UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 21, 2008
QUANEX BUILDING PRODUCTS CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 1-33913 | 26-1561397 | ||
| (State or other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
| 1900 West Loop South, Suite 1500, Houston, Texas |
77027 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: 713-961-4600
| (Former name or former address if changed since last report.) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01. Entry into a Material Definitive Agreement
The disclosure set forth below under Item 5.02 relating to the Company’s agreements with Brent L. Korb is incorporated into this Item 1.01.
Item 5.02. Departure of Directors or Principal Officer; Election of Directors; Appointment of Principal Officers.
| (a) | Appointment of Principal Financial Officer |
On July 21, 2008, Quanex Building Products Corporation (the “Company”) announced that its Board of Directors has elected Brent L. Korb, 36, as Senior Vice President – Finance and Chief Financial Officer of the Company, effective August 1, 2008.
Prior to joining the Company, Mr. Korb was Vice President of Finance and Corporate Controller at Energy Alloys since June 13, 2008. Mr. Korb previously served as Vice President—Corporate Controller of the Company and its predecessor beginning February 2, 2005, and Assistant Controller beginning November 24, 2003. Prior to that time, Mr. Korb was Corporate Controller & Director Business Analysis since 2003, and Manager of Business Analysis since 2001, of Resolution Performance Products, a manufacturer of specialty chemicals.
| (b) | Agreements |
In connection with Mr. Korb’s appointment, the Company and Mr. Korb entered into an agreement (the “Agreement”), and will enter into a change in control agreement (the “Change in Control Agreement”), each effective as of August 1, 2008. The Company also reinstated Mr. Korb’s severance agreement (the “Severance Agreement”), the form of which was originally filed as Exhibit 10.5 to Amendment No. 1 to the Company’s Registration Statement on Form 10, as filed with the Securities and Exchange Commission on February 14, 2008, with one amendment as described below.
The following discussion is qualified by reference to the Agreement, a copy of which is attached hereto as Exhibit 10.1 and incorporated herein by reference, and the Change in Control Agreement, the form of which is attached hereto as Exhibit 10.2 and incorporated herein by reference.
Under the Agreement, the Company will provide the following:
| (i) | An annual base salary of $325,000; |
| (ii) | An annual incentive award under the Quanex Building Products Corporation 2008 Omnibus Incentive Plan (the “Plan”), with a maximum award potential of 150% of Mr. Korb’s base salary (pro-rated for the current fiscal year); |
| (iii) | An award of 30,000 shares of restricted stock of the Company, which award will cliff vest on the third anniversary date of Mr. Korb’s employment, or in the event of a change in control of the Company; |
| (iv) | An option to purchase 100,000 shares of the Company’s Common Stock pursuant to the terms and conditions of the Plan, to be granted at a grant price equal to the closing price of the Company’s common stock on August 1, 2008. This option will vest in thirds on the first, second and third employment anniversary dates, or will fully vest in the event of a change in control of the Company; |
| (v) | Other benefits to the same extent and same cost as may be provided to other Company employees and officers in accordance with Company policies then in effect and subject to the terms and conditions of such benefit plans. |
Under the Change in Control Agreement, the Company will provide the following benefits in the event that Mr. Korb’s employment is terminated following a Change in Control of the Company (as defined in the Change in Control Agreement), if such termination is (x) by the Company for any reason other than occurrence of an Event of Termination for Cause, or (y) by Mr. Korb after the occurrence of an Event of Termination for Good Reason (as defined in the Change in Control Agreement):
| (i) | The Company will pay to Mr. Korb his base salary, bonus and benefits accrued through the termination date but not previously paid; |
| (ii) | The Company will pay to Mr. Korb a performance bonus equal to the higher of (x) the target performance bonus for the Fiscal Year in which the termination date occurs and (y) the performance bonus that was actually paid out for the Fiscal Year preceding the Fiscal Year in which the termination date occurs (the higher of (x) and (y) is referred to herein as the “Highest Bonus”), in each case pro-rated to reflect the number of days that passed between the beginning of the current fiscal year and the termination date; |
| (iii) | The Company will pay to Mr. Korb an amount equal to three (3) times the sum of (x) the Highest Bonus and (y) the amount of base salary that would have been paid during the fiscal year in which the termination date occurs based on the assumption that Mr. Korb’s employment would have continued throughout that fiscal year at the base salary rate in effect in the fiscal year in which the termination date occurs, or in the immediately preceding fiscal year, whichever is higher; and |
| (iv) | For a period of three years or until Mr. Korb begins new employment, the Company will maintain in effect, and not materially reduce the benefits provided by, certain of the Company’s benefit plans in which Mr. Korb will participate. |
Under the amended Severance Agreement, Mr. Korb will be entitled to a severance payment equal to 18 months’ worth of base salary, rather than the 12 months contemplated by the original severance agreement. No other amendments or alterations were made to the form of severance agreement originally filed as Exhibit 10.5 to Amendment No. 1 to the Company’s Registration Statement on Form 10, as filed with the Securities and Exchange Commission on February 14, 2008.
Item 8.01 Other Events.
On July 21, 2008, the Company issued a press release (the “Press Release”) announcing the election of Brent L. Korb as Senior Vice President – Finance and Chief Financial Officer of the Company. The foregoing is qualified by reference to the Press Release which is filed as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
| (a) | Financial Statements of businesses acquired. |
Not applicable
| (b) | Pro forma financial information. |
Not applicable
| (c) | Exhibits. |
10.1
|
Agreement between Quanex Building Products Corporation and Brent L. Korb, effective August 1, 2008. | |
10.2 |
Form of Change in Control Agreement between Quanex Building Products Corporation and Brent L. Korb. |
|
99.1 |
Press Release dated July 21, 2008. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| QUANEX BUILDING PRODUCTS CORPORATION (Registrant) |
||
July 21, 2008
|
/s/ Kevin P. Delaney | |
(Date)
|
Kevin P. Delaney | |
| Senior Vice President – | ||
| General Counsel and Secretary |
Exhibit Index
10.1 |
Agreement between Quanex Building Products Corporation and Brent L. Korb, effective August 1, 2008. |
|
10.2 |
Form of Change in Control Agreement between Quanex Building Products Corporation and Brent L. Korb. |
|
99.1 |
Press Release dated July 21, 2008. |
EXHIBIT 10.1
CONFIDENTIAL
July 15, 2008
Mr. Brent L. Korb
6110 South Royal Point Drive
Kingwood, Texas 77345
6110 South Royal Point Drive
Kingwood, Texas 77345
Dear Brent:
I am pleased to offer you the position of Senior Vice President — Finance & Chief Financial
Officer with Quanex Building Products Corporation (the “Company” or “QBP”), effective August 1,
2008 (the “Effective Date”), after approval of the Company’s Board of Directors. You will report
directly to me.
