Change of Control Agreement - Maytag Corp., Steven H. Wood, Terry A. Carlson, Arthur B. Learmonth, Jerome L. Davis, Thomas A. Briatico, Fredrick P. Foltz and Victor Lawrence
Change of Control Agreements.
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The following executives are covered under this Change of Control agreement:
Steven H. Wood
Terry A. Carlson
Arthur B. Learmonth
Jerome L. Davis
Thomas A. Briatico
Fredrick P. Foltz
Victor Lawrence
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Change of Control Agreement
THIS AGREEMENT is made this ___________ day of ____________, 1998 (the
"Effective Date"), by and between Maytag Corporation, a Delaware
corporation (the "Company"), and ______ (the "Executive"), and shall
continue in effect for two full calendar years (through the year 2000) (the
"Initial Term").
The Initial Term of this agreement automatically shall be extended for
one additional year on the first anniversary of the Effective Date, and
then again on each anniversary thereafter (each such one-year period
following the Initial Term a "Successive Period").
In the event that a "Change of Control" of the Company occurs (as such
term is hereinafter defined) during the Initial Term or any Successive
Period, upon the effective date of such Change of Control, the term of this
agreement shall automatically and irrevocably be renewed for a period of
twenty-four (24) full calendar months from the effective date of such
Change of Control. This agreement shall thereafter automatically terminate
following the twenty-four (24) month Change-of-Control renewal period.
Further, this agreement shall be assigned to, and shall be assumed by the
purchaser in such Change of Control, as further provided herein in
paragraph D5 of the section titled "Agreements."
RECITALS
A. The Board of Directors of the Company has approved the Company
entering into severance agreements with such executives of the Company and
its subsidiaries as is determined by the Chairman and Chief Executive
Officer.
B. Should the Company receive or learn of any proposal by a third
person about a possible business combination with the Company or the
acquisition of its equity securities, the Board considers it imperative
that the Company be able to rely upon the Executive to continue in his or
her position. This to the end that the Company be able to receive and rely
upon the Executive's advice concerning the best interests of the Company
and its stockholders, without concern that person might be distracted by
the personal uncertainties and risks created by such a proposal.
C. Should the Company receive any such proposals, in addition to the
Executive's regular duties, he or she may be called upon to assist in the
assessment of such proposals, advise management and the Board as to whether
such proposals would be in the best interests of the Company and its
stockholders, and to take such other actions as the Board might determine
to be appropriate.<PAGE>
AGREEMENT
NOW, THEREFORE, to assure the Company that it will have the continued
dedication of the Executive and the availability of that person's advice
and counsel notwithstanding the possibility, threat or occurrence of a bid
to take over control of the Company, and to induce the Executive to remain
in the employ of the Company, and for other good and valuable
consideration, the Company and the Executive agree that the Executive
Severance Agreement described above be amended and restated in its entirety
as follows:
A. Should a third person, in order to effect a change of control (as
defined), begin a tender or exchange offer, circulate a proxy to
stockholders or take other steps, the Executive agrees that he or she will
not voluntarily leave the employ of the Company, and will render the
services contemplated in the recitals to this agreement, until the third
person has abandoned or terminated his efforts to effect a change of
control or until a change of control has occurred.
B. Should the Executive's employment with the Company or its
subsidiaries terminate for any reason (either voluntary or involuntary),
other than because of death, disability, Cause, or Normal Retirement within
two (2) years after a change of control of the Company, or in the event a
successor company refuses to accept its obligations under this agreement as
required by paragraph D5 herein, the following will be provided:
1. Lump Sum Cash Payment. On or before the Executive's last day of
employment with the Company or its subsidiaries, or as soon thereafter as
possible, the Company will pay to the Executive as compensation for
services rendered, a lump sum cash amount (subject to the usual withholding
taxes) equal to (A) two times the sum of (1) the Executive's annual salary
at the rate in effect immediately prior to the change of control and (2)
the then-current maximum cash bonus opportunity established under the
annual incentive plan for the bonus plan year in which termination occurs
(but in no event shall such maximum cash bonus be less than that in effect
for the period immediately prior to the change of control) plus (B) an
amount equal to the compensation (at the Executive's rate of pay in effect
immediately prior to the change of control) payable for any period for
which the Executive could have, immediately prior to the date of his
termination of employment, been on vacation and received such compensation,
for unused and accrued vacation benefits determined under the Company's
vacation pay plan or program covering the Executive immediately prior to
the change of control.
