SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended February 24, 2001
-------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________________ to ______________________
Commission file number 1-6403
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WINNEBAGO INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
IOWA 42-0803978
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 152, Forest City, Iowa 50436
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (641) 585-3535
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No ___.
There were 20,525,160 shares of $.50 par value common stock outstanding on
April 6, 2001.
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
INDEX TO REPORT ON FORM 10-Q
Page Number
-----------
PART I. FINANCIAL INFORMATION:
Consolidated Balance Sheets (Interim period information
unaudited) 1 & 2
Unaudited Consolidated Statements of Income 3
Unaudited Consolidated Condensed Statements of Cash Flows 4
Unaudited Condensed Notes to Consolidated Financial
Statements 5 - 7
Management's Discussion and Analysis of Financial Condition
and Results of Operations 8 - 11
PART II. OTHER INFORMATION 12- 14
Part I Financial Information
Item 1.
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
FEBRUARY 24, AUGUST 26,
ASSETS 2001 2000
- -------------------------------------------------- ------------ ----------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 58,034 $ 51,443
Receivables, less allowance for doubtful
accounts ($1,100 and $1,168, respectively) 17,605 32,045
Dealer financing receivables, less allowance
for doubtful accounts ($33 and $27, respectively) 37,867 32,696
Inventories 89,160 85,707
Prepaid expenses 4,201 3,952
Deferred income taxes 7,675 7,675
-------- --------
Total current assets 214,542 213,518
-------- --------
PROPERTY AND EQUIPMENT, at cost
Land 1,138 1,138
Buildings 45,920 45,219
Machinery and equipment 81,067 78,099
Transportation equipment 5,504 5,414
-------- --------
133,629 129,870
Less accumulated depreciation 87,113 84,415
-------- --------
Total property and equipment, net 46,516 45,455
-------- --------
INVESTMENT IN LIFE INSURANCE 21,636 21,028
-------- --------
DEFERRED INCOME TAXES, NET 20,635 20,635
-------- --------
OTHER ASSETS 7,814 8,050
-------- --------
TOTAL ASSETS $311,143 $308,686
======== ========
See Unaudited Condensed Notes to Consolidated Financial Statements
1
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
FEBRUARY 24, AUGUST 26,
LIABILITIES AND STOCKHOLDERS' EQUITY 2001 2000
- ------------------------------------------------------------------- --------
(Unaudited)
CURRENT LIABILITIES
Accounts payable, trade $ 21,478 $ 26,212
Income tax payable 13,917 10,381
Accrued expenses:
Insurance 5,109 5,384
Product warranties 7,230 8,114
Accrued compensation 9,958 13,924
Promotional 6,354 3,145
Other 3,855 4,675
-------- --------
Total current liabilities 67,901 71,835
-------- --------
POSTRETIREMENT HEALTH CARE AND DEFERRED 63,610 61,942
COMPENSATION BENEFITS -------- --------
STOCKHOLDERS' EQUITY
Capital stock, common, par value $.50; authorized
60,000,000 shares: issued 25,882,000 and 25,878,000
shares, respectively 12,941 12,939
Additional paid-in capital 21,822 21,994
Reinvested earnings 208,225 195,556
-------- --------
242,988 230,489
Less treasury stock, at cost 63,356 55,580
-------- --------
Total stockholders' equity 179,632 174,909
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $311,143 $308,686
======== ========
See Unaudited Condensed Notes to Consolidated Financial Statements
2
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
================================================================================
IN THOUSANDS EXCEPT PER SHARE DATA
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
------------------------- --------------------------
February 24, February 26, February 24, February 26,
2001 2000 2001 2000
--------- --------- --------- ---------
Net revenues $ 142,531 $ 189,568 $ 306,698 $ 374,514
Cost of goods sold 125,365 160,997 267,049 316,794
--------- --------- --------- ---------
Gross profit 17,166 28,571 39,649 57,720
--------- --------- --------- ---------
Operating expenses:
Selling 5,470 5,723 11,809 12,212
General and administrative 3,146 5,845 5,910 10,445
--------- --------- --------- ---------
Total operating expenses 8,616 11,568 17,719 22,657
--------- --------- --------- ---------
Operating income 8,550 17,003 21,930 35,063
Financial income 901 905 1,872 1,558
--------- --------- --------- ---------
Income before tax and cumulative effect of a
change in accounting method 9,451 17,908 23,802 36,621
Provision for taxes 3,267 6,057 8,022 12,389
--------- --------- --------- ---------
Income before cumulative effect of a change in
accounting method 6,184 11,851 15,780 24,232
Cumulative effect on prior years of the accounting
method change -- -- (1,050) --
--------- --------- --------- ---------
Net income $ 6,184 $ 11,851 $ 14,730 $ 24,232
========= ========= ========= =========
Earnings per share - basic (Note 8):
Income before cumulative effect of change in
accounting method $ .30 $ .54 $ .76 $ 1.10
Cumulative effect on prior years of the
accounting method change -- -- (.05) --
--------- --------- --------- ---------
Net income $ .30 $ .54 $ .71 $ 1.10
========= ========= ========= =========
Number of shares used in per share calculations -
basic (Note 8) 20,576 21,765 20,839 21,946
========= ========= ========= =========
Earnings per share - diluted (Note 8):
Income before cumulative effect of a change in
accounting method $ .30 $ .54 $ .75 $ 1.08
Cumulative effect on prior years of the
accounting method change -- -- (.05) --
--------- --------- --------- ---------
Net income $ .30 $ .54 $ .70 $ 1.08
========= ========= ========= =========
Number of shares used in per share calculations -
diluted (Note 8) 20,882 22,134 21,082 22,339
========= ========= ========= =========
Proforma information for the adoption of SAB101
Net revenues $ 142,531 $ 183,004 $ 306,698 $ 370,100
Net income 6,184 11,216 15,780 23,652
Earnings per share - basic .30 .52 .76 1.08
Earnings per share - diluted .30 .51 .75 1.06
See Unaudited Condensed Notes to Consolidated Financial Statements.
================================================================================
3
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Dollars in thousands TWENTY-SIX WEEKS ENDED
---------------------------
February 24, February 26,
2001 2000
-------- --------
Cash flows from operating activities:
Net income as defined on the statements of income $ 14,730 $ 24,232
(page 3)
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 3,636 3,144
Other 106 177
Change in assets and liabilities:
Decrease (increase) in receivable and other assets 14,099 (13,381)
(Increase) decrease in inventories (3,453) 4,522
Decrease in accounts payable and accrued expenses (7,470) (7,443)
Increase in income taxes payable 3,536 12,608
Increase in postretirement benefits 3,862 2,966
-------- --------
Net cash provided by operating activities 29,046 26,825
-------- --------
Cash flows used by investing activities:
Purchases of property and equipment (4,795) (7,147)
Investments in dealer receivables (52,392) (53,635)
Collections of dealer receivables 47,220 46,978
Other (2,481) (2,040)
-------- --------
Net cash used by investing activities (12,448) (15,844)
-------- --------
Cash flows used by financing activities and capital transactions:
Payments for purchase of common stock (9,300) (14,490)
Payment of cash dividends (2,062) (2,189)
Other 1,355 1,036
-------- --------
Net cash used by financing activities and
capital transactions (10,007) (15,643)
-------- --------
Net increase (decrease) in cash and cash equivalents 6,591 (4,662)
Cash and cash equivalents - beginning of period 51,443 48,160
-------- --------
Cash and cash equivalents - end of period $ 58,034 $ 43,498
======== ========
See Unaudited Condensed Notes to Consolidated Financial Statements.
4
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments, consisting of
normal recurring accruals, necessary to present fairly the consolidated
financial position as of February 24, 2001, the consolidated results of
operations for the 26 and 13 weeks ended February 24, 2001 and February 26,
2000, and the consolidated cash flows for the 26 weeks ended February 24,
2001 and February 26, 2000. The statement of income for the 26 weeks ended
February 24, 2001, is not necessarily indicative of the results to be
expected for the full year. The balance sheet data as of August 26, 2000
was derived from audited financial statements, but does not include all
disclosures contained in the Company's Annual Report to Shareholders for
the year ended August 26, 2000. These interim consolidated financial
statements should be read in conjunction with the audited financial
statements and notes thereto appearing in the Company's Annual Report to
Shareholders for the year ended August 26, 2000.
NOTE 2: NEW ACCOUNTING PRONOUNCEMENTS
On August 27, 2000, the Company adopted the Securities and Exchange
Commission's (SEC) Staff Accounting Bulletin (SAB) No. 101 - REVENUE
RECOGNITION IN FINANCIAL STATEMENTS, which the SEC staff issued in December
1999. SAB No. 101 sets forth the SEC's views concerning revenue
recognition, which the effect on the Company was to begin recording revenue
upon receipt of products by Winnebago Industries' dealers rather than upon
shipment by the Company. This change required an adjustment to retained
earnings in the Company's first quarter 2001 results, which reflects the
cumulative effect on the prior year's results due to the application of SAB
No. 101. Pro forma information for the 13 and 26 weeks ended February 26,
2000 is disclosed on the Company's Unaudited Consolidated Statements of
Income (page 3 of this report).
On August 27, 2000, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES, as amended by SFAS No. 138, ACCOUNTING FOR CERTAIN DERIVATIVE
INSTRUMENTS AND CERTAIN HEDGING ACTIVITIES. It requires that all
derivatives, including those embedded in other contracts, be recognized as
either assets or liabilities and that those financial instruments be
measured at fair value. The accounting for changes in the fair value of
derivatives depends on their intended use and designation. Management has
reviewed the requirements of SFAS No. 133 and has determined that they have
no freestanding or embedded derivatives. All contracts that contain
provisions meeting the definition of a derivative also meet the
requirements of, and have been designated as, normal purchases or sales.
The Company's policy is to not use freestanding derivatives and to not
enter into contracts with terms that cannot be designated as normal
purchases or sales.
NOTE 3: INVENTORIES
Inventories are valued at the lower of cost or market, with cost being
determined under the last-in, first-out (LIFO) method and market defined as
net realizable value.
Inventories are composed of the following (dollars in thousands):
February 24, August 26,
2001 2000
--------- ---------
Finished goods........ $ 36,855 $ 28,286
Work in process....... 22,425 19,577
Raw materials......... 52,203 59,674
--------- ---------
111,483 107,537
LIFO reserve.......... (22,323) (21,830)
--------- ---------
$ 89,160 $ 85,707
========= =========
5
NOTE 4: NOTES PAYABLE
On October 19, 2000, the Company entered into an unsecured Credit Agreement
with Wells Fargo Bank Iowa, National Association as amended. The Credit
Agreement provides the Company with a line of credit of $20,000,000 until
January 31, 2002, at an interest rate of either (1) a variable rate per
annum of one percent below the Bank's prime rate in effect from time to
time or (2) a fixed rate per annum determined by the Bank to be one percent
above LIBOR, as selected by the Company in accordance with the Credit
Agreement. The Credit Agreement contains covenants that, among other
matters, impose certain limitations on mergers, transfers of assets and
encumbering or otherwise pledging the Company's assets. In addition, the
Company is required to satisfy certain financial covenants and tests
relating to tangible net worth, total liabilities and current ratio. As of
February 24, 2001, the Company was in compliance with these financial
covenants. There were no outstanding borrowings under the line of credit at
February 24, 2001.
NOTE 5: CONTINGENT LIABILITIES AND COMMITMENTS
It is customary practice for companies in the recreation vehicle industry
to enter into repurchase agreements with lending institutions which have
provided wholesale floor plan financing to dealers. The Company's
agreements provide for the repurchase of its products from the financing
institution in the event of repossession upon a dealer's default. The
Company was contingently liable for approximately $251,540,000 and
$219,873,000 under repurchase agreements with lending institutions as of
February 24, 2001 and August 26, 2000, respectively. Included in these
contingent liabilities as of February 24, 2001 and August 26, 2000 are
approximately $1,633,000 and $6,846,000, respectively, of certain dealer
receivables subject to recourse agreements with Bank of America Specialty
Group (formerly NationsBank Specialty Lending Unit) and Conseco Finance
Servicing Group (formerly Green Tree Financial).
NOTE 6: SUPPLEMENTAL CASH FLOW DISCLOSURE
For the periods indicated, the Company paid cash for the following (dollars
in thousands):
Twenty-Six Weeks Ended
------------------------------
February 24, February 26,
2001 2000
------------- ------------
Interest $ -- $ 129
Income taxes 3,000 13,205
NOTE 7: REPURCHASE OF OUTSTANDING STOCK
On March 8, 2001, the Company completed the repurchase of outstanding
shares of its common stock authorized by the Board of Directors on March
15, 2000. Under this repurchase program, 1,163,766 shares were
repurchased for an aggregate consideration of approximately $14,999,000.
On March 14, 2001, the Board of Directors authorized the repurchase of
outstanding shares of the Company's common stock for an aggregate
purchase price of up to $15,000,000.
6
NOTE 8: INCOME PER SHARE
The following table reflects the calculation of basic and diluted
earnings per share for the 13 and 26 weeks ended February 24, 2001 and
February 26, 2000:
Thirteen Weeks Ended Twenty-Six Weeks Ended
-------------------------- ---------------------------
February 24, February 26, February 24, February 26,
In thousands except per share data 2001 2000 2001 2000
-------- -------- -------- --------
Earnings per share - basic:
Net income $ 6,184 $ 11,851 $ 14,730 $ 24,232
-------- -------- -------- --------
Weighted average shares outstanding 20,576 21,765 20,839 21,946
Earnings per share - basic $ .30 $ .54 $ .71 $ 1.10
-------- -------- -------- --------
Earnings per share - assuming dilution:
Net income $ 6,184 $ 11,851 $ 14,730 $ 24,232
-------- -------- -------- --------
Weighted average shares outstanding 20,576 21,765 20,839 21,946
Dilutive impact of options outstanding 306 369 243 393
-------- -------- -------- --------
Weighted average shares & potential
dilutive shares outstanding 20,882 22,134 21,082 22,339
-------- -------- -------- --------
Earnings per share - assuming dilution $ .30 $ .54 $ .70 $ 1.08
-------- -------- -------- --------
NOTE 9: BUSINESS SEGMENT INFORMATION
The Company defines its operations into two business segments: Recreational
vehicles and other manufactured products and dealer financing. Recreation
vehicles and other manufactured products includes all data relative to the
manufacturing and selling of the Company's Class A, B and C motor home
products as well as sales of component products for other manufacturers and
recreation vehicle related parts and service revenue. Dealer financing
includes floorplan and rental unit financing for a limited number of the
Company's dealers. Management focuses on operating income as a segment's
measure of profit or loss when evaluating a segment's financial
performance. Operating income is before interest expense, interest income,
and income taxes. A variety of balance sheet ratios are used by management
to measure the business. Maximizing the return from each segment's assets
excluding cash and cash equivalents is the primary focus. Identifiable
assets are those assets used in the operations of each industry segment.
General corporate assets consist of cash and cash equivalents, deferred
income taxes and other corporate assets not related to the two business
segments. General corporate income and expenses include administrative
costs. Inter-segment sales and expenses are not significant.
For the 26 weeks ended February 24, 2001 and February 26, 2000, the
Company's segment information is as follows:
Recreation Vehicles &
Other Manufactured Dealer General
(dollars in thousands) Products Financing Corporate Total
-------------------------------- -------- -------- -------- --------
26 Weeks Ended February 24, 2001
Net revenues $304,458 $ 2,240 $ -- $306,698
Operating income (loss) 20,162 2,219 (451) 21,930
Identifiable assets 182,192 38,750 90,201 311,143
26 Weeks Ended February 26, 2000
Net revenues $372,719 $ 1,795 $ -- $374,514
Operating income (loss) 33,808 1,739 (484) 35,063
Identifiable assets 183,520 32,466 86,905 302,891
7
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Thirteen Weeks Ended February 24, 2001 Compared to Thirteen Weeks Ended February
26, 2000
Net revenues for recreation vehicles and other manufactured products for the 13
weeks ended February 24, 2001 were $141,320,000, a decrease of $47,323,000, or
25.1 percent from the 13-week period ended February 26, 2000. Motor home unit
sales (Class A and C) were 1,804 units, a decrease of 788 units, or 30.4
percent, during the second quarter of fiscal 2001 compared to the second quarter
of fiscal 2000. The percentage decrease in net revenues in the second quarter of
fiscal 2001 was less than the percentage decrease in motor home unit sales for
that period as a result of the Company's sales of more units, as a percentage of
the total unit sales, with the higher-priced slideout option during the second
quarter of fiscal 2001. Current economic conditions such as higher interest
rates and a decline in consumer confidence levels contributed to reductions in
unit sales, which resulted in reductions in the Company's net revenues.
The Company's expectations for the current fiscal year remain below the past two
fiscal year levels as a result of these factors. However, the long-term outlook
for motor home sales continues to appear very favorable. Demographic studies for
the United States show continued growth of the recreation vehicle industry's
prime target market for the next 30 years. Order backlog for the Company's Class
A and Class C motor homes was approximately 1,550 and 2,500 orders at February
24, 2001 and February 26, 2000, respectively. The Company includes in its
backlog all accepted purchase orders from dealers shippable within the next six
months. Orders in backlog can be canceled at the option of the purchaser at any
time without penalty and, therefore, backlog may not necessarily be a measure of
future sales.
Net revenues for dealer financing of Winnebago Acceptance Corporation (WAC) were
$1,211,000 for the 13 weeks ended February 24, 2001; an increase of $286,000, or
30.9 percent from the 13-week period ended February 26, 2000. Increased revenues
for dealer financing reflect an increase in dealer receivable balances and to a
lesser extent, an increase in interest rates charged when comparing the second
quarter of fiscal 2001 to the second quarter of fiscal 2000.
Gross profit, as a percent of net revenues, was 12.0 percent for the 13 weeks
ended February 24, 2001 compared to 15.1 percent for the 13 weeks ended February
26, 2000. The Company's lower volume of production and sales resulted in the
lower margins.
Selling expenses were $5,470,000, or 3.8 percent of net revenues during the
second quarter of fiscal 2001 compared to $5,723,000, or 3.0 percent of net
revenues during the second quarter of fiscal 2000. The decrease in dollars can
be attributed primarily to a reduction in incentives paid to the Company's
outside sales staff and to a reduction in Company sponsored promotional
programs; these reductions were partially offset by increases in Company
advertising costs. The increase in percentage was caused by the decreased sales
volume during the second quarter of fiscal 2001.
General and administrative expenses were $3,146,000, or 2.2 percent of net
revenues during the 13 weeks ended February 24, 2001 compared to $5,845,000, or
3.1 percent of net revenues during the 13 weeks ended February 26, 2000. The
decreases in dollars and percentage when comparing the two quarters were
primarily due to reductions in employee incentive programs and lower legal and
insurance costs.
The Company had net financial income of $901,000 for the second quarter of
fiscal 2001 compared to net financial income of $905,000 for the comparable
quarter of fiscal 2000. During the 13 weeks ended February 24, 2001, the Company
recorded $917,000 of net interest income and losses of $16,000 in foreign
currency transactions. During the 13 weeks ended February 26, 2000, the Company
recorded $909,000 of net interest income and losses of $4,000 in foreign
currency transactions. The increase in interest income when comparing the two
periods was due primarily to larger cash balances available for investing during
the second quarter of fiscal 2001.
8
The effective income tax rate increased to 34.6 percent during the second
quarter of fiscal 2001 from 33.8 percent during the second quarter of fiscal
2000. The primary reason for the increase was due to higher state income taxes
during the second quarter of fiscal 2001.
For the second quarter of fiscal 2001, the Company had net income of $6,184,000,
or $.30 per diluted share compared to the second quarter of fiscal 2000's net
income of $11,851,000, or $.54 per diluted share. Net income and earnings per
diluted share decreased by 47.8 percent and 44.4 percent, respectively, when
comparing the second quarter of fiscal 2001 to the second quarter of fiscal
2000. The difference in percentages when comparing the net income to the net
earnings per share was due primarily to a lower number of outstanding shares of
the Company's common stock at February 24, 2001 (see Note 7).
Twenty-Six Weeks Ended February 24, 2001 Compared to Twenty-Six Weeks Ended
February 26, 2000
Net revenues for manufactured products for the 26 weeks ended February 24, 2001
were $304,458,000, a decrease of $68,261,000, or 18.3 percent from the 26-week
period ended February 26, 2000. Motor home unit sales (Class A and C) were 4,001
units, a decrease of 1,216 units, or 23.3 percent during the 26 weeks ended
February 24, 2001 when compared to the 26 weeks ended February 26, 2000. The
percentage decrease in net revenues during the first half of fiscal 2001 was
less than the percentage decrease in motor home unit sales for that period as a
result of the Company's sales of more units, as a percentage of the total unit
sales, with the higher-priced slideout option during the first half of fiscal
2001. The Company's expectations for the remainder of the fiscal year remain
below prior year levels due to current economic conditions. However, the
long-term outlook for motor home sales continues to appear very favorable.
Demographic studies for the United States show continued growth of the
recreation vehicle industry's prime target market for the next 30 years.
Net revenues for dealer financing of WAC were $2,240,000 for the 26 weeks ended
February 24, 2001, an increase of $445,000 or 24.8 percent from the 26-week
period ended February 26, 2000. Increased revenues for dealer financing reflect
an increase in interest rates charged and to a lesser extent an increase in
dealer receivable balances when comparing the first half of fiscal 2001 to the
first half of fiscal 2000.
Gross profit, as a percent of net revenue, was 12.9 percent for the 26 weeks
ended February 24, 2001 compared to 15.4 percent for the 26 weeks ended February
26, 2000. The Company's lower volume of production and sales of motor homes
resulted in the lower margins.
Selling expenses were $11,809,000, or 3.9 percent of net revenues during the
first six months of fiscal 2001 compared to $12,212,000, or 3.3 percent of net
revenues during the first six months of fiscal 2000. The decrease in dollars can
be attributed primarily to a reduction in incentives paid to the Company's
outside sales staff and to a reduction in Company sponsored promotional programs
as well as to reductions in advertising expenses. The increase in percentage was
caused by the decreased sales volume during the first six months of fiscal 2001.
General and administrative expenses were $5,910,000, or 1.9 percent of net
revenue during the 26 weeks ended February 24, 2001 compared to $10,445,000, or
2.8 percent of net revenues during the 26 weeks ended February 26, 2000. The
decreases in dollars and percentage when comparing the two periods were
primarily due to reductions in employee incentive programs and lower insurance
and legal costs.
The Company had net financial income of $1,872,000 for the first half of fiscal
2001 compared to net financial income of $1,558,000 for the comparable period of
fiscal 2000. During the first half of fiscal 2001, the Company recorded
$1,869,000 of net interest income and gains of $3,000 in foreign currency
transactions. During the first half of fiscal 2000, the Company recorded
$1,535,000 of net interest income and gains of $23,000 in foreign currency
transactions. The increase in interest income when comparing the two periods was
due primarily to higher rates of return earned on available invested cash and
larger cash balances during the first half of fiscal 2001.
The effective income tax rate during the 26 weeks ended February 24, 2001 was
33.7 percent compared to 33.8 percent during the 26 weeks ended February 26,
2000.
9
For the 26 weeks ended February 24, 2001, the Company had income before
cumulative effect of a change in accounting method (SAB No. 101) of $15,780,000,
or $.75 per diluted share. The comparable results for the 26 weeks ended
February 26, 2000 was income of $24,232,000, or $1.08 per diluted share.
The Company adopted SAB No. 101 in fiscal 2001. SAB No. 101 which was issued by
the SEC in December 1999 sets forth the views of the SEC concerning revenue
recognition, the effect of which on the Company is to record revenue upon
receipt of products to dealers rather than upon shipment by the Company.
Adoption of SAB 101 during the 26 weeks ended February 24, 2001 resulted in a
decrease to the Company's income of $1,050,000, or $.05 per diluted share.
For the 26 weeks ended February 24, 2001, the Company had net income of
$14,730,000, or $.70 per diluted share compared to the 26 weeks ended February
26, 2000's net income of $24,232,000, or $1.08 per diluted share. Net income and
earnings per diluted share decreased by 39.2 percent and 35.2 percent,
respectively, when comparing the two periods. The difference in percentages when
comparing the net income to the net earnings per share was due primarily to a
lower number of outstanding shares of the Company's common stock at February 24,
2001 (see Note 7).
LIQUIDITY AND FINANCIAL CONDITION
The Company meets its working capital requirements, capital equipment
requirements and cash requirements of subsidiaries with funds generated
internally and funds from agreements with financial institutions.
