EXHIBIT 10.13
USG CORPORATION
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS CHANGE IN CONTROL SEVERANCE AGREEMENT (this "Agreement"), dated as of
January 1, 2007, is made and entered into by and between USG Corporation, a
Delaware corporation (the "Company"), and ____________________ (the
"Executive").
RECITALS:
I. The Executive is a senior executive of the Company or a Subsidiary and
has made and is expected to continue to make major contributions to the growth
and financial strength of the Company;
II. The Company recognizes that the possibility of a Change in Control (as
defined below) exists and that such possibility, and the uncertainty it may
create among management, may result in the distraction or departure of
management personnel, to the detriment of the Company and its stockholders;
III. The Company desires to assure itself of the continuity of management
and desires to establish certain minimum severance benefits for certain of its
senior executives, including the Executive, applicable in the event of a Change
in Control;
IV. The Company wishes to ensure that its senior executives are not unduly
distracted by the circumstances attendant to the possibility of a Change in
Control and to encourage the continued attention and dedication of such
executives, including the Executive, to their assigned duties with the Company;
and
V. The Company desires to provide additional inducement for the Executive
to continue to remain in the employ of the Company.
NOW, THEREFORE, the Company and the Executive agree as follows:
1. Certain Defined Terms. In addition to terms defined elsewhere herein, the
following terms have the following meanings when used in this Agreement
with initial capital letters:
(a) "Base Pay" means the Executive's annual base salary rate as in effect
from time to time.
(b) "Board" means the Board of Directors of the Company.
(c) "Cause" means that, prior to any termination pursuant to Section 3(b),
the Executive shall have:
(i) been convicted of a criminal violation involving fraud,
embezzlement or theft in connection with the Executive's duties
or in the course of the Executive's employment with the Company
or any Subsidiary;
(ii) committed intentional wrongful damage to tangible or intangible
property of the Company or any Subsidiary; or
(iii) committed intentional wrongful disclosure of secret processes or
confidential information of the Company or any Subsidiary.
For purposes of this Agreement, no act or failure to act on the part
of the Executive will be deemed "intentional" if it was due primarily
to an error in judgment or negligence, but will be deemed
"intentional" only if done or omitted to be done by the Executive not
in good faith and without reasonable belief that the Executive's
action or omission was in the best interest of the Company.
Notwithstanding the foregoing, the Executive will not be deemed to
have been terminated 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 a majority of the
Board then in office (excluding the Executive if the Executive is then
a member of the Board) at a meeting of the Board called and held for
such purpose, after reasonable notice to the Executive and an
opportunity for the Executive, together with the Executive's counsel
(if the Executive chooses to have counsel present at such meeting), to
be heard before the Board, finding that, in the good faith opinion of
the Board, the Executive had committed an act constituting "Cause" as
herein defined and specifying the particulars thereof in reasonable
detail. Nothing herein will limit the right of the Executive or the
Executive's beneficiaries to contest the validity or propriety of any
such determination.
(d) "Change in Control" means the occurrence during the Term of any of the
following events:
(i) any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") is or
becomes the beneficial owner (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of the
combined voting power of the then-outstanding Voting Stock of the
Company; provided, however, that:
(1) for purposes of this Section 1(d), the following
acquisitions shall not constitute a Change in Control: (A)
any acquisition of Voting Stock of the Company directly from
the Company that is approved by a majority of the Incumbent
Directors, (B) any acquisition of Voting Stock of the
Company by the Company or any Subsidiary, (C) any
acquisition of Voting Stock of the Company by the trustee or
other fiduciary holding securities under any employee
benefit plan (or related trust) sponsored or maintained by
the Company or any Subsidiary, and (D) any acquisition of
Voting Stock of the
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Company by any Person pursuant to a Business Transaction
that complies with clauses (A), (B) and (C) of Section
1(d)(iii) below;
(2) if any Person is or becomes the beneficial owner of 20% or
more of combined voting power of the then-outstanding Voting
Stock of the Company as a result of a transaction described
in clause (A) of Section 1(d)(i)(1) above and such Person
thereafter becomes the beneficial owner of any additional
shares of Voting Stock of the Company representing 1% or
more of the then-outstanding Voting Stock of the Company,
other than in an acquisition directly from the Company that
is approved by a majority of the Incumbent Directors or
other than as a result of a stock dividend, stock split or
similar transaction effected by the Company in which all
holders of Voting Stock are treated equally, such subsequent
acquisition shall be treated as a Change in Control;
(3) a Change in Control will not be deemed to have occurred if a
Person is or becomes the beneficial owner of 20% or more of
the Voting Stock of the Company as a result of a reduction
in the number of shares of Voting Stock of the Company
outstanding pursuant to a transaction or series of
transactions that is approved by a majority of the Incumbent
Directors unless and until such Person thereafter becomes
the beneficial owner of any additional shares of Voting
Stock of the Company representing 1% or more of the
then-outstanding Voting Stock of the Company, other than as
a result of a stock dividend, stock split or similar
transaction effected by the Company in which all holders of
Voting Stock are treated equally; and
(4) if at least a majority of the Incumbent Directors determine
in good faith that a Person has acquired beneficial
ownership of 20% or more of the Voting Stock of the Company
inadvertently, and such Person divests as promptly as
practicable but no later than the date, if any, set by the
Incumbent Board a sufficient number of shares so that such
Person beneficially owns less than 20% of the Voting Stock
of the Company, then no Change in Control shall have
occurred as a result of such Person's acquisition; or
(ii) a majority of the Board ceases to be comprised of Incumbent
Directors; or
(iii) the consummation of a reorganization, merger or consolidation,
or sale or other disposition of all or substantially all of the
assets of the Company or the acquisition of the stock or assets
of another corporation, or other transaction (each, a "Business
Transaction"), unless, in each case, immediately following such
Business Transaction (A) the Voting Stock of the Company
outstanding immediately prior to such Business Transaction
continues to represent (either by remaining outstanding or by
being
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converted into Voting Stock of the surviving entity or any parent
thereof), more than 60% of the combined voting power of the then
outstanding shares of Voting Stock of the entity resulting from
such Business Transaction (including, without limitation, an
entity 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), (B) no Person (other than
the Company, such entity resulting from such Business
Transaction, or any employee benefit plan (or related trust)
sponsored or maintained by the Company, any Subsidiary or such
entity resulting from such Business Transaction) beneficially
owns, directly or indirectly, 20% or more of the combined voting
power of the then outstanding shares of Voting Stock of the
entity resulting from such Business Transaction, and (C) at least
a majority of the members of the Board of Directors of the entity
resulting from such Business Transaction were Incumbent Directors
at the time of the execution of the initial agreement or of the
action of the Board providing for such Business Transaction; or
(iv) approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company, except pursuant to a
Business Transaction that complies with clauses (A), (B) and (C)
of Section 1(d)(iii).
