THE WELLS FARGO & COMPANY
CHANGE OF CONTROL SEVERANCE PLAN
AS ADOPTED BY THE BOARD OF DIRECTORS OF WELLS FARGO & COMPANY
AT ITS OCTOBER 20, 1998 MEETING
INTRODUCTION
The Board of Directors of Wells Fargo & Company recognizes that,
from time to time, the Company may explore potential transactions that could
result in a Change of Control of the Company. This possibility and the
uncertainty it creates may result in the loss or distraction of employees of
the Company to the detriment of the Company and its shareholders.
The Board considers the avoidance of such loss and distraction
to be essential to protecting and enhancing the best interests of the Company
and its shareholders. The Board also believes that when a Change in Control
is perceived as imminent, or is occurring, the Board should be able to
receive and rely on disinterested service from employees regarding the best
interests of the Company and its shareholders without concern that employees
might be distracted or concerned by the personal uncertainties and risks
created by the perception of an imminent or occurring Change in Control.
In addition, the Board believes that it is consistent with the
Company's employment practices and policies and in the best interests of the
Company and its shareholders to treat fairly its employees whose employment
terminates in connection with or following a Change of Control.
Accordingly, the Board has determined that appropriate steps
should be taken to assure the Company of the continued employment and
attention and dedication to duty of its employees and to seek to ensure the
availability of their continued service, notwithstanding the possibility or
occurrence of a Change of Control.
Therefore, in order to fulfill the above purpose, the following
Change of Control Severance Plan has been developed and is hereby adopted.
This Plan shall supercede any previous plans, policies or agreements
providing Change of Control severance benefits to Participants.
ARTICLE I
ESTABLISHMENT OF PLAN
As of the Effective Date, the Company hereby adopts the Wells
Fargo & Company Change of Control Severance Plan as set forth in this
document.
ARTICLE II
DEFINITIONS
As used herein, the following words and phrases shall have the
following respective meanings (unless the context clearly indicates
otherwise):
(a) ANNUAL BASE SALARY. The amount of a Participant's base salary
or wages on an annualized basis, which shall be at least equal to
twelve times the highest monthly base salary or wages paid or
payable, including any base salary or wages which have been earned
but deferred, to the Participant by an Employer in respect to the
twelve-month period immediately preceding the month in which the
Change of Control occurs, and excluding all bonus, overtime, expense
or relocation reimbursements and incentive compensation.
(b) BOARD. The Board of Directors of Wells Fargo & Company.
(c) CAUSE. As defined in Section 4.2(b)(iii).
(d) CHANGE OF CONTROL. The first to occur of the following events:
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934. as amended (the "Exchange
Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13-d-3 promulgated under the Exchange Act) of
20% or more of either (a) the then outstanding shares of
common stock of the Company (the "Outstanding Company Common
Stock) or (b) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding
Company Voting Securities"); PROVIDED, HOWEVER, that for
purposes of this subsection (i), the following acquisitions
shall not constitute a Change of Control: (A) any acquisition
directly from the Company, (B) any acquisition by the Company,
(C) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (D) any acquisition
pursuant to a transaction which complies with clauses (A),
(B), or (C) of subsection (iii) of this Section 2(d); or
(ii) Individuals who, as of the Effective Date, constitute
the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority
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of the Board; PROVIDED, HOWEVER, that any individual becoming
a director subsequent to the Effective Date whose election, or
nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual
or threatened election contest with respect to the election or
removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board, or
(iii) 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 assets of another entity (a "Corporate
Transaction"), in each case, unless, immediately following
such Corporate Transaction, (A) all or substantially all of
the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to
such Corporate Transaction beneficially own, directly or
indirectly, more than 60% 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, or the corporation resulting from such Corporate
Transaction (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 indirectly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Corporate Transaction of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (B) no Person
(excluding any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Corporate
Transaction) beneficially owns, directly or indirectly, 20% or
more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Corporate
Transaction 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 Corporate
Transaction and (C) at least a majority of the members of the
board of directors of the corporation resulting from such
Corporate Transaction were members of the Incumbent Board at
the time of the execution of the initial Plan, or the action
of the Board, providing for such Corporate Transaction; or
(iv) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
(e) CODE. The Internal Revenue Code of 1986, as amended from time to
time.
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(f) COMMITTEE. The Management Development and Compensation
Committee of the Board.
(g) COMPANY. Wells Fargo & Company and any successor thereto.
