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THIS
AGREEMENT dated as of February 28, 2006 (the “Agreement Date”) is made
by and among Principal Financial Group, Inc., a Delaware corporation (together
with all successors thereto, “PFG”), Principal Financial Services, Inc.,
an Iowa corporation, and Principal Life Insurance Company, an Iowa corporation
(together with all successors thereto, “Life”) (each of the foregoing
referred to individually as a “Company” or collectively as “Companies”),
and
(“Executive”).
RECITALS
The
Companies previously determined that it is in the best interests of the
Companies and their stockholders to assure that the Companies will have the
continued service of Executive. The Companies also concluded that it is
imperative to reduce the distraction of Executive that would result from the
personal uncertainties caused by a pending or threatened change of control of
PFG, to encourage Executive’s full attention and dedication to the Companies,
and to provide Executive with compensation and benefits arrangements upon a
change of control which ensure that the expectations of Executive will be
satisfied and are competitive with those of similarly-situated businesses. To
that end, the Companies and Executive previously entered into a Change of
Control Employment Agreement (the “Prior Agreement”).
The
parties have determined that the Prior Agreement should be modified to simplify
its operation, clarify certain provisions and otherwise conform to changes in
best practices for such arrangements arising since the execution of the Prior
Agreement. This Agreement is intended to accomplish these objectives, and shall
supercede the Prior Agreement in its entirety.
Article I.
Term
1.1 Term. This Agreement shall have
an initial term commencing on the Agreement Date and ending on the second
anniversary of the Agreement Date. On the second anniversary and each
subsequent anniversary of the Agreement Date, the Agreement Term shall
automatically be extended for one additional year unless prior thereto the
Company shall have delivered written notice (an “Expiration Notice”) to
Executive that the Agreement shall expire at the end of its then current term
(including any extensions of the initial term that having previously occurred)
(the “Expiration Date”). Notwithstanding the foregoing, if an Effective
Date occurs before the Expiration Date, then the Agreement Term shall
automatically be extended to the second anniversary of the Effective Date and
shall then expire. If an Expiration Notice is given but an Effective Date or a
Pre-Change of Control Event occurs before the Expiration Date, then the
Expiration Notice shall be void and of no further effect. However, if a
Pre-Change of Control Event does not culminate in a Consummation Date, then the
Expiration Notice shall be reinstated and the Agreement Term shall expire on
the later of (i) the originally-
specified
Expiration Date or (ii) the date the Board determines in good faith that
Pre-Change of Control Event will not result in a Change of Control.
1.2 Effective Date. Except as
otherwise expressly provided herein, this Agreement shall not have any affect
until the occurrence of an Effective Date. Notwithstanding anything else in the
Agreement to the contrary (other than Section 1.3 hereof), the provisions of
this Agreement other than Article IX shall have no force and effect unless
Executive is an employee of the Companies continuously from the Agreement Date
to the Effective Date.
1.3 Actions Taken Prior to the
Effective Date at the Direction or Request of a Third Party. Notwithstanding
anything else contained in this Agreement (including, without limitation,
Section 1.2 hereof), if following or in connection with a Pre-Change of Control
Event, any Person other than the Board or any of the Companies directs,
requests or otherwise causes or seeks to have occur a termination of Executive’s
employment with the Companies or an adverse change in the terms and conditions
of Executive’s employment with the Companies prior to an Effective Date, and
such action results, directly or indirectly, in the termination of Executive’s
employment or an adverse change in the terms and conditions of Executive’s
employment, solely for purposes of this Agreement and determining Executive’s
rights and entitlements hereunder, any such action shall be deemed not to have
occurred on the date actually taken, but instead to be taken immediately
following the Effective Date, with the consequence that (i) in the case
of a termination of employment, Executive shall be deemed to have been
terminated following the Effective Date, (and unless such termination would
qualify as a termination for Cause hereunder, Executive shall be entitled to
the benefits payable pursuant to Article V hereof), and (ii) in the case
of an adverse change in employment terms and conditions, shall not be taken
into account in determining Executive’s terms and conditions of employment in
any period prior to the Effective Date and shall be deemed to have occurred
immediately after the Effective Date for purposes of determining whether
Executive has Good Reason to terminate his employment hereunder and to receive
the benefits payable pursuant to Article V.
Article II.
Certain Definitions
As
used in this Agreement, the terms specified below shall have the following
meanings:
2.1 “Accountants” – see Section
6.1.
2.2 “Accrued Annual Bonus” means
the amount of any Annual Bonus earned but not yet paid with respect to any
Company’s latest fiscal year ended prior to Executive’s Termination Date.
2.3 “Accrued Base Salary” means the
amount of Executive’s Base Salary that is accrued but not yet paid as of the
Termination Date.
2.4 “Accrued LTIP Bonus” means the
amount of any LTIP Bonus earned but not paid on or prior to Executive’s
Termination Date.
2.5 “Accrued Obligations” means, as
of any date, Executive’s Current Obligations and any other amounts and benefits
which are then due to be paid or provided to Executive by
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the Company, but
have not yet been paid or provided (as applicable), including, without
limitation, amounts earned but deferred under the LTPP.
2.6 “Affiliate” of any Person means
any other Person that directly or indirectly controls, is controlled by, or is
under common control with, the first Person. For purposes of this definition
the term “control” with respect to any Person means the power to direct or
cause the direction of management or policies of such Person, directly or
indirectly, whether through the ownership of Voting Securities, by contract or
otherwise.
2.7 “Agreement Date” — see the
introductory paragraph of this Agreement.
2.8 “Annual Bonus” — see Section
3.2(b).
2.9 “Annual Performance Period”
means the calendar year or any other period of time not greater than 12 months
specifically designated as the applicable annual performance period in
accordance with any annual bonus arrangement applicable to Executive.
2.10 “Article” means an article of
this Agreement.
2.11 “Base Salary” — see Section
3.2(a).
2.12 “Beneficial Owner” means such
term as defined in Rule 13d-3 of the SEC under the Exchange Act.
2.13 “Beneficiary” — see Section 11.3.
2.14 “Board” means the Board of
Directors of PFG or, from and after the effective date of a Reorganization
Transaction, the Board of Directors of the Surviving Corporation.
2.15 “Bonus Pro-ration Fraction” —see
the definition of Pro-rata Annual Bonus.
2.16 “Cause” — see Section 4.3.
2.17 “Change of Control” means, except
as otherwise provided below, the occurrence of any one or more of the
following:
(a) any SEC Person becomes the Beneficial
Owner of 40% or more of the common stock or of Voting Securities representing
40% or more of the combined voting power of all Voting Securities of PFG (such
an SEC Person, a “40% Owner”); or
(b) the PFG Incumbent Directors cease for
any reason to constitute at least a majority of the Board;
(c) consummation of a merger,
reorganization, consolidation, or similar transaction (any of the foregoing, a “Reorganization
Transaction”) where the Persons who were the direct or indirect owners of
the outstanding common stock and Voting Securities of PFG immediately before
such Reorganization Transaction are not or do not become, immediately after the
consummation of such Reorganization Transaction, the direct or indirect owners
of 60% of each of (i) the then-outstanding common stock of the Surviving
Corporation and (ii) the combined voting power of the then-outstanding
Voting
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Securities of the Surviving Corporation, in
substantially the same respective proportions as such Persons’ ownership of the
common stock and Voting Securities of PFG immediately before such
Reorganization Transaction; or
(d) approval by PFG’s stockholders and
consummation of a plan or agreement for the sale or other disposition of all or
substantially all of the consolidated assets of PFG or a plan of liquidation of
PFG.
Notwithstanding the occurrence of any of the foregoing
events, for purposes of this Agreement, a Change of Control shall not be deemed
to have occurred for purposes of this Agreement, with respect to Executive if,
in advance of such event, Executive agrees in writing that such event shall not
constitute a Change of Control.
2.18 “Code” means the Internal Revenue
Code of 1986, as amended.
2.19 “Company” – see the introductory
paragraph to this Agreement.
2.20 “Company Certificate” — see
Section 6.4(a).
2.21 “Competitive Business” means as
of any date (including during the one-year period commencing on the Termination
Date) any Person (and any branch, office or operation thereof) that engages in,
or proposes to engage in:
(a) the underwriting, reinsurance,
marketing or sale of (i) any form of insurance of any kind that any of the
Companies as of such date does, or has under active consideration a proposal
to, underwrite, reinsure, market or sell (any such form of insurance, a “Company
Insurance Product” or (ii) any other form of insurance that is
marketed or sold in competition with any Company Insurance Product, or
(b) the sale of financial services which
involve (i) the management, for a fee or other remuneration, of an
investment account or fund (or portions thereof or a group of investment
accounts or funds), (ii) the giving of advice, for a fee or other
remuneration, with respect to the investment and/or reinvestment of assets or
funds (or any group of assets or funds), or (iii) financial planning
services in connection with the sale of financial services, or
(c) the design, implementation and
administration of employee benefit plans, including plan documents, employee
communications, reporting, disclosure, financial advice, investment advice, and
fiduciary services, or
(d) any other business that as of such
date is a direct and material competitor of a Company and its Affiliates to the
extent that prior to the date of determination (or, if earlier, Executive’s
Termination Date) any of the Companies or its Affiliates engaged at any time
within 12 months in or had under active consideration a proposal to engage in
such competitive business;
and that is located anywhere in the United States or
anywhere outside of the United States where such Company or its Affiliates is
then engaged in, or has under active consideration a proposal to engage in, any
of such activities.
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2.22 “Current Obligations” means the
sum of the amounts of Executive’s Accrued Annual Bonus, Accrued Base Salary,
Accrued LTIP Bonus and any accrued but unpaid paid time off; provided that,
if any amount that would otherwise be treated as a Current Obligation would, if
paid when specified hereunder, constitute deferred compensation within the
meaning of Section 409A of the Code, such amount shall not be treated as a
Current Obligation.
2.23 “Disability” – see Section
4.1(b).
2.24 “Effective Date” means the date
on which a Change of Control first occurs during the term of the Agreement.
2.25 “Employment Period” means the
period commencing on the Effective Date and ending on the second anniversary of
the Effective Date; provided that, in the event Executive’s employment
terminates after the Effective Date, in circumstances under which Executive
becomes entitled to receive the payments described in Section 5.1 or due to
Executive’s death or Disability, the Employment Period shall end on the date of
such termination of employment.
2.26 “Equity Performance Award” – see
Section 3.3.
2.27 “Equity Service Award” – see
Section 3.3.
2.28 “Exchange Act” means the
Securities Exchange Act of 1934, as amended.
2.29 “Excise Taxes” — see Section 6.1.
2.30 “40% Owner” see paragraph (a) of
the definition of “Change of Control.”
