EXHIBIT 10.17
XTRA CORPORATION
Severance Agreement
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AGREEMENT, made this 8th day of December, 1997, by and between Michael K.
Fox ("Executive") and XTRA Corporation (the "Company").
WITNESSETH
Executive is a key executive of the Company or one of its subsidiaries,
responsible, in part, for the policy-making functions of the Company and the
overall viability of the Company's business; and
The Company recognizes that the possibility that certain significant
transactions involving the Company may result in the departure or distraction of
management to the detriment of the Company and its shareholders, and
The Company wishes to assure Executive of fair severance should his
employment terminate in specified circumstances following the consummation of
certain significant transactions involving the Company and to assure Executive
of certain other benefits in the event of such transactions.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:
1. If, within the 24-month period (the "Post Significant Transaction Period")
beginning on the date of a Significant Transaction (as defined in Exhibit A
attached hereto and made a part hereof), (i) Executive's employment with the
company is terminated (i) by the Company for any reason other than for
"Cause" (as defined in paragraph 2 below), or (ii) Executive terminates such
employment for Good Reason (as defined in paragraph 4 below):
a. The Company will pay to Executive within five (5) business days of such
termination of employment a lump-sum cash payment equal to the sum of
(i) the Executive's annual base salary ("Annual Base Salary") through
the date of such termination of employment, and any earned bonuses for
any completed fiscal period, to the extent not theretofore paid, (ii) a
prorated portion (the "Prorated Bonus Amount") of the award payable
under the Company's Economic Profit Incentive Plan, or any comparable or
successor annual plan or plans in which the Executive is then a
participant (the "Cash Plan"), notwithstanding anything to the contrary
in the Cash Plan, determined by calculating the product of (A) the bonus
payable with respect to the award for the fiscal period in which the
date of termination occurs under the Cash Plan annualizing the Company's
performance under the plan up to the date of termination by dividing the
Company's performance to the date of termination by the number of full
months in the performance period through the date of termination and
multiplying the result by 12, times (B) a fraction, the numerator of
which is the number of full months in the current fiscal year through
the date of termination of employment, and the denominator of which is
12, and (iii) any compensation, including compensation for the fiscal
year in which the date of termination occurs, previously deferred by the
Executive (together with any accrued interest or earnings thereon) and
any accrued vacation pay, in each case to the extent not theretofore
paid (the sum of the amounts described in the above subsections (i)
through (iii) shall be hereinafter referred to as the "Accrued
Obligations"); and
b. any stock, stock option or cash awards granted to the Executive by the
Company, including any awards under the Company's 1987 Stock Incentive
Plan (or any successor plan), that would have become vested and
exercisable had the Executive continued to be employed by the Company
shall immediately vest and become exercisable in full notwithstanding
any provision to the contrary of such grant and shall remain exercisable
until the later of (i) the latest date on which such grant could have
been exercised had the Executive remained employed by the Company, and
(ii) the date upon which any period during which the Executive has
agreed not to sell the type of securities that may be issuable to such
Executive upon the exercise of such grant shall expire; and
c. the Company will pay to Executive within five (5) business days of such
termination of employment a lump-sum cash payment equal to two times the
sum of: (A) the amount of the Executive's Annual Base Salary at the
rate in effect immediately prior to the date of termination, and (B) the
Average Annualized Bonus Amount which shall be calculated by multiplying
by 12 the quotient determined by dividing (i) the sum of the actual cash
bonus earned by the Executive during each of the two fiscal years
immediately preceding the date of termination, plus the Prorated Bonus
Amount, by (ii) 24 plus the number of full months in the period for
which the Prorated Bonus Payment is calculated; and
d. the Company will pay to Executive within five (5) business days of such
termination of employment a lump-sum cash payment equal to the amount of
the forfeitable portion of the Executive's accrued benefit under the
Company's qualified 401(k) or other qualified retirement plans; and
e. Executive, together with his dependents, will continue following such
termination of employment to participate fully at the Company's expense
(subject to any required employee contributions at the rate in effect
immediately prior to the date of the Significant Transaction) in all
welfare benefit plans (other than disability insurance), programs,
practices and policies maintained or sponsored by the Company
immediately prior to the Significant Transaction, or
receive substantially the equivalent coverage (or the full value thereof
in cash) from the Company, until the second anniversary of such
termination or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, provided, however, that
if the Executive becomes re-employed with another employer and is
eligible to receive reasonably comparable medical or other welfare
benefits under another employer provided plan, the Company's obligation
to provide the medical and other welfare benefits described herein shall
cease; and provided further that if Executive's continued participation
is not possible under the terms of such Company plans and programs, the
Company shall instead either arrange to provide Executive with
substantially similar benefits upon comparable terms or pay to the
Executive (within five (5) business days of the date of termination) an
amount equal to the full value thereof in cash; and
f. to the extent not theretofore paid or provided for, the Company shall
timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is eligible to
receive under any plan, program, policy, practice, contract or agreement
of the Company ("Other Benefits").
