Exhibit 4
FORM OF
EXECUTIVE SEVERANCE AGREEMENT
This AGREEMENT ("Agreement") dated ______________ by and between
Wyman-Gordon Company, a Massachusetts corporation (the "Company"), and
________________ (the "Executive").
W I T N E S S E T H
WHEREAS, the Company desires to have the services of the Executive as
its _________________________; and
WHEREAS, the Executive is willing to serve the Company as its
_________________________, but desires assurance that he will not be materially
disadvantaged by a change in control of the Company;
NOW, THEREFORE, in consideration of the Executive's service to the
Company and the mutual agreements herein contained, the Company and the
Executive hereby agree, as follows:
ARTICLE I
ELIGIBILITY FOR BENEFITS
SECTION 1.1. QUALIFYING TERMINATION. The Company shall not be required
to provide any benefits to the Executive pursuant to this Agreement unless a
Qualifying Termination occurs before the Agreement expires in accordance with
Section 6.1 hereof. For purposes of this Agreement, a Qualifying Termination
shall occur only if
(a) a Change in Control occurs, and
(b) within three years after the Change in Control,
(i) the Company terminates the Executive's employment
other than for Cause; or
(ii) the Executive terminates his employment with the
Company for Good Reason;
provided, that a Qualifying Termination shall not occur if the Executive's
employment with the Company terminates by reason of the Executive's Disability,
death, or retirement. For the purposes hereof "retirement" shall mean any
termination of employment which occurs at or after age 65.
SECTION 1.2. CHANGE IN CONTROL. Except as provided below, a Change in
Control shall be deemed to occur when and only when the first of the following
events occurs:
2
(a) the acquisition (including by purchase, exchange, merger
or other business combination, or any combination of the
foregoing) by any individuals, firms, corporations or
other entities, acting in concert ("Person"), together
with all Affiliates and Associates of such Person, of
beneficial ownership of securities of the Company
representing 20 percent or more of the combined voting
power of the Company's then outstanding voting
securities, or
(b) members of the Incumbent Board cease to constitute a
majority of the Board of Directors.
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
pursuant to paragraph (a), above, (i) solely because 20 percent or more of the
combined voting power of the Company's outstanding securities is acquired by one
or more employee benefit plans maintained by the Company, or (ii) if the
Executive is included among the individuals, firms, corporations or other
entities that, acting in concert, acquire the Company's securities. For purposes
of this Section 1.2, the terms "Affiliates" and "Associates" shall have the
meanings set forth in Rule 12b-2 of the General Rules and Regulations
promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"); the
terms "beneficial ownership" and "beneficially owned" shall have the meaning set
forth in section 13(d) of the Exchange Act,
3
as amended, and in Rule 13d-3 promulgated thereunder, the term "Board of
Directors" shall mean the Board of Directors of the Company and the term
"Incumbent Board" shall mean (i) the members of the Board of Directors on the
date hereof, to the extent that they continue to serve as members of the Board
of Directors, and (ii) any individual who becomes a member of the Board of
Directors after the date hereof, if his election or nomination for election as a
director was approved by a vote of at least three quarters of the then Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or threatened solicitation
of proxies or consents by or on behalf of a person other than the Board of
Directors.
SECTION 1.3. TERMINATION FOR CAUSE. The Company shall have Cause to
terminate the Executive's employment with the Company for purposes of Section
1.1 hereof only if the Executive (a) engages in unlawful acts intended to result
in the substantial personal enrichment of the Executive at the Company's
expense, or (b) engages (except (i) by reason of incapacity due to illness or
injury or (ii) in connection with an actual or anticipated termination of
employment by the Executive for Good Reason) in a
4
material violation of his responsibilities to the Company that results in a
material injury to the Company.
