company business to a substantially greater extent
than required immediately prior to the Effective
Date;
(iv) any purported termination by the
Company of the Executive's employment otherwise
than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply
with and satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by the Executive
shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a termination by the
Executive for any reason during the 30-day period
immediately following the first anniversary of the
Effective Date shall be deemed to be a termination for
Good Reason for all purposes of this Agreement.
(d) Notice of Termination. Any termination
by the Company for Cause, or by the Executive for Good
Reason, shall be communicated by Notice of Termination
to the other party hereto given in accordance with
Section 12(b) 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) to the
extent applicable, 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) if the Date of
Termination (as defined below) is other than the date
of receipt of such notice, specifies the termination
date (which date shall be not more than thirty days
after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes
to a showing of Good Reason or Cause shall not waive
any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or
the Company, respectively, from asserting such fact or
circumstance in enforcing the Executive's or the
Company's rights hereunder.
(e) Date of Termination. "Date of
Termination" means (i) if the Executive's employment is
terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the
Notice of Termination or any later date specified
therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for
Cause or Disability, the Date of Termination shall be
the date on which the Company notifies the Executive of
such termination and (iii) if the Executive's
employment is terminated by reason of death or
Disability, the Date of Termination shall be the date
of death of the Executive or the Disability Effective
Date, as the case may be.
6. Obligations of the Company upon
Termination. (a) Good Reason; Other Than for Cause,
Death or Disability. If, during the Employment Period,
the Company shall terminate the Executive's employment
other than for Cause or Disability or the Executive
shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in
a lump sum in cash within 30 days after the Date of
Termination the aggregate of the following amounts:
A. the sum of (1) the Executive's Annual
Base Salary through the Date of Termination to
the extent not theretofore paid, (2) the
product of (x) the higher of (I) the Target
Bonus and (II) the Annual Bonus paid or
payable, including any bonus or portion
thereof which has been earned but deferred
(and annualized for any fiscal year consisting
of less than twelve full months or during
which the Executive was employed for less than
twelve full months), for the most recently
completed fiscal year during the Employment
Period, if any (such higher amount being
referred to as the "Highest Annual Bonus") and
(y) a fraction, the numerator of which is the
number of days in the current fiscal year
through the Date of Termination, and the
denominator of which is 365 and (3) any
compensation previously deferred by the
Executive (together with any accrued interest
or earnings thereon) and any accrued vacation
pay, in each case to the extent not
theretofore paid (the sum of the amounts
described in clauses (1), (2), and (3) shall
be hereinafter referred to as the "Accrued
Obligations"); and
B. the amount equal to the product of
(1) two and (2) the sum of (x) the Executive's
Annual Base Salary and (y) the Highest Annual
Bonus; and
C. an amount equal to the excess of (a)
the actuarial equivalent of the benefit under
the Company's qualified defined benefit
retirement plan (the "Retirement Plan")
(utilizing actuarial assumptions no less
favorable to the Executive than those in
effect under the Company's Retirement Plan
immediately prior to the Effective Date), and
any excess or supplemental retirement plan in
which the Executive participates (together,
the "SERP") which the Executive would receive
if the Executive's employment continued for
two years after the Date of Termination
assuming for this purpose that all accrued
benefits are fully vested, and, assuming that
the Executive's compensation in each of the
two years is that required by Section 4(b)(i)
and Section 4(b)(ii), over (b) the actuarial
equivalent of the Executive's actual benefit
(paid or payable), if any, under the
Retirement Plan and the SERP as of the Date of
Termination;
(ii) for two years after the Executive's Date
of Termination, or such longer period as may be
provided by the terms of the appropriate plan,
program, practice or policy, the Company shall
continue benefits to the Executive and/or the
Executive's family at least equal to those which
would have been provided to them in accordance with
the plans, programs, practices and policies
described in Section 4(b)(iv) of this Agreement if
the Executive's employment had not been terminated
or, if more favorable to the Executive, as in
effect generally at any time thereafter with
respect to other peer executives of the Company and
its affiliated companies and their families,
provided, however, that if the Executive becomes
reemployed with another employer and is eligible to
receive medical or other welfare benefits under
another employer provided plan, the medical and
other welfare benefits described herein shall be
secondary to those provided under such other plan
during such applicable period of eligibility. For
purposes of determining eligibility (but not the
time of commencement of benefits) of the Executive
for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive
shall be considered to have remained employed until
two years after the Date of Termination and to have
retired on the last day of such period;
(iii) the Company shall, at its sole expense
as incurred, provide the Executive with
outplacement services the scope and provider of
which shall be selected by the Executive in his
sole discretion; and
(iv) to the extent not theretofore paid or
provided, the Company shall timely pay or provide
to the Executive any other amounts or benefits
required to be paid or provided or which the
Executive is eligible to receive under any plan,
program, policy or practice or contract or
agreement of the Company and its affiliated
companies (such other amounts and benefits shall be
hereinafter referred to as the "Other Benefits").