Your total compensation will include the following:
| 1. | Base Salary. Your base salary will be $13,541.66 paid semi-monthly (annualized at $325,000). Your base salary will be reviewed again in December 2008. | ||
| 2. | Annual Incentive Award (AIA). The AIA target for your position is 75% of your base salary with a maximum not to exceed 150% of your base salary. Your fiscal year 2008 AIA will be based on the average RONA of QBP divisions and paid on your eligible wages earned during the QBP stub period fiscal year from April 24, 2008 to October 31, 2008. | ||
| 3. | Initial Restricted Stock Grant. You will receive 30,000 shares of the Company’s Restricted Stock on the Effective Date of your employment. This stock will cliff vest on the third anniversary date of the Effective Date. However in the event of a change in control, as defined in the 2008 QBP Omnibus Incentive Plan, you will become fully vested in your restricted stock award of 30,000 shares. | ||
| 4. | Initial Stock Option Grant. You will receive a Non-Incentive Stock Option to purchase 100,000 shares of Quanex Building Products Corporation common stock for a per-share exercise price equal to the closing price on the Effective Date. The option grant will vest in thirds on your first, second and third employment anniversary dates. However, the option will become fully vested and exercisable in the event of a change in control, as defined in the QBP 2008 Omnibus Incentive Plan. | ||
| 5. | Long Term Incentive Awards. You will also be eligible to receive a Long Term Incentive Award in December 2008 based upon approval of the Compensation and Management Development Committee. Currently, the Long Term Incentive Award is comprised of grants from the QBP 2008 Omnibus Incentive Plan that include a mix of options, restricted stock and Performance Units. The Performance Units have historically been based on the Company achieving a certain level of Earnings per Share growth and Relative Total Shareholder Return results against our peer group over a three year period. |
| 6. | Company Furnished Automobile. The Company will assume the lease payment on your recently leased vehicle and the insurance will be paid by the Company. You will be reimbursed for gasoline and maintenance costs. After your lease expires, you will participate in the Company’s program for automobiles in existence at the time your lease expires. | ||
| 7. | Vacation. You will be entitled to four weeks of paid vacation each calendar year. | ||
| 8. | Benefits. You will be eligible to participate in the Quanex Building Products Group Benefits Plan beginning on the Effective Date. It is a flexible cafeteria plan that offers a variety of benefit choices from which you can select that will best meet the needs of you and your family. Additionally, the Company provides certain benefits that are employer-paid (i.e., short-term disability, long-term disability, basic life insurance, and AD&D benefits). | ||
| 9. | Officer Life Insurance. You will participate in the Quanex Building Products Corporation Officer Life Insurance Plan. | ||
| 10. | Financial and Tax Counsel. You will be eligible to receive financial, tax and legal consulting services at Company expense up to a maximum of $7,500 per year. | ||
| 11. | 401(k) Plan. You will be eligible to participate in the Quanex Building Products Salaried and Nonunion Employee 401(k) Plan beginning the first day of employment. You may contribute up to a maximum of 50% of your eligible compensation up to the government mandated maximum. Under the terms of the 401(k) Savings Plan, Quanex will match $0.50 for each dollar you contribute up to a maximum of 5% of your eligible compensation. There is a five year vesting schedule on the Company match. In addition, you may elect to save on a before-tax or after-tax basis, or a combination of the two. | ||
| 12. | Pension. You will be eligible for pension benefits from two programs, Quanex Building Products Salaried and Nonunion Employee Pension Plan (the qualified plan), and the Quanex Building Products Supplemental Employee Retirement Plan (SERP). |
| a. | Qualified Plan. You are eligible for the qualified plan as of the Effective Date. The qualified plan consists of a notional account balance in your name. The account will receive an annual benefit credit of 4% based on your base pay plus bonus paid during the year. In addition to annual interest credits based on the 30 year Treasury rate (which is established each August for the next year). | ||
| b. | SERP. The SERP is a nonqualified plan designed to provide substantial additional pension benefits to Corporate Officers. In addition, it implicitly restores benefits on pay in excess of the qualified plan limit (currently $185,000). Under the SERP, an eligible participant receives a monthly single life annuity payable at age 65 equal to: |
| • | 2.75% of the average of the highest 36-months of salary and bonus compensation from the last 60 months of employment, |
| • | multiplied by the named executive officer’s years of service (but not in excess of 20 years), and | ||
| • | reduced by (i) any benefits payable under the qualified plan and (ii) 50% of the named executive officer’s Social Security benefits adjusted pro rata for years of service not in excess of 20 years. |
To be eligible to receive a benefit you must remain employed until you have
accumulated five years of service. You are eligible for early retirement benefits
when you attain age 55 with five years of service. The early retirement benefit is
calculated based on average compensation and service at early retirement, and
reduced by 5% for each year benefit commencement precedes age 65.
In the event of a change in control, you will be eligible to receive a lump sum
payment in lieu of any other benefit payable from the SERP. The lump sum is equal to
the present value of the SERP life annuity, which is payable immediately without
reduction for early payment, based on your years of service and compensation at date
of termination. The SERP will be administered in a manner that is intended to comply
with Section 409A of the Internal Revenue Code.
| 13. | Change in Control. As an Officer of the Company you will be eligible for protection under the provisions of the QBP Change in Control Agreement. A blank copy of the agreement is attached. |
| a. | The Change in Control Agreement provides for a “double trigger.” First a change in control of the Company must occur. Generally a change in control would occur if an unrelated person purchased 20 percent or more of the Company’s outstanding stock. Second, your employment must be terminated by the acquiring organization for other than cause, or you must resign for “good reason” as defined in the Change in Control Agreement. | ||
| b. | Examples of “good reason” defined in the Change in Control Agreement include: (1) when the common stock of QBP or the entity into which QBP is merged is no longer being actively traded on the New York Stock Exchange; and (2) the “relocation of the executive’s principal office outside the portion of the metropolitan area of the City of Houston, Texas that is located within the Highway known as ‘Beltway 8.’” |
| 14. | Severance Agreement. The Severance Agreement you originally executed as an officer of the Company will be reinstituted and you will have an 18 month severance protection term in place of the 12 month term originally noted in your original severance agreement. | ||
| 15. | Principal Office. The QBP offices at 1900 West Loop South, Suite 1500, Houston, Texas will be your principal office. | ||
| 16. | Deferred Compensation Plan. You will be eligible to participate in the Company’s Deferred Compensation Plan. | ||
| 17. | Houstonian Club Membership — the Company will pay for the transfer of a Houstonian Club membership to you and reimburse you for the monthly dues for a single membership. |
Your employment may be terminated by either you or Quanex Building Products Corporation at any time
upon thirty days advance written notice. This agreement is governed by the laws of the State of
Texas.
We believe that you will help provide the leadership we need to meet the Company’s long-term goals.
The members of the Board of Directors and the executive management team look forward to welcoming
you back to the team.
I look forward to your positive response on or before July 16th.
Sincerely,
David D. Petratis
Chief Executive Officer and President
Chief Executive Officer and President
Enclosures
ACCEPTANCE OF OFFER
Brent L. Korb
|
Date |
EXHIBIT 10.2
CHANGE IN CONTROL AGREEMENT
BETWEEN QUANEX BUILDING PRODUCTS CORPORATION
AND [CFO]
BETWEEN QUANEX BUILDING PRODUCTS CORPORATION
AND [CFO]
This Agreement between Quanex Building Products Corporation, a Delaware corporation
(the “Company”), and [CFO] (the “Executive”) is effective as of the Effective Date (as defined
herein).
W I T N E S S E T H:
Whereas, the Company considers it to be in the best interests of its stockholders to
encourage the continued employment of certain key employees of the Company notwithstanding the
possibility, threat or occurrence of a Change in Control of the Company (as that phrase is defined
in Section 2); and
Whereas, the Executive is a key employee of the Company; and
Whereas, the Company believes that the possibility of the occurrence of a Change in
Control of the Company may result in the termination by the Executive of the Executive’s employment
by the Company or in the distraction of the Executive from the performance of his duties to the
Company, in either case to the detriment of the Company and its stockholders; and
Whereas, the Company previously recognized that the Executive could suffer adverse
financial and professional consequences if a Change in Control of the Company were to occur and
entered into this Agreement to protect the Executive if a Change in Control of the Company occurs;
and
Whereas, under current Internal Revenue Service guidance, the Agreement is subject to
Section 409A of the Internal Revenue Code of 1986, as amended by the American Jobs Creation Act of
2004 (“Section 409A”);
Now, Therefore, the parties agree, effective as stated above, as follows:
Section 1. Other Employment Arrangements.
(a) Except as specified below in this paragraph, this Agreement does not affect the
Executive’s existing or future employment arrangements with the Company unless a Change in Control
of the Company shall have occurred before the expiration of the term of this Agreement. The
Executive’s employment with the Company shall continue to be governed by the Executive’s existing
or future employment agreements with the Company, if any, or, in the absence of any employment
agreement, shall continue to be at the will of the Board of Directors or, if the Executive is not
an officer of the Company at the time of the termination of the Executive’s employment with the
Company, the will of the Chief Executive Officer of the Company, except that if (i) a Change in
Control of the Company shall have occurred before the expiration of the term of this Agreement, and
(ii) the Executive’s employment with the Company is terminated (whether by the Executive or the
Company or automatically as provided in Section 3) after the occurrence of that Change in Control
of the Company, then the Executive shall be entitled to receive certain benefits as provided in
this Agreement.
