Exhibit 10.3
[TXI LETTERHEAD]
[Name]
[Home address]
Re: Change in Control Severance Agreement
Dear :
We believe it is in the best interests of our stockholders to foster the
continued employment of our key management personnel. Our Board of Directors
recognizes that the possibility of a change in control of the Company exists,
and that the resulting uncertainty and questions may result in the departure or
distraction of management personnel to our detriment. Therefore, to induce you
to remain employed with us or one of our subsidiaries, we agree that you will
receive the severance benefits set forth in this letter agreement if your
employment is terminated after a change in control under the circumstances
described below.
In this agreement, the terms "Company", "we", "our" and "us" mean Texas
Industries, Inc. and any successor to its business and/or assets which assumes
and agrees to perform this agreement by operation of law or otherwise. The term
"employment" means employment with us or one of our subsidiaries. Italicized
terms used in this agreement are defined in Section 6.
1. WHEN SEVERANCE BENEFITS WILL BE PAID. If a change in control of
the Company occurs prior to the termination or expiration of this agreement, you
will be entitled to the benefits provided in Section 2 if your employment is
terminated within twenty-four (24) months after the date of the change in
control, unless (a) such termination is because of your death or disability, or
(b) we terminate your employment for cause, or (c) you terminate your employment
for any reason other than good reason.
2. YOUR SEVERANCE BENEFITS. If you are entitled to severance
benefits pursuant to Section 1, you will receive the following:
(a) We will pay you your full base salary through the date
of termination at the rate in effect at the time notice of termination
is given, plus other amounts to which you are entitled under any of our
compensation plans, payable at the time such payments are due under the
terms of such plans.
(b) We will pay you a lump sum severance payment (together
with payments provided in paragraph (e) below, the "severance payments")
equal to 200% of the greater of (i) your annual base salary in effect on
the date of termination or (ii) your annual base salary in effect
immediately prior to the change in control, plus 200% of the greater of
(y) the sum of your annual and long-term incentive bonuses paid to you
for the full fiscal year immediately prior to the date of termination
(or for long-term bonuses, the applicable period ending with such fiscal
year), or (z) the sum of your annual and long-term incentive bonuses
paid to you for the full fiscal year immediately prior to the change in
control (or for long-term bonuses, the applicable period ending with
such fiscal year).
(c) If any of the severance payments will be subject to an
excise tax, we will pay you the gross-up payment.
(d) We will make the payments provided for in Sections 2(b)
and (c) on the first business day that is six months and one day after
your date of termination.
(e) We will also pay to you or on your behalf all legal fees
and expenses incurred by you as a result of such termination (including
all such fees and expenses incurred in contesting or disputing your
termination and in seeking to obtain or enforce any right or benefit
provided by this agreement). We will make such payment within 10 days
after you submit to us a request for payment accompanied by proper
documentation of such expenses.
(f) For twenty-four (24) months after such termination, we
will arrange to provide you with life, disability, accident, medical and
dental insurance benefits substantially similar to those which you are
receiving immediately prior to the notice of termination, for which you
will be required to pay no more than the amounts you were paying for
such benefits immediately prior to the notice of termination.
(g) You will not be required to mitigate the amount of any
payment provided for in this Section 2 by seeking other employment or
otherwise, nor will the amount of any payment or benefit provided for in
this Section 2 be reduced by any compensation earned by you as the
result of employment by another employer, by retirement benefits, by
offset against any amount that we claim you owe us, or otherwise.
(j) All of your rights to exercise stock appreciation rights
and options to purchase Company stock granted to you by the Company will
be immediately accelerated and vested.
(i) In addition to all other amounts payable to you under
this Section 2, you will be entitled to receive all benefits payable to
you under our retirement programs, including the Executive Financial
Security Plan. If we do not pay any amount due hereunder on the date
due, we will pay you interest on the amount thereof at an annualized
rate of interest equal to the then-applicable prime rate or, if less,
the highest rate allowed by applicable usury laws. The term "prime rate"
means the rate of interest published from time to time by the Wall
Street Journal, and designated as the Prime Rate in the "Money Rates"
section thereof.
3. YOUR BENEFITS UPON ANY OTHER TERMINATION.
(a) If your employment is terminated for any reason other than those
described in Section 1(a) or (b) following the commencement of any discussion
with a third person that ultimately results in a change in control or within the
six (6) month period immediately prior to a change in control, your termination
will be deemed to be a termination after a change in control for purposes of
this agreement, and the deemed date of termination will be the date of the
change in control.