(b) Death. If the Executive's employment is
terminated by reason of the Executive's death during
the Employment Period, this Agreement shall terminate
without further obligations to the Executive's legal
representatives under this Agreement, other than for
payment of Accrued Obligations and the timely payment
or provision of Other Benefits. Accrued Obligations
shall be paid to the Executive's estate or beneficiary,
as applicable, in a lump sum in cash within 30 days of
the Date of Termination. With respect to the provision
of Other Benefits, the term Other Benefits as utilized
in this Section 6(b) shall include, without limitation,
and the Executive's estate and/or beneficiaries shall
be entitled to receive, benefits at least equal to the
most favorable benefits provided by the Company and
affiliated companies to the estates and beneficiaries
of peer executives of the Company and such affiliated
companies under such plans, programs, practices and
policies relating to death benefits, if any, as in
effect with respect to other peer executives and their
beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more
favorable to the Executive's estate and/or the
Executive's beneficiaries, as in effect on the date of
the Executive's death with respect to other peer
executives of the Company and its affiliated companies
and their beneficiaries.
(c) Disability. If the Executive's
employment is terminated by reason of the Executive's
Disability during the Employment Period, this Agreement
shall terminate without further obligations to the
Executive, other than for payment of Accrued
Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to
the Executive in a lump sum in cash within 30 days of
the Date of Termination. With respect to the provision
of Other Benefits, the term Other Benefits as utilized
in this Section 6(c) shall include, and the Executive
shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least
equal to the most favorable of those generally provided
by the Company and its affiliated companies to disabled
executives and/or their families in accordance with
such plans, programs, practices and policies relating
to disability, if any, as in effect generally with
respect to other peer executives and their families at
any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to
the Executive and/or the Executive's family, as in
effect at any time thereafter generally with respect to
other peer executives of the Company and its affiliated
companies and their families.
(d) Cause; Other than for Good Reason. If
the Executive's employment shall be terminated for
Cause during the Employment Period, this Agreement
shall terminate without further obligations to the
Executive other than the obligation to pay to the
Executive (x) his Annual Base Salary through the Date
of Termination, (y) the amount of any compensation
previously deferred by the Executive, and (z) Other
Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates
employment during the Employment Period, excluding a
termination for Good Reason, this Agreement shall
terminate without further obligations to the Executive,
other than for Accrued Obligations and the timely
payment or provision of Other Benefits. In such case,
all Accrued Obligations shall be paid to the Executive
in a lump sum in cash within 30 days of the Date of
Termination.
7. Non-exclusivity of Rights. Nothing in
this Agreement shall prevent or limit the Executive's
continuing or future participation in any plan,
program, policy or practice provided by the Company or
any of its affiliated companies and for which the
Executive may qualify, nor, subject to Section 12(f),
shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or
agreement with the Company or any of its affiliated
companies. Amounts which are vested benefits or which
the Executive is otherwise entitled to receive under
any plan, policy, practice or program of or any
contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such
plan, policy, practice or program or contract or
agreement except as explicitly modified by this
Agreement.
8. Full Settlement. The Company's obligation
to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall
not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action
which the Company may have against the Executive or
others. In no event shall the Executive be obligated
to seek other employment or take any other action by
way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement
and such amounts shall not be reduced whether or not
the Executive obtains other employment. The Company
agrees to pay as incurred, to the full extent permitted
by law, all legal fees and expenses which the Executive
may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company, the
Executive or others of the validity or enforceability
of, or liability under, any provision of this Agreement
or any guarantee of performance thereof (including as a
result of any contest by the Executive about the amount
of any payment pursuant to this Agreement), plus in
each case interest on any delayed payment at the
applicable Federal rate provided for in Section
7872(f)(2)(A) of the Internal Revenue Code of 1986, as
amended (the "Code").
9. Certain Additional Payments by the
Company.
(a) Anything in this Agreement to the
contrary notwithstanding and except as set forth below,
in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of
the Executive (whether paid or payable or distributed
or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard
to any additional payments required under this
Section 9) (a "Payment") would be subject to the excise
tax imposed by Section 4999 of the Code or any interest
or penalties are incurred by the Executive with respect
to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the
Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including
any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes
(and any interest and penalties imposed with respect
thereto) and Excise Tax imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-
Up Payment equal to the Excise Tax imposed upon the
Payments. Notwithstanding the foregoing provisions of
this Section 9(a), if it shall be determined that the
Executive is entitled to a Gross-Up Payment, but that
the Payments do not exceed 110% of the greatest amount
(the "Reduced Amount") that could be paid to the
Executive such that the receipt of Payments would not
give rise to any Excise Tax, then no Gross-Up Payment
shall be made to the Executive and the Payments, in the
aggregate, shall be reduced to the Reduced Amount.
(b) Subject to the provisions of
Section 9(c), all determinations required to be made
under this Section 9, including whether and when a
Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made by Arthur
Andersen & Co. or such other certified public
accounting firm as may be designated by the Executive
(the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the
Executive within 15 business days of the receipt of
notice from the Executive that there has been a
Payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is
serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the
Executive shall appoint another nationally recognized
accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely
by the Company. Any Gross-Up Payment, as determined
pursuant to this Section 9, shall be paid by the
Company to the Executive within five days of the
receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the
Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with
the calculations required to be made hereunder. In the
event that the Company exhausts its remedies pursuant
to Section 9(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to
or for the benefit of the Executive.