Notwithstanding anything herein to the contrary, to the extent that any
payment or benefit provided for herein is required to be paid or vested on
any earlier date under the terms of any plan, agreement or arrangements,
such plan, agreement or arrangement shall control. Further, notwithstanding
anything herein to the contrary, if a Significant Transaction occurs and if
the Executive's employment with the Company is terminated by the Company for
a reason other than Cause prior to the date upon which the Significant
Transaction occurs, and if it can be reasonably demonstrated by the
Executive that such termination of employment (i) was at the request of a
third party who has taken steps reasonably calculated to effect a
Significant Transaction or (ii) otherwise arose in connection with or in
anticipation of a Significant Transaction, then for all purposes of this
Agreement, Executive shall be entitled to the benefits provided in Sections
1(a)-(f) above.
2. Cause, Other Than For Good Reason; Disability.
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a. Cause; Other Than for Good Reason. If the Executive's employment shall
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be terminated for Cause (as defined in Section 3 below), or if the
Executive voluntarily terminates employment, excluding a termination for
Good Reason, during the Post Significant Transaction Period, this
Agreement shall terminate without further obligations to the Executive
other than the obligation to pay the Executive (A) his Annual Base
Salary through the date of termination, (B) the amount of any
compensation previously deferred by the Executive, and (C) Other
Benefits, in each case to the extent theretofore unpaid.
b. Disability. If the Executive's employment is terminated during the Post
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Significant Transaction Period by reason of the Executive's Disability,
this Agreement shall terminate without further obligations to the
Executive other than for payment of Accrued Obligations and the timely
payment or provision of Other Benefits. Accrued Obligations shall be
paid to the Executive in a lump sum in cash within five (5) business
days of the date of termination of employment. For purposes of this
Agreement, "Disability" shall mean the absence of the Executive from the
Executive's duties with the Company on a full-time basis for 180
consecutive business days as a result of incapacity due to mental or
physical illness which is determined to be total and permanent by a
physician selected by the Company or its insurers and reasonably
acceptable to the Executive or the Executive's legal representative. If
the Company determines in good faith that the Disability of the
Executive has occurred during the Post Significant Transaction Period,
it may give the Executive written notice of its intention to terminate
the Executive's employment. In such event, the Executive's employment
with the Company shall terminate effective on the 30th day after receipt
of such notice by the Executive, provided that, within the 30 days of
such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties.
In the case of (a) or (b) above, all obligations shall be paid to the
Executive in a lump sum in cash within five (5) business days of date of the
termination of employment or such earlier time as may be required under law.
3. "Cause" means only: (a) commission of a felony or gross neglect of duty by
the Executive which is intended to result in substantial personal enrichment
of the Executive at the expense of the Company, (b) conviction of, or plea
of nolo contendere to, a crime involving moral turpitude, or (c) gross
neglect by the Executive in the performance of his duties to the Company
which results in material injury to the Company, and continues for more than
30 days after written notice given to the Executive pursuant to a two-thirds
vote of all of the members of the Board at a meeting called and held for
such purpose (after reasonable notice to Executive) and at which meeting the
Executive and his counsel were given an opportunity to be heard, such vote
to set forth in reasonable detail the nature of the failure. For purposes of
this definition of Cause, no act or omission shall be considered to have
been "willful" unless it was not in good faith and the Executive had
knowledge at the time that the act or omission was not in the best interest
of the Company. Any act, or failure to act, based on authority given
pursuant to a resolution duly adopted by the Board or upon the instructions
of the Chief Executive Officer or another senior officer of the Company or
based on the advice of counsel of the Company shall be conclusively presumed
to be done, or omitted to be done, by the Executive in good faith and in the
best interest of the Company.