2.31 “Good Reason” — see Section 4.4.
2.32 “Gross-Up Multiple” — see Section
6.1.
2.33 “Gross-Up Payment” — see Section
6.1.
2.34 “including” means including
without limitation.
2.35 “Incumbent Directors” means, as
of any date, the individuals then serving as members of the Board who were
members of the Board as of the Agreement Date; provided that any person
appointed or elected as a member of the Board after the Agreement Date whose
election, or nomination for election, by stockholders of PFG or the Surviving
Corporation, as applicable, was approved by a vote or written consent of at
least a majority of the directors then comprising the Incumbent Directors shall
also thereafter be considered an Incumbent Director, unless the initial
assumption of office of such subsequently-elected or appointed director was in
connection with a proxy solicitation or contest by any Person (other than any
of the Companies) to elect or remove one or more members of the Board.
2.36 “IRS” means the Internal Revenue
Service of the United States of America.
2.37 “IRS Claim” — see Section 6.4.
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2.38 “LTIP” means the Principal
Financial Group Stock Incentive Plan, the Principal Financial Group 2005 Stock
Incentive Plan and any other or successor long-term incentive plan (other than
the LTPP) established by any of the Companies or any Surviving Corporation.
2.39 “LTIP Award” means a grant under
the LTIP.
2.40 “LTIP Bonus” means the amount
paid or earned in respect of an LTIP Award.
2.41 “LTIP Performance Period” means
the performance period applicable to an LTIP Award, as designated in accordance
with the LTIP.
2.42 “LTIP Target Award” means, in
respect of any LTIP Award, the amount which Executive would have been entitled
to receive for the LTIP Performance Period corresponding to such LTIP Award if
the performance goals established pursuant to such LTIP Award were achieved at
the target level (currently 100%) as of the end of the LTIP Performance Period.
2.43 “LTPP” means the 1999 Long-Term
Performance Plan, as may be amended from time to time.
2.44 “Lump Sum Value” of an annuity
payable to Executive pursuant to a defined benefit plan (whether or not a
Qualified Plan or a Non-Qualified Plan) means, as of a specified date, the
present value of a single life annuity, payable under such plan and determined,
as of such date, under generally accepted actuarial principles (i) assuming for
the purposes of eligibility for payment of benefits prior to normal retirement
date that Executive had completed at least 10 years of service and had attained
age 57 or Executive’s actual age, if greater (but using actual age for
otherwise determining actuarial equivalent present value), (ii) using the
applicable interest rate, mortality tables and other methods and assumptions
that the Pension Benefit Guaranty Corporation (“PBGC”) would use in
determining the value of an immediate annuity on the Termination Date or (iii)
if such interest rate and mortality assumptions are no longer published by the
PBGC, interest rate and mortality assumptions determined in a manner as similar
as practicable to the manner by which the PBGC’s interest rate and mortality
assumptions were determined immediately prior to the PBGC’s cessation of
publication of such assumptions. The immediate annuity assumptions shall be
applied solely for purposes of determining the actuarial assumptions applicable
to the Lump Sum Value calculation and not for the purpose of determining when
an annuity would commence. The value of any post-retirement cost-of-living
adjustment to any annuity payable pursuant to a defined benefit plan shall be
included in the Lump Sum Value and shall be reduced to present value in
accordance with the foregoing assumptions and in such manner as shall be
determined by the outside actuarial firm engaged by the Company immediately
prior to the Effective Date for purpose of the defined benefit plan. Notwithstanding
the foregoing, if any such defined benefit plan provides for a lump sum
distribution and such lump-sum distribution either (x) is the only payment
method available under such plan or (y) provides for a greater amount than the
Lump Sum Value of the single life annuity available under such plan, then “Lump
Sum Value” in respect of the benefit payable under such Plan shall mean such
lump sum amount.
2.45 “Non-Qualified Plan” means a plan
that is not qualified under Section 401(a) of the Code.
2.46 “Notice of Consideration” — see
Section 4.3.
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2.47 “Notice of Termination” means a
written notice given in accordance with Section 11.7 which sets forth (i) the
specific termination provision in this Agreement relied upon by the party
giving such notice, (ii) in reasonable detail the specific facts and
circumstances claimed to provide a basis for such Termination of Employment,
and (iii) if the Termination Date is other than the date of receipt of such
Notice of Termination, the Termination Date.
2.48 “Parachute Payment” — see Section
6.1.
2.49 “Peer Executive” means each
officer of any of the Companies who is a party to a change of control agreement
having terms generally consistent with those of this Agreement and all
executive officers (and all other employees performing policy making functions,
regardless of title) at any organization that is a successor or interest to, or
the direct or indirect parent of, any of the Companies.
2.50 “Person” means any individual,
sole proprietorship, partnership, joint venture, limited liability company,
trust, unincorporated organization, association, corporation, institution,
public benefit corporation, entity or government instrumentality, division,
agency, body or department.
2.51 “PFG” – see the introductory
paragraph to this Agreement.
2.52 “Plans” means plans, programs,
policies, practices or procedures of the Companies.
2.53 “Pre-Change of Control Event” means
the occurrence of any one or more of the following: (i) the commencement
of a tender offer for Voting Securities of PFG, consummation of which would
result in a SEC Person becoming a 40% owner; (ii) a proxy solicitation
or contest for the election of one or more Board members commenced by a person
other than PFG; (iii) one of the Companies enters into an agreement the
consummation of which would constitute a Reorganization Transaction or would
otherwise result in a Change of Control; or (iv) any other event,
transaction or occurrence that the Board declares to be a Pre-Change of Control
Event.
2.54 “Pro-rata Annual Bonus” means an
amount equal to the product of Executive’s Target Annual Bonus (for the fiscal
year in which the Effective Date or Termination Date occurs, as applicable, but
disregarding any reduction in such Target Annual Bonus that would qualify as a
Good Reason if Executive were to terminate employment on account thereof)
multiplied by a fraction, the numerator of which equals the number of days from
and including the first day of such fiscal year through and including the
Effective Date or Termination Date, as applicable and the denominator of which
equals 365 (the “Bonus Pro-ration Fraction”).
2.55 “Pro-rata LTIP Bonus” means an
amount equal to the sum of the following amounts, calculated separately for
each LTIP Award for which the LTIP Performance Period has not ended as of
Executive’s Termination Date, as applicable:
(a) For any LTIP Award that was granted
in the fiscal year in which the Termination Date occurs an amount calculated by
multiplying the LTIP Target Award for such LTIP Award by a fraction, the
numerator of which equals the number of days from and including the beginning
of the LTIP Performance Period applicable to such LTIP
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Target Award through and including the Termination
Date and the denominator of which is 365.
(b) For any other LTIP Award not
described in subsection (a) above of this definition, the amount that would be
payable thereunder based on actual performance through the most recent date as
of which the achievement of the performance criteria can reasonably be
measured, projected out until the end of the stated performance period,
assuming that such most recent measurement date was the end of the applicable
performance period.
2.56 “Qualified Plan” means a plan
that is qualified under Section 401(a) of the Code.
2.57 “Refund Claim” — see Section 6.4.
2.58 “Reorganization Transaction” — see
clause (c) of the definition of “Change of Control.”
2.59 “SEC” means the United States
Securities and Exchange Commission.
2.60 “SEC Person” means any person (as
such term is used in Rule 13d-5 of the SEC under the Exchange Act) or group (as
such term is defined in Sections 3(a)(9) and 13(d)(3) of the Exchange Act),
other than an Affiliate of any Company or any employee benefit plan (or any
related trust) of PFG or any of its
Affiliates.
2.61 “Section” means, unless the context
otherwise requires, a section of this Agreement.
2.62 “SERP” means a supplemental
executive retirement Plan that is not qualified under Section 401(a) of the
Code, including the Supplemental Executive Retirement Plan for Employees (or
any successor plan).
2.63 “Surviving Corporation” means the
corporation resulting from a Reorganization Transaction or, if securities
representing at least 50% of the aggregate voting power of such resulting
corporation, (if such corporation is a stock company at the relevant time), or
of the mutual life insurance holding company policies (if such corporation is a
mutual life insurance holding company at the relevant time) are directly or
indirectly owned by another corporation, the highest corporation in an unbroken
chain of corporations that includes PFG or any successor in interest thereto.
2.64 “Target Annual Bonus” as of a
certain date means the amount equal to the product of (i) Executive’s
Base Salary determined as of such date multiplied by (ii) the percentage
of such Base Salary which Executive would have been entitled to receive as an
Annual Bonus for the Annual Performance Period in which such determination is
being made if the performance goals established with respect thereto were
achieved at the 100% level as of the end of the Annual Performance Period;
provided, however, that no reduction in Executive’s Base Salary or Annual Bonus
that would qualify as Good Reason shall be taken into account for purposes of
determining Target Annual Bonus pursuant to this definition.
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2.65 “Taxes” means the incremental
federal, state, local and foreign income, employment, excise and other taxes
payable by Executive with respect to any applicable item of income.
2.66 “Termination Date” means the date
of the receipt of a Notice of Termination by Executive (if such Notice is given
by the Company) or by or on behalf of the Companies (if such Notice is given by
Executive), or any later date, not more than 15 days after the giving of such
Notice, specified in such notice as of which Executives’ employment shall be
terminated; provided, however, that:
(i) if Executive’s employment is
terminated by reason of death or Disability, the Termination Date shall be the
date of Executive’s death or the date of the Disability (as described in
Section 4.1(a)), as applicable; and
(ii) if no Notice of Termination is given,
the Termination Date shall be the last date on which Executive is employed by
the Company.
2.67 “Termination of Employment” means
any termination of Executive’s employment with each of the Companies, whether
such termination is initiated by the Companies or by Executive.
2.68 “Voting Securities” means (a)
with respect to a corporation, securities of such corporation that are entitled
to vote generally in the election of directors of such corporation, and (b)
with respect to a mutual life insurance company or mutual life insurance
holding company, policies of such company entitled to vote generally in the
election of directors of such company.
2.69 “Welfare Benefits” means the
following (and only the following) welfare benefits, whether or not provided
under a Plan: accidental death and
dismemberment (AD&D), dental, medical, vision and group-term life
insurance.
Article III.
Employment Period
3.1 Position and Duties.
(a) Change of Control. During the
Employment Period, (i) Executive’s position (including offices,
titles, responsibilities and reporting requirements, but not reporting
responsibilities), authority and duties shall be at least commensurate in all
material respects with the most significant of those held, exercised and
assigned at any time during the 90-day period immediately before the Effective
Date and (ii) Executive’s services shall be performed at the
location where Executive was employed immediately before the Effective Date or
any other location no more than 50 miles from such former location.