(c) The Executive shall notify the Company in
writing of any claim by the Internal Revenue Service
that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification
shall be given as soon as practicable but no later than
ten business days after the Executive is informed in
writing of such claim and shall apprise the Company of
the nature of such claim and the date on which such
claim is requested to be paid. The Executive shall not
pay such claim prior to the expiration of the 30-day
period following the date on which it gives such notice
to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such
claim is due). If the Company notifies the Executive
in writing prior to the expiration of such period that
it desires to contest such claim, the Executive shall:
(i) give the Company any information
reasonably requested by the Company relating to
such claim,
(ii) take such action in connection with
contesting such claim as the Company shall
reasonably request in writing from time to time,
including, without limitation, accepting legal
representation with respect to such claim by an
attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith
in order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional
interest and penalties) incurred in connection with
such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with
respect thereto) imposed as a result of such
representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this
Section 9(c), the Company shall control all proceedings
taken in connection with such contest and, at its sole
option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at
its sole option, either direct the Executive to pay the
tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees 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 Executive to pay such claim and
sue for a refund, the Company shall advance the amount
of such payment to the Executive, on an interest-free
basis and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with
respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to
such advance; and further provided that any extension
of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to be
due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall
be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the Executive
shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of
an amount advanced by the Company pursuant to
Section 9(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive
shall (subject to the Company's complying with the
requirements of Section 9(c)) promptly pay to the
Company the amount of such refund (together with any
interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant
to Section 9(c), a determination is made that the
Executive shall not be entitled to any refund with
respect to such claim and the Company does not notify
the Executive in writing of its intent to contest such
denial of refund prior to the expiration of 30 days
after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the
amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be
paid.
10. Confidential Information. The Executive
shall hold in a fiduciary capacity for the benefit of
the Company all secret or confidential information,
knowledge or data relating to the Company or any of its
affiliated companies, and their respective businesses,
which shall have been obtained by the Executive during
the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive
or representatives of the Executive in violation of
this Agreement). After termination of the Executive's
employment with the Company, the Executive shall not,
without the prior written consent of the Company or as
may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge
or data to anyone other than the Company and those
designated by it. In no event shall an asserted
violation of the provisions of this Section 10
constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this
Agreement.
11. Successors. (a) This Agreement is
personal to the Executive and without the prior written
consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent
and distribution. This Agreement shall inure to the
benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit
of and be binding upon the Company and its successors
and assigns.
(c) The Company will require any successor
(whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the
same manner and to the same extent that the Company
would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid
which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
12. Miscellaneous. (a) This Agreement shall
be governed by and construed in accordance with the
laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this
Agreement are not part of the provisions hereof and
shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written
agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications
hereunder shall be in writing and shall be given by
hand delivery to the other party or by registered or
certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
James S. Marston
1867 Royal Court
Walnut Creek, CA 94595
If to the Company:
APL Limited
1111 Broadway
Oakland, CA 94607
Attention: General Counsel
or to such other address as either party shall have
furnished to the other in writing in accordance
herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the
validity or enforceability of any other provision of
this Agreement.
(d) The Company may withhold from any amounts
payable under this Agreement such Federal, state, local
or foreign taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure
to insist upon strict compliance with any provision of
this Agreement or the failure to assert any right the
Executive or the Company may have hereunder, including,
without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to
Section 5(c)(i)-(v) of this Agreement, shall not be
deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.
(f) The Executive and the Company acknowledge
that, except as may otherwise be provided under any
other written agreement between the Executive and the
Company, the employment of the Executive by the Company
is "at will" and, subject to Section 1(a) hereof, prior
to the Effective Date, the Executive's employment
and/or this Agreement may be terminated by either the
Executive or the Company at any time prior to the
Effective Date, in which case the Executive shall have
no further rights under this Agreement. From and after
the Effective Date this Agreement shall supersede any
other agreement between the parties with respect to the
subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto
set the Executive's hand and, pursuant to the
authorization from its Board of Directors, the Company
has caused these presents to be executed in its name on
its behalf, all as of the day and year first above
written.
/s/ James S. Marston
James S. Marston
APL LIMITED
By: Timothy J. Rhein
EMPLOYMENT AGREEMENT
AGREEMENT by and between APL Limited, a
Delaware corporation (the "Company"), and Timothy J.
Rhein (the "Executive"), dated as of the 28th day of
January, 1997.
The Board of Directors of the Company (the
"Board"), has determined that it is in the best
interests of the Company and its shareholders to assure
that the Company will have the continued dedication of
the Executive, notwithstanding the possibility, threat
or occurrence of a Change of Control (as defined below)
of the Company. The Board believes it is imperative to
diminish the inevitable distraction of the Executive by
virtue of the personal uncertainties and risks created
by a pending or threatened Change of Control and to
encourage the Executive's full attention and dedication
to the Company currently and in the event of any
threatened or pending Change of Control, and to provide
the Executive with compensation and benefits
arrangements upon a Change of Control which ensure that
the compensation and benefits expectations of the
Executive will be satisfied and which are competitive
with those of other corporations. Therefore, in order
to accomplish these objectives, the Board has caused
the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS
FOLLOWS:
1. Certain Definitions. (a) The "Effective
Date" shall mean the first date during the Change of
Control Period (as defined in Section 1(b)) on which a
Change of Control (as defined in Section 2) occurs.
Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if
the Executive's employment with the Company is
terminated prior to the date on which the Change of
Control occurs, and if it is reasonably demonstrated by
the Executive that such termination of employment (i)
was at the request of a third party who has taken steps
reasonably calculated to effect a Change of Control or
(ii) otherwise arose in connection with or anticipation
of a Change of 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.
(b) The "Change of Control Period" shall mean
the period commencing on the date hereof and ending on
the third anniversary of the date hereof; provided,
however, that commencing on the date one year after the
date hereof, and on each annual anniversary of such
date (such date and each annual anniversary thereof
shall be hereinafter referred to as the "Renewal
Date"), unless previously terminated, the Change of
Control Period shall be automatically extended so as to
terminate three years from such Renewal Date, unless at
least 60 days prior to the Renewal Date the Company
shall give notice to the Executive that the Change of
Control Period shall not be so extended.
2. Change of Control. For the purpose of
this Agreement, a "Change of Control" shall mean:
(a) The acquisition by any individual, entity
or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock
of the Company (the "Outstanding Company Common Stock")
or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled
to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided,
however, that for purposes of this subsection (a), the
following acquisiions shall not constitute a Change of
Control: (i) any acquisition of such shares by the
Company, (ii) any acquisition of such shares by any
employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled
by the Company or (iii) any acquisition of such shares
by any corporation pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of subsection
(c) of this Section 2; or
(b) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for
any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming
a director subsequent to the date hereof whose
election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incument
Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or
threatened election contest 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; or
(c) Consummation of a reorganization, merger
or consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a
"Business Combination"), in each case, unless,
following such Business Combination, (i) all or
substantially all of the individuals and entities who
were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then
outstanding shares of common stock and the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of
directors, as the case may be, of the corporation
resulting from such Business Combination (including,
without limittion, a corporation which as a result of
such transaction owns the Company or all or
substantially all of the Company's assets either
directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be, (ii) no
Person (excluding any corporation resulting from such
Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation
resulting from such Business Combination) beneficially
owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common
stock of the corporation resulting from such Business
Combination or the combined voting power of the then
outstanding voting securities of such corporation
except to the extent that such ownership existed prior
to the Business Combination and (iii) at least a
majority of the members of the board of directors of
the corporation 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
Company of a complete liquidation or dissolution of the
Company.
3. Employment Period. The Company hereby
agrees to continue the Executive in its employ, and the
Executive hereby agrees to remain in the employ of the
Company subject to the terms and conditions of this
Agreement, for the period commencing on the Effective
Date and ending on the third anniversary of such date
(the "Employment Period").
4. Terms of Employment. (a) Position and
Duties. (i) During the Employment Period, (A) the
Executive's position (including status, offices, titles
and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all
material respects with the most significant of those
held, exercised and assigned at any time during the 120-
day period immediately preceding the Effective Date and
(B) the Executive's services shall be performed at the
location where the Executive was employed immediately
preceding the Effective Date or any office or location
less than 35 miles from such location.
(ii) During the Employment Period, and
excluding any periods of vacation and sick leave to
which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal
business hours to the business and affairs of the
Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder,
to use the Executive's reasonable best efforts to
perform faithfully and efficiently such
responsibilities. During the Employment Period it
shall not be a violation of this Agreement for the
Executive to (A) serve on corporate, civic or
charitable boards or committees, (B) deliver lectures,
fulfill speaking engagements or teach at educational
institutions and (C) manage personal investments, so
long as such activities do not significantly interfere
with the performance of the Executive's
responsibilities as an employee of the Company in
accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such
activities have been conducted by the Executive prior
to the Effective Date, the continued conduct of such
activities (or the conduct of activities similar in
nature and scope thereto) subsequent to the Effective
Date shall not thereafter be deemed to interfere with
the performance of the Executive's responsibilities to
the Company.
(b) Compensation. (i) Base Salary. During
the Employment Period, the Executive shall receive an
annual base salary ("Annual Base Salary"), which shall
be paid at a monthly rate, at least equal to twelve
times the highest monthly base salary paid or payable,
including any base salary which has been earned but
deferred, to the Executive by the Company and its
affiliated companies in respect of the twelve-month
period immediately preceding the month in which the
Effective Date occurs. During the Employment Period,
the Annual Base Salary shall be reviewed no more than
12 months after the last salary increase awarded to the
Executive prior to the Effective Date and thereafter at
least annually. Any increase in Annual Base Salary
shall not serve to limit or reduce any other obligation
to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and
the term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so
increased. As used in this Agreement, the term
"affiliated companies" shall include any company
controlled by, controlling or under common control with
the Company.