(h) TERMINATION OF ACTIVE EMPLOYMENT. (i) If the Participant's
employment is terminated by the Company for Cause or by the
Participant for Good Reason, the date of receipt of the Notice of
Termination (as described in Section 4.2(c)) or any later date
specified therein, as the case may be, (ii) if the Participant's
employment is terminated by the Company other than for Cause or
Disability, the Termination of Active Employment shall be the date
on which the Company notifies the Participant of such termination or
any later date specified by the Company in the Participant's written
Notice of Termination and (iii) if the Participant's employment is
deemed terminated by reason of Disability, the Termination of Active
Employment shall be the Participant's Disability Effective Date.
(i) DISABILITY. As defined in Section 4.2(b)(i).
(j) DISABILITY EFFECTIVE DATE. As defined in Section 4.2(b)(i).
(k) EFFECTIVE DATE. Such date as the Board shall designate in its
resolution approving the Plan.
(l) EMPLOYEE. Any regular, full-time or part-time employee of the
Employer.
(m) EMPLOYER. The Company or any of its subsidiaries or affiliates.
(n) GOOD REASON. As defined in Section 4.2(a).
(o) HIGHEST ANNUAL BONUS. The amount of a Participant's annual
bonus, which shall be equal to the higher of (i) the highest bonus
paid or payable to the Participant under the Company's or an
Employer's annual bonus and incentive plans, for the last three full
fiscal years prior to the Change of Control, and (ii) the annual
bonus paid or payable to the Participant for the most recently
completed fiscal year prior to the Termination of Active Employment
(in the case of clauses (i) and (ii), including any bonus or portion
thereof which has been earned but deferred and, in the event that
the Participant was not employed by an Employer for the whole of
such fiscal year, annualized).
(p) LEVEL I. The Separation Benefit calculated in accordance with
Section 4.3(a)(i).
(q) LEVEL II. The Separation Benefit calculated in accordance with
Section 4.3(a)(ii).
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(r) LEVEL OF PARTICIPATION. The level of a Participant's
participation in the Plan, which shall be either Level I or Level
II, as designated by the Committee pursuant to Section 3.1.
(s) MULTIPLE. For purposes of determining a Participant's
Separation Benefits and Separation Period, the Multiple is either
two or three, as designated by the Committee pursuant to Section
3.1 with respect to a Level I Participant; and with respect to a
Level II Participant, the Multiple is one and one-half.
(t) PARTICIPANT. An Employee who meets the eligibility
requirements of Section 3.1.
(u) PLAN. The Wells Fargo & Company Change of Control Severance
Plan, as adopted by the Board of Directors at its October 20, 1998
meeting.
(v) SEPARATION BENEFITS. The amounts and benefits payable or
required to be provided in accordance with Section 4.3.
(w) SEPARATION PERIOD. The salary continuation leave of absence
period beginning on the date of Termination of Active Employment
that is equal to either (i) the number of years equal to the
applicable Multiple in the case of a Level I Participant or (ii) the
Multiple of one and one-half years in the case of a Level II
Participant.
ARTICLE III
ELIGIBILITY
3.1 PARTICIPATION. The Committee shall designate which Employees are
Participants in the Plan and the applicable Level of Participation and in the
case of Level I Participants, the Multiple. Such designations shall be
binding and conclusive. Notwithstanding the foregoing, the Committee may
cause any Employee to cease to be a Participant or change a Participant's
Level of Participation and in the case of a Level I Participant, the
Multiple, at any time prior to the effective time of a Change of Control,
provided that no such action shall be taken at the request of a third party
in anticipation of a Change of Control.
3.2 DURATION OF PARTICIPATION. A Participant shall cease to be a
Participant in the Plan if (i) he or she, under circumstances not entitling
him or her to Separation Benefits hereunder ceases to be an Employee of an
Employer or (ii) he or she ceases to be a Participant pursuant to the action
of the Committee in accordance with Section 3.1. Notwithstanding the
foregoing, a Participant who is entitled, as a result of ceasing to be an
Employee of an Employer, to Separation Benefits under the Plan shall remain a
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Participant in the Plan until the Separation Benefits and any other amounts
or benefits under the Plan have been paid or provided in full to the
Participant.
ARTICLE IV
SEPARATION BENEFITS
4.1 RIGHT TO SEPARATION BENEFIT. A Participant shall be entitled to
receive from the Company or an Employer, the Separation Benefits provided in
Section 4.3 if (i) a Change of Control has occurred and the Participant's
active employment is terminated by an Employer for any reason specified in
Section 4.2(a), and not one of the exceptions of Section 4.2(b), whether the
termination is voluntary or involuntary, (ii) such Termination of Active
Employment occurs after such Change of Control and on or before the second
anniversary thereof and (iii) the Participant executes a general release
agreement in accordance with Section 4.4.