(b) Executive’s Obligations. During
the Employment Period, Executive agrees to devote Executive’s full attention
and business time (other than during any periods of paid time off, sick leave
or disability to which Executive is entitled) to the business and affairs of
the Companies and, to the extent necessary to discharge the duties
9
assigned to Executive in accordance with this
Agreement, to use Executive’s commercially reasonable best efforts to perform
such duties. During the Employment Period, Executive may (i) serve on
corporate, civic or charitable boards or committees, (ii) deliver lectures,
fulfill speaking engagements or teach at educational institutions and (iii)
manage personal investments, so long as such activities do not significantly
interfere with the performance of Executive’s duties under this Agreement. To
the extent that any such activities were conducted by Executive immediately
prior to the Effective Date and such conduct was not in violation of any Plans
of any of the Companies, the continued conduct of such activities (or
activities similar in nature and scope) after the Effective Date shall not be
deemed to interfere with the performance of Executive’s duties under this
Agreement.
3.2 Compensation.
(a) Base Salary. During the
Employment Period, the Companies shall pay or cause to be paid to Executive an
annual base salary in cash, which shall be paid in a manner consistent with the
Companies payroll practices in effect immediately before the Effective Date, at
an annual rate not less than 12 times the highest monthly base salary paid or
payable to Executive by the Companies in respect of the 12-month period
immediately before the Effective Date (such annual rate salary, the “Base
Salary”). During the Employment Period, the Base Salary shall be reviewed
at least annually and shall be increased at any time and from time to time in
such manner as shall be substantially consistent with increases in base salary
awarded to Peer Executives. Any increase in Base Salary shall not limit or
reduce any other obligation of the Companies to Executive under this Agreement.
After any such increase, the Base Salary shall not be reduced and the term “Base
Salary” shall thereafter refer to the increased amount.
(b) Annual Bonus. In addition to
Base Salary, the Companies shall provide to Executive the opportunity to
receive payment of regular bonuses in accordance with this Section 3.2(b). If ,
immediately prior to the Effective Date, Executive participated in a Plan that
provided for an annual bonus in respect of each Annual Performance Period (an “Annual
Bonus”), then the Companies shall afford Executive the opportunity to
receive an Annual Bonus with respect to each Annual Performance Period which
ends during the Employment Period. If, immediately prior to the Effective Date,
Executive participated in a Plan that provided for a bonus payable in respect
of a performance period of less than 12 months (a “Periodic Bonus Period”),
then the Companies shall afford Executive the opportunity to receive a bonus (a
“Periodic Bonus”) for each comparable period ending during the
Employment Period. Executive’s bonus opportunity in respect of any such Annual
Performance Period or Periodic Performance Period shall not be less than, and
shall have target performance goals no more difficult to achieve than, those in
effect with respect to the Annual Performance Period or Periodic Performance
Period, as the case may be, in effect immediately prior to the Effective Date.
(c) Other Compensation and Benefits.
In addition to Base Salary and Annual Bonus, throughout the Employment Period,
the Companies shall provide the following other compensation and benefits to
Executive, provided that, in no event shall such other compensation and
benefits be materially less favorable, in the aggregate, than the most
favorable compensation and benefits, but (exclusive of Base Salary and Annual
Bonus)
10
provided by the Companies to Executive (including any
such compensation and benefits provided under Plans, but (exclusive of Base
Salary and Annual Bonus)) at any time during the 90-day period immediately
before the Effective Date:
(1) LTIP
Awards. LTIP Awards shall be granted to Executive at least as frequently as
LTIP Awards were granted to Executive during the three-year period immediately
preceding the Effective Date, with target payments no less than the average
(expressed as a percentage of Executive’s Base Salary in effect at the
beginning of the applicable Performance Period) of the targets applicable with
respect to the Executive’s LTIP Awards outstanding immediately prior to the
Effective Date, and with target performance goals that are not substantially
more difficult to obtain, on average, than the target performance goals under
Executive’s LTIP Awards outstanding on the Effective Date;
(2) Incentive,
Savings and Retirement Plans. Executive shall be eligible to participate in
all incentive (including long-term incentives), savings and retirement Plans
applicable to Peer Executives;
(3) Welfare
Benefit Plans. Executive and Executive’s family shall be eligible to
participate in, and receive any Welfare Benefits provided by the Company to any
Peer Executive and his or her family;
(4) Fringe
Benefits. Executive shall be entitled to fringe benefits in accordance with
the most favorable Plans applicable to Peer Executives;
(5) Expenses.
Executive shall be entitled to prompt reimbursement of all reasonable
employment-related expenses incurred by Executive upon the Company’s receipt of
accountings in accordance with the most favorable Plans applicable to Peer
Executives;
(6) Vacation.
Executive shall be entitled to paid time off in accordance with the most
favorable Plans applicable to Peer Executives.
3.3 Stock Incentive Awards. On the
Effective Date, any then outstanding equity or equity-based awards other than
stock options or stock appreciation rights held by, or credited to, Executive
that would, in accordance with their terms, generally become vested, if at all,
upon the achievement of specified performance objectives (and not on the basis
of the passage of time and the continued performance of service) (“Equity
Performance Awards”) shall be converted into a number of shares of restricted
stock or restricted stock units of PFG (or, in the case of a Reorganization
Transaction, in respect of the common stock of the Surviving Corporation) that
will vest, if at all, subject to Executive’s continued performance of services,
on the date on which the corresponding performance period would otherwise have
expired. The number of such shares of restricted stock and restricted stock
units shall be determined based on actual performance against the stated
performance criteria through the Effective Date, projected out to the end of
the corresponding performance period, but shall not be adjusted due to the fact
that the Effective Date occurs prior to the end of the stated performance
period. Each of Executive’s outstanding stock options or stock appreciation
rights and any outstanding equity or equity-based
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awards held by, or
credited to, Executive that would, in accordance with their terms, generally
become vested, if at all, on the basis of the passage of time and the continued
performance of service (such options, rights and other awards collectively
referred to as the “Equity Service Awards”) shall continue to be honored in
accordance with the terms of such award, except that, if the Effective Date
occurs in connection with a Reorganization Transaction, such Equity Service
Awards shall be converted into equity or equity-based awards of a similar type
and nature related to, the common stock of the Surviving Corporation using the
same exchange ratio as is applicable to shareholders of PFG (or, where
shareholders receive any consideration other than in common stock) based on the
relative values of the PFG and Surviving Corporation common stock on or about
the date the transaction closes, using valuation principals permitted under
Treas. Reg. §1.424-1. Notwithstanding the foregoing provisions of this Section
3.3 any conversion into equity or equity-based awards related to the common
stock of the Surviving Corporation shall only occur to the extent the agreement
pursuant to which the Reorganization Transaction is effected provides for such
conversion, and, if such agreement does not provide for such a conversion as to
some or all of Executive’s Equity Performance Awards or Equity Service Awards,
then such portion of Executive’s Equity Performance Awards or Equity Service
Awards (regardless of the terms upon which such Awards would otherwise vest)
shall become fully vested, exercisable and /or distributable upon the Effective
Date, and unless the Human Resources Committee of the Board (or such other
committee of the Board to which the Board shall have delegated authority for
such decision), as constituted immediately prior to a Reorganization
Transaction (the “Committee”), determines in accordance with the LTIP that no
equity or equity based award shall be settled in cash, the value of such Awards
will be paid to Executive in cash. The value of such Equity Performance Awards
or Equity Service Awards shall be determined based on the proceeds received by
shareholders for a share of PFG common stock in such Reorganization Transaction
(with any question pertaining to the value received by shareholders to be
conclusively determined by the Board of PFG (or any duly authorized committee
thereof), as constituted immediately prior to the Effective Date.
3.4 Unfunded Deferred Compensation.
On the Effective Date, Executive shall become fully vested in all benefits
previously accrued under any deferred compensation Plan (including any SERP and
defined contribution excess plan) that is not qualified under Section 401(a) of
the Code. Such benefits shall be paid to the Executive in accordance with the
distribution provisions of the applicable Plan and any elections as to the form
and time of distributions made by Executive in accordance with the terms of
such Plan (or, if no such elections shall be effective, pursuant to the default
distribution provisions of the applicable Plan).
Article IV.
Termination of Employment
4.1 Disability.
(a) During the Employment Period, the
Company may terminate Executive’s employment at any time because of Executive’s
Disability by giving Executive or his legal representative, as applicable, (i)
written notice in accordance with Section 11.7 of the Company’s intention to
terminate Executive’s employment pursuant to this Section and (ii) a
certification of Executive’s Disability by a physician selected in accordance
with subsection (b) below. Executive’s employment shall terminate effective on
the 30th
12
day after Executive’s receipt of such notice (which
such 30th day shall be deemed to be the date of the Disability) unless, before
such 30th day, Executive shall have resumed the full-time performance of
Executive’s duties.
(b) “Disability” means any
medically determinable physical or mental impairment that has lasted for a
continuous period of not less than six months and can be expected to be
permanent or of indefinite duration, and that renders Executive unable to
perform the duties required under this Agreement in the medical judgment of a
physician mutually selected by Executive and the Company. If Executive and the
Company cannot agree on the physician to be selected, each shall designate a
physician, and the two physicians thus designated shall select the physician to
make the disability determination.
4.2 Death. Executive’s employment
shall terminate automatically upon Executive’s death during the Employment
Period.
4.3 Termination for Cause. During
the Employment Period, the Companies may terminate Executive’s employment for
Cause solely in accordance with all of the substantive and procedural
provisions of this Section 4.3.
(a) Definition of Cause. For
purposes of this section 4.3, “Cause” means any one or more of the following:
(1) Executive’s
commission of a felony or other crime involving fraud, dishonesty or moral
turpitude;
(2) Executive’s
willful or reckless material misconduct in the performance of Executive’s
duties;
(3) Executive’s
habitual neglect of duties; or
(4) Executive’s
willful or intentional breach of this Agreement;
provided, however, that
for purposes of clauses (2), (3) and (4), Cause shall not include any one or
more of the following:
(A) Executive’s
bad judgment
(B) Executive’s
negligence, other than Executive’s habitual neglect of duties or gross
negligence;
(C) any
act or omission believed by Executive in good faith to have been in or not
opposed to the interest of the Company or was required by applicable law or
administrative regulation, in either case without intent of Executive to gain,
directly or indirectly, a profit to which Executive was not legally entitled;
or
(D) failure
to meet performance goals, objectives or measures following good faith efforts
to meet such goals, objectives or measures.