(ii) Annual Bonus. In addition to
Annual Base Salary, the Executive shall be awarded, for
each fiscal year ending during the Employment Period,
an annual bonus (the "Annual Bonus") in cash at least
equal to the Executive's target bonus under the
Company's annual bonus program, or any comparable bonus
under any predecessor or successor plan for the year
prior to the year in which the Effective Date occurs
(the "Target Bonus"). Each such Annual Bonus shall be
paid no later than the end of the third month of the
fiscal year next following the fiscal year for which
the Annual Bonus is awarded, unless the Executive shall
elect to defer the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement
Plans. During the Employment Period, the Executive
shall be entitled to participate in all incentive,
savings and retirement plans, practices, policies and
programs applicable generally to other peer executives
of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and
programs provide the Executive with incentive
opportunities (measured with respect to both regular
and special incentive opportunities, to the extent, if
any, that such distinction is applicable), savings
opportunities and retirement benefit opportunities, in
each case, less favorable, in the aggregate, than the
most favorable of those provided by the Company and its
affiliated companies for the Executive under such
plans, practices, policies and programs as in effect at
any time during the 120-day period immediately
preceding the Effective Date or if more favorable to
the Executive, those provided generally at any time
after the Effective Date to other peer executives of
the Company and its affiliated companies.
(iv) Welfare Benefit Plans. During the
Employment Period, the Executive and/or the Executive's
family, as the case may be, shall be eligible for
participation in and shall receive all benefits under
welfare benefit plans, practices, policies and programs
provided by the Company and its affiliated companies
(including, without limitation, medical, prescription,
dental, disability, employee life, group life,
accidental death and travel accident insurance plans
and programs) to the extent applicable generally to
other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices,
policies and programs provide the Executive with
benefits which are less favorable, in the aggregate,
than the most favorable of such plans, practices,
policies and programs in effect for the Executive at
any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to
the Executive, those provided generally at any time
after the Effective Date to other peer executives of
the Company and its affiliated companies.
(v) Expenses. During the Employment
Period, the Executive shall be entitled to receive
prompt reimbursement for all reasonable expenses
incurred by the Executive in accordance with the most
favorable policies, practices and procedures of the
Company and its affiliated companies in effect for the
Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer
executives of the Company and its affiliated companies.
(vi) Fringe Benefits. During the
Employment Period, the Executive shall be entitled to
fringe benefits, including, without limitation, tax and
financial planning services, payment of club dues, and,
if applicable, use of an automobile and payment of
related expenses, in accordance with the most favorable
plans, practices, programs and policies of the Company
and its affiliated companies in effect for the
Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer
executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During
the Employment Period, the Executive shall be entitled
to an office or offices of a size and with furnishings
and other appointments, and to exclusive personal
secretarial and other assistance, at least equal to the
most favorable of the foregoing provided to the
Executive by the Company and its affiliated companies
at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to
the Executive, as provided generally at any time
thereafter with respect to other peer executives of the
Company and its affiliated companies.
(viii) Vacation. During the Employment
Period, the Executive shall be entitled to paid
vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its
affiliated companies as in effect for the Executive at
any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the
Company and its affiliated companies.
5. Termination of Employment. (a) Death or
Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the
Employment Period. If the Company determines in good
faith that the Disability of the Executive has occurred
during the Employment Period (pursuant to the
definition of Disability set forth below), it may give
to the Executive written notice in accordance with
Section 12(b) of this Agreement of its intention to
terminate the Executive's employment. In such event,
the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of
such notice by the Executive (the "Disability Effective
Date"), provided that, within the 30 days after such
receipt, the Executive shall not have returned to full-
time performance of the Executive's duties. For
purposes of this Agreement, "Disability" shall mean the
absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180
consecutive business days as a result of incapacity due
to mental or physical illness which is determined to be
total and permanent by a physician selected by the
Company or its insurers and acceptable to the Executive
or the Executive's legal representative.
(b) Cause. The Company may terminate the
Executive's employment during the Employment Period for
Cause. For purposes of this Agreement, "Cause" shall
mean:
(i) the willful and continued failure of the
Executive to perform substantially the Executive's
duties with the Company or one of its affiliates
(other than any such failure resulting from
incapacity due to physical or mental illness),
after a written demand for substantial performance
is delivered to the Executive by the Board or the
Chief Executive Officer of the Company which
specifically identifies the manner in which the
Board or Chief Executive Officer believes that the
Executive has not substantially performed the
Executive's duties, or
(ii) the willful engaging by the Executive in
illegal conduct or gross misconduct which is
materially and demonstrably injurious to the
Company.
For purposes of this provision, no act or failure to
act, on the part of the Executive, shall be considered
"willful" unless it is done, or omitted to be done, by
the Executive in bad faith or without reasonable belief
that the Executive's action or omission was in the best
interests of the Company. Any act, or failure to act,
based upon authority given pursuant to a resolution
duly adopted by the Board or upon the instructions of
the Chief Executive Officer or a senior officer of the
Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or
omitted to be done, by the Executive in good faith and
in the best interests of the Company. The cessation of
employment of the Executive shall not be deemed to be
for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly
adopted by the affirmative vote of not less than three-
quarters of the entire membership of the Board at a
meeting of the Board called and held for such purpose
(after reasonable notice is provided to the Executive
and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding
that, in the good faith opinion of the Board, the
Executive is guilty of the conduct described in
subparagraph (i) or (ii) above, and specifying the
particulars thereof in detail.