Notwithstanding anything in this Agreement to the contrary, a Change in
Control shall not be deemed to have occurred as a result of an acquisition
or the holding of Voting Stock of the Company permitted by Section 2(a) of
the Shareholder's Agreement entered into as of January 30, 2006, by and
between the Company and Berkshire Hathaway, Inc.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(g) "Good Reason" means the failure of the Company to remedy any of the
following within 10 calendar days after receipt by the Company of
written notice thereof from the Executive:
(i) a material diminution in the Executive's normal duties and
responsibilities, including, but not limited to, the assignment
without the Executive's written consent of any diminished duties
and responsibilities which are inconsistent with the Executive's
positions, duties and responsibilities with the Company
immediately prior to a Change in Control, or a materially adverse
change in the Executive's reporting responsibilities or titles as
in effect immediately prior to the Change in Control, whether or
not resulting from an act of the Company or otherwise, or any
removal of the Executive from or any failure to re-elect the
Executive to any of such positions, except in connection with the
termination of the Executive's employment for disability,
retirement, or
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Cause or as a result of the Executive's death or by the Executive
other than for Good Reason;
(ii) a reduction by the Company in the Executive's Base Pay as in
effect on the date hereof or as the same may be increased from
time to time;
(iii) a change in the Executive's Target Direct Annual Compensation
that results in an aggregate decrease in such Target Direct
Annual Compensation in excess of ten percent (10%);
(iv) the Company's requiring the Executive, without the Executive's
written consent, to be based anywhere other than within fifty
(50) miles of the Executive's office location immediately prior
to the Change in Control, except for required travel on the
Company's business to an extent substantially consistent with
business travel obligations immediately prior to the Change in
Control;
(v) the failure by the Company to continue in effect any investment
plan, retirement plan, savings plan, supplemental retirement
plan, deferred compensation plan, supplemental investment plan,
life insurance plan, health and accident plan, disability plan or
other welfare benefit plan in which the Executive was
participating at the time of the Change in Control (or plans
providing the Executive with substantially similar benefits), the
taking of any action by the Company which would adversely affect
the Executive's participation or materially reduce the
Executive's benefits or value under any of such plans or deprive
the Executive of any material fringe benefit enjoyed by the
Executive at the time of the Change in Control, or the failure by
the Company to provide the Executive with the number of paid
vacation days to which the Executive was then entitled in
accordance with the Company's normal vacation policy in effect on
the date of the Change in Control; or
(vi) the failure by the Company to obtain the assumption of the
obligation to perform this Agreement by any successor as
contemplated in Section 11 hereof.
(h) "Incumbent Directors" means the individuals who, as of the date of
this Agreement, are Directors of the Company and any individual
becoming a Director subsequent to the date of this Agreement whose
election, nomination for election by the Company's stockholders, or
appointment, was approved by a vote of at least two-thirds of the then
Incumbent Directors (either by a specific vote or by approval of the
proxy statement of the Company in which such person is named as a
nominee for director, without objection to such nomination); provided,
however, that an individual shall not be an Incumbent Director if such
individual's election or appointment to the Board occurs as a result
of an actual or threatened election contest (as described in Rule
14a-12(c) of the Exchange Act) with respect to the election or removal
of Directors or other actual or threatened
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solicitation of proxies or consents by or on behalf of a Person other
than the Board.
(i) "Release Agreement" means an agreement, in substantially the form
customarily used by the Company for similarly situated executives of
the Company in similar instances, pursuant to which the Executive
releases, to the extent permitted by law, all current or future
claims, known or unknown, arising on or before the date of the release
against the Company, its subsidiaries and its officers.
(j) "Severance Period" means the period of time commencing on the date of
the first occurrence of a Change in Control and continuing until the
earlier of (i) the second anniversary of the occurrence of the Change
in Control, or (ii) the Executive's death.
(k) "Subsidiary" means a corporation, company or other entity (i) at least
50 percent of whose outstanding shares or securities (representing the
right to vote for the election of directors or other managing
authority) are, or (ii) which does not have outstanding shares or
securities (as may be the case in a partnership, joint venture or
unincorporated association), but at least 50 percent of whose
ownership interest representing the right generally to make decisions
for such other entity is, now or hereafter, owned or controlled,
directly or indirectly, by the Company.