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(b) Procedural Requirements for
Termination for Cause. In connection with any attempted termination for
Cause, each of the following procedures shall be strictly observed:
(1) Board
Meeting. A meeting of the Board shall be held at which shall be discussed
the question of whether Executive’s acts or omissions constitute Cause and, if
so, whether to terminate Executive’s employment for Cause;
(2) Notice
of Consideration. Not less than 30 days prior to the date of the Board
meeting referenced above the Company
shall provide Executive and each member of the Board written notice (a “Notice
of Consideration”) including a detailed description of Executive’s acts or
omissions alleged to constitute Cause, (y) the date, time and location of such
meeting of the Board, and (z) Executive’s rights under clause (3) below;
(3) Opportunity
to Respond. Executive shall have the opportunity to present to the Board a
written response to the Notice of Consideration; and
(4) Cause
Determination. Executive’s employment may be terminated for Cause only if
(x) the acts or omissions specified in the Notice of Consideration did in
fact occur and do constitute Cause as defined in this Section, (y) the Board
makes a specific determination to such effect and to the effect that Executive’s
employment should be terminated for Cause (“Cause Determination”) and (z) the
Company thereafter provides Executive with a Notice of Termination which
specifies in specific detail the basis of such Termination of Employment for
Cause and which Notice shall be consistent with the reasons set forth in the
Notice of Consideration. Any Cause determination shall require the affirmative
vote of a majority of the members of the Board.
(ii) Standard of Review. In the
event that the existence of Cause shall become an issue in any action or
proceeding between the Company and Executive, the Company shall,
notwithstanding the Cause determination referenced in clause (4)(y) of Section
4.3(b), have the burden of establishing that the actions or omissions specified
in the Notice of Consideration did in fact occur and do constitute Cause and
that the Company has satisfied the procedural requirements of Section 4.3(b).
4.4 Good Reason. During the
Employment Period, Executive may terminate his or her employment for Good
Reason in accordance with the substantive and procedural provisions of this
Section 4.4.
(a) Good Reason Definition. For
purposes of this Section 4.4, “Good Reason” means the occurrence of any one or
more of the following actions or omissions during the Employment Period:
14
(1) any
failure to pay Executive’s Base Salary in violation of Section 3.2(a) or any
failure to increase Executive’s Base Salary to the extent, if any, required by
such Section;
(2) any
failure to pay Executive’s Annual Bonus or any reduction in Executive’s bonus
opportunity, in either case in violation of Section 3.2(b);
(3) any
material adverse change in Executive’s position (including offices, titles, or
reporting requirements, but not reporting responsibilities), authority or duties
as contemplated by Section 3.1(a)(i);
(4) any
material reduction in aggregate compensation and benefits as provided in
Article III;
(5) requiring Executive to be based at any office
or location other than the location specified in Section 3.1(a);
(6) any
other material breach of this Agreement by any of the Companies;
(7) any
Termination of Employment by the Companies that purports to be for Cause, but
is not in full compliance with all of the substantive and procedural
requirements of this Agreement (any such purported termination shall be treated
as a Termination of Employment without Cause for all purposes of this
Agreement); or
(8) the
failure at any time of a successor to the Companies explicitly to assume and
agree to be bound by this Agreement.
(b) Determination of Good Reason. Any
reasonable determination by Executive that any of the events specified in
Section 4.4(a) above has occurred and constitutes Good Reason shall be
conclusive and binding for all purposes, unless the Company establishes that
Executive did not have any reasonable basis for such determination.
(c) Notice by Executive. In the
event of any Termination of Employment by Executive for Good Reason, Executive
shall as soon as practicable thereafter notify the Company of the events
constituting such Good Reason by a Notice of Termination. A delay in the
delivery of such Notice of Termination or a failure by Executive to include in
the Notice of Termination any fact or circumstance which contributes to a
showing of Good Reason shall not waive any right of Executive under this
Agreement or preclude Executive from asserting such fact or circumstance in
enforcing rights under this Agreement; provided that no act or omission by the
Company shall qualify as Good Reason if Executive’s Termination of Employment
occurs more than 12 months after Executive first obtains actual knowledge of
such act or omission.
15
Article V.
Company’s Obligations Upon Certain
Terminations of Employment
5.1 Termination During the Employment
Period. If, during the Employment Period the Company terminates Executive’s
employment other than for Cause or Disability, or Executive terminates
employment for Good Reason, the sole obligations of the Companies to Executive
under this Agreement shall be as follows:
(a) Separation Payments. The
Companies shall pay or provide Executive, in addition to all vested rights
arising from Executive’s employment as specified in Article III, the following
benefits, at the times specified below:
(i) Accrued Obligations. The
Current Obligations shall be paid within 30 days of the Termination Date. All
other Accrued Obligations will be paid at the times and in accordance with (x)
the terms and conditions specified in Section 5.1(a)(iv), if applicable, and (y)
in the case of amounts not described in such Section 5.1(a)(iv), the terms and
conditions of the Plan under which such obligations have accrued.
(ii) Prorated Bonus for Year of
Termination. Within 45 days after the Termination Date, Executive’s
Pro-rata Annual Bonus reduced (but not below zero) by the amount of any amount
previously paid to Executive with respect to such Annual Bonus for the fiscal
year in which the Termination Date occurs;
(iii) Prorated LTIP Bonus. Within 45
days after the Termination Date, Executive’s Pro-rata LTIP Bonus reduced (but
not below zero) by the amount of any LTIP Bonus previously paid to Executive
with respect to the LTIP Performance Periods not completed as of the
Termination Date;
(iv) Unvested Plan Benefits, Deferred
Pensions and Pension Enhancements. All amounts previously deferred by, or
accrued to the benefit of, Executive under any Non-Qualified Plans, whether
vested or unvested as of the Termination Date, together with any accrued
earnings thereon, to the extent that such amounts and earnings have not been
previously paid by the Companies (whether pursuant to Section 3.4 or
otherwise), shall be paid to the Executive in accordance with the distribution
provisions of the applicable Plan and any elections as to the form and time of
distributions made by Executive in accordance with the terms of such Plan (or,
if no such elections shall be effective, pursuant to the default distribution
provisions of the applicable Plan). In addition, the Executive shall be
entitled to receive (at the same time and in the same form as such amount would
have been payable if it were part of the benefit accrued under the terms of the
applicable Non-Qualified Plan or, in the case of any additional benefit related
to a Qualified Plan, the Non-Qualified Plan which primarily supplements the
benefit payable under such Non-Qualified Plan):
(1) The
benefit the Executive would have accrued under such defined benefit Plan
(whether a Qualified Plan or a Non-Qualified Plan) if Executive had:
16
(x) become
fully vested in all such previously-unvested benefits,
(y) for
purposes of determining the amount of such benefits, entitlement to early
retirement benefits and all other purposes (but not interest credits under any
cash balance formula) accrued a number of years of service that is three years
greater than the number of years of service actually accrued by Executive, and
attained the age that is three years greater than Executive’s actual age as of
the Termination Date, and
(z) for
purposes of determining final average pay under any final average pay formula
or annual pay credits (but not interest credits) under any cash balance plan
formula, received the lump-sum severance benefits specified in Section 5.1
(a)(v) below as covered compensation in equal monthly installments continuously
over a period of 36 months commencing on the Termination Date (or if earlier,
the date on which Executive ceased to accrue benefits under any such defined
benefit plan).
To the extent that
Executive has elected or would otherwise receive a lump sum payment in respect
of any benefit under any Non-Qualified Plan or Qualified Plan that is a defined
benefit Plan, Executive shall also be paid, within 45 days of the Termination
Date (or, if Executive is a key employee for purposes of Section 409A of the
Code, on the first business day after the six month anniversary of the
Termination Date), the amount, if any, by which the Lump Sum Values of the
benefits payable under each such Qualified Plan or Non-Qualified Plan (as enhanced
as provided above) exceeds the sum of (x) the amount that is actually
payable as a lump sum payment under such defined benefit Plan and (y)
the aggregate amounts previously paid (whether pursuant to Section 3.4 or
otherwise) under such defined benefit Plan.
(v) Multiple
of Salary and Bonus. Within 30 days (or, if necessary, to avoid the
imposition on Executive of any additional tax under Section 409A of the Code,
six months and one-day) after the Termination Date, an amount equal to three
(3.0) times the sum of Executive’s (x) Base Salary and (y) the Target
Annual Bonus, each determined as of the Termination Date; provided, however,
that any reduction in Executive’s Base Salary or Annual Bonus that would
qualify as Good Reason shall be disregarded for purposes of determining the
amount payable under this clause (v); and
17
(vi) Stock
Incentive Awards. On the Termination Date, Executive shall (i) become
fully vested in, and may thereafter exercise in whole or in part, in accordance
with the terms thereof, all outstanding stock options, stock appreciation
rights, or similar incentive awards and (ii) become fully vested in all shares
of restricted stock, performance share, restricted stock units, deferred stock
units and similar awards, regardless of whether such awards would otherwise
vest based upon the passage of time and the continued performance of services,
or upon the achievement of specified performance criteria.
(vii) Life
Insurance Opt Out Income. If Executive has waived all life insurance
benefits in excess of $50,000 in coverage, Executive shall receive a lump sum
amount, within 30 days of the Termination Date, determined using a discount
rate equal to that then prevailing for immediate annuities under the rules of
the Pension Benefit Guaranty Corporation, equal to the present value of 36
monthly opt-out income payments (based on the monthly amount of such opt-out
income payments payable immediately prior to the Effective Date).
(b) Continuation
of Welfare Benefits. Until the third anniversary of the Termination Date or
such later date as any Plan may specify (or such shorter period necessary for
such benefits not to be treated as deferred compensation under Section 409A of
the Code and any guidance thereunder issued by the IRS), the Companies shall
continue to provide to Executive and Executive’s family Welfare Benefits which
are at least as favorable as the most favorable plans applicable to Peer
Executives who are actively employed after the Termination Date and their
families, except and unless Executive has exercised the option to waive all
life insurance benefits over $50,000, in which case Executive will continue to
have $50,000 in life insurance coverage. The cost of such Welfare Benefits to
Executive shall not exceed the cost of such Welfare Benefits to actively
employed Peer Executives as applicable from time to time. Executive’s rights to
elect any post-termination continuation coverage or conversion rights Executive
may have pursuant to applicable law, including continuation coverage required
by Section 4980 of the Code shall run concurrently with the benefits provided
under this Section 5.1(b). Notwithstanding anything herein to the contrary,
continuation of any such Welfare Benefits shall cease if and when Executive is
eligible to receive any similar Welfare Benefit- provided by the Executive’s
subsequent employer (if any).
(c) Outplacement.
The Companies shall pay on behalf of Executive reasonable fees and costs
charged by the outplacement firm selected by the Company to provide
outplacement services to Executive after the Termination Date, within ten
business days of its receipt of an invoice therefor, subject to a maximum of
$30,000.
(d) Indemnification.