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(b) If during the term of this agreement your employment is
terminated in a manner that does not entitle you to severance benefits under
Section 1, you will be entitled to the following:
(i) We will pay you your full base salary through the date
of termination at the rate in effect at the time notice of termination
is given, plus other amounts to which you are entitled under any of our
compensation plans, payable at the time such payments are due under the
terms of such plans.
(ii) Your benefits will be determined in accordance with the
terms of our benefit programs in effect on the date of termination.
4. TERM OF AGREEMENT. This agreement commences on the date hereof
and will continue in effect through December 31, 2007. Each January 1
thereafter, the term of this agreement will be automatically extended for one
additional year; provided, if a change in control occurs during the original or
extended term of this agreement, this agreement will continue in effect for a
period of twenty four (24) months after the date of the change in control and
will then expire.
5. SUCCESSORS.
(a) We will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of our
business and/or assets to expressly assume and agree to perform this agreement
in the same manner and to the same extent that we would be required to perform
it if no such succession had taken place. Our failure to obtain such assumption
and agreement prior to the effectiveness of any such succession will be a breach
of this agreement and will entitle you to terminate your employment for good
reason following a change in control, and for purposes of implementing the
foregoing, the date on which any succession becomes effective shall be deemed
the date of termination. This agreement will be binding upon and inure to our
benefit and the benefit of any successor to us, including without limitation any
persons acquiring directly or indirectly all or substantially all of our
business and/or assets whether by purchase, merger, consolidation or otherwise
(and such successor will thereafter be deemed the "Company" for the purposes of
this agreement).
(b) 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
Section 5(a). Your 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 your will or by the laws of descent and
distribution and, in the event of any attempted assignment or transfer contrary
to this Section, we will have no liability to pay any amount so attempted to be
assigned, transferred or delegated.
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6. DEFINITIONS.
Board means the Board of Directors of the Company.
Cause means (a) your willful and continued failure to substantially
perform your duties (other than any such failure resulting from your incapacity
due to physical or mental illness or any such actual or anticipated failure
after the issuance of a notice of termination by you for good reason) after a
written demand for substantial performance is delivered to you by the Board,
which specifically identifies the manner in which the Board believes that you
have not substantially performed your duties, or (b) conviction of a felony
involving moral turpitude, or (c) willful conduct by you which is demonstrably
and materially injurious to the Company, monetarily or otherwise, or constitutes
fraud against the Company or theft of Company property. For purposes of this
definition, no act, or failure to act, on your part shall be deemed "willful"
unless done, or omitted to be done, by you not in good faith and without
reasonable belief that your action or omission was in the best interest of the
Company. You may be terminated for cause only after delivery to you of a copy of
a resolution duly adopted by the affirmative vote of not less then two thirds
(2/3) of the entire membership of the Board (after reasonable notice to you and
an opportunity for you, together with your counsel, to be heard before the
Board), finding that in the good faith opinion of the Board you engaged in the
conduct set forth above in clauses (a), (b) or (c) of the first sentence of this
definition and specifying the particulars thereof in detail.
Change in control means the occurrence of any of the following after the
date of this agreement:
(a) Any person becomes the beneficial owner of securities of the Company
representing more than 50% of the combined voting power of the Company's
then outstanding securities that have the right to vote for the election
of directors generally. "Person" shall have the meaning ascribed to such
term in Section 3(a)(9) of the Securities Exchange Act of 1934, as
amended, and used in Sections 13(d)(3) and 14(d)(2) thereof, including a
"group" as defined in Section 13(d) thereof, other than (1) any employee
plan established by the Company, (2) the Company or any of its
subsidiaries, (3) an underwriter temporarily holding securities pursuant
to an offering of such securities, or (4) an entity owned, directly or
indirectly, by security holders (including, without limitation, warrant
or option holders) of the Company in substantially the same proportions
as their ownership of the Company. "Beneficial owner" shall have the
meaning ascribed to such term in Rule 13d-3 under such act.
(b) Continuing directors cease for any reason to constitute a majority of
the directors of the Company then serving. "Continuing directors" means
directors of the Company who were:
(i) directors on the date of this agreement, or
(ii) elected or nominated for election with the approval of a
majority of the directors who, at the time of such election or
nomination, were Continuing directors.