At February 24, 2001, working capital was $146,641,000, an increase of
$4,958,000 from the amount at August 26, 2000. The Company's principal uses of
cash during the 26 weeks ended February 24, 2001 were $9,300,000 for the
purchase of shares of the Company's Common Stock, $4,795,000 for the purchase of
property and equipment and dividend payments of $2,062,000. The Company's
sources and uses of cash during the 26 weeks ended February 24, 2001 are set
forth in the unaudited consolidated condensed statement of cash flows for that
period.
Principal known demands at February 24, 2001 on the Company's liquid assets for
the remainder of fiscal 2001 include approximately $6,000,000 of capital
expenditures and payments of cash dividends. In addition, on March 14, 2001, the
Board of Directors authorized the repurchase of outstanding shares of the
Company's common stock for an aggregate purchase price of up to $15,000,000.
Management currently expects its cash on hand, funds from operations and
borrowings available under existing credit facilities to be sufficient to cover
both short-term and long-term operating requirements.
FORWARD LOOKING INFORMATION
Except for the historical information contained herein, certain of the matters
discussed in this report are "forward looking statements" as defined in the
Private Securities Litigation Reform Act of 1995, which involve risks and
uncertainties, including, but not limited to, availability and price of fuel,
significant increase in interest rates, a general slowdown in the economy,
availability of chassis, slower than anticipated sales of new or existing
products, new product introductions by competitors, collections of dealer
receivables, and other factors which may be disclosed throughout this Form 10-Q
or in the Company's Annual Report on Form 10-K for the year ended August 26,
2000. Any forecasts and projections in this report are "forward looking
statements" and are based on management's current expectations of the Company's
near-term results, based on current information available pertaining to the
Company, including the aforementioned risk factors, actual results could differ
materially.
10
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of February 24, 2001, the Company had an investment portfolio of fixed income
securities, which are classified as cash and cash equivalents of $58.0 million.
These securities, like all fixed income investments, are subject to interest
rate risk and will decline in value if market interest rates increase. However,
the Company has the ability to hold its fixed income investments until maturity,
and therefore, the Company would not expect to recognize an adverse impact in
income or cash flows in such an event.
As of February 24, 2001, the Company had dealer financing receivables in the
amount of $37.9 million. Interest rates charged on these receivables vary based
on the prime rate and are adjusted monthly.
11
Part II Other Information
Item 4 Submission of Matters to a Vote of Security Holders
(a) The annual meeting of shareholders was held January 16, 2001.
(b) The breakdown of votes for the election of two directors was
as follows*:
Votes Cast For Authority Withheld
-------------- ------------------
Joseph W. England (2004) 18,086,494 228,257
Richard C. Scott (2004) 18,103,235 211,516
* There were no broker non-votes.
( ) Represents year of Annual Meeting that individual's term will
expire.
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits - See Exhibit Index on page 14.
(b) The Company did not file any reports on Form 8-K during the period
covered by this report.
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WINNEBAGO INDUSTRIES, INC.
--------------------------------
(Registrant)
Date April 6, 2001 /s/ Bruce D. Hertzke
--------------------------------
Bruce D. Hertzke
Chairman of the board, Chief
Executive Officer, and President
(Principal Executive Officer)
Date April 6, 2001 /s/ Edwin F. Barker
--------------------------------
Edwin F. Barker
Vice President -- Chief
Financial Officer
(Principal Financial Officer)
EXHIBIT INDEX
4d. First Amendment dated October 19, 2000 to the Credit Agreement between
Winnebago Industries, Inc. and Wells Fargo Bank Iowa, National
Association.
10i. Amendment to Winnebago Industries, Inc. Executive Share Option Plan.
10n. Executive Change of Control Agreement dated January 17, 2001 between
Winnebago Industries, Inc. and Bruce D. Hertzke.
10o. Executive Change of Control Agreement dated January 17, 2001 between
Winnebago Industries, Inc. and Edwin F. Barker.
10p. Executive Change of Control Agreement dated January 17, 2001 between
Winnebago Industries, Inc. and Raymond M. Beebe.
10q. Executive Change of Control Agreement dated January 17, 2001 between
Winnebago Industries, Inc. and Robert L. Gossett.
10r. Executive Change of Control Agreement dated January 17, 2001 between
Winnebago Industries, Inc. and James P. Jaskoviak.
10s. Executive Change of Control Agreement dated January 17, 2001 between
Winnebago Industries, Inc. and Robert J. Olson.
EXHIBIT 4d.
FIRST AMENDMENT TO CREDIT AGREEMENT
This First Amendment to Credit Agreement (the "Amendment") is entered
into as of March 19, 2001 by and among WINNEBAGO INDUSTRIES, INC., an Iowa
corporation ("Borrower"), WINNEBAGO ACCEPTANCE CORPORATION, an Iowa corporation,
WINNEBAGO INTERNATIONAL CORPORATION, a Virgin Islands corporation, WINNEBAGO
HEALTH CARE MANAGEMENT COMPANY, an Iowa corporation and WINNEBAGO RV,
INCORPORATED, a Delaware corporation (each a "Guarantor" and, together, the
"Guarantors") and WELLS FARGO BANK IOWA, NATIONAL ASSOCIATION ("Bank").
RECITALS
The parties hereto have previously entered into a Credit Agreement
dated as of October 19, 2000 (the "Credit Agreement") relating to a Twenty
Million Dollar ($20,000,000.00) line of credit. The parties have discovered that
the Credit Agreement and relating instruments or documents contain typographical
errors which need to be corrected.
THEREFORE, it is agreed as follows:
1. Each reference in the Credit Agreement, the Line of Credit Note, any
Guaranty or any other instrument of document referred to in the Credit Agreement
to "Wells Fargo Bank, National Association" shall be deemed to be a reference to
"Wells Fargo Bank Iowa, National Association."
2. The reference in Section 4.9(a) to "$150,000.00" is hereby corrected
to be a reference to "150,000,000.00."
3. Borrower and Guarantors warrant and represent to the Bank that as of
the date hereof there exists no default under the Credit Agreement.
4. Except as herein modified, the Credit Agreement, the Line of Credit
Note and each Guaranty remains unaltered and in full force and effect.
5. Borrower and each Guarantor hereby acknowledges receipt of a fully
executed copy of this Amendment.
IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS AGREEMENT SHOULD BE READ
CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE ENFORCEABLE. NO OTHER TERMS
OR ORAL PROMISES NOT CONTAINED IN THIS WRITTEN CONTRACT MAY BE LEGALLY ENFORCED.
YOU MAY CHANGE THE TERMS OF THIS AGREEMENT ONLY BY ANOTHER WRITTEN AGREEMENT.
WINNEBAGO INDUSTRIES, INC.
By: /s/ Edwin F. Barker
-------------------------------
Edwin F. Barker
Vice President, CFO
1
WINNEBAGO ACCEPTANCE CORPORATION
By: /s/ Edwin F. Barker
-------------------------------
Edwin F. Barker
Vice President, CFO
WINNEBAGO INTERNATIONAL CORPORATION
By: /s/ Edwin F. Barker
-------------------------------
Edwin F. Barker
Vice President, Treasurer
WINNEBAGO HEALTH CARE MANAGEMENT
COMPANY
By: /s/ Edwin F. Barker
-------------------------------
Edwin F. Barker
Vice President, CFO
WINNEBAGO RV, INCORPORATED
By: /s/ Edwin F. Barker
-------------------------------
Edwin F. Barker
Vice President, CFO
WELLS FARGO BANK IOWA, NATIONAL
ASSOCIATION
By: /s/ Michael Wilson
-------------------------------
Michael Wilson
Vice President
2
EXHIBIT 10i.
WINNEBAGO INDUSTRIES, INC.
EXECUTIVE SHARE OPTION PLAN
(Amended and Restated Effective January 1, 2001)
TABLE OF CONTENTS
ARTICLE PAGE
- --------------------------------------------------------------------------------
ARTICLE I
PURPOSE.................................................................1
ARTICLE II
DEFINITIONS AND CONSTRUCTION............................................1
ARTICLE III
OPTION GRANT............................................................4
ARTICLE IV
OPTION EXERCISE.........................................................8
ARTICLE V
AMENDMENT OR TERMINATION...............................................10
ARTICLE VI
ADMINISTRATION.........................................................11
ARTICLE VII
TRUST PROVISIONS.......................................................13
ARTICLE VIII
MISCELLANEOUS PROVISIONS...............................................13
WINNEBAGO INDUSTRIES, INC.
EXECUTIVE SHARE OPTION PLAN
ARTICLE I
PURPOSE
1.1 PURPOSE. The purpose of the Plan is to provide stock options to
certain key individuals, commensurate with their contributions to the success of
the Employer, in a form that will provide incentives and rewards for superior
performance, encourage the recipients to continue in the employment of the
Employer, and allow the recipients to diversify their investment portfolios.
1.2 INTENT. The Plan is intended to be a nonqualified stock option plan
within the meaning of Section 83 of the Code. The Plan is not intended to be a
plan covered by the Employee Retirement Income Security Act of 1974, as amended.
ARTICLE II
DEFINITIONS AND CONSTRUCTION
As used herein, the following capitalized words and phrases shall have
the respective meanings set forth below:
2.1 "BENEFICIARY" means the person or persons designated by a
Participant, pursuant to Section 3.7, to exercise an Option after the
Participant's death.
2.2 "BOARD OF DIRECTORS" OR "BOARD" means the board of directors of the
Employer.
2.3 "CHANGE OF CONTROL" for the purposes of the Plan shall mean the
time when (i) any Person, becomes an Acquiring Person, or (ii) individuals who
shall qualify as Continuing Directors of the Company shall have ceased for any
reason to constitute at least a majority of the Board of Directors of the
Company; provided, however, that in the case of either clause (i) or (ii) a
Change of Control shall not be deemed to have occurred if the event shall have
been approved prior to the occurrence thereof by a majority of the Continuing
Directors who shall then be members of such Board of Directors, and in the case
of clause (i), a Change of Control shall not be deemed to have occurred upon the
acquisition of stock of the Company by a pension, profit sharing, stock bonus,
employee stock ownership plan or other retirement plan intended to be qualified
under Section 401(a) of the Internal Revenue Code of 1986, as amended,
established by the Company or any subsidiary of the Company. (In addition, stock
held by such a plan shall not be treated as outstanding in determining ownership
percentages for purposes of this definition.)
1
For the purpose of the definition "Change of Control:"
(a) "Continuing Director" means (i) any member of the Board of
Directors of the Company, while such person is a member of the Board, who is not
an Affiliate or Associate of any Acquiring Person or of any such Acquiring
Person's Affiliate or Associate and was a member of the Board prior to the time
when such Acquiring Person shall have become an Acquiring Person, and (ii) any
successor of a Continuing Director, while such successor is a member of the
Board, who is not an Acquiring Person or any Affiliate or Associate of any
Acquiring Person or a representative or nominee of an Acquiring Person or of any
affiliate or associate of such Acquiring Person and is recommended or elected to
succeed the Continuing Director by a majority of the Continuing Directors.
(b) "Acquiring Person" means any person or any individual or group of
Affiliates or Associates of such Person who acquires the beneficial ownership,
directly or indirectly, of 20% or more of the outstanding stock of the Company
if such acquisition occurs in whole or in part, except that the term "Acquiring
Person" shall not include a Hanson Family Member or an Affiliate or Associate of
a Hanson Family Member.
(c) "Affiliate" means a person that directly or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, the person specified.
(d) "Associate" means (1) any corporate, partnership, limited liability
company, entity or organization (other than the Company or a majority-owned
subsidiary of the Company) of which such a Person is an officer, director,
member, or partner or is, directly or indirectly the beneficial owner of ten
percent (10%) or more of any class of equity securities, (2) any trust or fund
in which such person has a substantial beneficial interest or as to which such
person serves as trustee or in a similar fiduciary capacity, (3) any relative or
spouse of such person, or any relative of such spouse, or (4) any investment
company for which such person or any Affiliate of such person serves as
investment advisor.
(e) "Hanson Family Member" means John K. Hanson and Luise V. Hanson
(and the executors or administrators of their estates), their lineal descendants
(and the executors or administrators of their estates), the spouses of their
lineal descendants (and the executors or administrators of their estates), and
the John K. and Luise V. Hanson Foundation.
(f) "Company" means Winnebago Industries Inc., an Iowa corporation.
(g) "Person" means an individual, corporation, limited liability
company, partnership, association, joint stock company, trust, unincorporated
organization or government or political subdivision thereof.
2.4 "CODE" means the Internal Revenue Code of 1986, any amendments
thereto, and any regulations or rulings issued thereunder.
2.5 "COMMITTEE" means the Winnebago Compensation Committee appointed in
accordance with Section 6.1.
2.6 "EFFECTIVE DATE" means April 1, 1997 as originally adopted by the
Board of Directors. The effective date of this amended and restated plan is
January 1, 2001.
2.7 "EMPLOYEE" means any key individual, including, but not limited to,
a person in an executive position with the Employer, who is employed by the
Employer.
2
2.8 "EMPLOYER" means Winnebago Industries, Inc. and any successor
thereto.
2.9 "ERISA" means the Employee Retirement Income Security Act of 1974,
any amendments thereto, and any regulations or rulings issued thereunder.
2.10 "EXERCISE DATE" means, with respect to any Option, the date on
which the Option is exercised by a Participant.
2.11 "EXERCISE PERIOD " means the period during which a Participant may
exercise an Option, as determined under Section 4.1.
2.12 "EXERCISE PRICE" means the price to be paid by a Participant to
exercise an Option, as determined under Section 3.3.
2.13 "GRANT DATE" means, with respect to any Option, the date on which
the Option Agreement is executed by the Employer and the Participant.
2.14 "MARKET PRICE" means the closing price of a share of Stock
reflected in the consolidated trading tables of the Wall Street Journal
(presently the NYSE Composite Transactions), or other recognized market source,
as determined by the Committee, on the applicable date of reference hereunder,
or if there is no sale on such date, then the closing price on the last previous
day on which a sale is reported. In the case of open-end mutual fund shares, the
Market Price means the net asset value per share as reported by the fund in such
publication on the applicable date of reference hereunder.
2.15 "OPTION" means the right of a Participant, granted by the Employer
in accordance with Section 3.2, to purchase Stock from the Employer at the
Exercise Price.
2.16 "OPTION AGREEMENT" means an agreement setting forth the terms of
an Option executed by the Employer and a Participant pursuant to Section 3.2.
2.17 "PARTICIPANT" means any Employee (i) who meets the eligibility
requirements of Section 3.1 or (ii) who has received an award of an Option in
accordance with Section 3.2 and whose Option has not been completely exercised
or lapsed.
For purposes of this Plan, Participants shall be categorized under the
following classifications and such additional classifications which shall
hereafter be determined by Human Resources Committee of the Board from time to
time:
(i) Chief Executive Officer
(ii) Class A Officer
(iii) Class B Executive Employees
(iv) Class C Management Employees
2.18 "PLAN" means the Winnebago Industries, Inc. Executive Share Option
Plan, as set forth herein and from time to time amended.
2.19 "STOCK" means shares of common or preferred stock of a corporation
listed on a national securities exchange (exclusive of the stock of Winnebago
Industries, Inc.) or NASDAQ, or shares of a regulated investment company
designated by the Committee as subject to purchase through the exercise of an
Option.
3
2.20 "TERMINATION OF EMPLOYMENT" means an Employee's separation from
the service of the Employer (including all subsidiaries and affiliates of the
Employer) by reason of resignation, discharge, death or other termination. The
Committee may, in its discretion, determine whether any leave or other absence
from service constitutes a Termination of Employment for purposes of the Plan.
2.21 "TRUST" means the trust established pursuant to Article VII to
hold the Stock that is subject to purchase through the exercise of an Option.
2.22 "TRUST AGREEMENT" means an agreement setting forth the terms of
the Trust established pursuant to Article VII.
2.23 "TRUST FUND" means the Stock subject to an Option that is held in
the Trust
2.24 "TRUSTEE" means the persons or institution acting as trustee of
the Trust.
ARTICLE III
OPTION GRANT
3.1 ELIGIBILITY. Options may be granted to any Employee selected by the
Human Resources Committee of the Board of Directors from the key Employees of
the Employer who have the capability of making a substantial contribution to the
success of the Employer. In making this selection, the Human Resources Committee
of the Board of Directors shall consider any factors that it deems relevant,
including the individual's functions, responsibilities, value of services to the
Employer and past and potential contributions to the Employer's profitability
and growth. Participation shall commence on the next day following the last
Saturday of November, February, May, or August subsequent to an Employee's
selection by the Human Resources Committee of the Board of Directors.
3.2 GRANT OF OPTIONS. Options may be granted by the Committee at any
time on or after the Effective Date and prior to the termination of the Plan.
Options may be granted, at the discretion of the Committee, in the form of
outright awards, in exchange for a specified amount of the future compensation
or bonus of the Participant, or in return for the Participant's agreement to
relinquish rights to unfunded, nonqualified deferred compensation that he or she
has accrued but does not have a current right to receive. While a Participant
may agree to exchange all or a portion of any future bonus or incentive
compensation payable to him or her for an Option, in the manner prescribed by
the Committee and prior to the fiscal year in which such compensation is earned,
the maximum percentage of future base compensation which a Participant may
exchange for an Option during a calendar year shall not exceed 30 percent. No
Committee member may take part in any way in determining the amount of any award
of an Opinion to himself or herself.
(a) SUBMISSION OF REQUESTS TO EXCHANGE COMPENSATION. Any specified
exchange of future base compensation or bonus by a Participant for an Option
must be executed by the Participant and the Committee before the beginning of
the calendar year in which the base compensation will be earned or before the
fiscal year in which the bonus will be earned. In the case of a newly eligible
Participant, such specified initial request to exchange compensation shall be
filed with the Committee within 30 days following the effective date of his or
her Plan eligibility and prior to the rendition of any services to which any
exchanged base compensation pertains or prior to the commencement of any
quarterly fiscal period beginning on the next day following the last Saturday of
November, February, May, and August with respect to any specified exchanges of
quarterly bonuses.
4
(b) GRANT DATE AND OPTION AGREEMENT. Options granted in exchange for a
specified amount of the future base compensation of the Participant shall be
granted in January of each year and shall reflect the requested exchange of base
compensation of the Participant for the calendar year.
Options granted in exchange for a specified amount of the future bonus
of the Participant shall be granted quarterly following the determination of
such bonus as of the last Saturday in November, February, May, and August of
each fiscal year and shall reflect the requested exchange of bonus of the
Participant for the fiscal quarter (excluding any fiscal quarter during which a
Participant's Termination of Employment occurs). Options granted in the form of
outright awards or in exchange for the Participant's agreement to relinquish
rights to nonqualified deferred compensation which the Participant does not have
a current right to receive may be granted to Participant at any time at the
discretion of the Committee.
Options shall become effective upon the execution by Employer and the
Participant of an Option Agreement specifying the Stock, the number of shares
subject to the Option the Exercise Price, and such other terms and in such form
as the Committee may from time to time determine in accordance with the Plan.
Any items not specified in the Plan shall be specified in the Option Agreement.
(c) EFFECT OF TERMINATION. In the event that a Participant's employment
with the Employer terminates prior to the grant of his or her Option in January
pertaining to a requested exchange of base compensation, an amount of
compensation equivalent to the amount of foregone base compensation, which was
to be exchanged for an Option, through the date of Termination of Employment,
shall be paid to the Participant by the Employer upon his or her Termination of
Employment.
(d) MAXIMUM OPTION GRANTS. The maximum number of underlying cumulative
share units permitted to be covered by all Option grants made to any one
Participant throughout his or her participation in the Plan is that number of
units for which the cumulative Market Price of the Stock, determined as of the
original Grant Dates, totals the dollar amount denoted for the specific
classification of Participant(s) which is set forth below:
Participant Classification Maximum Option Grants
-------------------------- ---------------------
Chief Executive Officer $ 2,000,000
Class A Officers 1,000,000
Class B Executive Employees 500,000
Class C Management Employees 266,666
(e) EFFECT OF CASH DIVIDENDS AND DISTRIBUTIONS WITH RESPECT TO STOCK.
All cash dividends and distributions received with respect to Stock shall be
reinvested in additional property of the same kind (or as nearly the same kind
as feasible, if property of the same kind is not available). Any property
acquired through reinvestment will be added to the Stock which is subject to an
Option Agreement. Any Stock representing shares of an open-end regulated
investment company which are acquired through reinvestment of long-term capital
gain dividends and return of capital distributions will be added to the Stock
which is subject to an Option Agreement. Any Stock representing shares of an
open-end regulated investment company which are acquired through reinvestment of
ordinary income dividends and exempt-interest dividends will also be added to
the Stock which is subject to an Option Agreement.
3.3 EXERCISE PRICE. The Exercise Price shall be initially determined by
the Committee but shall be no less than 25 percent and no more than 100 percent
of the Fair Market Value of the Stock on the Grant Date. The Exercise Price
shall be adjusted for the following events:
5
In the event of a stock dividend, stock split, reverse stock split,
rights offering, recapitalization or similar transaction that materially affects
the Market Price of the Stock, the Committee shall adjust the Exercise Price so
that it retains the same ratio to the Market Price of the Stock as existed
immediately before such transactions, or as otherwise provided in the Option
Agreement. Any Stock acquired because of one of the above events will
immediately be subject to an Option in favor of the Participant on terms
identical to those set forth in the pertinent Option Agreement.
3.4 CONDITIONS OF GRANT. As a condition to the grant of a Stock Option,
the Committee may, in its discretion, require a Participant to enter into one or
more of the following agreements with the Employer on or before the Grant Date:
(a) A covenant not to compete with the Employer, which shall become
effective on the date of Termination of Employment of the Participant with the
Employer and which shall contain such terms and conditions as may be required by
the Committee.
(b) An agreement to remain in the employ of the Employer for at least
six months after the Grant Date of an Option.
3.5 STOCK TO BE HELD IN TRUST. Upon the grant of an Option, the
Employer in accordance with the Trust Agreement, shall instruct the Trustee to
purchase the Stock underlying each Option Agreement as of the day of the Option
Agreement. The Employer shall transfer to the Trustee an amount of funds equal
to the Market Price of the Stock. Such funds shall be applied by the Trustee for
the purpose of payment for such underlying securities. In addition, if on the
date the Committee grants the Option, the principal of the Trust, and any
earnings thereon, are not sufficient to purchase such underlying securities, the
Employer may transfer to the Trustee an amount of funds sufficient to purchase
the underlying securities.
The Trustee shall establish a separate account for each Option
Agreement in which the Trustee shall hold funds to purchase securities, as well
as securities already purchased, underlying the Option Agreement. The Trustee
shall hold the securities in its own name until the Plan Participant exercises
the Option to purchase securities.
3.6 SUBSTITUTION OF ASSETS HELD IN TRUST. The Committee may, in its
discretion, after consultation with the Participant, substitute Stock of equal
Market Price for any Stock subject to purchase through the exercise of an
Option. When that substitution occurs, both parties are required to terminate
the Option Agreement and to adopt a new Option Agreement which awards an Option
of equal Market Price on the new Stock. Such change in Option property shall be
considered the grant of a new Option and the terms of this Plan, including
Articles III and IV, shall apply to the grant of the new Option, except that the
term of the new Option shall not extend beyond the term of the original Option.
The Exercise Price of the new Option shall be the same as the Exercise Price of
the original Option immediately before the substitution.
3.7 DESIGNATION OF BENEFICIARY. As soon as practicable after the grant
of an Option, the Participant shall designate one or more Beneficiaries and
successor Beneficiaries, and may change a Beneficiary designation at any time,
by filing the prescribed form with the Committee. The consent of the
Participant's current Beneficiary shall not be required for a change of
Beneficiary. No Beneficiary shall have any rights under the Plan or an Option
Agreement during the lifetime of the Participant, except as may otherwise be
provided in Section 3.9.
(a) The Beneficiary of a Participant who dies without having designated
a Beneficiary in accordance with this Section 3.7 and who is lawfully married on
the date of death shall be the Participant's surviving spouse.
6
(b) The Beneficiary of any other Participant who dies without having
designated a Beneficiary in accordance with this Section 3.7 shall be the
Participant's estate.
3.8 GENERAL NON-TRANSFERABILITY. No Option granted under this Plan may
be transferred, assigned, or alienated (whether by operation of law or
otherwise), except as provided herein, and no Option shall be subject to
execution, attachment or similar process. An Option may be exercised only by the
Participant (or the Participant's Beneficiary pursuant to Section 3.7).