The Executive shall be indemnified and held harmless by the Companies to the
greatest extent permitted under applicable Iowa law (or the law of the State of
incorporation of any successor or Surviving Corporation) as the same now exists
or may hereafter be amended (but, in the case of any such amendment, only to
the extent that such amendment permits a Company to provide broader
indemnification than was permitted prior to such amendment) and the Companies’
respective by-laws as such exist on the Agreement Date if the Executive was,
is, or is threatened to be, made a party to any pending, completed or
threatened action, suit, arbitration, alternate dispute
18
resolution mechanism, investigation, administrative
hearing or any other proceeding whether civil, criminal, administrative or
investigative, and whether formal or informal, by reason of the fact that the
Executive is or was, or had agreed to become, a director, officer, employee,
agent, or fiduciary of a Company or any other entity which the Executive is or
was serving at the request of a Company (“Proceeding”), against all
expenses (including all reasonable attorneys’ fees) and all claims, damages.
liabilities and losses incurred or suffered by the Executive or to which the
Executive may become subject for any reason. A Proceeding shall not include any
proceeding to the extent it concerns or relates to a matter described in
Section 7.1(a) (concerning reimbursement of certain costs and expenses). Upon
receipt from Executive of (i) a written request for an advancement of
expenses that Executive reasonably believes will be subject to indemnification
hereunder and (ii) a written undertaking by Executive to repay any such amounts
if it shall ultimately be determined that Executive is not entitled to
indemnification under this Agreement or otherwise, PFG shall advance such
expenses to Executive or pay such expenses for Executive, all in advance of the
final disposition of any such matter.
5.2 Waiver
and Release. Notwithstanding anything herein to the contrary, none of the
Companies shall have any obligation to Executive under Section 5.1 or Article
VI unless and until Executive executes a release and waiver in favor of PFG and
the Companies, in substantially the same form as attached hereto as Exhibit A.
5.3 Termination
by the Company for Cause. If the Companies terminate Executive’s employment
for Cause during the Employment Period, the sole obligations of the Companies
to Executive under Articles III and V shall be to pay Executive, pursuant to
their then effective Plans, a lump-sum cash amount equal to the Current
Obligations, determined as of the Termination Date ,and all other Accrued
Obligations in the form(s) and at the time(s) determined in accordance with the
terms of the applicable Plans. Any LTIP Bonus shall be governed according to
the terms of the LTIP.
5.4 Termination
by Executive Other Than for Good Reason. If Executive elects to retire or
otherwise terminate employment during the Employment Period other than for Good
Reason, Disabilityor death, the
sole obligations of the Companies to Executive under Articles III and V shall
be to pay Executive, pursuant to their then effective Plans, a lump-sum cash
amount equal to the Current Obligations, determined as of the Termination Date,
and all other Accrued Obligations in the form(s) and at the time(s) determined
in accordance with the terms of the applicable Plans. Any LTIP Bonus shall be
governed according to the terms of the LTIP.
5.5 Termination
by the Company for Disability. If the Companies terminate Executive’s
employment by reason of Executive’s Disability during the Employment Period,
the sole obligations of the Companies to Executive under Articles III and V
shall be as follows:
(a) to
pay Executive, pursuant to the Company’s then effective Plans, a lump-sum cash
amount equal to the Current Obligations determined as of the Termination Date,
and all other Accrued Obligations in the form(s) and at the time(s) determined
in accordance with the terms of the applicable Plans, and
19
(b) to
provide Executive disability and other benefits after the Termination Date that
are not less than the most favorable of such benefits then available under
Plans of the Company to any Peer Executive.
Any LTIP Bonus shall be governed according to the
terms of the LTIP.
5.6 409A
Payment Provisions. Notwithstanding anything else in this Agreement to the
contrary, no amount payable under this Agreement shall be paid earlier than six
months and one day following Executive’s Date of Termination if such delay is
necessary to avoid the imposition on Executive of an additional tax under
Section 409A of the Code, and no continuing benefit shall be allowed to be
provided for any period beyond the period for which such benefit can be
provided without subjecting Executive to any additional tax under such Section
409A of the Code. To the extent that a benefit is not allowed to be provided to
Executive (as opposed to being deferred) due to the immediately preceding
sentence, the Company shall pay Executive the economic equivalent of the
benefit (including a gross-up in respect of any benefit which would have been
provided to Executive on a tax-free basis) that can not be provided, in a
single cash payment, as soon as practicable following the earliest date at
which such cash payment can be made without subjecting Executive to an
additional tax under Section 409A of the Code. Whether and the extent to which
any interest or other compensation shall be payable with respect to a delay in
payment due to Section 409A shall be determined in accordance with the terms of
the applicable program under which such payment is to be made, or if the
payment is not made under such a program or such a program is silent on the
question of interest, interest shall be payable based on the then current
short-term applicable federal rate (as determined under Section 1274(d) of the
Code).
5.7 If
upon Death. If Executive’s employment is terminated by reason of Executive’s
death during the Employment Period, the sole obligations of the Companies to
Executive under Articles III and V shall be as follows:
(a) to
pay Executive’s Beneficiary, pursuant to the Company’s then effective Plans, a
lump-sum cash amount equal to the Current Obligations, determined as of the
date of Executive’s death, and all other Accrued Obligations in the form(s) and
at the time(s) determined in accordance with the terms of the applicable Plans;
and
(b) to
provide Executive’s Beneficiary survivor and other benefits that are not less
than the most favorable survivor and other benefits then available under Plans
of the Company to the estates or the surviving families of Peer Executives.
Any LTIP Bonus shall be governed according to the
terms of the LTIP.
Article VI.
Certain Additional Payments by the
Company
6.1 Gross-Up
Payment. If, at any time or from time to time, it shall be determined by
the independent financial accounting firm selected by PFG prior to the
Effective Date (the “Accountants”), that any payment or other benefit
provided to Executive pursuant to Article III or Article V of this Agreement or
otherwise (such payments or benefits hereafter called “Parachute Payments”)
is or will become subject to the excise tax imposed by Section 4999 of
20
the Code or any
similar tax payable under any United States federal, state, local, foreign or
other law (“Excise Taxes”), then, in addition to any other amounts due
the Executive, the Companies shall pay or cause to be paid to Executive a tax
gross-up payment (“Gross-Up Payment”) with respect to all such Excise
Taxes and any Taxes payable on or in respect of the Gross-Up Payment. The
Gross-Up Payment shall be an amount equal to the product of
(a) The
amount of the Excise Taxes (calculated at the effective marginal rates of all
Taxes imposed, whether by federal, state, local, foreign or other law that
constitute Excise Taxes), multiplied by
(b) A
fraction (the “Gross-Up Multiple”), the numerator of which is one (1.0),
and the denominator of which is one (1.0) minus the sum, expressed as a decimal
fraction, of the effective marginal rates of any Taxes (including any Excise
Taxes) imposed on or in respect of the Gross-Up Payment. If different
rates of tax are applicable to various portions of a Gross-Up Payment,
the weighted average of such rates shall be used. For purposes of this section,
Executive shall be deemed to be subject to the highest effective marginal rate
of Taxes in any jurisdiction in which Executive is subject to taxation.
The Gross-Up Payment is intended to compensate
Executive for all such Excise Taxes and any Taxes payable by Executive with
respect to the Gross-Up Payment. The Company shall pay or cause to be
paid the Gross-Up Payment to Executive within ten (10) days of the calculation
of such amount, but in all events by the time Executive is required to make
payment to the IRS of such Excise Taxes.
6.2 Limitation
on Gross-Up Payments.
(a) To
the extent possible, any payments or other benefits to Executive pursuant to
Article III and Article V of this Agreement shall be allocated as consideration
for Executive’s entry into the covenants of Article IX.
(b) Notwithstanding
any other provision of this Article VI, if the aggregate amount of the
Parachute Payments that, but for this Section 6.2, would be payable to
Executive, does not exceed 110% of Safe Harbor Amount (as defined below), then
no Gross-Up Payment shall be made to Executive and the aggregate amount
of Parachute Payments payable to Executive shall be reduced (but not below the
Safe Harbor Amount) to the largest amount which would both (i) not cause
any Excise Tax to be payable by Executive and (ii) not cause any Parachute
Payments to become nondeductible by the Company by reason of Section 280G
of the Code (or any successor provision). For purposes of the preceding
sentence, Executive shall be deemed to be subject to the highest effective
marginal rate of Taxes in any jurisdiction in which Executive is subject to
taxation.
(c) For
purposes of this Agreement, “Safe Harbor Amount” means the product of (i)
2.99 times (ii) Executive’s “base amount” as defined in Section
280G(b)(3) of the Code (or any successor provision thereto) and any regulations
promulgated thereunder.
21
6.3 Additional
Gross-up Amounts. If, for any reason (including pursuant to published
rulings of the IRS or a final judgment of a court of competent jurisdiction),
the Accountants determine that the amount of Excise Taxes payable by Executive
is greater than the amount initially determined pursuant to Section 6.1, then
the Companies shall, subject to Sections 6.2 and 6.4, pay Executive, within ten
(10) days of such determination, or pay to the IRS as required by applicable
law, an amount (which shall also be deemed a Gross-Up Payment) equal to the
product of:
(a) the
sum of (i) such additional Excise Taxes and (ii) any interest, penalties,
expenses or other costs incurred by Executive as a result of having taken a
position in accordance with a determination made pursuant to Section 6.1 or
6.4, multiplied by
(b) the
Gross-Up Multiple.
6.4 Amount
Increased or Contested.
(a) Executive
shall notify the Company in writing (an “Executive’s Notice”) of any
claim by the IRS or other taxing authority (an “IRS Claim”) that, if
successful, would require the payment by Executive of Excise Taxes in respect
of Parachute Payments in an amount in excess of the amount of such Excise Taxes
determined in accordance with Section 6.1. Executive’s Notice shall include the
nature and amount of such IRS Claim, the date on which such IRS Claim is due to
be paid (the “IRS Claim Deadline”), and a copy of all notices and other
documents or correspondence received by Executive in respect of such IRS Claim.
