UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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 1-1177
BENEFICIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 51-0003820
(State of incorporation) (I.R.S. Employer Identification
No.)
301 North Walnut Street
Wilmington, Delaware 19801
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (302) 425-2500
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding twelve months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
At May 1, 1996, the number of shares outstanding of the registrant's
common stock was 53,404,196.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BENEFICIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions)
March 31, December 31,
1996 1995
ASSETS
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Cash and Equivalents . . . . . . . . . . . . $ 393.6 $ 273.1
Finance Receivables (Note 2). . . . . . . . . . 12,666.0 13,416.2
Receivables Held for Resale (Note 2) . . . . . . 1,201.3 --
Allowance for Credit Losses (Note 3) . . . . . . (423.2) (406.1)
Net Finance Receivables. . . . . . . . . . . 13,444.1 13,010.1
Investment Securities (Note 4) . . . . . . . . . 655.8 1,491.4
Property and Equipment. . . . . . . . . . . . 183.5 183.1
Other Assets . . . . . . . . . . . . . . . 1,740.8 759.7
TOTAL ASSETS . . . . . . . . . . . . . $16,417.8 $15,717.4
LIABILITIES AND SHAREHOLDERS' EQUITY
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Short-Term Debt (Note 5) . . . . . . . . . . . $ 4,157.8 $4,023.9
Deposits Payable. . . . . . . . . . . . . . 627.5 642.5
Long-Term Debt (Note 6) . . . . . . . . . . . 8,004.0 7,792.5
Total Interest-Bearing Debt . . . . . . . . . 12,789.3 12,458.9
Accounts Payable and Accrued Liabilities. . . . . . 775.6 490.0
Insurance Policy and Claim Reserves . . . . . . . 1,276.1 1,265.5
Total Liabilities. . . . . . . . . . . . . 14,841.0 14,214.4
Shareholders' Equity:
Preferred Stock . . . . . . . . . . . . . 114.8 114.8
Common Stock . . . . . . . . . . . . . . 53.4 53.2
Additional Capital . . . . . . . . . . . . 277.6 270.0
Net Unrealized Gain on Investment Securities. . . . 3.7 18.4
Accumulated Foreign Currency Translation Adjustments . (46.4) (46.4)
Retained Earnings. . . . . . . . . . . . . 1,173.7 1,093.0
Total Shareholders' Equity . . . . . . . . . 1,576.8 1,503.0
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY . . . $16,417.8 $15,717.4
See Notes to Financial Statements.
BENEFICIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(in millions, except per share amounts)
Three Months Ended
March 31,
1996 1995
REVENUE
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Finance Charges and Fees . . . . . . . . . . . $ 545.3 $491.6
Interest Expense. . . . . . . . . . . . . . 209.0 212.2
Lending Spread. . . . . . . . . . . . . . 336.3 279.4
Insurance Premiums . . . . . . . . . . . . . 40.1 41.7
Other . . . . . . . . . . . . . . . . . 165.7 26.9
Total . . . . . . . . . . . . . . . . 542.1 348.0
OPERATING EXPENSES
Salaries and Employee Benefits . . . . . . . . . 101.7 99.3
Insurance Benefits . . . . . . . . . . . . . 22.7 26.9
Provision for Credit Losses . . . . . . . . . . 81.7 51.7
Other . . . . . . . . . . . . . . . . . 151.3 135.0
Total . . . . . . . . . . . . . . . . 357.4 312.9
Income Before Income Taxes . . . . . . . . . . . 184.7 35.1
Provision for Income Taxes . . . . . . . . . . . 77.3 14.4
NET INCOME . . . . . . . . . . . . . . . . $107.4 $ 20.7
EARNINGS PER COMMON SHARE . . . . . . . . . . . $ 1.96 $ .37
DIVIDENDS PER COMMON SHARE . . . . . . . . . . . $ .47 $ .43
See Notes to Financial Statements.
BENEFICIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
Three Months Ended
March 31,
1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES
Net Income . . . . . . . . . . . . . . . . .$ 107.4 $ 20.7
Reconciliation of Net Income to Net Cash
Provided by Operating Activities:
Provision for Credit Losses . . . . . . . . . . . 81.7 51.7
Provision for Deferred Income Taxes . . . . . . . . (12.4) (9.5)
Depreciation and Amortization . . . . . . . . . . 11.9 11.5
Insurance Policy & Claim Reserves . . . . . . . . . 10.6 37.2
Accounts Payable & Accrued Liabilities . . . . . . . 285.6 156.2
Net Cash Provided by Operating Activities. . . . . . 484.8 267.8
CASH FLOWS FROM INVESTING ACTIVITIES
Receivables Originated or Acquired . . . . . . . . .(2,733.8)(2,115.6)
Receivables Collected. . . . . . . . . . . . . . 2,188.4 1,771.8
Receivables Securitized . . . . . . . . . . . . . -- 1,103.8
Other Receivables, Net Change . . . . . . . . . . . (30.8) (288.6)
Investment Securities Purchased . . . . . . . . . . (282.9) (88.8)
Investment Securities Sold . . . . . . . . . . . . 903.5 9.4
Investment Securities Matured . . . . . . . . . . . 179.6 28.0
Deposit from Reinsurer . . . . . . . . . . . . . (957.4) --
Other . . . . . . . . . . . . . . . . . . . 41.0 (15.9)
Net Cash (Used) Provided in Investing Activities. . . . (692.4) 404.1
CASH FLOWS FROM FINANCING ACTIVITIES
Short-Term Debt, Net Change. . . . . . . . . . . . 145.1 (269.5)
Deposits Payable, Net Change . . . . . . . . . . . (4.8) 46.6
Long-Term Debt Issued. . . . . . . . . . . . . . 669.2 846.9
Long-Term Debt Repaid. . . . . . . . . . . . . . (454.7) (608.1)
Dividends Paid . . . . . . . . . . . . . . . . (26.7) (24.3)
Net Cash Provided (Used) in Financing Activities. . . . 328.1 (8.4)
NET INCREASE IN CASH AND EQUIVALENTS . . . . . . . . . 120.5 663.5
Cash and Equivalents at Beginning of Period. . . . . . . 273.1 189.5
CASH AND EQUIVALENTS AT END OF PERIOD. . . . . . . . .$ 393.6 $ 853.0
SUPPLEMENTAL CASH FLOW INFORMATION
Interest Paid . . . . . . . . . . . . . . . .$ 138.4 $ 134.6
Income Taxes Paid . . . . . . . . . . . . . . . 14.0 3.2
See Notes to Financial Statements.
BENEFICIAL CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(in millions, except per share amounts)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting policies used in the preparation of the unaudited
quarterly financial statements are consistent with accounting policies
described in the notes to financial statements contained in the
Company's 1995 Form 10-K to Shareholders. Additionally, the Company
classifies receivables specifically identified for inclusion in
securitizations as Receivables Held for Resale. These amounts are
carried at the lower of cost or market value on an aggregated basis.
In the opinion of management, all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation have been
reflected. Certain prior period amounts have been reclassified to
conform with the 1996 presentation. Interim results are not
necessarily indicative of results for a full year.
2. FINANCE RECEIVABLES
Finance receivables consisted of the following:
March 31, December 31,
1996 1995
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Receivables Owned:
Real Estate Secured. . . . . . . $ 5,778.3 $ 6,636.6
Personal Unsecured . . . . . . . .2,711.4 2,756.1
Credit Cards . . . . . . . . . .3,242.2 3,084.0
Sales Finance Contracts . . . . . . 828.9 836.6
Commercial. . . . . . . . . . . 105.2 102.9
Receivables Held for Resale . . . . .1,201.3 --
Total Owned 13,867.3 13,416.2
Receivables Sold with Servicing Retained
(all real estate secured). . . . . 994.2 1,113.5
Total Owned and Serviced. . . . . . .$14,861.5 $14,529.7
3. ALLOWANCE FOR CREDIT LOSSES
An analysis of the allowance for credit losses follows:
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1996
Balance at January 1 . . . . . . . . . . . . .$406.1
Accounts Charged Off . . . . . . . . . . . . . (79.9)
Recoveries on Accounts Previously Charged Off . . . . . 10.4
Provision for Credit Losses . . . . . . . . . . . 81.7
Other . . . . . . . . . . . . . . . . . . 4.9
Balance at March 31. . . . . . . . . . . . . .$423.2
4. INVESTMENT SECURITIES
Investment securities were as follows:
March 31, 1996 December 31,1995
Carrying Market Carrying Market
Value Value Value Value
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AVAILABLE-FOR-SALE
Debt Securities:
Corporate $342.6 $342.6 $ 807.5 $ 807.5
Mortgage-backed 53.9 53.9 335.5 335.5
Municipal 7.1 7.1 20.2 20.2
U.S. Government 114.5 114.5 176.3 176.3
Foreign Government 48.7 48.7 59.4 59.4
566.8 566.8 1,398.9 1,398.9
Equity Securities 1.9 1.9 6.3 6.3
Total $568.7 $568.7 $1,405.2 $1,405.2
HELD-TO-MATURITY
Debt Securities:
Corporate $ 41.0 $ 40.2 $ 41.2 $ 41.5
Mortgage-backed 2.5 2.4 2.6 2.7
Municipal 7.9 8.1 7.9 8.3
U.S. Government 17.3 17.2 17.5 17.5
Foreign Government 1.1 1.1 1.1 1.1
Other 17.3 17.3 15.9 15.9
Total $ 87.1 $ 86.3 $ 86.2 $ 87.0
TOTAL INVESTMENT SECURITIES $655.8 $655.0 $1,491.4 $1,492.2
Effective March 31, 1996, the Company fully reinsured its annuity
portfolio through a co-insurance agreement. While the risks and rewards
of the portfolio have been transferred to the reinsurer, the policy
reserves relating to the annuity portfolio have not been legally assumed.
Therefore, the policy reserves remain on the balance sheet. A similar
amount of assets (investments and cash) have been transferred to the
reinsurer as a deposit supporting the annuity contracts.
During the first quarter of 1996, there were no investments
transferred from Held-To-Maturity to Available-For-Sale, nor were there
any sales of Held-To-Maturity investments.
5. SHORT-TERM DEBT
Short-term debt outstanding consisted of the following:
March 31, December 31,
1996 1995
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Commercial Paper. . . . . . . . . . $3,700.4 $3,506.2
Bank Borrowings . . . . . . . . . . 457.4 517.7
Total . . . . . . . . . . . $4,157.8 $4,023.9
The weighted average interest rates (including the costs of
maintaining lines of credit) on short-term borrowings during the three
months ended March 31 were as follows:
1996 1995
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U.S. Dollar Borrowings. . . . . . . . 5.58% 6.24%
Other Currency Borrowings. . . . . . . 6.65 7.20
Overall. . . . . . . . . . . . . 5.80 6.42
The impact of interest rate hedging activities on the Company's
weighted average short-term borrowing rates and on the reported short-
term interest expense for the three months ended March 31 were as
follows: .07% (annualized) and $0.8 in 1996 and .07% (annualized) and
$0.6 in 1995.
6. LONG-TERM DEBT
Long-term debt is shown below in the earliest year it could become
payable:
Weighted Average
Interest Rates at March 31, December 31,
Maturity March 31, 1996 1996 1995
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1996 6.55% $1,607.1 $2,063.5
1997 6.42 2,534.7 2,164.5
1998 7.36 1,415.7 1,189.9
1999 7.47 938.3 891.2
2000 8.03 422.6 422.8
2001-2005 7.63 888.3 863.3
2006-2023 7.63 197.3 197.3
Total 6.99% $8,004.0 $7,792.5
The weighted average interest rates (including issuance costs) on
the Company's long-term debt during the three months ended March 31
were as follows:
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1996 1995
U.S. Dollar Borrowings. . . . . . . . 7.17% 7.66%
Other Currency Borrowings. . . . . . . 7.27 7.18
Overall. . . . . . . . . . . . . 7.18 7.62
Long-term debt outstanding at March 31, 1996, and December 31,
1995, includes $3,088.5 and $2,817.4, respectively, of variable-rate
debt that reprices based on various indices. Such variable-rate debt
generally has an original maturity of one-to-two years.
The impact of interest rate hedging activities on the Company's
weighted average long-term borrowing rates and on the reported long-
term interest expense for the three months ended March 31 were as
follows: .08% (annualized) and $1.6 in 1996 and .06% (annualized) and
$1.2 in 1995.
7. DERIVATIVE FINANCIAL INSTRUMENTS
The Company enters into foreign exchange forward agreements and
options to hedge its net investment in foreign subsidiaries. At March
31, 1996 and December 31, 1995, the Company had purchased options to
deliver British pounds and Canadian dollars in exchange for US$369.8
and US$391.5, respectively. Concurrently, the Company had sold options
to buy British pounds and Canadian dollars in exchange for US$371.2 and
US$393.3 in 1996 and 1995, respectively. The Company's outstanding
forward agreements as of March 31, 1996 consisted of sales of C$55.0
and DM48.0 in exchange for US$40.2 and US$32.6, respectively. This
compares to forward sales of DM107.0 for US$75.5 at year-end 1995.
The Company accrued pretax losses of $2.0 at March 31, 1996, and
pretax gains of $1.2 at December 31, 1995, on open hedges. All hedge
gains and losses, including the mark to spot on open options and
forwards, are recognized in a separate component of equity. There were
no gains or losses recognized in net income attributable to the above
hedging programs.
The Company utilizes interest-rate swaps to allow it to match fund
its variable- and fixed-rate receivables and to manage basis risk. The
amounts to be paid or received under the agreements are accrued in
interest expense consistent with the terms of the agreements. At March
31, 1996, accrued interest payable related to these interest-rate swaps
totaled $25.0, which is largely offset by $19.1 of accrued interest
receivable. The impact of interest rate hedging activities on the
Company's weighted average borrowing rates and on the reported interest
expense for the three months ended March 31, were as follows: .08%
(annualized) and $2.4 in 1996 and .07% (annualized) and $1.8 in 1995.
The following table summarizes the interest-rate swaps outstanding
at March 31, 1996:
Weighted Average Weighted
Notional Interest Rates Average
Amount Pay Receive Maturity*
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Pay fixed-rate-receive floating-rate $ 793.9 7.26% 5.93% 1.8
Pay floating-rate-receive fixed-rate 255.5 6.34 7.23 7.1
Pay floating-rate-receive floating-rate 1,545.0 5.43 5.40 1.1
Total $2,594.4 6.08% 5.74% 1.9
*Remaining term in years.
8. EARNINGS PER COMMON SHARE
Computations of primary and fully diluted earnings per common
share are as follows:
Three Months Ended
March 31,
1996 1995
PRIMARY EARNINGS
Net Income . . . . . . . . . . . . . . . . . $107.4 $20.7
Dividends on Preferred Stock . . . . . . . . . . . (1.3) (1.3)
Net Income Applicable to Common Stock . . . . . . . . $106.1 $19.4
Weighted Average Shares Outstanding:
Common . . . . . . . . . . . . . . . . . 52.9 52.2
Common Stock Equivalents . . . . . . . . . . . 1.2 .8
Total . . . . . . . . . . . . . . . . . 54.1 53.0
Primary Earnings per Common Share . . . . . . . . . .$ 1.96 $ .37
FULLY DILUTED EARNINGS
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Net Income . . . . . . . . . . . . . . . . $107.4 $20.7
Dividends on Non-Convertible Preferred Stock . . . . . (1.3) (1.3)
Net Income Applicable to Common Stock . . . . . . . $106.1 $19.4
Weighted Average Shares Outstanding:
Common . . . . . . . . . . . . . . . . . 52.9 52.2
Common Stock Equivalents . . . . . . . . . . . 1.6 1.0
Total. . . . . . . . . . . . . . . . . 54.5 53.2
Fully Diluted Earnings per Common Share . . . . . . . .$ 1.95 $ .36
9. RATIO OF EARNINGS TO FIXED CHARGES
Three Months Ended
March 31,
1996 1995
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Net Income. . . . . . . . . . . . . . . . $107.4 $ 20.7
Add Provision for Income Taxes . . . . . . . . . 77.3 14.4
Earnings Before Income Taxes . . . . . . . . 184.7 35.1
Fixed Charges:
Interest and Debt Expense . . . . . . . . . . 209.0 212.2
Interest Factor Portion of Rentals . . . . . . . 5.4 5.7
Preferred Stock Dividend Requirement . . . . . . 1.3 .9
Total Fixed Charges . . . . . . . . . . . 215.7 218.8
Earnings Before Income Taxes and Fixed Charges . . . $400.4 $253.9
Ratio of Earnings to Fixed Charges . . . . . . . 1.86 1.16
In computing the ratio of earnings to fixed charges, earnings
consist of net income to which has been added income taxes and fixed
charges. Fixed charges consist principally of interest on all
indebtedness and that portion of rentals considered to represent an
appropriate interest factor.
10. CONTINGENT LIABILITIES
In July 1992, the Internal Revenue Service completed its
examination of the Company's federal income tax returns for 1984
through 1987 and proposed certain adjustments that relate principally
to activities of the Company's former subsidiary, American Centennial
Insurance Company (ACIC), prior to its sale. The Company sold its
entire interest in ACIC in May 1987. The IRS has proposed, among other
items, $142.0 in adjustments relating to 1986 and 1987 ACIC additions
to loss reserves. In order to limit the further accrual of interest on
the proposed adjustments, the Company paid $105.5 of tax and interest
during the third quarter of 1992.
The Company's management and independent tax advisers believe that
certain of the IRS's proposed adjustments are without merit and that in
other instances the IRS's position is unlikely to be sustained in the
amounts proposed. The Company is in the process of contesting the
proposed adjustments within the administrative appeals process of the
IRS and is prepared to litigate if necessary. While the conclusion of
this matter cannot be predicted with certainty, management does not
anticipate the ultimate resolution to differ materially from amounts
accrued. Resolution is not expected to occur within one year.
BENEFICIAL CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Financial Condition
The $957 million annuity portfolio of the Central National Life
Insurance Company of Omaha, a subsidiary of the Beneficial Insurance
Group, was effectively sold to SunAmerica Life Insurance Company on
March 31, 1996 through a co-insurance agreement. Accordingly, roughly
$900 million ofinvestment securities were sold or transferred to
SunAmerica as part of this disposition, which resulted in capital
gains on disposition of investments of $8.4 million, after consideration
of related taxes. Although the risks of ownership have been substantially
transferred to SunAmerica by the co-insurance agreement, SunAmerica
has not yet legally assumed the policies. Therefore, the $957
million in policy reserves related to the annuity portfolio and an
offsetting deposit in other assets will remain until SunAmerica legally
assumes or rewrites the policies.
The Company's leverage (the ratio of interest-bearing debt to
total equity) dropped to 8.11 times at March 31, 1996, from 8.29 times
at year-end 1995, benefiting from strong quarterly earnings. In order
to maintain leverage within targeted levels, subsidiaries of the
Company sell receivables through securitizations in the capital markets
and retain collection and administrative responsibilities as servicer
for the trust holding the receivables. On April 30, 1996, the Company
completed a $1.2 billion securitization of variable-rate home equity
loans which will result in lower leverage for the second quarter. As a
result, these receivables were classified as held for resale at March
31, 1996.
Total owned finance receivables increased $451 million, or 3%,
during the first quarter of 1996, compared to a decline of $719
million, or 6%, during the same period in 1995, which reflected a $1.1
billion securitization of home equity loans in March 1995. The 1996
quarter benefited from $230 million in acquisitions of real estate
secured loans by the North American loan office system, as well as
stronger growth in Beneficial National Bank USA (BNB USA), the
Company's private-label credit card bank, than a year earlier.
Managed receivable growth was $360 million (before foreign exchange
impact) for the first three months of 1996 compared to a gain of
$195 million in the first quarter of 1995.
Reflecting the normal seasonal pattern for delinquency, as well as
a higher proportion of, and increased delinquency in, the credit card
and unsecured portfolios, total loans owned delinquent two months and
greater on a contractual basis increased to 3.16% at March 31, 1996,
from 2.95% at March 31, 1995, and 2.98% at the end of 1995. On a
managed basis, delinquency was 3.15%, up from 2.77% a year earlier and
2.97% at year end 1995.
First quarter net chargeoffs increased significantly by 65% to
$69.5 million from $42.2 million in the 1995 first quarter. As a
percentage of average owned gross receivables, annualized net
chargeoffs increased to 1.98% from 1.33% in the 1995 period. However,
this was down from the 2.09% in the fourth quarter of 1995. The year-
to-year increase is reflective of the higher proportion of credit card
receivables and personal unsecured loans in the Company's portfolio
coupled with some increase in chargeoff rate on these portfolios.
Management expects the trend toward personal unsecured lending to
continue for the foreseeable future. At March 31, 1996, the allowance
for credit losses as a percentage of owned finance receivables was
3.05%, up from 3.03% at December 31, 1995, and 2.97% at the end of
March 1995 reflecting an increased reserve balance of $423.2 million at
March 31, 1996 from $344.8 million at March 31, 1995. At this level,
the reserve covered annualized chargeoffs 1.5 times versus 2.0 times in
the first quarter of 1995.
Results of Operations
First quarter 1996 net income increased to $107.4 million from
$20.7 million recorded in the first quarter of 1995. The 1996 first
quarter Refund Anticipation Loan (RAL) pretax earnings were $80.5
million compared to the $65 million pretax loss recorded in the first
quarter of 1995. 1995's loss resulted when the IRS released payment of
the earned income tax credit portion on thousands of refunds directly
to taxpayers who had already received these refunds through the RAL
program, rather than to the Company's banking subsidiary to repay the
loan as directed by the taxpayer. RAL operations for the 1996 quarter
benefited from $41.9 million in prior year bad debt collections and
very smooth and efficient processing of tax refunds by the Internal
Revenue Service. Even excluding prior year collections, the current
year program proved successful with quarterly pretax income of $39
million versus $30 million during the first quarter of 1995 (excluding
earned income credit losses). RAL is expected to contribute another
$20 million of pretax earnings during the second quarter, reflecting
collections on accounts beyond the conservative first quarter bad debt
provision. Absent RAL, Insurance Operations' capital gain on the
annuity transaction and prior year's $23.5 million pretax
securitization gain, the Company's core business net income increased
11% from the prior year quarter.