4.2 TERMINATION OF ACTIVE EMPLOYMENT.
(a) TERMINATIONS OF ACTIVE EMPLOYMENT WHICH GIVE RISE TO
SEPARATION BENEFITS UNDER THIS PLAN. Except as set forth in
subsection (b) below and subject to Section 4.4, any termination of
active employment with an Employer by action of an Employer within
the two-year period following a Change of Control or a termination
of active employment by a Participant for Good Reason within the
two-year period following a Change of Control shall entitle a
Participant to the Separation Benefits provided in Section 4.3. For
purposes of this Plan, "Good Reason" shall mean (i) a decrease in
the Participant's Annual Base Salary, other than as the result of an
isolated, insubstantial and inadvertent error not occurring in bad
faith and which is remedied by the Company or the Employer promptly
after receipt of notice thereof given by the Participant or (ii) the
Company's or the Employer's requiring the Participant to be based at
any office or location more than 35 miles from the office or
location where the Participant was based and performed services
immediately prior to the Change of Control, provided such change in
office location results in an increase in the distance between the
Participant's place of residence and the new office location.
(b) TERMINATIONS WHICH DO NOT GIVE RISE TO SEPARATION BENEFITS
UNDER THIS PLAN. If a Participant's active employment is terminated
for Cause or Disability (as those terms are defined below) or as a
result of the Participant's death, or the Participant terminates
active employment other than for Good Reason, the Participant shall
not be entitled to Separation Benefits under the Plan, regardless of
the occurrence of a Change of Control.
(i) A termination for "Disability" shall be deemed to have
occurred where a Participant is absent from the Participant's
duties with the Company or the Employer on a full-time basis
for 180-consecutive
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business days as a result of incapacity due to mental or
physical illness which is determined to be total and permanent
in a medical certification statement prepared by a physician
selected by the Company or its insurers and acceptable to the
Participant or the Participant's legal representative. In such
event, the Participant's employment with the Company or the
Employer shall be deemed to have terminated for purposes of
this Plan, effective the 30th day after receipt of such notice
by the Participant (the "Disability Effective Date"), provided
that, within the 30 days after such receipt, the Participant
shall not have returned to active employment.
(ii) A termination for "Cause" shall have occurred where a
Participant is terminated because of:
(A) the continued failure of the Participant to
perform substantially the Participant's duties with the
Company or the Employer (other than any such failure
resulting from incapacity due to physical or mental
illness), after a written demand for performance is
delivered to the Participant by an officer of the
Company or the Employer which identifies the manner in
which the officer believes that the Participant has not
performed the Participant's duties, or
(B) the engaging by the Participant in illegal
conduct or gross misconduct which is materially and
demonstrably injurious to the Company or the Employer.
(c) NOTICE OF TERMINATION. A Notice of Termination shall communicate
any termination by the Company for Cause, or by the Participant for
Good Reason, to the other party. For purposes of this Plan, a "Notice
of Termination" means a written notice which (i) indicates the specific
termination provision in this Plan 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 Participant's
employment under the provision so indicated and (iii) if the
Termination of Active Employment is other than the date of receipt of
such notice, specifies the applicable date (which date shall not be
more than 60 days after the giving of such notice). The failure by the
Participant 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 Participant or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Participant's or the Company's rights hereunder.
4.3 SEPARATION BENEFITS. If a Participant's active employment is
terminated under the circumstances set forth in Section 4.2(a) entitling him
or her to Separation Benefits, the Company shall pay or provide, as the case
may be, to the Participant the amounts and
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benefits set forth in items (a) through (c) below (the "Separation
Benefits"), subject to Section 4.4.
(a) Subject to the provisions of Section 4.4, the Company shall
pay, or begin to pay, to the Participant as soon as administratively
possible, a Separation Benefit computed in accordance with the
Participant's designated Level of Participation (as set forth below
in clauses (i) and (ii). The Participant's Annual Base Salary shall
be paid in the form of salary continuation during the Participant's
Separation Period (as determined by the Multiple applicable to such
Participant) and the Participant's Highest Annual Bonus (multiplied
by the Multiple applicable to such Participant) shall be paid in a
lump sum.
(i) LEVEL I. The Separation Benefit payable to a
Participant with a Level of Participation designated by Level
I shall equal the product of (A) the Multiple (either two or
three, as determined in accordance with Section 3.1) and (B)
the sum of (x) the Participant's Annual Base Salary and (y)
the Highest Annual Bonus.