(l) "Target Annual Direct Compensation" means the sum of the Executive's
Base Pay, target annual incentive opportunity, and the annualized
value of the most recent long-term incentive award approved by the
Compensation and Organization Committee of the Board. For purposes of
measuring annualized long-term incentives, the awards shall be
measured on their date of grant using reasonable assumptions,
including, but not limited to, fair value principles such as those
identified in Statement of Financial Accounting Standards No. 123,
Share-Based Payment; the value of such awards shall be annualized over
the frequency of their grant. Notwithstanding the foregoing, if, for
purposes of calculating "Target Annual Direct Compensation," the most
recent long-term incentive award would be the long-term incentive
award granted in August 2006 (the "2006 Award"), the calculation of
"Target Annual Direct Compensation" will include only 50% of the value
of such 2006 Award.
(m) "Term" means the period commencing as of the date hereof and expiring
on the second anniversary of the date of this Agreement, with
automatic one-year renewals thereafter unless either party notifies
the other at least 90 days before the scheduled expiration date that
the Term is not to renew; provided, however, that (i) if a Change in
Control occurs during the Term, the Term will expire on, and no sooner
than, the last day of the Severance Period; and (ii) subject to
Section 3(c), if, prior to a Change in Control, the Executive ceases
for any reason to be an officer of the Company or an employee of the
Company or any Subsidiary, thereupon without further action the Term
shall be deemed to have expired and this Agreement will immediately
terminate and be of no further effect. For purposes of this Section
1(m), the Executive shall not be deemed to have ceased
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to be an employee of the Company and any Subsidiary by reason of the
transfer of the Executive's employment between the Company and any
Subsidiary, or among Subsidiaries.
(n) "Termination Date" means the date on which the Executive's employment
is terminated (the effective date of which will be the date of
termination, or such other date that may be specified by the Executive
if the termination is pursuant to Section 3(b)).
(o) "Voting Stock" means at any time, the then-outstanding securities
entitled to vote generally in the election of directors of the
Company.
2. Operation of Agreement. This Agreement will be effective and binding
immediately upon its execution, but, anything in this Agreement to the
contrary notwithstanding, except as provided in Section 3(c), the payments
and benefits provided under this Agreement will not be payable unless and
until a Change in Control occurs. Upon the occurrence of a Change in
Control at any time during the Term, without further action, this Agreement
will become immediately operative.
3. Termination Following a Change in Control.
(a) If a Change in Control occurs and the Executive's employment is
terminated by the Company or a Subsidiary during the Severance Period
(or pursuant to Section 3(c)), the Executive will be entitled to the
benefits provided by Section 4 unless such termination is the result
of the occurrence of one or more of the following events:
(i) The Executive's death;
(ii) The Executive's having become unable (as determined by the Board
in good faith), with or without reasonable accommodations, to
regularly perform the Executive's duties by reason of illness or
incapacity; or
(iii) Cause.
(b) In the event of the occurrence of a Change in Control, the Executive
may terminate employment with the Company and any Subsidiary during
the Severance Period for Good Reason with the right to severance
compensation as provided in Section 4 regardless of whether any other
reason, other than Cause, for such termination exists or has occurred,
including without limitation other employment.
(c) Anything in this Agreement to the contrary notwithstanding, if a
Change in Control occurs and not more than 90 days prior to the date
on which the Change in Control occurs, the Executive's employment with
the Company is terminated by the Company, such termination of
employment will be deemed to be a termination of employment after a
Change in Control for purposes of this Agreement and, in addition, the
Company will be required to pay to the Executive
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in a lump sum in cash, the sum of: (1) the difference between the fair
market value of a common share of the Company and the exercise price
of each outstanding stock option held by the Executive that was
forfeited as a result of the Executive's termination of employment
multiplied by the number of shares underlying each stock option held
by the Executive that was forfeited as a result of the Executive's
termination of employment and (2) the fair market value of a common
share of the Company multiplied by the number of shares underlying
each share of restricted stock and each performance share and other
equity award held by the Executive that was forfeited as a result of
the Executive's termination of employment. For this purpose, the "fair
market value of a common share of the Company" shall be deemed to be
the price per share paid in connection with the Change in Control.
(d) A termination of employment pursuant to Section 3(a), 3(b) or 3(c)
will not affect any rights that the Executive may have pursuant to any
agreement, policy, plan, program or arrangement of the Company or any
Subsidiary providing employee benefits, which rights will be governed
by the terms thereof; provided, however, that if upon termination of
employment, the Executive is entitled to severance compensation or
benefits under this Agreement and pursuant to any employment or
severance agreement or employee plan (an "Employment Agreement"), the
Executive will be entitled to severance benefits under either this
Agreement or such Employment Agreement, whichever agreement provides
for greater benefits, but will not be entitled to benefits under both
agreements.
4. Severance Compensation.
(a) If, following the occurrence of a Change in Control, the Company or a
Subsidiary of the Company terminates the Executive's employment during
the Severance Period other than pursuant to Section 3(a)(i), 3(a)(ii)
or 3(a)(iii), or if the Executive terminates the Executive's
employment pursuant to Section 3(b), the Company will be obligated to
make the following payments and provide the following benefits to the
Executive.