Lending spread income increased $56.9 million or 20% in the first
quarter of 1996 over the comparable period in 1995. As a percentage of
average receivables, the lending spread was 9.89%, improved from 9.13%
in the prior year period. The gross yield as a percentage of average
receivables was essentially flat at 16.04% compared to 16.06% a year
earlier, however, interest expense fell significantly to 6.15% from
6.93%. This increase in the lending spread reflected the shift in
product mix away from real estate loans to unsecured loans over the
past year, as well as a continued wide prime/commercial paper spread
and reduced RAL funding requirements. Although the annualized yield on
real estate loans dropped to 12.83% at March 1996 from 13.33% at March
1995, the annualized yield on unsecured loans increased to 23.54% in
the current quarter from 23.36% in the first quarter of the prior year.
Other revenues increased significantly in the quarter, to $165.7
million from $26.9 million in the 1995 period, reflecting the dramatic
turnaround in the RAL business as mentioned above.
Removing the impact of the $24 million annuity-related capital gain,
pretax earnings from insurance operations for the first quarter declined
to $16.6 million from $17.7 million in 1995, reflecting higher loss
ratios in virtually all product lines, which management beleives to be
normal claim experience fluctuations. In addition, 1995 results included
$1.0 million in pretax earnings from the annuity business.
Reflecting higher net chargeoffs and higher average receivables in
1996, the provision for credit losses was up 58% in the first quarter
over the same period in 1995. The increase in chargeoffs primarily
reflects the increased proportion of credit card receivables and
personal unsecured loans in the Company's portfolio. As a percentage
of average owned receivables, the provision for credit losses increased
to 2.40% from 1.69% in the first quarter of 1995.
All operating expenses (salaries and employee benefits and other
operating expenses) increased 8% in the first quarter of this year
compared to the 1995 period, generally reflecting higher volume-related
expenditures. However, as a percentage of average owned receivables,
all operating expenses in 1996 at 7.44% were improved from 7.66% in the
1995 period. On a percentage of average managed receivables this ratio
was 6.91% versus 7.16% in the first quarter of 1995.
As announced during the quarter, BNB USA is conducting a private-
label credit card pilot program with Kmart Corporation. Upon
successful completion of the pilot in 166 Kmart stores, the two
companies plan to expand the program in 1996 to all of the more than
2,000 Kmart locations in the U.S. and Canada. Although long-term
profitability is expected from this merchant relationship, the roll out
will result in considerable start-up losses in 1996, which will impact
1996 results of operations.
Changes in Cash Flow and Liquidity
The principal sources of cash are collections of finance
receivables, proceeds from the issuance of short- and long-term debt,
and cash provided through operations (including maturities and
repayments of its receivables). The monthly collections of cash
principal as a percentage of average receivables were 5.36% in the
first quarter of 1996, compared to 4.82% in the first quarter of 1995.
The increase year-to-year in the percentage collected is due to a
higher proportion of credit card receivables in the portfolio in the
current year, compared to the prior year period.
Substantial additional liquidity is available through committed
bank lines that the Company maintains in support of its commercial
paper borrowings and through long-term borrowings through both private
and public debt offerings. Also, as previously mentioned, from time to
time subsidiaries of the Company sell receivables through
securitizations in the capital markets.
The principal uses of cash are loans to customers, repayments of
maturing debt, dividends to shareholders, and general operating needs.
Recent Accounting Pronouncements
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-
Based Compensation" effective for transactions entered into after
December 15, 1995. The Company expects to disclose the pro forma
charge to earnings at year-end 1996 for the valuation of the non-
qualified stock option plan.
The consolidated financial statements and related notes should be
read in conjunction with the preceding review.
BENEFICIAL CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Company's private-label credit card issuer, Beneficial
National Bank USA (BNB USA) located in Delaware, is a defendant in a
putative class action filed in State Court, Denver County, Colorado on
December 16, 1994, alleging that the $10 late charge assessed by BNB
USA on delinquent Colorado cardholders violated Colorado law. By
stipulation of the parties, a stay of all proceedings in the case was
ordered on March 10, 1995 pending final disposition by the Colorado
Supreme Court of identical litigation involving other out of state card
issuers. Subsequently, in those related cases, the Colorado Supreme
Court held that Section 85 of the National Bank Act and Section 27 of
the Federal Deposit Insurance Act preempt claims challenging the
legality of late fees assessed by out of state card issuers in
conformity with the laws of their home states. Shortly thereafter, the
Colorado Supreme Court granted summary judgment in favor of BNB USA on
similar grounds. An appeal is currently pending before the U.S.
Supreme Court.
On January 19, 1996, the U.S. Supreme Court granted certiorari in
a case involving the same legal issues as in Colorado in an appeal of a
California Supreme Court decision in favor of Citibank (South Dakota),
N.A. A decision from the U.S. Supreme Court is expected before July 1,
1996 and that decision will control the issue in the pending BNB USA
case. These cases are significant because the same issues could arise
with respect to BNB USA in other states involving amounts of collected
late charges that may be material. Similar issues have recently been
litigated in dozens of state and federal courts and in all but two
pending cases, the courts have upheld the preemption doctrine
permitting the exportation of a bank's home state, late fee laws
notwithstanding inconsistent laws of other states in which cardholders
reside. Moreover, federal regulators have also issued opinions in
support of the preemption doctrine in favor of BNB USA and other
defendant banks.
Accordingly, the Company believes this case against BNB USA and
similar cases involving other defendant banks are without merit.
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits
Exhibit
Number Exhibit
3.1 Copy of the Company's Restated Certificate of
Incorporation, as amended, is incorporated by reference to
Exhibit 3.1 of the Annual Report on Form 10-K for the year
ended December 31, 1994.
3.2 Copy of the Company's By-Laws, as amended, is incorporated
by reference to Exhibit 3.2 of the Annual Report on Form 10-
K for the year ended December 31, 1990.
10 (a) Copies of forms of agreements to be entered into between
Beneficial Corporation and certain key management employees
of the Company and its subsidiaries.
(b) Copies of forms of Severance Agreements by and between
Beneficial Corporation and key executive officers of the
Company and its subsidiaries.
27 Financial Data Schedule (in EDGAR filing only).
b) The Company filed the following report on Form 8-K during the
period covered by this Form 10-Q:
1) A report on Form 8-K, dated January 29, 1996, relating
to the Company's fourth-quarter earnings and income
forthe full year 1995, which were announced on
January 29, 1996.
2) A report on Form 8-K, dated March 11, 1996, relating to
Kmart Corporation's announcement regarding the launching
of a new credit card through Beneficial National Bank
USA, a subsidiary of the Company.
3) A report on Form 8-K, dated March 12, 1996, relating to
the Company's announcement of a highly successful tax
refund anticipation loan (RAL) season.
BENEFICIAL CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Date May 9, 1996 /s/ Ronald E. Bombolis
Ronald E. Bombolis
Sr. Vice President
and Controller
(Chief Accounting
Officer)
Date May 9, 1996 /s/ Andrew C. Halvorsen
Andrew C. Halvorsen
Member of the Office
of the President and
Director (Chief
Financial Officer)
EXHIBIT INDEX
Exhibit
Number Exhibit
3.1 Copy of the Company's Restated Certificate of
Incorporation, as amended, is incorporated by reference to
Exhibit 3.1 of the Annual Report on Form 10-K for the year
ended December 31, 1994.
3.2 Copy of the Company's By-Laws, as amended, is incorporated
by reference to Exhibit 3.2 of the Annual Report on Form 10-
K for the year ended December 31, 1990.
10 (a) Copies of forms of agreements to be entered into between
Beneficial Corporation and certain key management employees
of the Company and its subsidiaries.
(b) Copies of forms of Severance Agreements by and between
Beneficial Corporation and key executive officers of the
Company and its subsidiaries.
27 Financial Data Schedule (in EDGAR filing only).
EXHIBIT 10(a)
AMENDED AND RESTATED AGREEMENT between
Beneficial Corporation, a Delaware corporation
("Beneficial"), and NAME (the "Executive"), dated as of
April 19, 1996.
1. Operation of Agreement. This Agreement
shall be effective immediately but shall not be operative
unless and until there has been a Change in Control while
the Executive is in the employ of Beneficial or a
Subsidiary, whereupon it shall become effective
immediately. A "Change in Control" shall mean a change
in control of Beneficial, which shall be deemed to have
occurred if and when:
(i) any Person (as defined below)
is or becomes the Beneficial Owner (as defined
below), directly or indirectly, of securities
of the Beneficial (not including in the
securities beneficially owned by such Person
any securities acquired directly from
Beneficial or its affiliates) representing 20%
or more of the combined voting power of
Beneficial's then outstanding securities,
excluding any Person who becomes such a
Beneficial Owner in connection with a
transaction described in clause (A) of
paragraph (iii); or
(ii) the following individuals cease
for any reason to constitute a majority of the
number of directors then serving as the Board
of Directors of Beneficial ("Board"):
individuals who, on the date hereof, constitute
the Board and any new directors (other than a
director whose initial assumption of office is
in connection with an actual or threatened
election contest, including but not limited to
a consent solicitation, relating to the
election of directors of Beneficial) whose
appointment or election by the Board or
nomination for election by Beneficial's
stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in
office who either were directors on the date
hereof or whose appointment, election or
nomination for election was previously so
approved; or
(iii) there is consummated a
merger or consolidation of Beneficial or a
direct or indirect subsidiary of Beneficial
with any other corporation, other than (A) a
merger or consolidation which would result in
the voting securities of Beneficial outstanding
immediately prior to such merger or
consolidation continuing to represent (either
by remaining outstanding or by being converted
into voting securities of the surviving entity
or any parent thereof), in combination with the
ownership of any trustee or other fiduciary
holding securities under an employee benefit
plan of Beneficial, at least 80% of the
combined voting power of the securities of
Beneficial or
such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (B) a
merger or consolidation effected to implement a
recapitalization of Beneficial (or similar transaction) in
which no Person is or becomes the Beneficial Owner, directly
or indirectly, of securities of Beneficial (not including in
the securities Beneficially Owned by such Person any
securities acquired directly from Beneficial or its
subsidiaries) representing 20% or more of either the then
outstanding shares of common stock of Beneficial or the
combined voting power of Beneficial's then outstanding
securities; or
(iv) the stockholders of Beneficial approve a plan
of complete liquidation or dissolution of Beneficial or there
is consummated an agreement for the sale or disposition by
Beneficial of all or substantially all of Beneficial's
assets, other than a sale or disposition by Beneficial of all
or substantially all of the Beneficial's assets to an entity,
at least 80% of the combined voting power of the voting
securities of which are owned by stockholders of Beneficial
in substantially the same proportions as their ownership of
Beneficial immediately prior to such sale.
provided, however, that the foregoing events shall not be deemed to be
a Change in Control if the transaction, transactions or elections
causing such change shall have been approved by the affirmative vote of
at least a majority of the members of the Board of Directors of
Beneficial in office immediately prior to the Change in Control.
For purposes of this Agreement, the term "Person" shall have
the meaning given in Section 3(a)(9) of the Exchange Act, as modified
and used in Sections 13(d) and 14(d) thereof, except that such term
shall not include (i) Beneficial or any of its subsidiaries, (ii) a
trustee or other fiduciary holding securities under an employee benefit
plan of Beneficial or any of its affiliates, (iii) an underwriter
temporarily holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or indirectly, by the
stockholders of Beneficial in substantially the same proportions as
their ownership of stock of Beneficial, and the term "Beneficial Owner"
shall have the meaning set forth in Rule 13d-3 under the Exchange Act.
2. Employment and Period of Employment. The Period of
Employment shall commence on the date of a Change in Control and shall
continue until the close of business on the last business day of the
36th calendar month following such Change in Control.
3. Position, Responsibilities and Location. During the
Period of Employment, the Executive shall hold and perform a position
of responsibility, importance and scope with the Company at least equal
to those of the position held by him immediately prior to the Change in
Control (the particular employer at the time the Change in Control
occurs is referred to herein as the "Company"). The Executive shall
not be required, without his written consent, to change his office
location from the location thereof immediately prior to a Change in
Control or to be absent therefrom on business more than 60 working days
in any year or more than 10 consecutive days at any one time.
4. Compensation, Perquisites and Benefit Plans. Subject to
Section 5 hereof, during the Period of Employment the Executive shall
receive a salary, payable no less often than monthly, at the rate of
monthly salary paid to him immediately prior to a Change in Control,
with increases effective as of January 1 of each calendar year that
begins during the Period of Employment, each such increase to be based
on the Company's regular salary practices prior to the Change in
Control.
The Executive shall also be entitled to (a) perquisites,
including, without limitation, an office, secretarial and clerical
staff, and to employee benefits, at least equal to those to which he
was entitled immediately prior to the Change in Control, and (b) all
payments, benefits and service credit for benefits during the Period of
Employment to which such Company executives immediately prior to the
Change in Control were entitled as a result of their employment under
the terms of employee plans and practices of the Company.
5. Termination. (a) In the event of a Termination for any
reason (including death or disability) other than Cause during the
Period of Employment and subject to Section 6 hereof, the Company shall
pay to the Executive (or in the event of his death following
Termination, his legal representative) an amount equal to, and in lieu
of, the monthly salary provided in Section 4 hereof for each month
thereafter during the remainder of the Period of Employment. In
addition, during the remainder of such period the Executive (or his
legal representative) shall continue to be entitled to participate in
or be eligible for benefits under the employee benefit plans of
Beneficial and its Subsidiaries, to the same extent that the Executive
would have been entitled were he still employed by the Company, except
such person shall not be entitled to make employee contributions or
payments into any such plan.
Should continued participation in any pension plan or
retirement plan be precluded by the terms thereof, the Company shall
pay to the Executive and, if applicable, to his beneficiaries, a
supplemental benefit equal to the excess of (i) the benefit that the
Executive would have been paid under such plan had he continued to be
employed during the remainder of the Period of Employment, over (ii)
the benefit actually payable under such plan. The Company shall pay
such benefit in a series of cash payments coinciding with payments of
benefits under such plan. Such benefit shall be in addition to any
benefit under the Company's retirement, survivor's benefits, insurance,
and other applicable plans and programs then in effect to which the
Executive is entitled. As used herein, the term "Termination" shall
mean:
(i) Termination by the Company of the Executive's
employment for any reason other than for Cause; or
(ii) Termination by the Executive of his
employment upon his good faith determination that there has
been a significant change in the nature or scope of his
authorities, powers, functions, duties or responsibilities
contemplated by Section 3, a reduction in his compensation,
or any other breach by the Company of any provision of this
Agreement, provided that the same shall have continued
unremedied for a period of 30 days after written notice
thereof requesting that the Company remedy the same was given
by the Executive to the Board of Directors of the Company,
attention of the Secretary.
(b) The Company shall have the right to
terminate for Cause the employment of the Executive and
the Period of Employment, provided that there shall have
been delivered to the Executive 60 days' prior written
notice thereof approved by the vote of not less than
three-fourths of the Board of Directors of the Company
at a meeting called and held for that purpose and at
which the Executive was given a reasonable opportunity
to appear and be heard. Termination of the Executive's
employment shall be deemed to have been for Cause only
if it shall have been the result of:
(i) an act or acts of
dishonesty by him constituting a felony and
resulting or intended to result directly or
indirectly in gain to or personal enrichment of
the Executive at the Company's expense, or
(ii) a deliberate and
intentional refusal by the Executive during the
Period of Employment (except by reason of
incapacity due to illness or accident) to comply
with the provisions of Section 3, provided that
such breach shall have resulted in demonstrably
material injury to the Company.
6. Non-Competition. The Company shall not be required to
continue to make payments or provide benefits under this Agreement if
during the period that such requirement would otherwise be applicable
the Executive shall have engaged in conduct constituting Competition
with the Company for a period of 30 days following written notice from
or on behalf of the Board of Directors of the Company that it has
determined that the Executive is engaged in such conduct, provided that
prior to such notice the Executive shall have been afforded a
reasonable opportunity to appear before and be heard by said Board of
Directors.
The Executive shall be deemed to be engaged in Competition
with the Company at a particular time if the Executive shall, directly
or indirectly, engage in, or work for or render services to any person
or firm (in any capacity) which directly or indirectly engages in any
field of business which during the then most recently completed
calendar year provided more than 25 percent of the Company's revenues
or net income on a consolidated basis; provided, however, that the
foregoing shall be limited to conduct of the Executive carried out
within (a) a distance of 50 miles from the office in which the
Executive was principally employed immediately prior to the Change in
Control, and (b) 25 miles from any other office of Beneficial or any
Subsidiary engaged in any such business located within the same state
or comparable jurisdiction as such office; and provided further, that
the Executive shall not be deemed to be engaged in Competition with the
Company solely by reason of ownership of less than 5% of the
outstanding capital stock entitled to vote for the election of
directors of a corporation with a class of equity securities held of
record by more than 500 persons.
7. Arbitration. In the event of any dispute regarding a
refusal or failure by the Company to make payments or provide benefits
hereunder for any reason, the Executive shall have the right, in
addition to all other rights and remedies provided by law, to seek
arbitration under the rules of the American Arbitration Association, by
serving notice to arbitrate upon the Company stating the place of
arbitration, within 90 days after having received notice in any form
that the Company is withholding or proposes to withhold payments or
provisions of benefits.
8. Other Employment; Reduction of Benefits. In the event
that following a Termination the Executive becomes employed by any
person or firm or becomes self-employed, then to the extent that the
Executive shall receive compensation, benefits and service credit for
benefits from such other employment, the aggregate amount of all
payments to be made and benefits and service credit for benefits to be
provided by the Company under the provisions hereof shall be
correspondingly reduced; provided however, that no amount that shall
become payable to the Executive under any Company plan, program, policy
or arrangement without regard to this Agreement shall be reduced by any
such compensation, benefits or service credit received from such other
employment.
9. Confidential Information. The Executive agrees not to
disclose, either while in the Company's employ or at any time
thereafter, to any person not employed or retained by the Company, any
confidential plans, data or other information obtained by him while in
the employ of the Company unless the same shall be known generally to
the public, or unless disclosure of the same is required by law or
Court order.
10. Notices. All notices, requests, demands and other
communications provided for by this Agreement shall be in writing and
shall be sufficiently given if and when mailed in the
United States by registered or certified mail (or comparable service in
the country of residence outside the United States) or personally
delivered to the party entitled thereto at the address stated below or
to such changed address as the addressee may have given by a similar
notice:
To the Company: c/o Beneficial Corporation
One Christina Centre
301 North Walnut Street
Wilmington, Delaware 19801
Attention: Secretary
To the Executive: At his or her home address, as last shown
on the records of the Company.
11. Term of Agreement. This Agreement shall remain
effective until July 19, 1996 and shall continue in effect thereafter
unless and until terminated by Beneficial upon not less than three
months' written notice to the Executive; provided, however, that this
Agreement will remain effective with respect to a Change in Control
which occurs on or prior to any such termination date.
12. General Provisions.
(a) This Agreement shall not confer any right or
impose any obligation on the Executive to continue in the
employ of Beneficial or any Subsidiary, or limit the right of
any such company or the Executive to terminate his
employment, at any time prior to a Change in Control.
(b) No provision of this Agreement may be
amended, modified or waived unless such amendment,
modification or waiver shall be agreed to in writing signed
by the Executive and by a duly authorized officer of
Beneficial.
(c) This Agreement shall be binding upon and
inure to the benefit of Beneficial and any successor of
Beneficial, including, without limitation, any corporation or
corporations acquiring directly or indirectly all or
substantially all of the assets of Beneficial, whether by
merger, consolidation, sale or otherwise, but shall not
otherwise be assignable by Beneficial.
(d) The validity, interpretation, performance and
enforcement of this Agreement shall be governed by the laws
of the State of Delaware, without giving effect to the
principles of conflict of laws thereof.
(e) If any provision of this Agreement shall be
determined to be invalid or unenforceable by a court of
competent jurisdiction, the remaining provisions of this
Agreement shall remain in full force and effect to the
fullest extent permitted by law.
(f) As used herein "Subsidiary" means any
corporation of which securities having ordinary voting power
to elect a majority of the board of directors thereof or
other persons performing similar functions are at the time
directly or indirectly owned by Beneficial and/or one or more
Subsidiaries.
(g) Whenever any words relating to the Executive
are used herein in the masculine gender, they shall be
construed as though they were used in the feminine gender in
all cases where they should so apply.
(h) Should any payments pursuant to this
Agreement be subject to excise tax pursuant to Section 4999
of the Internal Revenue Code of 1986, as Amended, the Company
shall pay to the Executive such additional compensation as is
necessary to place the Executive in the same after-tax
position he would have been in had no such excise tax been
paid or incurred. The Company's obligation with respect to
such additional compensation shall continue until 90 days
after the tax liabilities of the Executive for all tax years
in question are finally determined.
The parties to this amended and restated agreement intend
that this agreement be considered an instrument under seal with the
intent that the statute of limitations provided for at 10 Del.C. section
8106 be tolled to the full extent permitted under Delaware law.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
BENEFICIAL CORPORATION
[SEAL] BY
Scott A. Siebels
Vice President and
Corporate Secretary
[SEAL] Name
AGREEMENT between Beneficial Corporation, a Delaware
corporation ("Beneficial"), and NAME (the "Executive"), dated as
of DATE .
1. Operation of Agreement. This Agreement shall be
effective immediately but shall not be operative unless and until there
has been a Change in Control while the Executive is in the employ of
Beneficial or a Subsidiary, whereupon it shall become effective
immediately. A "Change in Control" shall mean a change in control of
Beneficial, which shall be deemed to have occurred if and when:
(i) any Person (as defined below) is or becomes
the Beneficial Owner (as defined below), directly or
indirectly, of securities of the Beneficial (not including in
the securities beneficially owned by such Person any
securities acquired directly from Beneficial or its
affiliates) representing 20% or more of the combined voting
power of Beneficial's then outstanding securities, excluding
any Person who becomes such a Beneficial Owner in connection
with a transaction described in clause (A) of paragraph
(iii); or
(ii) the following individuals cease for any
reason to constitute a majority of the number of directors
then serving as the Board of Directors of Beneficial
("Board"): individuals who, on the date hereof, constitute
the Board and any new directors (other than a director whose
initial assumption of office is in connection with an actual
or threatened election contest, including but not limited to
a consent solicitation, relating to the election of directors
of Beneficial) whose appointment or election by the Board or
nomination for election by Beneficial's stockholders was
approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors on
the date hereof or whose appointment, election or nomination
for election was previously so approved; or
(iii) there is consummated a merger or
consolidation of Beneficial or a direct or indirect
subsidiary of Beneficial with any other corporation, other
than (A) a merger or consolidation which would result in the
voting securities of Beneficial outstanding immediately prior
to such merger or consolidation continuing to represent
(either by remaining outstanding or by being converted into
voting securities of the surviving entity or any parent
thereof), in combination with the ownership of any trustee or
other fiduciary holding securities under an employee benefit
plan of Beneficial, at least 80% of the combined voting power
of the securities of Beneficial or
such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (B) a
merger or consolidation effected to implement a
recapitalization of Beneficial (or similar transaction) in
which no Person is or becomes the Beneficial Owner, directly
or indirectly, of securities of Beneficial (not including in
the securities Beneficially Owned by such Person any
securities acquired directly from Beneficial or its
subsidiaries) representing 20% or more of either the then
outstanding shares of common stock of Beneficial or the
combined voting power of Beneficial's then outstanding
securities; or
(iv) the stockholders of Beneficial approve a plan
of complete liquidation or dissolution of Beneficial or there
is consummated an agreement for the sale or disposition by
Beneficial of all or substantially all of Beneficial's
assets, other than a sale or disposition by Beneficial of all
or substantially all of the Beneficial's assets to an entity,
at least 80% of the combined voting power of the voting
securities of which are owned by stockholders of Beneficial
in substantially the same proportions as their ownership of
Beneficial immediately prior to such sale.
provided, however, that the foregoing events shall not be deemed to be
a Change in Control if the transaction, transactions or elections
causing such change shall have been approved by the affirmative vote of
at least a majority of the members of the Board of Directors of
Beneficial in office immediately prior to the Change in Control.