(c) Good Reason. The Executive's employment
may be terminated by the Executive for Good Reason.
For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to the Executive of any
duties inconsistent in any respect with the
Executive's position (including status, offices,
titles and reporting requirements), authority, du
ties or responsibilities as contemplated by Section
4(a) of this Agreement, or any other action by the
Company which results in a diminution in such
position, authority, duties or responsibilities,
excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in
bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by
the Executive;
(ii) any failure by the Company to comply
with any of the provisions of Section 4(b) of this
Agreement, other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith
and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive
to be based at any office or location other than as
provided in Section 4(a)(i)(B) hereof or the
Company's requiring the Executive to travel on
Company business to a substantially greater extent
than required immediately prior to the Effective
Date;
(iv) any purported termination by the
Company of the Executive's employment otherwise
than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply
with and satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by the Executive
shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a termination by the
Executive for any reason during the 30-day period
immediately following the first anniversary of the
Effective Date shall be deemed to be a termination for
Good Reason for all purposes of this Agreement.
(d) Notice of Termination. Any termination
by the Company for Cause, or by the Executive for Good
Reason, shall be communicated by Notice of Termination
to the other party hereto given in accordance with
Section 12(b) 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) to the
extent applicable, 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) if the Date of
Termination (as defined below) is other than the date
of receipt of such notice, specifies the termination
date (which date shall be not more than thirty days
after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes
to a showing of Good Reason or Cause shall not waive
any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or
the Company, respectively, from asserting such fact or
circumstance in enforcing the Executive's or the
Company's rights hereunder.
(e) Date of Termination. "Date of
Termination" means (i) if the Executive's employment is
terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the
Notice of Termination or any later date specified
therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for
Cause or Disability, the Date of Termination shall be
the date on which the Company notifies the Executive of
such termination and (iii) if the Executive's
employment is terminated by reason of death or
Disability, the Date of Termination shall be the date
of death of the Executive or the Disability Effective
Date, as the case may be.
6. Obligations of the Company upon
Termination. (a) Good Reason; Other Than for Cause,
Death or Disability. If, during the Employment Period,
the Company shall terminate the Executive's employment
other than for Cause or Disability or the Executive
shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in
a lump sum in cash within 30 days after the Date of
Termination the aggregate of the following amounts:
A. the sum of (1) the Executive's Annual
Base Salary through the Date of Termination to
the extent not theretofore paid, (2) the
product of (x) the higher of (I) the Target
Bonus and (II) the Annual Bonus paid or
payable, including any bonus or portion
thereof which has been earned but deferred
(and annualized for any fiscal year consisting
of less than twelve full months or during
which the Executive was employed for less than
twelve full months), for the most recently
completed fiscal year during the Employment
Period, if any (such higher amount being
referred to as the "Highest Annual Bonus") and
(y) a fraction, the numerator of which is the
number of days in the current fiscal year
through the Date of Termination, and the
denominator of which is 365 and (3) any
compensation previously deferred by the
Executive (together with any accrued interest
or earnings thereon) and any accrued vacation
pay, in each case to the extent not
theretofore paid (the sum of the amounts
described in clauses (1), (2), and (3) shall
be hereinafter referred to as the "Accrued
Obligations"); and
B. the amount equal to the product of
(1) three and (2) the sum of (x) the
Executive's Annual Base Salary and (y) the
Highest Annual Bonus; and
C. an amount equal to the excess of (a)
the actuarial equivalent of the benefit under
the Company's qualified defined benefit
retirement plan (the "Retirement Plan")
(utilizing actuarial assumptions no less
favorable to the Executive than those in
effect under the Company's Retirement Plan
immediately prior to the Effective Date), and
any excess or supplemental retirement plan in
which the Executive participates (together,
the "SERP") which the Executive would receive
if the Executive's employment continued for
three years after the Date of Termination
assuming for this purpose that all accrued
benefits are fully vested, and, assuming that
the Executive's compensation in each of the
three years is that required by Section
4(b)(i) and Section 4(b)(ii), over (b) the
actuarial equivalent of the Executive's actual
benefit (paid or payable), if any, under the
Retirement Plan and the SERP as of the Date of
Termination;
(ii) for three years after the Executive's
Date of Termination, or such longer period as may
be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall
continue benefits to the Executive and/or the
Executive's family at least equal to those which
would have been provided to them in accordance with
the plans, programs, practices and policies
described in Section 4(b)(iv) of this Agreement if
the Executive's employment had not been terminated
or, if more favorable to the Executive, as in
effect generally at any time thereafter with
respect to other peer executives of the Company and
its affiliated companies and their families,
provided, however, that if the Executive becomes
reemployed with another employer and is eligible to
receive medical or other welfare benefits under an
other employer provided plan, the medical and other
welfare benefits described herein shall be
secondary to those provided under such other plan
during such applicable period of eligibility. For
purposes of determining eligibility (but not the
time of commencement of benefits) of the Executive
for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive
shall be considered to have remained employed until
three years after the Date of Termination and to
have retired on the last day of such period;
(iii) the Company shall, at its sole expense
as incurred, provide the Executive with
outplacement services the scope and provider of
which shall be selected by the Executive in his
sole discretion; and
(iv) to the extent not theretofore paid or
provided, the Company shall timely pay or provide
to the Executive any other amounts or benefits
required to be paid or provided or which the
Executive is eligible to receive under any plan,
program, policy or practice or contract or
agreement of the Company and its affiliated
companies (such other amounts and benefits shall be
hereinafter referred to as the "Other Benefits").