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(c) A merger, consolidation or other business combination (including an
exchange of securities with the security holders of an entity that is a
constituent in such transaction) of the Company with any other entity,
unless the voting securities of the Company outstanding immediately
prior to such merger, consolidation or business combination continue to
represent at least a majority of the combined voting power of the
securities having the right to vote for the election of directors
generally of the Company or the surviving entity or any parent thereof
outstanding immediately after such merger, consolidation or business
combination (either by remaining outstanding or by being converted into
or exchanged for voting securities of the surviving entity or parent
thereof).
(d) The Company (taken as a whole with its subsidiaries) sells, leases or
otherwise disposes of all or substantially all of its assets (in one
transaction or a series of related transactions, including by means of a
sale, lease or disposition of the assets or equity interests in one or
more of its direct or indirect subsidiaries), other than such a sale,
lease or other disposition to an entity of which at least a majority of
the combined voting power of the outstanding securities are owned
directly or indirectly by stockholders of the Company.
(e) The occurrence of any other event or circumstance that results in the
Company filing or being required to file a report or proxy statement
with the Securities and Exchange Commission disclosing that a change in
control of the Company has occurred.
Code means the Internal Revenue Code of 1986, as amended.
Date of termination means (a) if your employment is terminated for
disability, thirty (30) days after notice of termination is given (provided that
you have not returned to the full-time performance of your duties during such
thirty day period), and (b) if your employment is terminated due to your death,
the date of your death, and (c) if your employment is terminated for any reason
other than disability or death, the date specified in the notice of termination
which, in the case of a termination for good reason shall not be less than
thirty (30) nor more than sixty (60) days from the date such notice of
termination is given. Notwithstanding the foregoing, if a dispute exists
concerning the termination, we will continue to pay you your full compensation
in effect when the notice giving rise to the dispute was given (including, but
not limited to, base salary) and continue you as a participant in all
compensation, benefit and insurance plans in which you were participating when
the notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this agreement. Such amounts will be paid in
addition to all other amounts due under this agreement and shall not be offset
against or reduce any other amounts due under this agreement except to the
extent otherwise provided in this agreement.
Disability means that you are determined to be totally disabled by the
Social Security Administration or under our long term disability plan.
Excise tax means any tax imposed by section 4999 of the Code (or any
similar tax that may hereafter be imposed).
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Good reason means the occurrence, without your express written consent,
of any of the following:
(a) a substantial and material adverse alteration in your responsibilities
from those in effect immediately prior to a change in control other than
any such alteration primarily attributable to the fact that the Company
may no longer be a public company;
(b) a reduction of Participant's rate of salary or annual or long-term
incentive opportunities as in effect prior to the change in control, or
a failure to provide employee benefits which, in the aggregate, are not
significantly less favorable to you than those in effect immediately
prior to the change in control;
(c) the failure to pay you any portion of your current compensation, or to
pay you any portion of an installment of deferred compensation under any
deferred compensation arrangement, within seven (7) days of the date
such compensation is due;
(d) the failure of the Company to obtain a satisfactory agreement from any
successor to assume and agree to perform this agreement, as contemplated
in Section 5(a) hereof, or any other breach by the Company of a material
provision of this agreement or any written employment or other agreement
with you which is not corrected within 15 days following your notice
thereof to the Company; or
(e) a requirement by the Company that you be based at an office or location
that is more than 35 miles (one-way) from your primary office location
immediately prior to the change in control, or to travel away from your
office in the course of discharging your responsibilities significantly
more (in terms of either consecutive days or aggregate days in a
calendar year) than was required of you prior to the change in control.
Your continued employment will not constitute consent to, or a waiver of
rights with respect to, any circumstance constituting good reason hereunder.