For purposes of this Agreement, the term "Person" shall have
the meaning given in Section 3(a)(9) of the Exchange Act, as modified
and used in Sections 13(d) and 14(d) thereof, except that such term
shall not include (i) Beneficial or any of its subsidiaries, (ii) a
trustee or other fiduciary holding securities under an employee benefit
plan of Beneficial or any of its affiliates, (iii) an underwriter
temporarily holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or indirectly, by the
stockholders of Beneficial in substantially the same proportions as
their ownership of stock of Beneficial, and the term "Beneficial Owner"
shall have the meaning set forth in Rule 13d-3 under the Exchange Act.
2. Employment and Period of Employment. The Period of
Employment shall commence on the date of a Change in Control and shall
continue until the close of business on the last business day of the
36th calendar month following such Change in Control.
3. Position, Responsibilities and Location. During the
Period of Employment, the Executive shall hold and perform a position
of responsibility, importance and scope with the Company at least equal
to those of the position held by him immediately prior to the Change in
Control (the particular employer at the
time the Change in Control occurs is referred to herein as the
"Company"). The Executive shall not be required, without his written
consent, to change his office location from the location thereof
immediately prior to a Change in Control or to be absent therefrom on
business more than 60 working days in any year or more than 10
consecutive days at any one time.
4. Compensation, Perquisites and Benefit Plans. Subject to
Section 5 hereof, during the Period of Employment the Executive shall
receive a salary, payable no less often than monthly, at the rate of
monthly salary paid to him immediately prior to a Change in Control,
with increases effective as of January 1 of each calendar year that
begins during the Period of Employment, each such increase to be based
on the Company's regular salary practices prior to the Change in
Control.
The Executive shall also be entitled to (a) perquisites,
including, without limitation, an office, secretarial and clerical
staff, and to employee benefits, at least equal to those to which he
was entitled immediately prior to the Change in Control, and (b) all
payments, benefits and service credit for benefits during the Period of
Employment to which such Company executives immediately prior to the
Change in Control were entitled as a result of their employment under
the terms of employee plans and practices of the Company.
5. Termination. (a) In the event of a Termination for any
reason (including death or disability) other than Cause during the
Period of Employment and subject to Section 6 hereof, the Company shall
pay to the Executive (or in the event of his death following
Termination, his legal representative) an amount equal to, and in lieu
of, the monthly salary provided in Section 4 hereof for each month
thereafter during the remainder of the Period of Employment. In
addition, during the remainder of such period the Executive (or his
legal representative) shall continue to be entitled to participate in
or be eligible for benefits under the employee benefit plans of
Beneficial and its Subsidiaries, to the same extent that the Executive
would have been entitled were he still employed by the Company, except
such person shall not be entitled to make employee contributions or
payments into any such plan.
Should continued participation in any pension plan or
retirement plan be precluded by the terms thereof, the Company shall
pay to the Executive and, if applicable, to his beneficiaries, a
supplemental benefit equal to the excess of (i) the benefit that the
Executive would have been paid under such plan had he continued to be
employed during the remainder of the Period of Employment, over (ii)
the benefit actually payable under such plan. The Company shall pay
such benefit in a series of cash payments coinciding with payments of
benefits under such plan. Such benefit shall be in addition to any
benefit under the Company's retirement, survivor's benefits, insurance,
and other applicable plans and programs then in effect to which the
Executive is entitled. As used herein, the term "Termination" shall
mean:
(i) Termination by the Company of the Executive's
employment for any reason other than for Cause; or
(ii) Termination by the Executive of his
employment upon his good faith determination that there has
been a significant change in the nature or scope of his
authorities, powers, functions, duties or responsibilities
contemplated by Section 3, a reduction in his compensation,
or any other breach by the Company of any provision of this
Agreement, provided that the same shall have continued
unremedied for a period of 30 days after written notice
thereof requesting that the Company remedy the same was given
by the Executive to the Board of Directors of the Company,
attention of the Secretary.
(b) The Company shall have the right to
terminate for Cause the employment of the Executive and
the Period of Employment, provided that there shall have
been delivered to the Executive 60 days' prior written
notice thereof approved by the vote of not less than
three-fourths of the Board of Directors of the Company
at a meeting called and held for that purpose and at
which the Executive was given a reasonable opportunity
to appear and be heard. Termination of the Executive's
employment shall be deemed to have been for Cause only
if it shall have been the result of:
(i) an act or acts of
dishonesty by him constituting a felony and
resulting or intended to result directly or
indirectly in gain to or personal enrichment of
the Executive at the Company's expense, or
(ii) a deliberate and
intentional refusal by the Executive during the
Period of Employment (except by reason of
incapacity due to illness or accident) to comply
with the provisions of Section 3, provided that
such breach shall have resulted in demonstrably
material injury to the Company.
6. Non-Competition. The Company shall not be required to
continue to make payments or provide benefits under this Agreement if
during the period that such requirement would otherwise be applicable
the Executive shall have engaged in conduct constituting Competition
with the Company for a period of 30 days following written notice from
or on behalf of the Board of Directors of the Company that it has
determined that the Executive is engaged in such conduct, provided that
prior to such notice the Executive shall have been afforded a
reasonable opportunity to appear before and be heard by said Board of
Directors.
The Executive shall be deemed to be engaged in Competition
with the Company at a particular time if the Executive shall, directly
or indirectly, engage in, or work for or render services to any person
or firm (in any capacity) which directly or indirectly engages in any
field of business which during the then most recently completed
calendar year provided more than 25 percent of the Company's revenues
or net income on a consolidated basis; provided, however, that the
foregoing shall be limited to conduct of the Executive carried out
within (a) a distance of 50 miles from the office in which the
Executive was principally employed immediately prior to the Change in
Control, and (b) 25 miles from any other office of Beneficial or any
Subsidiary engaged in any such business located within the same state
or comparable jurisdiction as such office; and provided further, that
the Executive shall not be deemed to be engaged in Competition with the
Company solely by reason of ownership of less than 5% of the
outstanding capital stock entitled to vote for the election of
directors of a corporation with a class of equity securities held of
record by more than 500 persons.
7. Arbitration. In the event of any dispute regarding a
refusal or failure by the Company to make payments or provide benefits
hereunder for any reason, the Executive shall have the right, in
addition to all other rights and remedies provided by law, to seek
arbitration under the rules of the American Arbitration Association, by
serving notice to arbitrate upon the Company stating the place of
arbitration, within 90 days after having received notice in any form
that the Company is withholding or proposes to withhold payments or
provisions of benefits.
8. Other Employment; Reduction of Benefits. In the event
that following a Termination the Executive becomes employed by any
person or firm or becomes self-employed, then to the extent that the
Executive shall receive compensation, benefits and service credit for
benefits from such other employment, the aggregate amount of all
payments to be made and benefits and service credit for benefits to be
provided by the Company under the provisions hereof shall be
correspondingly reduced; provided however, that no amount that shall
become payable to the Executive under any Company plan, program, policy
or arrangement without regard to this Agreement shall be reduced by any
such compensation, benefits or service credit received from such other
employment.
9. Confidential Information. The Executive agrees not to
disclose, either while in the Company's employ or at any time
thereafter, to any person not employed or retained by the Company, any
confidential plans, data or other information obtained by him while in
the employ of the Company unless the same shall be known generally to
the public, or unless disclosure of the same is required by law or
Court order.
10. Notices. All notices, requests, demands and other
communications provided for by this Agreement shall be in writing and
shall be sufficiently given if and when mailed in the
United States by registered or certified mail (or comparable service in
the country of residence outside the United States) or personally
delivered to the party entitled thereto at the address stated below or
to such changed address as the addressee may have given by a similar
notice:
To the Company: c/o Beneficial Corporation
One Christina Centre
301 North Walnut Street
Wilmington, Delaware 19801
Attention: Secretary
To the Executive: At his or her home address, as last shown
on the records of the Company.
11. Term of Agreement. This Agreement shall remain
effective until DATE and shall continue in effect thereafter unless
and until terminated by Beneficial upon not less than three months'
written notice to the Executive; provided, however, that this Agreement
will remain effective with respect to a Change in Control which occurs
on or prior to any such termination date.
12. General Provisions.
(a) This Agreement shall not confer any right or
impose any obligation on the Executive to continue in the
employ of Beneficial or any Subsidiary, or limit the right of
any such company or the Executive to terminate his
employment, at any time prior to a Change in Control.
(b) No provision of this Agreement may be
amended, modified or waived unless such amendment,
modification or waiver shall be agreed to in writing signed
by the Executive and by a duly authorized officer of
Beneficial.
(c) This Agreement shall be binding upon and
inure to the benefit of Beneficial and any successor of
Beneficial, including, without limitation, any corporation or
corporations acquiring directly or indirectly all or
substantially all of the assets of Beneficial, whether by
merger, consolidation, sale or otherwise, but shall not
otherwise be assignable by Beneficial.
(d) The validity, interpretation, performance and
enforcement of this Agreement shall be governed by the laws
of the State of Delaware, without giving effect to the
principles of conflict of laws thereof.
(e) If any provision of this Agreement shall be
determined to be invalid or unenforceable by a court of
competent jurisdiction, the remaining provisions of this
Agreement shall remain in full force and effect to the
fullest extent permitted by law.
(f) As used herein "Subsidiary" means any
corporation of which securities having ordinary voting power
to elect a majority of the board of directors thereof or
other persons performing similar functions are at the time
directly or indirectly owned by Beneficial and/or one or more
Subsidiaries.
(g) Whenever any words relating to the Executive
are used herein in the masculine gender, they shall be
construed as though they were used in the feminine gender in
all cases where they should so apply.
(h) Should any payments pursuant to this
Agreement be subject to excise tax pursuant to Section 4999
of the Internal Revenue Code of 1986, as Amended, the Company
shall pay to the Executive such additional compensation as is
necessary to place the Executive in the same after-tax
position he would have been in had no such excise tax been
paid or incurred. The Company's obligation with respect to
such additional compensation shall continue until 90 days
after the tax liabilities of the Executive for all tax years
in question are finally determined.
The parties to this amended and restated agreement intend
that this agreement be considered an instrument under seal with the
intent that the statute of limitations provided for at 10 Del.C. Section
8106 be tolled to the full extent permitted under Delaware law.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
BENEFICIAL CORPORATION
[SEAL] BY
Scott A. Siebels
Vice President and
Corporate Secretary
[SEAL] Executive
EXHIBIT 10 (b)
March 26, 1996
<<addr>>
Dear <<name>>:
You previously entered into an agreement dated
August 21, 1986 providing you certain protection in the
event of a change of control of Beneficial Corporation
(the "Corporation"), which agreement was subsequently
amended effective as of February 21, 1990, and which
remains in effect. The Board of Directors of the
Corporation has authorized this amendment and restatement
of your August 21, 1986 agreement, and has requested that
you indicate your agreement and consent (pursuant to
Section 7 of that agreement) by signing in the space
provided below on the enclosed duplicate copy, and
returning it to the Corporation.
The Corporation recognizes that your contribution to
the growth and success of the Corporation has been
substantial and desires to assure the Corporation of your
continued employment. In this connection, the Board of
Directors of the Corporation (the "Board") recognizes
that, as is the case with many publicly held
corporations, the possibility of a change in control may
exist and that such possibility, and the uncertainty and
questions which it may raise among management, may result
in the departure or distraction of management personnel
to the detriment of the Corporation and its stockholders.
The Board has determined that appropriate steps
should be taken to reinforce and encourage the continued
attention and dedication of members of the Corporation's
management, including yourself, to their assigned duties
without distraction in the face of potentially disturbing
circumstances arising from the possibility of a change in
control of the Corporation.
In order to induce you to remain in the employ of
the Corporation and in consideration of your agreement
set forth in paragraph (b) of Section 2 hereof, the
Corporation agrees that you shall receive the severance
benefits set forth in this amended and restated letter
agreement ("Agreement") in the event your employment with
the Corporation is terminated subsequent to a "Change in
Control of the Corporation" (as defined in Section 2
hereof) under the circumstances described below.
For purposes of this Agreement, an employee of a
subsidiary of the Corporation shall be considered an
employee of the Corporation and in such case the
obligation of the Corporation hereunder shall be to cause
such subsidiary to perform the obligations of the
Corporation hereunder.
1. Term of Agreement. This amended and restated
agreement supersedes your August 21, 1986 agreement and
shall continue in effect until December 31, 1998;
provided, however, that commencing on January 1, 1998 and
each January 1 thereafter, the term of this Agreement
shall automatically be extended for one additional year
unless, not later than November 1 of the preceding year,
the Corporation shall have given notice that it does not
wish to extend this Agreement; provided, further, if a
Change in Control of the Corporation shall have occurred
during the original or extended term of this Agreement,
this Agreement shall continue in effect for a period of
thirty-six (36) months beyond the month in which such
Change in Control of the Corporation occurred.
2. Change in Control of the Corporation.
(a) No benefits shall be payable hereunder
unless there shall have been a Change in Control of the
Corporation, as set forth below. For purposes of this
Agreement, a "Change in Control" shall be deemed to have
occurred if the event set forth in any one of the
following paragraphs shall have occurred:
(i) any Person (as defined below) is or
becomes the Beneficial Owner (as defined below), directly
or indirectly, of securities of the Corporation (not
including in the securities beneficially owned by such
Person any securities acquired directly from the Company
or its affiliates) representing 20% or more of the
combined voting power of the Corporation's then
outstanding securities, excluding any Person who becomes
such a Beneficial Owner in connection with a transaction
described in clause (A) of paragraph (iii); or
(ii) the following individuals cease for
any reason to constitute a majority of the number of
directors then serving: individuals who, on the date
hereof, constitute the Board and any new director (other
than a director whose initial assumption of office is in
connection with an actual or threatened election contest,
including but not limited to a consent solicitation,
relating to the election of directors of the Corporation)
whose appointment or election by the Board or nomination
for election by the Corporation's stockholders was
approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors
on the date hereof or whose appointment, election or
nomination for election was previously so approved; or
(iii) there is consummated a merger or
consolidation of the Corporation or a direct or indirect
subsidiary of the Corporation with any other corporation,
other than (A) a merger or consolidation which would
result in the voting securities of the Corporation
outstanding immediately prior to such merger or
consolidation continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity of any parent
thereof), in combination with the ownership of any
trustee or other fiduciary holding securities under an
employee benefit plan of the Corporation, at least 80% of
the combined voting power of the securities of the
Corporation or such surviving entity or any parent
thereof outstanding immediately after such merger or
consolidation, or (B) a merger or consolidation effected
to implement a recapitalization of the Corporation (or
similar transaction) in which no Person is or becomes the
Beneficial Owner, directly or indirectly, of securities
of the Corporation (not including in the securities
Beneficially Owned by such Person any securities acquired
directly from the Corporation or its subsidiaries
representing 20% or more of either the then outstanding
shares of common stock of the Corporation or the combined
voting power of the Corporation's then outstanding
securities; or
(iv) the stockholders of the Corporation
approve a plan of complete liquidation or dissolution of
the Corporation or there is consummated an agreement for
the sale or disposition by the Corporation of all or
substantially all of the Corporation's assets, other than
a sale or disposition by the Corporation of all or
substantially all of the Corporation's assets to an
entity, at least 80% of the combined voting power of the
voting securities of which are owned by stockholders of
the Corporation in substantially the same proportions as
their ownership of the Corporation immediately prior to
such sale.
For purposes of this Agreement, the term "Person" shall
have the meaning given in Section 3(a)(9) of the Exchange
Act, as modified and used in Sections 13(d) and 14(d)
thereof, except that such term shall not include (i) the
Corporation or any of its subsidiaries, (ii) a trustee or
other fiduciary holding securities under an employee
benefit plan of the Corporation or any of its Affiliates,
(iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the
stockholders of the Corporation in substantially the same
proportions as their ownership of stock of the
Corporation, and the term "Beneficial Owner" shall have
the meaning set forth in Rule 13d-3 under the Exchange
Act.
(b) You agree that, subject to the terms and
conditions of this Agreement, in the event of a Change in
Control of the Corporation, you will remain in the employ
of the Corporation for a period of three (3) months from
the occurrence of such Change in Control of the
Corporation; provided, however, that if during such three-
month period (i) your employment is involuntarily
terminated by the Corporation other than for Cause, or
(ii) you terminate your employment during such three-
month period for Good Reason, you shall not be required
to remain in the Corporation's employ. Unless your
employment is terminated pursuant to clause (i) or (ii)
of the preceding sentence, you may terminate your
employment with the corporation by giving written notice
thereof at any time within thirty (30) days following the
expiration of such three (3) month period, in which
event, you shall be entitled to all of the benefits
provided for in Section 4(d) hereof. For purposes of any
determination regarding the existence of Cause or Good
Reason in the application of the foregoing two (2)
sentences, any position taken by you shall be presumed
correct unless the Corporation establishes by clear and
convincing evidence that such position is not correct.
The foregoing shall in no event limit or otherwise affect
your rights under any other provision of this Agreement.
3. Termination Following a Change in Control of
the Corporation. If any of the events described in
Section 2 hereof constituting a Change in Control of the
Corporation shall have occurred, you shall be entitled to
the benefits provided in Section 4(d) hereof upon the
termination of your employment during the term of this
Agreement unless such termination is (i) because of your
Death, Disability or Retirement, (ii) by the Corporation
for Cause, or (iii) by you other than for Good Reason.
For purposes of any determination regarding the
applicability of the immediately preceding sentence, any
position taken by you shall be presumed to be correct
unless the Corporation establishes by clear and
convincing evidence that such position is not correct.
(a) Disability; Retirement. If, as a result
of your incapacity due to physical or mental illness, you
shall have been absent from the full-time performance of
your duties with the Corporation for six (6) consecutive
months, and within thirty (30) days after written notice
of termination is given you shall not have returned to
the full-time performance of your duties, the Corporation
may terminate your employment for "Disability."
Termination by the Corporation or you of your employment
by reason of "Retirement" shall mean termination on or
after attainment of your "normal retirement age," as
defined in the Beneficial Corporation Pension Plan, or in
accordance with any retirement arrangement established
with your consent with respect to you.
(b) Cause. Termination by the Corporation of
your employment for "Cause" shall mean termination upon
(i) the willful and continued failure by you to
substantially perform your duties with the Corporation
(other than any such failure resulting from termination
by you for Good Reason), after a demand for substantial
performance is delivered to you that specifically
identifies the manner in which the Corporation believes
that you have not substantially performed your duties,
and you have failed to resume substantial performance of
your duties on a continuous basis within fourteen (14)
days of receiving such demand, (ii) the willful engaging
by you in conduct which is demonstrably and materially
injurious to the Corporation, monetarily or otherwise or
(iii) your conviction of a felony or conviction of a
misdemeanor which impairs your ability substantially to
perform your duties with the Corporation. For purposes
of this Subsection, no act, or failure to act, on your
part shall be deemed "willful" unless done, or omitted to
be done, by you not in good faith and without reasonable
belief that your action or omission was in the best
interest of the Corporation. In the event of a dispute
concerning the application of this provision, no claim by
the Corporation that Cause exists shall be given effect
unless the Corporation establishes by clear and
convincing evidence that Cause exists.
(c) Good Reason. You shall be entitled to
terminate your employment for Good Reason. For purposes
of this Agreement, "Good Reason" shall mean, without your
express written consent, the occurrence after a Change in
Control of the Corporation of any one or more of the
following:
(i) the assignment to you of duties
inconsistent with your present positions, duties,
responsibilities and status or a reduction or alteration
in the nature or status of your responsibilities from
those in effect as of the date hereof;
(ii) a reduction by the Corporation in
your annual base salary as in effect on the date hereof
as such may be increased from time to time by the Board
("Base Salary");
(iii) the Corporation's requiring you to
be based at a location in excess of twenty-five (25)
miles from the location where you are presently based;
(iv) the failure by the Corporation to
continue in effect any salary plan, incentive plan,
deferred compensation plan or any other of the
Corporation's employee benefit plans, policies, practices
or arrangements in which you participate or the failure
by the Corporation to continue your participation therein
on substantially the same basis, both in terms of the
amount of benefits provided and the level of your
participation relative to other participants, as existed
as of the date hereof;
(v) the failure of the Corporation to
obtain a satisfactory agreement from any successor to the
Corporation to assume and agree to perform this
Agreement, as contemplated in Section 5 hereof; and
(vi) any purported termination by the
Corporation of your employment that is not effected
pursuant to a Notice of Termination satisfying the
requirements of subparagraph (d) below, and for purposes
of this Agreement, no such purported termination shall be
effective. Your right to terminate your employment
pursuant to this Subsection shall not be affected by your
incapacity due to physical or mental illness. Your
continued employment shall not constitute consent to, or
a waiver of rights with respect to, any circumstance
constituting Good Reason hereunder. For purposes of any
determination regarding the existence of Good Reason, any
claim by you that Good Reason exists shall be presumed to
be correct unless the Corporation establishes by clear
and convincing evidence that Good Reason does not exist.