(b) Notwithstanding anything contained in this Agreement to the contrary, if following the
commencement of any discussion with a third person that ultimately results in a Change in Control
of the Company, (i) the Executive’s employment with the Company is terminated, (ii) the Executive
is removed from any material duties or position with the Company, (iii) the Executive’s Base Salary
is reduced, or (iv) the Executive’s annual bonus is reduced to an amount less than the Benchmark
Bonus, then for all purposes of this Agreement, such Change in Control of the Company shall be deemed to have
occurred on the date immediately prior to the date of such termination, removal, or reduction.
(c) Nothing in this Agreement shall prevent or limit the Executive’s continuing or future
participation in any plan, program, policy or practice of or provided by the Company or any of its
Affiliates and for which the Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any contract or agreement with the Company or
any of its Affiliates. Amounts which are vested benefits or which the Executive is otherwise
entitled to receive under any plan, program, policy or practice of or provided by, or any contract
or agreement with, the Company or any of its Affiliates at or subsequent to the date of termination
of the Executive’s employment with the Company shall be payable or otherwise provided in accordance
with such plan, program, policy or practice or contract or agreement except as explicitly modified
by this Agreement.
Section 2. Change in Control of the Company. For purposes of this Agreement,
a “Change in Control of the Company” shall mean the occurrence of any of the following after the
Effective Date:
(a) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Exchange Act) (a “ Covered Person”) of beneficial ownership (within the meaning
of rule 13d-3 promulgated under the Exchange Act) of 20 percent or more of either (i) the then
outstanding shares of the 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) of this Section 2, the
following acquisitions shall not constitute a Change in Control of the Company: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Company or any entity
controlled by the Company, or (iv) any acquisition by any corporation pursuant to a transaction
which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or
(b) individuals who, as of the Effective Date, constitute the Board of Directors (the
“Incumbent Board”) cease for any reason to constitute at least a majority of the Board of
Directors; provided, however, that any individual becoming a director subsequent to
the Effective Date whose election, or nomination for election by the Company’s stockholders, was
approved by a vote of at least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a Covered Person other
than the Board; or
(c) the consummation of (xx) a reorganization, merger or consolidation or sale of the Company,
or (yy) a 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, direct or indirectly, more than 80 percent 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 Covered 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 percent 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 of Directors, providing for such Business Combination; or
(d) the approval by the stockholders of the Company of a complete liquidation or dissolution
of the Company.
Section 3. Term of This Agreement. The term of this Agreement shall begin on
the Effective Date and, unless automatically extended pursuant to the second sentence of this
Section 3, shall expire on the first to occur of:
(i) the Executive’s death or the Executive’s Disability, which events shall
also be deemed automatically to terminate Executive’s employment by the Company;
(ii) the termination by the Executive or the Company of the Executive’s
employment by the Company; or
(iii) the end of the last day (the “Expiration Date”) of:
(1) the three-year period beginning on the Effective Date (or
any period for which the term of this Agreement shall have been
automatically extended pursuant to the second sentence of this
Section 3) if no Change in Control of the Company shall have
occurred during that three-year period (or any period for which the
term of this Agreement shall have been automatically extended
pursuant to the second sentence of this Section 3); or
(2) if one or more Changes in Control of the Company shall have
occurred during the three-year period beginning on the Effective
Date (or any period for which the term of this Agreement shall have
been automatically extended pursuant to the second sentence of this
Section 3), the three-year period beginning on the date on which the
last Change in Control of the Company occurred.
If (i) the term of this Agreement shall not have expired as a result of the occurrence of one of
the events described in clause (i) or (ii) of the immediately preceding sentence, and (ii) the
Company shall not have given notice to the Executive at least ninety (90) days before the
Expiration Date that the term of this Agreement will expire on the Expiration Date, then the term
of this Agreement shall be automatically extended for successive one-year periods (the first such
period to begin on the day immediately following the Expiration Date) unless the Company shall have
given notice to the Executive at least ninety (90) days before the end of any one-year period for
which the term of this Agreement shall have been automatically extended that such term will expire
at the end of that one-year period. The expiration of the term of this Agreement shall not
terminate this Agreement itself or affect the right of the Executive or the Executive’s legal
representatives to enforce the payment of any amount or other benefit to which the Executive was entitled before the expiration of the term of this Agreement or to which the Executive became
entitled as a result of the event (including the termination, whether by the Executive or the
Company or automatically as provided in this Section 3, of the Executive’s employment by the
Company) that caused the term of this Agreement to expire.
Section 4. Event of Termination for Cause. An “Event of Termination for
Cause“shall have occurred if, after a Change in Control of the Company, the Executive shall have
committed:
(i) gross negligence or willful misconduct in connection with his duties or in
the course of his employment with the Company;
(ii) an act of fraud, embezzlement or theft in connection with his duties or in
the course of his employment with the Company;
(iii) intentional wrongful damage to property of the Company;
(iv) intentional wrongful disclosure of secret processes or confidential
information of the Company; or
(v) an act leading to a conviction of a felony or a misdemeanor involving moral
turpitude.
For purposes of this Agreement, no act, or failure to act, on the part of the Executive shall be
deemed “intentional“if it was due primarily to an error in judgment or negligence, but shall be
deemed “intentional” only if done, or omitted to be done, by the Executive not in good faith and
without reasonable belief that his action or omission was in the best interest of the Company.
Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated as a
result of an “Event of Termination for Cause” hereunder unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less
than three-quarters of the Board of Directors then in office at a meeting of the Board of Directors
called and held for such purpose (after reasonable notice to the Executive and an opportunity for
the Executive, together with his counsel, to be heard before the Board of Directors), finding that,
in the good faith opinion of the Board of Directors, the Executive had committed an act set forth
above in this Section 4 and specifying the particulars thereof in detail. Nothing herein shall
limit the right of the Executive or his legal representatives to contest the validity or propriety
of any such determination.