(ii) LEVEL II. The Separation Benefit payable to a
Participant with a Level of Participation designated as Level
II shall equal the product of (A) the Multiple (one and
one-half) and (B) the sum of (x) the Participant's Annual Base
Salary and (y) the Highest Annual Bonus.
(b) For the Separation Period, the Company shall continue welfare
benefits to the Participant and/or the Participant's eligible
dependents at least equal to those which would have been
provided to them in accordance with the plans, programs,
practices and policies (including, without limitation,
medical, prescription, dental, disability, employee life,
group life, accidental death and travel accident insurance
plans and programs), as in effect immediately prior to the
Change of Control, or, if more favorable to the Participant,
as in effect immediately prior to the date of Termination of
Active Employment; PROVIDED, HOWEVER, that if the Participant
becomes reemployed with another employer and is eligible to
receive medical and other welfare benefits under another
employer provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under
such other plan during such applicable period of eligibility.
For purposes of determining eligibility (but not the time of
commencement of benefits) of the Participant for retiree
benefits pursuant to such plans, practices, programs and
policies, the Participant shall be considered to have remained
employed until the end of the Separation Period.
(c) The Company shall timely pay or provide to the Participant any
other amounts or benefits due or payable or which the Participant
is eligible to receive under any plan, program, policy or
practice or contract or agreement of, or with, the Company and
its affiliated companies, as if the
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Participant remained an Employee on a paid leave of absence
during the Separation Period.
4.4 GENERAL RELEASE AGREEMENT. As set forth in Section 4.1, Separation
Benefits under this Plan are contingent upon the Participant's execution of a
general release agreement in such form as determined by the Plan's
administrator. Upon the execution of the general release agreement,
Participant has seven days in which to revoke such agreement. As soon as
administratively possible following this seven-day revocation period, the
Company shall pay, or begin to pay, Separation Benefits to the Participant.
However, in no event shall Separation Benefits begin prior to the
Participant's Termination of Active Employment, the timely execution of the
general release agreement and the expiration of the rescission period.
4.5 EXCESS PARACHUTE PAYMENTS. Anything in this Plan to the contrary
notwithstanding, the Committee shall in its sole and absolute discretion
determine whether a Participant, with respect to the Separation Benefits
provided under the Plan or otherwise, shall receive a Gross-Up Payment
pursuant to the terms of Schedule I hereof, a Modified Reduced Amount
pursuant to the terms of Schedule II hereof, or a Reduced Amount pursuant to
the terms of Schedule III hereof. The determination of the Committee with
respect to the application of the provisions of Schedule I, II or III to the
Separation Benefits of an individual Participant shall be made at the time an
Employee is designated as a Participant and shall be binding and conclusive.
4.6. PAYMENT OBLIGATIONS ABSOLUTE. Upon a Change of Control, subject to
Section 4.5, the obligations of the Company to pay or provide the Separation
Benefits described in Section 4.3 shall be absolute and unconditional,
subject to compliance with Sections 4.3 and 4.4, and shall not be affected by
any circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which the Company, the Employer or any of
their affiliates may have against any Participant. In no event shall a
Participant be obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to a Participant under any of the
provisions of this Plan, nor shall the amount of any payment or value of any
benefits thereunder be reduced by any compensation or benefits earned by a
Participant as a result of employment by another employer, except as provided
under Section 4.3(c).
Nothing in this Plan shall prevent or limit the Participant's
continuing or future participation in any plan, program, policy or practice
provided by the Company, the Employer or any of their affiliated companies
and for which the Participant may qualify, nor, subject to Section 7.2, shall
anything herein limit or otherwise affect such rights as the Participant may
have under any contract or agreement with the Company or any of its
subsidiaries or affiliated companies. Amounts or benefits which the
Participant is otherwise entitled to receive under any plan, policy, practice
or program of or any contract or agreement with the Company or any of its
affiliated companies shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as explicitly modified by
this Plan. However, benefits under the Wells Fargo & Company Change of
Control Severance Plan, as adopted by the Board
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of Directors of Wells Fargo at its October 20, 1998 meeting, are in lieu of
any other severance benefits that would otherwise be payable to the
Participant.
ARTICLE V
SUCCESSOR TO COMPANY
This Plan shall bind any successor of the Company, its assets or
its businesses (whether direct or indirect, by purchase, merger,
consolidation or otherwise), in the same manner and to the same extent that
the Company would be obligated under this Plan if no succession had taken
place.