ARTICLE IV
OPTION EXERCISE
4.1 EXERCISE PERIOD. A Participant may exercise all or any portion of
an Option at any time during the period beginning six months after the Grant
Date and ending on the earlier of:
(a) twelve months after the Participant's date of death, and
(b) fifteen years after the Grant Date.
4.2 EXERCISE OF VESTED PORTION OF OPTION. A Participant (or the
Participant's Beneficiary pursuant to Section 3.7) may exercise the "Vested
Portion" of an Option in accordance with this Section 4.2. The terms of the
Participant's Option Agreement will determine the Vested Portion of an Option
eligible for exercise in the case of an Option granted to a Participant in the
form of an outright award or in exchange for the Participant's agreement to
relinquish rights to nonqualified deferred compensation which the Participant
does not have a current right to receive. That percentage of a Participant's
Option granted in the form of an outright award or in exchange for the
Participant's agreement to relinquish rights to nonqualified deferred
compensation which the Participant does not have a current right to receive,
which is not a Vested Portion of an Option, shall be forfeited by the
Participant upon Termination of Employment.
The Vested Portion of an Option granted in exchange for the base
compensation of a Participant is 100 percent if the Participant remains in
service with the Employer through the end of the calendar year in which the
Option is granted. If the Participant's service with the Employer is terminated
during the same calendar year in which the Grant Date occurs, he or she may
exercise the Vested Portion of the Option, which is equal to the full number of
payroll periods during which the Participant was in the service of the Employer
during the calendar year in which the Option was granted, divided by 50. That
percentage of a Participant's Option granted in exchange for the base
compensation of a Participant which is not a Vested Portion of the Option shall
be forfeited by the Participant upon Termination of Employment during the
calendar year in which the Option was granted.
The Participant shall exercise the Vested Portion of the Option by
giving written notice to the Committee and (i) tendering full payment of the
Exercise Price on or before the date of exercise, or (ii) by obtaining necessary
financing from a financial institution which is utilized to pay the Exercise
Price. The minimum number of share units allowed to be exercised at any one time
is the number of share units for which the Market Price of the Stock totals
$2,500.
In the event that the listing, registration or qualification of the
Option or the Stock on any securities exchange or under any state or federal
law, or the consent or approval of any governmental regulatory body, or the
availability of any exemption therefrom, is necessary as a condition of, or in
connection with, the exercise of the Option, then the Option shall not be
exercised in whole or in part until such listing, registration, qualification,
consent, approval, or exemption has been effected, obtained, or established to
the satisfaction of the Committee.
7
4.3 DELIVERY OF STOCK. On the date of exercise, or as soon as
practicable thereafter (but in no event later than five business days after the
date of exercise), the Employer shall deliver or cause to be delivered the Stock
then being purchased to the Participant (or the Participant's Beneficiary
pursuant to Section 3.7). In the event that the listing, registration or
qualification of the Option or the Stock on any securities exchange or under any
state or federal law, or the consent or approval of any governmental regulatory
body, is necessary as a condition of, or in connection with, the exercise of the
Option, then the Option shall not be exercised in whole or in part until such
listing, registration, qualification, consent or approval has been effected or
obtained.
4.4 TAX WITHHOLDING. Whenever Stock is to be delivered upon exercise of
an Option under the Plan, the Employer shall require as a condition of such
delivery:
(a) the cash payment by the Participant of an amount sufficient to
satisfy all federal, state and local tax withholding, requirements related
thereto,
(b) the withholding of such amount from any Stock to be delivered to
the Participant,
(c) the withholding of such amount from compensation otherwise due to
the Participant, or
(d) any combination of the foregoing, at the election of the
Participant with the consent of the Employer. Such election shall be made before
the date on which the amount of tax to be withheld is determined by the
Employer, and such election shall be irrevocable.
4.5 ADDITIONAL WITHHOLDING. With the consent of the Employer, the
Participant may elect a greater amount of withholding, not to exceed the
estimated amount of the Participant's total tax liability with respect to the
delivery of Stock under the Plan. Such election shall be made at the same time
and in the same manner as provided under Section 4.4.
4.6 FAILURE TO EXERCISE. No Option shall be exercised, in whole or in
part, after the end of the Exercise Period and the Employer shall have no
obligation to deliver or cause to be delivered to the Participant (or the
Participant's Beneficiary or Assignee) the Stock subject to such Option.
ARTICLE V
AMENDMENT OR TERMINATION
5.1 PLAN AMENDMENT. The Board may, from time to time in its discretion,
amend any provision of the Plan, in whole or in part, with respect to any
Participant or group of Participants. Such amendment shall be effective as of
the date specified therein and shall be binding upon the Committee, all
Participants and Beneficiaries, and all other persons claiming an interest under
the Plan.
5.2 PLAN TERMINATION. The Plan shall terminate on the fifteenth
anniversary of the original Effective Date or such earlier date as the Board may
determine in its discretion. Such termination shall be effective as of the date
determined by the Board and shall be binding upon the Committee, all
Participants and Beneficiaries, and all other persons claiming an interest under
the Plan. Options shall continue to be exercisable after the effective date of
such termination, and may be exercised in accordance with Article IV, but no new
Options shall be granted. However, in the event of a termination of the Plan in
connection with compliance with or any addition or
8
change in the Code or ERISA, federal or state securities laws, or any other law
or regulations, all Options shall be required to be exercised immediately.
5.3 AMENDMENT OF OPTIONS. An Option may be amended by the Committee at
any time if the Committee determines that an amendment is necessary or advisable
as a result of:
(a) any addition to or change in the Code or ERISA, a federal or state
securities law or any other law or regulation, which occurs after the Grant Date
and by its terms applies to the Option,
(b) any substitution of stock held in Trust pursuant to Section 3.6,
(c) any Plan amendment pursuant to Section 5.1, or Plan termination
pursuant to Section 5.2, provided that the amendment does not materially affect
the terms, conditions and restrictions applicable to the Option, or
(d) any circumstances not specified in Paragraphs (a), (b), or (c),
with the consent of the Participant.
5.4 CHANGE OF CONTROL. Notwithstanding any other provision of the Plan
or an Option Agreement, in the event of a Change of Control:
(a) the Participant shall not be required to remain in the employ of
the Employer for at least six months after the Grant Date of an Option under
Section 3.4(b),
(b) the Exercise Period under Section 4.1 shall not end prior to six
months after such Change of Control,
(c) an Option Agreement shall not be amended by the Committee under
Section 5.3 for any reason without the consent of the Participant, and
(d) an Option may be terminated by the Committee on any date after a
Change of Control, in its sole discretion and without the consent of the
Participant, if the Committee makes a cash payment to the Participant on such
date in an amount equal to the Fair Market Value of the Stock subject to such
Option, reduced by the Exercise Price, and multiplied by the number of shares
subject to such Option.
ARTICLE VI
ADMINISTRATION
6.1 THE COMMITTEE. The Plan shall be administered by a Committee
consisting of one or more persons appointed by the Board of Directors. The
Committee shall act by a majority of its members at the time in office and may
take action either by vote at a meeting or by consent in writing without a
meeting.
(a) The Board may remove any member of the Committee at any time, with
or without cause, and may fill any vacancy. If a vacancy occurs, the remaining
member or members of the Committee shall have full authority to act.
(b) Any member of the Committee may resign by written resignation
delivered to the Board. Any such resignation shall become effective upon its
receipt by the Board or on such other date as agreed to by the Board and the
resigning member.
9
6.2 POWERS OF THE COMMITTEE. In carrying out its duties with respect to
the general administration of the Plan, the Committee shall have, in addition to
any other powers conferred by the Plan or by law, the following powers:
(a) to determine eligibility to receive Options;
(b) to grant Options, and to determine the form, amount and timing of
such Options;
(c) to determine the terms and provisions of the Option Agreements, and
to modify such Option Agreements as provided in Section 5.3;
(d) to substitute stock held in Trust as provided in Section 3.6;
(e) to maintain all records necessary for the administration of the
Plan;
(f) to prescribe, amend, and rescind rules for the administration of
the Plan to the extent not inconsistent with the terms thereof;
(g) to direct the Trustee respecting investment of the Trust Fund;
(h) to appoint such individuals and subcommittees as it deems desirable
for the conduct of its affairs and the administration of the Plan;
(i) to employ counsel, accountants and other consultants to aid in
exercising its powers and carrying out its duties under the Plan; and
(j) to perform any other acts necessary, and proper for the conduct of
its affairs and the administration of the Plan, except those reserved by the
Board.
6.3 DETERMINATIONS BY THE COMMITTEE. The Committee shall interpret and
construe the Plan and the Option Agreements and its interpretations and
determinations shall be conclusive and binding on all Participants,
Beneficiaries and any other persons claiming an interest under the Plan or any
Option Agreement. The Committee's interpretations and determinations under the
Plan and Option Agreements need not be uniform and may be made by it selectively
among Participants, Beneficiaries and any other persons whether or not they are
similarly situated. The failure of the Committee to strictly enforce the terms
and conditions of the Plan or the Option Agreement shall not constitute a waiver
of any provision of the Plan or the Option Agreement. No Participant may rely on
any act or statement of the Committee or anyone charged with the administration
of the Plan which is inconsistent with any of the terms and conditions of the
Plan or the Option Agreement.
6.4 INDEMNIFICATION OF THE COMMITTEE. The Employer shall indemnify and
hold harmless each member of the Committee against any and all expenses and
liabilities arising out of such member's action or failure to act in such
capacity excepting only expenses and liabilities arising out of such member's
own willful misconduct or gross negligence.
(a) Expenses and liabilities against which a member of the Committee is
indemnified hereunder shall include, without limitation, the amount of any
settlement or judgment, costs, counsel fees and related charges reasonably
incurred in connection with a claim asserted or a proceeding brought against him
or the settlement thereof, provided that the Employer shall not be liable for
any settlement to which it does not consent but such consent shall not be
unreasonably withheld.
10
(b) This right of indemnification shall be in addition to any other
rights to which any member of the Committee may be entitled.
(c) The Employer may, at its own expense, settle any claim asserted or
proceeding brought against any member of the Committee when such settlement
appears to be in the best interests of the Employer, provided that such
settlement includes a complete release from liability of such member and is
otherwise reasonably acceptable to such member.
The provisions of this Section 6.4 are for the benefit of each member of the
Committee, his or her heirs, successors and assigns and as to each such member
shall survive the termination of his or her service as such. Any amendment of
this Section 6.4 shall not materially impair the rights of members and former
members of the Committee thereunder as to any period prior to such amendment.
6.5 EXPENSES OF THE COMMITTEE. The members of the Committee shall serve
without compensation for services as such. All expenses of the Committee shall
be paid by the Employer.
ARTICLE VII
TRUST PROVISIONS
7.1 ESTABLISHMENT OF THE TRUST. The Trust shall be established to hold
all Stock contributed by the Employer pursuant to Section 3.5. Except as
otherwise provided in Section 7.2, and Section 12 of the Trust Agreement, the
Trust shall be irrevocable and no portion of the Trust Fund shall be used for
any purpose other than the delivery of Stock pursuant to the exercise of an
Option, and the payment of expenses of the Plan and Trust.
7.2 TRUST STATUS. The Trust is intended to be a grantor trust, within
the meaning of Section 671 of the Code, of which the Employer is the grantor,
and this Plan is to be construed in accordance with that intention.
Notwithstanding any other provision of this Plan, the Trust Fund shall remain
the property of the Employer and shall be subject to the claims of its creditors
in the event of its bankruptcy or insolvency. No Participant shall have any
priority claim on the Trust Fund or any security interest or other right
superior to the rights of a general creditor of the Employer.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1 HEADINGS. The headings of Articles, Sections and Paragraphs are
solely for convenience of reference. If there is any conflict between such
headings and the text of this Plan, the text shall control.
8.2 GENDER. Unless the context clearly requires a different meaning,
all pronouns shall refer indifferently to persons of any gender.
8.3 SINGULAR AND PLURAL. Unless the context clearly requires a
different meaning, singular terms shall also include the plural and vice versa.
8.4 GOVERNING LAW. Except to the extent preempted by federal law, the
construction and operation of the Plan shall be governed by the laws of the
State of Iowa without regard to the choice of law principles of such state.
11
8.5 SEVERABILITY. If any provision of this Plan is held illegal or
invalid by any court or govemmental authority for any reason, the remaining
provisions shall remain in full force and effect and shall be construed and
enforced in accordance with the purposes of the Plan as if the illegal or
invalid provision did not exist.
8.6 NO OBLIGATION TO EXERCISE. The granting of an Option shall impose
no obligation upon a Participant to exercise such Option.
8.7 NO RIGHTS OF SHAREHOLDER. Neither the Participant or, a Beneficiary
shall be, or shall have any of the rights and privileges of, a stockholder with
respect to any Stock purchasable or issuable upon the exercise of an Option,
prior to the date of exercise of such Option.
8.8 NO RIGHT TO CONTINUED EMPLOYMENT. Nothing contained in the Plan
shall be deemed to give any person the right to be retained in the employ of the
Employer, or to interfere with the right of the Employer to discharge any person
at any time without regard to the effect that such discharge shall have upon
such person's rights or potential rights, if any, under the Plan. The provisions
of the Plan are in addition to, and not a limitation on, any rights that a
Participant may have against the Employer by reason of any employment or other
agreement with the Employer.
8.9 NOTICES. Unless otherwise specified in an Option Agreement, any
notice to be provided under the Plan to the Committee shall be mailed (by
certified mail, postage prepaid) or delivered to the Committee in care of the
Employer at its executive offices, and any notice to the Participant shall be
mailed (by certified mail, postage prepaid) or delivered to the Participant at
the current address shown on the payroll records of the Employer. No notice
shall be binding on the Committee until received by the Committee, and no notice
shall be binding on the Participant until received by the Participant.
12
EXHIBIT 10n.
EXECUTIVE CHANGE OF CONTROL AGREEMENT
This EXECUTIVE CHANGE OF CONTROL AGREEMENT is made as of January 17,
2001, by and between WINNEBAGO INDUSTRIES, INC., an Iowa corporation (the
"Company"), and Bruce D. Hertzke (the "Executive").
RECITALS
WHEREAS, the Executive is a senior executive and officer of the Company
and has made and is expected to continue to make major contributions to the
profitability, growth and financial strength of the Company;
WHEREAS, the Company recognizes that, as is the case for most publicly
held companies, the possibility of a Change of Control (as hereafter defined)
exists;
WHEREAS, it is in the best interests of the Company, considering the
past and future services of the Executive, to improve the security and climate
for objective decision making by providing for the personal security of the
Executive upon a Change of Control.
NOW, THEREFORE, in consideration of the foregoing premises and the past
and future services rendered and to be rendered by the Executive to the Company
and of the mutual covenants and agreements hereinafter set forth, the parties
agree as follows:
AGREEMENT
1. CONTINUED SERVICE BY EXECUTIVE. In the event a person or entity, in
order to effect a Change of Control, commences a tender or exchange offer,
circulates a proxy to shareholders or takes other steps, the Executive agrees
that the Executive will not voluntarily leave the employ of the Company, and
will render faithful services to the Company consistent with Executive's
position and responsibilities, until the person or entity has abandoned or
terminated its efforts to effect such Change of Control or until such Change of
Control has occurred.
2. CHANGE OF CONTROL. For purposes of this Agreement, the term "Change
of Control" means the time when (i) any Person becomes an Acquiring Person, or
(ii) individuals who shall qualify as Continuing Directors of the Company shall
have ceased for any reason to constitute at least a majority of the Board of
Directors of the Company; PROVIDED HOWEVER, that in the case of either clause
(i) or (ii) a Change of Control shall not be deemed to have occurred if the
event shall have been approved prior to the occurrence thereof by a majority of
the Continuing Directors who shall then be members of such Board of Directors,
and in the case of clause (i) a Change of Control shall not be deemed to have
occurred upon the acquisition of stock of the Company by a pension, profit
sharing, stock bonus, employee stock ownership plan or other retirement plan
intended to be qualified under Section 401(a) of the Internal Revenue Code of
1986, as amended, established by the Company or any subsidiary of the Company.
(In addition, stock held by such a plan shall not be treated as outstanding in
determining ownership percentages for purposes of this definition.)
For the purpose of the foregoing definition of "Change of Control," the
capitalized terms shall have the following meanings:
1
(a) "Continuing Director" means (i) any member of the Board of
Directors of the Company, while such person as a member of the
Board, who is not an Affiliate or Associate of any Acquiring
Person or of any such Acquiring Person's Affiliate or
Associate and was a member of the Board prior to the time when
such Acquiring Person shall have become an Acquiring Person,
and (ii) any successor of a Continuing Director, while such
successor is a member of the Board, who is not an Acquiring
Person or any Affiliate or Associate of any Acquiring Person
or a representative or nominee of an Acquiring Person or of
any affiliate or associate of such Acquiring Person and is
recommended or elected to succeed the Continuing Director by a
majority of the Continuing Directors.
(b) "Acquiring Person" means any Person or any individual or group
of Affiliates or Associates of such Person who acquires
beneficial ownership, directly or indirectly, of 20% or more
of the outstanding stock of the Company if such acquisition
occurs in whole or in part following January 17, 2001, except
that the term "Acquiring Person" shall not include a Hanson
Family Member or an Affiliate or Associate of a Hanson Family
Member.
(c) "Affiliate" means a Person that directly or indirectly through
one or more intermediaries, controls, or is controlled by, or
is under common control with, the person specified.
(d) "Associate" means (1) any corporate, partnership, limited
liability company, entity or organization (other than the
Company or a majority-owned subsidiary of the Company) of
which such a Person is an officer, director, member, or
partner or is, directly or indirectly the beneficial owner of
ten percent (10%) or more of the class of equity securities,
(2) any trust or fund in which such person has a substantial
beneficial interest or as to which such person serves as
trustee or in a similar fiduciary capacity, (3) any relative
or spouse of such person, or any relative of such spouse, or
(4) any investment company for which such person or any
Affiliate of such person serves as investment advisor.
(e) "Hanson Family Member" means John K. Hanson (deceased) and
Luise V. Hanson (and the executors or administrators of their
estates), their lineal descendants (and the executors or
administrators of their estates), the spouses of their lineal
descendants (and the executors or administrators of their
estates) and the John K. and Luise V. Hanson Foundation.
(f) "Person" means an individual, corporation, limited liability
company, partnership, association, joint stock company, trust,
unincorporated organization or government or political
subdivision thereof.
3. SPECIAL BENEFITS EFFECTIVE IMMEDIATELY UPON A CHANGE OF CONTROL. If
a Change of Control shall have occurred while the Executive is still an employee
of the Company, then the Executive shall immediately be entitled to the
following benefits:
(a) IMMEDIATE VESTING OF ALL STOCK OPTIONS AND RIGHTS. All
options and rights granted to the Executive by the Company pursuant to the
Company's Stock Option Plan effective as of August 14, 1997, or any successor or
supplemental stock plan shall become immediately exercisable upon a Change of
Control.
(b) EXECUTIVE SPLIT DOLLAR LIFE INSURANCE PROGRAM. If the
Executive is a participant under the Company's Executive Split Dollar Life
Insurance Program at the time of a Change of Control and the Company has paid
any portion of the premium on the policy or policies issued in connection
therewith during the twelve months preceding the occurrence of
2
the Change of Control, then the Company shall continue to pay all premiums on
such policies so long as the Executive remains in the employ of the Company.
(c) RETIREE HEALTH INSURANCE. Any plans or policies of the
Company providing for medical, dental, vision or similar benefits for retired
employees existing as of the time of a Change of Control shall, as to the
Executive, not be rescinded or modified in any manner which is adverse to the
Executive following a Change of Control.
(d) RESTRICTED STOCK. All nonregistered stock of the Company
owned by the Executive, which is subject to restrictions on sale or other
transfer, shall, at the option of the Executive (exercisable at any time by the
delivery of written notice to the Company) be purchased by the Company at its
fair market value. The purchase shall be completed by the Company within thirty
(30) days after the Company receives the written notice of exercise from the
Executive. So long as the Company's stock is traded on the New York Stock
Exchange (the "NYSE"), the "fair market value" shall be the mean between the
highest and lowest reported selling prices as reported by the NYSE on the
business day immediately preceding the day of sale.
4. OTHER BENEFITS EFFECTIVE IMMEDIATELY UPON A CHANGE OF CONTROL
PURSUANT TO PLAN DOCUMENTS. It is acknowledged that there presently exist other
plans and agreements of the Company which may provide benefits to the Executive
and which contain specific provisions dealing with the occurrence of a change of
control of the Company (as defined in such plan or agreement). Following a
Change of Control, no such plan or agreement shall be rescinded or modified in
any manner which is adverse to the Executive. Such other plans and agreements of
the Company shall mean: (a) the Executive Share Option Program; (b) the
Officers' Long-Term Incentive Plan; (c) the Deferred Compensation and Deferred
Bonus Plans; and (d) the Officers' Incentive Compensation Plan. Nothing herein
shall be construed to affect the Company's right and ability to terminate or
amend any such plan or agreement (subject to the terms thereof) prior to a
Change of Control.
5. TERMINATION FOLLOWING A CHANGE OF CONTROL. If a Change of Control
shall have occurred while the Executive is still an employee of the Company, and
if the Executive's employment with the Company is terminated, within three years
following such Change of Control, then the Executive shall be entitled to the
compensation and benefits provided in Sections 6 and 7, unless such termination
is a result of: (a) the Executive's death; (b) the Executive's disability [as
defined in Section 5(a) below]; (c) the Executive's retirement [as defined in
Section 5(b) below]; (d) the Executive's termination by the Company for Cause
[as defined in Section 5(c) below]; or (e) the Executive's decision to terminate
employment other than for Good Reason [as defined in Section 5(d) below].
(a) DISABILITY. If, as a result of the Executive's incapacity
due to physical or mental illness, the Executive shall have been absent from his
duties with the Company on a full-time basis for six months and within 30 days
after written notice of termination is thereafter given by the Company the
Executive shall not have returned to the full-time performance of the
Executive's duties, the Company may terminate the Executive for "Disability."
(b) RETIREMENT. The term "Retirement" as used in this
Agreement shall mean termination by the Company or the Executive of the
Executive's employment based on the Executive having attained the age of 65 or
such other age as shall have been fixed in any arrangement established with the
Executive's consent with respect to the Executive.
(c) CAUSE. The Company may terminate the Executive's
employment for Cause. For purposes of this Agreement only, the Company shall
have "Cause" to terminate the Executive's employment hereunder only on the basis
of (i) fraud, misappropriation or embezzlement on the part of the Executive; or
(ii) intentional misconduct or gross negligence on
3
the part of the Executive which has resulted in material harm to the Company.
Notwithstanding the foregoing, the Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters of the entire membership of the Company's Board of
Directors at a meeting of the Board called and held for the purpose (after
reasonable notice to the Executive and an opportunity for the Executive,
together with the Executive's counsel, to be heard before the Board), finding
that in the good faith opinion of the Board the Executive was guilty of conduct
set forth in the second sentence of this Section 5(c) and specifying the
particulars thereof in detail. Nothing herein shall limit the right of the
Executive or his beneficiaries to contest the validity or propriety of any such
determination.
