Exhibit 10.29
ORIGINALLY EFFECTIVE AS OF 10/31/11
AMENDED AS OF MARCH 26, 2012
Form of Xylem Enhanced Severance Pay Plan
| 1. | Purpose |
The purpose of this Xylem Enhanced Severance Pay Plan (“Plan”) is to assist in occupational transition by providing Severance Benefits, as defined herein, for employees covered by this Plan whose employment is terminated under conditions set forth in this Plan.
The Plan first became effective as of October 31, 2011 following the spin-off of Xylem Inc. from ITT Corporation (the “Predecessor Corporation”) on October 31, 2011. The Predecessor Corporation maintained a similar plan prior to the spin-off (the “Predecessor Plan”), and the Plan was created to continue service accruals under the Predecessor Plan. The Plan shall remain in effect as provided in Section 9 hereof, and covered employees shall receive full credit for their service and participation with the Predecessor Corporation as provided in Section 5 hereof. The Plan was modified on March 26, 2012 to reflect updated pension provisions for Section 5 and certain other technical updates.
| 2. | Covered Employees |
Covered employees under this Plan (“Employees”) are active full-time, regular salaried United States or Canadian citizen employees of Xylem Inc. (“Xylem”) and of any subsidiary company (“Xylem Subsidiary”) (including Employees who are short term disabled, within the meaning of the Company’s short term disability benefit plans, as of a Potential Acceleration Event) (other than Employees receiving periodic severance payments as of a Potential Acceleration Event) who are or were, at any time within the two year period immediately preceding the Employees’ Qualifying Termination primarily located at Xylem Inc. Corporate Headquarters (currently in White Plains, New York), and such other employees of the Company who shall be designated as covered employees thereunder by the Chief Executive or the Senior Vice President, Chief Human Resources Officer of Xylem or a designee of such officers (“Authorized Officers or Designees”). No person who is employed on a temporary, occasional or seasonal basis is eligible under this Plan. Additionally, executives covered by the Xylem Special Senior Executive Severance Pay Plan shall not be considered covered Employees under this Plan.
After the occurrence of an Acceleration Event, the terms “Xylem”, “Xylem Subsidiary” and “Company” as used herein shall also include, respectively and as the context requires any successor company to Xylem or any successor company to any Xylem Subsidiary and any affiliate of any such successor company.
| 3. | Definitions |
An “Acceleration Event” shall occur if:
(i) a report on Schedule 13D shall be filed with the Securities and Exchange Commission pursuant to Section 13(d) of the Securities Exchange Act of 1934 (the “Act”) disclosing that any person (within the meaning of Section 13(d) of the Act), other than Xylem or a subsidiary of Xylem or any employee benefit plan sponsored by Xylem or a subsidiary of Xylem, is the beneficial owner directly or indirectly of twenty percent (20%) or more of the outstanding Common Stock $1 par value, of Xylem (the “Stock”);
(ii) any person (within the meaning of Section 13(d) of the Act), other than Xylem or a subsidiary of Xylem, or any employee benefit plan sponsored by Xylem or a subsidiary of Xylem, shall purchase shares pursuant to a tender offer or exchange offer to acquire any Stock of Xylem (or securities convertible into Stock) for cash, securities or any other consideration, provided that after consummation of the offer, the person in question is the beneficial owner (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, of twenty percent (20%) or more of the outstanding Stock of Xylem (calculated as provided in paragraph (d) of Rule 13d-3 under the Act in the case of rights to acquire Stock);
(iii) the consummation of (A) any consolidation, business combination or merger involving Xylem, other than a consolidation, business combination or merger involving Xylem in which holders of Stock immediately prior to the consolidation, business combination or merger (x) hold fifty percent (50%) or more of the combined voting power of Xylem (or the corporation resulting from the merger or consolidation or the parent of such corporation) after the merger and (y) have the same proportionate ownership of common stock of Xylem (or the corporation resulting from the merger or consolidation or the parent of such corporation), relative to other holders of Stock immediately prior to the merger, business combination or consolidation, immediately after the merger as immediately before, or (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of Xylem,
(iv) there shall have been a change in a majority of the members of the Board of Directors of Xylem within a 12-month period unless the election or nomination for election by Xylem’s stockholders of each new director during such 12-month period was approved by the vote of two-thirds of the directors then still in office who (x) were directors at the beginning of such 12-month period or (y) whose nomination for election or election as directors was recommended or approved by a majority of the directors who where directors at the beginning of such 12-month period or
(v) any person (within the meaning of Section 13(d) of the Act) (other than Xylem or any subsidiary of Xylem or any employee benefit plan (or related trust) sponsored by Xylem or a subsidiary of Xylem) becomes the beneficial owner (as such term is defined in Rule 13d-3 under the Act) of twenty percent (20%) or more of the Stock.