In the case of any transaction in which a successor would not by
the foregoing provision or by operation of law be bound by the Plan, the
Company shall require such successor expressly and unconditionally to assume
and agree to perform the Company's obligations under this Plan, in the same
manner and to the same extent that the Company would be required to perform
if no such succession had taken place. The term "Company," as used in this
Plan, shall mean the Company as hereinbefore defined and any successor or
assignee to the business or assets which by reason hereof becomes bound by
this Plan.
ARTICLE VI
DURATION, AMENDMENT AND TERMINATION
6.1 DURATION. If a Change of Control has not occurred, this Plan shall
expire five years from the Effective Date, unless sooner terminated as
provided in Section 6.2, or unless extended for an additional period or
periods by resolution adopted by the Board. If a Change of Control occurs,
this Plan shall continue in full force and effect and shall not terminate or
expire until after all Participants who become entitled to any payments
hereunder shall have received such payments in full.
6.2 AMENDMENT AND TERMINATION. The Plan may be terminated or amended in
any respect by resolution adopted by a majority of the Board, unless a Change
of Control has previously occurred. However, after the Board has knowledge of
a transaction or event that if consummated would constitute a Change of
Control, this Plan may not be terminated or amended in any manner which would
adversely affect the rights or potential rights of Participants, unless and
until the Board has determined that the transactions or events that, if
consummated, would constitute a Change of Control have been abandoned and
will not be consummated, and, provided that, the Board does not have
knowledge of other transactions or events that, if consummated, would
constitute a Change of Control. If a Change of Control occurs, the Plan shall
no longer be subject to amendment, change, substitution, deletion, revocation
or termination in any respect which adversely affects the rights of
Participants.
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ARTICLE VII
MISCELLANEOUS
7.1 INDEMNIFICATION. The Company agrees to pay, to the full extent
permitted by law, all legal fees and expenses which the Participant may
reasonably incur as a result of any contest (regardless of the outcome
thereof) by the Company, the Participant or others of the validity or
enforceability of, or liability under, any provision of this Plan or any
guarantee of performance thereof (including as a result of any contest by the
Participant about the amount of any payment pursuant to this Plan), plus in
each case interest on any delayed payment at the applicable Federal rate
provided for in Section 7872(f)(2)(A) of the Code.
7.2 EMPLOYMENT STATUS. This Plan does not constitute a contract of
employment or impose on the Participant, the Company or the Participant's
Employer any obligation to retain the Participant as an employee, to change
the status of the Participant's employment, or to change the Company's or the
Employer's policies or those of their affiliates regarding termination of
employment.
7.3 TAX WITHHOLDING. The Company may withhold from any amounts payable
under this Plan such Federal, state, local or foreign taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
7.4 VALIDITY AND SEVERABILITY. The invalidity or unenforceability of any
provision of the Plan shall not affect the validity or enforceability or any
other provision of the Plan, which shall remain in full force and effect, and
any prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
7.5 GOVERNING LAW. The validity, interpretation, construction and
performance of the Plan shall in all respects be governed by the laws of
California, without reference to principles of conflict of law.
7.6 CLAIM PROCEDURE. If a Participant makes a written request alleging a
right to receive Separation Benefits under the Plan or alleging a right to
receive an adjustment in benefits being paid under the Plan, the Company
shall treat it as a claim for benefits. All claims for Separation Benefits
under the Plan shall be sent to the Human Resources Department of the Company
and must be received within 30 days after the Termination of Active
Employment. If the Company determines that any individual who has claimed a
right to receive Separation Benefits under the Plan is not entitled to
receive all or a part of the benefits claimed, it will inform the claimant in
writing of its determination and the reasons therefor in terms calculated to
be understood by the claimant. The notice will be sent within 90 days of the
written request, unless the Company determines additional time, not exceeding
90 days, is needed. The notice shall make specific reference to the pertinent
Plan provisions on which the denial is based, and described any additional
material or information that is necessary. Such notice shall, in addition,
inform the claimant what procedure the claimant should follow to take
advantage of the
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review procedures set forth below in the event the claimant desires to
contest the denial of the claim. The claimant may within 90 days thereafter
submit in writing to the Company, a notice that the claimant contests the
denial of his or her claim by the Company and desires a further review. The
Company shall within 60 days thereafter review the claim and authorize the
claimant to appear personally and review the pertinent documents and submit
issues and comments relating to the claim to the persons responsible for
making the determination on behalf of the Company. The Company will render
its final decision with specific reasons therefor in writing and will
transmit it to the claimant within 60 days of the written request for review,
unless the Company determines additional time, not exceeding 60 days, is
needed, and so notifies the Participant. If the Company fails to respond to a
claim filed in accordance with the foregoing within 60 days or any such
extended period, the Company shall be deemed to have denied the claim.