(d) GOOD REASON. The Executive may terminate the Executive's
employment for Good Reason at any time during the term of this Agreement. For
purposes of this Agreement "Good Reason" shall mean any of the following
(without the Executive's express written consent):
(i) the assignment to the Executive by the Company of duties
inconsistent with the Executive's position, duties, responsibilities
and status with the Company immediately prior to a Change in Control of
the Company, or a change in the Executive's titles or offices as in
effect immediately prior to a Change in Control of the Company, or any
removal of the Executive from or any failure to reelect the Executive
to any of such positions, except in connection with the termination of
his employment for Disability, Retirement or Cause or as a result of
the Executive's death or by the Executive other than for Good Reason;
(ii) a reduction by the Company in the Executive's base salary
as in effect on the date hereof or as the same may be increased from
time to time during the term of this Agreement or the Company's failure
to increase (within 12 months of the Executive's last increase in base
salary) the Executive's base salary after a Change in Control of the
Company in an amount which at least equals, on a percentage basis, the
average percentage increase in base salary for all officers of the
Company effected in the preceding 12 months;
(iii) any failure by the Company to continue in effect any
benefit plan or arrangement (including, without limitation, the
Company's 401(k) plan, nonqualified deferred compensation plan, profit
sharing plan, group life insurance plan, and medical, dental, accident
and disability plans) in which the Executive is participating at the
time of a Change of Control (or any other plans providing the Executive
with substantially similar benefits) (hereinafter referred to as
"Benefit Plans"), or the taking of any action by the Company which
would adversely affect the Executive's participation in or materially
reduce the Executive's benefits under any such Benefit Plan or deprive
the Executive of any material fringe benefit enjoyed by the Executive
at the time of a Change in Control of the Company;
(iv) any failure by the Company to continue in effect any
incentive plan or arrangement (including, without limitation, the
Company's Officers' Incentive Compensation Plan, Officers' Long-Term
Incentive Plan, bonus and contingent bonus arrangements and credits and
the right to receive performance awards and similar incentive
compensation benefits) in which the Executive is participating at the
time of a Change of Control (or any other plans or arrangements
providing him with substantially similar benefits) (hereinafter
referred to as "Incentive Plans") or the taking of any action by the
Company which would adversely affect the Executive's participation in
any such Incentive Plan or reduce the Executive's benefits under any
such Incentive Plan, expressed as a percentage of his base salary, by
more than 10 percentage points in any fiscal year as compared to the
immediately preceding fiscal year;
(v) any failure by the Company to continue in effect any plan
or arrangement to receive securities of the Company in which the
Executive is participating at the time of a Change of Control (or plans
or arrangements providing him with substantially similar benefits)
4
(hereinafter referred to as "Securities Plans") or the taking of any
action by the Company which would adversely affect the Executive's
participation in or materially reduce the Executive's benefits under
any such Securities Plan;
(vi) a relocation of the Company's principal executive offices
to a location outside of Forest City, Iowa, or the Executive's
relocation to any place other than the location at which the Executive
performed the Executive's duties prior to a Change in Control of the
Company, except for required travel by the Executive on the Company's
business to an extent substantially consistent with the Executive's
business travel obligations at the time of a Change in Control of the
Company;
(vii) any failure by the Company to provide the Executive with
the number of paid vacation days to which the Executive is entitled at
the time of a Change in Control of the Company;
(viii) any material breach by the Company of any provision of
this Agreement;
(ix) any failure by the Company to obtain the assumption of
this Agreement by any successor or assign of the Company; or
(x) any purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination satisfying
the requirements of Section 3(f), and for purposes of this Agreement,
no such purported termination shall be effective.
(e) NOTICE OF TERMINATION. Any termination by the Company
pursuant to Section 5(a), (b) or (c) shall be communicated by a Notice of
Termination. For purposes of this Agreement, a "Notice of Termination" shall
mean a written notice which shall indicate those specific termination provisions
in this Agreement relied upon and which sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provisions so indicated. For purposes of this
Agreement, no such purported termination by the Company shall be effective
without such Notice of Termination.
(f) DATE OF TERMINATION. "Date of Termination" shall mean (a)
if this Agreement is terminated by the Company for Disability, 30 days after
Notice of Termination is given to the Executive (provided that the Executive
shall not have returned to the performance of the Executive's duties on a time
basis during such 30-day period) or (b) if the Executive's employment is
terminated by the Company for any other reason, the date on which a Notice of
Termination is given; PROVIDED that if within 30 days after any Notice of
Termination is given to the Executive by the Company the Executive notifies the
Company that a dispute exists concerning the termination, the Date of
Termination shall be the date the dispute is finally determined, whether by
mutual agreement by the parties or upon final judgment, order or decree of a
court of competent jurisdiction (the time for appeal therefrom having expired
and no appeal having been perfected).
6. SEVERANCE COMPENSATION UPON TERMINATION OF EMPLOYMENT. If the
Company shall terminate the Executive's employment other than pursuant to
Section 5(a), (b) or (c) or if the Executive shall terminate his employment for
Good Reason, then the Company shall pay to the Executive as severance pay in a
lump sum, in cash, on the fifth day following the Date of Termination, an amount
equal to three (3) times the average of the aggregate annual compensation paid
to the Executive during the three (3) fiscal years of the Company immediately
preceding the Change of Control by the Company subject to United States income
taxes (or, such fewer number of fiscal years if the Executive has not been
employed by the Company during each of the preceding three (3) fiscal years).
5
7. ADDITIONAL BENEFITS UPON TERMINATION. If within three years
following a Change of Control, the Company shall terminate the Executive's
employment other than pursuant to Section 5(a), (b) or (c) or if the Executive
shall terminate his employment for Good Reason, then the Company shall further
provide to the Executive the following benefits:
(a) LIFE, DENTAL, VISION, HEALTH AND LONG-TERM DISABILITY
COVERAGE. The Executive's participation in, and entitlement to, benefits under:
(i) all life insurance plans of the Company; (ii) all health insurance plans of
the Company, including, but not limited to, those providing major medical and
hospitalization benefits, dental benefits and vision benefits; and (iii) the
Company's long-term disability plan or plans; as all such plans existed
immediately prior to the Change of Control shall continue as though the
Executive remained employed by the Corporation for an additional period of three
(3) years or until the obtainment of such coverages by the Executive through
another employer, whichever is earlier; provided, however, that in the case of
all health insurance plans of the Company (including, but not limited to, those
providing major medical and hospitalization benefits, dental benefits and vision
benefits), such three-(3) year period shall be extended to the time that the
Executive attains age 65 (and provided further that the Executive may then be
entitled to certain retiree health insurance under Section 3(c) hereof). To the
extent such participation or entitlement is not possible for any reason
whatsoever, equivalent benefits shall be provided by the Company to the
Executive.
(b) AUTOMOBILE BENEFIT. If the Executive is entitled to the
use of a Company-owned automobile at the time of a Change of Control, then title
to such automobile shall be transferred to the Executive (upon termination of
employment as described in Section 7 above) free and clear of all liens and
encumbrances (or, if the Company does not own such automobile at the time of
termination, then the Company shall arrange for the purchase, for the benefit of
the Executive, of a similar make, model and year of automobile).
(c) EXECUTIVE SPLIT DOLLAR LIFE INSURANCE PROGRAM. Provided
that the Company is obligated, pursuant to Section 3(b) hereof, to pay premiums
on a policy or policies issued in favor of the Executive following a Change of
Control, then the Company shall, in the same manner, continue making such
premium payments until the later of (i) the Executive attains the age of 55; or
(ii) three (3) years following the Executive's termination of employment
(provided, however, that the Company shall not be obligated to make any such
payments after the Executive attains age 65).
(d) DEFERRED COMPENSATION PLANS. Any vesting requirement
imposed under the provisions of, or rules relating to, the Company's Deferred
Compensation and Deferred Bonus Plans, (including, but not limited to, vesting
conditions requiring that the Executive attain the age of 55 and/or complete
five years of service following a deferral) shall be waived and the Executive
shall be fully vested in all deferrals made under such plans.
8. EXCISE TAX-ADDITIONAL PAYMENT.
(a) Notwithstanding anything in this Agreement or any written
or unwritten policy of the Company to the contrary, (i) if it shall be
determined that any payment or distribution by the Company to or for the benefit
of the Executive, whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement, any other agreement between the Company
and the Executive or otherwise (a "Payment"), would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, (the
"Code") or any interest or penalties with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), or (ii) if the Executive shall
otherwise become obligated to pay the Excise Tax in respect of a Payment, then
the Company shall pay to the Executive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including any Excise Tax, imposed upon the Gross-Up
6
Payment, the Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon such Payment.
(b) All determinations and computations required to be made
under this Section 8, including whether a Gross-Up Payment is required under
clause (ii) of paragraph 8(a) above, and the amount of any Gross-Up Payment,
shall be made by the Company's regularly engaged independent certified public
accountants (the "Accounting Firm"). The Company shall cause the Accounting Firm
to provide detailed supporting calculations both to the Company and the
Executive within 15 business days after such determination or computation is
requested by the Executive. Any initial Gross-Up Payment determined pursuant to
this Section 8 shall be paid by the Company to the Executive within five days of
the receipt of the Accounting Firm's determination. A determination that no
Excise Tax is payable by the Executive shall not be valid or binding unless
accompanied by a written opinion of the Accounting Firm to the Executive that
the Executive has substantial authority not to report any Excise Tax on his
federal income tax return. Any determination by the Accounting Firm shall be
binding upon the Company and the Executive, except to the extent the Executive
becomes obligated to pay an Excise Tax in respect of a Payment. In the event
that the Company or the subsidiary exhausts or waives its remedies pursuant to
paragraph 8(c) and the Executive thereafter shall become obligated to make a
payment of any Excise Tax, and if the amount thereof shall exceed the amount, if
any, of any Excise Tax computed by the Accounting Firm pursuant to this
paragraph 8(b) in respect to which an initial Gross-Up Payment was made to the
Executive, the Accounting Firm shall within 15 days after Notice thereof
determine the amount of such excess Excise Tax and the amount of the additional
Gross-Up Payment to the Executive. All expenses and fees of the Accounting Firm
incurred by reason of this Section 8 shall be paid by the Company.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of a Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten business days after the Executive
knows of such claim and shall apprise the Company of the nature of such claim
and the date on which such claim is requested to be paid. The Executive shall
not pay such claim prior to the expiration of the 30-day period following the
date on which it gives such notice to the Company (or such shorter period ending
on the date that any payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested
relating to such claim,
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
PROVIDED, HOWEVER, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax, including
interest and penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this paragraph 8(c), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
7
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company or the subsidiary shall determine; PROVIDED, HOWEVER, that if the
Company or the subsidiary directs the Executive to pay such claim and sue for a
refund, the Company or the subsidiary shall advance the amount of such payment
to the Executive, on an interest-free basis and shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or income tax,
including interest or penalties with respect thereto, imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and FURTHER PROVIDED, that any extension of the statue of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, control of the contest by the Company shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company or the subsidiary pursuant to paragraph 8(c), the
Executive becomes entitled to receive any refund with respect to such claim, the
Executive shall (subject to compliance with the requirements of Section 8 by the
Company or the subsidiary) promptly pay to the Company or the subsidiary the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company or the subsidiary pursuant to paragraph 8(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
9. NO OBLIGATION TO MITIGATE DAMAGES; NO EFFECT ON OTHER CONTRACTUAL
RIGHTS.
(a) The Executive shall not be required to mitigate damages or
the amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment provided for under
this Agreement be reduced by any compensation earned by the Executive as the
result of employment by another employer after the Date of Termination, or
otherwise.
(b) The provisions of this Agreement, and any payment provided
for hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's existing rights, or rights which would accrue solely as
a result of the passage of time, under any Benefit Plan, Incentive Plan or
Securities Plan, employment agreements or other contract, plan or arrangement.
10. SUCCESSOR TO THE COMPANY.
(a) The Company will require any successor or assign (whether
direct or indirect, by purchase, merger, consolidation or otherwise) of all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to the Executive, expressly, absolutely and
unconditionally to assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if no
such succession or assignment had taken place. Any failure of the Company to
obtain such agreement prior to the effectiveness of any such succession or
assignment shall be a material breach of this Agreement and shall entitle the
Executive to terminate the Executive's employment for Good
8
Reason. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor or assign to its business and/or assets
as aforesaid which executes and delivers the agreement provided for in this
Section 10 or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal and legal representatives, executors,
administrators, successors, heirs, distributes, devisees and legatees. If the
Executive should die while any amounts are still payable to him hereunder, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Executive's devisee, legatee, or other
designee or, if there be no such designee, to the Executive's estate.
11. NO GUARANTY OF EMPLOYMENT. Nothing in this Agreement shall be
deemed to entitle the Executive to continued employment with the Company prior
to a Change of Control, and the rights of the Company to terminate the
employment of the Executive, prior to a Change of Control, shall continue as
fully as if this Agreement were not in effect.
12. NOTICE. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt registered, postage prepaid, as follows:
If to the Company:
Attn: General Counsel
Winnebago Industries, Inc.
605 W. Crystal Lake Road
P.O. Box 152
Forest City, IA 50436
If to the Executive:
Bruce D. Hertzke
3368 Sage Drive
Forest City, IA 50436
or such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
13. MISCELLANEOUS. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. This Agreement shall be governed by and construed
in accordance with the laws of the State of Iowa.
14. VALIDITY. The invalidity or unenforceability of any provisions of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
15. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
9
16. LEGAL FEES AND EXPENSES. The Company shall pay all legal fees and
expenses which the Executive may incur as a result of the Company's contesting
the validity, enforceability or the Executive's interpretation of, or
determinations under, this Agreement.
17. CONFIDENTIALITY. The Executive shall retain in confidence any and
all confidential information known to the Executive concerning the Company and
its business so long as such information is not otherwise publicly disclosed.
IN WITNESS WHEREOF, the parties have executed this agreement on the
date set out above.
COMPANY:
WINNEBAGO INDUSTRIES, INC.
By:
-----------------------------------
Raymond M. Beebe
Vice President-General Counsel and
Secretary
EXECUTIVE:
By:
-----------------------------------
Bruce D. Hertzke
10
EXHIBIT 10o.
EXECUTIVE CHANGE OF CONTROL AGREEMENT
This EXECUTIVE CHANGE OF CONTROL AGREEMENT is made as of January 17,
2001, by and between WINNEBAGO INDUSTRIES, INC., an Iowa corporation (the
"Company"), and Edwin F. Barker (the "Executive").
RECITALS:
WHEREAS, the Executive is a senior executive and officer of the Company
and has made and is expected to continue to make major contributions to the
profitability, growth and financial strength of the Company;
WHEREAS, the Company recognizes that, as is the case for most publicly
held companies, the possibility of a Change of Control (as hereafter defined)
exists;
WHEREAS, it is in the best interests of the Company, considering the
past and future services of the Executive, to improve the security and climate
for objective decision making by providing for the personal security of the
Executive upon a Change of Control.
NOW, THEREFORE, in consideration of the foregoing premises and the past
and future services rendered and to be rendered by the Executive to the Company
and of the mutual covenants and agreements hereinafter set forth, the parties
agree as follows:
AGREEMENT:
1. CONTINUED SERVICE BY EXECUTIVE. In the event a person or entity, in
order to effect a Change of Control, commences a tender or exchange offer,
circulates a proxy to shareholders or takes other steps, the Executive agrees
that the Executive will not voluntarily leave the employ of the Company, and
will render faithful services to the Company consistent with Executive's
position and responsibilities, until the person or entity has abandoned or
terminated its efforts to effect such Change of Control or until such Change of
Control has occurred.
2. CHANGE OF CONTROL. For purposes of this Agreement, the term "Change
of Control" means the time when (i) any Person becomes an Acquiring Person, or
(ii) individuals who shall qualify as Continuing Directors of the Company shall
have ceased for any reason to constitute at least a majority of the Board of
Directors of the Company; PROVIDED HOWEVER, that in the case of either clause
(i) or (ii) a Change of Control shall not be deemed to have occurred if the
event shall have been approved prior to the occurrence thereof by a majority of
the Continuing Directors who shall then be members of such Board of Directors,
and in the case of clause (i) a Change of Control shall not be deemed to have
occurred upon the acquisition of stock of the Company by a pension, profit
sharing, stock bonus, employee stock ownership plan or other retirement plan
intended to be qualified under Section 401(a) of the Internal Revenue Code of
1986, as amended, established by the Company or any subsidiary of the Company.
(In addition, stock held by such a plan shall not be treated as outstanding in
determining ownership percentages for purposes of this definition.)
For the purpose of the foregoing definition of "Change of Control," the
capitalized terms shall have the following meanings:
1
(a) "Continuing Director" means (i) any member of the Board of
Directors of the Company, while such person as a member of the
Board, who is not an Affiliate or Associate of any Acquiring
Person or of any such Acquiring Person's Affiliate or
Associate and was a member of the Board prior to the time when
such Acquiring Person shall have become an Acquiring Person,
and (ii) any successor of a Continuing Director, while such
successor is a member of the Board, who is not an Acquiring
Person or any Affiliate or Associate of any Acquiring Person
or a representative or nominee of an Acquiring Person or of
any affiliate or associate of such Acquiring Person and is
recommended or elected to succeed the Continuing Director by a
majority of the Continuing Directors.
(b) "Acquiring Person" means any Person or any individual or group
of Affiliates or Associates of such Person who acquires
beneficial ownership, directly or indirectly, of 20% or more
of the outstanding stock of the Company if such acquisition
occurs in whole or in part following January 17, 2001, except
that the term "Acquiring Person" shall not include a Hanson
Family Member or an Affiliate or Associate of a Hanson Family
Member.
(c) "Affiliate" means a Person that directly or indirectly through
one or more intermediaries, controls, or is controlled by, or
is under common control with, the person specified.
(d) "Associate" means (1) any corporate, partnership, limited
liability company, entity or organization (other than the
Company or a majority-owned subsidiary of the Company) of
which such a Person is an officer, director, member, or
partner or is, directly or indirectly the beneficial owner of
ten percent (10%) or more of the class of equity securities,
(2) any trust or fund in which such person has a substantial
beneficial interest or as to which such person serves as
trustee or in a similar fiduciary capacity, (3) any relative
or spouse of such person, or any relative of such spouse, or
(4) any investment company for which such person or any
Affiliate of such person serves as investment advisor.
(e) "Hanson Family Member" means John K. Hanson (deceased) and
Luise V. Hanson (and the executors or administrators of their
estates), their lineal descendants (and the executors or
administrators of their estates), the spouses of their lineal
descendants (and the executors or administrators of their
estates) and the John K. and Luise V. Hanson Foundation.
(f) "Person" means an individual, corporation, limited liability
company, partnership, association, joint stock company, trust,
unincorporated organization or government or political
subdivision thereof.
3. SPECIAL BENEFITS EFFECTIVE IMMEDIATELY UPON A CHANGE OF CONTROL. If
a Change of Control shall have occurred while the Executive is still an employee
of the Company, then the Executive shall immediately be entitled to the
following benefits:
(a) IMMEDIATE VESTING OF ALL STOCK OPTIONS AND RIGHTS. All
options and rights granted to the Executive by the Company pursuant to the
Company's Stock Option Plan effective as of August 14, 1997, or any successor or
supplemental stock plan shall become immediately exercisable upon a Change of
Control.
(b) EXECUTIVE SPLIT DOLLAR LIFE INSURANCE PROGRAM. If the
Executive is a participant under the Company's Executive Split Dollar Life
Insurance Program at the time of a Change of Control and the Company has paid
any portion of the premium on the policy or policies issued in connection
therewith during the twelve months preceding the occurrence of the
2
Change of Control, then the Company shall continue to pay all
premiums on such policies so long as the Executive remains in the employ of the
Company.
(c) RETIREE HEALTH INSURANCE. Any plans or policies of the
Company providing for medical, dental, vision or similar benefits for retired
employees existing as of the time of a Change of Control shall, as to the
Executive, not be rescinded or modified in any manner which is adverse to the
Executive following a Change of Control.
(d) RESTRICTED STOCK. All nonregistered stock of the Company
owned by the Executive, which is subject to restrictions on sale or other
transfer, shall, at the option of the Executive (exercisable at any time by the
delivery of written notice to the Company) be purchased by the Company at its
fair market value. The purchase shall be completed by the Company within thirty
(30) days after the Company receives the written notice of exercise from the
Executive. So long as the Company's stock is traded on the New York Stock
Exchange (the "NYSE"), the "fair market value" shall be the mean between the
highest and lowest reported selling prices as reported by the NYSE on the
business day immediately preceding the day of sale.
4. OTHER BENEFITS EFFECTIVE IMMEDIATELY UPON A CHANGE OF CONTROL
PURSUANT TO PLAN DOCUMENTS. It is acknowledged that there presently exist other
plans and agreements of the Company which may provide benefits to the Executive
and which contain specific provisions dealing with the occurrence of a change of
control of the Company (as defined in such plan or agreement). Following a
Change of Control, no such plan or agreement shall be rescinded or modified in
any manner which is adverse to the Executive. Such other plans and agreements of
the Company shall mean: (a) the Executive Share Option Program; (b) the Officers
Long-Term Incentive Plan; (c) the Deferred Compensation and Deferred Bonus
Plans; and (d) the Officers Incentive Compensation Plan. Nothing herein shall be
construed to affect the Company's right and ability to terminate or amend any
such plan or agreement (subject to the terms thereof) prior to a Change of
Control.
5. TERMINATION FOLLOWING A CHANGE OF CONTROL. If a Change of Control
shall have occurred while the Executive is still an employee of the Company, and
if the Executive's employment with the Company is terminated, within three years
following such Change of Control, then the Executive shall be entitled to the
compensation and benefits provided in Sections 6 and 7, unless such termination
is a result of: (a) the Executive's death; (b) the Executive's Disability (as
defined in Section 5(a) below); (c) the Executive's Retirement (as defined in
Section 5(b) below); (d) the Executive's termination by the Company for Cause
(as defined in Section 5(c) below); or (e) the Executive's decision to terminate
employment other than for Good Reason (as defined in Section 5(d) below).
(a) DISABILITY. If, as a result of the Executive's incapacity
due to physical or mental illness, the Executive shall have been absent from his
duties with the Company on a full-time basis for six months and within 30 days
after written notice of termination is thereafter given by the Company the
Executive shall not have returned to the full-time performance of the
Executive's duties, the Company may terminate the Executive for "Disability."
(b) RETIREMENT. The term "Retirement" as used in this
Agreement shall mean termination by the Company or the Executive of the
Executive's employment based on the Executive having attained the age of 65 or
such other age as shall have been fixed in any arrangement established with the
Executive's consent with respect to the Executive.
(c) CAUSE. The Company may terminate the Executive's
employment for Cause. For purposes of this Agreement only, the Company shall
have "Cause" to terminate the Executive's employment hereunder only on the basis
of (i) fraud, misappropriation or embezzlement on the part of the Executive; or
(ii) intentional misconduct or gross negligence on
3
the part of the Executive which has resulted in material harm to the Company.
Notwithstanding the foregoing, the Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters of the entire membership of the Company's Board of
Directors at a meeting of the Board called and held for the purpose (after
reasonable notice to the Executive and an opportunity for the Executive,
together with the Executive's counsel, to be heard before the Board), finding
that in the good faith opinion of the Board the Executive was guilty of conduct
set forth in the second sentence of this Section 5(c) and specifying the
particulars thereof in detail. Nothing herein shall limit the right of the
Executive or his beneficiaries to contest the validity or propriety of any such
determination.
(d) GOOD REASON. The Executive may terminate the Executive's
employment for Good Reason at any time during the term of this Agreement. For
purposes of this Agreement "Good Reason" shall mean any of the following
(without the Executive's express written consent):
(i) the assignment to the Executive by the Company of duties
inconsistent with the Executive's position, duties, responsibilities
and status with the Company immediately prior to a Change in Control of
the Company, or a change in the Executive's titles or offices as in
effect immediately prior to a Change in Control of the Company, or any
removal of the Executive from or any failure to reelect the Executive
to any of such positions, except in connection with the termination of
his employment for Disability, Retirement or Cause or as a result of
the Executive's death or by the Executive other than for Good Reason;
(ii) a reduction by the Company in the Executive's base salary
as in effect on the date hereof or as the same may be increased from
time to time during the term of this Agreement or the Company's failure
to increase (within 12 months of the Executive's last increase in base
salary) the Executive's base salary after a Change in Control of the
Company in an amount which at least equals, on a percentage basis, the
average percentage increase in base salary for all officers of the
Company effected in the preceding 12 months;
(iii) any failure by the Company to continue in effect any
benefit plan or arrangement [including, without limitation, the
Company's 401(K) plan, nonqualified deferred compensation plan, profit
sharing plan, group life insurance plan, and medical, dental, accident
and disability plans] in which the Executive is participating at the
time of a Change of Control (or any other plans providing the Executive
with substantially similar benefits) (hereinafter referred to as
"Benefit Plans"), or the taking of any action by the Company which
would adversely affect the Executive's participation in or materially
reduce the Executive's benefits under any such Benefit Plan or deprive
the Executive of any material fringe benefit enjoyed by the Executive
at the time of a Change in Control of the Company;
(iv) any failure by the Company to continue in effect any
incentive plan or arrangement [including, without limitation, the
Company's Officers Incentive Compensation Plan, Officers Long-Term
Incentive Plan, bonus and contingent bonus arrangements and credits and
the right to receive performance awards and similar incentive
compensation benefits] in which the Executive is participating at the
time of a Change of Control (or any other plans or arrangements
providing him with substantially similar benefits) (hereinafter
referred to as "Incentive Plans") or the taking of any action by the
Company which would adversely affect the Executive's participation in
any such Incentive Plan or reduce the Executive's benefits under any
such Incentive Plan, expressed as a percentage of his base salary, by
more than 10 percentage points in any fiscal year as compared to the
immediately preceding fiscal year;
(v) any failure by the Company to continue in effect any plan
or arrangement to receive securities of the Company in which the
Executive is participating at the time of a Change of Control (or plans
or arrangements providing him with substantially similar benefits)
4
(hereinafter referred to as "Securities Plans") or the taking of any
action by the Company which would adversely affect the Executive's
participation in or materially reduce the Executive's benefits under
any such Securities Plan;
(vi) a relocation of the Company's principal executive offices
to a location outside of Forest City, Iowa, or the Executive's
relocation to any place other than the location at which the Executive
performed the Executive's duties prior to a Change in Control of the
Company, except for required travel by the Executive on the Company's
business to an extent substantially consistent with the Executive's
business travel obligations at the time of a Change in Control of the
Company;
(vii) any failure by the Company to provide the Executive with
the number of paid vacation days to which the Executive is entitled at
the time of a Change in Control of the Company;
(viii) any material breach by the Company of any provision of
this Agreement;
(ix) any failure by the Company to obtain the assumption of
this Agreement by any successor or assign of the Company; or
(x) any purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination satisfying
the requirements of Section 3(f), and for purposes of this Agreement,
no such purported termination shall be effective.