(i) The Executive will be entitled to receive: (i) as soon as
practicable following the end of the Employment Period, any Base
Pay which has accrued but is unpaid, any reimbursable expenses
which have been incurred but are unpaid, and payment for any
unexpired vacation days which have accrued under the Company's or
a Subsidiary's vacation policy but are unused, as of the date of
termination of the Executive's employment, (ii) any plan benefits
which by their terms extend beyond termination of the Executive's
employment (but only to the extent provided in any such benefit
plan in which the Executive has participated as an employee of
the Company or a Subsidiary and excluding, except as hereinafter
provided in this Section 4, any severance pay program or policy
of the Company or a Subsidiary), and (iii) subject to Section
4(a)(ii) below, payments or benefits payable pursuant to the
terms of any annual and/or long-term incentive plan of the
Company or a Subsidiary in
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accordance with the terms thereof. In addition, the Executive
shall be entitled to the additional benefits and amounts
described in the succeeding subsections of this Section 4, in the
circumstances described in such subsections.
(ii) Within ten (10) business days after the expiration of any
revocation period relating to the Release Agreement described in
Section 20 below and in lieu of payments under the terms of the
Company's annual bonus plan applicable to the Executive, the
Executive will be entitled to receive a lump sum cash payment in
an amount equal to the greater of (A) the Executive's target or
par annual bonus for the fiscal year in which the Termination
Date occurs or (B) the Executive's target or par annual bonus for
the fiscal year in which the Change in Control occurs, pro-rated
for the number of full months that the Executive was employed
during such fiscal year (i.e., the annual bonus shall be
multiplied by a fraction, the numerator of which is the number of
full months during which the Executive was actively employed by
the Company in the relevant fiscal year and the denominator of
which is 12).
(iii) Within ten (10) business days after the expiration of any
revocation period relating to the Release Agreement described in
Section 20 below, the Executive will be entitled to receive a
lump sum cash payment in an amount equal to two (2) times the sum
of (A) Base Pay (at the highest rate in effect for any period
within three years prior to the Termination Date), plus (B)
annual bonus (in an amount equal to the greater of the
Executive's target or par annual bonus for the year in which the
Termination Date occurs or for the year in which the Change in
Control occurs, whichever is greater).
(iv) For a period of eighteen (18) months following the Termination
Date (the "Continuation Period"), the Executive will be entitled
to continued participation in the Company's medical, dental,
vision, long-term disability and life insurance plans (excluding
benefits under the executive death benefit plan) (the "Benefit
Plans"), subject to the terms and conditions of the Benefit
Plans, including, but not limited to, timely payment of any
employee contributions necessary to maintain participation;
provided, however, that (A) such coverage shall be provided only
to the extent that such coverage would not be considered
"deferred compensation" subject to the requirements of Section
409A of the Code; and (B) the Executive's continued participation
in the Benefit Plans during the Continuation Period shall satisfy
the Benefit Plans' obligation, if any, to provide the Executive
the right to continuation coverage under the Benefit Plans
pursuant to the Consolidated Omnibus Budget Reconciliation Act of
1986, as amended. If any benefit described in this Section
4(a)(iv) is subject to tax, the Company will pay to the Executive
an additional amount such that after payment by the Executive or
the Executive's dependents or beneficiaries, as the case may be,
of all taxes
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(including any income or social security tax) imposed on the
benefits described in this Section 4(a)(iv) and any such
additional payment by the Company, the recipient retains an
amount equal to such taxes. Notwithstanding the foregoing, if the
Company determines that the provision of benefits under this
Section 4(a)(iv) would be likely to result in negative tax
consequences to the Executive, the Company will use its
reasonable best efforts to make other arrangements to provide a
substantially similar benefit to the Executive that does not have
such negative tax consequences, which may include, making a lump
sum payment at the earliest time permitted under Section 409A of
the Code, in an amount equal to the Company's reasonable
determination of the present value of any such benefits that, if
provided, would result in negative tax consequences to the
Executive and/or providing such benefit through insurance
coverage on the Executive's behalf.
(v) Within ten (10) business days after the expiration of any
revocation period relating to the Release Agreement described in
Section 20 below, the Executive will be entitled to receive a
lump sum cash payment in an amount equal to the present value of
continued participation in the Benefit Plans for an additional
six (6) months. If any benefit described in this Section 4(a)(v)
is subject to tax, the Company will pay to the Executive an
additional amount such that after payment by the Executive or the
Executive's dependents or beneficiaries, as the case may be, of
all taxes (including any income or social security tax) imposed
on the benefits described in this Section 4(a)(v) and any such
additional payment by the Company, the recipient retains an
amount equal to such taxes.
(vi) In addition to the retirement and other benefits to which the
Executive is entitled under the Company's defined benefit
retirement plans (including any supplemental plans) with respect
to the Executive's employment through the Termination Date, the
Executive shall be entitled to a lump sum cash payment, within
five (5) business days after the expiration of any revocation
period relating to the Release Agreement described in Section 20
below, in an amount equal to the present value (calculated in
accordance with the terms of the Company's defined benefit plans
or supplemental plans, based on the age of the Executive at the
date entitlement to benefits under this Section 4(a)(vi) arises)
of the excess of (A) the retirement income and other benefits
that would be payable to the Executive under the defined benefit
plans (including any supplemental plans) of the Company if the
Executive was credited with an additional two years of age and
two years of benefit and credited service in addition to the age
and total number of years of benefit and credited service the
Executive has accrued under such plans over (B) the retirement
income and other benefits the Executive is entitled to receive
(either immediately or on a deferred basis) under the defined
benefit plans (including any supplemental plans) of the Company.
In the event that the Executive, after credit for the additional
two years, has a total of less than five years of
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credited service, the Executive nonetheless shall be treated as
fully vested under the defined benefit retirement plans and any
supplemental retirement plans, but with benefits computed solely
on the basis of total benefit service.