2. Salaried and Supplemental Executive Retirement Plans. The
Executive shall be paid a monthly retirement benefit, in addition to any
benefits received under the Salaried Retirement Plans maintained by the
Company or its subsidiaries, including The Maytag Corporation Salaried
Retirement Plan and any Supplemental Executive Retirement Plan, such
benefit to commence on the first to occur of (a) the commencement of
payment of benefits under the Maytag Corporation Salaried Retirement Plan
or (b) attainment of age 65, but not prior to two (2) years following the
date of termination of employment or age 65, whichever first occurs, such
benefit to be an amount equal to the excess of (i) the aggregate benefits
under such Salaried Retirement Plans to which the Executive would be<PAGE>
entitled if he or she remained employed by the Company or its subsidiaries,
for an additional period of two (2) years, at the rate of annual
compensation specified herein; over (ii) the benefits to which the
Executive is actually entitled under such Salaried Retirement Plans.
The source of payment of these benefits shall be the general assets of
the Company unless the payment of such amounts is otherwise permissible
from the corresponding qualified plan trust without violating any
governmental regulations or statutes.
3. Life, Dental, Vision, Health and Long-Term Disability Coverage.
The Executive's participation in, and entitlement to, benefits under: (i)
the life insurance plan of the Company; (ii) all the health insurance plan
or plans of the Company or its subsidiaries, including but not limited to
those providing major medical and hospitalization benefits, dental benefits
and vision benefits; and (iii) the Company's long-term disability plan or
plans; as all such plans existed immediately prior to the change of control
shall continue as though he or she remained employed by the Corporation or
its subsidiaries for an additional period of two (2) years. The applicable
COBRA health insurance benefit continuation period shall begin at the end
of this two (2) year period. To the extent such participation or
entitlement is not possible for any reason whatsoever, equivalent benefits
shall be provided.
The providing of these benefits by the Company shall be discontinued
prior to the end of the two (2) year continuation period in the event that
the Executive becomes covered under the insurance programs of a subsequent
employer and, with respect to all health insurance plans, provided that
such subsequent employer's health insurance plans do not contain any
exclusion or limitation with respect to any preexisting condition of the
Executive or the Executive's eligible dependents. For purposes of enforcing
this offset provision, the Executive shall have a duty to inform the
Company as to the terms and conditions of any subsequent employment and the
corresponding benefits earned from such employment. The Executive shall
provide, or cause to provide, to the Company in writing correct, complete,
and timely information concerning the same.
4. Participation in Employee Benefit Plans. Unless otherwise
provided, the Executive's participation in any other savings, capital
accumulation, retirement, incentive compensation, profit sharing, stock
option, and/or stock appreciation rights plans of the Company or any of its
subsidiaries shall continue only through the last day of his or her
employment. Any terminating distributions and/or vested rights under such
plans shall be governed by the terms of those respective plans.
Furthermore, the Executive's participation in any insurance plans of the
Company and rights to any other fringe benefits shall, except as otherwise
specifically provided in such plans or Company policy, terminate as of the
close of the Executive's last day of employment, except to the extent
specifically provided to the contrary in this agreement.
5. Incentive Plans. In addition to the payments required by
paragraph 1 of this Section, the Company shall pay to the Executive as
compensation for services rendered cash in an amount equal to the then-
current maximum cash bonus opportunity established under the annual
incentive plan for the bonus plan year in which termination occurs,
adjusted on a pro rata basis based on the number of days the Executive was
actually employed during such bonus plan year (but in no event shall such<PAGE>
maximum cash bonus be less than that in effect for the period immediately
prior to the change of control). In the case of long-term stock incentive
awards represented by restricted shares of stock of the Company, made to
Executive under the Maytag Corporation Employee Stock Incentive Plan (any
prior plan, or successor plan) in lieu of stock under such stock incentive
awards the Executive shall receive a cash payment equal to the aggregate
value of the maximum number of shares for which the Executive holds
outstanding awards, with share value determined at the closing price as of
the date of the change of control. Any payment due pursuant to this
paragraph 5 shall be paid at the same time as the amounts payable pursuant
to paragraph 1 of this Section.
6. Excise Tax-Additional Payment. (a) Notwithstanding anything in
this agreement or any written or unwritten policy of the Company or its
subsidiaries to the contrary, (i) if it shall be determined that any
payment or distribution by the Company or its subsidiaries to or for the
benefit of the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this agreement, any other agreement
between the Company or its subsidiaries and the Executive or otherwise (a
"Payment"), would be subject to the excise tax imposed by section 4999 of
the Internal Revenue Code of 1986, as amended, (the "Code") or any interest
or penalties with respect to such excise tax (such excise tax, together
with any such interest and penalties, are hereinafter collectively referred
to as the "Excise Tax"), or (ii) if the Executive shall otherwise become
obligated to pay the Excise Tax in respect of a Payment, then the Company
shall pay to the Executive an additional payment in an amount to cover the
full cost of any Excise Tax and the Executive's state and federal income
and employment taxes on this additional payment (cumulatively, the "Gross-
Up Payment").