(e) NOTICE OF TERMINATION. Any termination by the Company
pursuant to Section 5(a), (b) or (c) shall be communicated by a Notice of
Termination. For purposes of this Agreement, a "Notice of Termination" shall
mean a written notice which shall indicate those specific termination provisions
in this Agreement relied upon and which sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provisions so indicated. For purposes of this
Agreement, no such purported termination by the Company shall be effective
without such Notice of Termination.
(f) DATE OF TERMINATION. "Date of Termination" shall mean (a)
if this Agreement is terminated by the Company for Disability, 30 days after
Notice of Termination is given to the Executive (provided that the Executive
shall not have returned to the performance of the Executive's duties on a
full-time basis during such 30-day period) or (b) if the Executive's employment
is terminated by the Company for any other reason, the date on which a Notice of
Termination is given; PROVIDED that if within 30 days after any Notice of
Termination is given to the Executive by the Company the Executive notifies the
Company that a dispute exists concerning the termination, the Date of
Termination shall be the date the dispute is finally determined, whether by
mutual agreement by the parties or upon final judgment, order or decree of a
court of competent jurisdiction (the time for appeal therefrom having expired
and no appeal having been perfected).
6. SEVERANCE COMPENSATION UPON TERMINATION OF EMPLOYMENT. If the
Company shall terminate the Executive's employment other than pursuant to
Section 5(a), (b) or (c) or if the Executive shall terminate his employment for
Good Reason, then the Company shall pay to the Executive as severance pay in a
lump sum, in cash, on the fifth day following the Date of Termination, an amount
equal to three (3) times the average of the aggregate annual compensation paid
to the Executive during the three (3) fiscal years of the Company immediately
preceding the Change of Control by the Company subject to United States income
taxes [or, such fewer number of fiscal years if the Executive has not been
employed by the Company during each of the preceding three (3) fiscal years].
5
7. ADDITIONAL BENEFITS UPON TERMINATION. If within three years
following a Change of Control, the Company shall terminate the Executive's
employment other than pursuant to Section 5(a), (b) or (c) or if the Executive
shall terminate his employment for Good Reason, then the Company shall further
provide to the Executive the following benefits:
(a) LIFE, DENTAL, VISION, HEALTH AND LONG-TERM DISABILITY
COVERAGE. The Executive's participation in, and entitlement to, benefits under:
(i) all life insurance plans of the Company; (ii) all health insurance plans of
the Company, including but not limited to those providing major medical and
hospitalization benefits, dental benefits and vision benefits; and (iii) the
Company's long-term disability plan or plans; as all such plans existed
immediately prior to the Change of Control shall continue as though the
Executive remained employed by the Corporation for an additional period of three
(3) years or until the obtainment of such coverages by the Executive through
another employer, whichever is earlier; provided, however, that in the case of
all health insurance plans of the Company (including but not limited to those
providing major medical and hospitalization benefits, dental benefits and vision
benefits), such three-(3) year period shall be extended to the time that the
Executive attains age 65 (and provided further that the Executive may then be
entitled to certain retiree health insurance under Section 3(c) hereof). To the
extent such participation or entitlement is not possible for any reason
whatsoever, equivalent benefits shall be provided by the Company to the
Executive.
(b) AUTOMOBILE BENEFIT. If the Executive is entitled to the
use of a Company-owned automobile at the time of a Change of Control, then title
to such automobile shall be transferred to the Executive (upon termination of
employment as described in Section 7 above) free and clear of all liens and
encumbrances (or, if the Company does not own such automobile at the time of
termination, then the Company shall arrange for the purchase, for the benefit of
the Executive, of a similar make, model and year of automobile).
(c) EXECUTIVE SPLIT DOLLAR LIFE INSURANCE PROGRAM. Provided
that the Company is obligated, pursuant to Section 3(b) hereof, to pay premiums
on a policy or policies issued in favor of the Executive following a Change of
Control, then the Company shall, in the same manner, continue making such
premium payments until the later of (i) the Executive attains the age of 55; or
(ii) three (3) years following the Executive's termination of employment
(provided, however, that the Company shall not be obligated to make any such
payments after the Executive attains age 65).
(d) DEFERRED COMPENSATION PLANS. Any vesting requirement
imposed under the provisions of, or rules relating to, the Company's Deferred
Compensation and Deferred Bonus Plans, (including, but not limited to, vesting
conditions requiring that the Executive attain the age of 55 and/or complete
five years of service following a deferral) shall be waived and the Executive
shall be fully vested in all deferrals made under such plans.
8. EXCISE TAX-ADDITIONAL PAYMENT.
(a) Notwithstanding anything in this Agreement or any written
or unwritten policy of the Company to the contrary, (i) if it shall be
determined that any payment or distribution by the Company to or for the benefit
of the Executive, whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement, any other agreement between the Company
and the Executive or otherwise (a "Payment"), would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, (the
"Code") or any interest or penalties with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), or (ii) if the Executive shall
otherwise become obligated to pay the Excise Tax in respect of a Payment, then
the Company shall pay to the Executive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including any Excise Tax, imposed upon the Gross-Up
6
Payment, the Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon such Payment.
(b) All determinations and computations required to be made
under this Section 8, including whether a Gross-Up Payment is required under
clause (ii) of paragraph 8(a) above, and the amount of any Gross-Up Payment,
shall be made by the Company's regularly engaged independent certified public
accountants (the "Accounting Firm"). The Company shall cause the Accounting Firm
to provide detailed supporting calculations both to the Company and the
Executive within 15 business days after such determination or computation is
requested by the Executive. Any initial Gross-Up Payment determined pursuant to
this Section 8 shall be paid by the Company to the Executive within five days of
the receipt of the Accounting Firm's determination. A determination that no
Excise Tax is payable by the Executive shall not be valid or binding unless
accompanied by a written opinion of the Accounting Firm to the Executive that
the Executive has substantial authority not to report any Excise Tax on his
federal income tax return. Any determination by the Accounting Firm shall be
binding upon the Company and the Executive, except to the extent the Executive
becomes obligated to pay an Excise Tax in respect of a Payment. In the event
that the Company or the subsidiary exhausts or waives its remedies pursuant to
paragraph 8(c) and the Executive thereafter shall become obligated to make a
payment of any Excise Tax, and if the amount thereof shall exceed the amount, if
any, of any Excise Tax computed by the Accounting Firm pursuant to this
paragraph 8(b) in respect to which an initial Gross-Up Payment was made to the
Executive, the Accounting Firm shall within 15 days after Notice thereof
determine the amount of such excess Excise Tax and the amount of the additional
Gross-Up Payment to the Executive. All expenses and fees of the Accounting Firm
incurred by reason of this Section 8 shall be paid by the Company.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of a Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten business days after the Executive
knows of such claim and shall apprise the Company of the nature of such claim
and the date on which such claim is requested to be paid. The Executive shall
not pay such claim prior to the expiration of the 30-day period following the
date on which it gives such notice to the Company (or such shorter period ending
on the date that any payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested
relating to such claim,
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
PROVIDED, HOWEVER, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax, including
interest and penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this paragraph 8(c), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
7
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company or the subsidiary shall determine; PROVIDED, HOWEVER, that if the
Company or the subsidiary directs the Executive to pay such claim and sue for a
refund, the Company or the subsidiary shall advance the amount of such payment
to the Executive, on an interest-free basis and shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or income tax,
including interest or penalties with respect thereto, imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and FURTHER PROVIDED, that any extension of the statue of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, control of the contest by the Company shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company or the subsidiary pursuant to paragraph 8(c), the
Executive becomes entitled to receive any refund with respect to such claim, the
Executive shall (subject to compliance with the requirements of Section 8 by the
Company or the subsidiary) promptly pay to the Company or the subsidiary the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company or the subsidiary pursuant to Paragraph 8(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall off-set,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
9. NO OBLIGATION TO MITIGATE DAMAGES; NO EFFECT ON OTHER CONTRACTUAL
RIGHTS.
(a) The Executive shall not be required to mitigate damages or
the amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment provided for under
this Agreement be reduced by any compensation earned by the Executive as the
result of employment by another employer after the Date of Termination, or
otherwise.
(b) The provisions of this Agreement, and any payment provided
for hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's existing rights, or rights which would accrue solely as
a result of the passage of time, under any Benefit Plan, Incentive Plan or
Securities Plan, employment agreements or other contract, plan or arrangement.
10. SUCCESSOR TO THE COMPANY.
(a) The Company will require any successor or assign (whether
direct or indirect, by purchase, merger, consolidation or otherwise) of all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to the Executive, expressly, absolutely and
unconditionally to assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if no
such succession or assignment had taken place. Any failure of the Company to
obtain such agreement prior to the effectiveness of any such succession or
assignment shall be a material breach of this Agreement and shall entitle the
Executive to terminate the Executive's employment for Good
8
Reason. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor or assign to its business and/or assets
as aforesaid which executes and delivers the agreement provided for in this
Section 10 or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal and legal representatives, executors,
administrators, successors, heirs, distributes, devisees and legatees. If the
Executive should die while any amounts are still payable to him hereunder, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Executive's devisee, legatee, or other
designee or, if there be no such designee, to the Executive's estate.
11. NO GUARANTY OF EMPLOYMENT. Nothing in this Agreement shall be
deemed to entitle the Executive to continued employment with the Company prior
to a Change of Control, and the rights of the Company to terminate the
employment of the Executive, prior to a Change of Control, shall continue as
fully as if this Agreement were not in effect.
12. NOTICE. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt registered, postage prepaid, as follows:
If to the Company:
Attn: General Counsel
Winnebago Industries, Inc.
605 W. Crystal Lake Road
P.O. Box 152
Forest City, IA 50436
If to the Executive:
Edwin F. Barker
2680 Taft Avenue
Garner, IA 50438
or such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
13. MISCELLANEOUS. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. This Agreement shall be governed by and construed
in accordance with the laws of the State of Iowa.
14. VALIDITY. The invalidity or unenforceability of any provisions of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
15. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
9
16. LEGAL FEES AND EXPENSES. The Company shall pay all legal fees and
expenses which the Executive may incur as a result of the Company's contesting
the validity, enforceability or the Executive's interpretation of, or
determinations under, this Agreement.
17. CONFIDENTIALITY. The Executive shall retain in confidence any and
all confidential information known to the Executive concerning the Company and
its business so long as such information is not otherwise publicly disclosed.
IN WITNESS WHEREOF, the parties have executed this agreement on the
date set out above.
COMPANY:
WINNEBAGO INDUSTRIES, INC.
By:
--------------------------------------
Bruce D. Hertzke
Chairman of the Board, Chief Executive
Officer and President
EXECUTIVE:
------------------------------------------
Edwin F. Barker
10
EXHIBIT 10p.
EXECUTIVE CHANGE OF CONTROL AGREEMENT
This EXECUTIVE CHANGE OF CONTROL AGREEMENT is made as of January 17,
2001, by and between WINNEBAGO INDUSTRIES, INC., an lowa corporation (the
"Company"), and Raymond M. Beebe (the "Executive").
RECITALS
WHEREAS, the Executive is a senior executive and officer of the Company
and has made and is expected to continue to make major contributions to the
profitability, growth and financial strength of the Company;
WHEREAS, the Company recognizes that, as is the case for most publicly
held companies, the possibility of a Change of Control (as hereafter defined)
exists;
WHEREAS, it is in the best interests of the Company, considering the
past and future services of the Executive, to improve the security and climate
for objective decision making by providing for the personal security of the
Executive upon a Change of Control.
NOW, THEREFORE, in consideration of the foregoing premises and the past
and future services rendered and to be rendered by the Executive to the Company
and of the mutual covenants and agreements hereinafter set forth, the parties
agree as follows:
AGREEMENT
1. CONTINUED SERVICE BY EXECUTIVE. In the event a person or entity, in
order to effect a Change of Control, commences a tender or exchange offer,
circulates a proxy to shareholders or takes other steps, the Executive agrees
that the Executive will not voluntarily leave the employ of the Company, and
will render faithful services to the Company consistent with Executive's
position and responsibilities, until the person or entity has abandoned or
terminated its efforts to effect such Change of Control or until such Change of
Control has occurred.
2. CHANGE OF CONTROL. For purposes of this Agreement, the term "Change
of Control" means the time when (i) any Person becomes an Acquiring Person, or
(ii) individuals who shall qualify as Continuing Directors of the Company shall
have ceased for any reason to constitute at least a majority of the Board of
Directors of the Company; PROVIDED HOWEVER, that in the case of either clause
(i) or (ii) a Change of Control shall not be deemed to have occurred if the
event shall have been approved prior to the occurrence thereof by a majority of
the Continuing Directors who shall then be members of such Board of Directors,
and in the case of clause (i) a Change of Control shall not be deemed to have
occurred upon the acquisition of stock of the Company by a pension, profit
sharing, stock bonus, employee stock ownership plan or other retirement plan
intended to be qualified under Section 401(a) of the Internal Revenue Code of
1986, as amended, established by the Company or any subsidiary of the Company.
(In addition, stock held by such a plan shall not be treated as outstanding in
determining ownership percentages for purposes of this definition.)
For the purpose of the foregoing definition of "Change of Control," the
capitalized terms shall have the following meanings:
1
(a) "Continuing Director" means (i) any member of the Board of
Directors of the Company, while such person as a member of the
Board, who is not an Affiliate or Associate of any Acquiring
Person or of any such Acquiring Person's Affiliate or
Associate and was a member of the Board prior to the time when
such Acquiring Person shall have become an Acquiring Person,
and (ii) any successor of a Continuing Director, while such
successor is a member of the Board, who is not an Acquiring
Person or any Affiliate or Associate of any Acquiring Person
or a representative or nominee of an Acquiring Person or of
any affiliate or associate of such Acquiring Person and is
recommended or elected to succeed the Continuing Director by a
majority of the Continuing Directors.
(b) "Acquiring Person" means any Person or any individual or group
of Affiliates or Associates of such Person who acquires
beneficial ownership, directly or indirectly, of 20% or more
of the outstanding stock of the Company if such acquisition
occurs in whole or in part following January 17, 2001, except
that the term "Acquiring Person" shall not include a Hanson
Family Member or an Affiliate or Associate of a Hanson Family
Member.
(c) "Affiliate" means a Person that directly or indirectly through
one or more intermediaries, controls, or is controlled by, or
is under common control with, the person specified.
(d) "Associate" means (1) any corporate, partnership, limited
liability company, entity or organization (other than the
Company or a majority-owned subsidiary of the Company) of
which such a Person is an officer, director, member, or
partner or is, directly or indirectly the beneficial owner of
ten percent (10%) or more of the class of equity securities,
(2) any trust or fund in which such person has a substantial
beneficial interest or as to which such person serves as
trustee or in a similar fiduciary capacity, (3) any relative
or spouse of such person, or any relative of such spouse, or
(4) any investment company for which such person or any
Affiliate of such person serves as investment advisor.
(e) "Hanson Family Member" means John K. Hanson (deceased) and
Luise V. Hanson (and the executors or administrators of their
estates), their lineal descendants (and the executors or
administrators of their estates), the spouses of their lineal
descendants (and the executors or administrators of their
estates) and the John K. and Luise V. Hanson Foundation.
(f) "Person" means an individual, corporation, limited liability
company, partnership, association, joint stock company, trust,
unincorporated organization or government or political
subdivision thereof.
3. SPECIAL BENEFITS EFFECTIVE IMMEDIATELY UPON A CHANGE OF CONTROL. If
a Change of Control shall have occurred while the Executive is still an employee
of the Company, then the Executive shall immediately be entitled to the
following benefits:
(a) IMMEDIATE VESTING OF ALL STOCK OPTIONS AND RIGHTS. All
options and rights granted to the Executive by the Company pursuant to the
Company's Stock Option Plan effective as of August 14, 1997, or any successor or
supplemental stock plan shall become immediately exercisable upon a Change of
Control.
(b) EXECUTIVE SPLIT DOLLAR LIFE INSURANCE PROGRAM. If the
Executive is a participant under the Company's Executive Split Dollar Life
Insurance Program at the time of a Change of Control and the Company has paid
any portion of the premium on the policy or policies issued in connection
therewith during the twelve months preceding the occurrence of the
2
Change of Control, then the Company shall continue to pay all premiums on such
policies so long as the Executive remains in the employ of the Company.
(c) RETIREE HEALTH INSURANCE. Any plans or policies of the
Company providing for medical, dental, vision or similar benefits for retired
employees existing as of the time of a Change of Control shall, as to the
Executive, not be rescinded or modified in any manner which is adverse to the
Executive following a Change of Control.
(d) RESTRICTED STOCK. All nonregistered stock of the Company
owned by the Executive, which is subject to restrictions on sale or other
transfer, shall, at the option of the Executive (exercisable at any time by the
delivery of written notice to the Company) be purchased by the Company at its
fair market value. The purchase shall be completed by the Company within thirty
(30) days after the Company receives the written notice of exercise from the
Executive. So long as the Company's stock is traded on the New York Stock
Exchange (the "NYSE"), the "fair market value" shall be the mean between the
highest and lowest reported selling prices as reported by the NYSE on the
business day immediately preceding the day of sale.
4. OTHER BENEFITS EFFECTIVE IMMEDIATELY UPON A CHANGE OF CONTROL
PURSUANT TO PLAN DOCUMENTS. It is acknowledged that there presently exist other
plans and agreements of the Company which may provide benefits to the Executive
and which contain specific provisions dealing with the occurrence of a change of
control of the Company (as defined in such plan or agreement). Following a
Change of Control, no such plan or agreement shall be rescinded or modified in
any manner which is adverse to the Executive. Such other plans and agreements of
the Company shall mean: (a) the Executive Share Option Program; (b) the
Officers' Long-Term Incentive Plan; (c) the Deferred Compensation and Deferred
Bonus Plans; and (d) the Officers' Incentive Compensation Plan. Nothing herein
shall be construed to affect the Company's right and ability to terminate or
amend any such plan or agreement (subject to the terms thereof) prior to a
Change of Control.
5. TERMINATION FOLLOWING A CHANGE OF CONTROL. If a Change of Control
shall have occurred while the Executive is still an employee of the Company, and
if the Executive's employment with the Company is terminated, within three years
following such Change of Control, then the Executive shall be entitled to the
compensation and benefits provided in Sections 6 and 7, unless such termination
is a result of: (a) the Executive's death; (b) the Executive's disability [as
defined in Section 5(a) below]; (c) the Executive's retirement [as defined in
Section 5(b) below]; (d) the Executive's termination by the Company for Cause
[as defined in Section 5(c) below]; or (e) the Executive's decision to terminate
employment other than for Good Reason [as defined in Section 5(d) below].
(a) DISABILITY. If, as a result of the Executive's incapacity
due to physical or mental illness, the Executive shall have been absent from his
duties with the Company on a full-time basis for six months and within 30 days
after written notice of termination is thereafter given by the Company the
Executive shall not have returned to the full-time performance of the
Executive's duties, the Company may terminate the Executive for "Disability."
(b) RETIREMENT. The term "Retirement" as used in this
Agreement shall mean termination by the Company or the Executive of the
Executive's employment based on the Executive having attained the age of 65 or
such other age as shall have been fixed in any arrangement established with the
Executive's consent with respect to the Executive.
(c) CAUSE. The Company may terminate the Executive's
employment for Cause. For purposes of this Agreement only, the Company shall
have "Cause" to terminate the Executive's employment hereunder only on the basis
of (i) fraud, misappropriation or embezzlement on the part of the Executive; or
(ii) intentional misconduct or gross negligence on
3
the part of the Executive which has resulted in material harm to the Company.
Notwithstanding the foregoing, the Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters of the entire membership of the Company's Board of
Directors at a meeting of the Board called and held for the purpose (after
reasonable notice to the Executive and an opportunity for the Executive,
together with the Executive's counsel, to be heard before the Board), finding
that in the good faith opinion of the Board the Executive was guilty of conduct
set forth in the second sentence of this Section 5(c) and specifying the
particulars thereof in detail. Nothing herein shall limit the right of the
Executive or his beneficiaries to contest the validity or propriety of any such
determination.
(d) GOOD REASON. The Executive may terminate the Executive's
employment for Good Reason at any time during the term of this Agreement. For
purposes of this Agreement "Good Reason" shall mean any of the following
(without the Executive's express written consent):
(i) the assignment to the Executive by the Company of duties
inconsistent with the Executive's position, duties, responsibilities
and status with the Company immediately prior to a Change in Control of
the Company, or a change in the Executive's titles or offices as in
effect immediately prior to a Change in Control of the Company, or any
removal of the Executive from or any failure to reelect the Executive
to any of such positions, except in connection with the termination of
his employment for Disability, Retirement or Cause or as a result of
the Executive's death or by the Executive other than for Good Reason;
(ii) a reduction by the Company in the Executive's base salary
as in effect on the date hereof or as the same may be increased from
time to time during the term of this Agreement or the Company's failure
to increase (within 12 months of the Executive's last increase in base
salary) the Executive's base salary after a Change in Control of the
Company in an amount which at least equals, on a percentage basis, the
average percentage increase in base salary for all officers of the
Company effected in the preceding 12 months;
(iii) any failure by the Company to continue in effect any
benefit plan or arrangement [including, without limitation, the
Company's 401(k) plan, nonqualified deferred compensation plan, profit
sharing plan, group life insurance plan, and medical, dental, accident
and disability plans] in which the Executive is participating at the
time of a Change of Control (or any other plans providing the Executive
with substantially similar benefits) (hereinafter referred to as
"Benefit Plans"), or the taking of any action by the Company which
would adversely affect the Executive's participation in or materially
reduce the Executive's benefits under any such Benefit Plan or deprive
the Executive of any material fringe benefit enjoyed by the Executive
at the time of a Change in Control of the Company;
(iv) any failure by the Company to continue in effect any
incentive plan or arrangement [including, without limitation, the
Company's Officers' Incentive Compensation Plan, Officers' Long-Term
Incentive Plan, bonus and contingent bonus arrangements and credits and
the right to receive performance awards and similar incentive
compensation benefits] in which the Executive is participating at the
time of a Change of Control (or any other plans or arrangements
providing him with substantially similar benefits) (hereinafter
referred to as "Incentive Plans") or the taking of any action by the
Company which would adversely affect the Executive's participation in
any such Incentive Plan or reduce the Executive's benefits under any
such Incentive Plan, expressed as a percentage of his base salary, by
more than 10 percentage points in any fiscal year as compared to the
immediately preceding fiscal year;
(v) any failure by the Company to continue in effect any plan
or arrangement to receive securities of the Company in which the
Executive is participating at the time of a Change of Control (or plans
or arrangements providing him with substantially similar benefits)
4
(hereinafter referred to as "Securities Plans") or the taking of any
action by the Company which would adversely affect the Executive's
participation in or materially reduce the Executive's benefits under
any such Securities Plan;
(vi) a relocation of the Company's principal executive offices
to a location outside of Forest City, Iowa, or the Executive's
relocation to any place other than the location at which the Executive
performed the Executive's duties prior to a Change in Control of the
Company, except for required travel by the Executive on the Company's
business to an extent substantially consistent with the Executive's
business travel obligations at the time of a Change in Control of the
Company;
(vii) any failure by the Company to provide the Executive with
the number of paid vacation days to which the Executive is entitled at
the time of a Change in Control of the Company;
(viii) any material breach by the Company of any provision of
this Agreement;
(ix) any failure by the Company to obtain the assumption of
this Agreement by any successor or assign of the Company; or
(x) any purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination satisfying
the requirements of Section 3(f), and for purposes of this Agreement,
no such purported termination shall be effective.