(vii) The Executive shall be entitled to outplacement services for a
time period (not less than six (6) months) established by the
Company, by a firm selected by the Company in its sole
discretion, and at the expense of the Company; provided, however,
that all such outplacement services must be completed by December
31 of the second calendar year following the calendar year in
which the Termination Date occurs and the Company will be
required to make all payments to the Executive for such
outplacement services by December 31 of the second calendar year
following the calendar year in which the Termination Date occurs.
(b) Notwithstanding anything to the contrary contained in this Section 4,
if any payment to the Executive under this Section 4 would constitute
a "deferral of compensation" under Section 409A of the Code (such
compensation does not, for example, qualify for the "short-term
deferral exception" under Section 409A of the Code) and the Executive
is a "specified employee" (as such phrase is defined in Section 409A
of the Code), the Executive (or the Executive's beneficiary) will
receive payment of such amounts described in this Section 4 upon the
earlier of (i) six (6) months following the Executive's "separation
from service" with the Company (as such phrase is defined in Section
409A of the Code) or (ii) the Executive's death.
(c) Without limiting the rights of the Executive at law or in equity, if
the Company fails to make any payment or provide any benefit required
to be made or provided hereunder on a timely basis, the Company will
pay interest on the amount or value thereof at an annualized rate of
interest equal to the "prime rate" as set forth from time to time
during the relevant period in The Wall Street Journal "Money Rates"
column. Such interest will be payable as it accrues on demand. Any
change in such prime rate will be effective on and as of the date of
such change.
5. Golden Parachute Excise Tax. The amounts payable to the Executive under
Section 4 shall be adjusted as set forth in this Section 5 if the sum (the
"combined amount") of the amounts payable under Section 4 and all other
payments or benefits which the Executive has received or has the right to
receive from the Company which are defined in Section 280G(b)(2)(A)(i) of
the Code, would constitute a "parachute payment" (as defined in Section
280G(b)(2) of the Code). In such event, the combined amount shall, unless
the following sentence applies, be decreased by the smallest amount that
will eliminate any parachute payment. If the decrease referred to in the
preceding sentence is 10% or more of the combined amount, the combined
amount shall not be decreased, but rather shall be increased by an amount
(the "Gross Up Payment") sufficient to provide the Executive, after tax, a
net amount equal to the Code Section 4999 excise tax imposed on such
combined amount, as increased pursuant to this section. For this purpose,
"after tax" means the amount retained by the Executive after satisfaction
(whether through
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withholding, direct payment or otherwise) of all applicable federal, state,
provincial and local income taxes at the highest marginal tax rate, and the
employee share of any applicable FICA taxes. To the extent a Gross-Up
Payment is due to the Executive pursuant to this Section 5, the Gross-Up
Payment shall be made on the date the lump sum payments provided in Section
4 are made and shall include all Gross-Up Payments due in respect of
payments made before, payments made at the same time as, and payments
projected to be made after such payment date; provided, however, that in
accordance with Section 280G, such Gross-Up Payment shall not include taxes
imposed by Section 4999 for health insurance benefits, which shall be paid
and withheld by the Company at the same date that income taxes are withheld
from such health insurance benefits. If at a time subsequent to any payment
under Section 4, an additional amount of Code Section 4999 excise tax is
definitively determined to be due by either the Internal Revenue Service or
a court of competent jurisdiction, the Company shall pay to the Executive
an additional amount which, net of Federal, state, provincial and local
income, FICA and Code Section 4999 excise taxes, will satisfy such
additional Code Section 4999 excise tax, including applicable interest and
penalties. The parties acknowledge that, if the decrease referred to in the
second sentence of this Section 5 is 10% or more of the combined amount,
the intention of the preceding sentences in this Section 5 is to place the
Executive in the position in which the Executive would be if the Code
Section 4999 excise tax did not exist. Notwithstanding the foregoing
provisions of this Section 5, Gross-Up Payments, including any additional
payment made subsequent to any payment under Section 4, will be made only
in a manner and to the extent (and at the earliest date(s)) such that
Section 409A of the Code will not be violated.
6. No Mitigation Obligation. The Company hereby acknowledges that it will be
difficult and may be impossible for the Executive to find reasonably
comparable employment following the Termination Date. Accordingly, the
payment of the severance compensation by the Company to the Executive in
accordance with the terms of this Agreement is hereby acknowledged by the
Company to be reasonable, and the Executive will not be required to
mitigate the amount of any payment provided for in this Agreement by
seeking other employment or otherwise, nor will any profits, income,
earnings or other benefits from any source whatsoever create any
mitigation, offset, reduction or any other obligation on the part of the
Executive hereunder or otherwise.
7. Legal Fees and Expenses.
(a) If it should appear to the Executive that the Company has failed to
comply with any of its obligations under this Agreement or in the
event that the Company or any other person takes or threatens to take
any action to declare this Agreement void or unenforceable, or
institutes any proceeding designed to deny, or to recover from, the
Executive the benefits provided or intended to be provided to the
Executive hereunder, the Company irrevocably authorizes the Executive
from time to time to retain counsel of the Executive's choice, at the
expense of the Company as hereafter provided, to advise and represent
the Executive in connection with any such dispute or proceeding.
Without respect to whether the Executive prevails, in whole or in
part, in connection with any of the foregoing, the Company will pay
and be financially responsible for reasonable attorneys' and
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related fees and expenses incurred by the Executive in connection with
claims made in good faith but only if, and to the extent and at the
earliest date(s) that, such actions are determined to be permitted
without violating Section 409A of the Code. Such payments will be made
after delivery of the Executive's written requests for payment,
accompanied by such evidence of fees and expenses incurred as the
Company may reasonably require.