(d) Notice of Termination. Any termination by
the Corporation for Cause or by you for Good Reason shall
be communicated by Notice of Termination to the other
party hereto. For purposes of this Agreement, a "Notice
of Termination" shall mean a written notice which shall
indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances claimed to provide a
basis for termination of your employment under the
provision so indicated.
(e) Date of Termination. "Date of
Termination" shall mean the date specified in the Notice
of Termination where required or in any other case upon
ceasing to perform services to the Corporation; provided
that if within thirty (30) days after any Notice of
Termination a party hereto notifies the other party that
a dispute exists concerning the termination, the Date of
Termination shall be the date finally determined to be
the Date of Termination, either by mutual written
agreement of the parties or by a binding and final
arbitration award.
4. Compensation Upon Termination or During
Disability. Following a Change in Control of the
Corporation, as defined in Section 2 hereof, upon
termination of your employment or during a period of
disability you shall be entitled to the following
benefits:
(a) During any period that you fail to perform
your full-time duties with the Corporation as a result of
incapacity due to physical or mental illness, you shall
continue to receive your Base Salary at the rate in
effect at the commencement of any such period, until your
employment is terminated pursuant to Section 3(a) hereof.
Thereafter, your benefits shall be determined in
accordance with the Corporation's retirement, insurance
and other applicable programs and plans then in effect.
(b) If your employment shall be terminated by
the Corporation for Cause or by you other than for Good
Reason, the Corporation shall pay you your full Base
Salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given or on
the Date of Termination if no Notice of Termination is
required hereunder, together with accrued vacation pay,
if any, and the Corporation shall have no further
obligations to you under this Agreement.
(c) If your employment terminates by reason of
your Retirement, or by reason of your death, your
benefits shall be determined in accordance with the
Corporation's retirement, survivor's benefits, insurance
and other applicable programs and plans then in effect.
(d) If your employment by the Corporation
shall be terminated (i) by the Corporation other than for
Cause, Retirement or Disability, (ii) by you for Good
Reason or (iii) in accordance with the provisions of
Section 2(b) hereof, then, in addition to any benefits to
which you are otherwise entitled in accordance with the
Corporation's retirement, survivor's benefits, insurance
and other applicable programs and plans then in effect,
you shall be entitled to the benefits (the "Severance
Payments") provided below:
(A) the Corporation will pay you
your full Base Salary through the Date of
Termination at the rate in effect at the time
Notice of Termination is given, or the Date of
Termination where no Notice of Termination is
required hereunder, and any previously awarded
bonuses which have been deferred;
(B) the Corporation will pay you not
later than the fifth (5th) day following the
Date of Termination, a lump sum severance
payment equal to three (3) times the sum of
(x), (y), and (z), where (x) equals your annual
Base Salary in effect immediately prior to the
occurrence of the circumstances giving rise to
such termination, where (y) equals the amount,
if any, of the highest of your three most
recent awards (or, if fewer than three have
been received, such lesser number) pursuant to
the Corporation's Key Employees Stock Bonus
Plan, and where (z) equals the amount, if any,
of your award for the year in which the Date of
Termination occurs, if determined by the Board
but not yet paid, or if no determination has
been made, your most recent annual award paid
to you under any annual cash incentive or bonus
program for which you are eligible, regardless
of whether such incentive or bonus program has
been established as of the date of this
Agreement.
(C) the Corporation will pay you,
not later than the fifth day following the Date
of Termination, (x) with respect to your
interest in the Corporation's Employees' Stock
Purchase Plan ("ESPP"), an amount, in cash,
equal to the aggregate value of (i) the non-
vested share units credited to your account
thereunder, and (ii) the nonvested Deferred
Shares (as defined for purposes of Section 5.1
of the ESPP), if any, credited to your account
thereunder as of the Date of Termination and
(y) with respect to your interest in the
Corporation's Key Employees Stock Bonus Plan,
an amount, in cash, equal to the aggregate
value of all Corporation stock, cash and other
property credited to your account thereunder
as of the Date of Termination and upon making
such payments the Corporation shall have no
further obligation to you under such plans
except with respect to any previously vested
interest you may have in such plans; and
(D) for a thirty-six (36) month
period after such termination, the Corporation
will arrange to provide you, at the
Corporation's expense, with life, disability,
accident and health insurance benefits
substantially similar to those which you were
receiving immediately prior to the Notice of
Termination; but benefits otherwise receivable
by you pursuant to this Subsection (D) shall be
reduced to the extent comparable benefits are
actually received by you during the thirty-six
(36) month period following your termination,
and any such benefits actually received by you
shall be reported to the Corporation.
(E) If you would have become
entitled to benefits under the Corporation's
post-retirement health care or life insurance
plans, as such plans existed immediately prior
to the Change in Control, had your employment
terminated at any time during the period of
thirty-six (36) months after the Date of
Termination, the Company shall provide such
post-retirement health care or life insurance
benefits to you commencing on the later of (i)
the date that such coverage would have first
become available and (ii) the date on which
benefits described in subsection (D) of this
Section 4(d) terminate.
(e) (A) Whether or not you become entitled
to the Severence Payments, if any of the payments or
benefits received or to be received by you in connection
with a Change in Control or your termination of
employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement
with the Corporation, any Person whose actions result in
a Change in Control or any Person affiliated with the
Corporation or such Person) (such payments or benefits,
excluding the payment made under this subsection (e),
being hereinafter referred to as the "Total Payments")
will be subject to any excise tax imposed under Section
4999 of the Internal Revenue Code of 1986 (the "Code"),
as amended from time to time (the "Excise Tax"), the
Corporation shall pay to you an additional amount (the
"Gross-Up Payment") such that the net amount retained by
you, after deduction of any Excise Tax on the Total
Payments and any federal, state and local income and
employment taxes and Excise Tax upon the Gross-Up
payment, shall be equal to the Total Payments.
(B) For purposes of determining whether
any of the Total Payments will be subject to the Excise
Tax and the amount of such Excise Tax, (i) all of the
Total Payments shall be treated as "parachute payments"
(within the meaning of Section 280G(b) (2) of the Code)
unless, in the option of tax counsel (the "Tax Counsel")
reasonably acceptable to you and selected by the
accounting firm which was, immediately prior to the
Change in Control, the Corporation's independent auditor
(the "Auditor"), such payments or benefits (in whole or
in part) do not constitute parachute payments, including
by reason of Section 280G(b) (4) (A) of the Code, (ii)
all "excess parachute payments" within the meaning of
Section 280G(b) (l) of the Code shall be treated as
subject to the Excise Tax unless, in the opinion of the
Tax Counsel, such excess parachute payments (in whole or
in part) represent reasonable compensation for services
actually rendered (within the meaning of Section 280G(b)
(4) (B) of the Code) in excess of the "Base Amount", as
defined in Section 280G(b)(3) of the Code, allocable to
such reasonable compensation, or are otherwise not
subject to the Excise Tax, and (iii) the value of any non-
cash benefits or any deferred payment or benefit shall be
determined by the Auditor in accordance with the
principles of Sections 280G(d) (3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up
Payment, you shall be deemed to pay federal income tax at
the highest marginal rate of federal income taxation in
the calendar year in which Gross-Up Payment is to be made
and state and local income taxes at the highest marginal
rate of taxation in the state and locality of your
residence on the Date of Termination (or if there is no
Date of Termination, then the date on which the Gross-Up
Payment is calculated for purposes of this Section 4(e)),
net of the maximum reduction in federal income taxes
which could be obtained from deduction of such state and
local taxes.
(C) In the event that the Excise Tax is
subsequently determined to be less than the amount taken
into account hereunder at the time of termination of your
employment, you shall repay to the Corporation, at the
time that the amount of such reduction in Excise Tax is
finally determined, the portion of the Gross-Up Payment
attributable to such reduction (plus that portion of the
Gross-Up Payment attributable to the Excise Tax and
federal, state and local income and employment taxes
imposed on the Gross-Up Payment being repaid by you to
the extent that such repayment results in a reduction in
Excise Tax and/or federal, state or local income or
employment tax deduction) plus interest on the amount of
such repayment of 120% of the rate provided in Section
1274(b) (2) (B) of the Code. In the event that the
Excise Tax is determined to exceed the amount taken into
account hereunder at the time of the termination of your
employment (including by reason of any payment the
existence or amount of which cannot be determined at the
time of the Gross-Up Payment), the Corporation shall make
an additional Gross-Up Payment in respect of such excess
(plus any interest, penalties or additions payable by you
with respect to such excess) at the time that the amount
of such excess is finally determined. You and the
Corporation shall each reasonably cooperate with the
other in connection with any administrative or judicial
proceedings concerning the existence or amount of
liability for Excise Tax with respect to the Total
Payments.
(f) The payments provided for in paragraphs
(d) and (e) above shall be made not later than the fifth
day following the Date of Termination; provided, however,
that if the amounts of such payments cannot be finally
determined on or before such day, the Corporation shall
pay to you on such day an estimate as determined in good
faith by the Corporation of the minimum amount of such
payments and shall pay the remainder of such payments
(together with interest at 120% of the rate provided in
Section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined but in no event later than the
thirtieth (30th) day after the Date of Termination. In
the event that the amount of the estimated payments
exceeds the amount subsequently determined to have been
due, such excess shall constitute a loan by the
Corporation to you payable on the fifth (5th) day after
demand by the Corporation (together with interest at 120%
of the rate provided in Section 1274(b)(2)(B) of the
Code).
(g) The Corporation shall also pay to you any
and all legal fees and expenses incurred by you in
contesting or disputing any termination of employment or
in seeking to obtain or enforce any right or benefit
provided by this Agreement or in connection with any tax
audit or proceeding to the extent attributable to the
application of Section 4999 of the Code to any payment or
benefit provided hereunder).
(h) You shall not be required to mitigate the
amount of any payment provided for either in this Section
4 by seeking other employment or otherwise, nor shall the
amount of any payment provided for in this Section 4 be
reduced (except as provided in subparagraph (D) of
Section 4(d) hereof) by any compensation earned by you as
the result of employment by another employer after the
Date of Termination, or otherwise.
5. Successors; Binding Agreement.
(a) The Corporation 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 Corporation or of
any division or subsidiary thereof employing you to
expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the
Corporation would be required to perform it if no such
succession had taken place. Failure of the Corporation
to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of
this Agreement and shall entitle you to compensation from
the Corporation in the same amount and on the same terms
as you would be entitled hereunder if you terminated your
employment for Good Reason, except that for purposes of
implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of
Termination.
(b) This Agreement shall inure to the benefit
of and be enforceable by your personal or legal
representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If you
should die while any amount would still be payable to you
hereunder if you had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement, to your
devisee, legatee or other designee or, if there is not
such designee, to your estate.
6. Notices. For the purpose of this
Agreement, notices and all other communications provided
for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed
by United States registered mail, return receipt
requested, postage prepaid, addressed to the respective
addresses set forth on the first page of this Agreement
or to such other addresses as may be designated by prior
written notice given in accordance with this Section 6.
7. Miscellaneous. No provision of this
Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is agreed to in
writing and signed by you and such officer as may be
specifically designated by the Board. The validity,
interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of
Delaware. The parties to this amended and restated
agreement intend that this agreement be considered an
instrument under seal with the intent that the statute of
limitations provided for at 10 Del.C. Section 8106 be tolled to
the full extent permitted under Delaware law.
8. Validity. The invalidity or
unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full
force and effect.
9. Counterparts. This Agreement may be
executed in several counterparts, each of which shall be
deemed to be an original but all of which together will
constitute one and the same instrument.
10. Arbitration. Any dispute or controversy
arising under or in connection with this Agreement shall
be settled exclusively by arbitration in accordance with
the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's
award in any court having jurisdiction; provided,
however, that you shall be entitled to seek specific
performance of your right to be paid until the Date of
Termination during the pendency of any dispute or
controversy arising under or in connection with this
Agreement.
11. Entire Agreement. This Agreement
supersedes any other agreement or understanding between
the parties hereto, including, if applicable, a severance
agreement dated March 12, 1982, as amended, between you
and the Corporation.
12. Effective Date. This amended and restated
agreement shall become effective as of the date set forth
above.
Sincerely,
BENEFICIAL CORPORATION
[SEAL]
By
James H. Gilliam, Jr.
Executive Vice President
and General Counsel
Agreed and consented to as
of the date set forth above. [SEAL]
By
<<name&title>>
March 26, 1996
<<addr>>
Dear <<name>>:
Beneficial Corporation (the "Corporation") recognizes that
your contribution to the growth and success of the Corporation has
been substantial and desires to assure the Corporation of your
continued employment. In this connection, the Board of Directors
of the Corporation (the "Board") recognizes that, as is the case
with many publicly held corporations, the possibility of a change
in control may exist and that such possibility, and the
uncertainty and questions which it may raise among management, may
result in the departure or distraction of management personnel to
the detriment of the Corporation and its stockholders.
The Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and
dedication of members of the Corporation's management, including
yourself, to their assigned duties without distraction in the face
of potentially disturbing circumstances arising from the
possibility of a change in control of the Corporation.
In order to induce you to remain in the employ of the
Corporation, the Corporation agrees that you shall receive the
severance benefits set forth in this letter agreement
("Agreement") in the event your employment with the Corporation is
terminated subsequent to a "Change in Control of the Corporation"
(as defined in Section 2 hereof) under the circumstances described
below.
For purposes of this Agreement, an employee of a subsidiary
of the Corporation shall be considered an employee of the
Corporation and in such case the obligation of the Corporation
hereunder shall be to cause such subsidiary to perform the
obligations of the Corporation hereunder.
1. Term of Agreement. This Agreement shall commence on the
date hereof and shall continue in effect until December 31, 1998;
provided, however, that commencing on January 1, 1998 and each
January 1 thereafter, the term of this Agreement shall
automatically be extended for one additional year unless, not
later than November 1 of the preceding year, the Corporation shall
have given notice that it does not wish to extend this Agreement;
provided, further, if a Change in Control of the Corporation shall
have occurred during the original or extended term of this
Agreement, this Agreement shall continue in effect for a period of
twenty-four (24) months beyond the month in which such Change in
Control of the Corporation occurred.
2. Change in Control of the Corporation. No benefits shall
be payable hereunder unless there shall have been a Change in
Control of the Corporation, as set forth below. For purposes of
this Agreement, a "Change in Control" shall be deemed to have
occurred if the event set forth in any one of the following
paragraphs shall have occurred:
(i) any Person (as defined below) is or becomes the
Beneficial Owner (as defined below), directly or indirectly, of
securities of the Corporation (not including in the securities
beneficially owned by such Person any securities acquired directly
from the Company or its affiliates) representing 20% or more of
the combined voting power of the Corporation's then outstanding
securities, excluding any Person who becomes such a Beneficial
Owner in connection with a transaction described in clause (A) of
paragraph (iii); or
(ii) the following individuals cease for any reason to
constitute a majority of the number of directors then serving:
individuals who, on the date hereof, constitute the Board and any
new director (other than a director whose initial assumption of
office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation,
relating to the election of directors of the Corporation) whose
appointment or election by the Board or nomination for election by
the Corporation's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either
were directors on the date hereof or whose appointment, election
or nomination for election was previously so approved; or
(iii) there is consummated a merger or consolidation of
the Corporation or a direct or indirect subsidiary of the
Corporation with any other corporation, other than (A) a merger or
consolidation which would result in the voting securities of the
Corporation outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity or any parent thereof), in combination with the
ownership of any trustee or other fiduciary holding securities
under an employee benefit plan of the Corporation, at least 80% of
the combined voting power of the securities of the Corporation or
such surviving entity of any parent thereof outstanding
immediately after such merger or consolidation, or (B) a merger or
consolidation effected to implement a recapitalization of the
Corporation (or similar transaction) in which no Person is or
becomes the Beneficial Owner, directly or indirectly, of
securities of the Corporation (not including in the securities
Beneficially Owned by such Person any securities acquired directly
from the Corporation or its subsidiaries) representing 20% or more
of either the then outstanding shares of common stock of the
Corporation or the combined voting power of the Corporation's then
outstanding securities; or
(iv) the stockholders of the Corporation approve a plan
of complete liquidation or dissolution of the Corporation or there
is consummated an agreement for the sale or disposition by the
Corporation of all or substantially all of the Corporation's
assets, other than a sale or disposition by the Corporation of all
or substantially all of the Corporation's assets to an entity, at
least 80% of the combined voting power of the voting securities of
which are owned by stockholders of the Corporation in
substantially the same proportions as their ownership of the
Corporation immediately prior to such sale.
For purposes of this Agreement, the term "Person" shall have
the meaning given in Section 3(a)(9) of the Exchange Act, as
modified and used in Sections 13(d) and 14(d) thereof, except that
such term shall not include (i) the Corporation or any of its
subsidiaries, (ii) a trustee or other fiduciary holding securities
under an employee benefit plan of the Corporation or any of its
Affiliates, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the stockholders of the
Corporation in substantially the same proportions as their
ownership of stock of the Corporation, and the term "Beneficial
Owner" shall have the meaning set forth in Rule 13d-3 under the
Exchange Act.
3. Termination Following a Change in Control of the
Corporation. If any of the events described in Section 2 hereof
constituting a Change in Control of the Corporation shall have
occurred, you shall be entitled to the benefits proved in Section
4(d) hereof upon the termination of your employment during the
term of this Agreement unless such termination is (i) because of
your death, Disability or Retirement, (ii) by the Corporation for
Cause, or (iii) by you other than for Good Reason. For purposes
of any determination regarding the applicability of the
immediately preceding sentence, any position taken by you shall be
presumed to be correct unless the Corporation establishes by clear
and convincing evidence that such position is not correct.
(a) Disability; Retirement. If, as a result of your
incapacity due to physical or mental illness, you shall have been
absent from the full-time performance of your duties with the
Corporation for six (6) consecutive months, and within thirty (30)
days after written notice of termination is given you shall not
have returned to the full-time performance of your duties, the
Corporation may terminate your employment for "Disability."
Termination by the Corporation or you of your employment by reason
of "Retirement" shall mean termination on or after attainment of
your "normal retirement age," as defined in the Beneficial
Corporation Pension Plan, or in accordance with any retirement
arrangement established with your consent with respect to you.
(b) Cause. Termination by the Corporation of your
employment for "Cause" shall mean termination upon (i) the willful
and continued failure by you to substantially perform your duties
with Corporation (other than any such failure resulting from
termination by you for Good Reason), after a demand for
substantial performance is delivered to you that specifically
identifies the manner in which the Corporation believed that you
have not substantially performed your duties, and you have failed
to resume substantial performance of your duties on a continuous
basis within fourteen (14) days of receiving such demand, (ii) the
willful engaging by you in conduct which is demonstrably and
materially injurious to the Corporation, monetarily or otherwise
or (iii) your conviction of a felony or conviction of a
misdemeanor which impairs your ability substantially to perform
your duties with the Corporation. For purposes of this
Subsection, no act, or failure to act, on your part shall be
deemed "willful" unless done, or omitted to be done, by you not in
good faith and without reasonable belief that your action or
omission was in the best interest of the Corporation. In the
event of a dispute concerning the application of this provision,
no claim by the Corporation that Cause exists shall be given
effect unless the Corporation establishes by clear and convincing
evidence that Cause exists.
(c) Good Reason. You shall be entitled to terminate
your employment for Good Reason. For purposes of this Agreement,
"Good Reason" shall mean, without your express written consent,
the occurrence after a Change in Control of the Corporation of any
one or more of the following:
(i) the assignment to you of duties inconsistent
with your present positions, duties, responsibilities and status
or a reduction or alteration in the nature or status of your
responsibilities from those in effect as of the date hereof;
(ii) a reduction by the Corporation in your annual
base salary as in effect on the date hereof as such may be
increased from time to time by the Board ("Base Salary");
(iii) the Corporation's requiring you to be based
at a location in excess of twenty-five (25) miles from the
location where you are presently based;
(iv) the failure by the Corporation to continue in
effect any salary plan, incentive plan, deferred compensation plan
or any other of the Corporation's employee benefit plans,
policies, practices or arrangements in which you participate or
the failure by the Corporation to continue your participation
therein on substantially the same basis, both in terms of the
amount of benefits provided and the level of your participation
relative to other participants, as existed as of the date hereof;
(v) the failure of the Corporation to obtain a
satisfactory agreement from any successor to the Corporation to
assume and agree to perform this Agreement, as contemplated in
Section 5 hereof; and
(vi) any purported termination by the Corporation
of your employment that is not effected pursuant to a Notice of
Termination satisfying the requirements of subparagraph (d) below,
and for purposes of this Agreement, no such purported termination
shall be effective. Your right to terminate your employment
pursuant to this Subsection shall not be affected by your
incapacity due to physical or mental illness. Your continued
employment shall not constitute consent to, or a waiver of rights
with respect to, any circumstance constituting Good Reason
hereunder. For purposes of any determination regarding the
existence of Good Reason, any claim by you that Good Reason exists
shall be presumed to be correct unless the Corporation extablishes
by clear and convincing evidence that Good Reason does not exist.
(d) Notice of Termination. Any termination by the
Corporation for Cause or by you for Good Reason shall be
communicated by Notice of Termination to the other party hereto.
For purposes of this Agreement, a "Notice of Termination" shall
mean a written notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the
provision so indicated.
(e) Date of Termination. "Date of Termination" shall
mean the date specified in the Notice of Termination where
required or in any other case upon ceasing to perform services to
the Corporation; provided that if within thirty (30) days after an
Notice of Termination a party hereto notifies the other party that
a dispute exists concerning the termination, the Date of
Termination shall be the date finally determined to be the Date of
Termination, either by mutual written agreement of the parties or
by a binding and final arbitration award.
4. Compensation Upon Termination or During Disability.
Following a Change in Control of the Corporation, as defined in
Section 2 hereof, upon termination of your employment or during a
period of disability you shall be entitled to the following
benefits:
(a) During any period that you fail to perform your
full-time duties with the Corporation as a result of incapacity
due to physical or mental illness, you shall continue to receive
your Base Salary at the rate in effect at the commencement of any
such period, until your employment is terminated pursuant to
Section 3(a) hereof. Thereafter, your benefits shall be
determined in accordance with the Corporation's retirement,
insurance and other applicable programs and plans then in effect.
(b) If your employment shall be terminated by the
Corporation for Cause or by you other than for Good Reason, the
Corporation shall pay you your full Base Salary through the Date
of Termination at the rate in effect at the time Notice of
Termination is given or on the Date of Termination if no Notice of
Termination is required hereunder, together with accrued vacation
pay, if any, and the Corporation shall have no further obligations
to you under this Agreement.
