HOMESTAKE MINING COMPANY [HOMESTAKE LOGO HERE]
1999 Change of Control Severance Plan of Homestake Mining Company
(alternative II, applicable to persons who became participants in
the Change of Control Severance Plan after May, 1998).
Date:
TO:
SUBJECT: 1999 Change of Control Severance Plan
Homestake Mining Company ("Homestake" or the "Company")
considers the establishment and maintenance of a sound and vital
management to be essential to protecting and enhancing the best
interests of Homestake and its Stockholders. In this connection,
Homestake recognizes that the possibility of a change in control
and the uncertainty and questions which it may raise among
management may result in the departure or distraction of
management personnel to the detriment of Homestake and its
Stockholders. Accordingly, the Board of Directors of Homestake
("Board") has determined that appropriate steps should be taken
to reinforce and encourage the continued attention and dedication
of members of Homestake management, including yourself, to their
assigned duties without distraction in the face of the
potentially disturbing circumstances arising from the possibility
of a change in control of Homestake.
As a result, the Board has adopted the 1999 Change of
Control Severance Plan ("Severance Plan") which will provide you
with financial support in the event Homestake undergoes a
significant change of ownership or other change in control. The
terms of the Severance Plan are set forth in this letter. If you
accept the terms of the Severance Plan, you should acknowledge
such by signing the Verification and Acceptance at the end of the
letter. Your participation in the Severance Plan will begin
effective as of the date your acceptance is received by Homestake
and will terminate effective as of the date of your 65th
birthday.
1. Events Entitling You to Benefits
(a) No benefits will be payable under the Severance Plan
unless there is a Change of Control (as defined below). You will
become entitled to benefits under the Severance Plan if, within
the two-year period following a Change of Control and prior to
the date of your becoming age 65,
(i) Your employment is terminated involuntarily
for reasons other than death, disability or
discharge for Good and Sufficient Cause (as
defined below); or
(ii) You voluntarily choose to terminate your
employment for Good Reason (as defined below).
(b) As used herein, "Change of Control" means any of the
following events (except as specifically provided elsewhere):
(i) Homestake or any of its Subsidiaries is a
party to a consolidation or merger or other
combination, or there is an acquisition by
Homestake or any of its Subsidiaries of another
corporation or entity or its assets, or there is
any other corporate reorganization or acquisition
transaction in which Homestake or any of its
Subsidiaries is a participant, under the terms of
which capital stock having less than 62.5% of the
voting power in election of directors in Homestake
or the resulting or surviving publicly held
corporation or entity (if not Homestake) is held
by the Stockholders of Homestake immediately
preceding such event;
(ii) At least 75% in fair market value of
Homestake's assets are sold; or
(iii)Capital stock having at least 25% in
voting power in election of directors of Homestake
is acquired by any one person or "group," as that
term is used in Rule 13d-5 under the Securities
Exchange Act of 1934.
For purposes of this clause 1(b), holders of Homestake Canada
Inc. Exchangeable Shares shall be deemed to be Stockholders of
Homestake.
(c) As used herein, voluntary termination by you of your
employment for "Good Reason" means termination after a Change of
Control of Homestake following the occurrence of one of the
following events without your express written consent:
(i) The assignment by Homestake to you of any
duties inconsistent with your positions, duties,
responsibilities, and status with Homestake
immediately prior to the Change of Control,
provided, however, that for purposes of this
subclause 1(c)(i), the amount "50%" shall be
substituted for "62.5%" in subclause 1(b)(i) above
(definition of "Change of Control") and subclauses
1(b)(ii) and (iii) shall not apply;
(ii) A material reduction in your
responsibilities, titles, or offices as in effect
immediately prior to the Change of Control, or any
removal of you from or any failure to re-elect you
to any such positions, except in connection with
the involuntary termination of your employment for
Good and Sufficient Cause, or as a result of your
death, disability or retirement, or voluntary
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termination by you for other than Good Reason;
provided, however, that for purposes of this
subclause 1(c)(ii), the amount "50%" shall be
substituted for "62.5%" in subclause 1(b)(i) above
(definition of "Change of Control");
(iii)A reduction by Homestake in your base
salary as in effect immediately prior to the
Change of Control;
(iv) If there has been a change in the principal
executive office of Homestake to a location more
than 50 miles from the location of the principal
executive office of Homestake immediately prior to
the Change of Control, the requirement by
Homestake that you be based anywhere other than
within a 50-mile radius of your location
immediately prior to the Change of Control, except
for required travel on the Company's business to
an extent substantially consistent with your