(b) Without limiting the obligations of the Company pursuant to Section
7(a), in the event that (i) the Executive is entitled to benefits
hereunder and (ii) payments to the Executive would be required to be
delayed by more than 20 business days due to Section 409A of the Code
or otherwise, the performance of the Company's obligations under
Section 4 and this Section 7 will be secured by amounts deposited or
to be deposited in a grantor trust pursuant to certain trust
agreements to which the Company will be a party providing that the
benefits to be paid pursuant to Section 4 and the reasonable fees and
expenses of counsel selected from time to time by the Executive
pursuant to Section 7(a) will be paid, or reimbursed to the Executive
if paid by the Executive, either in accordance with the terms of such
trust agreements, or, if not so provided, on a regular, periodic basis
upon presentation by the Executive to the trustee of a statement or
statements prepared by such counsel in accordance with its customary
practices. Any failure by the Company to satisfy any of its
obligations under this Section 7(b) will not limit the rights of the
Executive hereunder. Subject to the foregoing, the Executive will have
the status of a general unsecured creditor of the Company and will
have no right to, or security interest in, any assets of the Company
or any Subsidiary.
8. Competitive Activity; Confidentiality; Nonsolicitation.
(a) Acknowledgements and Agreements. The Executive hereby acknowledges and
agrees that in the performance of the Executive's duties for the
Company during the Executive's employment, the Executive will be
brought into frequent contact, either in person, by telephone or
through the mails, with existing and potential customers of the
Company throughout the United States. The Executive also agrees that
trade secrets and confidential information of the Company, more fully
described in Section 8(i) of this Agreement, gained by the Executive
during the Executive's association with the Company, have been
developed by the Company through substantial expenditures of time,
effort and money and constitute valuable and unique property of the
Company. The Executive further understands and agrees that the
foregoing makes it necessary for the protection of the business of the
Company that the Executive not compete with the Company during the
Executive's employment and not compete with the Company for a
reasonable period thereafter, as further provided in the following
subsections.
(b) Covenants During Employment. During the Executive's employment, the
Executive will not compete with the Company anywhere that the Company
conducts its business. In accordance with this restriction, but
without limiting its terms, during the Executive's employment, the
Executive will not:
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(i) enter into or engage in any business which competes with the
business of the Company;
(ii) solicit customers, business, patronage or orders for, or sell,
any products and services in competition with, or for any
business that competes with, the business of the Company;
(iii) divert, entice or otherwise take away any customers, business,
patronage or orders of the Company or attempt to do so; or
(iv) promote or assist, financially or otherwise, any person, firm,
association, partnership, corporation or other entity engaged in
any business which competes with the business of the Company.
(c) Covenants Following Termination. If, during the Severance Period, the
Executive's employment is terminated entitling the Executive to
payments and benefits under Section 4 of this Agreement, for a period
of one (1) year following the termination of the Executive's
employment, the Executive will not:
(i) enter into or engage in any business which competes with the
Company's business within the United States;
(ii) solicit customers, business, patronage or orders for, or sell,
any products and services in competition with, or for any
business, wherever located, that competes with, the Company's
business within the United States;
(iii) divert, entice or otherwise take away any customers, business,
patronage or orders of the Company within the United States, or
attempt to do so; or
(iv) promote or assist, financially or otherwise, any person, firm,
association, partnership, corporation or other entity engaged in
any business which competes with the Company's business within
the United States.
(d) Indirect Competition. For the purposes of Sections 8(b) and 8(c), but
without limitation thereof, the Executive will be in violation thereof
if the Executive engages in any or all of the activities set forth
therein directly as an individual on the Executive's own account, or
indirectly as a general partner, joint venturer, employee, agent,
salesperson, consultant, officer and/or director of any firm,
association, partnership, corporation or other entity, or as a limited
partner, member or stockholder of any limited partnership, limited
liability company, or corporation in which the Executive or the
Executive's spouse, child or parent owns, directly or indirectly,
individually or in the aggregate, more than five percent (5%) of the
limited partnership interests, limited liability company interests or
outstanding stock, as the case may be.
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(e) The Company. For purposes of this Section 8, the Company shall include
any and all Subsidiaries.
(f) The Company's Business. For the purposes of Sections 8(b), 8(c), 8(j)
and 8(k), the Company's business is defined to be the manufacture and
distribution of gypsum wallboard, joint compound and related gypsum
products, cement board, gypsum fiber panels, ceiling panels and grid,
the distribution of building products and any future businesses that
the Company may enter, as further described in any and all
manufacturing, marketing and sales manuals and materials of the
Company as the same may be altered, amended, supplemented or otherwise
changed from time to time, or of any other products or services
substantially similar to or readily substitutable for any such
described products and services.
(g) Extension. If it shall be judicially determined that the Executive has
violated any of the Executive's obligations under Section 8(c), then
the period applicable to each obligation that the Executive shall have
been determined to have violated shall automatically be extended by a
period of time equal in length to the period during which such
violation(s) occurred.
(h) Non-Solicitation. Until the expiration of two (2) years following the
Termination Date, the Executive will not directly or indirectly at any
time solicit or induce or attempt to solicit or induce any
employee(s), sales representative(s), agent(s) or consultant(s) of the
Company and/or of its Subsidiaries to terminate their employment,
representation or other association with the Company and/or its
Subsidiaries.
(i) Further Covenants.