(c) If your employment terminates by reason of your
Retirement, or by reason of your death, your benefits shall be
determined in accordance with the Corporation's retirement,
survivor's benefits, insurance and other applicable programs and
plans then in effect.
(d) If your employment by the Corporation shall be
terminated (i) by the Corporation other than for Cause, Retirement
or Disability or (ii) by you for Good Reason, then, in addition to
any benefits to which you are otherwise entitled in accordance
with the Corporation's retirement, survivor's benefits, insurance
and other applicable programs and plans then in effect, you shall
be entitled to the benefits (the "Severance Payments") provided
below:
(A) the Corporation will pay you your
full Base Salary through the Date of Termination at the
rate in effect at the time Notice of Termination is
given, or the Date of Termination where no Notice of
Termination is required hereunder, and any previously
awarded bonuses which have been deferred;
(B) the Corporation will pay you not
later than the fifth (5th) day following the Date of
Termination, a lump sum severance payment equal to twice
the sum of (x), (y), and (z), where (x) equals your
annual Base Salary in effect immediately prior to the
occurrence of the circumstances giving rise to such
termination, where (y) equals the amount, if any, of the
highest of your three most recent awards (or, if fewer
than three have been received, such lesser number)
pursuant to the Corporation's Key Employees Stock Bonus
Plan and where (z) equals the amount, if any, of your
aware for the year in which the Date of Terminination
occurs, if determined by the Board but not yet paid, or
if no determination has been made, your most recent
annual award paid to you under any annual cash incentive
or bonus program for which you are eligible, regardless
of whether such incentive or bonus program has been
established as of the date of this Agreement.
(C) the Corporation will pay you, not
later then the fifth day following the Date of
Termination, (x) with respect to your interest in the
Corporation's Employees' Stock Purchase Plan, an amount,
in cash, equal to the aggregate value of the nonvested
share units credited to your account thereunder as of
the Date of Termination and (y) with respect to your
interest in the Corporation's Key Employees Stock Bonus
Plan, an amount, in cash, equal to the aggregate value
of all Corporation stock, cash and other property
credited to your account thereunder as of the Date of
Termination and upon making such payments, the
Corporation shall have no further obligation to you
under such plans except with respect to any previously
vested interest you may have in such plans; and
(D) for a twenty-four (24) month period
after such termination, the Corporation will arrange to
provide you, at the Corporation's expense, with life,
disability, accident and health insurance benefits
substantially similar to those which you were receiving
immediately prior to the Notice of Termination; but
benefits otherwise receivable by you pursuant to this
Subsection (D) shall be reduced to the extent comparable
benefits are actually received by you during the twenty-
four (24) month period following your termination, and
any such benefits actually received by you shall be
reported to the Corporation.
(E) if you would have become entitled to
benefits under the Corporation's post-retirement health
care or life insurance plans, as such plans existed
immediately prior to the Change in Control, had your
employment terminated at any time during the period of
twenty-four (24) months after the Date of Termination,
the Corporation shall provide such post-retirement
health care or life insurance benefits to you commencing
on the later of (i) the date that such coverage would
have first become available and (ii) the date on which
benefits described in subsection (D) of this Section
4(a) terminate.
(e) (A) Notwithstanding any other provisions of
this Agreement, in the event that any payment or benefit received
or to be received by you in connection with a Change in Control or
the termination of your employment (whether pursuant to the terms
of this Agreement or any other plan, arrangement or agreement with
the Corporation, and Person whose actions result in a Change in
Control or any Person affiliated with the Corporation or such
Person) (all such payments and benefits, including the Severance
Payments, being hereinafter called "Total Payments") would be
subject (in whole or part), to any excise tax imposed under
Section 4999 of the Internal Revenue Code of 1988 (the "Code"), as
amended from time to time (the Excise Tax") the, after taking into
account any reduction in the Total Payments provided by reason of
section 280G of the Code in such other plan, arrangement or
agreement, the cash Severance Payments shall first be reduced, and
the noncash Severance Payments shall thereafter be reduced, to the
extent necessary so that no portion of the Total Payments is
subject to the Excise Tax but only if (1) the net amount of such
Total Payments, as so reduced (and after subtracting the net
amount of federal, state and local income taxes on such reduced
Total Payments) is equal to or greater than (2) the net amount of
such Total Payments, without reduction (but after subtracting the
net amount of federal, state and local income taxes on such Total
Payments and the amount of Excise Tax to which you would be
subject to respect of such unreduced Total Payments); provided,
however, that you may elect (at any time prior to the delivery of
a Notice of Termination hereunder) to have the noncash Severance
Payments reduced (or eliminated) prior to any reduction of the
cash Severance Payments.
(B) For purposes of determining whether and
the extend to which the Total Payments will be subject to the
Excise Tax, (i) no portion of the Total Payments the receipt or
enjoyment of which you shall have effectively waived in writing
prior to the delivery of a Notice of Termination shall be taken
into account, (ii) no portion of the Total Payments shall be taken
into account which, in the opinion of tax counsel reasonably
acceptable to you and selected by the accounting firm (the
"Auditor") which was, immediately prior to the Change in Control,
the Company's independent auditor, does not constitute a
"parachute payment" within the meaning of section 280G(b) (2) of
the Code (including by reason of section 280(b) (4) (A) of the
Code) and, in calculating the Excise Tax, no portion of such Total
Payments shall be taken into account which constitutes reasonable
compensation for services actually rendered, within the meaning of
section 280G(b) (4) (B) of the Code, in excess of the Base Amount
allocable to such reasonable compensation, and (iii) the value of
any non-cash benefit or any deferred payment or benefit included
in the Total Payments shall be determined by the Auditor in
accordance with the principles of sections 280G(d) (3) and (4) of
the Code.
(f) The payments provided for in paragraph (d)
above shall be made not later than the fifth day following the
Date of Termination; provided, however, that if the amounts of
such payments or the limitation on such payments set forth in
paragraph (e) above cannot be finally determined on or before such
day, the Corporation shall pay to you on such day an estimate as
determined in good faith by the Corporation of the minimum amount
of such payments and shall pay the remainder of such payments
(together with interest at 120% of the rate provided in Section
1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined but in no event later than the thirtieth (30th) day
after the Date of Termination. In the event that the amount of
the estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by the
Corporation to you payable on the fifth (5th) day after demand by
the Corporation (together with interest at 120% of the rate
provided in Section 1274(b)(2)(B) of the Code).
(g) The Corporation shall also pay to you any and
all legal fees and expenses incurred by you in contesting or
disputing any termination of employment or in seeking to obtain or
enforce any right or benefit provided by this Agreement or in
connection with any tax audit or proceeding to the extent
attributable to the application of Section 4999 of the Code to any
payment or benefit provided hereunder).
(h) You shall not be required to mitigate the
amount of any payment provided for in this Section 4 by seeking
other employment or otherwise, nor shall the amount of any payment
provided for in this Section 4 be reduced (except as provided in
subparagraph (D) of Section 4(d) hereof) by any compensation
earned by you as the result of employment by another employer
after the Date of Termination, or otherwise.
5. Successors; Binding Agreement.
(a) The Corporation 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 Corporation or of any division or subsidiary thereof
employing you to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the
Corporation would be required to perform it if no such succession
had taken place. Failure of the Corporation to obtain such
assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle
you to compensation from the Corporation in the same amount and on
the same terms as you would be entitled hereunder if you terminate
your employment for Good Reason, except that for purposes of
implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination.
(b) This Agreement shall inure to the benefit of
and be enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If you should die while any amount would
still be payable to you hereunder if you had continued to live,
all such amount, unless otherwise provided herein, shall be paid
in accordance with the terms of this Agreement, to your devisee,
legatee or other designee or, if there is not such designee, to
your estate.
6. Notices. For the purpose of this Agreement,
notices and all other communications provided for in the Agreement
shall be in writing and shall be deemed to have been duly given
when delivered or mailed by United States registered mail, return
receipt requested, postage prepaid, addressed to the respective
addresses set forth on the first page of this Agreement or to such
other addresses as may be designated by prior written notice give
in accordance with this Section 6.
7. Miscellaneous. No provision of this Agreement may
be modified, waived or discarded unless such waiver, modification
or discharge is agreed to in writing and signed by you and such
officer as may be specifically designated by the Board. The
validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Delaware.
The parties to this agreement intend that this agreement be
considered an instrument under seal with the intent that the
statute of limitations provided for at 10 Del.C. Section 8106 be tolled
to the full extent permitted under Delaware law.
8. Validity. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an
original but all of which together will constitute one and the
same instrument.
10. Arbitration. Any dispute or controversy arising
under or in connection with this Agreement shall be settled
exclusively by arbitration in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court having
jurisdiction; provided, however, that you shall be entitled to
seek specific performance of your right to be paid until the Date
of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
11. Entire Agreement. This Agreement supersedes any
other agreement or understanding between the parties hereto,
including, if applicable, a severance agreement dated March 12,
1982, as amended, between you and the Corporation.
12. Effective Date. This Agreement shall be come
effective as of the date set forth above.
Sincerely,
BENEFICIAL CORPORATION
[SEAL]
By
James H. Gilliam, Jr.
Executive Vice President
and General Counsel
Agreed and consented to as
of the date set forth above.
By [SEAL]
<<name&title>>
March 26, 1996
<<addr>>
Dear <<name>>:
You previously entered into an agreement dated August 21,
1986 providing you certain protection in the event of a change of
control of Beneficial Corporation (the "Corporation"), which
agreement was subsequently amended effective as of February 21,
1990, and which remains in effect. The Board of Directors of the
Corporation has authorized this amendment and restatement of your
August 21, 1986 agreement, and has requested that you indicate
your agreement and consent (pursuant to Section 7 of that
agreement) by signing in the space provided below on the enclosed
duplicate copy, and returning it to the Corporation.
Beneficial Corporation (the "Corporation") recognizes that
your contribution to the growth and success of the Corporation has
been substantial and desires to assure the Corporation of your
continued employment. In this connection, the Board of Directors
of the Corporation (the "Board") recognizes that, as is the case
with many publicly held corporations, the possibility of a change
in control may exist and that such possibility, and the
uncertainty and questions which it may raise among management, may
result in the departure or distraction of management personnel to
the detriment of the Corporation and its stockholders.
The Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and
dedication of members of the Corporation's management, including
yourself, to their assigned duties without distraction in the face
of potentially disturbing circumstances arising from the
possibility of a change in control of the Corporation.
In order to induce you to remain in the employ of the
Corporation, the Corporation agrees that you shall receive the
severance benefits set forth in this letter agreement
("Agreement") in the event your employment with the Corporation is
terminated subsequent to a "Change in Control of the Corporation"
(as defined in Section 2 hereof) under the circumstances described
below.
For purposes of this Agreement, an employee of a subsidiary
of the Corporation shall be considered an employee of the
Corporation and in such case the obligation of the Corporation
hereunder shall be to cause such subsidiary to perform the
obligations of the Corporation hereunder.
1. Term of Agreement. This amended and restated agreement
supersedes your August 21, 1986 agreement and shall continue in
effect until December 31, 1998; provided, however, that commencing
on January 1, 1998 and each January 1 thereafter, the term of this
Agreement shall automatically be extended for one additional year
unless, not later than November 1 of the preceding year, the
Corporation shall have given notice that it does not wish to
extend this Agreement; provided, further, if a Change in Control
of the Corporation shall have occurred during the original or
extended term of this Agreement, this Agreement shall continue in
effect for a period of twenty-four (24) months beyond the month in
which such Change in Control of the Corporation occurred.
2. Change in Control of the Corporation. No benefits shall
be payable hereunder unless there shall have been a Change in
Control of the Corporation, as set forth below. For purposes of
this Agreement, a "Change in Control" shall be deemed to have
occurred if the event set forth in any one of the following
paragraphs shall have occurred:
(i) any Person (as defined below) is or becomes the
Beneficial Owner (as defined below), directly or indirectly, of
securities of the Corporation (not including in the securities
beneficially owned by such Person any securities acquired
directly from the Company or its affiliates) representing 20% or
more of the combined voting power of the Corporation's then
outstanding securities, excluding any Person who becomes such a
Beneficial Owner in connection with a transaction described in
clause (A) of paragraph (iii); or
(ii) the following individuals cease for any reason to
constitute a majority of the number of directors then serving:
individuals who, on the date hereof, constitute the Board and any
new director (other than a director whose initial assumption of
office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation,
relating to the election of directors of the Corporation) whose
appointment or election by the Board or nomination for election by
the Corporation's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either
were directors on the date hereof or whose appointment, election
or nomination for election was previously so approved; or
(iii) there is consummated a merger or consolidation of
the Corporation or a direct or indirect subsidiary of the
Corporation with any other corporation, other than (A) a merger or
consolidation which would result in the voting securities of the
Corporation outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity or any parent thereof), in combination with the
ownership of any trustee or other fiduciary holding securities
under an employee benefit plan of the Corporation, at least 80% of
the combined voting power of the securities of the Corporation or
such surviving entity of any parent thereof outstanding
immediately after such merger or consolidation, or (B) a merger or
consolidation effected to implement a recapitalization of the
Corporation (or similar transaction) in which no Person is or
becomes the Beneficial Owner, directly or indirectly, of
securities of the Corporation (not including in the securities
Beneficially Owned by such Person any securities acquired directly
from the Corporation or its subsidiaries representing 20% or more
of either the then outstanding shares of common stock of the
Corporation or the combined voting power of the Corporation's then
outstanding securities; or
(iv) the stockholders of the Corporation approve a plan
of complete liquidation or dissolution of the Corporation or there
is consummated an agreement for the sale or disposition by the
Corporation of all or substantially all of the Corporation's
assets, other than a sale or disposition by the Corporation of all
or substantially all of the Corporation's assets to an entity, at
least 80% of the combined voting power of the voting securities of
which are owned by stockholders of the Corporation in
substantially the same proportions as their ownership of the
Corporation immediately prior to such sale.
For purposes of this Agreement, the term "Person" shall have
the meaning given in Section 3(a)(9) of the Exchange Act, as
modified and used in Sections 13(d) and 14(d) thereof, except that
such term shall not include (i) the Corporation or any of its
subsidiaries, (ii) a trustee or other fiduciary holding securities
under an employee benefit plan of the Corporation or any of its
Affiliates, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the stockholders of the
Corporation in substantially the same proportions as their
ownership of stock of the Corporation, and the term "Beneficial
Owner" shall have the meaning set forth in Rule 13d-3 under the
Exchange Act.
3. Termination Following a Change in Control of the
Corporation. If any of the events described in Section 2 hereof
constituting a Change in Control of the Corporation shall have
occurred, you shall be entitled to the benefits proved in Section
4(d) hereof upon the termination of your employment during the
term of this Agreement unless such termination is (i) because of
your death, Disability or Retirement, (ii) by the Corporation for
Cause, or (iii) by you other than for Good Reason. For purposes
of any determination regarding the applicability of the
immediately preceding sentence, any position taken by you shall be
presumed to be correct unless the Corporation establishes by clear
and convincing evidence that such position is not correct.
(a) Disability; Retirement. If, as a result of your
incapacity due to physical or mental illness, you shall have been
absent from the full-time performance of your duties with the
Corporation for six (6) consecutive months, and within thirty (30)
days after written notice of termination is given you shall not
have returned to the full-time performance of your duties, the
Corporation may terminate your employment for "Disability."
Termination by the Corporation or you of your employment by reason
of "Retirement" shall mean termination on or after attainment of
your "normal retirement age," as defined in the Beneficial
Corporation Pension Plan, or in accordance with any retirement
arrangement established with your consent with respect to you.
(b) Cause. Termination by the Corporation of your
employment for "Cause" shall mean termination upon (i) the willful
and continued failure by you to substantially perform your duties
with Corporation (other than any such failure resulting from
termination by you for Good Reason), after a demand for
substantial performance is delivered to you that specifically
identifies the manner in which the Corporation believed that you
have not substantially performed your duties, and you have failed
to resume substantial performance of your duties on a continuous
basis within fourteen (14) days of receiving such demand, (ii) the
willful engaging by you in conduct which is demonstrably and
materially injurious to the Corporation, monetarily or otherwise
or (iii) your conviction of a felony or conviction of a
misdemeanor which impairs your ability substantially to perform
your duties with the Corporation. For purposes of this
Subsection, no act, or failure to act, on your part shall be
deemed "willful" unless done, or omitted to be done, by you not in
good faith and without reasonable belief that your action or
omission was in the best interest of the Corporation. In the
event of a dispute concerning the application of this provision,
no claim by the Corporation that Cause exists shall be given
effect unless the Corporation establishes by clear and convincing
evidence that Cause exists.
(c) Good Reason. You shall be entitled to terminate
your employment for Good Reason. For purposes of this Agreement,
"Good Reason" shall mean, without your express written consent,
the occurrence after a Change in Control of the Corporation of any
one or more of the following:
(i) the assignment to you of duties inconsistent
with your present positions, duties, responsibilities and status
or a reduction or alteration in the nature or status of your
responsibilities from those in effect as of the date hereof;
(ii) a reduction by the Corporation in your annual
base salary as in effect on the date hereof as such may be
increased from time to time by the Board ("Base Salary");
(iii) the Corporation's requiring you to be based
at a location in excess of twenty-five (25) miles from the
location where you are presently based;
(iv) the failure by the Corporation to continue in
effect any salary plan, incentive plan, deferred compensation plan
or any other of the Corporation's employee benefit plans,
policies, practices or arrangements in which you participate or
the failure by the Corporation to continue your participation
therein on substantially the same basis, both in terms of the
amount of benefits provided and the level of your participation
relative to other participants, as existed as of the date hereof;
(v) the failure of the Corporation to obtain a
satisfactory agreement from any successor to the Corporation to
assume and agree to perform this Agreement, as contemplated in
Section 5 hereof; and
(vi) any purported termination by the Corporation
of your employment that is not effected pursuant to a Notice of
Termination satisfying the requirements of subparagraph (d) below,
and for purposes of this Agreement, no such purported termination
shall be effective. Your right to terminate your employment
pursuant to this Subsection shall not be affected by your
incapacity due to physical or mental illness. Your continued
employment shall not constitute consent to, or a waiver of rights
with respect to, any circumstance constituting Good Reason
hereunder. For purposes of any determination regarding the
existence of Good Reason, any claim by you that Good Reason exists
shall be presumed to be correct unless the Corporation extablishes
by clear and convincing evidence that Good Reason does not exist.
(d) Notice of Termination. Any termination by the
Corporation for Cause or by you for Good Reason shall be
communicated by Notice of Termination to the other party hereto.
For purposes of this Agreement, a "Notice of Termination" shall
mean a written notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the
provision so indicated.
(e) Date of Termination. "Date of Termination" shall
mean the date specified in the Notice of Termination where
required or in any other case upon ceasing to perform services to
the Corporation; provided that if within thirty (30) days after an
Notice of Termination a party hereto notifies the other party that
a dispute exists concerning the termination, the Date of
Termination shall be the date finally determined to be the Date of
Termination, either by mutual written agreement of the parties or
by a binding and final arbitration award.
4. Compensation Upon Termination or During Disability.
Following a Change in Control of the Corporation, as defined in
Section 2 hereof, upon termination of your employment or during a
period of disability you shall be entitled to the following
benefits:
(a) During any period that you fail to perform your
full-time duties with the Corporation as a result of incapacity
due to physical or mental illness, you shall continue to receive
your Base Salary at the rate in effect at the commencement of any
such period, until your employment is terminated pursuant to
Section 3(a) hereof. Thereafter, your benefits shall be
determined in accordance with the Corporation's retirement,
insurance and other applicable programs and plans then in effect.
(b) If your employment shall be terminated by the
Corporation for Cause or by you other than for Good Reason, the
Corporation shall pay you your full Base Salary through the Date
of Termination at the rate in effect at the time Notice of
Termination is given or on the Date of Termination if no Notice of
Termination is required hereunder, together with accrued vacation
pay, if any, and the Corporation shall have no further obligations
to you under this Agreement.
(c) If your employment terminates by reason of your
Retirement, or by reason of your death, your benefits shall be
determined in accordance with the Corporation's retirement,
survivor's benefits, insurance and other applicable programs and
plans then in effect.
(d) If your employment by the Corporation shall be
terminated (i) by the Corporation other than for Cause, Retirement
or Disability or (ii) by you for Good Reason, then, in addition to
any benefits to which you are otherwise entitled in accordance
with the Corporation's retirement, survivor's benefits, insurance
and other applicable programs and plans then in effect, you shall
be entitled to the benefits (the "Severance Payments") provided
below:
(A) the Corporation will pay you your full
Base Salary through the Date of Termination at the rate
in effect at the time Notice of Termination is given, or
the Date of Termination where no Notice of Termination
is required hereunder, and any previously awarded
bonuses which have been deferred;
(B) the Corporation will pay you not later
than the fifth (5th) day following the Date of
Termination, a lump sum severance payment equal to
twice the sum of (x), (y), and (z), where (x) equals
your annual Base Salary in effect immediately prior to
the occurrence of the circumstances giving rise to such
termination, where (y) equals the amount, if any, of the
highest of your three most recent awards (or, if fewer
than three have been received, such lesser number)
pursuant to the Corporation's Key Employees Stock Bonus
Plan and where (z) equals the amount, if any, of your
aware for the year in which the Date of Terminination
occurs, if determined by the Board but not yet paid, or
if no determination has been made, your most recent
annual award paid to you under any annual cash incentive
or bonus program for which you are eligible, regardless
of whether such incentive or bonus program has been
established as of the date of this Agreement.
(C) the Corporation will pay you, not later
then the fifth day following the Date of Termination,
(x) with respect to your interest in the Corporation's
Employees' Stock Purchase Plan, an amount, in cash,
equal to the aggregate value of the nonvested share
units credited to your account thereunder as of the Date
of Termination and (y) with respect to your interest in
the Corporation's Key Employees Stock Bonus Plan, an
amount, in cash, equal to the aggregate value of all
Corporation stock, cash and other property credited to
your account thereunder as of the Date of Termination
and upon making such payments, the Corporation shall
have no further obligation to you under such plans
except with respect to any previously vested interest
you may have in such plans; and
(D) for a twenty-four (24) month period after
such termination, the Corporation will arrange to
provide you, at the Corporation's expense, with life,
disability, accident and health insurance benefits
substantially similar to those which you were receiving
immediately prior to the Notice of Termination; but
benefits otherwise receivable by you pursuant to this
Subsection (D) shall be reduced to the extent comparable
benefits are actually received by you during the
twenty-four (24) month period following your
termination, and any such benefits actually received by
you shall be reported to the Corporation.