business travel obligations immediately prior to
the Change of Control; provided, however, that
this subclause 1(c)(iv) shall not apply if the new
location at which you are to be based is as close
to or closer to your principal residence than the
prior location at which you were based;
(v) The requirement by Homestake that you be
based anywhere other than within a 50-mile radius
of your location immediately prior to the Change
of Control, except for required travel on the
Company's business to an extent substantially
consistent with your business travel obligations
immediately prior to the Change of Control;
provided, however, that for purposes of this
subclause 1(c)(v), the amount "50%" shall be
substituted for "62.5%" in subclause 1(b)(i) above
(definition of "Change of Control") and subclauses
1(b)(ii) and (iii) shall not apply; and provided,
further, that this subclause 1(c)(v) shall not
apply if the new location at which you are to be
based is as close to or closer to your principal
residence than the prior location at which you
were based;
(vi) The failure by Homestake to continue in
effect, or a change of your participation or
benefits under, any bonus or incentive
compensation plan, any employee benefit plan
qualified under Section 401 (a) of the Internal
Revenue Code of 1954, as amended from time to time
(the "Code"), any stock ownership, stock purchase,
stock option or other equity incentive plan, any
life, health, accident, disability or similar plan
providing welfare benefits or any plan or program
of fringe benefits in which you are participating
immediately prior to a Change of Control
("Existing Plans"), the effect of which would be
to materially reduce the total value, in the
aggregate, of your benefits under all Existing
Plans and all amendments thereto and plans
substituted therefor, as compared to your benefits
under Existing Plans as they existed immediately
prior to the Change of Control, or the failure by
Homestake to provide you with the number of paid
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vacation days to which you are entitled in
accordance with Homestake's general vacation
policy in effect immediately prior to the Change
of Control; or
(vii)The failure of Homestake to obtain the
express assumption by any successor of Homestake's
obligations under the Severance Plan, as
contemplated in Section 3.
(e) As used herein, "Good and Sufficient Cause" means any
act of fraud or dishonesty, or conviction of a felony involving
moral turpitude or your knowingly engaging in acts seriously
detrimental to Homestake.
2. Severance Payment and Benefits Payable to You.
(a) As the Severance Payment hereunder, you will be
entitled to receive a lump sum cash payment equal to two [three*]
times your highest "Annual Compensation" during the three
calendar years immediately preceding the date of your
termination. The lump sum cash payment shall be payable in full
within 10 calendar days of the occurrence of the first event
entitling you to benefits under the Plan. The foregoing
notwithstanding, if, at the date of the occurrence of the first
event entitling you to benefits under the Severance Plan, your
age is greater than 63 [62*], then the amount of the lump sum
cash payment payable to you shall be reduced by multiplying the
amount otherwise payable by a fraction, (i) the numerator of
which is the number of weeks (or part thereof) from the date of
such first event until your 65th birthday and (ii) the
denominator of which is the number "104" ["156"*].
(b) You will be entitled to the continuation of the
following benefits:
(i) Continuation of participation and coverage
for a period of two [three*] years from the date
of your termination, or until your 65th birthday
if earlier, under all Homestake life, health,
accident, disability or similar plans providing
welfare benefits, and all fringe benefit plans and
programs in which you are participating
immediately prior to your termination of
employment, under the same coverages and on the
same terms as in effect immediately prior to the
date of your termination (or in the case of your
voluntary termination for Good Reason following a
Change of Control as a result of a reduction in
benefits, such coverages and terms as were in
effect immediately prior to a Change of Control);
provided, however, that if your continued
participation is not possible under the general
terms and provisions of such plans and programs,
Homestake shall arrange to provide you with
substantially similar benefits; and provided
further, that, except as provided in such plans or
in existing agreements, you will not have
continued participation in Homestake's bonus
plans, stock option, stock appreciation and share
rights plans, or any other similar incentive based
compensation plan or the plans and programs
described in clause 2(c) below.
_________
* Chief Executive Officer and Chief Operating Officer only.
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(ii) Relocation assistance, to the extent not
provided by another employer.
(c) Benefit accruals under Homestake employee benefit plans
qualified under Section 401(a) and 401(k) of the Code and under
any supplemental retirement plan or executive supplemental
retirement plan in which you are participating immediately prior
to your termination shall cease as of the date of your
termination. You will become entitled to payment of benefits, if
any, under such plans in accordance with their terms.