7.7 UNFUNDED PLAN STATUS. This Plan is intended to be an unfunded plan.
All payments pursuant to the Plan shall be made from the general funds of the
Company and no special or separate fund shall be established or other
segregation of assets made to assure payment. No Participant or other person
shall have under any circumstances any interest in any particular property or
assets of the Company as a result of participating in the Plan.
Notwithstanding the foregoing, the Company may (but shall not be obligated
to) create one or more grantor trusts, the assets of which are subject to the
claims of the Company's creditors, to assist it in accumulating funds to pay
its obligations under the Plan.
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SCHEDULE I
GROSS-UP PAYMENT. (a) Anything in the Plan to the contrary notwithstanding
and except as set forth below, in the event it shall be determined that any
payment or distribution by the Company or its affiliates to or for the
benefit of the Participant (whether paid or payable or distributed or
distributable pursuant to the terms of the Plan or otherwise, but determined
without regard to any additional payments required under this Schedule I) (a
"Payment") would be subject to the excise tax imposed by Section 4999 of the
Code or any interest or penalties are incurred by the Participant with
respect to such excise tax (such excise tax, together with any such interest
and penalties, are hereinafter collectively referred to as the "Excise Tax"),
then the Participant shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by the Participant
of all taxes (including any interest or penalties imposed with respect to
such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed
upon the Gross-Up Payment, the Participant retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding
the foregoing provisions of the Section (a) of Schedule I, if it shall be
determined that the Participant is entitled to a Gross-Up Payment, but that
the Payments do not exceed 110% of the greatest amount (the "Reduced Amount")
that could be paid to the Participant such that the receipt of Payments would
not give rise to any Excise Tax, then no Gross-Up Payment shall be made to
the Participant and the Payments, in the aggregate, shall be reduced to the
Reduced Amount.
(b) Subject to the provisions of Section (c) of Schedule I, all
determinations required to be made under Schedule I, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination, shall
be made by KPMG Peat Marwick or such other certified public accounting firm
as may be designated by the Participant (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and the
Participant within 15 business days of the receipt of notice from the
Participant that there has been a Payment, or such earlier time as is
requested by the Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting the
Change of Control, the Participant may use the nationally recognized
accounting firm of Ernst & Young LLP or appoint another nationally recognized
accounting firm to make determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder). All fees
and expenses of the Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, as determined pursuant to this Schedule I, shall be paid by
the Company to the Participant within five days of the receipt of the
Accounting Firm's determination. Any determination by the Accounting Firm
shall be binding upon the Company and the Participant. As a result of the
uncertainty in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have
been made ("Underpayment"), consistent with the calculations required to be
made hereunder. In the event that the Company exhausts its remedies
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pursuant to Section (c) of Schedule I and the Participant thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of
the Participant.
(c) The Participant shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than ten business days after the
Participant is informed in writing of such claim and shall apprise the
Company of the nature of such claim and the date on which such claim is
requested to be paid. The Participant shall not pay such claim prior to the
expiration of the 30-day period following the date on which it gives such
notice to the Company (or such shorter period ending on the date than any
payment of taxes with respect to such claim is due). If the Company notifies
the Participant in writing prior to the expiration of such period that it
desires to contest such claim, the Participant shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from time
to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney reasonably
selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
related to such claim;
PROVIDED, HOWEVER, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Participant harmless, on
an after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation
and payment of costs and expenses. Without limitation on the foregoing
provisions of the Section (c) of Schedule I, the Company shall control all
proceedings taken in connection with such contest and, at its sole option,
either direct the Participant to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and the Participant agrees to
prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as
the Company shall determine; PROVIDED, HOWEVER, that if the Company directs
Participant to pay such claim and sue for a refund, the Company shall advance
the amount of such payment to the Participant, on an interest-free basis and
shall indemnify and hold the Participant harmless, on an after-tax basis,
from any Excise Tax or income tax (including interest or
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penalties with respect thereto, imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to the
payment of taxes for the taxable year of the Participant with respect to
which such contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and the Participant shall be entitled to settle or contest, as the
case may be, any other issue raised by the Internal Revenue Service or any
other taxing authority.