(E) if you would have become entitled to
benefits under the Corporation's post-retirement health
care or life insurance plans, as such plans existed
immediately prior to the Change in Control, had your
employment terminated at any time during the period of
twenty-four (24) months after the Date of Termination,
the Corporation shall provide such post-retirement
health care or life insurance benefits to you commencing
on the later of (i) the date that such coverage would
have first become available and (ii) the date on which
benefits described in subsection (D) of this Section
4(a) terminate.
(e) (A) Notwithstanding any other provisions of this
Agreement, in the event that any payment or benefit received or to
be received by you in connection with a Change in Control or the
termination of your employment (whether pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with
the Corporation, and Person whose actions result in a Change in
Control or any Person affiliated with the Corporation or such
Person) (all such payments and benefits, including the Severance
Payments, being hereinafter called "Total Payments") would be
subject (in whole or part), to any excise tax imposed under
Section 4999 of the Internal Revenue Code of 1988 (the "Code"), as
amended from time to time (the Excise Tax") the, after taking into
account any reduction in the Total Payments provided by reason of
section 280G of the Code in such other plan, arrangement or
agreement, the cash Severance Payments shall first be reduced, and
the noncash Severance Payments shall thereafter be reduced, to the
extent necessary so that no portion of the Total Payments is
subject to the Excise Tax but only if (1) the net amount of such
Total Payments, as so reduced (and after subtracting the net
amount of federal, state and local income taxes on such reduced
Total Payments) is equal to or greater than (2) the net amount of
such Total Payments, without reduction (but after subtracting the
net amount of federal, state and local income taxes on such Total
Payments and the amount of Excise Tax to which you would be
subject to respect of such unreduced Total Payments); provided,
however, that you may elect (at any time prior to the delivery of
a Notice of Termination hereunder) to have the noncash Severance
Payments reduced (or eliminated) prior to any reduction of the
cash Severance Payments.
(B) For purposes of determining whether and the
extend to which the Total Payments will be subject to the Excise
Tax, (i) no portion of the Total Payments the receipt or enjoyment
of which you shall have effectively waived in writing prior to the
delivery of a Notice of Termination shall be taken into account,
(ii) no portion of the Total Payments shall be taken into account
which, in the opinion of tax counsel reasonably acceptable to you
and selected by the accounting firm (the "Auditor") which was,
immediately prior to the Change in Control, the Company's
independent auditor, does not constitute a "parachute payment"
within the meaning of section 280G(b) (2) of the Code (including
by reason of section 280(b) (4) (A) of the Code) and, in
calculating the Excise Tax, no portion of such Total Payments
shall be taken into account which constitutes reasonable
compensation for services actually rendered, within the meaning of
section 280G(b) (4) (B) of the Code, in excess of the Base Amount
allocable to such reasonable compensation, and (iii) the value of
any non-cash benefit or any deferred payment or benefit included
in the Total Payments shall be determined by the Auditor in
accordance with the principles of sections 280G(d) (3) and (4) of
the Code.
(f) The payments provided for in paragraph (d) above
shall be made not later than the fifth day following the Date of
Termination; provided, however, that if the amounts of such
payments or the limitation on such payments set forth in paragraph
(e) above cannot be finally determined on or before such day, the
Corporation shall pay to you on such day an estimate as determined
in good faith by the Corporation of the minimum amount of such
payments and shall pay the remainder of such payments (together
with interest at 120% of the rate provided in Section
1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined but in no event later than the thirtieth (30th) day
after the Date of Termination. In the event that the amount of
the estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by the
Corporation to you payable on the fifth (5th) day after demand by
the Corporation (together with interest at 120% of the rate
provided in Section 1274(b)(2)(B) of the Code).
(g) The Corporation shall also pay to you and and all
legal fees and expenses incurred by you in contesting or disputing
any termination of employment or in seeking to obtain or enforce
any right or benefit provided by this Agreement or in connection
with any tax audit or proceeding to the extent attributable to the
application of Section 4999 of the Code to any payment or benefit
provided hereunder).
(h) You shall not be required to mitigate the amount of
any payment provided for in this Section 4 by seeking other
employment or otherwise, nor shall the amount of any payment
provided for in this Section 4 be reduced (except as provided in
subparagraph (D) of Section 4(d) hereof) by any compensation
earned by you as the result of employment by another employer
after the Date of Termination, or otherwise.
5. Successors; Binding Agreement.
(a) The Corporation 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 Corporation or of any division or subsidiary thereof
employing you to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the
Corporation would be required to perform it if no such succession
had taken place. Failure of the Corporation to obtain such
assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle
you to compensation from the Corporation in the same amount and on
the same terms as you would be entitled hereunder if you terminate
your employment for Good Reason, except that for purposes of
implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination.
(b) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees. If you should die while any amount would still be
payable to you hereunder if you had continued to live, all such
amount, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement, to your devisee,
legatee or other designee or, if there is not such designee, to
your estate.
6. Notices. For the purpose of this Agreement, notices and
all other communications provided for in the Agreement shall be in
writing and shall be deemed to have been duly given when delivered
or mailed by United States registered mail, return receipt
requested, postage prepaid, addressed to the respective addresses
set forth on the first page of this Agreement or to such other
addresses as may be designated by prior written notice give in
accordance with this Section 6.
7. Miscellaneous. No provision of this Agreement may be
modified, waived or discarded unless such waiver, modification or
discharge is agreed to in writing and signed by you and such
officer as may be specifically designated by the Board. The
validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Delaware.
The parties to this amended and restated agreement intend that
this agreement be considered an instrument under seal with the
intent that the statute of limitations provided for at 10 Del.C.
Section 8106 be tolled to the full extent permitted under Delaware law.
8. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but
all of which together will constitute one and the same instrument.
10. Arbitration. Any dispute or controversy arising under
or in connection with this Agreement shall be settled exclusively
by arbitration in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered
on the arbitrator's award in any court having jurisdiction;
provided, however, that you shall be entitled to seek specific
performance of your right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or
in connection with this Agreement.
11. Entire Agreement. This Agreement supersedes any other
agreement or understanding between the parties hereto,
including, if applicable, a severance agreement dated March 12,
1982, as amended, between you and the Corporation.
12. Effective Date. This amended and restated agreement
shall become effective as of the date set forth above.
Sincerely,
BENEFICIAL CORPORATION
[SEAL]
By
James H. Gilliam, Jr.
Executive Vice President
and General Counsel
Agreed and consented to as
of the date set forth above. [SEAL]
By
<<name&title>>
March 26, 1996
addr
Dear name:
You previously entered into an agreement dated August 21,
1986 providing you certain protection in the event of a change of
control of Beneficial Corporation (the "Corporation"), which
agreement was subsequently amended effective as of February 21,
1990, and which remains in effect. The Board of Directors of the
Corporation has authorized this amendment and restatement of your
August 21, 1986 agreement, and has requested that you indicate
your agreement and consent (pursuant to Section 7 of that
agreement) by signing in the space provided below on the enclosed
duplicate copy, and returning it to the Corporation.
Beneficial Corporation (the "Corporation") recognizes that
your contribution to the growth and success of the Corporation has
been substantial and desires to assure the Corporation of your
continued employment. In this connection, the Board of Directors
of the Corporation (the "Board") recognizes that, as is the case
with many publicly held corporations, the possibility of a change
in control may exist and that such possibility, and the
uncertainty and questions which it may raise among management, may
result in the departure or distraction of management personnel to
the detriment of the Corporation and its stockholders.
The Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and
dedication of members of the Corporation's management, including
yourself, to their assigned duties without distraction in the face
of potentially disturbing circumstances arising from the
possibility of a change in control of the Corporation.
In order to induce you to remain in the employ of the
Corporation, the Corporation agrees that you shall receive the
severance benefits set forth in this letter agreement
("Agreement") in the event your employment with the Corporation is
terminated subsequent to a "Change in Control of the Corporation"
(as defined in Section 2 hereof) under the circumstances described
below.
For purposes of this Agreement, an employee of a subsidiary
of the Corporation shall be considered an employee of the
Corporation and in such case the obligation of the Corporation
hereunder shall be to cause such subsidiary to perform the
obligations of the Corporation hereunder.
1. Term of Agreement. This amended and restated agreement
supersedes your August 21, 1986 agreement and shall continue in
effect until December 31, 1998; provided, however, that commencing
on January 1, 1998 and each January 1 thereafter, the term of this
Agreement shall automatically be extended for one additional year
unless, not later than November 1 of the preceding year, the
Corporation shall have given notice that it does not wish to
extend this Agreement; provided, further, if a Change in Control
of the Corporation shall have occurred during the original or
extended term of this Agreement, this Agreement shall continue in
effect for a period of twenty-four (24) months beyond the month in
which such Change in Control of the Corporation occurred.
2. Change in Control of the Corporation. No benefits shall
be payable hereunder unless there shall have been a Change in
Control of the Corporation, as set forth below. For purposes of
this Agreement, a "Change in Control" shall be deemed to have
occurred if the event set forth in any one of the following
paragraphs shall have occurred:
(i) any Person (as defined below) is or becomes the
Beneficial Owner (as defined below), directly or indirectly, of
securities of the Corporation (not including in the securities
beneficially owned by such Person any securities acquired
directly from the Company or its affiliates) representing 20% or
more of the combined voting power of the Corporation's then
outstanding securities, excluding any Person who becomes such a
Beneficial Owner in connection with a transaction described in
clause (A) of paragraph (iii); or
(ii) the following individuals cease for any reason to
constitute a majority of the number of directors then serving:
individuals who, on the date hereof, constitute the Board and any
new director (other than a director whose initial assumption of
office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation,
relating to the election of directors of the Corporation) whose
appointment or election by the Board or nomination for election by
the Corporation's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either
were directors on the date hereof or whose appointment, election
or nomination for election was previously so approved; or
(iii) there is consummated a merger or consolidation of
the Corporation or a direct or indirect subsidiary of the
Corporation with any other corporation, other than (A) a merger or
consolidation which would result in the voting securities of the
Corporation outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity or any parent thereof), in combination with the
ownership of any trustee or other fiduciary holding securities
under an employee benefit plan of the Corporation, at least 80% of
the combined voting power of the securities of the Corporation or
such surviving entity of any parent thereof outstanding
immediately after such merger or consolidation, or (B) a merger or
consolidation effected to implement a recapitalization of the
Corporation (or similar transaction) in which no Person is or
becomes the Beneficial Owner, directly or indirectly, of
securities of the Corporation (not including in the securities
Beneficially Owned by such Person any securities acquired directly
from the Corporation or its subsidiaries representing 20% or more
of either the then outstanding shares of common stock of the
Corporation or the combined voting power of the Corporation's then
outstanding securities; or
(iv) the stockholders of the Corporation approve a plan
of complete liquidation or dissolution of the Corporation or there
is consummated an agreement for the sale or disposition by the
Corporation of all or substantially all of the Corporation's
assets, other than a sale or disposition by the Corporation of all
or substantially all of the Corporation's assets to an entity, at
least 80% of the combined voting power of the voting securities of
which are owned by stockholders of the Corporation in
substantially the same proportions as their ownership of the
Corporation immediately prior to such sale.
For purposes of this Agreement, the term "Person" shall have the
meaning given in Section 3(a)(9) of the Exchange Act, as modified
and used in Sections 13(d) and 14(d) thereof, except that such
term shall not include (i) the Corporation or any of its
subsidiaries, (ii) a trustee or other fiduciary holding securities
under an employee benefit plan of the Corporation or any of its
Affiliates, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the stockholders of the
Corporation in substantially the same proportions as their
ownership of stock of the Corporation, and the term "Beneficial
Owner" shall have the meaning set forth in Rule 13d-3 under the
Exchange Act.
3. Termination Following a Change in Control of the
Corporation. If any of the events described in Section 2 hereof
constituting a Change in Control of the Corporation shall have
occurred, you shall be entitled to the benefits proved in Section
4(d) hereof upon the termination of your employment during the
term of this Agreement unless such termination is (i) because of
your death, Disability or Retirement, (ii) by the Corporation for
Cause, or (iii) by you other than for Good Reason. For purposes
of any determination regarding the applicability of the
immediately preceding sentence, any position taken by you shall be
presumed to be correct unless the Corporation establishes by clear
and convincing evidence that such position is not correct.
(a) Disability; Retirement. If, as a result of your
incapacity due to physical or mental illness, you shall have been
absent from the full-time performance of your duties with the
Corporation for six (6) consecutive months, and within thirty (30)
days after written notice of termination is given you shall not
have returned to the full-time performance of your duties, the
Corporation may terminate your employment for "Disability."
Termination by the Corporation or you of your employment by reason
of "Retirement" shall mean termination on or after attainment of
your "normal retirement age," as defined in the Beneficial
Corporation Pension Plan, or in accordance with any retirement
arrangement established with your consent with respect to you.
(b) Cause. Termination by the Corporation of your
employment for "Cause" shall mean termination upon (i) the willful
and continued failure by you to substantially perform your duties
with Corporation (other than any such failure resulting from
termination by you for Good Reason), after a demand for
substantial performance is delivered to you that specifically
identifies the manner in which the Corporation believed that you
have not substantially performed your duties, and you have failed
to resume substantial performance of your duties on a continuous
basis within fourteen (14) days of receiving such demand, (ii) the
willful engaging by you in conduct which is demonstrably and
materially injurious to the Corporation, monetarily or otherwise
or (iii) your conviction of a felony or conviction of a
misdemeanor which impairs your ability substantially to perform
your duties with the Corporation. For purposes of this
Subsection, no act, or failure to act, on your part shall be
deemed "willful" unless done, or omitted to be done, by you not in
good faith and without reasonable belief that your action or
omission was in the best interest of the Corporation. In the
event of a dispute concerning the application of this provision,
no claim by the Corporation that Cause exists shall be given
effect unless the Corporation establishes by clear and convincing
evidence that Cause exists.
(c) Good Reason. You shall be entitled to terminate
your employment for Good Reason. For purposes of this Agreement,
"Good Reason" shall mean, without your express written consent,
the occurrence after a Change in Control of the Corporation of any
one or more of the following:
(i) the assignment to you of duties inconsistent
with your present positions, duties, responsibilities and status
or a reduction or alteration in the nature or status of your
responsibilities from those in effect as of the date hereof;
(ii) a reduction by the Corporation in your annual
base salary as in effect on the date hereof as such may be
increased from time to time by the Board ("Base Salary");
(iii) the Corporation's requiring you to be based
at a location in excess of twenty-five (25) miles from the
location where you are presently based;
(iv) the failure by the Corporation to continue in
effect any salary plan, incentive plan, deferred compensation plan
or any other of the Corporation's employee benefit plans,
policies, practices or arrangements in which you participate or
the failure by the Corporation to continue your participation
therein on substantially the same basis, both in terms of the
amount of benefits provided and the level of your participation
relative to other participants, as existed as of the date hereof;
(v) the failure of the Corporation to obtain a
satisfactory agreement from any successor to the Corporation to
assume and agree to perform this Agreement, as contemplated in
Section 5 hereof; and
(vi) any purported termination by the Corporation
of your employment that is not effected pursuant to a Notice of
Termination satisfying the requirements of subparagraph (d) below,
and for purposes of this Agreement, no such purported termination
shall be effective. Your right to terminate your employment
pursuant to this Subsection shall not be affected by your
incapacity due to physical or mental illness. Your continued
employment shall not constitute consent to, or a waiver of rights
with respect to, any circumstance constituting Good Reason
hereunder. For purposes of any determination regarding the
existence of Good Reason, any claim by you that Good Reason exists
shall be presumed to be correct unless the Corporation extablishes
by clear and convincing evidence that Good Reason does not exist.
(d) Notice of Termination. Any termination by the
Corporation for Cause or by you for Good Reason shall be
communicated by Notice of Termination to the other party hereto.
For purposes of this Agreement, a "Notice of Termination" shall
mean a written notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the
provision so indicated.
(e) Date of Termination. "Date of Termination" shall
mean the date specified in the Notice of Termination where
required or in any other case upon ceasing to perform services to
the Corporation; provided that if within thirty (30) days after an
Notice of Termination a party hereto notifies the other party that
a dispute exists concerning the termination, the Date of
Termination shall be the date finally determined to be the Date of
Termination, either by mutual written agreement of the parties or
by a binding and final arbitration award.
4. Compensation Upon Termination or During Disability.
Following a Change in Control of the Corporation, as defined in
Section 2 hereof, upon termination of your employment or during a
period of disability you shall be entitled to the following
benefits:
(a) During any period that you fail to perform your
full-time duties with the Corporation as a result of incapacity
due to physical or mental illness, you shall continue to receive
your Base Salary at the rate in effect at the commencement of any
such period, until your employment is terminated pursuant to
Section 3(a) hereof. Thereafter, your benefits shall be
determined in accordance with the Corporation's retirement,
insurance and other applicable programs and plans then in effect.
(b) If your employment shall be terminated by the
Corporation for Cause or by you other than for Good Reason, the
Corporation shall pay you your full Base Salary through the Date
of Termination at the rate in effect at the time Notice of
Termination is given or on the Date of Termination if no Notice of
Termination is required hereunder, together with accrued vacation
pay, if any, and the Corporation shall have no further obligations
to you under this Agreement.
(c) If your employment terminates by reason of your
Retirement, or by reason of your death, your benefits shall be
determined in accordance with the Corporation's retirement,
survivor's benefits, insurance and other applicable programs and
plans then in effect.
(d) If your employment by the Corporation shall be
terminated (i) by the Corporation other than for Cause, Retirement
or Disability or (ii) by you for Good Reason, then, in addition to
any benefits to which you are otherwise entitled in accordance
with the Corporation's retirement, survivor's benefits, insurance
and other applicable programs and plans then in effect, you shall
be entitled to the benefits (the "Severance Payments") provided
below:
(A) the Corporation will pay you your full
Base Salary through the Date of Termination at the rate
in effect at the time Notice of Termination is given, or
the Date of Termination where no Notice of Termination
is required hereunder, and any previously awarded
bonuses which have been deferred;
(B) the Corporation will pay you not later
than the fifth (5th) day following the Date of
Termination, a lump sum severance payment equal to
twice the sum of (x), (y), and (z), where (x) equals
your annual Base Salary in effect immediately prior to
the occurrence of the circumstances giving rise to such
termination, where (y) equals the amount, if any, of the
highest of your three most recent awards (or, if fewer
than three have been received, such lesser number)
pursuant to the Corporation's Key Employees Stock Bonus
Plan and where (z) equals the amount, if any, of your
aware for the year in which the Date of Terminination
occurs, if determined by the Board but not yet paid, or
if no determination has been made, your most recent
annual award paid to you under any annual cash incentive
or bonus program for which you are eligible, regardless
of whether such incentive or bonus program has been
established as of the date of this Agreement.
(C) the Corporation will pay you, not later
then the fifth day following the Date of Termination,
(x) with respect to your interest in the Corporation's
Employees' Stock Purchase Plan, an amount, in cash,
equal to the aggregate value of the nonvested share
units credited to your account thereunder as of the Date
of Termination and (y) with respect to your interest in
the Corporation's Key Employees Stock Bonus Plan, an
amount, in cash, equal to the aggregate value of all
Corporation stock, cash and other property credited to
your account thereunder as of the Date of Termination
and upon making such payments, the Corporation shall
have no further obligation to you under such plans
except with respect to any previously vested interest
you may have in such plans; and
(D) for a twenty-four (24) month period after
such termination, the Corporation will arrange to
provide you, at the Corporation's expense, with life,
disability, accident and health insurance benefits
substantially similar to those which you were receiving
immediately prior to the Notice of Termination; but
benefits otherwise receivable by you pursuant to this
Subsection (D) shall be reduced to the extent comparable
benefits are actually received by you during the
twenty-four (24) month period following your
termination, and any such benefits actually received by
you shall be reported to the Corporation.
(E) if you would have become entitled to
benefits under the Corporation's post-retirement health
care or life insurance plans, as such plans existed
immediately prior to the Change in Control, had your
employment terminated at any time during the period of
twenty-four (24) months after the Date of Termination,
the Corporation shall provide such post-retirement
health care or life insurance benefits to you commencing
on the later of (i) the date that such coverage would
have first become available and (ii) the date on which
benefits described in subsection (D) of this Section
4(a) terminate.
(e) (A) Whether or not you become entitled to the
Severence Payments, if any of the payments or benefits received or
to be received by you in connection with a Change in Control or
your termination of employment (whether pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with
the Corporation, any Person whose actions result in a Change in
Control or any Person affiliated with the Corporation or such
Person) (such payments or benefits, excluding the payment made
under this subsection (e), being hereinafter referred to as the
"Total Payments") will be subject to any excise tax imposed under
Section 4999 of the Internal Revenue Code of 1986 (the "Code"), as
amended from time to time (the "Excise Tax"), the Corporation
shall pay to you an additional amount (the "Gross-Up Payment")
such that the net amount retained by you, after deduction of any
Excise Tax on the Total Payments and any federal, state and local
income and employment taxes and Excise Tax upon the Gross-Up
payment, shall be equal to the Total Payments.
(B) For purposes of determining whether any of the
Total Payments will be subject to the Excise Tax and the amount of
such Excise Tax, (i) all of the Total Payments shall be treated as
"parachute payments" (within the meaning of Section 280G(b) (2) of
the Code) unless, in the option of tax counsel (the "Tax Counsel")
reasonably acceptable to you and selected by the accounting firm
which was, immediately prior to the Change in Control, the
Corporation's independent auditor (the "Auditor"), such payments
or benefits (in whole or in part) do not constitute parachute
payments, including by reason of Section 280G(b) (4) (A) of the
Code, (ii) all "excess parachute payments" within the meaning of
Section 280G(b) (l) of the Code shall be treated as subject to the
Excise Tax unless, in the opinion of the Tax Counsel, such excess
parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered (within the meaning of
Section 280G(b) (4) (B) of the Code) in excess of the "Base
Amount," as defined in Section 280G(b)(3) of the code allocable to
such reasonable compensation, or are otherwise not subject to the
Excise Tax, and (iii) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the Auditor in
accordance with the principles of Sections 280G(d) (3) and (4) of
the Code. For purposes of determining the amount of the Gross-Up
Payment, you shall be deemed to pay federal income tax at the
highest marginal rate of federal income taxation in the calendar
year in which Gross-Up Payment is to be made and state and local
income taxes at the highest marginal rate of taxation in the state
and locality of your residence on the Date of Termination (or if
there is no Date of Termination, then the date on which the Gross-
Up Payment is calculated for purposes of this Section 4(e)), net
of the maximum reduction in federal income taxes which could be
obtained from deduction of such state and local taxes.