(b) Death. If the Executive's employment is
terminated by reason of the Executive's death during
the Employment Period, this Agreement shall terminate
without further obligations to the Executive's legal
representatives under this Agreement, other than for
payment of Accrued Obligations and the timely payment
or provision of Other Benefits. Accrued Obligations
shall be paid to the Executive's estate or beneficiary,
as applicable, in a lump sum in cash within 30 days of
the Date of Termination. With respect to the provision
of Other Benefits, the term Other Benefits as utilized
in this Section 6(b) shall include, without limitation,
and the Executive's estate and/or beneficiaries shall
be entitled to receive, benefits at least equal to the
most favorable benefits provided by the Company and
affiliated companies to the estates and beneficiaries
of peer executives of the Company and such affiliated
companies under such plans, programs, practices and
policies relating to death benefits, if any, as in
effect with respect to other peer executives and their
beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more
favorable to the Executive's estate and/or the
Executive's beneficiaries, as in effect on the date of
the Executive's death with respect to other peer
executives of the Company and its affiliated companies
and their beneficiaries.
(c) Disability. If the Executive's
employment is terminated by reason of the Executive's
Disability during the Employment Period, this Agreement
shall terminate without further obligations to the
Executive, other than for payment of Accrued
Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to
the Executive in a lump sum in cash within 30 days of
the Date of Termination. With respect to the provision
of Other Benefits, the term Other Benefits as utilized
in this Section 6(c) shall include, and the Executive
shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least
equal to the most favorable of those generally provided
by the Company and its affiliated companies to disabled
executives and/or their families in accordance with
such plans, programs, practices and policies relating
to disability, if any, as in effect generally with
respect to other peer executives and their families at
any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to
the Executive and/or the Executive's family, as in
effect at any time thereafter generally with respect to
other peer executives of the Company and its affiliated
companies and their families.
(d) Cause; Other than for Good Reason. If
the Executive's employment shall be terminated for
Cause during the Employment Period, this Agreement
shall terminate without further obligations to the
Executive other than the obligation to pay to the
Executive (x) his Annual Base Salary through the Date
of Termination, (y) the amount of any compensation
previously deferred by the Executive, and (z) Other
Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates
employment during the Employment Period, excluding a
termination for Good Reason, this Agreement shall
terminate without further obligations to the Executive,
other than for Accrued Obligations and the timely
payment or provision of Other Benefits. In such case,
all Accrued Obligations shall be paid to the Executive
in a lump sum in cash within 30 days of the Date of
Termination.
7. Non-exclusivity of Rights. Nothing in
this Agreement shall prevent or limit the Executive's
continuing or future participation in any plan,
program, policy or practice provided by the Company or
any of its affiliated companies and for which the
Executive may qualify, nor, subject to Section 12(f),
shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or
agreement with the Company or any of its affiliated
companies. Amounts which are vested benefits or which
the Executive is otherwise entitled to receive under
any plan, policy, practice or program of or any
contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such
plan, policy, practice or program or contract or
agreement except as explicitly modified by this
Agreement.
8. Full Settlement. The Company's obligation
to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall
not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action
which the Company may have against the Executive or
others. In no event shall the Executive be obligated
to seek other employment or take any other action by
way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement
and such amounts shall not be reduced whether or not
the Executive obtains other employment. The Company
agrees to pay as incurred, to the full extent permitted
by law, all legal fees and expenses which the Executive
may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company, the
Executive or others of the validity or enforceability
of, or liability under, any provision of this Agreement
or any guarantee of performance thereof (including as a
result of any contest by the Executive about the amount
of any payment pursuant to this Agreement), plus in
each case interest on any delayed payment at the
applicable Federal rate provided for in Section
7872(f)(2)(A) of the Internal Revenue Code of 1986, as
amended (the "Code").
9. Certain Additional Payments by the
Company.
(a) Anything in this Agreement to the
contrary notwithstanding and except as set forth below,
in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of
the Executive (whether paid or payable or distributed
or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard
to any additional payments required under this
Section 9) (a "Payment") would be subject to the excise
tax imposed by Section 4999 of the Code or any interest
or penalties are incurred by the Executive with respect
to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the
Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including
any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes
(and any interest and penalties imposed with respect
thereto) and Excise Tax imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-
Up Payment equal to the Excise Tax imposed upon the
Payments. Notwithstanding the foregoing provisions of
this Section 9(a), if it shall be determined that the
Executive is entitled to a Gross-Up Payment, but that
the Payments do not exceed 110% of the greatest amount
(the "Reduced Amount") that could be paid to the
Executive such that the receipt of Payments would not
give rise to any Excise Tax, then no Gross-Up Payment
shall be made to the Executive and the Payments, in the
aggregate, shall be reduced to the Reduced Amount.