Executive shall give the Executive’s Notice as soon as practicable, but no
later than the earlier of (i) 10 days after Executive first obtains actual
knowledge of such IRS Claim or (ii) five days before the IRS Claim Deadline;
provided, however, that any failure to give such Executive’s Notice shall
affect the Company’s obligations under this Article only to the extent that the
Company is actually prejudiced by such failure. If at least one business day
before the IRS ClaimDeadline the
Company shall:
(i) deliver
to Executive a written certificate from the Accountants (“Company
Certificate”) to the effect that, notwithstanding the IRS Claim, the amount
of Excise Taxes, interest or penalties payable by Executive is either zero or
an amount less than the amount specified in the IRS Claim,
(ii) pay
to Executive, or to the IRS as required by applicable law, an amount (which
shall also be deemed a Gross-Up Payment) equal to difference between the
product of (x) amount of Excise Taxes, interest and penalties specified in the
Company Certificate, if any, multiplied by (y) the Gross-Up Multiple, less the
portion of such product, if any, previously paid to Executive by the Companies,
and
(iii) direct
Executive pursuant to Section 6.4(d) to contest the balance of the IRS Claim,
then Executive shall pay
only the amount, if any, of Excise Taxes, interest and penalties specified in
the Company Certificate. In no event shall Executive pay an IRS Claim
22
earlier than 30 business
days after having given an Executive’s Notice to the Company (or, if sooner,
the IRS Claim Deadline).
(b) At
any time after the payment by Executive of any amount of Excise Taxes, other
taxes or related interest or penalties in respect of Parachute Payments
(including any such amount equal to or less than the amount of such Excise
Taxes specified in any Company Certificate, or IRS Claim), any of the Companies
may in its discretion require Executive to pursue a claim for a refund (a “Refund
Claim”) of all or any portion of such Excise Taxes, other taxes, interest
or penalties as may be specified by the Company in a written notice to
Executive.
(c) If
any Company notifies Executive in writing that such Company desires Executive
to contest an IRS Claim or to pursue a Refund Claim, Executive shall:
(i) give
such Company all information that it reasonably requests in writing from time
to time relating to such IRS Claim or Refund Claim, as applicable,
(ii) take
such action in connection with such IRS Claim or Refund Claim (as applicable)
as such Company reasonably requests in writing from time to time, including
accepting legal representation with respect thereto by an attorney selected by
such Company, subject to the approval of Executive (which approval shall not be
unreasonably withheld or delayed),
(iii) cooperate
with such Company in good faith to contest such IRS Claim or pursue such Refund
Claim, as applicable,
(iv) permit
such Company to participate in any proceedings relating to such IRS Claim or
Refund Claim, as applicable, and
(v) contest
such IRS Claim or prosecute Refund Claim (as applicable) to a determination
before any administrative tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as such Company may from time to time determine
in its discretion.
Such Company shall
control all proceedings in connection with such IRS Claim or Refund Claim (as
applicable) and in its discretion may cause Executive to pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with the
Internal Revenue Service or other taxing authority in respect of such IRS Claim
or Refund Claim (as applicable); provided that (i) any extension of the
statute of limitations relating to payment of taxes for the taxable year of
Executive relating to the IRS Claim is limited solely to such IRS Claim, (ii)
such Company’s control of the IRS Claim or Refund Claim (as applicable) shall
be limited to issues with respect to which a Gross-Up Payment would be payable,
and (iii) Executive shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service or other taxing
authority.
(d) Such
Company may at any time in its discretion direct Executive to (i) contest
the IRS Claim in any lawful manner or (ii) pay the amount specified in
an IRS
23
Claim and pursue a Refund Claim; provided, however,
that if any Company directs Executive to pay an IRS Claim and pursue a Refund Claim,
such Company shall advance the amount of such payment to Executive on an
interest-free basis and shall indemnify Executive, on an after-tax basis, for
any Excise Tax or other Taxes, including related interest or penalties, imposed
with respect to such advance.
(e) The
Company shall pay directly all legal, accounting and other costs and expenses
(including additional interest and penalties) incurred by such Company or
Executive in connection with any IRS Claim or Refund Claim, as applicable, and
shall indemnify Executive, on an after-tax basis, for any Excise Tax other
Taxes, including related interest and penalties, imposed as a result of such
payment of costs and expenses.
6.5 Refunds.
If, after the receipt by Executive
or the IRS of any payment or advance of Excise Taxes or other Taxes by any
Company pursuant to this Article, Executive receives any refund with respect to
such Excise Taxes, Executive shall (subject to such Company’s complying with
any applicable requirements of Section 6.4) promptly pay such Company the
amount of such refund (together with any interest paid or credited thereon
after taxes applicable thereto). If, after the receipt by Executive of an
amount advanced by a Company pursuant to Section 6.4 or receipt by the IRS of
an amount paid by a Company on behalf of the Executive pursuant to Section 6.4,
a determination is made that Executive shall not be entitled to any refund with
respect to such claim and such Company does not notify Executive in writing of
its intent to contest such determination within 30 days after such Company
receives written notice of 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. Any contest of a denial of refund shall be controlled by Section
6.4(d).
Article VII.
Expenses, Interest and Dispute
Resolution
7.1 Legal
Fees and Other Expenses.
(a) If
Executive incurs legal fees or other expenses (including expert witness and
accounting fees and arbitration costs and expenses under Section 6.3) in an
effort to secure, preserve, or obtain benefits under this Agreement, the
Companies shall reimburse Executive on a
current basis (in accordance with Section 7.1(b)) for such fees and expenses
and provide a gross-up payment related to any Taxes arising in respect of such
reimbursement.
(b) Reimbursement
of legal fees and expenses and gross-up payments related to such legal fees
shall be made monthly within 10 days after Executive’s written submission of a
request for reimbursement together with evidence that such fees and expenses
were incurred.
(c) If
Executive does not prevail (after exhaustion of all available judicial
remedies) in respect of a claim by Executive or by any Company hereunder, and
the Companies establish that Executive had no reasonable basis for Executive’s
claim hereunder, or for Executive’s response to any Company’s claim hereunder,
or that
24
Executive acted in bad faith, no further reimbursement
for legal fees and expenses shall be due to Executive in respect of such claim
and Executive shall refund any amounts previously reimbursed hereunder with
respect to such claim.
7.2 Interest.
If any amount due to Executive under this Agreement is not paid within ten
business days after such amount first became due and owing, interest shall
accrue on such amount from the date it became due and owing until the date of
payment at an annual rate equal to 300 basis points above the base commercial
lending rate published in The Wall Street Journal in
effect from time to time during the period of such nonpayment.
7.3 Binding
Arbitration. Any dispute, controversy or claim arising out of or in connection
with or relating to this Agreement or any breach or alleged breach thereof, or
any benefit or alleged benefit hereunder, shall be submitted to and settled by
binding arbitration in Des Moines, Iowa, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association. Any dispute,
controversy or claim submitted for resolution shall be submitted to three (3)
arbitrators. The Company involved in the dispute, controversy or claim, or PFG
if more than one Company is so involved, shall select one arbitrator, the
Executive shall select one arbitrator and the third arbitrator shall be
selected by the first two arbitrators. Any award rendered shall be final and
conclusive upon the parties and a judgment thereon may be entered in the highest
court of a forum, state or federal, having jurisdiction. The expenses of the
arbitration shall be borne by the Companies, except that Executive’s expenses
shall be handled according to Section 7.1. No arbitration shall be commenced
after the date when institution of legal or equitable proceedings based upon
such subject matter would be barred by the applicable statute of limitations. Notwithstanding
anything to the contrary contained in this Section 7.3 or elsewhere in this
Agreement, either party may bring an action in the District Court of Polk
County, or the United States District Court for the Southern District of Iowa,
if jurisdiction there lies, in order to maintain the status quo ante of the
parties. The “status quo ante” is defined as the last peaceable, uncontested
status between the parties. However, neither the party bringing the action nor
the party defending the action thereby waives its right to arbitration of any
dispute, controversy or claim arising out of or in connection or relating to
this Agreement. Notwithstanding anything to the contrary contained in this
Section 7.3 or elsewhere in this Agreement, either party may seek relief in the
form of specific performance, injunctive or other equitable relief in order to
enforce the decision of the arbitrators. The parties agree that in any
arbitration commenced pursuant to this Agreement, the parties shall be entitled
to such discovery (including depositions, requests for the production of
documents and interrogatories) as would be available in a federal district
court pursuant to Rules 26 through 37 of the Federal Rules of Civil Procedure. In
the event that either party fails to comply with its discovery obligations
hereunder, the arbitrator(s) shall have full power and authority to compel disclosure
or impose sanctions to the full extent of Rule 37 of the Federal Rules of Civil
Procedure.
Article VIII.
No Set-off or Mitigation
8.1 No
Set-off by Company. Executive’s right to receive when due the payments and
other benefits provided for under this Agreement is absolute, unconditional and
subject to no setoff, counterclaim or legal or equitable defense. Time is of
the essence in the performance by the Company of its obligations under this
Agreement. Any claim which the Company may have
25
against Executive, whether for a breach of this
Agreement or otherwise, shall be brought in a separate action or proceeding and
not as part of any action or proceeding brought by Executive to enforce any
rights against the Company under this Agreement.
8.2 No
Mitigation. Executive shall not have any duty to mitigate the amounts
payable by the Company under this Agreement by seeking new employment or
self-employment following termination. Except as specifically otherwise
provided in this Agreement, all amounts payable pursuant to this Agreement
shall be paid without reduction regardless of any amounts of salary,
compensation or other amounts which may be paid or payable to Executive as the
result of Executive’s employment by another employer or self-employment.
Article IX.
Confidentiality and Noncompetition
9.1 Confidential
Information. The Executive acknowledges that in the course of performing
services for the Companies and Affiliates, he may create, develop, learn of,
receive or contribute non-public information, ideas, processes, methods,
designs, devices, inventions, data, models and other information relating to
the Companies and their Affiliates or their products, services, businesses,
operations, employees or customers, whether in tangible or intangible form, and
that the Companies or their Affiliates desire to protect and keep secret and
confidential, including trade secrets and information from third parties that
the Companies or their Affiliates are obligated to keep confidential (“Confidential
Information”). Confidential Information shall not include: (i) information
that is or becomes generally known through no fault of Executive; (ii)
information received from a third party outside of the Companies that was
disclosed without a breach of any confidentiality obligation; or (iii)
information approved for release by written authorization of any Company. The
Executive recognizes that all such Confidential Information is the sole and
exclusive property of the Companies and their Affiliates, and that disclosure
of Confidential Information would cause damage to the Companies and their
Affiliates. The Executive agrees that, except (i) as required by the
duties of his employment with any of the Companies or any of their and/or its
Affiliates, (ii) in connection with enforcing the Executive’s rights
under this Agreement or (iii) if compelled by a court or governmental
agency, he will not, without the consent of PFG, willfully disseminate or
otherwise disclose, directly or indirectly, any Confidential Information
obtained during his employment with any of the Companies or their Affiliates,
and will take all necessary precautions to prevent disclosure, to any
unauthorized individual or entity inside or outside the Company, and will not
use the Confidential Information or permit its use for the benefit of Executive
or any other person or entity other than the Companies or the Affiliates;
provided that, in the circumstances referenced in clause (iii), no exception shall
apply unless prior written notice of such disclosure is given to PFG. These
obligations shall commence on the Agreement Date and shall continue during and
after the termination of Executive’s employment (whether or not after the
Effective Date).