Section 5. An Event of Termination for Good Reason. An “Event of Termination
for Good Reason” shall mean the occurrence of any of the following on or after a Change in Control
of the Company:
(i) the Company or the Successor assigns to the Executive any duties
inconsistent with the Executive’s position (including offices, titles and reporting
requirements), authority, duties or responsibilities with the Company in effect
immediately before the occurrence of the first Change in Control of the Company or
otherwise make any change in any such position, authority, duties or
responsibilities;
(ii) the Company or the Successor removes the Executive from, or fails to
re-elect or appoint the Executive to, any duties or position with the Company that
were assigned or held by the Executive immediately before the occurrence of the
first Change in Control of the Company, except that a nominal change in the
Executive’s title that is merely descriptive and does not affect rank or status
shall not constitute such an event;
(iii) the Company or the Successor takes any other action that results in a
material diminution in such position, authority, duties or responsibilities or
otherwise take any action that materially interferes therewith;
(iv) the Company or the Successor reduces the Executive’s annual base salary as
in effect immediately before the occurrence of the first Change in Control of the
Company or as the Executive’s annual base salary may be increased from time to time
after that occurrence (the “Base Salary”);
(v) the Company or the Successor reduces the Executive’s annual bonus (x) to an
amount less than $700,000 at any time on or prior to the third anniversary of the
Effective Date, or (y) to an amount less than the average of the two annual bonuses
earned by such Executive with respect to the two preceding years at any time after
the third anniversary of the Effective Date (the amount determined pursuant to
clause (x) or (y), as applicable, is referred to herein as the “Benchmark Bonus”);
(vi) the Company or the Successor relocates the Executive’s principal office
outside of the portion of the metropolitan area of the City of Houston, Texas that
is located within the highway known as “Beltway 8”;
(vii) the Company or the Successor fails to (x) continue in effect any bonus,
incentive, profit sharing, performance, savings, retirement or pension policy, plan,
program or arrangement (such policies, plans, programs and arrangements collectively
being referred to herein as “Basic Benefit Plans”), including, but not limited to,
any deferred compensation, supplemental executive retirement or other retirement
income, stock option, stock purchase, stock appreciation, or similar policy, plan,
program or arrangement of the Company, in which the Executive was a participant
immediately before the occurrence of the first Change in Control of the Company, or
any substitute plan adopted by the Board of Directors and in which the Executive was
a participant immediately before the occurrence of the last Change in Control of the
Company, unless an equitable and reasonably comparable arrangement (embodied in a
substitute or alternative benefit or plan) shall have been made with respect to such
Basic Benefit Plan promptly following the occurrence of the last Change in Control
of the Company, or (y) continue the Executive’s participation in any Basic Benefit
Plan (or any substitute or alternative plan) on substantially the same basis, both
in terms of the amount of benefits provided to the Executive (which are in any event
always subject to the terms of any applicable Basic Benefit Plan) and the level of
the Executive’s participation relative to other participants, as existed immediately
before the occurrence of the first Change in Control of the Company;
(viii) the Company or the Successor fails to continue to provide the Executive
with benefits substantially similar to those enjoyed by the Executive under any of
the Company’s other Executive benefit plans, policies, programs and arrangements,
including, but not limited to, life insurance, medical, dental, health, hospital,
accident or disability plans, in which the Executive was a participant immediately
before the occurrence of the first Change in Control of the Company;
(ix) the Company or the Successor takes any action that would directly or
indirectly materially reduce any other non-contractual benefits that were provided
to the Executive by the Company immediately before the occurrence of the first
Change in Control of the Company or deprive the Executive of any material fringe
benefit enjoyed by the Executive immediately before the occurrence of the first Change in
Control of the Company;
(x) the Company or the Successor fails to provide the Executive with the number
of paid vacation days to which the Executive was entitled in accordance with the
Company’s vacation policy in effect immediately before the occurrence of the first
Change in Control of the Company;
(xi) the Company or the Successor fails to continue to provide the Executive
with office space, related facilities and support personnel (including, but not
limited to, administrative and secretarial assistance) (y) that are both
commensurate with Executive’s responsibilities to and position with the Company
immediately before the occurrence of the first Change in Control of the Company and
not materially dissimilar to the office space, related facilities and support
personnel provided to other Executives of the Company having comparable
responsibility to the Executive, or (z) that are physically located at the Company’s
principal executive offices;
(xii) the Company or the Successor requires the Executive to perform a majority
of his duties outside the Company’s principal executive offices for a period of more
than 21 consecutive days or for more than 90 days in any calendar year;
(xiii) the Company or the Successor fails to honor any provision of any
employment agreement Executive has or may in the future have with the Company or
fail to honor any provision of this Agreement;
(xiv) the Company or the Successor gives effective notice of an election to
terminate at the end of the term or extended the term of any employment agreement
Executive has or may in the future have with the Company or the Successor in
accordance with the terms of any such agreement; or
(xv) the Company or the Successor purports to terminate the Executive’s
employment by the Company unless notice of that termination shall have been given to
the Executive pursuant to, and that notice shall meet the requirements of, Section
6.
Section 6. Notice of Termination If a Change in Control of the Company shall
have occurred before the expiration of the term of this Agreement, any subsequent termination by
the Executive or the Company of the Executive’s employment by the Company, or any determination of
the Executive’s Disability, shall be communicated by notice to the other party that shall indicate
the specific paragraph of Section 7 pursuant to which the Executive is to receive benefits as a
result of the termination. If the notice states that the Executive’s employment by the Company has
been automatically terminated as a result of the Executive’s Disability, the notice shall (i)
specifically describe the basis for the determination of the Executive’s Disability, and (ii) state
the date of the determination of the Executive’s Disability, which date shall be not more than ten
(10) days before the date such notice is given. If the notice is from the Company and states that
the Executive’s employment by the Company is terminated by the Company as a result of the
occurrence of an Event of Termination for Cause, the notice shall specifically describe the action
or inaction of the Executive that the Company believes constitutes an Event of Termination for
Cause and shall be accompanied by a copy of the resolution satisfying Section 4. If the notice is
from the Executive and states that the Executive’s employment by the Company is terminated by the
Executive as a result of the occurrence of an Event of Termination for Good Reason, the notice
shall specifically describe the action or inaction of the Company that the Executive believes
constitutes an Event of Termination for Good Reason. Each notice given pursuant to this Section 6
(other
than a notice stating that the Executive’s employment by the Company has been automatically
terminated as a result of the Executive’s Disability) shall state a date, which shall be not fewer
than thirty (30) days nor more than sixty (60) days after the date such notice is given, on which
the termination of the Executive’s employment by the Company is effective. The date so stated in
accordance with this Section 6 shall be the “Termination Date”. If a Change in Control of the
Company shall have occurred before the expiration of the term of this Agreement, any subsequent
purported termination by the Company of the Executive’s employment by the Company, or any
subsequent purported determination by the Company of the Executive’s Disability, shall be
ineffective unless that termination or determination shall have been communicated by the Company to
the Executive by notice that meets the requirements of the foregoing provisions of this Section 6
and the provisions of Section 9.
Section 7. Benefits Payable on Change in Control and Termination. (a) If (x)
a Change in Control of the Company shall have occurred before the expiration of the term of this
Agreement, and (y) the Executive’s employment by the Company is terminated (whether by the
Executive or the Company or automatically as provided in Section 3) after the occurrence of that
Change in Control of the Company, the Executive shall be entitled to the following benefits:
(i) If the Executive’s employment by the Company is terminated (x) by the
Company as a result of the occurrence of an Event of Termination for Cause, or (y)
by the Executive before the occurrence of an Event of Termination for Good Reason,
then the Company shall pay to the Executive the Base Salary accrued through the
Termination Date but not previously paid to the Executive, and the Executive shall
be entitled to any other amounts or benefits provided under any plan, policy,
practice, program, contract or arrangement of or with the Company, including, but
not limited to, the Basic Benefit Plans and the Other Benefit Plans, which shall be
governed by the terms thereof (except as explicitly modified by this Agreement).
(ii) If the Executive’s employment by the Company is automatically terminated
as a result of the Executive’s death or the Executive’s Disability, then (x) the
Company shall pay to the Executive the Base Salary accrued through the date of the
occurrence of that event but not previously paid to the Executive, and (y) the
Executive shall be entitled to any other amounts or benefits provided under any
plan, policy, practice, program, contract or arrangement of or with the Company,
including, but not limited to, the Basic Benefit Plans and the Other Benefit Plans,
which shall be governed by the terms thereof (except as explicitly modified by this
Agreement).
(iii) If the Executive’s employment by the Company is terminated (x) by the
Company otherwise than as a result of the occurrence of an Event of Termination for
Cause, or (y) by the Executive after the occurrence of an Event of Termination for
Good Reason, then the Executive shall be entitled to the following:
(1) the Company shall pay to the Executive the Base Salary and
compensation for earned but unused vacation time accrued through the
Termination Date but not previously paid to the Executive;
(2) the Company shall pay to the Executive an amount equal to
the product of (A) the greater of (I) the Executive’s target
performance bonus for the Fiscal Year in which the Termination Date
occurs and (II) the Executive’s performance bonus for the Fiscal
Year preceding the Fiscal Year in which the Termination Date occurs
(including any deferred portion thereof) (the greater of the amounts
described in clauses (I) and (II) of this Section 7(a)(iii)(2)(A) being referred to
herein as the “Highest Bonus”), and (B) a fraction, the numerator of
which is the number of days in the current Fiscal Year through the
Termination Date and the denominator of which is 365;
(3) the Company shall pay to the Executive, as a lump sum, an
amount (the “Severance Payment”) equal to three (3) times the sum
of:
(A) the amount (including any deferred portion
thereof) of the Base Salary that would have been
paid to the Executive during the Fiscal Year in
which the Termination Date occurs based on the
assumption that the Executive’s employment by the
Company had continued throughout that Fiscal Year at
the Base Salary rate in effect in the Fiscal Year in
which the Termination Date occurs, or in the
immediately preceding Fiscal Year, whichever is
higher;
(B) the amount of the Highest Bonus;
(4) the Company (at its sole expense) shall take the following
actions:
(A) throughout the Relevant Period, the Company
shall maintain in effect, and not materially reduce
the benefits provided by, each of the Other Benefit
Plans in which the Executive was a participant
immediately before the Termination Date; and
(B) the Company shall arrange for the
Executive’s uninterrupted participation throughout
the Relevant Period in each of such Other Benefit
Plans,
provided that if the Executive’s
participation after the Termination Date in any such
Other Benefit Plan is not permitted by the terms of
that Other Benefit Plan, then throughout the
Relevant Period, the Company (at its sole expense)
shall provide the Executive with substantially the
same benefits that were provided to the Executive by
that Other Benefit Plan immediately before the
Termination Date; and
(5) the Executive shall be entitled to any other amounts or
benefits provided under any plan, policy, practice, program,
contract or arrangement of or with the Company, including, but not
limited to, the Basic Benefit Plans and the Other Benefit Plans,
which shall be governed by the terms thereof (except as explicitly
modified by this Agreement).