(d) If, after the receipt by the Participant of an amount advanced
by the Company pursuant to Section (c) of Schedule I, the Participant becomes
entitled to receive any refund with respect to such claim, the Participant
shall (subject to the Company's complying with the requirements of Section
(c) of Schedule I) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes applicable
thereto). If, after receipt by the Participant of an amount advanced by the
Company pursuant to Section (c) of Schedule I, a determination is made that
the Participant shall not be entitled to any refund with respect to such
claim and the Company does not notify the Participant in writing of its
intent to contest such denial of refund prior to the expiration of 30 days
after such determination, then such advance shall be forgiven and shall not
be required to be repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.
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SCHEDULE II
MODIFIED REDUCED AMOUNT. (a) For purposes of this Schedule II: (i) a
"Payment" shall mean any payment or distribution in the nature of
compensation to or for the benefit of the Participant, whether paid or
payable pursuant to the Plan or otherwise; (ii) "Plan of Payment" shall mean
a Payment paid or payable pursuant to the Plan (disregarding this Schedule
II); (iii) "Net After Tax Receipt" shall mean the Present Value of a Payment
net of all federal, state and local taxes imposed on the Participant with
respect thereto (including without limitation under Section 4999 of the
Code), determined by applying the highest marginal rates of such taxes that
applied to the Participant's taxable income for the immediately preceding
taxable year, or such other rate(s) as the Participant shall in his or her
sole discretion certify as likely to apply to the Participant in the relevant
tax year(s); (iv) "Present Value" shall mean such value determined in
accordance with Section 280G(d)(4) of the Code; and (v) "Modified Reduced
Amount" shall mean the smallest aggregate amount of Plan Payments which (A)
is less than the sum of all Plan Payments and (B) results in aggregate Net
After Tax Receipts which are equal to or greater than the Net After Tax
Receipts which would result if the aggregate Plan Payments were any other
amount less than the sum of all Plan Payments. Anything in the Plan to the
contrary notwithstanding, in the event KPMG Peat Marwick LLP or such other
nationally recognized certified public accounting firm as may be designated
by the Participant (the "Accounting Firm") shall determine that receipt of
all Payments would subject the Participant to tax under Section 4999 of the
Code, it shall determine whether some amount of Plan Payments would meet the
definition of a "Reduced Amount." If said firm determines that there is a
Modified Reduced Amount, the aggregate Plan Payments shall be reduced to such
Modified Reduced Amount.
(b) If the Accounting Firm determines that aggregate Plan Payments
should be reduced to the Modified Reduced Amount, the Company shall promptly
give the Participant notice to that effect and a copy of the detailed
calculation thereof, and the Participant may then elect, in his or her sole
discretion, which and how much of the Plan Payments shall be eliminated or
reduced (as long as after such election the present value of the aggregate
Plan Payments equals the Modified Reduced Amount), and shall advise the
Company in writing of his or her election within ten days of his or her
receipt of notice. If no such election is made by the Participant within such
ten-day period, the Company may elect which of such Plan Payments shall be
eliminated or reduced (as long as after such election the present value of
the aggregate Plan Payments equals the Modified Reduced Amount) and shall
notify the Participant promptly of such election. All determinations made by
the Accounting Firm under this Schedule II shall be binding upon the Company
and the Participant and shall be made within 60 days of a termination of
employment of the Participant. As promptly as practicable following such
determination, the Company shall pay to or distribute for the benefit of the
Participant such Plan Payments as are then due to the Participant under the
Plan and shall promptly pay to or distribute for the benefit of the
Participant in the future such Plan Payments as become due to the Participant
under the Plan.
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(c) While it is the intention of the Company and the Participant to
reduce the amounts payable or distributable to the Participant hereunder only
if the aggregate Net After Tax Receipts to the Participant would thereby be
increased, as a result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that amounts will have been paid or distributed by
the Company to or for the benefit of the Participant pursuant to the Plan
which should not have been paid or so distributed ("Overpayment") or that
additional amounts which will have not been paid or distributed by the
Company to or for the benefit of the Participant pursuant to the Plan could
have been so paid or distributed ("Underpayment"), in each case, consistent
with the calculation of the Modified Reduced Amount hereunder. In the event
that the Accounting Firm, based upon the assertion of a deficiency by the
Internal Revenue Service against either the Company or the Participant which
the Accounting Firm believes has a high probability of success determines
that an Overpayment has been made, any such Overpayment paid or distributed
by the Company to or for the benefit of the Participant shall be treated for
all purposes as a loan to the Participant which the Participant shall repay
to the Company together with interest at the applicable federal rate provided
for in Section 7872(f)(2) of the Code; PROVIDED, HOWEVER, that no such loan
shall be deemed to have been made and no amount shall be payable by the
Participant to the Company if and to the extent such deemed loan and payment
would not either reduce the amount on which the Participant is subject to tax
under Section 1 and Section 4999 of the Code or generate a refund of such
taxes. In the event that the Accounting Firm, based upon controlling
precedent or substantial authority, determines that an Underpayment has
occurred, any such Underpayment shall be promptly paid by the Company to or
for the benefit of the Participant together with interest as the applicable
federal rate provided for in Section 7872(f)(2) of the Code.