“Cause” shall mean action by the Employee involving willful malfeasance or gross negligence or the Employee’s failure to act involving material nonfeasance that would tend to have a materially adverse effect on the Company. No act or omission on the part of the Employee shall be considered “willful” unless it is done or omitted in bad faith or without reasonable belief that the action or omission was in the best interests of the Company.
2
“Code” shall mean the Internal Revenue Code of 1986, as amended.
“Company” shall mean Xylem Inc. (“Xylem”) and of any subsidiary company (“Xylem Subsidiary”), collectively or individually as the context requires “Company”; provided, however, that for purposes of service under the Predecessor Plan, Company shall include the Predecessor Corporation.
“Enhanced Severance Period” shall mean the period, expressed in weeks, equal to the sum of (x) two times the normal severance pay or termination pay period of weeks for the Employee (the “Normal Severance Period”), determined as if the Employee were an employee of the same grade, and having the same years of service, covered by and eligible for the severance pay or termination pay plans or policies at Xylem Corporate Headquarters, White Plains, New York, as in effect immediately preceding an Acceleration Event and (y) four (4) weeks (in lieu of notice of termination), provided that the Enhanced Severance Period shall not exceed 108 weeks and shall not be less than the Minimum Severance Period.
“Enhanced Week’s Pay” shall mean the sum of (x) the current annual base salary rate paid or in effect at the time of Employee’s termination of employment and (y) the most recent annual bonus or service recognition award paid to or earned by the Employee in respect of the Company’s most recent completed fiscal year prior to the date of the Employee’s termination of employment, divided by 52 weeks.
“Good Reason” shall mean:
(i) without the Employee’s express written consent and excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company or its affiliates within 30 days after receipt of notice thereof given by the Employee, (A) a reduction in the Employee’s annual base compensation (whether or not deferred), (B) the assignment to the Employee of any duties inconsistent in any material respect with the Employee’s position (including status, offices, titles and reporting requirements), authority, duties or responsibilities, or (C) any other action by the Company or its affiliates which results in a material diminution in such position, authority, duties or responsibilities;
(ii) without the Employee’s express written consent, the Company’s requiring the Employee’s work location to be other than within twenty-five (25) miles of the location where such Employee was principally working immediately prior to the Acceleration Event; or
(iii) any failure by the Company to obtain the express written assumption of this Plan from any successor to the Company; provided that “Good Reason” shall cease to exist for an event on the 90th day following the later of its occurrence or the Employee’s knowledge thereof, unless the Employee has given the Company notice thereof prior to such date.
“Minimum Severance Period” shall mean:
(i) with respect to Employees with less than twenty (20) years of service with the Company, twenty-six (26) weeks,
3
(ii) with respect to Employees with between twenty (20) and twenty-five (25) years of service with the Company, 52 weeks,
(iii) with respect to Employees with greater than twenty-five (25) years of service with the Company but less than or equal to thirty (30) years of service with the Company, seventy-eight (78) weeks and
(iv) with respect to Employees with greater than thirty (30) years of service with the Company, one hundred and four (104) weeks.
For purposes hereof, “years of service” shall have the same meaning as in the termination pay plans or policies at Xylem Corporate Headquarters, White Plains, New York, as in effect immediately preceding an Acceleration Event and shall be determined as of the date of the Employee’s termination of employment with the Company.