SECTION 1.4. TERMINATION FOR GOOD REASON. The Executive shall have a
Good Reason for terminating employment with the Company only if one or more of
the following occurs after a Change in Control:
(a) a change in the Executive's status or position
(including for this purpose a change in the principal
place of the Executive's employment on a basis that does
not conform with the Company's present policies for
executive relocation, but excluding required travel on
the Company's business to an extent substantially
consistent with the Executive's present business travel
obligations) with the Company that, in the Executive's
reasonable judgment, represents an adverse change from
the Executive's status or position in effect immediately
before the Change in Control;
(b) the assignment to the Executive of any duties or
responsibilities that, in the Executive's reasonable
judgment, are inconsistent with the Executive's status
or position in effect immediately before the Change in
Control;
5
(c) layoff or involuntary termination of the Executive's
employment, except in connection with the termination of
the Executive's employment for Cause or as a result of
the Executive's Disability, death or retirement;
(d) a reduction by the Company in the Executive's total
compensation as in effect at the time of the Change in
Control (which shall be deemed, for this purpose, to be
equal to his base salary plus the most recent award that
he has earned under the Company's Management Incentive
Plan, as amended from time to time, or any successor
thereto (the "MIP")) or as the same may be increased
from time to time;
(e) the failure by the Company to continue in effect any
Plan in which the Executive is participating at the time
of the Change in Control (or plans or arrangements
providing the Executive with substantially equivalent
benefits) other than as a result of the normal
expiration of any such Plan in accordance with its terms
as in effect at the time of the Change in Control;
(f) any action or inaction by the Company that would
adversely affect the Executive's continued participation
in any Plan on at least as favorable
6
a basis as was the case at the time of the Change in
Control, or that would materially reduce the Executive's
benefits in the future under the Plan or deprive him if
any material benefits that he enjoyed at the time of the
Change in Control, except to the extent that such action
or inaction by the Company is required by the terms of
the Plan as in effect immediately before the Change in
Control, or is necessary to comply with applicable law
or to preserve the qualification of the Plan under
section 401(a) of the Internal Revenue Code (the
"Code"), and except to the extent that the Company
provides the Executive with substantially equivalent
benefits;
(g) the Company's failure to obtain the express assumption
of this Agreement by any successor to the Company as
provided by Section 6.3 hereof;
(h) any material violation by the Company of any agreement
(including this Agreement) between it and the Executive;
or
(i) the failure by the Company, without the Executive's
consent, to pay to him any portion of his current
compensation, or to pay to the Executive any portion of
any deferred compensation, within 30 days of the date
the
7
Executive notifies the Company that any such
compensation payment is past due.
Notwithstanding the foregoing, no action by the Company shall give rise to a
Good Reason if it results from the Executive's termination for Cause, death or
retirement, and no action by the Company specified in paragraphs (a) through (d)
of the preceding sentence shall give rise to a Good Reason if it results from
the Executive's Disability. A Good Reason shall not be deemed to be waived by
reason of the Executive's continued employment as long as the termination of the
Executive's employment occurs within the time prescribed by Section 1.1(b)
hereof. For purposes of this Section 1.4, "Plan" means any compensation plan,
such as an incentive or stock option plan, or any employee benefit plan, such as
a thrift, pension, profit-sharing, stock bonus, long-term performance award,
medical, disability, accident, or life insurance plan, or any other plan,
program or policy of the Company that is intended to benefit employees.
SECTION 1.5. DISABILITY. For purposes of this Agreement, "Disability"
shall mean illness or injury that prevents the Executive from performing his
duties (as they existed immediately before the illness or injury) on a full-time
basis for six consecutive months.
8
SECTION 1.6. NOTICE. If a Change in Control occurs, the Company shall
notify the Executive of the occurrence of the Change in Control within two weeks
after the Change in Control.