9.2 Non-Competition.
During the period beginning on the Agreement Date and ending at the date
specified below, Executive shall not at any time, directly or indirectly, in
any capacity:
(a) engage
or participate in, become employed by, serve as a director of, or render
advisory or consulting or other services in connection with, any Competitive
26
Business; provided, however, that after the
Termination Date this Section 9.2 shall not preclude Executive from being an
employee of, or consultant to, any business unit of a Competitive Business if (i) such business unit does not qualify as
a Competitive Business in its own right and (ii) Executive does not have any
direct or indirect involvement in, or responsibility for, any operations of
such Competitive Business that cause it to qualify as a Competitive Business.
(b) make
or retain any financial investment, whether in the form of equity or debt, or
own any interest, in any Competitive Business. Nothing in this subsection
shall, however, restrict Executive from making an investment in any Competitive
Business if such investment does not (i) represent more than 1% of the
aggregate market value of the outstanding capital stock or debt (as applicable)
of such Competitive Business, (ii) give Executive any right or ability,
directly or indirectly, to control or influence the policy decisions or
management of such Competitive Business, and (iii) create a conflict of
interest between Executive’s duties under this Agreement and his interest in
such investment.
Executive’s
obligations to the Companies under this Section 9.2 shall expire on the first
to occur of any of the following three events:
(x) the
expiration of this Agreement prior to the occurrence of an Effective Date,
(y) the
first anniversary of Executive’s Termination Date if (I) Executive’s employment
by the Company other than for Disability or Cause or (II) Executive’s
employment is terminated by Executive for Good Reason, and Executive receives
benefits (other than the payment of the Accrued Obligations) under Article V,
or
(z) Executive’s
Termination Date occurs other than as a result of a termination described in
clause (y) of this Section 9.2.
9.3 Non-Solicitation.
During the period beginning on the Agreement Date and ending on the first
anniversary of any Termination Date, whether or not after an Effective Date or
the expiration of the term of this Agreement, Executive shall not, directly or
indirectly:
(a) other
than in connection with the good-faith performance of his duties as an officer
of any Company, encourage any employee or agent of any Company to terminate his
or her relationship with any Company;
(b) employ,
engage as a consultant or adviser, or solicit the employment or engagement as a
consultant or adviser, of any employee or agent of any Company (other than by
any Company or its Affiliates), or cause or encourage any Person to do any of
the foregoing;
(c) establish
(or take preliminary steps to establish) a business with, or encourage others to
establish (or take preliminary steps to establish) a business with, any
employee or agent of any Company; or
27
(d) interfere
with the relationship of any Company with, or endeavor to entice away from any
Company, any Person who or which at any time during the period commencing one
year prior to the date of determination (or, if earlier, the Executive’s
Termination Date) was or is a material customer or material supplier of, or
maintained a material business relationship with, such Company.
To the
extent Executive is bound by any similar restrictions on solicitation under any
other agreement entered into in connection with any compensatory grant or
award, or under the terms of any compensatory plan, Executive and the Companies
hereby agree that such other restrictions shall be deemed amended or otherwise
modified to be coextensive with the time period during which the restrictions
of this Section 9.3 are applicable. The immediately preceding sentence shall
not apply to any such restrictions applicable under the terms of any individual
employment agreement or individually negotiated separation or other termination
agreement.
9.4 Intellectual
Property. During the term of this Agreement, Executive shall disclose
immediately to the Companies all ideas, inventions and business plans that he
makes, conceives, discovers or develops alone or with others during the course
of his employment with the Companies, including any inventions, modifications,
discoveries, developments, improvements, computer programs, processes, products
or procedures (whether or not protectable upon application by copyright,
patent, trademark, trade secret or other proprietary rights) (“Work Product”) that: (i) relate to the business of the
Companies or any customer or supplier to the Companies or any of the products
or services being developed, manufactured, sold or otherwise provided by the
Companies or that may be used in relation therewith; or (ii) result
from tasks assigned to Executive by the Companies; or (iii) result
from the use of the premises or personal property (whether tangible or
intangible) owned, leased or contracted for by the Companies. Executive agrees
that any Work Product shall be the property of the Companies and, if subject to
copyright, shall be considered a “work made for hire” within the meaning of the
Copyright Act of 1976, as amended (the “Act”). If and to the extent that
any such Work Product is found as a matter of law not to be a “work made for
hire” within the meaning of the Act, Executive expressly assigns to the
Companies all right, title and interest in and to the Work Product, and all
copies thereof, and the copyright, patent, trademark, trade secret and all
their proprietary rights in the Work Product, without further consideration,
free from any claim, lien for balance due or rights of retention thereto on the
part of Executive.
(a) Each
of the Companies hereby notifies Executive that the preceding paragraph does
not apply to any inventions for which no equipment, supplies, facility, or
trade secret information of any of the Companies was used and which was
developed entirely on the Executive’s own time, unless: (i) the invention relates (a) to
the business of any of the Companies, or (b) to actual or demonstrably
anticipated research or development of any of the Companies, or (ii) the
invention results from any work performed by the Executive for any of the
Companies.
(b) Executive
agrees that upon disclosure of Work Product to the Companies, Executive will,
during his employment and at any time thereafter, at the request and cost of
the Companies, execute all such documents and perform all such acts any of the
Companies or any of their duly authorized agents may reasonably require: (i) to apply for, obtain and vest in the
name of one or more of the Companies alone (unless the
28
Companies otherwise direct) letters patent, copyrights
or other analogous protection in any country throughout the world, and when so
obtained or vested to renew and restore the same; and (ii) to defend any
opposition proceedings in respect of such applications and any opposition
proceedings or petitions or applications for revocation of such letters patent,
copyright or other analogous protection.
(c) In
the event that all of the Companies are unable, after reasonable effort, to
secure Executive’s signature on any letters patent, copyright or other
analogous protection relating to Work Product, whether because of Executive’s
physical or mental incapacity or for any other reason whatsoever, Executive
hereby irrevocably designates and appoints each of the Companies and each of
their duly authorized officers and agents as his agent and attorney-in-fact, to
act for and on his behalf to execute and file any such application or
applications and to do all other lawfully permitted acts to further the
prosecution and issuance of letters patent, copyright and other analogous
protection with the same legal force and effect as if personally executed by
Executive.
9.5 Reasonableness
of Restrictive Covenants.
(a) Executive
acknowledges that the covenants contained in Sections 9.1, 9.2, 9.3 and 9.4 are
reasonable in the scope of the activities restricted, the geographic area
covered by the restrictions, and the duration of the restrictions, and that
such covenants are reasonably necessary to protect the legitimate interests of
each of the Companies in their respective Confidential Information and their
relationships with their employees, customers and suppliers. Executive further
acknowledges such covenants are essential elements of this Agreement and that,
but for such covenants, the Company would not have entered into this Agreement.
(b) Each
of the Companies and Executive have each consulted with their respective legal
counsel and have been advised concerning the reasonableness and propriety of
such covenants. Executive acknowledges that his observance of the covenants
contained in Sections 9.1, 9.2, 9.3 and 9.4 will not deprive him of the ability
to earn a livelihood or to support his dependents.
9.6 Right
to Injunction; Survival of Undertakings.
(a) In
recognition of the confidential nature of the Confidential Information, and in
recognition of the necessity of the limited restrictions imposed by Sections
9.1, 9.2, 9.3 and 9.4 the parties agree that it would be impossible to measure
solely in money the damages which any of the Companies would suffer if
Executive were to breach any of his obligations under such Sections. Executive
acknowledges that any breach of any provision of such Sections would
irreparably injure the Companies. Accordingly, Executive agrees that if he
breaches any of the provisions of such Sections, each of the Companies shall be
entitled, in addition to any other remedies to which such Company may be
entitled under this Agreement or otherwise, to an injunction to be issued by a
court of competent jurisdiction, to restrain any breach, or threatened breach,
of such provisions, and Executive hereby waives any right to assert any claim
or defense that such Company has an adequate remedy at law for any such breach.
29
(b) If
a court determines that any of the covenants included in this Article IX is
unenforceable in whole or in part because of such covenant’s duration or
geographical or other scope, such court shall have the power to modify the
duration or scope of such provision, as the case may be, so as to cause such
covenant as so modified to be enforceable.
(c) Except
as otherwise expressly provided in this Article IX, the provisions of this
Article IX shall survive any Termination of Employment without regard to (i)
the reasons for such termination or (ii) the expiration of the term of this
Agreement.
Article X.
Non-Exclusivity of Rights
10.1 Waiver
of Certain Other Rights. To the extent that lump sum cash severance
payments are made to Executive pursuant to Article V, Executive hereby waives
the right to receive severance payments or severance benefits under any other
Plan or agreement with any of the Companies; provided, however, that if
Executive’s employment was terminated prior to the Effective Date but is deemed
to terminate after the Effective Date pursuant to Section 1.3, Executive shall
be entitled to retain any severance payments or benefits paid in connection
with such termination, but such amounts shall apply as an offset against the
benefits payable under Article V hereof.
10.2 Other
Rights. Except as expressly provided in Section 10.1 or elsewhere in this
Agreement, this Agreement shall not prevent or limit Executive’s continuing or
future participation in any benefit, bonus, incentive or other Plans provided
by the Company and for which Executive may qualify, nor shall this Agreement
limit or otherwise affect such rights as Executive may have under any other
agreements with any of the Companies. Amounts which are vested benefits or
which Executive is otherwise entitled to receive under any Plan and any other
payment or benefit required by law at or after the Termination Date shall be
payable in accordance with such Plan or applicable law except as expressly
modified by this Agreement.
10.3 No
Right to Continued Employment. Nothing in this Agreement shall guarantee
the right of Executive to continue in employment, and each of the Companies
retains the right to terminate the Executive’s employment at any time for any
reason or for no reason.
Article XI.
Miscellaneous
11.1 No
Assignability. This Agreement is personal to Executive and without the
prior written consent of each of the Companies shall not be assignable by
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by Executive’s legal
representatives.
11.2 Successors.
This Agreement shall inure to the benefit of and be binding upon each of the
Companies and its respective successors and assigns. Each of the Companies will
require any successor (whether direct or indirect, by purchase, merger,
consolidation or
30
otherwise) to all
or substantially all of the business or assets of such Company to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that such Company would have been required to perform it if no such
succession had taken place. Any successor to the business or assets of any of
the Companies which assumes or agrees to perform this Agreement by operation of
law, contract, or otherwise shall be jointly and severally liable under this
Agreement with such Company as if such successor were the Company.