“Potential Acceleration Event” shall mean any execution of an agreement, the commencement of a tender offer or any other transaction or event that if consummated would result in an Acceleration Event.
| 4. | Severance Benefits Upon Termination of Employment |
If an Employee’s employment with the Company is terminated due to a Qualifying Termination, he or she shall receive the severance benefits set forth in Section 5 hereof (“Severance Benefits”). For purposes hereof, a “Qualifying Termination” shall mean a termination of an Employee’s employment with the Company either:
(x) by the Company without Cause (A) within the two (2) year period commencing on the date of the occurrence of an Acceleration Event or (B) prior to the occurrence of an Acceleration Event and either (1) following the public announcement of the transaction or event which ultimately results in such Acceleration Event or (2) at the request of a party to, or participant in, the transaction or event which ultimately results in an Acceleration Event; or
(y) by an Employee for Good Reason within the two (2) year period commencing with the date of the occurrence of an Acceleration Event.
| 5. | Severance Benefits |
Severance Benefits for Employees:
| • | Accrued Rights — The Employee’s base salary through the date of termination of employment, any annual bonus earned but unpaid as of the date of termination for any previously completed fiscal year, reimbursement for any unreimbursed business expenses properly incurred by the Employee in accordance with Company policy prior to the date of the Employee’s termination of employment and such employee benefits, if any, as to which the Employee may be entitled under the employee benefit plans of the Company, including without limitation, the payment of any accrued or unused vacation under the Company’s vacation policy. |
4
| • | Severance Pay — The number of weeks of the Employee’s Enhanced Severance Period times the Employee’s Enhanced Week’s Pay, paid in the form described in Section 6 below. |
| • | Benefits |
> Continued health and life insurance benefits for a period equal to the Employee’s Enhanced Severance Period following the Employee’s termination of employment at the same cost to the Employee, and at the same coverage levels, as provided to the Employee (and the Employee’s eligible dependents) immediately prior to his or her termination of employment. In the event the Company changes health and/or life insurance programs, coverage levels, benefit providers and/or modifies benefit contributions, the Employee would be treated consistent with other employees at his or her salary grade. In the event continuation of health and/or life insurance is not permissible, the Company may provide alternative benefits or payments as described under the subheading “General” below.
> Payment of a lump sum amount (“Savings Plan Lump Sum Amount”) for the Enhanced Severance Period equal to the product of (x) the number of years corresponding to the duration of the Enhanced Severance Period (expressed as a fraction, for any fractional years), (y) the current annual base salary rate and annual bonus as determined above as “Severance Pay” and (z) the current aggregate percentage used to determine “Company Contributions” which the Employee would have been eligible for under the Xylem Retirement Savings Plan for Salaried Employees (the “RSP”) and Xylem Supplemental Retirement Savings Plan (the “Supplemental Plan”) (or corresponding savings plan arrangements outside of the United States or any successor plans thereto) in respect of the plan year during which the Employee’s termination of employment occurs.
“Company Contributions” means the sum of:
(i) Company core contributions (e.g., either 3% or 4% based on age and years of eligible service, based on the terms of the RSP and Supplemental Plan as in effect in March 2012);
(ii) Company matching contributions (e.g., equal to 50% of the first 6% of eligible pay contributed to the RSP and Supplemental Plan, based on the terms of the RSP and Supplemental Plan as in effect in March 2012; for calculation of Savings Plan Lump Sum Amount 3% will be applied); and
(iii) Company transition credit contributions (e.g., another 3% or 5% based on age and service as defined in the RSP and Supplemental Plan, based on the terms of the RSP and Supplemental Plan as in effect in March 2012).
In aggregate, the maximum percentage of Company Contributions for calculating the Savings Plan Lump Sum Amount may not exceed 12%.
| • | Outplacement - Outplacement services for one (1) year. |
5
General
With respect to the provision of benefits described above during the above period equal to the Employee’s Enhanced Severance Period, if, for any reason at any time the Company is unable to treat the Employee as being eligible for ongoing participation in any Company employee benefit plans in existence immediately prior to the termination of employment of the Employee, and if, as a result thereof, the Employee does not receive a benefit or receives a reduced benefit the Company shall provide such benefits by making available equivalent benefits from other sources or making cash payments providing equivalent value (as reasonably determined in good faith by the Company) in a manner consistent with Section 15 below.