(d) All fees and expenses of the Accounting Firm in implementing the
provisions of this Schedule II shall be borne by the Company.
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SCHEDULE III
REDUCED AMOUNT. (a) For purposes of this Schedule III: (i) a "Payment" shall
mean any payment or distribution in the nature of compensation to or for the
benefit of a Participant, whether paid or payable pursuant to the Plan or
otherwise; (ii) "Separation Benefits" shall mean a Payment paid or payable
pursuant to the Plan (disregarding this Schedule III); "(iii) "Present Value"
shall mean such value determined in accordance with Section 280G(d)(4) of the
Internal Revenue Code; and (iv) "Reduced Amount" shall mean an amount
expressed in Present Value that maximizes the aggregate Present Value of
Separation Benefits without causing any Payment to be nondeductible by the
Company or Employer because of Section 280G of the Code. Anything in the Plan
to the contrary notwithstanding, in the event KPMG Peat Marwick LLP (the
"Accounting Firm") shall determine that receipt of all Payments would subject
the Participant to tax under Section 4999 of the Code, the aggregate
Separation Benefits shall be reduced (but not below zero) to meet the
definition of Reduced Amount.
(b) If the Accounting Firm determines that aggregate Separation
Benefits should be reduced to the Reduced Amount, the Company shall promptly
give the Participant notice to that effect and a copy of the detailed
calculation thereof, and the Participant may then elect, in his or her sole
discretion, which and how much of the Separation Benefits shall be eliminated
or reduced (as long as after such election the present value of the aggregate
Separation Benefits equals the Reduced Amount), and shall advise the Company
in writing of his or her election within ten days of his or her receipt of
notice. If no such election is made by the Participant within such ten-day
period, the Company may elect which of such Separation Benefits shall be
eliminated or reduced (as long as after such election the present value of
the aggregate Separation Benefits equals the Reduced Amount) and shall notify
the Participant promptly of such election. All determinations made by the
Accounting Firm under this Schedule III shall be binding upon the Company and
the Participant and shall be made within 60 days of a termination of
employment by the Participant. As promptly as practicable following such
determination, the Company shall pay to or distribute for the benefit of the
Participant such Separation Benefits as are then due to the Participant under
the Plan and shall promptly pay to or distribute for the benefit of the
Participant in the future such Separation Benefits as become due to the
Participant under the Plan.
(c) As a result of the uncertainty in the application of Section
4999 of the Code at the time of the initial determination by the Accounting
Firm hereunder, it is possible that amounts will have been paid or
distributed by the Company to or for the benefit of a Participant pursuant to
the Plan which should not have been so paid or distributed ("Overpayment") or
that additional amounts which will have not been paid or distributed by the
Company to or for the benefit of a Participant pursuant to the Plan could
have been so paid or distributed ("Underpayment"), in each case, consistent
with the calculation of the Reduced Amount hereunder. In the event that the
Accounting Firm, based upon the assertion of a deficiency by the Internal
Revenue Service against either the Company or the Participant which the
Accounting Firm believes has a high probability of success determines that an
Overpayment has been made, any such
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Overpayment paid or distributed by the Company to or for the benefit of a
Participant shall be treated for all purposes as a loan to the Participant
which the Participant shall repay to the Company together with interest as
the applicable federal rate provided for in Section 7872(f)(2) of the Code;
PROVIDED, HOWEVER, that no such loan shall be deemed to have made and no
amount shall be payable by a Participant to the Company if and to the extent
such deemed loan and payment would not either reduce the amount on which the
Participant is subject to tax under Section 1 and Section 4999 of the Code or
generate a refund of such taxes. In the event that the Accounting Firm, based
upon controlling precedent or substantial authority, determines that an
Underpayment has occurred, any such Underpayment shall be promptly paid by
the Company to or for the benefit of the Participant together with interest
at the applicable federal rate provided for in Section 7872(f)(2) of the Code.
(d) All fees and expenses of the Accounting Firm in implementing
provisions of this Schedule III shall be borne by the Company.
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