(i) The Executive will keep in strict confidence, and will not,
without the prior written consent of the Company or as may
otherwise be required by law or legal process, directly or
indirectly, at any time during or after the Executive's
employment with the Company, disclose, furnish, disseminate, make
available or, except in the course of performing the Executive's
duties of employment, use any trade secrets or non-public
confidential business and technical information of the Company or
its customers or vendors, including without limitation as to when
or how the Executive may have acquired such information before or
during employment. Such confidential information shall include,
without limitation, the Company's unique non-public confidential
selling, manufacturing and servicing methods and business
techniques, training, service and business manuals, promotional
materials, training courses and other training and instructional
materials, vendor and product information, customer and
prospective customer lists, other customer and prospective
customer information and other business information. The
Executive specifically acknowledges that all such non-public
confidential information, whether reduced to writing, maintained
on any form of electronic media, or maintained in the Executive's
mind or memory and
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whether compiled by the Company and/or the Executive, derives
independent economic value from not being readily known to or
ascertainable by proper means by others who can obtain economic
value from its disclosure or use, that reasonable efforts have
been made by the Company to maintain the secrecy of such
information, that such information is the sole property of the
Company and that any retention and use of such information by the
Executive during the Executive's employment with the Company
(except in the course of performing the Executive's duties and
obligations to the Company) or after the termination of the
Executive's employment shall constitute a misappropriation of the
Company's trade secrets.
(ii) The Executive agrees that upon termination of the Executive's
employment with the Company, for any reason, the Executive shall
return to the Company, in good condition, all property of the
Company, including without limitation, the originals and all
copies of any materials which contain, reflect, summarize,
describe, analyze or refer or relate to any items of information
listed in Section 8(i)(i) of this Agreement. In the event that
such items are not so returned, the Company will have the right
to charge the Executive for all reasonable damages, costs,
attorneys' fees and other expenses incurred in searching for,
taking, removing and/or recovering such property.
(j) Discoveries and Inventions; Work Made for Hire.
(i) The Executive hereby assigns and agrees to assign to the Company,
its successors, assigns or nominees, all of the Executive's
rights to any discoveries, inventions and improvements, whether
patentable or not, made, conceived or suggested, either solely or
jointly with others, by the Executive while in the Company's
employ with the use of the Company's time, material or facilities
or in any way within or related to the existing or contemplated
scope of the Company's business. Any discovery, invention or
improvement relating to any subject matter with which the Company
was concerned during the Executive's employment and made,
conceived or suggested by the Executive, either solely or jointly
with others, within one (1) year following termination of the
Executive's employment under this Agreement or any successor
agreements shall be irrebuttably presumed to have been so made,
conceived or suggested in the course of such employment with the
use of the Company's time, materials or facilities. Upon request
by the Company with respect to any such discoveries, inventions
or improvements, the Executive will execute and deliver to the
Company, at any time during or after the Executive's employment,
all appropriate documents for use in applying for, obtaining and
maintaining such domestic and foreign patents as the Company may
desire, and all proper assignments therefor, when so requested,
at the expense of the Company, but without further or additional
consideration.
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(ii) Executive acknowledges that, to the extent permitted by law, all
work papers, reports, documentation, drawings, photographs,
negatives, tapes and masters therefor, prototypes and other
materials (hereinafter, "items"), including without limitation,
any and all such items generated and maintained on any form of
electronic media, generated by the Executive during the
Executive's employment with the Company shall be considered a
"work made for hire" and that ownership of any and all copyrights
in any and all such items shall belong to the Company. The item
will recognize the Company as the copyright owner, will contain
all proper copyright notices, e.g., "(creation date) USG
Corporation, All Rights Reserved," and will be in condition to be
registered or otherwise placed in compliance with registration or
other statutory requirements throughout the world.
(k) Communication of Contents of Agreement. During the Executive's
employment and for one (1) year thereafter, the Executive will
communicate the contents of this Agreement to any person, firm,
association, partnership, corporation or other entity which the
Executive intends to be employed by, associated with, or represent and
which is engaged in a business that is competitive to the business of
the Company.
(l) Relief. The Executive acknowledges and agrees that the remedy at law
available to the Company for breach of any of the Executive's
obligations under this Agreement would be inadequate. The Executive
therefore agrees that, in addition to any other rights or remedies
that the Company may have at law or in equity, temporary and permanent
injunctive relief may be granted in any proceeding which may be
brought to enforce any provision contained in Sections 8(b), 8(c),
8(h), 8(i), 8(j) and 8(k) of this Agreement, without the necessity of
proof of actual damage.
(m) Reasonableness. The Executive acknowledges that the Executive's
obligations under this Section 8 are reasonable in the context of the
nature of the Company's business and the competitive injuries likely
to be sustained by the Company if the Executive was to violate such
obligations. The Executive further acknowledges that this Agreement is
made in consideration of, and is adequately supported by, the
agreement of the Company to perform its obligations under this
Agreement and by other consideration, which the Executive acknowledges
constitutes good, valuable and sufficient consideration.
9. Employment Rights. Nothing expressed or implied in this Agreement will
create any right or duty on the part of the Company or the Executive to
have the Executive remain in the employment of the Company or any
Subsidiary prior to or following any Change in Control.
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10. Withholding of Taxes. The Company may withhold from any amounts payable
under this Agreement all federal, state, city or other taxes as the Company
is required to withhold pursuant to any applicable law, regulation or
ruling.
11. Successors and Binding Agreement.
(a) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation, reorganization or otherwise) to all
or substantially all of the business or assets of the Company, by
agreement in form and substance reasonably satisfactory to the
Executive, expressly to assume and agree to perform this Agreement in
the same manner and to the same extent the Company would be required
to perform if no such succession had taken place. This Agreement will
be binding upon and inure to the benefit of the Company and any
successor to the Company, including without limitation any persons
acquiring directly or indirectly all or substantially all of the
business or assets of the Company whether by purchase, merger,
consolidation, reorganization or otherwise (and such successor will
thereafter be deemed the "Company" for the purposes of this
Agreement), but will not otherwise be assignable, transferable or
delegable by the Company.