Notwithstanding any other provision of the Plan to the contrary, all prior service and participation by an Employee with the Predecessor Corporation shall be credited in full towards an Employee’s service and participation with the Company.
| 6. | Form of Payment of Severance Pay and Lump Sum Payments |
Severance Pay shall be paid in cash, in non-discounted equal periodic installment payments corresponding to the frequency and duration of the severance payments that the Employee would have been entitled to receive under the Normal Severance Period in the absence of the occurrence of an Acceleration Event. The Savings Plan Lump Sum Amount shall be paid in cash within thirty (30) calendar days after the date the employment of the Employee terminates. The timing of payments shall in all respects be subject to Section 15 below.
| 7. | Termination of Employment — Other |
The Severance Benefits shall only be payable upon an Employee’s termination of employment due to a Qualifying Termination; provided, that if, following the occurrence of an Acceleration Event, an Employee is terminated due to the Employee’s death or disability (as defined in the long-term disability plan in which the Employee is entitled to participate (whether or not the Employee voluntarily participates in such plan)) and, at the time of such termination, the Employee had grounds to resign with Good Reason, such termination of employment shall be deemed to be a Qualifying Termination.
| 8. | Administration of Plan |
This Plan shall be administered by Xylem, who shall have the exclusive right to interpret this Plan, adopt any rules and regulations for carrying out this Plan as may be appropriate and decide any and all matters arising under this Plan, including but not limited to the right to determine appeals. Subject to applicable Federal and state law, all interpretations and decisions by Xylem shall be final, conclusive and binding on all parties affected thereby.
Notwithstanding the preceding paragraph, following an Acceleration Event, any controversy or claim arising out of or relating to this Plan, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules and the entire cost thereof shall be borne by the Company. The location of the arbitration proceedings shall be reasonably acceptable to the Employee. Judgment on the award
6
rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. The Company shall pay all legal fees, costs of litigation, prejudgment interest, and other expenses which are incurred in good faith by the Employee as a result of the Company’s refusal to provide any of the Severance Benefits to which the Employee becomes entitled under this Plan, or as a result of the Company’s (or any third party’s) contesting the validity, enforceability, or interpretation of this Plan, or as a result of any conflict between the Employee and the Company pertaining to this Plan. The Company shall pay such fees and expenses from the general assets of the Company.
| 9. | Termination or Amendment |
Xylem may terminate or amend this Plan (“Plan Change”) at any time except, that following the occurrence of (i) an Acceleration Event or (ii) a Potential Acceleration Event, no Plan Change that would adversely affect any Employee may be made without the prior written consent of such Employee affected thereby; provided, however, that (ii) above shall cease to apply if such Potential Acceleration Event does not result in the occurrence of an Acceleration Event.
| 10. | Offset |
Any Severance Benefits provided to an Employee under this Plan shall be offset in a manner consistent with Section 15 by reducing (x) any Severance Pay hereunder by any severance pay, salary continuation pay, termination pay or similar pay or allowance and (y) any other Severance Benefits hereunder by corresponding employee benefits, or outplacement services, which the Employee receives or is entitled to receive, (i) pursuant to any other Company policy, practice program or arrangement, (ii) pursuant to any Company employment agreement or other agreement with the Company, or (iii) by virtue of any law, custom or practice excluding, however, any unemployment compensation in the United States, unless the Employee voluntarily expressly waives (which the Employee shall have the exclusive right to do) in writing any such respective entitlement.
| 11. | Excise Tax |
In the event that it shall be determined that any Payment would constitute an “excess parachute payment” within the meaning of Section 280G of the Code, then the aggregate of all Payments shall be reduced so that the Present Value of the aggregate of all Payments does not exceed the Safe Harbor Amount; provided, however, that no such reduction shall be effected, if the Net After-tax Benefit to the Employee of receiving all of the Payments exceeds the Net After-tax Benefit to the Employee resulting from having such Payments so reduced. In the event a reduction is required pursuant hereto, the order of reduction shall be first all cash payments on a pro rata basis, then any equity compensation on a pro rata basis, and lastly medical and dental coverage.
For purposes of this Section 11, the following terms have the following meanings:
(i) “Net After-tax Benefit” shall mean the Present Value of a Payment net of all federal state and local income, employment and excise taxes imposed on Employee with respect thereto, determined by applying the highest marginal rate(s) applicable to an individual for the Employee’s taxable year in which the Qualifying Termination occurs.
7
(ii) “Payment” means any payment or distribution or provision of benefits by the Company to or for the benefit of the Employee, whether paid or payable or distributed or distributable pursuant to the terms of this Plan or otherwise, but determined without regard to any reductions required by this Section 11.
(iii) “Present Value” shall mean such value determined in accordance with Section 280G(d)(4) of the Code.
(iv) “Safe Harbor Amount” shall be an amount expressed in Present Value which maximizes the aggregate Present Value of Payments without causing any Payment to be subject to excise tax under Section 4999 of the Code or the deduction limitation of Section 280G of the Code.