(b) Each payment required to be made to the Executive pursuant to the foregoing provisions of
this Section 7(a) above (i) shall be made by check drawn on an account of the Company at a bank
located in the United States of America, and (ii) shall be paid (x) if the Executive’s employment
by the Company was terminated as a result of the Executive’s death or the Executive’s Disability,
not more than thirty (30) days immediately following the date of the occurrence of that event, and (y) if
the Executive’s employment by the Company was terminated for any other reason, on the Termination
Payment Date.
(c) The following shall occur immediately upon the occurrence of a Change in Control of the
Company:
(i) all options to acquire Voting Stock and all stock appreciation rights
pertaining to Voting Stock held by the Executive immediately prior to a Change in
Control of the Company shall become fully exercisable, regardless of whether or not
the vesting conditions set forth in the relevant stock option agreements have been
satisfied in full; and
(ii) all restrictions on any restricted Voting Stock granted to the Executive
prior to a Change in Control of the Company shall be removed and the stock shall be
freely transferable, regardless of whether the conditions set forth in the relevant
restricted stock agreements have been satisfied in full.
Section 8. Successors. If a Change in Control of the Company shall have
occurred before the expiration of the term of this Agreement,
(i) the Company shall not, directly or indirectly, consolidate with, merge into
or sell or otherwise transfer its assets as an entirety or substantially as an
entirety to, any person, or permit any person to consolidate with or merge into the
Company, unless immediately after such consolidation, merger, sale or transfer, the
Successor shall have assumed in writing the Company’s obligations under this
Agreement; and
(ii) not fewer than ten (10) days before the consummation of any consolidation
of the Company with, merger by the Company into, or sale or other transfer by the
Company of its assets as an entirety or substantially as an entirety to, any person,
the Company shall give the Executive notice of that proposed transaction.
Section 9. Notice. Notices required or permitted to be given by either party
pursuant to this Agreement shall be in writing and shall be deemed to have been given when
delivered personally to the other party or when deposited with the United States Postal Service as
certified or registered mail with postage prepaid and addressed:
(i) if to the Executive, at the Executive’s address last shown on the Company’s
records, and
(ii) if to the Company, at 1900 West Loop West, Suite 1500, Houston, Texas
77027, directed to the attention of the Chair of the Compensation & Management
Development Committee of the Board of Directors.
or, in either case, to such other address as the party to whom or which such notice is to be given
shall have specified by notice given to the other party.
Section 10. Withholding Taxes. The Company may withhold from all payments to
be paid to the Executive pursuant to this Agreement all taxes that, by applicable federal or state
law, the Company is required to so withhold.
Section 11. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be
determined that any payment or distribution by, or benefit from, the Company or any of its
Affiliates to or for the benefit of the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise (any such payments,
distributions or benefits being individually referred to herein as a “Payment,” and any two or more
of such payments, distributions or benefits being referred to herein as “Payments”), would be
subject to the excise tax imposed by Section 4999 of the Code (such excise tax, together with any
interest thereon, any penalties, additions to tax, or additional amounts with respect to such
excise tax, and any interest in respect of such penalties, additions to tax or additional amounts,
being collectively referred herein to as the “Excise Tax”), then the Executive shall be entitled to
receive an additional payment or payments (individually referred to herein as a “Gross-Up Payment”
and any two or more of such additional payments being referred to herein as “Gross-Up Payments”) in
an amount such that after payment by the Executive of all taxes (as defined in Section 11(k))
imposed upon the Gross-Up Payment, the Executive retains an amount of such Gross-Up Payment equal
to the Excise Tax imposed upon the Payments. The purpose of this Section 11 and the intent of the
parties to this Agreement is to place the Executive in the same economic position the Executive
would have been in had no Excise Tax been imposed with respect to the Payments.
(b) Subject to the provisions of Section 11(c) through (i), any determination (individually, a
“Determination”) required to be made under this Section 11(b), including whether a Gross-Up Payment
is required and the amount of such Gross-Up Payment, shall initially be made, at the Company’s
expense, by nationally recognized tax counsel mutually acceptable to the Company and the Executive
(“Tax Counsel”). Tax Counsel shall provide detailed supporting legal authorities, calculations,
and documentation both to the Company and the Executive within 15 business days of the termination
of the Executive’s employment, if applicable, or such other time or times as is reasonably
requested by the Company or the Executive. If Tax Counsel makes the initial Determination that no
Excise Tax is payable by the Executive with respect to a Payment or Payments, it shall furnish the
Executive with an opinion reasonably acceptable to the Executive that no Excise Tax will be imposed
with respect to any such Payment or Payments. The Executive shall have the right to dispute any
Determination (a “Dispute”) within 15 business days after delivery of Tax Counsel’s opinion with
respect to such Determination. The Gross-Up Payment, if any, as determined pursuant to such
Determination shall, at the Company’s expense, be paid by the Company to the Executive within five
business days of the Executive’s receipt of such Determination. The existence of a Dispute shall
not in any way affect the Executive’s right to receive the Gross-Up Payment in accordance with such
Determination. If there is no Dispute, such Determination shall be binding, final and conclusive
upon the Company and the Executive, subject in all respects, however, to the provisions of Section
11(c) through (i) below. As a result of the uncertainty in the application of Sections 4999 and
280G of the Code, it is possible that Gross-Up Payments (or portions thereof) which will not have
been made by the Company should have been made (“Underpayment”), and if upon any reasonable written
request from the Executive or the Company to Tax Counsel, or upon Tax Counsel’s own initiative, Tax
Counsel, at the Company’s expense, thereafter determines that the Executive is required to make a
payment of any Excise Tax or any additional Excise Tax, as the case may be, Tax Counsel shall, at
the Company’s expense, determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to the Executive.
(c) The Company shall defend, hold harmless, and indemnify the Executive on a fully grossed-up
after tax basis from and against any and all claims, losses, liabilities, obligations, damages,
impositions, assessments, demands, judgements, settlements, costs and expenses (including
reasonable attorneys’, accountants’, and experts’ fees and expenses) with respect to any tax
liability of the Executive resulting from any Final Determination (as defined in Section 11(j))
that any Payment is subject to the Excise Tax.
(d) If a party hereto receives any written or oral communication with respect to any question,
adjustment, assessment or pending or threatened audit, examination, investigation or
administrative, court or other proceeding which, if pursued successfully, could result in or give
rise to a claim by the Executive against the Company under this Section 11 (“Claim”), including,
but not limited to, a claim for indemnification of the Executive by the Company under Section
11(c), then such party shall promptly notify the other party hereto in writing of such Claim (“Tax
Claim Notice”).