(b) All determinations and computations required to be made under
this section B6, including whether a Gross-Up Payment is required under
clause (ii) of paragraph B6(a) above, and the amount of any Gross-Up
Payment, shall be made by the Company's regularly engaged independent
certified public accountants (the "Accounting Firm"). The Company shall
cause the Accounting Firm to provide detailed supporting calculations both
to the Company and the Executive within 15 business days after such
determination or computation is requested by the Executive. Any initial
Gross-Up Payment determined pursuant to this paragraph B6 shall be paid by
the Company or the subsidiary to the Executive within 5 days of the receipt
of the Accounting Firm's determination. A determination that no Excise Tax
is payable by the Executive shall not be valid or binding unless
accompanied by a written opinion of the Accounting Firm to the Executive
that the Executive has substantial authority not to report any Excise Tax
on his federal income tax return. Any determination by the Accounting Firm
shall be binding upon the Company, its subsidiaries and the Executive,
except to the extent the Executive becomes obligated to pay an Excise Tax
in respect of a Payment. In the event that the Company or the subsidiary
exhausts or waives its remedies pursuant to subparagraph B6(c) and the
Executive thereafter shall become obligated to make a payment of any Excise
Tax, and if the amount thereof shall exceed the amount, if any, of any
Excise Tax computed by the Accounting Firm pursuant to this subparagraph
(b) in respect to which an initial Gross-Up Payment was made to the
Executive, the Accounting Firm shall within 15 days after Notice thereof
determine the amount of such excess Excise Tax and the amount of the
additional Gross-Up Payment to the Executive. All expenses and fees of the
Accounting Firm incurred by reason of this paragraph B6 shall be paid by<PAGE>
the Company.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment
by the Company of a Gross-Up Payment. Such notification shall be given as
soon as practicable but no later than ten business days after the Executive
knows of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the thirty-
day period following the date on which it gives such notice to the Company
(or such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Executive in
writing prior to the expiration of such period that it desires to contest
such claim, the Executive shall:
(i) give the Company any information reasonably requested relating to
such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by
the Company,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim,
(iv) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax,
including interest and penalties with respect thereto, imposed as a result
of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this subparagraph B6(c), the
Company shall control all proceedings taken in connection with such contest
and, at its sole option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim and may, at its sole option, either direct the
Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts, as the Company
or the subsidiary shall determine; provided, however, that if the Company
or the subsidiary directs the Executive to pay such claim and sue for a
refund, the Company or the subsidiary shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income tax, including interest or penalties with respect thereto, imposed
with respect to such advance or with respect to any imputed income with
respect to such advance; and further provided, that any extension of the
statue of limitations relating to payment of taxes for the taxable year of
the Executive with respect to which such contested amount is claimed to be
due is limited solely to such contested amount. Furthermore, control of the
contest by the Company or the subsidiary shall be limited to issues with<PAGE>
respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d)If, after the receipt by the Executive of an amount advanced by the
Company or the subsidiary pursuant to subparagraph B6(c), the Executive
becomes entitled to receive any refund with respect to such claim, the
Executive shall (subject to compliance with the requirements of paragraph
B6 by the Company or the subsidiary) promptly pay to the Company or the
subsidiary the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by
the Executive of an amount advanced by the Company or the subsidiary
pursuant to subparagraph B6(c), a determination is made that the Executive
shall not be entitled to any refund with respect to such claim and the
Company does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of thirty days after such
determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall off-set, to the
extent thereof, the amount of Gross-Up Payment required to be paid.
C.Definitions.
1. "Cause." For purposes of this agreement, Cause shall be determined by
the Board of Directors, in the exercise of good faith and reasonable
judgment, and shall mean the occurrence of any one or more of the
following:
(a) A demonstrably willful and deliberate act or failure to act by
the Executive (other than as a result of incapacity due to physical or
mental illness) which is committed in bad faith, without reasonable belief
that such action or inaction is in the best interests of the Company, which
causes actual material financial injury to the Company and which act or
inaction is not remedied within fifteen (15) business days of written
notice from the Company; or
(b) The Executive's conviction for committing an act of fraud,
embezzlement, theft, or any other act constituting a felony involving moral
turpitude or causing material harm, financial or otherwise, to the Company.