All determinations required to be made under this Section 11, including whether and when a reduction is required and the amount of such reduction and the assumptions to be utilized in arriving at such determination, shall be made by a nationally recognized accounting firm mutually agreed to by the Employee and the Company (the “Accounting Firm”) which shall provide detailed supporting calculations both to the Company and the Employee within ten (10) business days of the receipt of notice from the Employee that there has been a Payment, or such earlier time as is requested by the Company; provided that for purposes of determining the amount of any reduction, the Employee shall be deemed to pay federal income tax at the highest marginal rates applicable to individuals in the calendar year in which any such Qualifying Termination occurs.
All fees and expenses of the Accounting Firm shall be borne solely by the Company. If the Accounting Firm determines that no excise tax is payable by the Employee, it shall so indicate to the Employee in writing. Any determination by the Accounting Firm shall be binding upon the Company and the Employee.
| 12. | Miscellaneous |
The Employee shall not be entitled to any notice of termination or pay in lieu thereof except as included as part of Severance Pay as provided herein.
Severance Benefits under this Plan are paid entirely by the Company from its general assets.
This Plan is not a contract of employment, does not guarantee the Employee employment for any specified period and does not limit the right of the Company to terminate the employment of the Employee at any time.
If an Employee should die while any amount is still payable to the Employee hereunder had the Employee continued to live, all such amounts shall be paid in accordance with this Plan to the Employee’s designated heirs or, in the absence of such designation, to the Employee’s estate.
8
The numbered section headings contained in this Plan are included solely for convenience of reference and shall not in any way affect the meaning of any provision of this Plan.
If, for any reason, any one or more of the provisions or part of a provision contained in this Plan shall be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Plan not held so invalid, illegal or unenforceable, and each other provision or part of a provision shall to the full extent consistent with law remain in full force and effect.
The Plan shall be governed by and construed in accordance with the laws of the State of New York without regard to the conflicts of laws provisions thereof.
The Plan shall be binding on all successors and assigns of the Xylem and an Employee.
| 13. | Notices |
Any notice and all other communication provided for in this Plan shall be in writing and shall be deemed to have been duly given when delivered by hand or overnight courier or three days after it has been mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.
If to the Company:
Xylem Inc.
1133 Westchester Avenue, Suite N200
White Plains, New York 10604
Attention: General Counsel
If to Employee:
To the most recent address of Employee set forth in the personnel records of Xylem.
| 14. | Adoption and Amendments |
This Plan was initially adopted by Xylem on October 31, 2011 (the “Adoption Date”) and subsequently amended on March 26, 2012; and does not apply to any termination of employment which occurred or which was communicated to the Employee prior to the Adoption Date.
9
| 15. Section 409A |
This Plan is intended to comply with Section 409A of the Code and will be interpreted in a manner intended to comply with Section 409A of the Code. Notwithstanding anything herein to the contrary, (i) if at the time of the Employee’s termination of employment with the Company the Employee is a “specified employee” as defined in Section 409A of the Code (and any related regulations or other pronouncements thereunder) and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such termination of employment is necessary in order to prevent any accelerated or additional tax under Section 409A of the Code, then the Company will defer the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to the Employee) until the date that is six months following the Employee’s termination of employment with the Company (or the earliest date as is permitted under
Section 409A of the Code), at which point all payments deferred pursuant to this Section 15 shall be paid to the Employee in a lump sum and (ii) if any other payments of money or other benefits due hereunder could cause the application of an accelerated or additional tax under Section 409A of the Code, such payments or other benefits shall be deferred if deferral will make such payment or other benefits compliant under Section 409A of the Code, or otherwise such payment or other benefits shall be restructured, to the extent possible, in a manner, determined by the Company, that does not cause such an accelerated or additional tax. To the extent any reimbursements or in-kind benefits due under this Plan constitute “deferred compensation” under Section 409A of the Code, any such reimbursements or in-kind benefits shall be paid in a manner consistent with Treas. Reg. Section 1.409A-3(i)(1)(iv). Each payment made under this Plan shall be designated as a “separate payment” within the meaning of Section 409A of the Code. The Company shall consult with Employees in good faith regarding the implementation of the provisions of this section; provided that neither the Company nor any of its employees or representatives shall have any liability to Employees with respect thereto.
10