(e) If a Claim is asserted against the Executive (“Executive Claim”), the Executive shall take
or cause to be taken such action in connection with contesting such Executive Claim as the Company
shall reasonably request in writing from time to time, including the retention of counsel and
experts as are reasonably designated by the Company (it being understood and agreed by the parties
hereto that the terms of any such retention shall expressly provide that the Company shall be
solely responsible for the payment of any and all fees and disbursements of such counsel and any
experts) and the execution of powers of attorney, provided that:
(i) within 30 calendar days after the Company receives or delivers, as the case
may be, the Tax Claim Notice relating to such Executive Claim (or such earlier date
that any payment of the taxes claimed is due from the Executive, but in no event
sooner than five calendar days after the Company receives or delivers such Tax Claim
Notice), the Company shall have notified the Executive in writing (“Election
Notice”) that the Company does not dispute its obligations (including, but not
limited to, its indemnity obligations) under this Agreement and that the Company
elects to contest, and to control the defense or prosecution of, such Executive
Claim at the Company’s sole risk and sole cost and expense; and
(ii) the Company shall have advanced to the Executive on an interest-free
basis, the total amount of the tax claimed in order for the Executive, at the
Company’s request, to pay or cause to be paid the tax claimed, file a claim for
refund of such tax and, subject to the provisions of the last sentence of Section
11(g), sue for a refund of such tax if such claim for refund is disallowed by the
appropriate taxing authority (it being understood and agreed by the parties hereto
that the Company shall only be entitled to sue for a refund and the Company shall
not be entitled to initiate any proceeding in, for example, United States Tax Court)
and shall indemnify and hold the Executive harmless, on a fully grossed-up after tax
basis, from any tax imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and
(iii) the Company shall reimburse the Executive for any and all costs and
expenses resulting from any such request by the Company and shall indemnify and hold
the Executive harmless, on fully grossed-up after-tax basis, from any tax imposed as
a result of such reimbursement.
(f) Subject to the provisions of Section 11(e) hereof, the Company shall have the right to
defend or prosecute, at the sole cost, expense and risk of the Company, such Executive Claim by all
appropriate proceedings, which proceedings shall be defended or prosecuted diligently by the
Company to a Final Determination; provided, however, that (i) the Company shall
not, without the Executive’s prior written consent, enter into any compromise or settlement of such
Executive Claim that would adversely affect the Executive, (ii) any request from the Company to the
Executive regarding any extension of the statute of limitations relating to assessment, payment, or
collection of taxes for the taxable year of the Executive with respect to which the contested
issues involved in, and amount of, the Executive Claim relate is limited solely to such contested
issues and amount, and (iii) the Company’s control of any
contest or proceeding shall be limited to issues with respect to the Executive Claim and the
Executive shall be entitled to settle or contest, in his sole and absolute discretion, any other
issue raised by the Internal Revenue Service or any other taxing authority. So long as the Company
is diligently defending or prosecuting such Executive Claim, the Executive shall provide or cause
to be provided to the Company any information reasonably requested by the Company that relates to
such Executive Claim, and shall otherwise cooperate with the Company and its representatives in
good faith in order to contest effectively such Executive Claim. The Company shall keep the
Executive informed of all developments and events relating to any such Executive Claim (including,
without limitation, providing to the Executive copies of all written materials pertaining to any
such Executive Claim), and the Executive or his authorized representatives shall be entitled, at
the Executive’s expense, to participate in all conferences, meetings and proceedings relating to
any such Executive Claim.
(g) If, after actual receipt by the Executive of an amount of a tax claimed (pursuant to an
Executive Claim) that has been advanced by the Company pursuant to Section 11(e)(ii) hereof, the
extent of the liability of the Company hereunder with respect to such tax claimed has been
established by a Final Determination, the Executive shall promptly pay or cause to be paid to the
Company any refund actually received by, or actually credited to, the Executive with respect to
such tax (together with any interest paid or credited thereon by the taxing authority and any
recovery of legal fees from such taxing authority related thereto), except to the extent that any
amounts are then due and payable by the Company to the Executive, whether under the provisions of
this Agreement or otherwise. If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 11(e)(ii), a determination is made by the Internal Revenue Service or
other appropriate taxing authority that the Executive shall not be entitled to any refund with
respect to such tax claimed and the Company does not notify the Executive in writing of its intent
to contest such denial of refund prior to the expiration of 30 days after such determination, then
such advance shall be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of any Gross-Up Payments and other payments
required to be paid hereunder.
(h) With respect to any Executive Claim, if the Company fails to deliver an Election Notice to
the Executive within the period provided in Section 11(e)(i) hereof or, after delivery of such
Election Notice, the Company fails to comply with the provisions of Section 11(e)(ii) and (iii) and
(f) hereof, then the Executive shall at any time thereafter have the right (but not the
obligation), at his election and in his sole and absolute discretion, to defend or prosecute, at
the sole cost, expense and risk of the Company, such Executive Claim. The Executive shall have
full control of such defense or prosecution and such proceedings, including any settlement or
compromise thereof. If requested by the Executive, the Company shall cooperate, and shall cause
its Affiliates to cooperate, in good faith with the Executive and his authorized representatives in
order to contest effectively such Executive Claim. The Company may attend, but not participate in
or control, any defense, prosecution, settlement or compromise of any Executive Claim controlled by
the Executive pursuant to this Section 11(h) and shall bear its own costs and expenses with respect
thereto. In the case of any Executive Claim that is defended or prosecuted by the Executive, the
Executive shall, from time to time, be entitled to current payment, on a fully grossed-up after tax
basis, from the Company with respect to costs and expenses incurred by the Executive in connection
with such defense or prosecution.
(i) In the case of any Executive Claim that is defended or prosecuted to a Final Determination
pursuant to the terms of this Section 11(i), the Company shall pay, on a fully grossed-up after tax
basis, to the Executive in immediately available funds the full amount of any taxes arising or
resulting from or incurred in connection with such Executive Claim that have not theretofore been
paid by the Company to the Executive, together with the costs and expenses, on a fully grossed-up
after tax basis, incurred in connection therewith that have not theretofore been paid by the
Company to the Executive, within ten calendar days after such Final Determination. In the case of
any Executive Claim not covered
by the preceding sentence, the Company shall pay, on a fully grossed-up after tax basis, to
the Executive in immediately available funds the full amount of any taxes arising or resulting from
or incurred in connection with such Executive Claim at least ten calendar days before the date
payment of such taxes is due from the Executive, except where payment of such taxes is sooner
required under the provisions of this Section 11(i), in which case payment of such taxes (and
payment, on a fully grossed-up after tax basis, of any costs and expenses required to be paid under
this Section 11(i) shall be made within the time and in the manner otherwise provided in this
Section 11(i).
(j) For purposes of this Agreement, the term “Final Determination” shall mean (A) a decision,
judgment, decree or other order by a court or other tribunal with appropriate jurisdiction, which
has become final and non-appealable; (B) a final and binding settlement or compromise with an
administrative agency with appropriate jurisdiction, including, but not limited to, a closing
agreement under Section 7121 of the Code; (C) any disallowance of a claim for refund or credit in
respect to an overpayment of tax unless a suit is filed on a timely basis; or (D) any final
disposition by reason of the expiration of all applicable statutes of limitations.
(k) For purposes of this Agreement, the terms “tax” and “taxes” mean any and all taxes of any
kind whatsoever (including, but not limited to, any and all Excise Taxes, income taxes, and
employment taxes), together with any interest thereon, any penalties, additions to tax, or
additional amounts with respect to such taxes and any interest in respect of such penalties,
additions to tax, or additional amounts.
(l) Nothwithstanding anything in this Agreement to the contrary, if any additional payment
required pursuant to this Section 11 is determined by the Board (or its delegate) to be subject to
Section 409A, such payment shall be made no later than the end of the Executive’s taxable year
following the year in which the related Excise Taxes are remitted to the relevant taxing authority.
Section 12. Expenses of Enforcement. If a Change in Control of the Company
shall have occurred before the expiration of the term of this Agreement, then, upon demand by the
Executive made to the Company, the Company shall reimburse the Executive for the reasonable
expenses (including attorneys’ fees and expenses) incurred by the Executive in enforcing or seeking
to enforce the payment of any amount or other benefit to which the Executive shall have become
entitled pursuant to this Agreement, including those incurred in connection with any arbitration
initiated pursuant to Section 20. To the extent that any such reimbursement would be subject to
the Excise Tax, then the Executive shall be entitled to receive Gross-Up Payments in an amount such
that after payment by the Executive of all taxes imposed on such Gross-Up Payments, the Executive
retains an amount equal to the Excise Tax imposed upon the reimbursement, and the other provisions
of Section 11 hereof shall also apply to such circumstance unless the context thereof otherwise
indicates.