(e) NOTICE OF TERMINATION. Any termination by the Company
pursuant to Section 5(a), (b) or (c) shall be communicated by a Notice of
Termination. For purposes of this Agreement, a "Notice of Termination" shall
mean a written notice which shall indicate those specific termination provisions
in this Agreement relied upon and which sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provisions so indicated. For purposes of this
Agreement, no such purported termination by the Company shall be effective
without such Notice of Termination.
(f) DATE OF TERMINATION. "Date of Termination" shall mean (a)
if this Agreement is terminated by the Company for Disability, 30 days after
Notice of Termination is given to the Executive (provided that the Executive
shall not have returned to the performance of the Executive duties on a
full-time basis during such 30-day period) or (b) if the Executive's employment
is terminated by the Company for any other reason, the date on which a Notice of
Termination is given; PROVIDED that if within 30 days after any Notice of
Termination is given to the Executive by the Company the Executive notifies the
Company that a dispute exists concerning the termination, the Date of
Termination shall be the date the dispute is finally determined, whether by
mutual agreement by the parties or upon final judgment, order or decree of a
court of competent jurisdiction (the time for appeal therefrom having expired
and no appeal having been perfected).
6. SEVERANCE COMPENSATION UPON TERMINATION OF EMPLOYMENT. If the
Company shall terminate the Executive's employment other than pursuant to
Section 5(a), (b) or (c) or if the Executive shall terminate his employment for
Good Reason, then the Company shall pay to the Executive as severance pay in a
lump sum, in cash, on the fifth day following the Date of Termination, an amount
equal to three (3) times the average of the aggregate annual compensation paid
to the Executive during the three (3) fiscal years of the Company immediately
preceding the Change of Control by the Company subject to United States income
taxes [or, such fewer number of fiscal years if the Executive has not been
employed by the Company during each of the preceding three (3) fiscal years].
5
7. ADDITIONAL BENEFITS UPON TERMINATION. If within three years
following a Change of Control, the Company shall terminate the Executive's
employment other than pursuant to Section 5(a), (b) or (c) or if the Executive
shall terminate his employment for Good Reason, then the Company shall further
provide to the Executive the following benefits:
(a) LIFE, DENTAL, VISION, HEALTH AND LONG-TERM DISABILITY
COVERAGE. The Executive's participation in, and entitlement to, benefits under:
(i) all life insurance plans of the Company; (ii) all health insurance plans of
the Company, including, but not limited to, those providing major medical and
hospitalization benefits, dental benefits and vision benefits; and (iii) the
Company's long-term disability plan or plans; as all such plans existed
immediately prior to the Change of Control shall continue as though the
Executive remained employed by the Corporation for an additional period of three
(3) years or until the obtainment of such coverages by the Executive through
another employer, whichever is earlier; provided, however, that in the case of
all health insurance plans of the Company (including, but not limited to, those
providing major medical and hospitalization benefits, dental benefits and vision
benefits), such three-(3) year period shall be extended to the time that the
Executive attains age 65 [and provided further that the Executive may then be
entitled to certain retiree health insurance under Section 3(c) hereof]. To the
extent such participation or entitlement is not possible for any reason
whatsoever, equivalent benefits shall be provided by the Company to the
Executive.
(b) AUTOMOBILE BENEFIT. If the Executive is entitled to the
use of a Company-owned automobile at the time of a Change of Control, then title
to such automobile shall be transferred to the Executive (upon termination of
employment as described in Section 7 above) free and clear of all liens and
encumbrances (or, if the Company does not own such automobile at the time of
termination, then the Company shall arrange for the purchase, for the benefit of
the Executive, of a similar make, model and year of automobile).
(c) EXECUTIVE SPLIT DOLLAR LIFE INSURANCE PROGRAM. Provided
that the Company is obligated, pursuant to Section 3(b) hereof, to pay premiums
on a policy or policies issued in favor of the Executive following a Change of
Control, then the Company shall, in the same manner, continue making such
premium payments until the later of (i) the Executive attains the age of 55; or
(ii) three (3) years following the Executive's termination of employment
(provided, however, that the Company shall not be obligated to make any such
payments after the Executive attains age 65).
(d) DEFERRED COMPENSATION PLANS. Any vesting requirement
imposed under the provisions of, or rules relating to, the Company's Deferred
Compensation and Deferred Bonus Plans, (including, but not limited to, vesting
conditions requiring that the Executive attain the age of 55 and/or complete
five years of service following a deferral) shall be waived and the Executive
shall be fully vested in all deferrals made under such plans.
8. EXCISE TAX-ADDITIONAL PAYMENT.
(a) Notwithstanding anything in this Agreement or any written
or unwritten policy of the Company to the contrary, (i) if it shall be
determined that any payment or distribution by the Company to or for the benefit
of the Executive, whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement, any other agreement between the Company
and the Executive or otherwise (a "Payment"), would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, (the
"Code") or any interest or penalties with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), or (ii) if the Executive shall
otherwise become obligated to pay the Excise Tax in respect of a Payment, then
the Company shall pay to the Executive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including any Excise Tax, imposed upon the Gross-Up
6
Payment, the Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon such Payment.
(b) All determinations and computations required to be made
under this Section 8, including whether a Gross-Up Payment is required under
clause (ii) of paragraph 8(a) above, and the amount of any Gross-Up Payment,
shall be made by the Company's regularly engaged independent certified public
accountants (the "Accounting Firm"). The Company shall cause the Accounting Firm
to provide detailed supporting calculations both to the Company and the
Executive within 15 business days after such determination or computation is
requested by the Executive. Any initial Gross-Up Payment determined pursuant to
this Section 8 shall be paid by the Company to the Executive within five days of
the receipt of the Accounting Firm's determination. A determination that no
Excise Tax is payable by the Executive shall not be valid or binding unless
accompanied by a written opinion of the Accounting Firm to the Executive that
the Executive has substantial authority not to report any Excise Tax on his
federal income tax return. Any determination by the Accounting Firm shall be
binding upon the Company and the Executive, except to the extent the Executive
becomes obligated to pay an Excise Tax in respect of a Payment. In the event
that the Company or the subsidiary exhausts or waives its remedies pursuant to
paragraph 8(c) and the Executive thereafter shall become obligated to make a
payment of any Excise Tax, and if the amount thereof shall exceed the amount, if
any, of any Excise Tax computed by the Accounting Firm pursuant to this
paragraph 8(b) in respect to which an initial Gross-Up Payment was made to the
Executive, the Accounting Firm shall within 15 days after Notice thereof
determine the amount of such excess Excise Tax and the amount of the additional
Gross-Up Payment to the Executive. All expenses and fees of the Accounting Firm
incurred by reason of this Section 8 shall be paid by the Company.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of a Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten business days after the Executive
knows of such claim and shall apprise the Company of the nature of such claim
and the date on which such claim is requested to be paid. The Executive shall
not pay such claim prior to the expiration of the 30-day period following the
date on which it gives such notice to the Company (or such shorter period ending
on the date that any payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested
relating to such claim,
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
PROVIDED, HOWEVER, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax, including
interest and penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this paragraph 8(c), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
7
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company or the subsidiary shall determine; PROVIDED, HOWEVER, that if the
Company or the subsidiary directs the Executive to pay such claim and sue for a
refund, the Company or the subsidiary shall advance the amount of such payment
to the Executive, on an interest-free basis and shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or income tax,
including interest or penalties with respect thereto, imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and FURTHER PROVIDED, that any extension of the statue of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, control of the contest by the Company shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company or the subsidiary pursuant to paragraph 8(c), the
Executive becomes entitled to receive any refund with respect to such claim, the
Executive shall (subject to compliance with the requirements of Section 8 by the
Company or the subsidiary) promptly pay to the Company or the subsidiary the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company or the subsidiary pursuant to paragraph 8(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
9. NO OBLIGATION TO MITIGATE DAMAGES; NO EFFECT ON OTHER CONTRACTUAL
RIGHTS.
(a) The Executive shall not be required to mitigate damages or
the amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment provided for under
this Agreement be reduced by any compensation earned by the Executive as the
result of employment by another employer after the Date of Termination, or
otherwise.
(b) The provisions of this Agreement, and any payment provided
for hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's existing rights, or rights which would accrue solely as
a result of the passage of time, under any Benefit Plan, Incentive Plan or
Securities Plan, employment agreements or other contract, plan or arrangement.
10. SUCCESSOR TO THE COMPANY.
(a) The Company will require any successor or assign (whether
direct or indirect, by purchase, merger, consolidation or otherwise) of all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to the Executive, expressly, absolutely and
unconditionally to assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if no
such succession or assignment had taken place. Any failure of the Company to
obtain such agreement prior to the effectiveness of any such succession or
assignment shall be a material breach of this Agreement and shall entitle the
Executive to terminate the Executive's employment for Good
8
Reason. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor or assign to its business and/or assets
as aforesaid which executes and delivers the agreement provided for in this
Section 10 or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal and legal representatives, executors,
administrators, successors, heirs, distributes, devisees and legatees. If the
Executive should die while any amounts are still payable to him hereunder, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Executive's devisee, legatee, or other
designee or, if there be no such designee, to the Executive's estate.
11. NO GUARANTY OF EMPLOYMENT. Nothing in this Agreement shall be
deemed to entitle the Executive to continued employment with the Company prior
to a Change of Control, and the rights of the Company to terminate the
employment of the Executive, prior to a Change of Control, shall continue as
fully as if this Agreement were not in effect.
12. NOTICE. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt registered, postage prepaid, as follows:
If to the Company:
Attn: General Counsel
Winnebago Industries, Inc.
605 W. Crystal Lake Road
P.O. Box 152
Forest City, IA 50436
If to the Executive:
Raymond M. Beebe
17121 - 350th Street
Forest City, IA 50436
or such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
13. MISCELLANEOUS. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. This Agreement shall be governed by and construed
in accordance with the laws of the State of Iowa.
14. VALIDITY. The invalidity or unenforceability of any provisions of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
15. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
9
16. LEGAL FEES AND EXPENSES. The Company shall pay all legal fees and
expenses which the Executive may incur as a result of the Company's contesting
the validity, enforceability or the Executive's interpretation of, or
determinations under, this Agreement.
17. CONFIDENTIALITY. The Executive shall retain in confidence any and
all confidential information known to the Executive concerning the Company and
its business so long as such information is not otherwise publicly disclosed.
IN WITNESS WHEREOF, the parties have executed this agreement on the
date set out above.
COMPANY:
WINNEBAGO INDUSTRIES, INC.
By:
--------------------------------------
Bruce D. Hertzke
Chairman of the Board, Chief Executive
Officer and President
EXECUTIVE:
------------------------------------------
Raymond M. Beebe
10
EXHIBIT 10q.
EXECUTIVE CHANGE OF CONTROL AGREEMENT
This EXECUTIVE CHANGE OF CONTROL AGREEMENT is made as of January 17,
2001, by and between WINNEBAGO INDUSTRIES, INC., an Iowa corporation (the
"Company"), and Robert L. Gossett (the "Executive").
RECITALS
WHEREAS, the Executive is a senior executive and officer of the Company
and has made and is expected to continue to make major contributions to the
profitability, growth and financial strength of the Company;
WHEREAS, the Company recognizes that, as is the case for most publicly
held companies, the possibility of a Change of Control (as hereafter defined)
exists;
WHEREAS, it is in the best interests of the Company, considering the
past and future services of the Executive, to improve the security and climate
for objective decision making by providing for the personal security of the
Executive upon a Change of Control.
NOW, THEREFORE, in consideration of the foregoing premises and the past
and future services rendered and to be rendered by the Executive to the Company
and of the mutual covenants and agreements hereinafter set forth, the parties
agree as follows:
AGREEMENT
1. CONTINUED SERVICE BY EXECUTIVE. In the event a person or entity, in
order to effect a Change of Control, commences a tender or exchange offer,
circulates a proxy to shareholders or takes other steps, the Executive agrees
that the Executive will not voluntarily leave the employ of the Company, and
will render faithful services to the Company consistent with Executive's
position and responsibilities, until the person or entity has abandoned or
terminated its efforts to effect such Change of Control or until such Change of
Control has occurred.
2. CHANGE OF CONTROL. For purposes of this Agreement, the term "Change
of Control" means the time when (i) any Person becomes an Acquiring Person, or
(ii) individuals who shall qualify as Continuing Directors of the Company shall
have ceased for any reason to constitute at least a majority of the Board of
Directors of the Company; PROVIDED HOWEVER, that in the case of either clause
(i) or (ii) a Change of Control shall not be deemed to have occurred if the
event shall have been approved prior to the occurrence thereof by a majority of
the Continuing Directors who shall then be members of such Board of Directors,
and in the case of clause (i) a Change of Control shall not be deemed to have
occurred upon the acquisition of stock of the Company by a pension, profit
sharing, stock bonus, employee stock ownership plan or other retirement plan
intended to be qualified under Section 401(a) of the Internal Revenue Code of
1986, as amended, established by the Company or any subsidiary of the Company.
(In addition, stock held by such a plan shall not be treated as outstanding in
determining ownership percentages for purposes of this definition.)
For the purpose of the foregoing definition of "Change of Control," the
capitalized terms shall have the following meanings:
1
(a) "Continuing Director" means (i) any member of the Board of
Directors of the Company, while such person as a member of the
Board, who is not an Affiliate or Associate of any Acquiring
Person or of any such Acquiring Person's Affiliate or
Associate and was a member of the Board prior to the time when
such Acquiring Person shall have become an Acquiring Person,
and (ii) any successor of a Continuing Director, while such
successor is a member of the Board, who is not an Acquiring
Person or any Affiliate or Associate of any Acquiring Person
or a representative or nominee of an Acquiring Person or of
any affiliate or associate of such Acquiring Person and is
recommended or elected to succeed the Continuing Director by a
majority of the Continuing Directors.
(b) "Acquiring Person" means any Person or any individual or group
of Affiliates or Associates of such Person who acquires
beneficial ownership, directly or indirectly, of 20% or more
of the outstanding stock of the Company if such acquisition
occurs in whole or in part following January 17, 2001, except
that the term "Acquiring Person" shall not include a Hanson
Family Member or an Affiliate or Associate of a Hanson Family
Member.
(c) "Affiliate" means a Person that directly or indirectly through
one or more intermediaries, controls, or is controlled by, or
is under common control with, the person specified.
(d) "Associate" means (1) any corporate, partnership, limited
liability company, entity or organization (other than the
Company or a majority-owned subsidiary of the Company) of
which such a Person is an officer, director, member, or
partner or is, directly or indirectly the beneficial owner of
ten percent (10%) or more of the class of equity securities,
(2) any trust or fund in which such person has a substantial
beneficial interest or as to which such person serves as
trustee or in a similar fiduciary capacity, (3) any relative
or spouse of such person, or any relative of such spouse, or
(4) any investment company for which such person or any
Affiliate of such person serves as investment advisor.
(e) "Hanson Family Member" means John K. Hanson (deceased) and
Luise V. Hanson (and the executors or administrators of their
estates), their lineal descendants (and the executors or
administrators of their estates), the spouses of their lineal
descendants (and the executors or administrators of their
estates) and the John K. and Luise V. Hanson Foundation.
(f) "Person" means an individual, corporation, limited liability
company, partnership, association, joint stock company, trust,
unincorporated organization or government or political
subdivision thereof.
3. SPECIAL BENEFITS EFFECTIVE IMMEDIATELY UPON A CHANGE OF CONTROL. If
a Change of Control shall have occurred while the Executive is still an employee
of the Company, then the Executive shall immediately be entitled to the
following benefits:
(a) IMMEDIATE VESTING OF ALL STOCK OPTIONS AND RIGHTS. All
options and rights granted to the Executive by the Company pursuant to the
Company's Stock Option Plan effective as of August 14, 1997, or any successor or
supplemental stock plan shall become immediately exercisable upon a Change of
Control.
(b) EXECUTIVE SPLIT DOLLAR LIFE INSURANCE PROGRAM. If the
Executive is a participant under the Company's Executive Split Dollar Life
Insurance Program at the time of a Change of Control and the Company has paid
any portion of the premium on the policy or policies issued in connection
therewith during the twelve months preceding the occurrence of the
2
Change of Control, then the Company shall continue to pay all premiums on such
policies so long as the Executive remains in the employ of the Company.
(c) RETIREE HEALTH INSURANCE. Any plans or policies of the
Company providing for medical, dental, vision or similar benefits for retired
employees existing as of the time of a Change of Control shall, as to the
Executive, not be rescinded or modified in any manner which is adverse to the
Executive following a Change of Control.
(d) RESTRICTED STOCK. All nonregistered stock of the Company
owned by the Executive, which is subject to restrictions on sale or other
transfer, shall, at the option of the Executive (exercisable at any time by the
delivery of written notice to the Company) be purchased by the Company at its
fair market value. The purchase shall be completed by the Company within thirty
(30) days after the Company receives the written notice of exercise from the
Executive. So long as the Company's stock is traded on the New York Stock
Exchange (the "NYSE"), the "fair market value" shall be the mean between the
highest and lowest reported selling prices as reported by the NYSE on the
business day immediately preceding the day of sale.
4. OTHER BENEFITS EFFECTIVE IMMEDIATELY UPON A CHANGE OF CONTROL
PURSUANT TO PLAN DOCUMENTS. It is acknowledged that there presently exist other
plans and agreements of the Company which may provide benefits to the Executive
and which contain specific provisions dealing with the occurrence of a change of
control of the Company (as defined in such plan or agreement). Following a
Change of Control, no such plan or agreement shall be rescinded or modified in
any manner which is adverse to the Executive. Such other plans and agreements of
the Company shall mean: (a) the Executive Share Option Program; (b) the
Officers' Long-Term Incentive Plan; (c) the Deferred Compensation and Deferred
Bonus Plans; and (d) the Officers' Incentive Compensation Plan. Nothing herein
shall be construed to affect the Company's right and ability to terminate or
amend any such plan or agreement (subject to the terms thereof) prior to a
Change of Control.
5. TERMINATION FOLLOWING A CHANGE OF CONTROL. If a Change of Control
shall have occurred while the Executive is still an employee of the Company, and
if the Executive's employment with the Company is terminated, within three years
following such Change of Control, then the Executive shall be entitled to the
compensation and benefits provided in Sections 6 and 7, unless such termination
is a result of: (a) the Executive's death; (b) the Executive's disability [as
defined in Section 5(a) below]; (c) the Executive's retirement [as defined in
Section 5(b) below]; (d) the Executive's termination by the Company for Cause
[as defined in Section 5(c) below]; or (e) the Executive's decision to terminate
employment other than for Good Reason [as defined in Section 5(d) below].
(a) DISABILITY. If, as a result of the Executive's incapacity
due to physical or mental illness, the Executive shall have been absent from his
duties with the Company on a full-time basis for six months and within 30 days
after written notice of termination is thereafter given by the Company the
Executive shall not have returned to the full-time performance of the
Executive's duties, the Company may terminate the Executive for "Disability."
(b) RETIREMENT. The term "Retirement" as used in this
Agreement shall mean termination by the Company or the Executive of the
Executive's employment based on the Executive having attained the age of 65 or
such other age as shall have been fixed in any arrangement established with the
Executive's consent with respect to the Executive.
(c) CAUSE. The Company may terminate the Executive's
employment for Cause. For purposes of this Agreement only, the Company shall
have "Cause" to terminate the Executive's employment hereunder only on the basis
of (i) fraud, misappropriation or embezzlement on the part of the Executive; or
(ii) intentional misconduct or gross negligence on
3
the part of the Executive which has resulted in material harm to the Company.
Notwithstanding the foregoing, the Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters of the entire membership of the Company's Board of
Directors at a meeting of the Board called and held for the purpose (after
reasonable notice to the Executive and an opportunity for the Executive,
together with the Executive's counsel, to be heard before the Board), finding
that in the good faith opinion of the Board the Executive was guilty of conduct
set forth in the second sentence of this Section 5(c) and specifying the
particulars thereof in detail. Nothing herein shall limit the right of the
Executive or his beneficiaries to contest the validity or propriety of any such
determination.
(d) GOOD REASON. The Executive may terminate the Executive's
employment for Good Reason at any time during the term of this Agreement. For
purposes of this Agreement "Good Reason" shall mean any of the following
(without the Executive's express written consent):
(i) the assignment to the Executive by the Company of duties
inconsistent with the Executive's position, duties, responsibilities and status
with the Company immediately prior to a Change in Control of the Company, or a
change in the Executive's titles or offices as in effect immediately prior to a
Change in Control of the Company, or any removal of the Executive from or any
failure to reelect the Executive to any of such positions, except in connection
with the termination of his employment for Disability, Retirement or Cause or as
a result of the Executive's death or by the Executive other than for Good
Reason;
(ii) a reduction by the Company in the Executive's base salary
as in effect on the date hereof or as the same may be increased from time to
time during the term of this Agreement or the Company's failure to increase
(within 12 months of the Executive's last increase in base salary) the
Executive's base salary after a Change in Control of the Company in an amount
which at least equals, on a percentage basis, the average percentage increase in
base salary for all officers of the Company effected in the preceding 12 months;
(iii) any failure by the Company to continue in effect any
benefit plan or arrangement (including, without limitation, the Company's 401(k)
plan, nonqualified deferred compensation plan, profit sharing plan, group life
insurance plan, and medical, dental, accident and disability plans) in which the
Executive is participating at the time of a Change of Control (or any other
plans providing the Executive with substantially similar benefits) (hereinafter
referred to as "Benefit Plans"), or the taking of any action by the Company
which would adversely affect the Executive's participation in or materially
reduce the Executive's benefits under any such Benefit Plan or deprive the
Executive of any material fringe benefit enjoyed by the Executive at the time of
a Change in Control of the Company;
(iv) any failure by the Company to continue in effect any
incentive plan or arrangement (including, without limitation, the Company's
Officers' Incentive Compensation Plan, Officers' Long-Term Incentive Plan, bonus
and contingent bonus arrangements and credits and the right to receive
performance awards and similar incentive compensation benefits) in which the
Executive is participating at the time of a Change of Control (or any other
plans or arrangements providing him with substantially similar benefits)
(hereinafter referred to as "Incentive Plans") or the taking of any action by
the Company which would adversely affect the Executive's participation in any
such Incentive Plan or reduce the Executive's benefits under any such Incentive
Plan, expressed as a percentage of his base salary, by more than 10 percentage
points in any fiscal year as compared to the immediately preceding fiscal year;
(v) any failure by the Company to continue in effect any plan
or arrangement to receive securities of the Company in which the Executive is
participating at the time of a Change of Control (or plans or arrangements
providing him with substantially similar benefits)
4
(hereinafter referred to as "Securities Plans") or the taking of any action by
the Company which would adversely affect the Executive's participation in or
materially reduce the Executive's benefits under any such Securities Plan;
(vi) a relocation of the Company's principal executive offices
to a location outside of Forest City, Iowa, or the Executive's relocation to any
place other than the location at which the Executive performed the Executive's
duties prior to a Change in Control of the Company, except for required travel
by the Executive on the Company's business to an extent substantially consistent
with the Executive's business travel obligations at the time of a Change in
Control of the Company;
(vii) any failure by the Company to provide the Executive with
the number of paid vacation days to which the Executive is entitled at the time
of a Change in Control of the Company;
(viii) any material breach by the Company of any provision of
this Agreement;
(ix) any failure by the Company to obtain the assumption of
this Agreement by any successor or assign of the Company; or
(x) any purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of Section 3(f), and for purposes of this Agreement, no such
purported termination shall be effective.
(e) NOTICE OF TERMINATION. Any termination by the Company
pursuant to Section 5(a), (b) or (c) shall be communicated by a Notice of
Termination. For purposes of this Agreement, a "Notice of Termination" shall
mean a written notice which shall indicate those specific termination provisions
in this Agreement relied upon and which sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provisions so indicated. For purposes of this
Agreement, no such purported termination by the Company shall be effective
without such Notice of Termination.
(f) DATE OF TERMINATION. "Date of Termination" shall mean (a)
if this Agreement is terminated by the Company for Disability, 30 days after
Notice of Termination is given to the Executive (provided that the Executive
shall not have returned to the performance of the Executive's duties on a
full-time basis during such 30-day period) or (b) if the Executive's employment
is terminated by the Company for any other reason, the date on which a Notice of
Termination is given; PROVIDED that if within 30 days after any Notice of
Termination is given to the Executive by the Company the Executive notifies the
Company that a dispute exists concerning the termination, the Date of
Termination shall be the date the dispute is finally determined, whether by
mutual agreement by the parties or upon final judgment, order or decree of a
court of competent jurisdiction (the time for appeal therefrom having expired
and no appeal having been perfected).