(b) This Agreement will inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees and legatees.
(c) This Agreement is personal in nature and neither of the parties hereto
will, without the consent of the other, assign, transfer or delegate
this Agreement or any rights or obligations hereunder except as
expressly provided in Sections 11(a) and 11(b). Without limiting the
generality or effect of the foregoing, the Executive's right to
receive payments hereunder will not be assignable, transferable or
delegable, whether by pledge, creation of a security interest, or
otherwise, other than by a transfer by the Executive's will or by the
laws of descent and distribution and, in the event of any attempted
assignment or transfer contrary to this Section 11(c), the Company
will have no liability to pay any amount so attempted to be assigned,
transferred or delegated.
12. Notices. For all purposes of this Agreement, all communications, including
without limitation notices, consents, requests or approvals, required or
permitted to be given hereunder will be in writing and will be deemed to
have been duly given when hand delivered or dispatched by electronic
facsimile transmission (with receipt thereof orally confirmed), or five
business days after having been mailed by United States registered or
certified mail, return receipt requested, postage prepaid, or three
business days after having been sent by a nationally recognized overnight
courier service such as FedEx or UPS, addressed to the Company (to the
attention of the Secretary of the Company) at its principal executive
office and to the Executive at the Executive's principal residence, or to
such other address as any party may have furnished to the other in writing
and in accordance herewith, except that notices of changes of address will
be effective only upon receipt.
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13. Governing Law. The validity, interpretation, construction and performance
of this Agreement will be governed by and construed in accordance with the
substantive laws of the State of Delaware and federal law, without giving
effect to the principles of conflict of laws of such State, except as
expressly provided herein.
14. Validity. If any provision of this Agreement or the application of any
provision hereof to any person or circumstance is held invalid or otherwise
unenforceable, the remainder of this Agreement and the application of such
provision to any other person or circumstance will not be affected, and the
provision so held to be invalid or otherwise unenforceable will be reformed
to the extent (and only to the extent) necessary to make it enforceable or
valid.
15. Miscellaneous.
(a) No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing
signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto or
compliance with any condition or provision of this Agreement to be
performed by such other party will be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise,
expressed or implied with respect to the subject matter hereof have
been made by either party that are not set forth expressly in this
Agreement.
(b) Subject to Section 3(d), this Agreement supersedes, as of the date
first above written, any prior agreements providing for severance
payments and benefits following a Change in Control, including the
Termination Compensation Agreement, between the Executive and the
Company (the "Prior Agreements"). The Executive agrees that he or she
has no further rights under the Prior Agreements.
(c) The headings used in this Agreement are intended for convenience or
reference only and will not in any manner amplify, limit, modify or
otherwise be used in the construction or interpretation of any
provision of this Agreement. References to Sections are to Sections of
this Agreement. Any reference in this Agreement to a provision of a
statute, rule or regulation will also include any successor provision
thereto.
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16. Severability. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity or unenforceability shall not affect any
other provision of this Agreement, but this Agreement shall be reformed,
construed and enforced in such jurisdiction as if such invalid or
unenforceable provision had never been contained herein.
17. Survival. Notwithstanding any provision of this Agreement to the contrary,
the parties' respective rights and obligations under Sections 3(d), 4, 5,
7, 8, 10, 11(b), 16 and 17 will survive any termination or expiration of
this Agreement or the termination of the Executive's employment following a
Change in Control for any reason whatsoever.
18. Beneficiaries. The Executive will be entitled to select (and change, to the
extent permitted under any applicable law) a beneficiary or beneficiaries
to receive any compensation or benefit payable hereunder following the
Executive's death, and may change such election, in either case by giving
the Company written notice thereof in accordance with Section 12. In the
event of the Executive's death or a judicial determination of the
Executive's incompetence, reference in this Agreement to the "Executive"
will be deemed, where appropriate, to the Executive's beneficiary, estate
or other legal representative.
19. Counterparts. This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original but all of which together
will constitute one and the same agreement.
20. Release Agreement. No payments shall be made under Section 4 hereof if the
Executive declines to sign and return a Release Agreement or revokes such
Release Agreement within the time provided therein. If the Executive
becomes entitled to payments under Section 4 hereof, the Company shall
deliver to the Executive a copy of the Company's standard form of Release
Agreement within ten (10) business days of the Executive's Termination
Date.
21. Representations. The Executive represents and warrants to the Company that
upon the execution and delivery of this Agreement by the Company, this
Agreement shall be the valid and binding obligation of the Executive,
enforceable in accordance with its terms. The Company represents and
warrants to the Executive that upon the execution and delivery of this
Agreement by the Executive, this Agreement shall be the valid and binding
obligation of the Company, enforceable in accordance with its terms.
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22. Section 409A of the Code. To the extent applicable, it is intended that
this Agreement comply with the provisions of Section 409A of the Code. This
Agreement shall be administered in a manner consistent with this intent,
and any provision that would cause the Agreement to fail to satisfy Section
409A of the Code shall have no force and effect until amended to comply
with Section 409A of the Code (which amendment may be retroactive to the
extent permitted by Section 409A of the Code and may be made by the Company
without the consent of the Executive).
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
USG CORPORATION
By:
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Name: Brian J. Cook
Title: Senior Vice President, Human
Resources
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Executive
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