2. Change of Control. For purposes of this agreement, "change of
control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13 (d) (3) or 14 (d) (2) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 20% or more of either (i) the then outstanding shares of common
stock of the Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for
purposes of this subsection (a), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition by the Company, (ii)
any acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company or any corporation controlled by the Company
or (iii) any acquisition by any corporation pursuant to a transaction which
<PAGE>
complies with clauses (i), (ii) and (iii) of subsection (c) below; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of a least a majority of
the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and outstanding Company Voting Securities immediately
prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to
such Business Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (ii) no Person
(excluding any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) beneficially
owns, directly or indirectly, 20% or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding
voting securities of such corporation except to the extent that such
ownership existed prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the corporation
resulting from such Business Combination were members of the Incumbent
Board at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
3. Normal Retirement. For purposes of this agreement, "Normal
Retirement" shall have the same meaning as provided in the Maytag
Corporation Salaried Retirement Plan; provided, however, that "Normal
Retirement" shall not include terminations of the Executive by the Company
without Cause.
4. Subsidiary. For purposes of this agreement, a Subsidiary shall
mean any domestic or foreign corporation at least 20% of whose shares
normally entitled to vote in electing directors is owned directly or
indirectly by the Company or by other subsidiaries.<PAGE>
D. General Provisions.
1. No Guaranty of Employment. Nothing in this agreement shall be
deemed to entitle the Executive to continued employment with the Company or
its subsidiaries, and the rights of the Company to terminate the employment
of the Executive shall continue as fully as if this agreement were not in
effect, provided that any such termination of employment within two (2)
years following a change of control shall entitle the Executive to the
benefits herein provided.
2. Confidentiality. The Executive shall retain in confidence any
confidential information known to him concerning the Company and its
business so long as such information is not publicly disclosed.
3. Payment Obligation Absolute. The Company's obligation to pay the
Executive the compensation and to make the arrangements provided herein
shall be absolute and unconditional and shall not be affected by any
circumstances, including without limitation, any set-off, counterclaim,
recoupment, defense or other right which the Company may have against him,
her or anyone else. All amounts payable by the Company hereunder shall be
paid without notice or demand. Each and every payment made hereunder by the
Company shall be final and the Company shall not seek to recover all or any
part of such payment from the Executive or from whoever may be entitled
thereto, for any reason whatsoever.
In the event that the cash payment due the Executive under Paragraph
B1 or B5 herein is not paid to the Executive within thirty (30) calendar
days of the Executive's employment termination, such amount due shall
accrue interest (compounded monthly) beginning on the date of employment
termination at a rate equal to the prevailing Prime Rate as determined by
Harris Bank of Chicago, or the Company's then-current primary banking
institution. Further, to the extent this additional amount would be subject
to the Excise Tax, the Company shall pay to the Executive a Gross-Up
Payment, as such terms are described in Paragraph B6 herein.
4. Dispute Resolution.
(a) The Company shall pay all legal fees, costs of litigation,
prejudgment interest, and other expenses which are incurred in good faith
by the Executive as a result of the Company's refusal to provide the
benefits to which the Executive becomes entitled under this agreement, or
as a result of the Company's (or any third party's) contesting the
validity, enforceability, or interpretation of the agreement, or as a
result of any conflict between the parties pertaining to this agreement.
(b) The Executive shall have the right and option to elect (in lieu
of litigation) to have any dispute or controversy arising under or in
connection with this agreement settled by arbitration, conducted before a
panel of three (3) arbitrators sitting in a location selected by the
Executive within fifty (50) miles from the location of his or her job with
the Company, in accordance with the rules of the American Arbitration
Association then in effect. The Executive's election to arbitrate, as
herein provided, and the decision of the arbitrators in that proceeding,
shall be binding on the Company and the Executive.
Judgment may be entered on the award of the arbitrator in any court
having jurisdiction. All expenses of such arbitration, including the fees
and expenses of the counsel for the Executive, shall be borne by the<PAGE>
Company.
5. Successors. This agreement shall be binding upon and inure to the
benefit of the Executive and his or her estate, and the Company and any
successor of the Company, but neither this agreement nor any rights arising
hereunder may be assigned or pledged by the Executive.
6. Severability. Any provision in this agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective only to the extent of such prohibition or unenforceability
without invalidating or affecting the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
7. Entire Agreement. With respect to the subject matter hereof, this
agreement supersedes any prior agreements or understandings, oral or
written, between the parties hereto and contains the entire understanding
of the Company and the Executive.
8. Controlling Law. This agreement shall in all respects be governed
by, and construed in accordance with, the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties have executed this agreement on the
date set out above.
MAYTAG CORPORATION
By
Chairman & C.E.O.
Leonard A. Hadley
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