(d) Benefits payable under the Severance Plan will be in
lieu of any severance pay benefits provided under any Homestake
severance pay policy provided, however, that if Homestake has a
severance pay policy that would apply to you in the absence of
the Severance Plan that would permit payment of a greater amount
than provided for in clause 2(a), then you will be entitled to
receive that greater amount. In the event you have an
outstanding employment agreement with Homestake in effect as of
your date of termination and such agreement provides you with
compensation and benefits which will continue during the period
of time coincident with that covered by the Severance Plan, your
benefits under the Severance Plan will be provided only to the
extent they exceed the benefits under such agreement.
(e) As used in clause 2(a), "Annual Compensation" includes:
all regular base salary and performance bonuses paid under the
Homestake Variable Pay Plan which are or would be reported on
your Form W-2 for any calendar year; any pre-tax reductions of
such compensation made at your election under a Section 401(k),
Cafeteria, Deferred Income or similar plan; and any amount of
cash bonus for such year under the Homestake Variable Pay Plan
that has been foregone in lieu of restricted stock awards.
"Annual Compensation" does not include: directors' fees; amounts
resulting or relating to exercise of or vesting in stock options,
stock appreciation rights or other restricted stock rights under
stock option and share rights plans (including stock received on
vesting of restricted stock awards received in lieu of cash
bonuses foregone); relocation or signing bonuses; loan
forgiveness amounts; tax gross-up payments; tax equalization
payments; other fees and commissions; and any other payments (or
deemed payments) to you and not described in the preceding
sentence.
3. Successors
As used herein, Homestake means Homestake (as defined
above) and any successor to its business and/or assets.
Homestake will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of Homestake by
agreement to expressly assume Homestake's obligations under the
Plan in the same manner and to the same extent that Homestake
would be required to perform if no such succession had taken
place.
4. Arbitration
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Any controversy between you and Homestake involving the
construction or application of any of the terms, provisions, or
conditions of this Agreement shall be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association, then in effect, and judgment on the
award may be entered by any court having jurisdiction thereof.
The exclusive location of the arbitration shall be San Francisco,
California. The expenses reasonably incurred by both parties in
connection with arbitration, including attorney fees, shall be
borne by Homestake.
5. Tax Gross-up
(a) Sections 280G and 4999 of the Code imposes penalties on
the payor and payee of certain "excess parachute payments." Very
generally, "parachute payments" are amounts which are paid as a
result of the change of control of a corporation and the present
value of which equals or exceeds a threshold of three times the
employee's average annual taxable compensation (excluding
deferred compensation) for the five years preceding the year in
which a change of control occurs. If the employee has been with
Homestake, including predecessor or related entities, for less
than five years, the employee's average annual compensation is
that earned during the period of employment. If the threshold is
exceeded, "parachute payments" which exceed one times your
average annual taxable compensation for the five-year period
preceding the change of control will be deemed "excess parachute
payments" which are (i) not deductible by the payor corporation,
and (ii) subject the payee to a non-deductible excise tax equal
to 20% of the payment.
(b) The IRS has proposed regulations which define a "change
of control." Some or all of the events which constitute a Change
of Control for purposes of the Severance Plan also constitute a
change of control under the regulations. In the event a Change
of Control occurs which also constitutes a change of control
under the IRS regulations, you will be subject to the non-
deductible excise tax if your benefits under the Severance Plan,
together with any other amounts that are deemed to be conditioned
on a change of control, equal or exceed the threshold amount.
(c) If you are subject to the excise tax, you will be
entitled to receive a "gross-up payment" in an amount sufficient
to pay the excise tax, the taxes (including the excise tax) on
the gross-up payment, and any related interest and penalties.
Whether you are subject to the excise tax and the amount of the
gross-up payment shall be determined by a law firm, a certified
public accounting firm, and/or a firm of recognized executive
compensation consultants selected by Homestake (the
"Consultant"). Determinations of the Consultant shall be binding
upon you and Homestake. Unless the Consultant concludes that a
contrary method is clearly preferable, the gross-up payment shall
be calculated on the assumption that you are subject to tax at
the sum of the maximum marginal tax rates applicable to the state
of your residence, with no adjustment for the amount of your
income, for the deduction of state taxes on a federal return, for
the deduction of federal tax on a state return, for the loss of
itemized deductions or exemptions, or for any other purpose, and
Homestake shall make the gross-up payment in a lump sum within 10
days of receipt of the Consultant's determination. For example,
the rate applicable to a California
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resident in 1998 would be
70.35% (39.6% federal income tax, plus 20% excise tax, plus 1.45%
federal Medicare tax, plus 9.3% California income tax). The
Consultant shall provide you and Homestake with a written notice
of the amount of the excise taxes that you are required to pay
and the amount of the gross-up payment, including any necessary
calculations in support of its conclusions. Homestake shall pay
all fees and expenses of the Consultant.