(C) In the event that the Excise Tax is
subsequently determined to be less than the amount taken into
account hereunder at the time of termination of your employment,
you shall repay to the Corporation, at the time that the amount of
such reduction in Excise Tax is finally determined, the portion of
the Gross-Up Payment attributable to such reduction (plus that
portion of the Gross-Up Payment attributable to the Excise Tax and
federal, state and local income and employment taxes imposed on
the Gross-Up Payment being repaid by you to the extent that such
repayment results in a reduction in Excise Tax and/or federal,
state or local income or employment tax deduction) plus interest
on the amount of such repayment of 120% of the rate provided in
Section 1274(b) (2) (B) of the Code. In the event that the Excise
Tax is determined to exceed the amount taken into account
hereunder at the time of the termination of your employment
(including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment),
the Corporation shall make an additional Gross-Up Payment in
respect of such excess (plus any interest, penalties or additions
payable by you with respect to such excess) at the time that the
amount of such excess is finally determined. You and the
Corporation shall each reasonably cooperate with the other in
connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise Tax
with respect to the Total Payments.
(f) The payments provided for in paragraphs (d) and (e)
above shall be made not later than the fifth day following the
Date of Termination; provided, however, that if the amounts of
such payments cannot be finally determined on or before such day,
the Corporation shall pay to you on such day an estimate as
determined in good faith by the Corporation of the minimum amount
of such payments and shall pay the remainder of such payments
(together with interest at the rate provided in Section
1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined but in no event later than the thirtieth (30th) day
after the Date of Termination. In the event that the amount of
the estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by the
Corporation to you payable on the fifth (5th) day after demand by
the Corporation (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code).
(g) The Corporation shall also pay to you any and all
legal fees and expenses incurred by you in contesting or disputing
any termination of employment or in seeking to obtain or enforce
any right or benefit provided by this Agreement or in connection
with any tax audit or proceeding to the extent attributable to the
application of Section 4999 of the Code to any payment or benefit
provided hereunder).
(h) You shall not be required to mitigate the amount of
any payment provided for in this Section 4 by seeking other
employment or otherwise, nor shall the amount of any payment
provided for in this Section 4 be reduced (except as provided in
subparagraph (D) of Section 4(d) hereof) by any compensation
earned by you as the result of employment by another employer
after the Date of Termination, or otherwise.
5. Successors; Binding Agreement.
(a) The Corporation 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 Corporation or of any division or subsidiary thereof
employing you to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the
Corporation would be required to perform it if no such succession
had taken place. Failure of the Corporation to obtain such
assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle
you to compensation from the Corporation in the same amount and on
the same terms as you would be entitled hereunder if you terminate
your employment for Good Reason, except that for purposes of
implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination.
(b) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees. If you should die while any amount would still be
payable to you hereunder if you had continued to live, all such
amount, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement, to your devisee,
legatee or other designee or, if there is not such designee, to
your estate.
6. Notices. For the purpose of this Agreement, notices and
all other communications provided for in the Agreement shall be in
writing and shall be deemed to have been duly given when delivered
or mailed by United States registered mail, return receipt
requested, postage prepaid, addressed to the respective addresses
set forth on the first page of this Agreement or to such other
addresses as may be designated by prior written notice give in
accordance with this Section 6.
7. Miscellaneous. No provision of this Agreement may be
modified, waived or discarded unless such waiver, modification or
discharge is agreed to in writing and signed by you and such
officer as may be specifically designated by the Board. The
validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Delaware.
The parties to this amended and restated agreement intend that
this agreement be considered an instrument under seal with the
intent that the statute of limitations provided for at 10 Del.C.
Section 8106 be tolled to the full extent permitted under Delaware law.
8. Validity. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but
all of which together will constitute one and the same instrument.
10. Arbitration. Any dispute or controversy arising under
or in connection with this Agreement shall be settled exclusively
by arbitration in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered
on the arbitrator's award in any court having jurisdiction;
provided, however, that you shall be entitled to seek specific
performance of your right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or
in connection with this Agreement.
11. Entire Agreement. This Agreement supersedes any other
agreement or understanding between the parties hereto,
including, if applicable, a severance agreement dated March 12,
1982, as amended, between you and the Corporation.
12. Effective Date. This amended and restated agreement
shall become effective as of the date set forth above.
Sincerely,
BENEFICIAL CORPORATION
[SEAL]
By
James H. Gilliam, Jr.
Executive Vice President
and General Counsel
Agreed and consented to as [SEAL]
of the date set forth above.
By
name&title
March 26, 1996
<<addr>>
Dear <<name>>:
Beneficial Corporation (the "Corporation") recognizes that your
contribution to the growth and success of the Corporation has been
substantial and desires to assure the Corporation of your continued
employment. In this connection, the Board of Directors of the
Corporation (the "Board") recognizes that, as is the case with many
publicly held corporations, the possibility of a change in control may
exist and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Corporation
and its stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of
members of the Corporation's management, including yourself, to their
assigned duties without distraction in the face of potentially
disturbing circumstances arising from the possibility of a change in
control of the Corporation.
In order to induce you to remain in the employ of the Corporation,
the Corporation agrees that you shall receive the severance benefits
set forth in this letter agreement ("Agreement") in the event your
employment with the Corporation is terminated subsequent to a "Change
in Control of the Corporation" (as defined in Section 2 hereof) under
the circumstances described below.
For purposes of this Agreement, an employee of a subsidiary of the
Corporation shall be considered an employee of the Corporation and in
such case the obligation of the Corporation hereunder shall be to cause
such subsidiary to perform the obligations of the corporation
hereunder.
1. Term of Agreement. This Agreement shall commence on the
date hereof and shall continue in effect until December 31, 1998;
provided, however, that commencing on January 1, 1998 and each January
1 thereafter, the term of this Agreement shall automatically be
extended for one additional year unless, not later than November 1 of
the preceding year, the Corporation shall have given notice that it
does not wish to extend this Agreement; provided, further, if a Change
in Control of the Corporation shall have occurred during the original
or extended term of this Agreement, this Agreement shall continue in
effect for a period of eighteen (18) months beyond the month in which
such Change in Control of the Corporation occurred.
2. Change in Control of the Corporation. No benefits shall
be payable hereunder unless there shall have been a Change in Control
of the Corporation, as set forth below. For purposes of this
Agreement, a "Change in Control of the Corporation" shall be deemed to
have occurred if the event set forth in any one of the following
paragraphs shall have occurred:
(i) any Person (as defined below) is or becomes the
Beneficial Owner (as defined below), directly or indirectly, of
securities of the Corporation (not including in the securities
beneficially owned by such Person any securities acquired directly from
the Company or its affiliates) representing 20% or more of the combined
voting power of the Corporation's then outstanding securities,
excluding any Person who becomes such a Beneficial Owner in connection
with a transaction described in clause (A) of paragraph (iii); or
(ii) the following individuals cease for any reason to
constitute a majority of the number of directors then serving:
individuals who, on the date hereof, constitute the Board and any new
directors (other than a director whose initial assumption of office is
in connection with an actual or threatened election contest, including
but not limited to a consent solicitation, relating to the election of
directors of the Corporation) whose appointment or election by the
Board or nomination for election by the Corporation's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors on the date hereof or whose
appointment, election or nomination for election was previously so
approved; or
(iii) there is consummated a merger or consolidation of
the Corporation or a direct or indirect subsidiary of the Corporation
with any other corporation, other than (A) a merger or consolidation
which would result in the voting securities of the Corporation
outstanding immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or any parent
thereof), in combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan of the
Corporation, at least 80% of the combined voting power of the
securities of the Corporation or such surviving entity or any parent
thereof outstanding immediately after such merger or consolidation, or
(B) a merger or consolidation effected to implement a recapitalization
of the Corporation (or similar transaction) in which no Person is or
becomes the Beneficial Owner, directly or indirectly, of securities of
the Corporation (not including in the securities Beneficially Owned by
such Person any securities acquired directly from the Corporation or
its subsidiaries) representing 20% or more of either the then
outstanding shares of common stock of the Corporation or the combines
voting power of the Corporation's then outstanding securities; or
(iv) the stockholders of the Corporation approve a plan
of complete liquidation or dissolution of the Corporation or there is
consummated an agreement for the sale or disposition by the Corporation
of all or substantially all of the Corporation's assets, other than a
sale or disposition by the Corporation of all or substantially all of
the Corporation's assets to an entity, at least 80% of the combined
voting power of the voting securities of which are owned by
stockholders of the Corporation in substantially the same proportions
as their ownership of the Corporation immediately prior to such sale.
For purposes of this Agreement, the term "Person" shall have the
meaning given in Section 3(a)(9) of the Exchange Act, as modified and
used in Sections 13(d) and 14(d) thereof, except that such term shall
not include (i) the Corporation or any of its subsidiaries, (ii) a
trustee or other fiduciary holding securities under an employee benefit
plan of the Corporation or any of its Affiliates, (iii) an underwriter
temporarily holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Corporation in substantially the same proportions
as their ownership of stock of the Corporation, and the term
"Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under
the Exchange Act.
3. Termination following a Change in Control of the
Corporation. If any of the events described in Section 2 hereof
constituting a Change in Control of the Corporation shall have
occurred, you shall be entitled to the benefits provided in Section
4(d) hereof upon the termination of your employment during the term of
this Agreement unless such termination is (i) because of your death,
Disability or Retirement, (ii) by the Corporation for Cause, or (iii)
by you other than for Good Reason. For purposes of any determination
regarding the applicability of the immediately preceding sentence, any
position taken by the you shall be presumed to be correct unless the
Corporation establishes by clear and convincing evidence that such
position is not correct.
(a) Disability; Retirement. If, as a result of your
incapacity due to physical or mental illness, you shall have been
absent from the full-time performance of your duties with the
Corporation for six (6) consecutive months, and within thirty (30) days
after written notice of termination is given you shall not have
returned to the full-time performance of your duties, the Corporation
may terminate your employment for "Disability." Termination by the
Corporation or you of your employment by reason of "Retirement" shall
mean termination on or after attainment of your "normal retirement
age," as defined in the Beneficial Corporation Pension Plan, or in
Accordance with any retirement arrangement established with your
consent with respect to you.
(b) Cause. Termination by the Corporation of your
employment for "Cause" shall mean termination upon (i) the willful and
continued failure to you to substantially perform your duties with the
Corporation (other than any such failure resulting from termination by
you for Good Reason), after a demand for substantial performance is
delivered to you that specifically identifies the manner in which the
Corporation believes that you have not substantially performed your
duties, and you have failed to resume substantial performance of your
duties on a continuous basis within fourteen (14) days of receiving
such demand, (ii) the willful engaging by you in conduct which is
demonstrably and materially injurious to the Corporation, monetarily or
otherwise or (iii) your conviction of a felony or conviction of a
misdemeanor which impairs your ability substantially to perform your
duties with the Corporation. For purposes of this Subsection, no act,
or failure to act, on your part shall be deemed "willful" unless done,
or omitted to be done, by you not in good faith and without reasonable
belief that your action or omission was in the best interest of the
Corporation. In the event of a dispute concerning the application of
this provision, no claim by the Corporation that "Cause" exists shall
be given effect unless the Corporation established by clear and
convincing evidence that Cause exists.
(c) Good Reason. You shall be entitled to terminate
your employment for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean, without your express written
consent, the occurrence after a Change in Control of the Corporation of
any one or more of the following:
(i) the assignment to you of duties inconsistent
with your present positions, duties, responsibilities and status or a
reduction or alteration in the nature or status of your
responsibilities from those in effect as of the date hereof;
(ii) a reduction by the Corporation in your annual
base salary as in effect on the date hereof as such may be increased
from time by the Board ("Base Salary");
(iii) the Corporation's requiring you to be based
at a location in excess of twenty-five (25) miles from the location
where you are presently based;
(iv) the failure by the Corporation to continue in
effect any salary plan, incentive plan, deferred compensation plan or
any other of the corporation's employee benefit plans, policies,
practices or arrangements in which you participate or the failure by
the corporation to continue your participation therein on substantially
the same basis, both in terms of the amount of benefits provided and
the level of your participation relative to other participants, as
existed as of the date hereof;
(v) the failure of the Corporation to obtain a
satisfactory agreement from any successor to the Corporation to assume
and agree to perform this Agreement, as contemplated in Section 5
hereof; and
(vi) any purported termination by the Corporation
of your employment that is not effected pursuant to a Notice of
Termination satisfying the requirements of subparagraph (d) below, and
for purposes of this Agreement, no such purported termination shall be
effective. Your right to terminate your employment pursuant to this
Subsection shall not be affected by your incapacity due to physical or
mental illness. Your continued employment shall not constitute consent
to, or a waiver of rights with respect to, any circumstance
constituting Good Reason hereunder. For purpose of any determination
regarding the existence of Good Reason, any claim by you that Good
Reason exists shall be presumed to be correct unless the Corporation
establishes by clear and convincing evidence that Good Reason does not
exist.
(d) Notice of Termination. Any termination by the
Corporation for Cause or by you for Good Reason shall be communicated
by Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice
which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of
your employment under the provision so indicated.
(e) Date of Termination. "Date of Termination" shall
mean the date specified in the Notice of Termination where required or
in any other case upon ceasing to perform services to the Corporation;
provided that if within thirty (30) days after any Notice of
Termination a party hereto notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the
date finally determined to be the Date of Termination, either by mutual
written agreement of the parties or by a binding and final arbitration
award.
4. Compensation Upon Termination or During Disability.
Following a Change in Control of the Corporation, as defined in Section
2 hereof, upon termination of your employment or during a period of
disability you shall be entitled to the following benefits:
(a) During any period that you fail to perform your
full-time duties with the Corporation as a result of incapacity due to
physical or mental illness, you shall continue to receive your Base
Salary at the rate in effect at the commencement of any such period,
until your employment is terminated pursuant to Section 3(a) hereof.
Thereafter, your benefits shall be determined in accordance with the
corporation's retirement, insurance and other applicable programs and
plans then in effect.
(b) If your employment shall be terminated by the
Corporation for Cause or by you other than for Good Reason, the
Corporation shall pay you your full Base Salary through the Date of
Termination at the rate in effect at the time Notice of Termination is
given or on the Date of Termination if no Notice of Termination is
required hereunder, together with accrued vacation pay, if any, and the
Corporation shall have no further obligations to you under this
Agreement.
(c) If your employment terminates by reason of your
Retirement, or by reason of your death, your benefits shall be
determined in accordance with the Corporation's retirement, survivor's
benefits, insurance and other applicable programs and plans then in
effect.
(d) If your employment by the Corporation shall be
terminated (i) by the Corporation other than for Cause, Retirement or
Disability or (ii) by you for Good Reason, then, in addition to any
benefits to which you are otherwise entitled in accordance with the
Corporation's retirement, survivor's benefits, insurance and other
applicable programs and plans then in effect, you shall be entitled to
the benefits (the "Severance Payments") provided below:
(A) the Corporation will pay you your full
Base Salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given, or the
Date of Termination where no Notice of Termination is
required hereunder, and any previously awarded bonuses which
have been deferred;
(B) the Corporation will pay you not later
than the fifth (5th) day following the Date of Termination, a
lump sum severance payment equal to one and one-half (1.5)
times the sum of (x), (y), and (z), where (x) equals your
annual Base Salary in effect immediately prior to the
occurrence of the circumstances giving rise to such
termination, where (y) equals the amount, if any, of the
highest of your three most recent awards (or, if fewer than
three have been received, such lesser number) pursuant to the
Corporation's Key Employees Stock Bonus Plan; and where (z)
equals the amount, if any, of your award for the year in
which the Date of Termination occurs, if determined by the
Board but not yet paid, or if no determination has been made,
your most recent annual award paid to you under any annual
cash incentive or bonus program for which you are eligible,
regardless of whether such incentive or bonus program has
been established as of the date of this Agreement.
(C) the Corporation will pay you, not later
then the fifth day following the Date of Termination, (x)
with respect to your interest in the Corporation's Employees'
Stock Purchase Plan, an amount, in cash, equal to the
aggregate value of the nonvested share units credited to your
account thereunder as of the Date of Termination and (y) with
respect to your interest in the Corporation's Key Employees
Stock Bonus Plan, an amount, in cash, equal to the aggregate
value of all Corporation stock, cash and other property
credited to your account thereunder as of the Date of
Termination and upon making such payments, the Corporation
shall have no further obligation to you under such plans
except with respect to any previously vested interest you may
have in such plans; and
(D) for an eighteen (18) month period after
such termination, the Corporation will arrange to provide
you, at the Corporation's expense, with life, disability,
accident and health insurance benefits substantially similar
to those which you were receiving immediately prior to the
Notice of Termination; but benefits otherwise receivable by
you pursuant to this Subsection (D) shall be reduced to the
extent comparable benefits are actually received by you
during the eighteen (18) month period following your
termination, and any such benefits actually received by you
shall be reported to the Corporation.
(E) If you would have become entitled to
benefits under the Corporation's post-retirement health care
or life insurance plans, as such plans existed immediately
prior to the Change in Control, had your employment
terminated at any time during the period of eighteen (18)
month after the Date of Termination, the Corporation shall
provide such post-retirement health care or life insurance
benefits to you commencing on the later of (i) the date that
such coverage would have first become available and (ii) the
date on which benefits described in subsection (D) of this
Section 4(d) terminate.
(e) (A) Notwithstanding any other provisions of this
Agreement, in th event that any payment or benefit received or to be
received by you in connection with a Change in Control or the
termination of your employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the
Corporation, any Person whose actions result in a Change in Control or
any Person affiliated with the Corporation or such Person) (all such
payments and benefits, including the Severance Payments, being
hereinafter called "Total Payments") would be subject (in whole or
part), to any excise tax imposed under Section 4999 of the Internal
Revenue Code of 1986 (the "Code"), as amended from time to time (the
"Excise Tax"), then, after taking into account any reduction in the
Total Payments provided by reason of section 280G of the Code in such
other plan, arrangement or agreement, the cash Severance Payments shall
first be reduced, and the noncash Severance Payments shall thereafter
be reduced, to the extent necessary so that no portion of the Total
Payments is subject to the Excise Tax but only if (A) the net amount of
such Total Payments, as so reduced (and after subtracting the net
amount of federal, state and local income taxes on such reduced Total
Payments) is equal to or greater than (B) the net amount of such Total
Payments, without reduction (but after subtracting the next amount of
federal, state and local income taxes on such Total Payments and the
amount of Excise Tax to which you would be subject in respect of such
unreduced Total Payments); provided, however, that you may elect (at
any time prior to the delivery of a Notice of Termination hereunder) to
have the noncash Severance Payments reduced (or eliminated) prior to
any reduction of the cash Severance Payments.
(B) For purposes of determining whether and the
extent to which the Total Payments will be subject to the Excise Tax,
(i) no portion of the Total Payments the receipt or enjoyment of which
you shall have effectively waived in writing prior to the delivery of a
Notice of Termination shall be taken into account, (ii) no portion of
the Total Payments shall be taken into account which, in the opinion of
tax counsel reasonably acceptable to you and selected by the accounting
firm (the "Auditor") which was, immediately prior to the Change in
Control, the Company's independent auditor, does not constitute a
"parachute payment" within the meaning of section 280G(b) (2) of the
Code (including by reason of section 280G(b) (4) (A) of the Code) and
in calculating the Excise Tax, no portion of such Total Payments shall
be taken into account which constitutes reasonable compensation for
services actually rendered, within the meaning of section 280G(b) (4)
(B) of the Code, in excess of the Base Amount allocable to such
reasonable compensation, and (iii) the value of any non-cash benefit or
any deferred payment of benefit included in the Total Payments shall be
determined by the Auditor in accordance with the principles of sections
280G(d) (3) and (4) of the Code.
(f) The payments provided for in paragraph (d) above
shall be made not later than the fifth day following the Date of
Termination; provided, however, that if the amounts of such payments or
the limitation on such payments set forth in paragraph (e) above cannot
be finally determined on or before such day, the Corporation shall pay
to you on such day an estimate as determined in good faith by you of
the minimum amount of such payments and shall pay the remainder of such
payments (together with interest at 120% of the rate provided in
Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined but in no event later than the thirtieth (30th) day after
the Date of Termination. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Corporation to you payable
on the fifth (5th) day after demand by the Corporation (together with
interest at 120% of the rate provided in Section 1274(b)(2)(B) of the
Code).
(g) The Corporation shall also pay to you any and all
legal fees and expenses incurred by you in contesting or disputing any
termination of employment or in seeking to obtain or enforce any right
or benefit provided by this Agreement or in connection with any tax
audit or proceeding to the extent attributable to the application of
Section 4999 of the Code to any payment or benefits provided
hereunder).
(h) You shall not be required to mitigate the amount of
any payment provided for in this Section 4 by seeking other employment
or otherwise, nor shall the amount of any payment provided for in this
Section 4 be reduced (except as provided in subparagraph (D) of Section
4(d) hereof) by any compensation earned by you as the result of
employment by another employer after the Date of Termination, or
otherwise.
5. Successors; Binding Agreement.
(a) The Corporation 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
Corporation or of any division or subsidiary thereof employing you to
expressly assume and agree to perform this Agreement in the same manner
and to the same extent that the Corporation would be required to
perform it if no such succession had taken place. Failure of the
Corporation to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall entitle you to compensation from the Corporation in
the same amount and on the same terms as you would be entitled
hereunder if you terminate your employment for Good Reason, except that
for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination.
(b) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
If you should die while any amount would still be payable to you
hereunder if you had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms
of this Agreement, to your devisee, legatee or other designee or, if
there is not such designee, to your estate.
6. Notices For the purpose of this Agreement, notices and
all other communications provided for in the Agreement shall be in
writing and shall be deemed to have been duly given when delivered or
mailed by United Sates registered mail, return receipt requested,
postage prepaid, addressed to the respective addresses set forth on the
first page of this Agreement or to such other addresses as may be
designated by prior written notice given in accordance with this
Section 6.
7. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing and signed by you and such officer as
may be specifically designated by the Board. The validity,
interpretation, construction and performance of this Agreement shall be
governed by the laws of the State of Delaware. The parties to this
agreement intend that this agreement be considered an instrument under
seal with the intent that the statute of limitations provided for at 10
Del.C. Section 8106 be tolled to the full extent permitted under Delaware law.
8. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall
remain in full force and effect.
9. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all
of which together will constitute one and the same instrument.
10. Arbitration. Any dispute or controversy arising under
or in connection with this Agreement shall be settled exclusively by
arbitration in accordance with the rules of the American Arbitration
Association the in effect. Judgment may be entered on the arbitrator's
award in any court having jurisdiction; provided, however, that you
shall be entitled to seek specific performance of your right to be paid
until the Date of Termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
11. Entire Agreement. This Agreement supersedes any other
agreement or understanding between the parties hereto, including, if
applicable, a severance agreement dated March 12, 1982, as amended,
between you and the Corporation.
12. Effective Date. This Agreement shall become effective
as of the date set forth above.
Sincerely,
BENEFICIAL CORPORATION
[SEAL]
By
James H. Gilliam, Jr.
Executive Vice President
and General Counsel
Agreed and consented to as
of the date set forth above.
By [SEAL]
<<name&title>>
March 26, 1996
addr
Dear name:
You previously entered into an agreement dated August 21, 1986
providing you certain protection in the event of a change of control of
Beneficial Corporation (the "Corporation"), which agreement was
subsequently amended effective as of February 21, 1990, and which
remains in effect. The Board of Directors of the Corporation has
authorized this amendment and restatement of your August 21, 1986
agreement, and has requested that you indicate agreement) by signing in
the space provided below on the enclosed duplicate copy, and returning
it to the Corporation.
Beneficial Corporation (the "Corporation") recognizes that your
contribution to the growth and success of the Corporation has been
substantial and desires to assure the Corporation of your continued
employment. In this connection, the Board of Directors of the
Corporation (the "Board") recognizes that, as is the case with many
publicly held corporations, the possibility of a change in control may
exist and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Corporation
and its stockholders.
The Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication
of members of the Corporation's management, including yourself, to
their assigned duties without distraction in the face of potentially
disturbing circumstances arising from the possibility of a change in
control of the Corporation.
In order to induce you to remain in the employ of the Corporation,
the Corporation agrees that you shall receive the severance benefits
set forth in this letter agreement ("Agreement") in the event your
employment with the Corporation is terminated subsequent to a "Change
in Control of the Corporation" (as defined in Section 2 hereof) under
the circumstances described below.
For purposes of this Agreement, an employee of a subsidiary of the
Corporation shall be considered an employee of the Corporation and in
such case the obligation of the Corporation hereunder shall be to cause
such subsidiary to perform the obligations of the corporation
hereunder.
1. Term of Agreement. This amended and restated agreement
supersedes your August 21, 1986 agreement and shall continue in effect
until December 31, 1998; provided, however, that commending on January
1, 1998 and each January 1 thereafter, the term of this Agreement shall
automatically be extended for one additional year unless, not later
than November 1 of the preceding year, the Corporation shall have given
notice that it does not wish to extend this Agreement; provided,
further, if a Change in Control of the Corporation shall have occurred
during the original or extended term of this Agreement, this Agreement
shall continue in effect for a period of eighteen (18) months beyond
the month in which such Change in Control of the Corporation occurred.
2. Change in Control of the Corporation. No benefits shall be
payable hereunder unless there shall have been a Change in Control of
the Corporation, as set forth below. For purposes of this Agreement, a
"Change in Control of the Corporation" shall be deemed to have occurred
if the event set forth in any one of the following paragraphs shall
have occurred:
(i) any Person (as defined below) is or becomes the
Beneficial Owner (as defined below), directly or indirectly, of
securities of the Corporation (not including in the securities
beneficially owned by such Person any securities acquired directly from
the Company or its affiliates) representing 20% or more of the combined
voting power of the Corporation's then outstanding securities excluding
any Person who becomes such a Beneficial Owner in connection with a
transaction described in clause (A) of paragraph (iii); or
(ii) the following individuals cease for any reason to
constitute a majority of the number of directors then serving:
individuals who, on the date hereof, constitute the Board and any new
directors (other than a director whose initial assumption of office is
in connection with an actual or threatened election contest, including
but not limited to a consent solicitation, relating to the election of
directors of the Corporation) whose appointment or election by the
Board or nomination for election by the Corporation's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors on the date hereof or whose
appointment, election or nomination for election was previously so
approved; or
(iii) there is consummated a merger or consolidation of
the Corporation or a direct or indirect subsidiary of the Corporation
with any other corporation, other than (A) a merger or consolidation
which would result in the voting securities of the Corporation
outstanding immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or any parent
thereof), in combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan of the
Corporation, at least 80% of the combined voting power of the
securities of the Corporation or such surviving entity or any parent
thereof outstanding immediately after such merger or consolidation, or
(B) a merger or consolidation effected to implement a recapitalization
of the Corporation (or similar transaction) in which no Person is or
becomes the Beneficial Owner, directly or indirectly, of securities of
the Corporation (not including in the securities Beneficially Owned by
such Person any securities acquired directly from the Corporation or
its subsidiaries) representing 20% or more of either the then
outstanding shares of common stock of the Corporation or the combines
voting power of the Corporation's then outstanding securities; or
(iv) the stockholders of the Corporation approve a plan
of complete liquidation or dissolution of the Corporation or there is
consummated an agreement for the sale or disposition by the Corporation
of all or substantially all of the Corporation's assets, other than a
sale or disposition by the Corporation of all or substantially all of
the Corporation's assets to an entity, at least 80% of the combined
voting power of the voting securities of which are owned by
stockholders of the Corporation in substantially the same proportions
as their ownership of the Corporation immediately prior to such sale.
For purposes of this Agreement, the term "Person" shall have the
meaning given in Section 3(a)(9) of the Exchange Act, as modified and
used in Sections 13(d) and 14(d) thereof, except that such term shall
not include (i) the Corporation or any of its subsidiaries, (ii) a
trustee or other fiduciary holding securities under an employee benefit
plan of the Corporation or any of its Affiliates, (iii) an underwriter
temporarily holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Corporation in substantially the same proportions
as their ownership of stock of the Corporation, and the term
"Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under
the Exchange Act.
3. Termination following a Change in Control of the Corporation.
If any of the events described in Section 2 hereof constituting a
Change in Control of the Corporation shall have occurred, you shall be
entitled to the benefits provided in Section 4(d) hereof upon
the termination of your employment during the term of this Agreement
unless such termination is (i) because of your death, Disability or
Retirement, (ii) by the Corporation for Cause, or (iii) by you other
than for Good Reason. For purposes of any determination regarding the
applicability of the immediately preceding sentence, any position taken
by the you shall be presumed to be correct unless the Corporation
establishes by clear and convincing evidence that such position is not
correct.
(a) Disability; Retirement. If, as a result of your
incapacity due to physical or mental illness, you shall have been
absent from the full-time performance of your duties with the
Corporation for six (6) consecutive months, and within thirty (30) days
after written notice of termination is given you shall not have
returned to the full-time performance of your duties, the Corporation
may terminate your employment for "Disability." Termination by the
Corporation or you of your employment by reason of "Retirement" shall
mean termination on or after attainment of your "normal retirement
age," as defined in the Beneficial Corporation Pension Plan, or in
Accordance with any retirement arrangement established with your
consent with respect to you.
(b) Cause. Termination by the Corporation of your
employment for "Cause" shall mean termination upon (i) the willful and
continued failure to you to substantially perform your duties with the
Corporation (other than any such failure resulting from termination by
you for Good Reason), after a demand for substantial performance is
delivered to you that specifically identifies the manner in which
the Corporation believes that you have not substantially performed your
duties, and you have failed to resume substantial performance of your
duties on a continuous basis within fourteen (14) days of receiving
such demand, (ii) the willful engaging by you in conduct which is
demonstrably and materially injurious to the Corporation, monetarily or
otherwise or (iii) your conviction of a felony or conviction of a
misdemeanor which impairs your ability substantially to perform your
duties with the Corporation. For purposes of this Subsection, no act,
or failure to act, on your part shall be deemed "willful" unless
done, or omitted to be done, by you not in good faith and without
reasonable belief that your action or omission was in the best interest
of the Corporation. In the event of a dispute concerning the
application of this provision, no claim by the Corporation that "Cause"
exists shall be given effect unless the Corporation established by
clear and convincing evidence that Cause exists.
(c) Good Reason. You shall be entitled to terminate your
employment for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean, without your express written consent, the
occurrence after a Change in Control of the Corporation of any one or
more of the following:
(i) the assignment to you of duties inconsistent with
your present positions, duties, responsibilities and status or a
reduction or alteration in the nature or status of your
responsibilities from those in effect as of the date hereof;
(ii) a reduction by the Corporation in your annual
base salary as in effect on the date hereof as such may be increased
from time by the Board ("Base Salary");
(iii) the Corporation's requiring you to be based at a
location in excess of twenty-five (25) miles from the location where
you are presently based;
(iv) the failure by the Corporation to continue in
effect any salary plan, incentive plan, deferred compensation plan or
any other of the corporation's employee benefit plans, policies,
practices or arrangements in which you participate or the failure by
the corporation to continue your participation therein on substantially
the same basis, both in terms of the amount of benefits provided and
the level of your participation relative to other participants, as
existed as of the date hereof;
(v) the failure of the Corporation to obtain a
satisfactory agreement from any successor to the Corporation to assume
and agree to perform this Agreement, as contemplated in Section 5
hereof; and
(vi) any purported termination by the Corporation of
your employment that is not effected pursuant to a Notice of
Termination satisfying the requirements of subparagraph (d) below, and
for purposes of this Agreement, no such purported termination shall be
effective. Your right to terminate your employment pursuant to this
Subsection shall not be affected by your incapacity due to physical or
mental illness. Your continued employment shall not constitute consent
to, or a waiver of rights with respect to, any circumstance
constituting Good Reason hereunder. For purpose of any determination
regarding the existence of Good Reason, any claim by you that Good
Reason exists shall be presumed to be correct unless the Corporation
establishes by clear and convincing evidence that Good Reason does not
exist.
(d) Notice of Termination. Any termination by the
Corporation for Cause or by you for Good Reason shall be communicated
by Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a written
notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of
your employment under the provision so indicated.
(e) Date of Termination. "Date of Termination" shall mean
the date specified in the Notice of Termination where required or in
any other case upon ceasing to perform services to the Corporation;
provided that if within thirty (30) days after any Notice of
Termination a party hereto notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the
date finally determined to be the Date of Termination, either by mutual
written agreement of the parties or by a binding and final arbitration
award.
4. Compensation Upon Termination or During Disability.
Following a Change in Control of the Corporation, as defined in Section
2 hereof, upon termination of your employment or during a period of
disability you shall be entitled to the following benefits:
(a) During any period that you fail to perform your
full-time duties with the Corporation as a result of incapacity due to
physical or mental illness, you shall continue to receive your Base
Salary at the rate in effect at the commencement of any such period,
until your employment is terminated pursuant to Section 3(a) hereof.
Thereafter, your benefits shall be determined in accordance with the
corporation's retirement, insurance and other applicable programs and
plans then in effect.
(b) If your employment shall be terminated by the
Corporation for Cause or by you other than for Good Reason, the
Corporation shall pay you your full Base Salary through the Date of
Termination at the rate in effect at the time Notice of Termination is
given or on the Date of Termination if no Notice of Termination is
required hereunder, together with accrued vacation pay, if any, and the
Corporation shall have no further obligations to you under this
Agreement.
(c) If your employment terminates by reason of your
Retirement, or by reason of your death, your benefits shall be
determined in accordance with the Corporation's retirement, survivor's
benefits, insurance and other applicable programs and plans then in
effect.
(d) If your employment by the Corporation shall be
terminated (i) by the Corporation other than for Cause, Retirement or
Disability or (ii) by you for Good Reason, then, in addition to any
benefits to which you are otherwise entitled in accordance with the
Corporation's retirement, survivor's benefits, insurance and other
applicable programs and plans then in effect, you shall be entitled to
the benefits (the "Severance Payments") provided below:
(A) the Corporation will pay you your full Base
Salary through the Date of Termination at the rate in effect
at the time Notice of Termination is given, or the Date
of Termination where no Notice of Termination is required
hereunder, and any previously awarded bonuses which have been
deferred;
(B) the Corporation will pay you not later than
the fifth (5th) day following the Date of Termination, a lump
sum severance payment equal to one and one-half (1.5) times
the sum of (x), (y), and (z), where (x) equals your annual
Base Salary in effect immediately prior to the occurrence of
the circumstances giving rise to such termination, where (y)
equals the amount, if any, of the highest of your three most
recent awards (or, if fewer than three have been received,
such lesser number) pursuant to the Corporation's Key
Employees Stock Bonus Plan; and where (z) equals the amount,
if any, of your award for the year in which the Date of
Termination occurs, if determined by the Board but not yet
paid, or if no determination has been made, your most recent
annual award paid to you under any annual cash incentive or
bonus program for which you are eligible, regardless of
whether such incentive or bonus program has been established
as of the date of this Agreement.
(C) the Corporation will pay you, not later then
the fifth day following the Date of Termination, (x) with
respect to your interest in the Corporation's Employees'
Stock Purchase Plan, an amount, in cash, equal to the
aggregate value of the nonvested share units credited to your
account thereunder as of the Date of Termination and (y)
with respect to your interest in the Corporation's Key
Employees Stock Bonus Plan, an amount, in cash, equal to the
aggregate value of all Corporation stock, cash and other
property credited to your account thereunder as of the Date
of Termination and upon making such payments, the Corporation
shall have no further obligation to you under such plans
except with respect to any previously vested interest you may
have in such plans; and
(D) for an eighteen (18) month period after such
termination, the Corporation will arrange to provide you, at
the Corporation's expense, with life, disability, accident
and health insurance benefits substantially similar to those
which you were receiving immediately prior to the Notice of
Termination; but benefits otherwise receivable by you
pursuant to this Subsection (D) shall be reduced to the
extent comparable benefits are actually received by you
during the eighteen (18) month period following your
termination, and any such benefits actually received by you
shall be reported to the Corporation.
(E) If you would have become entitled to benefits
under the Corporation's post-retirement health care or life
insurance plans, as such plans existed immediately prior to
the Change in Control, had your employment terminated at any
time during the period of eighteen (18) months after the
Date of Termination, the Corporation shall provide such post-
retirement health care or life insurance benefits to you
commencing on the later of (i) the date that such coverage
would have first become available and (ii) the date on which
benefits described in subsection (D) of this Section 4(d)
terminate.
(e) (A) Notwithstanding any other provisions of this
Agreement, in the event that any payment or benefit received or to be
received by you in connection with a Change in Control or the
termination of your employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the
Corporation, any Person whose actions result in a Change in Control or
any Person affiliated with the Corporation or such Person) (all such
payments and benefits, including the Severance Payments, being
hereinafter called "Total Payments") would be subject (in whole or
part), to any excise tax imposed under Section 4999 of the Internal
Revenue Code of 1986 (the "Code"), as amended from time to time (the
"Excise Tax"), then, after taking into account any reduction in the
Total Payments provided by reason of section 280G of the Code in such
other plan, arrangement or agreement, the cash Severance Payments shall
first be reduced, and the noncash Severance Payments shall thereafter
be reduced, to the extent necessary so that no portion of the Total
Payments is subject to the Excise Tax but only if (A) the net amount of
such Total Payments, as so reduced (and after subtracting the net
amount of federal, state and local income taxes on such reduced Total
Payments) is equal to or greater than (B) the net amount of such Total
Payments, without reduction (but after subtracting the next amount of
federal, state and local income taxes on such Total Payments and the
amount of Excise Tax to which you would be subject in respect of such
unreduced Total Payments); provided, however, that you may elect (at
any time prior to the delivery of a Notice of Termination hereunder) to
have the noncash Severance Payments reduced (or eliminated) prior to
any reduction of the cash Severance Payments.
(B) For purposes of determining whether and the extent
to which the Total Payments will be subject to the Excise Tax, (i) no
portion of the Total Payments the receipt or enjoyment of which you
shall have effectively waived in writing prior to the delivery of a
Notice of Termination shall be taken into account, (ii) no portion of
the Total Payments shall be taken into account which, in the opinion of
tax counsel reasonably acceptable to you and selected by the accounting
firm (the "Auditor") which was, immediately prior to the Change in
Control, the Company's independent auditor, does not constitute a
"parachute payment" within the meaning of section 280G(b) (2) of the
Code (including by reason of section 280G(b) (4) (A) of the Code) and
in calculating the Excise Tax, no portion of such Total Payments shall
be taken into account which constitutes reasonable compensation for
services actually rendered, within the meaning of section 280G(b) (4)
(B) of the Code, in excess of the Base Amount allocable to such
reasonable compensation, and (iii) the value of any non-cash benefit
or any deferred payment of benefit included in the Total Payments shall
be determined by the Auditor in accordance with the principles of
sections 280G(d) (3) and (4) of the Code.
(f) The payments provided for in paragraph (d) above shall
be made not later than the fifth day following the Date of Termination;
provided, however, that if the amounts of such payments or the
limitation on such payments set forth in paragraph (e) above cannot be
finally determined on or before such day, the Corporation shall pay to
you on such day an estimate as determined in good faith by you of the
minimum amount of such payments and shall pay the remainder of such
payments (together with interest at 120% of the rate provided in
Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined but in no event later than the thirtieth (30th) day after
the Date of Termination. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Corporation to you payable
on the fifth (5th) day after demand by the Corporation (together with
interest at 120% of the rate provided in Section 1274(b)(2)(B) of the
Code).
(g) The Corporation shall also pay to you any and all legal
fees and expenses incurred by you in contesting or disputing any
termination of employment or in seeking to obtain or enforce any right
or benefit provided by this Agreement or in connection with any tax
audit or proceeding to the extent attributable to the application of
Section 4999 of the Code to any payment or benefits provided
hereunder).
(h) You shall not be required to mitigate the amount of any
payment provided for in this Section 4 by seeking other employment or
otherwise, nor shall the amount of any payment provided for in this
Section 4 be reduced (except as provided in subparagraph (D) of Section
4(d) hereof) by any compensation earned by you as the result of
employment by another employer after the Date of Termination, or
otherwise.
5. Successors; Binding Agreement.
(a) The Corporation 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
Corporation or of any division or subsidiary thereof employing you to
expressly assume and agree to perform this Agreement in the same manner
and to the same extent that the Corporation would be required to
perform it if no such succession had taken place. Failure of the
Corporation to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall entitle you to compensation from the Corporation in
the same amount and on the same terms as you would be entitled
hereunder if you terminate your employment for Good Reason, except that
for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination.
(b) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
If you should die while any amount would still be payable to you
hereunder if you had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms
of this Agreement, to your devisee, legatee or other designee or, if
there is not such designee, to your estate.
6. Notices. For the purpose of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered or mailed by
United Sates registered mail, return receipt requested, postage
prepaid, addressed to the respective addresses set forth on the first
page of this Agreement or to such other addresses as may be designated
by prior written notice given in accordance with this Section 6.
7. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing and signed by you and such officer as
may be specifically designated by the Board. The validity,
interpretation, construction and performance of this Agreement shall be
governed by the laws of the State of Delaware. The parties of this
amended and restated agreement intend that this agreement be considered
an instrument under seal with the intent that the statute of
limitations provided for at 10 Del.C. Section 8106 be tolled to the full
extent permitted under Delaware law.
8. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all
of which together will constitute one and the same instrument.
10. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by
arbitration in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however,
that you shall be entitled to seek specific performance of your right
to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this
Agreement.
11. Entire Agreement. This Agreement supersedes any other
agreement or understanding between the parties hereto, including, if
applicable, a severance agreement dated March 12, 1982, as amended,
between you and the Corporation.
12. Effective Date. This amended and restated agreement shall
become effective as of the date set forth above.
Sincerely,
BENEFICIAL CORPORATION
[SEAL]
By
James H. Gilliam, Jr.
Executive Vice President
and General Counsel
Agreed and consented to as
of the date set forth above.
By [SEAL]
name&title
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AND STATEMENT OF INCOME (BOTH DATED 3/31/96) AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 394
<SECURITIES> 0<F1>
<RECEIVABLES> 13867
<ALLOWANCES> 423
<INVENTORY> 0
<CURRENT-ASSETS> 0<F2><F3>
<PP&E> 457<F3>
<DEPRECIATION> 274<F3>
<TOTAL-ASSETS> 15460
<CURRENT-LIABILITIES> 0<F2>
<BONDS> 8004<F4>
0
115
<COMMON> 53
<OTHER-SE> 1409<F5>
<TOTAL-LIABILITY-AND-EQUITY> 15460
<SALES> 0
<TOTAL-REVENUES> 751<F6>
<CGS> 0
<TOTAL-COSTS> 209<F7>
<OTHER-EXPENSES> 276<F8>
<LOSS-PROVISION> 82
<INTEREST-EXPENSE> 0<F9>
<INCOME-PRETAX> 185
<INCOME-TAX> 77
<INCOME-CONTINUING> 107
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 107
<EPS-PRIMARY> 1.96
<EPS-DILUTED> 1.95
<FN>
<F1>CURRENT MARKETABLE EQUITY SECURITIES ARE NOT SEPARATELY STATED
<F2>DO NOT PREPARED CLASSIFIED BALANCE SHEET
<F3>PP&E PER BALANCE SHEET (183.5) IS SHOWN NET OF DEPRECIATION
<F4>LONG-TERM DEBT PER BALANCE SHEET
<F5>INCLUDES ADDITIONAL CPAITAL (277.6), NET UNRELAIXED GAIN ON INVESTMENT (3.7),
FOREIGN CURRENCY TRANSLATION ADJ (-46.4) & RETAINED EARNINGS (1173.7) PER
BALANCE SHEET = 1408.6
<F6>INCLUDES FINANCE CHARGES AND FEES (545.3), INSURANCE PREMIUMS (40.1) AND OTHER
REVENUE (165.7) PER INCOME STATEMENT = 751.1
<F7>INTEREST EXPENSE PER INCOME STATMENT.
<F8>INCLUDES SALARIES AND BENEFITS (101.7), INSURANCE BENEFITS (22.7) AND OTHER
(151.3) PER INCOME STATEMENT = 275.7
<F9>COMPANY'S PRIMARY COST OF GENERATING REVENUE IS INTEREST EXPENSE WHICH IS
INCLUDED IN TOTAL COSTS (ABOVE)
</FN>
</TABLE>