Section 13. Employment by Wholly Owned Entities. If, at or after the
Effective Date, the Executive is or becomes an Executive of one or more corporations, partnerships,
limited liability companies or other entities that are, directly or indirectly, wholly owned by the
Company (“Wholly Owned Entities”), references in this Agreement to the Executive’s employment by
the Company shall include the Executive’s employment by any such Wholly Owned Entity.
Section 14. No Obligation to Mitigate; No Rights of Offset.
(a) The Executive shall not be required to mitigate the amount of any payment or other benefit
required to be paid to the Executive pursuant to this Agreement, whether by seeking other
employment or otherwise, nor shall the amount of any such payment or other benefit be reduced on
account of any compensation earned by the Executive as a result of employment by another person.
(b) The Company’s obligation to make the payments provided for in this Agreement and otherwise
to perform its obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may have against the
Executive or others.
Section 15. Amendment and Waiver. No provision of this Agreement may be
amended or waived (whether by act or course of conduct or omission or otherwise) unless that
amendment or waiver is by written instrument signed by the parties hereto. No waiver by either
party of any breach of this Agreement shall be deemed a waiver of any other or subsequent breach.
Section 16. Governing Law. The validity, interpretation, construction and
enforceability of this Agreement shall be governed by the laws of the State of Texas.
Section 17. 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.
Section 18. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original but all of which together will constitute the same
instrument.
Section 19. Assignment; Binding Effect. This Agreement shall inure to the
benefit of and be enforceable by the Executive’s legal representative. This Agreement shall be
binding upon any Successor. The Company may not assign any of its obligations under this Agreement
unless (i) such assignment is to a Successor and (ii) the requirements of Section 8 are fulfilled.
Section 20. Arbitration. Except as otherwise explicitly provided in Section
11, any dispute between the parties arising out of this Agreement, whether as to this Agreement’s
construction, interpretation or enforceability or as to any party’s breach or alleged breach of any
provision of this Agreement, shall be submitted to arbitration in accordance with the following
procedures:
(i) Either party may demand such arbitration by giving notice of that demand to
the other party. The notice shall state (x) the matter in controversy, and (y) the
name of the arbitrator selected by the party giving the notice.
(ii) Not more than 15 days after such notice is given, the other party shall
give notice to the party who demanded arbitration of the name of the arbitrator
selected by the other party. If the other party shall fail to timely give such
notice, the arbitrator that the other party was entitled to select shall be named by
the Arbitration Committee of the American Arbitration Association. Not more than 15
days after the second arbitrator is so named, the two arbitrators shall select a
third arbitrator. If the two arbitrators shall fail to timely select a third
arbitrator, the third arbitrator shall be named by the Arbitration Committee of the
American Arbitration Association.
(iii) The dispute shall be arbitrated at a hearing that shall be concluded
within ten days immediately following the date the dispute is submitted to
arbitration unless a majority of the arbitrators shall elect to extend the period of
arbitration. Any award made by a majority of the arbitrators (x) shall be made
within ten days following the conclusion of the arbitration hearing, (y) shall be
conclusive and binding on the parties, and (z) may be made the subject of a judgment
of any court having jurisdiction.
(iv) All expenses of the arbitration shall be borne by the Company.
The agreement of the parties contained in the foregoing provisions of this Section 20 shall be a
complete defense to any action, suit or other proceeding instituted in any court or before any
administrative tribunal with respect to any dispute between the parties arising out of this
Agreement.
Section 21. Interpretation.
(a) As used in this Agreement, the following terms and phrases have the indicated meanings:
(i) “Affiliate” and “Affiliates” mean, when used with respect to any entity,
individual, or other person, any other entity, individual, or other person which,
directly or indirectly, through one or more intermediaries controls, or is
controlled by, or is under common control with such entity, individual or person.
(ii) “Base Salary” has the meaning assigned to that term in Section 5.
(iii) “Basic Benefit Plans” has the meaning assigned to that term in Section 5.
(iv) “Benchmark Bonus” has the meaning assigned to that term in Section 5.
(v) “Board of Directors” means the Board of Directors of the Company.
(vi) “Business Combination” has the meaning assigned to that term in Section 2.
(vii) “Change in Control of the Company” has the meaning assigned to that
phrase in Section 2.
(viii) “Claim” has the meaning assigned to such term in Section 11.
(ix) “Code” means the Internal Revenue Code of 1986, as amended from time to
time.
(x) “Commission” means the United States Securities and Exchange Commission or
any successor agency.
(xi) “Company” has the meaning assigned to that term in the preamble to this
Agreement. The term “Company” shall also include any Successor, whether the
liability of such Successor under this Agreement is established by contract or
occurs by operation of law.
(xii) “ Covered Person” has the meaning assigned to that term in Section 2.
(xiii) “Determination” has the meaning assigned to that term in Section 11.
(xiv) “Dispute” has the meaning assigned to that term in Section 11.
(xv) “Effective Date” means the first day of employment with the Company by the
Executive.
(xvi) “Election Notice” has the meaning assigned to such term in Section 11.
(xvii) “Executive” has the meaning assigned to such term in the preamble to
this Agreement.
(xviii) “Executive Claim” has the meaning assigned to such term in Section 11.
(xix) “Executive’s Disability” means:
(1) if no Change in Control of the Company shall have occurred
before the date of determination, the physical or mental disability
of the Executive determined in accordance with the disability policy
of the Company at the time in effect and generally applicable to its
salaried Executives; and
(2) if a Change in Control of the Company shall have occurred
at that date, the physical or mental disability of the Executive
determined in accordance with the disability policy of the Company
in effect immediately before the occurrence of the first Change in
Control of the Company and generally applicable to its salaried
Executives.
The Executive’s Disability, and the automatic termination of the
Executive’s employment by the Company by reason of the Executive’s
Disability, shall be deemed to have occurred on the date of
determination, provided that if (1) a Change in Control of
the Company shall have occurred before the expiration of the term of
this Agreement, (2) the Company shall have subsequently given notice
pursuant to Section 6 of the Company’s determination of the
Executive’s Disability, and (3) the Executive shall have given
notice to the Company that the Executive disagrees with that
determination, then (A) whether the Executive’s Disability shall
have occurred shall be submitted to arbitration pursuant to Section
20, and (B) if a majority of the arbitrators decide that the
Executive’s Disability had not occurred, at the date of
determination by the Company, then (I) the Executive’s Disability,
and the automatic termination of the Executive’s employment by the
Company by reason of the Executive’s Disability, shall be deemed not
to have occurred, and (II) on demand by the Executive made to the
Company, the Company shall reimburse the Executive for the
reasonable expenses (including attorneys’ fees and expenses)
incurred by the Executive in obtaining that decision.
(xx) “Event of Termination for Good Reason” has the meaning assigned to that
phrase in Section 5.
(xxi) “Event of Termination for Cause” has the meaning assigned to that phrase
in Section 4.
(xxii) “Exchange Act” means the Securities Exchange Act of 1934, as amended
from time to time.
(xxiii) “Excise Tax” has the meaning assigned to that term in Section 11.
(xxiv) “Expiration Date” has the meaning assigned to that term in Section 3.
(xxv) “Final Determination” has the meaning assigned to such term in Section
11.
(xxvi) “Fiscal Year” means the fiscal year of the Company.
(xxvii) “Gross-Up Payment” has the meaning assigned to that term in Section 11.
(xxviii) “Other Benefit Plan” means any employee welfare benefit plan (within
the meaning of section 3(1) of the Employee Retirement Income Security Act of 1974,
as amended) maintained by the Company.
(xxix) “Outstanding Company Common Stock” has the meaning assigned to that term
in Section 2.
(xxx) “Outstanding Company Voting Securities” has the meaning assigned to that
term in Section 2.
(xxxi) “Payment” has the meaning assigned to that term in Section 11.