Gross-up payment means an amount paid to you such that the net
amount of Total Payments (as defined below) retained by you, after the deduction
of (i) all excise taxes under Section 4999 of the Code which are imposed on you
in whole or in part by reason of your receipt of the Total Payments, plus (ii)
all federal, state and local income taxes and excise taxes imposed on you by
virtue of receiving the gross-up payment described in (i) and this (ii), but
before deduction for any federal, state or local income or employment tax on
such Total Payments, shall be equal to the amount of such Total Payments. The
"Total Payments" shall equal the sum of any payments or benefits received or to
be received by you under the terms of this agreement or under any other plan,
arrangement or agreement with the Company, any person whose actions result in a
change in control or any person affiliated with the Company or such person which
shall be determined (as provided below) to be a "parachute payment(s)" within
the meaning of section 280G of the Code. The determination of (1) what portion
of any payment made to you is included in your Total Payments, (2) what portion
of the Total Payments are "excess parachute payments" within the meaning of
Section 280G of the Code, including, but not limited to, the
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determination of what portion represents reasonable compensation for services
actually rendered within the meaning of section 280G(b)(4) of the Code, (3) the
amount of excise taxes under Section 4999 of the Code imposed on you as a result
of your receipt of the Total Payments and the gross-up payment, and (4) any
other determination necessary or appropriate to calculating the gross-up payment
shall be determined by tax counsel selected by us and reasonably acceptable to
you. For purposes of determining the amount of the gross-up payment, tax counsel
will be required to assume (a) that you pay federal income taxes at the highest
marginal rate of federal income taxation in the calendar year in which the
gross-up payment is made, and (b) you pay state and local income taxes in an
amount equal to the excess of taxes imposed at the highest marginal rate of
taxation in the state and locality of your residence on the date the gross-up
payment is made, over the amount of reduction in federal income taxes which
could be obtained from deduction of such state and local taxes at the federal
income tax rate used under (a). In the event that, subsequent to the payment of
the gross-up payment, the excise tax is determined to be less than the amount
determined by the tax counsel in connection with such tax counsel's initial
calculation and the resulting payment of your gross-up payment, you must repay
to the Company, at the time that the amount of such reduction in excise tax is
finally determined, the difference between the gross-up payment you received,
and lower amount of gross-up payment you would have received if the lower amount
of actual excise tax had been used by the tax counsel to make the calculation,
plus interest on the amount of such repayment at the rate provided in section
1274(b)(2)(B) of the Code. In the event that, subsequent to the payment of the
gross-up payment the excise tax is determined to exceed the amount determined by
the tax counsel in connection with the such tax counsel's initial calculation
and payment of your gross-up payment, the Company must pay you an additional
gross-up payment, at the time that the amount of such increase in excise tax is
finally determined, equal to the difference between the gross-up payment you
received, and larger amount of gross-up payment you would have received if the
higher amount of actual excise tax had been used by the tax counsel to make the
calculation, plus interest on the amount of such payment at the rate provided in
section 1274(b)(2)(B) of the Code.
Notice of termination means a written notice of the termination of your
employment by the terminating party to the other party hereto in accordance with
Section 7 hereof, which shall set forth the specific termination provision in
this agreement relied upon and, in reasonable detail, the facts and
circumstances claimed to provide a basis for termination of your employment.
Severance payments has the meaning set forth in Section 2(b).
7. NOTICE. Notices and all other communications provided for in
this agreement shall be in writing and shall be deemed to have been duly given
when delivered personally or mailed by United States certified mail, return
receipt requested, postage prepaid, addressed to the respective addresses set
forth on the first page of this agreement, provided that all notices to us shall
be directed to the attention of the Board with a copy to the Secretary of the
Company. Either party may change its address for notice by furnishing notice of
its new address to the other in accordance herewith, except that notice of
change of address shall be effective only upon receipt.
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8. MISCELLANEOUS. This agreement is in full and complete
substitution for any prior agreement providing for severance payments to you
after a change in control of the Company. No provision of this agreement may be
modified or waived unless such waiver or modification is agreed to in writing
and signed by you and such officer as may be specifically designated by the
Board. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not expressly set forth in this agreement. The validity, interpretation,
construction and performance of this agreement shall be governed by the laws of
the State of Texas without reference to its conflict of laws rules. All
references to sections of any statute or regulation shall be deemed also to
refer to any successor provisions to such sections. Any payments provided for
hereunder shall be paid net of any applicable withholding required under
federal, state or local law. We may terminate your employment at any time before
or after a change in control, provided that our obligations under Sections 2 and
3, if any, shall survive the expiration or termination of your employment. The
invalidity or unenforceability of any provision of this agreement shall not
affect the validity or enforceability of any other provision of this agreement.
This agreement may be executed in several counterparts.
Please indicate your agreement to the terms hereof by signing below and
returning a copy to the Secretary of the Company.
Very truly yours,
Texas Industries, Inc.
By:
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Chairman, Compensation
Committee of the Board of Directors
AGREED TO this day of , 20 .
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