4. Executive shall be deemed to have voluntarily terminated his employment for
Good Reason if the Executive leaves the employ of the Company for any reason
following:
a. Any action by the Company which results in a material diminution in
Executive's position, authority, duties or responsibilities immediately
prior to the Significant Transaction, excluding for this purpose an
isolated, insubstantial and inadvertent action not taken in bad faith
and which is remedied by the Company promptly after receipt of notice
thereof given by the Executive; provided, however, a sale or transfer of
some or all of the business of the Company or any of its subsidiaries or
other reduction in its business or that of its subsidiaries, or the fact
that the Company shall become a subsidiary of another company or the
securities of the Company shall no longer be publicly traded, shall not
constitute "Good Reason" hereunder;
b. Any reduction in the Executive's rate of Annual Base Salary for any
fiscal year to less than 100% of the rate of Annual Base Salary payable
for the completed fiscal year immediately preceding the Significant
Transaction; or
c. Failure of the Company to permit the Executive to participate in all
incentive, retirement, and savings policies and programs, and all
welfare benefit plans, practices and programs (including without
limitation, life, accidental death and travel accident insurance,
medical insurance, dental insurance or disability plans) to the extent
applicable generally at the time to other peer executives of the Company
and its affiliated companies, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by
the Company promptly after receipt of notice thereof given by the
Executive; or
d. The Company requires Executive to be based at any office or location
further than 50 miles from Kansas City, Missouri; or
e. Any failure by the Company to comply with and satisfy Section 7 of this
Agreement.
5. If any portion of any payment in the nature of compensation to or for the
benefit of Executive would, but for the application of this Section 5,
constitute a "parachute payment" within the meaning of Section 280G(b)(2) of
the Internal Revenue Code of 1986, as amended (the "Code"), the cash amounts
payable under Section 1 shall be reduced to the extent, but only to the
extent, necessary to assure that no portion of such payments or of any other
payments in the nature of compensation to or for the benefit of Executive
will be treated as a "parachute payment" as so defined. The determination
as to whether and to what extent, if any, cash payments under Section 1 are
required to be reduced in accordance with the preceding sentence shall be
made at the Company's expense by KPMG Peat Marwick LLP, Tax and Regulatory
Group or by such other certified public accounting firm, law firm or
benefits consulting firm as Executive and the Company may mutually agree
(KPMG Peat Marwick LLP or such other firm being hereinafter referred to as
the "Firm").
Notwithstanding the limitation provided for in this Section 5, the Company
will pay the full amount of the cash payments required under Section 1
hereof within the time period described in said Section 1. The cash payments
required under Section 1 shall be made as a loan to Executive (the "Loan").
Such Loan shall be evidenced by a note substantially in the form of Exhibit
B attached hereto. Upon a Final Determination (as hereinafter defined) that
the amount paid in cash to Executive under Section 1 is required to be
reduced in order to satisfy the limitations of this Section 5, Executive
shall promptly repay that portion of the principal amount of the Loan equal
to the required reduction amount plus interest on such portion at a rate
equal to the rate described in Section 280G(d)(4) of the Code, and the
balance of the Loan shall be immediately and automatically forgiven. Upon a
Final Determination (as hereinafter defined) that no portion of the amount
paid in cash to Executive under Section 1 is required to be reduced under
this Section 5, the entirety of the Loan shall be immediately and
automatically forgiven.
The Firm shall make the determination required by the first sentence of this
Section 5 (the "Preliminary Determination") not later than thirty (30) days
following the date of the Executive's termination of employment and shall
deliver to Executive and the Company a copy of the Preliminary
Determination, together with any supporting documentation. If both the
Company and Executive agree with any Preliminary Determination by the Firm,
such Preliminary Determination shall constitute the Final Determination. If
either the Company or Executive believes that a Preliminary Determination by
the Firm is incorrect for any reason, such party may deliver to the Firm and
the other party any information that the Company or Executive thinks should
be considered by the Firm, within thirty (30) business days following
receipt by Executive and the Company of the Firm's Preliminary
Determination. Within 10 business days following receipt by the Firm of such
information, the Firm shall either confirm its Preliminary Determination or
issue its Alternative Determination which shall constitute the Final
Determination. The Final Determination shall be binding on all parties.