(xxxii) “Person” means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited partnership, limited liability company,
trust, unincorporated organization, government, or agency or political subdivision
of any government.
(xxxiii) “Relevant Period” means a period beginning on the Termination Date and
ending on the first to occur of (x) the third anniversary of the Termination Date,
or (y) the date on which the Executive becomes employed on a full-time basis by
another person.
(xxxiv) “Severance Payment” has the meaning assigned to that term in Section 7.
(xxxv) “Successor” means a person with or into which the Company shall have
been merged or consolidated or to which the Company shall have transferred its
assets as an entirety or substantially as an entirety.
(xxxvi) “Tax” has the meaning assigned to that term in Section 11.
(xxxvii) “Tax Claim Notice” has the meaning assigned to that term in Section
11.
(xxxviii) “Tax Counsel” has the meaning assigned to that term in Section 11.
(xxxix) “Termination Date” has the meaning assigned to that term in Section 6.
(xl) “Termination Payment Date” means
(1) if the Board (or its delegate) determines in its sole
discretion that as of the Termination Date, other than a termination
due to death or Disability, the Executive is a specified employee
(as defined in Section 409A(a)(2)(B)(i), and Department of Treasury
regulations and other interpretive guidance issued thereunder) as of
such date (a “Specified Employee”) and that Section 409A applies
with respect to a portion of the payments hereunder, then with
respect to such portion, the first business day following the
six-month anniversary of the Termination Date (the “Six-Month Delay
Period”)or
(2) if the Board (or its delegate) determines in its sole
discretion that as of the Termination Date, other than a termination
due to death or Disability, the Executive is not a Specified
Employee as of such date or that Section 409A does not apply with
respect to a portion of the payments hereunder, then with respect to
such portion, not more than ten (10) days immediately following the
Termination Date and
(3) with respect to any amount payable to or on behalf of the
Executive under a welfare or benefit plan program of the Company,
including but not limited to a Basic Benefit Plan or Other Benefit
Plan, then, to the extent such benefits are provided after the
period of time during which the Executive would be entitled to (or
would, but for this Agreement, be entitled to) COBRA continuation
coverage under a group health plan of the Company, the Company shall
make any payments due for such coverage during the Relevant Period
on the last business day of the calendar month following the month
in which such payments become due.
If the Board (or its delegate) determines in its sole discretion
that as of the Termination Date, other than a termination due to
death or Disability, the Executive is a Specified Employee as of
such date and that Section 409A applies with respect to a portion of
the payments hereunder, then any such portion payable during the
Six-Month Delay Period, including but not limited to any payments
under Section 11 or any other reimbursements, shall be transferred
to a rabbi trust (which shall be a rabbi trust previously created by
the Company that contains other amounts of deferred compensation
payable by the Company to the Executive or a rabbi trust created by
the Company or its successor, on terms reasonably acceptable to the
Executive) as soon as administratively feasible following the
occurrence of the event giving rise to the Executive’s right to such
payment, except to the extent such transfer would subject the
Executive to penalties under the funding restriction provisions of
Section 409A, as amended by the Pension Protection Act of 2006, and
such amounts (together with earnings thereon determined in
accordance with the terms of the trust agreement) shall be
transferred from the trust to the Executive upon the earlier of (i)
the expiration of the Six-Month Delay Period, or (ii) any other
earlier date permitted under Section 409A.
(xli) “This Agreement” means this Change in Control Agreement as it may be
amended from time to time in accordance with Section 15.
(xlii) “Underpayment” has the meaning assigned to that term in Section 11.
(xliii) “Wholly Owned Entities” has the meaning assigned to that term in
Section 13.
(b) In the event of the enactment of any successor provision to any statute or rule cited in
this Agreement, references in this Agreement to such statute or rule shall be to such successor
provision.
(c) The headings of Sections of this Agreement shall not control the meaning or interpretation
of this Agreement.
(d) References in this Agreement to any Section are to the corresponding Section of this
Agreement unless the context otherwise indicates.
(e) This Agreement is intended to meet the requirements of Section 409A and shall be
administered, construed and interpreted in a manner that is intended to meet those requirements.
To the extent that the provision of a benefit or payment under the Agreement is subject to Section
409A, except as the Company and Executive otherwise determine in writing, the provision or payment
shall be provided or paid in a manner that will meet the requirements of Section 409A, including
regulations or other guidance issued with respect thereto, such that the provisions or payment
shall not be subject to the additional tax or interest applicable under Section 409A. Any
provision of this Agreement that would cause the provision or payment to fail to satisfy Section
409A shall be amended to comply with Section 409A on a timely basis, which may be made on a
retroactive basis, in accordance with regulations and other guidance issued under Section 409A. In
the event additional regulations or other guidance is issued under Section 409A or a court of
competent jurisdiction provides additional authority concerning the application of Section 409A
with respect to the distributions under the Agreement, then the provisions of the Agreement
regarding distributions shall be automatically amended to permit such distributions to be made at
the earliest time permitted under such additional regulations, guidance or authority that is
practicable and achieves the intent of the Agreement prior to its amendment to comply with Section
409A.
Signature Page to Follow
In Witness Whereof, the Company and the Executive have executed this Agreement this
_____
day of , 2008, to be effective as set forth herein.
| QUANEX BUILDING | ||||
| PRODUCTS CORPORATION | ||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| EXECUTIVE | ||||
| CFO | ||||
Exhibit 99.1
| Quanex Building Products | News Release |
Quanex Building Products Corporation Announces the Return of Brent Korb as Senior Vice President — Finance and Chief Financial Officer
Houston, Texas, July 21, 2008 — Quanex Building Products Corporation (NYSE:NX), an industry-leading
manufacturer of value-added, engineered materials and components for the building products market,
today announced effective August 1, 2008, Brent L. Korb will rejoin the management team of Quanex
as its Senior Vice President — Finance and Chief Financial Officer. Korb, 36, replaces Tom Walker
who resigned June 30, 2008.
In his new role, Korb will be responsible for the overall finance functions of the Company, which
include accounting, treasury, tax, investor relations and internal audit. He will also collaborate
on acquisitions that support the Company’s strategy to enhance shareholder value. He has an
extensive background in financial management, mergers and acquisitions, as well as past experience
with the Company’s various businesses.
On June 13, 2008, Korb left Quanex to take a position as Vice President of Finance and Accounting
at Energy Alloys. Starting November 2003, he held the Assistant Controller position at Quanex,
then served as its Vice President — Corporate Controller. Before that time, he was Corporate
Controller and Director of Planning and Analysis at Resolution Performance Products, and prior to that, Director of International Finance and Accounting at SCI
Management Corporation.
Exhibit 99.1
“We are very pleased that Brent has rejoined Quanex Building Products,” said David D. Petratis, the
Company’s president and chief executive officer. “He has a depth of financial and operational
acumen and a proven track record of managing capital. With his leadership capabilities, we are now
in an even stronger position to deliver on our objective of becoming North America’s leading
manufacturer of engineered products and components sold to producers and distributors of building
products.”
Mr. Korb received his BBA in Accounting from The University of Texas at Austin in 1994. Korb went
on to earn an MBA from the University of Houston in 1999. Korb also holds a CPA certification in
the state of Texas.
Statements that use the words “expect,” “should,” “believe,” “will,” “might,” or similar words
reflecting future expectations or beliefs are forward-looking statements. The statements found
above are based on current expectations. Actual results or events may differ materially from this
release. Factors that could impact future results may include, without limitation, the effect of
both domestic and global economic conditions, the impact of competitive products and pricing, and
the availability and cost of raw materials. For a more complete discussion of factors that may
affect the Company’s future performance, please refer to the Company’s Registration Statement on
Form 10, filed with the SEC on April 4, 2008 pursuant to the Securities Exchange Act of 1934, in
particular the section titled, “Special Note About Forward-Looking Statements” contained therein.
Financial Contact: Jeff Galow, 713/877-5327
Media Contact: Valerie Calvert, 713/877-5305
Media Contact: Valerie Calvert, 713/877-5305
For additional information, visit the Company’s website at www.quanex.com.