6. SEVERANCE COMPENSATION UPON TERMINATION OF EMPLOYMENT. If the
Company shall terminate the Executive's employment other than pursuant to
Section 5(a), (b) or (c) or if the Executive shall terminate his employment for
Good Reason, then the Company shall pay to the Executive as severance pay in a
lump sum, in cash, on the fifth day following the Date of Termination, an amount
equal to three (3) times the average of the aggregate annual compensation paid
to the Executive during the three (3) fiscal years of the Company immediately
preceding the Change of Control by the Company subject to United States income
taxes (or, such fewer number of fiscal years if the Executive has not been
employed by the Company during each of the preceding three (3) fiscal years).
5
7. ADDITIONAL BENEFITS UPON TERMINATION. If within three years
following a Change of Control, the Company shall terminate the Executive's
employment other than pursuant to Section 5(a), (b) or (c) or if the Executive
shall terminate his employment for Good Reason, then the Company shall further
provide to the Executive the following benefits:
(a) LIFE, DENTAL, VISION, HEALTH AND LONG-TERM DISABILITY
COVERAGE. The Executive's participation in, and entitlement to, benefits under:
(i) all life insurance plans of the Company; (ii) all health insurance plans of
the Company, including, but not limited to, those providing major medical and
hospitalization benefits, dental benefits and vision benefits; and (iii) the
Company's long-term disability plan or plans; as all such plans existed
immediately prior to the Change of Control shall continue as though the
Executive remained employed by the Corporation for an additional period of three
(3) years or until the obtainment of such coverages by the Executive through
another employer, whichever is earlier; provided, however, that in the case of
all health insurance plans of the Company (including, but not limited to, those
providing major medical and hospitalization benefits, dental benefits and vision
benefits), such three-(3) year period shall be extended to the time that the
Executive attains age 65 (and provided further that the Executive may then be
entitled to certain retiree health insurance under Section 3(c) hereof). To the
extent such participation or entitlement is not possible for any reason
whatsoever, equivalent benefits shall be provided by the Company to the
Executive.
(b) AUTOMOBILE BENEFIT. If the Executive is entitled to the
use of a Company-owned automobile at the time of a Change of Control, then title
to such automobile shall be transferred to the Executive (upon termination of
employment as described in Section 7 above) free and clear of all liens and
encumbrances (or, if the Company does not own such automobile at the time of
termination, then the Company shall arrange for the purchase, for the benefit of
the Executive, of a similar make, model and year of automobile).
(c) EXECUTIVE SPLIT DOLLAR LIFE INSURANCE PROGRAM. Provided
that the Company is obligated, pursuant to Section 3(b) hereof, to pay premiums
on a policy or policies issued in favor of the Executive following a Change of
Control, then the Company shall, in the same manner, continue making such
premium payments until the later of (i) the Executive attains the age of 55; or
(ii) three (3) years following the Executive's termination of employment
(provided, however, that the Company shall not be obligated to make any such
payments after the Executive attains age 65).
(d) DEFERRED COMPENSATION PLANS. Any vesting requirement
imposed under the provisions of, or rules relating to, the Company's Deferred
Compensation and Deferred Bonus Plans, (including, but not limited to, vesting
conditions requiring that the Executive attain the age of 55 and/or complete
five years of service following a deferral) shall be waived and the Executive
shall be fully vested in all deferrals made under such plans.
8. EXCISE TAX-ADDITIONAL PAYMENT.
(a) Notwithstanding anything in this Agreement or any written
or unwritten policy of the Company to the contrary, (i) if it shall be
determined that any payment or distribution by the Company to or for the benefit
of the Executive, whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement, any other agreement between the Company
and the Executive or otherwise (a "Payment"), would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, (the
"Code") or any interest or penalties with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), or (ii) if the Executive shall
otherwise become obligated to pay the Excise Tax in respect of a Payment, then
the Company shall pay to the Executive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including any Excise Tax, imposed upon the Gross-Up
6
Payment, the Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon such Payment.
(b) All determinations and computations required to be made
under this Section 8, including whether a Gross-Up Payment is required under
clause (ii) of paragraph 8(a) above, and the amount of any Gross-Up Payment,
shall be made by the Company's regularly engaged independent certified public
accountants (the "Accounting Firm"). The Company shall cause the Accounting Firm
to provide detailed supporting calculations both to the Company and the
Executive within 15 business days after such determination or computation is
requested by the Executive. Any initial Gross-Up Payment determined pursuant to
this Section 8 shall be paid by the Company to the Executive within 5 days of
the receipt of the Accounting Firm's determination. A determination that no
Excise Tax is payable by the Executive shall not be valid or binding unless
accompanied by a written opinion of the Accounting Firm to the Executive that
the Executive has substantial authority not to report any Excise Tax on his
federal income tax return. Any determination by the Accounting Firm shall be
binding upon the Company and the Executive, except to the extent the Executive
becomes obligated to pay an Excise Tax in respect of a Payment. In the event
that the Company or the subsidiary exhausts or waives its remedies pursuant to
paragraph 8(c) and the Executive thereafter shall become obligated to make a
payment of any Excise Tax, and if the amount thereof shall exceed the amount, if
any, of any Excise Tax computed by the Accounting Firm pursuant to this
paragraph 8(b) in respect to which an initial Gross-Up Payment was made to the
Executive, the Accounting Firm shall within 15 days after Notice thereof
determine the amount of such excess Excise Tax and the amount of the additional
Gross-Up Payment to the Executive. All expenses and fees of the Accounting Firm
incurred by reason of this Section 8 shall be paid by the Company.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of a Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten business days after the Executive
knows of such claim and shall apprise the Company of the nature of such claim
and the date on which such claim is requested to be paid. The Executive shall
not pay such claim prior to the expiration of the 30-day period following the
date on which it gives such notice to the Company (or such shorter period ending
on the date that any payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested
relating to such claim;
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order
effectively to contest such claim; and
(iv) permit the Company to participate in any proceedings
relating to such claim;
PROVIDED, HOWEVER, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this paragraph 8(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and
7
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company or the subsidiary shall determine; PROVIDED, HOWEVER, that if the
Company or the subsidiary directs the Executive to pay such claim and sue for a
refund, the Company or the subsidiary shall advance the amount of such payment
to the Executive, on an interest-free basis and shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or income tax,
including interest or penalties with respect thereto, imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and FURTHER PROVIDED, that any extension of the statue of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, control of the contest by the Company shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company or the subsidiary pursuant to paragraph 8(c), the
Executive becomes entitled to receive any refund with respect to such claim, the
Executive shall (subject to compliance with the requirements of Section 8 by the
Company or the subsidiary) promptly pay to the Company or the subsidiary the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company or the subsidiary pursuant to paragraph 8(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
9. NO OBLIGATION TO MITIGATE DAMAGES; NO EFFECT ON OTHER CONTRACTUAL
RIGHTS.
(a) The Executive shall not be required to mitigate damages or
the amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment provided for under
this Agreement be reduced by any compensation earned by the Executive as the
result of employment by another employer after the Date of Termination, or
otherwise.
(b) The provisions of this Agreement, and any payment provided
for hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's existing rights, or rights which would accrue solely as
a result of the passage of time, under any Benefit Plan, Incentive Plan or
Securities Plan, employment agreements or other contract, plan or arrangement.
10. SUCCESSOR TO THE COMPANY.
(a) The Company will require any successor or assign (whether
direct or indirect, by purchase, merger, consolidation or otherwise) of all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to the Executive, expressly, absolutely and
unconditionally to assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if no
such succession or assignment had taken place. Any failure of the Company to
obtain such agreement prior to the effectiveness of any such succession or
assignment shall be a material breach of this Agreement and shall entitle the
Executive to terminate the Executive's employment for Good
8
Reason. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor or assign to its business and/or assets
as aforesaid which executes and delivers the agreement provided for in this
Section 10 or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal and legal representatives, executors,
administrators, successors, heirs, distributes, devisees and legatees. If the
Executive should die while any amounts are still payable to him hereunder, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Executive's devisee, legatee, or other
designee or, if there be no such designee, to the Executive's estate.
11. NO GUARANTY OF EMPLOYMENT. Nothing in this Agreement shall be
deemed to entitle the Executive to continued employment with the Company prior
to a Change of Control, and the rights of the Company to terminate the
employment of the Executive, prior to a Change of Control, shall continue as
fully as if this Agreement were not in effect.
12. NOTICE. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt registered, postage prepaid, as follows:
If to the Company:
Attn: General Counsel
Winnebago Industries, Inc.
605 W. Crystal Lake Road
P.O. Box 152
Forest City, IA 50436
If to the Executive:
Robert L. Gossett
2713 Campus Lane
Albert Lea, MN 56007
or such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
13. MISCELLANEOUS. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. This Agreement shall be governed by and construed
in accordance with the laws of the State of Iowa.
14. VALIDITY. The invalidity or unenforceability of any provisions of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
15. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
9
16. LEGAL FEES AND EXPENSES. The Company shall pay all legal fees and
expenses which the Executive may incur as a result of the Company's contesting
the validity, enforceability or the Executive's interpretation of, or
determinations under, this Agreement.
17. CONFIDENTIALITY. The Executive shall retain in confidence any and
all confidential information known to the Executive concerning the Company and
its business so long as such information is not otherwise publicly disclosed.
IN WITNESS WHEREOF, the parties have executed this agreement on the
date set out above.
COMPANY:
WINNEBAGO INDUSTRIES, INC.
By:
--------------------------------------
Bruce D. Hertzke
Chairman of the Board, Chief Executive
Officer and President
EXECUTIVE:
------------------------------------------
Robert L. Gossett
10
EXHIBIT 10r.
EXECUTIVE CHANGE OF CONTROL AGREEMENT
This EXECUTIVE CHANGE OF CONTROL AGREEMENT is made as of January 17,
2001, by and between WINNEBAGO INDUSTRIES, INC., an Iowa corporation (the
"Company"), and James P. Jaskoviak (the "Executive").
RECITALS
WHEREAS, the Executive is a senior executive and officer of the Company
and has made and is expected to continue to make major contributions to the
profitability, growth and financial strength of the Company;
WHEREAS, the Company recognizes that, as is the case for most publicly
held companies, the possibility of a Change of Control (as hereafter defined)
exists;
WHEREAS, it is in the best interests of the Company, considering the
past and future services of the Executive, to improve the security and climate
for objective decision making by providing for the personal security of the
Executive upon a Change of Control.
NOW, THEREFORE, in consideration of the foregoing premises and the past
and future services rendered and to be rendered by the Executive to the Company
and of the mutual covenants and agreements hereinafter set forth, the parties
agree as follows:
AGREEMENT
1. CONTINUED SERVICE BY EXECUTIVE. In the event a person or entity, in
order to effect a Change of Control, commences a tender or exchange offer,
circulates a proxy to shareholders or takes other steps, the Executive agrees
that the Executive will not voluntarily leave the employ of the Company, and
will render faithful services to the Company consistent with Executive's
position and responsibilities, until the person or entity has abandoned or
terminated its efforts to effect such Change of Control or until such Change of
Control has occurred.
2. CHANGE OF CONTROL. For purposes of this Agreement, the term "Change
of Control" means the time when (i) any Person becomes an Acquiring Person, or
(ii) individuals who shall qualify as Continuing Directors of the Company shall
have ceased for any reason to constitute at least a majority of the Board of
Directors of the Company; PROVIDED HOWEVER, that in the case of either clause
(i) or (ii) a Change of Control shall not be deemed to have occurred if the
event shall have been approved prior to the occurrence thereof by a majority of
the Continuing Directors who shall then be members of such Board of Directors,
and in the case of clause (i) a Change of Control shall not be deemed to have
occurred upon the acquisition of stock of the Company by a pension, profit
sharing, stock bonus, employee stock ownership plan or other retirement plan
intended to be qualified under Section 401(a) of the Internal Revenue Code of
1986, as amended, established by the Company or any subsidiary of the Company.
(In addition, stock held by such a plan shall not be treated as outstanding in
determining ownership percentages for purposes of this definition.)
For the purpose of the foregoing definition of "Change of Control," the
capitalized terms shall have the following meanings:
1
(a) "Continuing Director" means (i) any member of the Board of
Directors of the Company, while such person as a member of the
Board, who is not an Affiliate or Associate of any Acquiring
Person or of any such Acquiring Person's Affiliate or
Associate and was a member of the Board prior to the time when
such Acquiring Person shall have become an Acquiring Person,
and (ii) any successor of a Continuing Director, while such
successor is a member of the Board, who is not an Acquiring
Person or any Affiliate or Associate of any Acquiring Person
or a representative or nominee of an Acquiring Person or of
any affiliate or associate of such Acquiring Person and is
recommended or elected to succeed the Continuing Director by a
majority of the Continuing Directors.
(b) "Acquiring Person" means any Person or any individual or group
of Affiliates or Associates of such Person who acquires
beneficial ownership, directly or indirectly, of 20% or more
of the outstanding stock of the Company if such acquisition
occurs in whole or in part following January 17, 2001, except
that the term "Acquiring Person" shall not include a Hanson
Family Member or an Affiliate or Associate of a Hanson Family
Member.
(c) "Affiliate" means a Person that directly or indirectly through
one or more intermediaries, controls, or is controlled by, or
is under common control with, the person specified.
(d) "Associate" means (1) any corporate, partnership, limited
liability company, entity or organization (other than the
Company or a majority-owned subsidiary of the Company) of
which such a Person is an officer, director, member, or
partner or is, directly or indirectly the beneficial owner of
ten percent (10%) or more of the class of equity securities,
(2) any trust or fund in which such person has a substantial
beneficial interest or as to which such person serves as
trustee or in a similar fiduciary capacity, (3) any relative
or spouse of such person, or any relative of such spouse, or
(4) any investment company for which such person or any
Affiliate of such person serves as investment advisor.
(e) "Hanson Family Member" means John K. Hanson (deceased) and
Luise V. Hanson (and the executors or administrators of their
estates), their lineal descendants (and the executors or
administrators of their estates), the spouses of their lineal
descendants (and the executors or administrators of their
estates) and the John K. and Luise V. Hanson Foundation.
(f) "Person" means an individual, corporation, limited liability
company, partnership, association, joint stock company, trust,
unincorporated organization or government or political
subdivision thereof.
3. SPECIAL BENEFITS EFFECTIVE IMMEDIATELY UPON A CHANGE OF CONTROL. If
a Change of Control shall have occurred while the Executive is still an employee
of the Company, then the Executive shall immediately be entitled to the
following benefits:
(a) IMMEDIATE VESTING OF ALL STOCK OPTIONS AND RIGHTS. All
options and rights granted to the Executive by the Company pursuant to the
Company's Stock Option Plan effective as of August 14, 1997, or any successor or
supplemental stock plan shall become immediately exercisable upon a Change of
Control.
(b) EXECUTIVE SPLIT DOLLAR LIFE INSURANCE PROGRAM. If the
Executive is a participant under the Company's Executive Split Dollar Life
Insurance Program at the time of a Change of Control and the Company has paid
any portion of the premium on the policy or policies issued in connection
therewith during the twelve months preceding the occurrence of the
2
Change of Control, then the Company shall continue to pay all premiums on such
policies so long as the Executive remains in the employ of the Company.
(c) RETIREE HEALTH INSURANCE. Any plans or policies of the
Company providing for medical, dental, vision or similar benefits for retired
employees existing as of the time of a Change of Control shall, as to the
Executive, not be rescinded or modified in any manner which is adverse to the
Executive following a Change of Control.
(d) RESTRICTED STOCK. All nonregistered stock of the Company
owned by the Executive, which is subject to restrictions on sale or other
transfer, shall, at the option of the Executive (exercisable at any time by the
delivery of written notice to the Company) be purchased by the Company at its
fair market value. The purchase shall be completed by the Company within thirty
(30) days after the Company receives the written notice of exercise from the
Executive. So long as the Company's stock is traded on the New York Stock
Exchange (the "NYSE"), the "fair market value" shall be the mean between the
highest and lowest reported selling prices as reported by the NYSE on the
business day immediately preceding the day of sale.
4. OTHER BENEFITS EFFECTIVE IMMEDIATELY UPON A CHANGE OF CONTROL
PURSUANT TO PLAN DOCUMENTS. It is acknowledged that there presently exist other
plans and agreements of the Company which may provide benefits to the Executive
and which contain specific provisions dealing with the occurrence of a change of
control of the Company (as defined in such plan or agreement). Following a
Change of Control, no such plan or agreement shall be rescinded or modified in
any manner which is adverse to the Executive. Such other plans and agreements of
the Company shall mean: (a) the Executive Share Option Program; (b) the
Officers' Long-Term Incentive Plan; (c) the Deferred Compensation and Deferred
Bonus Plans; and (d) the Officers' Incentive Compensation Plan. Nothing herein
shall be construed to affect the Company's right and ability to terminate or
amend any such plan or agreement (subject to the terms thereof) prior to a
Change of Control.
5. TERMINATION FOLLOWING A CHANGE OF CONTROL. If a Change of Control
shall have occurred while the Executive is still an employee of the Company, and
if the Executive's employment with the Company is terminated, within three years
following such Change of Control, then the Executive shall be entitled to the
compensation and benefits provided in Sections 6 and 7, unless such termination
is a result of: (a) the Executive's death; (b) the Executive's disability [as
defined in Section 5(a) below]; (c) the Executive's retirement [as defined in
Section 5(b) below]; (d) the Executive's termination by the Company for Cause
[as defined in Section 5(c) below]; or (e) the Executive's decision to terminate
employment other than for Good Reason [as defined in Section 5(d) below].
(a) DISABILITY. If, as a result of the Executive's incapacity
due to physical or mental illness, the Executive shall have been absent from his
duties with the Company on a full-time basis for six months and within 30 days
after written notice of termination is thereafter given by the Company the
Executive shall not have returned to the full-time performance of the
Executive's duties, the Company may terminate the Executive for "Disability."
(b) RETIREMENT. The term "Retirement" as used in this
Agreement shall mean termination by the Company or the Executive of the
Executive's employment based on the Executive having attained the age of 65 or
such other age as shall have been fixed in any arrangement established with the
Executive's consent with respect to the Executive.
(c) CAUSE. The Company may terminate the Executive's
employment for Cause. For purposes of this Agreement only, the Company shall
have "Cause" to terminate the Executive's employment hereunder only on the basis
of (i) fraud, misappropriation or embezzlement on the part of the Executive; or
(ii) intentional misconduct or gross negligence on
3
the part of the Executive which has resulted in material harm to the Company.
Notwithstanding the foregoing, the Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters of the entire membership of the Company's Board of
Directors at a meeting of the Board called and held for the purpose (after
reasonable notice to the Executive and an opportunity for the Executive,
together with the Executive's counsel, to be heard before the Board), finding
that in the good faith opinion of the Board the Executive was guilty of conduct
set forth in the second sentence of this Section 5(c) and specifying the
particulars thereof in detail. Nothing herein shall limit the right of the
Executive or his beneficiaries to contest the validity or propriety of any such
determination.
(d) GOOD REASON. The Executive may terminate the Executive's
employment for Good Reason at any time during the term of this Agreement. For
purposes of this Agreement "Good Reason" shall mean any of the following
(without the Executive's express written consent):
(i) the assignment to the Executive by the Company of duties
inconsistent with the Executive's position, duties, responsibilities and status
with the Company immediately prior to a Change in Control of the Company, or a
change in the Executive's titles or offices as in effect immediately prior to a
Change in Control of the Company, or any removal of the Executive from or any
failure to reelect the Executive to any of such positions, except in connection
with the termination of his employment for Disability, Retirement or Cause or as
a result of the Executive's death or by the Executive other than for Good
Reason;
(ii) a reduction by the Company in the Executive's base salary
as in effect on the date hereof or as the same may be increased from time to
time during the term of this Agreement or the Company's failure to increase
(within 12 months of the Executive's last increase in base salary) the
Executive's base salary after a Change in Control of the Company in an amount
which at least equals, on a percentage basis, the average percentage increase in
base salary for all officers of the Company effected in the preceding 12 months;
(iii) any failure by the Company to continue in effect any
benefit plan or arrangement (including, without limitation, the Company's 401(k)
plan, nonqualified deferred compensation plan, profit sharing plan, group life
insurance plan, and medical, dental, accident and disability plans) in which the
Executive is participating at the time of a Change of Control (or any other
plans providing the Executive with substantially similar benefits) (hereinafter
referred to as "Benefit Plans"), or the taking of any action by the Company
which would adversely affect the Executive's participation in or materially
reduce the Executive's benefits under any such Benefit Plan or deprive the
Executive of any material fringe benefit enjoyed by the Executive at the time of
a Change in Control of the Company;
(iv) any failure by the Company to continue in effect any
incentive plan or arrangement (including, without limitation, the Company's
Officers' Incentive Compensation Plan, Officers' Long-Term Incentive Plan, bonus
and contingent bonus arrangements and credits and the right to receive
performance awards and similar incentive compensation benefits) in which the
Executive is participating at the time of a Change of Control (or any other
plans or arrangements providing him with substantially similar benefits)
(hereinafter referred to as "Incentive Plans") or the taking of any action by
the Company which would adversely affect the Executive's participation in any
such Incentive Plan or reduce the Executive's benefits under any such Incentive
Plan, expressed as a percentage of his base salary, by more than 10 percentage
points in any fiscal year as compared to the immediately preceding fiscal year;
(v) any failure by the Company to continue in effect any plan
or arrangement to receive securities of the Company in which the Executive is
participating at the time of a Change of Control (or plans or arrangements
providing him with substantially similar benefits)
4
(hereinafter referred to as "Securities Plans") or the taking of any action by
the Company which would adversely affect the Executive's participation in or
materially reduce the Executive's benefits under any such Securities Plan;
(vi) a relocation of the Company's principal executive offices
to a location outside of Forest City, Iowa, or the Executive's relocation to any
place other than the location at which the Executive performed the Executive's
duties prior to a Change in Control of the Company, except for required travel
by the Executive on the Company's business to an extent substantially consistent
with the Executive's business travel obligations at the time of a Change in
Control of the Company;
(vii) any failure by the Company to provide the Executive with
the number of paid vacation days to which the Executive is entitled at the time
of a Change in Control of the Company;
(viii) any material breach by the Company of any provision of
this Agreement;
(ix) any failure by the Company to obtain the assumption of
this Agreement by any successor or assign of the Company; or
(x) any purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of Section 3(f), and for purposes of this Agreement, no such
purported termination shall be effective.
(e) NOTICE OF TERMINATION. Any termination by the Company
pursuant to Section 5(a), (b) or (c) shall be communicated by a Notice of
Termination. For purposes of this Agreement, a "Notice of Termination" shall
mean a written notice which shall indicate those specific termination provisions
in this Agreement relied upon and which sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provisions so indicated. For purposes of this
Agreement, no such purported termination by the Company shall be effective
without such Notice of Termination.
(f) DATE OF TERMINATION. "Date of Termination" shall mean (a)
if this Agreement is terminated by the Company for Disability, 30 days after
Notice of Termination is given to the Executive (provided that the Executive
shall not have returned to the performance of the Executive's duties on a
full-time basis during such 30-day period) or (b) if the Executive's employment
is terminated by the Company for any other reason, the date on which a Notice of
Termination is given; PROVIDED that if within 30 days after any Notice of
Termination is given to the Executive by the Company the Executive notifies the
Company that a dispute exists concerning the termination, the Date of
Termination shall be the date the dispute is finally determined, whether by
mutual agreement by the parties or upon final judgment, order or decree of a
court of competent jurisdiction (the time for appeal therefrom having expired
and no appeal having been perfected).
6. SEVERANCE COMPENSATION UPON TERMINATION OF EMPLOYMENT. If the
Company shall terminate the Executive's employment other than pursuant to
Section 5(a), (b) or (c) or if the Executive shall terminate his employment for
Good Reason, then the Company shall pay to the Executive as severance pay in a
lump sum, in cash, on the fifth day following the Date of Termination, an amount
equal to three (3) times the average of the aggregate annual compensation paid
to the Executive during the three (3) fiscal years of the Company immediately
preceding the Change of Control by the Company subject to United States income
taxes (or, such fewer number of fiscal years if the Executive has not been
employed by the Company during each of the preceding three (3) fiscal years).