9
ARTICLE II
BENEFITS AFTER A QUALIFYING TERMINATION
SECTION 2.1. BASIC SEVERANCE PAYMENT. If the Executive incurs a
Qualifying Termination following a Change in Control that occurs on or before
termination of this Agreement as provided in Section 6.1 hereof, the Company
shall pay within 30 days after the date of the Qualifying Termination to the
Executive a single lump sum cash amount equal to his Total Annual Compensation
multiplied by the lesser of (a) 2.50 or (b) .0833 multiplied by the number of
full months remaining between termination and his attaining age 65. "Total
Annual Compensation" shall mean the sum of annual base salary in effect
immediately preceding termination or the Change of Control, whichever is higher,
and annual incentive compensation earned under the "MIP" (annualized in the case
of less than a full year's service) in the last full fiscal year immediately
preceding termination or the Change in Control, whichever is higher.
SECTION 2.2. INSURANCE. If the Executive incurs a Qualifying
Termination following a Change in Control that occurs on or before termination
of this Agreement as provided in Section 6.1 hereof, the Company shall provide
the Executive, at the
10
Company's expense, for a period beginning on the date of the Qualifying
Termination, the same medical, accident, disability, life and any other
insurance coverage as was provided to him by the Company immediately before the
Change in Control (or, if greater, as in effect immediately before the
Qualifying Termination occurs); such coverage shall end upon the earlier of (a)
the expiration of 24 months after the Qualifying Termination or (b) with respect
to each coverage, the date on which the Executive first becomes eligible for
insurance coverage of a similar nature provided by a firm that employs him
following the Qualifying Termination.
SECTION 2.3. EXECUTIVE LONG-TERM INCENTIVE PROGRAM. If the Executive
incurs a Qualifying Termination following a Change in Control that occurs on or
before termination of this Agreement as provided in Section 6.1 hereof, all of
the options to purchase common stock of the Company (and the alternative common
stock appreciation rights) granted to the Executive prior to termination of this
Agreement as provided in Section 6.1 hereof, under the Executive Long-Term
Incentive Program shall become exercisable in accordance with the terms set
forth in the applicable Agreement.
SECTION 2.4. NONDUPLICATION. Nothing in this Agreement shall require
the Company to make any payment or to provide any benefit or service credit that
the Company is otherwise required
11
to provide under any other contract, agreement, policy, plan or arrangement.
ARTICLE III
EFFECT ON SEVERANCE POLICY
SECTION 3.1. EFFECT ON SEVERANCE POLICY. If the Executive becomes entitled to
receive benefits hereunder, the Executive shall not be entitled to any benefits
under any other Company severance policy.
ARTICLE IV
TAX MATTERS
SECTION 4.1. WITHHOLDING. The Company may withhold from any amount
payable to the Executive hereunder all federal, state or other taxes that the
Company may reasonably determine are required to be withheld pursuant to any
applicable law or regulation.
SECTION 4.2 SPECIAL LIMITATION.
(a) If part or all of the payments or benefits payable to the
Executive, when added to other payments payable to the Executive
as a result of a Change in Control, constitute Parachute Payments,
the following limitation shall apply. If the Parachute Payments,
net of the sum
12
of the Excise Tax and the Federal income and employment taxes,
state and local income taxes on the amount of the Parachute
Payments in excess of the Threshold Amount, are greater than the
Threshold Amount, the Executive shall be entitled to the full
payments and benefits payable under this Agreement. If the
Threshold Amount is greater than the Parachute Payments, net of
the sum of the Excise Tax, and the Federal income and employment
taxes, state and local income taxes on the amount of the Parachute
Payments in excess of the Threshold Amount, then the payments and
benefits under this Agreement shall be reduced to the extent
necessary so that the maximum Parachute Payments shall not exceed
the Threshold Amount. In the event a reduction is required, it
shall be the Executive's choice as to which payments or benefits
shall be so reduced. The Company shall select a firm of
independent certified public accountants to determine which of the
foregoing alternative provisions shall apply. For purposes of
determining the amount of the Federal income and employment taxes,
and state and local income taxes on the amount of the Parachute
Payments in excess of the Threshold Amount, the Executive shall be
deemed to pay Federal income taxes at the highest marginal rate of
Federal income taxation
13
applicable to individuals for the calendar year in which the
payments and benefits under this Agreement are payable and state
and local income taxes at the highest marginal rates of individual
taxation in the state and locality of the Executive's residence
for the calendar year in which the payments and benefits under
this Agreement are payable, net of the maximum reduction in
Federal income taxes which could be obtained from deduction of
such state and local taxes.