6. The Company agrees (i) to promptly reimburse Executive for any and all legal
fees and related expenses (including, without limitation, stenographer fees,
printing costs, etc.) incurred by him to enforce the provisions of this
Agreement or in contesting or disputing that the termination of his
employment is for Cause or other than for Good Reason (regardless of the
outcome thereof), (ii) to pay the cost of such judicial proceeding, and
(iii) to pay interest to Executive on all amounts owed to Executive under
this Agreement during any period of time that such amounts are withheld
pending judicial proceedings (such interest will be at the base rate as
published from time to time in the eastern edition of the Wall Street
Journal); provided, however, that the Company shall not be required to
reimburse the Executive for such fees, costs and expenses, if a court of
competent jurisdiction shall issue a final order to the effect that the
Executive shall not prevail on any claim relating to this Agreement.
7. If the Company is at any time before, after or in connection with, a
Significant Transaction merged or consolidated into or with any other
corporation or other entity (whether or not the Company is the surviving
entity), or if substantially all of the assets thereof are transferred to
another corporation or other entity, the provisions of this Agreement will
be binding upon and inure to the benefit of the corporation or other entity
resulting from such merger or consolidation or the acquirer of such assets
(the "Successor Entity"), and this paragraph 7 will apply in the event of
any subsequent merger or consolidation or transfer of assets. The Company
will require any such Successor Entity to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any Successor Entity
which assumes and agrees to perform this Agreement by operation of law or
otherwise.
In the event of any merger, consolidation, or sale of assets described
above, nothing contained in this Agreement will detract from or otherwise
limit Executive's right to or privilege of participation in any stock option
or purchase plan or any bonus, profit sharing, pension, group insurance,
hospitalization, or other incentive or benefit plan or arrangement which may
be or become applicable to executives of the entity resulting from such
merger or consolidation or the entity acquiring such assets of the Company.
In the event of any merger, consolidation, or sale of assets described
above, references to the Company in this Agreement shall unless the context
suggests otherwise be deemed to include the entity resulting from such
merger or consolidation or the acquirer of such assets of the Company.
8. Any termination by the Company for Cause, or by the Executive for Good
Reason, shall be communicated by Notice of Termination to the other party
hereto given in accordance with the last paragraph of Section 13 of this
Agreement. For purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination provision in
this Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated
and (iii) if the Date of Termination (as defined below) is other than the
date of receipt of such notice, specifies the termination date (which date
shall be not more than thirty days after the giving of such notice). The
failure by the Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Good
Reason or Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
"Date of Termination" means (i) if the Executive's employment is terminated
by the Company for Cause, or by the Executive for Good Reason, the date of
receipt of the Notice of Termination or any later date specified therein, as
the case may be, and (ii) if
the Executive's employment is terminated by the Company other than for
Cause, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination.
9. All payments required to be made by the Company hereunder to, or on behalf
of, Executive or his dependents, beneficiaries, or estate will be subject to
the withholding of such amounts relating to tax and/or other payroll
deductions as may be required by law.
10. There shall be no requirement on the part of the Executive to seek other
employment or otherwise mitigate damages in order to be entitled to the full
amount of any payments and benefits to which Executive is entitled under
this Agreement, and the amount of such payments and benefits shall not be
reduced by any compensation or benefits received by Executive from other
employment, other than with respect to certain welfare benefits as provided
in the proviso to Section 1(e).
11. Nothing contained in this Agreement shall be construed as a contract of
employment between the Company and the Executive, or as a right of the
Executive to continue in the employ of the Company, or as a limitation of
the right of the Company to discharge the Executive with or without Cause;
provided that the Executive shall have the right to receive upon termination
of his employment the payments and benefits provided in this Agreement and
shall not be deemed to have waived any rights he may have either at law or
in equity in respect of such discharge.
12. No amendment, change, or modification of this Agreement may be made except
in writing, signed by both parties.