11.3 Payments
to Beneficiary. If Executive dies before receiving amounts to which
Executive is entitled under this Agreement, such amounts shall be paid in a
lump sum to one or more beneficiaries designated in writing by Executive under
the Companies’ group life insurance plan (each, a “Beneficiary”). If no
such beneficiary is so designated, the Executive’s estate shall be his or her
Beneficiary. If Executive participates in more than one group life insurance
plan, Executive’s Beneficiary shall be the person(s) named as his or her
beneficiary under whichever such plan provides Executive the largest amount of
insurance coverage.
11.4 Non-Alienation
of Benefits. Benefits payable under this Agreement shall not be subject in
any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, execution or levy of any kind, either
voluntary or involuntary, before actually being received by Executive, and any
such attempt to dispose of any right to benefits payable under this Agreement
shall be void.
11.5 Severability.
If any one or more Articles, Sections or other portions of this Agreement are
declared by any court or governmental authority to be unlawful or invalid, such
unlawfulness or invalidity shall not serve to invalidate any Article, Section
or other portion not so declared to be unlawful or invalid. Any Article,
Section or other portion so declared to be unlawful or invalid shall be
construed so as to effectuate the terms of such Article, Section or other
portion to the fullest extent possible while remaining lawful and valid.
11.6 Amendments.
Except as expressly provided in the second sentence hereof, this Agreement may
not be amended or modified except by written instrument executed by or on
behalf of each of the Companies and Executive. Notwithstanding the foregoing,
the Board or any duly authorized committee thereof may amend this Agreement at
any time or from time to time, in any way (other than an amendment that has the
effect of terminating this Agreement other than in the manner specified in
Article I) without the consent of Executive, but no such amendment shall take
effect until the first anniversary after it is approved or adopted by the Board
or such committee and shall be of no force and effect (unless the Executive
otherwise elects in writing) if either (i) the Effective Date or (ii)
a Pre-Change of Control Event occurs prior to the time such amendment would
otherwise have become effective; provided, however, that if the Board
determines in good faith that a Pre-Change of Control Event will not result in
a Change of Control, such an amendment shall become effective as of the later
of (x) the date the Board makes that determination or (ii) the
first anniversary of the date such amendment was adopted.
11.7 Notices.
All notices and other communications under this Agreement shall be in writing
and delivered by hand, by nationally-recognized delivery service that promises
overnight delivery, or by first-class registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
31
If to Executive, to Executive at his most recent home
address on file with
the Companies.
or to such other address as either party shall have
furnished to the other in writing. Notice and communications shall be effective
when actually received by the addressee.
11.8 Counterparts.
This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original, but all of which together constitute one and the same
instrument.
11.9 Governing
Law. This Agreement shall be interpreted and construed in accordance with
the laws of the State of Iowa, without regard to its choice of law principles.
11.10 Captions.
The captions of this Agreement are not a part of the provisions hereof and
shall have no force or effect.
11.11 Number
and Gender. Wherever appropriate, the singular shall include the plural,
the plural shall include the singular, and the masculine shall include the
feminine.
11.12 Tax
Withholding. The Companies may withhold from any amounts payable under this
Agreement any Taxes that are required to be withheld pursuant to any applicable
law or regulation and may report all such amounts payable to such authority as
is required by any applicable law or regulation.
11.13 Waiver.
Executive’s failure to insist upon strict compliance with any provision of this
Agreement shall not be deemed a waiver of such provision or any other provision
of this Agreement. A waiver of any provision of this Agreement shall not be
deemed a waiver of any other provision, and any waiver of any default in any
such provision shall not be deemed a waiver of any later default thereof or of
any other provision.
11.14 Joint
and Several Liability. The obligations of the Companies (and of any
successor to any of the Companies) to Executive under this Agreement shall be
joint and several.
11.15 Entire
Agreement. This Agreement contains the entire understanding of each of the
Companies and Executive with respect to its subject matter, and supercedes any
prior agreement whether written or oral, dealing with the subject matter hereof
including, without limitation, the Prior Agreement.
32
IN
WITNESS WHEREOF, Executive, Principal Financial Group, Inc., Principal
Financial Services, Inc., and Principal Life Insurance Company have executed
this Change of Control Employment Agreement as of the date first above written.
This
agreement, release and waiver (the “Release”), made as of the
day of ,
, is made by and among
Principal Financial Group, Inc., a Delaware corporation, Principal Financial
Services, Inc., an Iowa corporation, Principal Life Insurance Company, an Iowa
corporation (collectively “Company”), and
(“Executive”).
WHEREAS,
the Company and Executive have entered into a Change of Control Employment
Agreement dated (“Agreement”);
NOW
THEREFORE, in consideration for receiving benefits and severance pursuant to
the Agreement, and in consideration of the representations, covenants and
mutual promises set forth in this Release, the parties agree as follows:
1. Release.
Except with respect to the Company’ obligations under the Agreement, the
Executive, on behalf of himself and Executive’s heirs, executors, assigns,
representatives, agents, legal representatives, and personal representatives,
hereby releases, acquits and forever discharges the Company, its agents,
subsidiaries, affiliates, respective officers, directors, agents, servants,
employees, attorneys, shareholders, successors, assigns and affiliates, of and
from any and all claims, liabilities, demands, causes of action, costs,
expenses, attorneys fees, damages, indemnities and obligations of every kind and
nature, in law, equity, or otherwise, known and unknown, suspected and
unsuspected, disclosed and undisclosed, arising out of or in any way related to
agreements, events, acts or conduct at any time prior to the day prior to
execution of this Release, including but not limited to: any and all such
claims and demands directly or indirectly arising out of or in any way
connected with the Executive’s employment with the Company; the Executive’s
termination of employment with the Company; claims or demands related to
salary, bonuses, commissions, stock, stock options, or any other ownership
interests in the Company, vacation pay, fringe benefits, expense
reimbursements, sabbatical benefits, severance benefits, or any other form of
compensation or equity; claims pursuant to any federal, state, local law,
statute, ordinance or cause of action including, but not limited to, the
federal Civil Rights Act of 1964, as amended; the federal Age Discrimination in
Employment Act of 1967, as amended; the federal Americans with Disabilities Act
of 1990; tort law; contract law; wrongful discharge; discrimination; fraud;
defamation; harassment; emotional distress; or breach of the implied covenant
of good faith and fair dealing. This Release does not apply to any benefits to which
the Executive may be entitled under a Company sponsored tax qualified
retirement or savings plan.
2. Release
by Company. Except with respect to the Executive’s obligations under the
Agreement, including but not limited to the covenants entered into pursuant to
the eligibility requirements of the Agreement, the Company, and its agents,
subsidiaries, attorneys, representatives, successors, and assigns, hereby
release, acquit and forever discharge the Executive, and Executive’s heirs,
executors, assigns, representatives, agents, legal representatives, and
personal representatives, of and from any and all claims, liabilities, demands,
causes of action, costs, expenses, attorneys fees, damages,
indemnities and
obligations of every kind and nature, in law, equity, or otherwise, known and
unknown, suspected and unsuspected, disclosed and undisclosed, arising out of
or in any way related to agreements, events, acts or conduct at any time prior
to the day prior to execution of this Release, including but not limited
to: any and all claims and demands
directly or indirectly arising out of or in any way connected with the
Executive’s employment with the Company.
3. No
Inducement. Executive agrees that no promise or inducement to enter into
this Release has been offered or made except as set forth in this Release and
the Agreement, that the Executive is entering into this Release without any
threat or coercion and without reliance or any statement or representation made
on behalf of the Company or by any person employed by or representing the
Company, except for the written provisions and promises contained in this
Release and the Agreement.
4. Damages.
The parties agree that damages incurred as a result of a breach of this Release
will be difficult to measure. It is, therefore, further agreed that, in
addition to any other remedies, equitable relief will be available in the case
of a breach of this Release. It is also agreed that, in the event of a breach
of this Release by Executive, the Company may withhold, retain, or require
reimbursement of all or any portion of the benefits and payments under the Agreement.
5. Advice of Counsel; Time to Consider; Revocation. Executive acknowledges the following:
(a) Executive
has read this Release, and understands its legal and binding effect. Executive
is acting voluntarily and of Executive’s own free will in executing this
Release.
(b) Executive
has been advised to seek and has had the opportunity to seek legal counsel in
connection with this Release.
(c) Executive
was given the opportunity to consider the terms of this Release for at least 21
days before signing it. To the extent that Executive executes this Release
prior to the expiration of such 21-day period, Executive has done so knowingly
and voluntarily, and has expressly waived the right to consider this Release
for the full 21-day period.
Executive
understands that, if Executive signs the Release, Executive may revoke it
within seven days after signing it, and that Executive’s right to revoke this
Release during such period may not be waived or otherwise curtailed. Executive
understands that this Release will not be effective until after the seven-day
period has expired.
6. Reaffirmation
of Covenants. Executive agrees, understands and acknowledges that, to the
extent expressly provided in Article IX of the Agreement, Executive is bound by
certain covenants in favor of the Company with regard to confidential
information, non-solicitation and intellectual property, which continue in full
force and effect as specified in the Agreement following Executive’s
termination of employment with the Company and the execution of this Release. Executive
agrees, understands and acknowledges that
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the non-competition covenant
contained in Section 9.2 of the Agreement shall continue in full force and
effect the first anniversary of the date Executive’s employment terminates.
7. Severability.
If all or any part of this Release is declared by any court or governmental
authority to be unlawful or invalid, such unlawfulness or invalidity shall not
invalidate any other portion of this Release. Any section or a part of a
section declared to be unlawful or invalid shall, if possible, be construed in
a manner which will give effect to the terms of the section to the fullest
extent possible while remaining lawful and valid.
8. Amendment.
This Release shall not be altered, amended, or modified except by written
instrument executed by the Companies and the Executive. A waiver of any portion
of this Release shall not be deemed a waiver of any other portion of this
Release.
9. Counterparts.
This Release may be executed in several counterparts, each of which shall be
deemed to be an original, but all of which together will constitute one and the
same instrument.
10. Headings.
The headings of this Release are not part of the provisions hereof and shall
not have any force or effect.
11. Applicable
Law. The provisions of this Release shall be interpreted and construed in
accordance with the laws of the State of Iowa without regard to its choice of
law principles.
IN
WITNESS WHEREOF, the parties have executed this Release as of the dates
specified below.
EXECUTIVE
DATE:
PRINCIPAL FINANICIAL GROUP, INC.
By:
Title:
DATE:
PRINCIPAL FINANCIAL SERVICES, INC.
By:
Title:
Date:
3
PRINCIPAL LIFE INSURANCE COMPANY
By:
Title:
DATE:
4
Dates Referenced Herein and Documents Incorporated by Reference