(d) You agree to notify Homestake in writing within five
days if the Internal Revenue Service takes the position that the
amount of excise tax paid by you was incorrect. Homestake has
the right to challenge any excise tax determinations made by the
Internal Revenue Service, and you must cooperate fully with
Homestake in connection with any such challenge. Homestake shall
control any such challenge and shall bear all costs associated
with the challenge. After Homestake has exhausted the rights to
challenge the determination or indicated that it intends to
concede or settle the excise tax determination, the gross-up
payment will be recalculated by the Consultant to reflect the
actual excise taxes and any related interest and penalties.
Homestake will pay you any deficiency in the gross-up payment and
any related interest and penalties payable (or will you return to
Homestake any excess gross-up payment and any interest received
thereon) within 10 days of receipt of the revised calculations
from the Consultant.
6. [Reserved]
7. General Provisions
(a) No provision in the Severance Plan shall be construed
to guarantee continued employment by Homestake for any specified
period of time, or to impair or interfere with Homestake's right
to dismiss its employees.
(b) You will be entitled to reimbursement by Homestake of
all reasonable expenses, including attorney's fees, incurred by
you in enforcing the provisions of the Severance Plan.
(c) For purposes of the Severance Plan, "Subsidiary" of
Homestake means any corporation or other entity that is
controlled by Homestake.
(d) All payments are subject to applicable withholding
taxes and income taxes.
8. Administration and Interpretation
(a) This Severance Plan is intended to qualify for
exemption from Parts II, III and IV of the Employee Retirement
Income Security Act of 1974, as amended, as a plan maintained
primarily for the purpose of providing deferred compensation for
a select group of management or highly compensated employees
under Sections 201(2), 301(a)(3) and 401(a)(1) of such Act, and
shall be so interpreted.
(b) The Severance Plan shall be administered by the
Compensation Committee of the Board ("Committee"). The Committee
shall have the discretion and authority to make, amend,
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interpret and enforce all appropriate rules and regulations for the
administration of the Severance Plan and decide or resolve any
and all questions including interpretations of the Severance
Plan, as may arise in connection with the Severance Plan.
(c) In the administration of the Severance Plan, the
Committee may, from time to time, employ agents and delegate to
them such administrative duties as it sees fit and may, from time
to time, consult with counsel who may be counsel to Homestake.
(d) The decision or action of the Committee with respect to
any question arising out of or in connection with the
administration, interpretation and application of the Severance
Plan and the rules and regulations promulgated hereunder shall be
final and conclusive and binding.
(e) Homestake shall indemnify and hold harmless each member
of the Committee against any and all claims, losses, damages,
expenses or liabilities arising from any action or failure to act
with respect to the Severance Plan, except in the case of willful
misconduct by that member.
(f) To enable the Committee to perform its functions,
Homestake shall supply full and timely information to the
Committee on all matters relating to your compensation, the date
and circumstances of the termination of your employment, and such
other pertinent information as the Committee may reasonably
require.
(g) If you believes that you are entitled to a benefit or
greater benefit as the case may be, under the Severance Plan, you
may submit a signed, written application to the Committee within
90 days of having been denied such benefit. You will generally
be notified of the approval or denial of this application within
90 days of the date that the Committee receives the application.
If the claim is denied, the denial will state specific reasons
for the denial and you will have 60 days to file a signed,
written request for a review of the denial with the Committee.
This request should include the reasons for requesting a review,
facts supporting the request and any other relevant comments.
The Committee, operating pursuant to its discretionary authority
to administer and interpret the Severance Plan and to determine
eligibility for benefits under the terms of the Severance Plan,
will generally make a final, written determination of your
eligibility for benefits within 60 days of receipt of the request
for review.
Please indicate your acceptance of the terms of the
Severance Plan by signing one copy of this letter and returning
it to me in the enclosed envelope. The second copy is for your
own records.
Sincerely,
HOMESTAKE MINING COMPANY
By ______________________________
VERIFICATION AND ACCEPTANCE
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I have read the foregoing letter and understand that
the 1999 Change of Control Severance Plan set out above
("Severance Plan") defines the entire obligation of Homestake
with respect to the benefits identified above and is limited to
those benefits. I understand that the Severance Plan modifies
Homestake's obligations under Homestake's general severance pay
policy in the manner described above and that the opportunity to
receive the special benefits provided under the Plan represents
valuable consideration for this modification. I accept the terms
of the Severance Plan.
Date:_____________ __________________________________
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