(b) Subject to the provisions of
Section 9(c), all determinations required to be made
under this Section 9, including whether and when a
Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made by Arthur
Andersen & Co. or such other certified public
accounting firm as may be designated by the Executive
(the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the
Executive within 15 business days of the receipt of
notice from the Executive that there has been a
Payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is
serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the
Executive shall appoint another nationally recognized
accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely
by the Company. Any Gross-Up Payment, as determined
pursuant to this Section 9, shall be paid by the
Company to the Executive within five days of the
receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the
Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with
the calculations required to be made hereunder. In the
event that the Company exhausts its remedies pursuant
to Section 9(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the
Accounting Firm shall detemine the amount of the
Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to
or for the benefit of the Executive.
(c) The Executive shall notify the Company in
writing of any claim by the Internal Revenue Service
that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification
shall be given as soon as practicable but no later than
ten business days after the Executive is informed in
writing of such claim and shall apprise the Company of
the nature of such claim and the date on which such
claim is requested to be paid. The Executive shall not
pay such claim prior to the expiration of the 30-day
period following the date on which it gives such notice
to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such
claim is due). If the Company notifies the Executive
in writing prior to the expiration of such period that
it desires to contest such claim, the Executive shall:
(i) give the Company any information
reasonably requested by the Company relating to
such claim,
(ii) take such action in connection with
contesting such claim as the Company shall
reasonably request in writing from time to time,
including, without limitation, accepting legal
representation with respect to such claim by an
attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith
in order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional
interest and penalties) incurred in connection with
such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with
respect thereto) imposed as a result of such
representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this
Section 9(c), the Company shall control all proceedings
taken in connection with such contest and, at its sole
option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at
its sole option, either direct the Executive to pay the
tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees 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 Executive to pay such claim and
sue for a refund, the Company shall advance the amount
of such payment to the Executive, on an interest-free
basis and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with
respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to
such advance; and further provided that any extension
of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to be
due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall
be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the Executive
shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of
an amount advanced by the Company pursuant to
Section 9(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive
shall (subject to the Company's complying with the
requirements of Section 9(c)) promptly pay to the
Company the amount of such refund (together with any
interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant
to Section 9(c), a determination is made that the
Executive shall not be entitled to any refund with
respect to such claim and the Company does not notify
the Executive in writing of its intent to contest such
denial of refund prior to the expiration of 30 days
after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the
amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be
paid.
10. Confidential Information. The Executive
shall hold in a fiduciary capacity for the benefit of
the Company all secret or confidential information,
knowledge or data relating to the Company or any of its
affiliated companies, and their respective businesses,
which shall have been obtained by the Executive during
the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive
or representatives of the Executive in violation of
this Agreement). After termination of the Executive's
employment with the Company, the Executive shall not,
without the prior written consent of the Company or as
may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge
or data to anyone other than the Company and those
designated by it. In no event shall an asserted
violation of the provisions of this Section 10
constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this
Agreement.
11. Successors. (a) This Agreement is
personal to the Executive and without the prior written
consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent
and distribution. This Agreement shall inure to the
benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit
of and be binding upon the Company and its successors
and assigns.
(c) The Company will require any successor
(whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the
same manner and to the same extent that the Company
would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid
which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
12. Miscellaneous. (a) This Agreement shall
be governed by and construed in accordance with the
laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this
Agreement are not part of the provisions hereof and
shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written
agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications
hereunder shall be in writing and shall be given by
hand delivery to the other party or by registered or
certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
Timothy J. Rhein
85 Verissimo Drive
Novato, CA 94947
If to the Company:
APL Limited
1111 Broadway
Oakland, CA 94607
Attention: General Counsel
or to such other address as either party shall have
furnished to the other in writing in accordance
herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the
validity or enforceability of any other provision of
this Agreement.
(d) The Company may withhold from any amounts
payable under this Agreement such Federal, state, local
or foreign taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure
to insist upon strict compliance with any provision of
this Agreement or the failure to assert any right the
Executive or the Company may have hereunder, including,
without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to
Section 5(c)(i)-(v) of this Agreement, shall not be
deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.
(f) The Executive and the Company acknowledge
that, except as may otherwise be provided under any
other written agreement between the Executive and the
Company, the employment of the Executive by the Company
is "at will" and, subject to Section 1(a) hereof, prior
to the Effective Date, the Executive's employment
and/or this Agreement may be terminated by either the
Executive or the Company at any time prior to the
Effective Date, in which case the Executive shall have
no further rights under this Agreement. From and after
the Effective Date this Agreement shall supersede any
other agreement between the parties with respect to the
subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto
set the Executive's hand and, pursuant to the
authorization from its Board of Directors, the Company
has caused these presents to be executed in its name on
its behalf, all as of the day and year first above
written.
/s/ Timothy J. Rhein
Timothy J. Rhein
APL LIMITED
By: Joji Hayashi