(b) ADDITIONAL DEFINITIONS
"CODE" shall mean the Internal Revenue Code of 1986, as
amended.
"PARACHUTE PAYMENTS" shall mean any payment or provision by
the Employer of any amount or benefit to and for the benefit of
the Executive, whether paid or payable or provided or to be
provided under the terms of this Agreement or otherwise, that
would be considered "parachute payments" within the meaning of
Section 280G(B)(2)(A) of the Code and the regulations promulgated
thereunder.
"THRESHOLD AMOUNT" shall mean three times the Executive's
"base amount" within the meaning of Section 280G(b)(3) of the Code
and the regulations promulgated thereunder, less one dollar.
14
"EXCISE TAX" shall mean the excise tax imposed by Section
4999 of the Code.
15
ARTICLE V
COLLATERAL MATTERS
SECTION 5.1. NATURE OF PAYMENTS. All payments to the Executive under
this Agreement shall be considered either payments in consideration of his
continued service to the Company or severance payments in consideration of his
past services thereto.
SECTION 5.2. LEGAL EXPENSES. The Company shall pay all legal fees and
expenses that the Executive may incur as a result of the Company's contesting
the validity, the enforceability or the Executive's interpretation of, or
determinations under, this Agreement.
SECTION 5.3. MITIGATION. The Executive shall not be required to
mitigate the amount of any payment provided for in this Agreement either by
seeking other employment or otherwise. The amount of any payment provided for
herein shall not be reduced by an remuneration that the Executive may earn from
employment with another employer or otherwise following his Qualifying
Termination.
SECTION 5.4. AUTHORITY. The execution of this Agreement has been
authorized by the Board of Directors of the Company.
16
ARTICLE VI
GENERAL PROVISIONS
SECTION 6.1. TERM OF AGREEMENT. This Agreement shall become effective
on the date hereof and shall continue in effect until the earliest of (a)
October 31, 2000, if no Change in Control has occurred before that date;
provided, however, that commencing on November 1, 2000 and each November 1
thereafter, the term of this Agreement shall automatically be extended for an
additional year unless, not later than January 30 of the same year, the Company
shall have given notice that it does not wish to extend this Agreement; (b) the
termination of the Executive's employment with the Company for any reason prior
to a Change in Control; (c) the Company's termination of the Executive's
employment for Cause, or the Executive's resignation for other than Good Reason,
following a Change in Control and the Company's and the Executive's fulfillment
of all of their obligations hereunder; and (d) the expiration following a Change
in Control of three years and the fulfillment by the Company and the Executive
of all of their obligations hereunder. Furthermore, nothing in this Article VI
shall cause this Agreement to terminate before both the Company and the
Executive have fulfilled all of their obligations hereunder.
17
SECTION 6.2. GOVERNING LAW. Except as otherwise expressly provided
herein, this Agreement and the rights and obligations hereunder shall be
construed and enforced in accordance with the laws of The Commonwealth of
Massachusetts.
SECTION 6.3. SUCCESSOR TO THE COMPANY. This Agreement shall inure to
the benefit of and shall be binding upon and enforceable by the Company and any
successor thereto, including, without limitation, any corporation or
corporations acquiring directly or indirectly all or substantially all of the
business or assets of the Company, whether by merger, consolidation, sale or
otherwise, but shall not otherwise be assignable by the Company. Without
limitation of the foregoing sentence, the Company shall require any successor
(whether direct or indirect, by merger, consolidation, sale or otherwise) to all
of substantially all of the business or assets of the Company, by agreement in
form satisfactory to the Executive, expressly, absolutely and unconditionally to
assume and to agree to perform this Agreement in the same manner and to the same
extent as the Company would have been required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean the
Company as heretofore defined and any successor to all or substantially all of
its business or assets that executes and delivers the agreement provided for in
this Section 6.3 or
18
that becomes bound by this Agreement either pursuant to this Agreement or by
operation of law.