13. This Agreement shall terminate on the third anniversary of the date hereof,
provided, however, that commencing on the date one year after the date
hereof, and on each annual anniversary of such date (each such date
hereinafter referred to as a "Renewal Date"), unless previously terminated,
the term of this Agreement shall be automatically extended so as to
terminate three years from such Renewal Date, unless at least sixty days
prior to the Renewal Date the Company shall give notice to the Executive
that the term of this Agreement shall not be so extended. This Agreement
shall not apply to a Significant Transaction which takes place after the
termination of this Agreement.
Payments made by the Company pursuant to this Agreement shall be in lieu of
severance payments, if any, which might otherwise be available to Executive
under any severance plan, policy, program or arrangement generally
applicable to the employees of the Company. If for any reason Executive
receives severance payments (other than under this Agreement) upon the
termination of his employment with the Company, the amount of such payments
shall be deducted from the amount paid under this Agreement. The purpose of
this provision is solely to avert a duplication of benefits; neither this
provision nor the provisions of any other agreement shall be interpreted to
reduce the amount payable to Executive below the amount that would otherwise
have been payable under this Agreement.
The provisions of this Agreement shall be binding upon and shall inure to the
benefit of Executive, his executors, administrators, legal representatives, and
assigns, and the Company and its successors.
The validity, interpretation, and effect of this Agreement shall be governed by
the laws of The Commonwealth of Massachusetts.
The invalidity or unenforceability of any provisions 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.
The Company shall have no right of set-off or counterclaims, in respect of any
claim, debt, or obligation, against any payments to Executive, his dependents,
beneficiaries, or estate provided for in this Agreement.
No right or interest to or in any payments shall be assignable by the Executive.
No right, benefit, or interest hereunder, shall be subject to anticipation,
alienation, sale, assignment, encumbrance, charge, pledge, hypothecation, or
set-off in respect of any claim, debt, or obligation, or to execution,
attachment, levy, or similar process, or assignment by operation of law. Any
attempt, voluntary or involuntary, to effect any action specified in the
immediately preceding sentence shall, to the full extent permitted by law, be
null, void, and of no effect.
All notices and other communications hereunder shall be in writing and shall be
given by hand delivery to the other party or by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:
If to the Executive: Michael K. Fox
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4941 Glendale Road
Westwood Hills, Kansas 66205
If to the Company: XTRA Corporation
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60 State Street - 11th Floor
Boston, Massachusetts 02109
Attn: Chair, Compensation Committee,
and the General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
either on the date of delivery (in the case of delivery by hand), or three
business days after deposit into the mails (in the case of delivery by mail).
IN WITNESS WHEREOF, XTRA Corporation and Executive have each caused this
Agreement to be duly executed and delivered as of the date set forth above.
XTRA CORPORATION
By: /s/ Martin L. Solomon
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Name: Martin L. Solomon
Title: Chair, Compensation Committee
/s/ Michael K. Fox
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Michael K. Fox
EXHIBIT A
Significant Transaction. For the purposes of this Agreement, a "Significant
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Transaction" shall mean:
a. Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the
Company, or XTRA Intermodal, Inc., in one or a series of transactions
(but excluding any reorganization, merger or consolidation or sale of
assets with or to the Company or any subsidiary of the Company, unless
in connection with such transaction there is also a Significant
Transaction involving 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 then outstanding shares of
common stock of the Company (the "Company Common Stock") and the then
outstanding voting securities of the Company entitled to vote generally
in the election of directors (the "Outstanding Company Voting
Securities" immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 50% of, respectively, the then
outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or
all or substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same proportions
as their ownership, immediately prior to such Business Combination of
the Outstanding Company Common Stock and outstanding Company Voting
Securities, as the case may be, (ii) no individual, corporation,
partnership, limited liability company, or other entity, which term
shall include a "group" (within the meaning of section 13(d) of the
Securities Exchange Act of 1934 (the "Act"), excluding any employee
benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination, beneficially owns, directly or
indirectly, 30% or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such Business Combination
or the combined voting power of the then outstanding voting securities
of such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of the
members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of
the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
b. Approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company or XTRA Intermodal, Inc., other than a
liquidation or dissolution of XTRA Intermodal, Inc. into the Company or
any subsidiary of the Company.