SECTION 6.4. SUCCESSOR TO THE EXECUTIVE. This Agreement shall inure to
the benefit of and shall be binding upon and enforceable by the Executive and
his personal and legal representatives, executors, administrators, heirs,
distributees, legatees and, subject to the Section 6.5 hereof, his designees
("Successors"). If the Executive should die while amounts are or may be payable
to him under this Agreement, references hereunder to the "Executive" shall,
where appropriate, be deemed to refer to his Successors; provided that nothing
in this Section 6.5 shall supersede the terms of any plan or arrangement (other
than this Agreement) that is affected by this Agreement.
SECTION 6.5. NONALIENABILITY. No right of or amount payable to the
Executive under this Agreement shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, hypothecation, encumbrance,
charge, execution, attachment, levy or similar process or to setoff against any
obligations or to assignment by operation of law. Any attempt, voluntary or
involuntary, to effect any action specified in the immediately preceding
sentence shall be void. However, this Section 6.5 shall not prohibit the
Executive from designating one or more persons, on a form satisfactory to the
19
Company, to receive amounts payable to him under this Agreement in the event
that he should die before receiving them.
SECTION 6.6. NOTICES. All notices provided for in this Agreement shall
be in writing. Notices to the Company shall be deemed given when personally
delivered or sent by certified or registered mail or overnight delivery service
to Wyman-Gordon Company, 244 Worcester Street, North Grafton, Massachusetts
01536, Attention: Vice President, General Counsel and Clerk. Notices to the
Executive shall be deemed given when personally delivered or sent by certified
or registered mail or overnight delivery service to the last address for the
Executive shown on the records of the Company. Either the Company or the
Executive may, by notice to the other, designate an address other than the
foregoing for the receipt of subsequent notices.
SECTION 6.7. AMENDMENT. No amendment to this Agreement shall be
effective unless in writing and signed by both the Company and the Executive.
SECTION 6.8. WAIVERS. No waiver of any provision of this Agreement
shall be valid unless approved in writing by the party giving such waiver. No
waiver of a breach under any provision of this Agreement shall be deemed to be a
waiver of such provision or any other provision of this Agreement or any
subsequent breach. No failure on the part of either the Company or the Executive
to exercise, and no delay in exercising, any right
20
or remedy conferred by law or this Agreement shall operate as waiver of such
right or remedy, and no exercise or waiver, in whole or in part, or any right
or remedy conferred by law or herein shall operate as a waiver of any other
right or remedy.
SECTION 6.9. SEVERABILITY. If any provision of this Agreement shall be
held invalid or unenforceable in whole or in part, such invalidity or
unenforceability shall not affect any other provision of this Agreement or part
thereof, each of which shall remain in full force and effect.
SECTION 6.10. CAPTIONS. The captions to this respective articles and
section of this Agreement are intended for convenience of reference only and
have no substantive significance.
SECTION 6.11. COUNTERPARTS. This Agreement may be executed in a number
of counterparts, each of which shall be deemed to be an original but all of
which together shall constitute a single instrument.
SECTION 6.12. ENTIRE AGREEMENT. This Agreement contains a final and
complete integration of all prior expressions by the parties hereto with respect
to the subject matter hereof and shall constitute the entire agreement between
the parties hereto with respect to the subject matter hereof, superseding all
previous oral statements and other writings with respect thereto.
21
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
ATTEST: WYMAN-GORDON COMPANY
By:
- ------------------------------ --------------------------------------
David P. Gruber, Chairman
Chief Executive Officer
ATTEST:
- ------------------------------ --------------------------------------
Executive
22