5
7. ADDITIONAL BENEFITS UPON TERMINATION. If within three years
following a Change of Control, the Company shall terminate the Executive's
employment other than pursuant to Section 5(a), (b) or (c) or if the Executive
shall terminate his employment for Good Reason, then the Company shall further
provide to the Executive the following benefits:
(a) LIFE, DENTAL, VISION, HEALTH AND LONG-TERM DISABILITY
COVERAGE. The Executive's participation in, and entitlement to, benefits under:
(i) all life insurance plans of the Company; (ii) all health insurance plans of
the Company, including, but not limited to, those providing major medical and
hospitalization benefits, dental benefits and vision benefits; and (iii) the
Company's long-term disability plan or plans; as all such plans existed
immediately prior to the Change of Control shall continue as though the
Executive remained employed by the Corporation for an additional period of three
(3) years or until the obtainment of such coverages by the Executive through
another employer, whichever is earlier; provided, however, that in the case of
all health insurance plans of the Company (including, but not limited to, those
providing major medical and hospitalization benefits, dental benefits and vision
benefits), such three-(3) year period shall be extended to the time that the
Executive attains age 65 (and provided further that the Executive may then be
entitled to certain retiree health insurance under Section 3(c) hereof). To the
extent such participation or entitlement is not possible for any reason
whatsoever, equivalent benefits shall be provided by the Company to the
Executive.
(b) AUTOMOBILE BENEFIT. If the Executive is entitled to the
use of a Company-owned automobile at the time of a Change of Control, then title
to such automobile shall be transferred to the Executive (upon termination of
employment as described in Section 7 above) free and clear of all liens and
encumbrances (or, if the Company does not own such automobile at the time of
termination, then the Company shall arrange for the purchase, for the benefit of
the Executive, of a similar make, model and year of automobile).
(c) EXECUTIVE SPLIT DOLLAR LIFE INSURANCE PROGRAM. Provided
that the Company is obligated, pursuant to Section 3(b) hereof, to pay premiums
on a policy or policies issued in favor of the Executive following a Change of
Control, then the Company shall, in the same manner, continue making such
premium payments until the later of (i) the Executive attains the age of 55; or
(ii) three (3) years following the Executive's termination of employment
(provided, however, that the Company shall not be obligated to make any such
payments after the Executive attains age 65).
(d) DEFERRED COMPENSATION PLANS. Any vesting requirement
imposed under the provisions of, or rules relating to, the Company's Deferred
Compensation and Deferred Bonus Plans, (including, but not limited to, vesting
conditions requiring that the Executive attain the age of 55 and/or complete
five years of service following a deferral) shall be waived and the Executive
shall be fully vested in all deferrals made under such plans.
8. EXCISE TAX-ADDITIONAL PAYMENT.
(a) Notwithstanding anything in this Agreement or any written
or unwritten policy of the Company to the contrary, (i) if it shall be
determined that any payment or distribution by the Company to or for the benefit
of the Executive, whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement, any other agreement between the Company
and the Executive or otherwise (a "Payment"), would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, (the
"Code") or any interest or penalties with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), or (ii) if the Executive shall
otherwise become obligated to pay the Excise Tax in respect of a Payment, then
the Company shall pay to the Executive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including any Excise Tax, imposed upon the Gross-Up
6
Payment, the Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon such Payment.
(b) All determinations and computations required to be made
under this Section 8, including whether a Gross-Up Payment is required under
clause (ii) of paragraph 8(a) above, and the amount of any Gross-Up Payment,
shall be made by the Company's regularly engaged independent certified public
accountants (the "Accounting Firm"). The Company shall cause the Accounting Firm
to provide detailed supporting calculations both to the Company and the
Executive within 15 business days after such determination or computation is
requested by the Executive. Any initial Gross-Up Payment determined pursuant to
this Section 8 shall be paid by the Company to the Executive within five days of
the receipt of the Accounting Firm's determination. A determination that no
Excise Tax is payable by the Executive shall not be valid or binding unless
accompanied by a written opinion of the Accounting Firm to the Executive that
the Executive has substantial authority not to report any Excise Tax on his
federal income tax return. Any determination by the Accounting Firm shall be
binding upon the Company and the Executive, except to the extent the Executive
becomes obligated to pay an Excise Tax in respect of a Payment. In the event
that the Company or the subsidiary exhausts or waives its remedies pursuant to
paragraph 8(c) and the Executive thereafter shall become obligated to make a
payment of any Excise Tax, and if the amount thereof shall exceed the amount, if
any, of any Excise Tax computed by the Accounting Firm pursuant to this
paragraph 8(b) in respect to which an initial Gross-Up Payment was made to the
Executive, the Accounting Firm shall within 15 days after Notice thereof
determine the amount of such excess Excise Tax and the amount of the additional
Gross-Up Payment to the Executive. All expenses and fees of the Accounting Firm
incurred by reason of this Section 8 shall be paid by the Company.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of a Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten business days after the Executive
knows of such claim and shall apprise the Company of the nature of such claim
and the date on which such claim is requested to be paid. The Executive shall
not pay such claim prior to the expiration of the 30-day period following the
date on which it gives such notice to the Company (or such shorter period ending
on the date that any payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested
relating to such claim,
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
PROVIDED, HOWEVER, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax, including
interest and penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this paragraph 8(c), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
7
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company or the subsidiary shall determine; PROVIDED, HOWEVER, that if the
Company or the subsidiary directs the Executive to pay such claim and sue for a
refund, the Company or the subsidiary shall advance the amount of such payment
to the Executive, on an interest-free basis and shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or income tax,
including interest or penalties with respect thereto, imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and FURTHER PROVIDED, that any extension of the statue of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, control of the contest by the Company shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company or the subsidiary pursuant to paragraph 8(c), the
Executive becomes entitled to receive any refund with respect to such claim, the
Executive shall (subject to compliance with the requirements of Section 8 by the
Company or the subsidiary) promptly pay to the Company or the subsidiary the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company or the subsidiary pursuant to paragraph 8(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
9. NO OBLIGATION TO MITIGATE DAMAGES; NO EFFECT ON OTHER CONTRACTUAL
RIGHTS.
(a) The Executive shall not be required to mitigate damages or
the amount of any payment provided for under this Agreement by seeking other
employment or other vise, nor shall the amount of any payment provided for under
this Agreement be reduced by any compensation earned by the Executive as the
result of employment by another employer after the Date of Termination, or
otherwise.
(b) The provisions of this Agreement, and any payment provided
for hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's existing rights, or rights which would accrue solely as
a result of the passage of time, under any Benefit Plan. Incentive Plan or
Securities Plan, employment agreements or other contract, plan or arrangement.
10. SUCCESSOR TO THE COMPANY.
(a) The Company will require any successor or assign (whether
direct or indirect, by purchase, merger, consolidation or otherwise) of all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to the Executive, expressly, absolutely and
unconditionally to assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if no
such succession or assignment had taken place. Any failure of the Company to
obtain such agreement prior to the effectiveness of any such succession or
assignment shall be a material breach of this Agreement and shall entitle the
Executive to terminate the Executive's employment for Good
8
Reason. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor or assign to its business and/or assets
as aforesaid which executes and delivers the agreement provided for in this
Section 10 or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal and legal representatives, executors,
administrators, successors, heirs, distributes, devisees and legatees. If the
Executive should die while any amounts are still payable to him hereunder, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Executive's devisee, legatee, or other
designee or, if there be no such designee, to the Executive's estate.
11. NO GUARANTY OF EMPLOYMENT. Nothing in this Agreement shall be
deemed to entitle the Executive to continued employment with the Company prior
to a Change of Control, and the rights of the Company to terminate the
employment of the Executive, prior to a Change of Control, shall continue as
fully as if this Agreement were not in effect.
12. NOTICE. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt registered, postage prepaid, as follows:
If to the Company:
Attn: General Counsel
Winnebago Industries, Inc
605 W. Crystal Lake Road
P.O. Box 152
Forest City, IA 50436
If to the Executive:
James P. Jaskoviak
606 S. 6th Street
Forest City, IA 50436
or such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
13. MISCELLANEOUS. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. This Agreement shall be governed by and construed
in accordance with the laws of the State of Iowa.
14. VALIDITY. The invalidity or unenforceability of any provisions of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
15. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
9
16. LEGAL FEES AND EXPENSES. The Company shall pay all legal fees and
expenses which the Executive may incur as a result of the Company's contesting
the validity, enforceability or the Executive's interpretation of, or
determinations under, this Agreement.
17. CONFIDENTIALITY. The Executive shall retain in confidence any and
all confidential information known to the Executive concerning the Company and
its business so long as such information is not otherwise publicly disclosed.
IN WITNESS WHEREOF, the parties have executed this agreement on the
date set out above.
COMPANY:
WINNEBAGO INDUSTRIES, INC.
By:
--------------------------------------
Bruce D. Hertzke
Chairman of the Board, Chief Executive
Officer and President
EXECUTIVE:
------------------------------------------
James P. Jaskoviak
10
EXHIBIT 10s.
EXECUTIVE CHANGE OF CONTROL AGREEMENT
This EXECUTIVE CHANGE OF CONTROL AGREEMENT is made as of January 17,
2001, by and between WINNEBAGO INDUSTRIES, INC., an Iowa corporation (the
"Company"), and Robert J. Olson (the "Executive").
RECITALS
WHEREAS, the Executive is a senior executive and officer of the Company
and has made and is expected to continue to make major contributions to the
profitability, growth and financial strength of the Company;
WHEREAS, the Company recognizes that, as is the case for most publicly
held companies, the possibility of a Change of Control (as hereafter defined)
exists;
WHEREAS, it is in the best interests of the Company, considering the
past and future services of the Executive, to improve the security and climate
for objective decision making by providing for the personal security of the
Executive upon a Change of Control.
NOW, THEREFORE, in consideration of the foregoing premises and the past
and future services rendered and to be rendered by the Executive to the Company
and of the mutual covenants and agreements hereinafter set forth, the parties
agree as follows:
AGREEMENT
1. CONTINUED SERVICE BY EXECUTIVE. In the event a person or entity, in
order to effect a Change of Control, commences a tender or exchange offer,
circulates a proxy to shareholders or takes other steps, the Executive agrees
that the Executive will not voluntarily leave the employ of the Company, and
will render faithful services to the Company consistent with Executive's
position and responsibilities, until the person or entity has abandoned or
terminated its efforts to effect such Change of Control or until such Change of
Control has occurred.
2. CHANGE OF CONTROL. For purposes of this Agreement, the term "Change
of Control" means the time when (i) any Person becomes an Acquiring Person, or
(ii) individuals who shall qualify as Continuing Directors of the Company shall
have ceased for any reason to constitute at least a majority of the Board of
Directors of the Company; PROVIDED HOWEVER, that in the case of either clause
(i) or (ii) a Change of Control shall not be deemed to have occurred if the
event shall have been approved prior to the occurrence thereof by a majority of
the Continuing Directors who shall then be members of such Board of Directors,
and in the case of clause (i) a Change of Control shall not be deemed to have
occurred upon the acquisition of stock of the Company by a pension, profit
sharing, stock bonus, employee stock ownership plan or other retirement plan
intended to be qualified under Section 401(a) of the Internal Revenue Code of
1986, as amended, established by the Company or any subsidiary of the Company.
(In addition, stock held by such a plan shall not be treated as outstanding in
determining ownership percentages for purposes of this definition.)
For the purpose of the foregoing definition of "Change of Control," the
capitalized terms shall have the following meanings:
1
(a) "Continuing Director" means (i) any member of the Board of
Directors of the Company, while such person as a member of the
Board, who is not an Affiliate or Associate of any Acquiring
Person or of any such Acquiring Person's Affiliate or
Associate and was a member of the Board prior to the time when
such Acquiring Person shall have become an Acquiring Person,
and (ii) any successor of a Continuing Director, while such
successor is a member of the Board, who is not an Acquiring
Person or any Affiliate or Associate of any Acquiring Person
or a representative or nominee of an Acquiring Person or of
any affiliate or associate of such Acquiring Person and is
recommended or elected to succeed the Continuing Director by a
majority of the Continuing Directors.
(b) "Acquiring Person" means any Person or any individual or group
of Affiliates or Associates of such Person who acquires
beneficial ownership, directly or indirectly, of 20% or more
of the outstanding stock of the Company if such acquisition
occurs in whole or in part following January 17, 2001, except
that the term "Acquiring Person" shall not include a Hanson
Family Member or an Affiliate or Associate of a Hanson Family
Member.
(c) "Affiliate" means a Person that directly or indirectly through
one or more intermediaries, controls, or is controlled by, or
is under common control with, the person specified.
(d) "Associate" means (1) any corporate, partnership, limited
liability company, entity or organization (other than the
Company or a majority-owned subsidiary of the Company) of
which such a Person is an officer, director, member, or
partner or is, directly or indirectly the beneficial owner of
ten percent (10%) or more of the class of equity securities,
(2) any trust or fund in which such person has a substantial
beneficial interest or as to which such person serves as
trustee or in a similar fiduciary capacity, (3) any relative
or spouse of such person, or any relative of such spouse, or
(4) any investment company for which such person or any
Affiliate of such person serves as investment advisor.
(e) "Hanson Family Member" means John K. Hanson (deceased) and
Luise V. Hanson (and the executors or administrators of their
estates), their lineal descendants (and the executors or
administrators of their estates), the spouses of their lineal
descendants (and the executors or administrators of their
estates) and the John K. and Luise V. Hanson Foundation.
(f) "Person" means an individual, corporation, limited liability
company, partnership, association, joint stock company, trust,
unincorporated organization or government or political
subdivision thereof.
3. SPECIAL BENEFITS EFFECTIVE IMMEDIATELY UPON A CHANGE OF CONTROL. If
a Change of Control shall have occurred while the Executive is still an employee
of the Company, then the Executive shall immediately be entitled to the
following benefits:
(a) IMMEDIATE VESTING OF ALL STOCK OPTIONS AND RIGHTS. All
options and rights granted to the Executive by the Company pursuant to the
Company's Stock Option Plan effective as of August 14, 1997, or any successor or
supplemental stock plan shall become immediately exercisable upon a Change of
Control.
(b) EXECUTIVE SPLIT DOLLAR LIFE INSURANCE PROGRAM. If the
Executive is a participant under the Company's Executive Split Dollar Life
Insurance Program at the time of a Change of Control and the Company has paid
any portion of the premium on the policy or policies issued in connection
therewith during the twelve months preceding the occurrence of the
2
Change of Control, then the Company shall continue to pay all premiums on such
policies so long as the Executive remains in the employ of the Company.
(c) RETIREE HEALTH INSURANCE. Any plans or policies of the
Company providing for medical, dental, vision or similar benefits for retired
employees existing as of the time of a Change of Control shall, as to the
Executive, not be rescinded or modified in any manner which is adverse to the
Executive following a Change of Control.
(d) RESTRICTED STOCK. All nonregistered stock of the Company
owned by the Executive, which is subject to restrictions on sale or other
transfer, shall, at the option of the Executive (exercisable at any time by the
delivery of written notice to the Company) be purchased by the Company at its
fair market value. The purchase shall be completed by the Company within thirty
(30) days after the Company receives the written notice of exercise from the
Executive. So long as the Company's stock is traded on the New York Stock
Exchange (the "NYSE"), the "fair market value" shall be the mean between the
highest and lowest reported selling prices as reported by the NYSE on the
business day immediately preceding the day of sale.
4. OTHER BENEFITS EFFECTIVE IMMEDIATELY UPON A CHANGE OF CONTROL
PURSUANT TO PLAN DOCUMENTS. It is acknowledged that there presently exist other
plans and agreements of the Company which may provide benefits to the Executive
and which contain specific provisions dealing with the occurrence of a change of
control of the Company (as defined in such plan or agreement). Following a
Change of Control, no such plan or agreement shall be rescinded or modified in
any manner which is adverse to the Executive. Such other plans and agreements of
the Company shall mean: (a) the Executive Share Option Program; (b) the
Officers' Long-Term Incentive Plan; (c) the Deferred Compensation and Deferred
Bonus Plans; and (d) the Officers' Incentive Compensation Plan. Nothing herein
shall be construed to affect the Company's right and ability to terminate or
amend any such plan or agreement (subject to the terms thereof) prior to a
Change of Control.
5. TERMINATION FOLLOWING A CHANGE OF CONTROL. If a Change of Control
shall have occurred while the Executive is still an employee of the Company, and
if the Executive's employment with the Company is terminated, within three years
following such Change of Control, then the Executive shall be entitled to the
compensation and benefits provided in Sections 6 and 7, unless such termination
is a result of: (a) the Executive's death; (b) the Executive's Disability [as
defined in Section 5(a) below]; (c) the Executive's Retirement [as defined in
Section 5(b) below]; (d) the Executive's termination by the Company for Cause
[as defined in Section 5(c) below]; or (e) the Executive's decision to terminate
employment other than for Good Reason [as defined in Section 5(d) below].
(a) DISABILITY. If, as a result of the Executive's incapacity
due to physical or mental illness, the Executive shall have been absent from his
duties with the Company on a full-time basis for six months and within 30 days
after written notice of termination is thereafter given by the Company the
Executive shall not have returned to the full-time performance of the
Executive's duties, the Company may terminate the Executive for "Disability."
(b) RETIREMENT. The term "Retirement" as used in this
Agreement shall mean termination by the Company or the Executive of the
Executive's employment based on the Executive having attained the age of 65 or
such other age as shall have been fixed in any arrangement established with the
Executive's consent with respect to the Executive.
(c) CAUSE. The Company may terminate the Executive's
employment for Cause. For purposes of this Agreement only, the Company shall
have "Cause" to terminate the Executive's employment hereunder only on the basis
of (i) fraud, misappropriation or embezzlement on the part of the Executive; or
(ii) intentional misconduct or gross negligence on
3
the part of the Executive which has resulted in material harm to the Company.
Notwithstanding the foregoing, the Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters of the entire membership of the Company's Board of
Directors at a meeting of the Board called and held for the purpose (after
reasonable notice to the Executive and an opportunity for the Executive,
together with the Executive's counsel, to be heard before the Board), finding
that in the good faith opinion of the Board the Executive was guilty of conduct
set forth in the second sentence of this Section 5(c) and specifying the
particulars thereof in detail. Nothing herein shall limit the right of the
Executive or his beneficiaries to contest the validity or propriety of any such
determination.
(d) GOOD REASON. The Executive may terminate the Executive's
employment for Good Reason at any time during the term of this Agreement. For
purposes of this Agreement "Good Reason" shall mean any of the following
(without the Executive's express written consent):
(i) the assignment to the Executive by the Company of duties
inconsistent with the Executive's position, duties, responsibilities and status
with the Company immediately prior to a Change in Control of the Company, or a
change in the Executive's titles or offices as in effect immediately prior to a
Change in Control of the Company, or any removal of the Executive from or any
failure to reelect the Executive to any of such positions, except in connection
with the termination of his employment for Disability, Retirement or Cause or as
a result of the Executive's death or by the Executive other than for Good
Reason;
(ii) a reduction by the Company in the Executive's base salary
as in effect on the date hereof or as the same may be increased from time to
time during the term of this Agreement or the Company's failure to increase
(within 12 months of the Executive's last increase in base salary) the
Executive's base salary after a Change in Control of the Company in an amount
which at least equals, on a percentage basis, the average percentage increase in
base salary for all of officers of the Company effected in the preceding 12
months;
(iii) any failure by the Company to continue in effect any
benefit plan or arrangement (including, without limitation, the Company's 401(k)
plan, nonqualified deferred compensation plan, profit sharing plan, group life
insurance plan, and medical, dental, accident and disability plans) in which the
Executive is participating at the time of a Change of Control (or any other
plans providing the Executive with substantially similar benefits) (hereinafter
referred to as "Benefit Plans"), or the taking of any action by the Company
which would adversely affect the Executive's participation in or materially
reduce the Executive's benefits under any such Benefit Plan or deprive the
Executive of any material fringe benefit enjoyed by the Executive at the time of
a Change in Control of the Company;
(iv) any failure by the Company to continue in effect any
incentive plan or arrangement (including, without limitation, the Company's
Officers' Incentive Compensation Plan, Officers' Long-Term Incentive Plan, bonus
and contingent bonus arrangements and credits and the right to receive
performance awards and similar incentive compensation benefits) in which the
Executive is participating at the time of a Change of Control (or any other
plans or arrangements providing him with substantially similar benefits)
(hereinafter referred to as "Incentive Plans") or the taking of any action by
the Company which would adversely affect the Executive's participation in any
such Incentive Plan or reduce the Executive's benefits under any such Incentive
Plan, expressed as a percentage of his base salary, by more than 10 percentage
points in any fiscal year as compared to the immediately preceding fiscal year;
(v) any failure by the Company to continue in effect any plan
or arrangement to receive securities of the Company in which the Executive is
participating at the time of a Change of Control (or plans or arrangements
providing him with substantially similar benefits)
4
(hereinafter referred to as "Securities Plans") or the taking of any action by
the Company which would adversely affect the Executive's participation in or
materially reduce the Executive's benefits under any such Securities Plan;
(vi) a relocation of the Company's principal executive offices
to a location outside of Forest City, Iowa, or the Executive's relocation to any
place other than the location at which the Executive performed the Executive's
duties prior to a Change in Control of the Company, except for required travel
by the Executive on the Company's business to an extent substantially consistent
with the Executive's business travel obligations at the time of a Change in
Control of the Company;
(vii) any failure by the Company to provide the Executive with
the number of paid vacation days to which the Executive is entitled at the time
of a Change in Control of the Company;
(viii) any material breach by the Company of any provision of
this Agreement;
(ix) any failure by the Company to obtain the assumption of
this Agreement by any successor or assign of the Company; or
(x) any purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of Section 3(f), and for purposes of this Agreement, no such
purported termination shall be effective.
(e) NOTICE OF TERMINATION. Any termination by the Company
pursuant to Section 5(a), (b) or (c) shall be communicated by a Notice of
Termination. For purposes of this Agreement, a "Notice of Termination" shall
mean a written notice which shall indicate those specific termination provisions
in this Agreement relied upon and which sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provisions so indicated. For purposes of this
Agreement, no such purported termination by the Company shall be effective
without such Notice of Termination.
(f) DATE OF TERMINATION. "Date of Termination" shall mean (a)
if this Agreement is terminated by the Company for Disability, 30 days after
Notice of Termination is given to the Executive (provided that the Executive
shall not have returned to the performance of the Executive's duties on a
full-time basis during such 30-day period) or (b) if the Executive's employment
is terminated by the Company for any other reason, the date on which a Notice of
Termination is given; PROVIDED that if within 30 days after any Notice of
Termination is given to the Executive by the Company the Executive notifies the
Company that a dispute exists concerning the termination, the Date of
Termination shall be the date the dispute is finally determined, whether by
mutual agreement by the parties or upon final judgment, order or decree of a
court of competent jurisdiction (the time for appeal therefrom having expired
and no appeal having been perfected).
6. SEVERANCE COMPENSATION UPON TERMINATION OF EMPLOYMENT. If the
Company shall terminate the Executive's employment other than pursuant to
Section 5(a), (b) or (c) or if the Executive shall terminate his employment for
Good Reason, then the Company shall pay to the Executive as severance pay in a
lump sum, in cash, on the fifth day following the Date of Termination, an amount
equal to three (3) times the average of the aggregate annual compensation paid
to the Executive during the three (3) fiscal years of the Company immediately
preceding the Change of Control by the Company subject to United States income
taxes (or, such fewer number of fiscal years if the Executive has not been
employed by the Company during each of the preceding three (3) fiscal years).
5
7. ADDITIONAL BENEFITS UPON TERMINATION. If within three years
following a Change of Control, the Company shall terminate the Executive's
employment other than pursuant to Section 5(a), (b) or (c) or if the Executive
shall terminate his employment for Good Reason, then the Company shall further
provide to the Executive the following benefits:
(a) LIFE, DENTAL, VISION, HEALTH AND LONG-TERM DISABILITY
COVERAGE. The Executive's participation in, and entitlement to, benefits under:
(i) all life insurance plans of the Company; (ii) all health insurance plans of
the Company, including, but not limited to, those providing major medical and
hospitalization benefits, dental benefits and vision benefits; and (iii) the
Company's long-term disability plan or plans; as all such plans existed
immediately prior to the Change of Control shall continue as though the
Executive remained employed by the Corporation for an additional period of three
(3) years or until the obtainment of such coverages by the Executive through
another employer, whichever is earlier; provided, however, that in the case of
all health insurance plans of the Company (including, but not limited to, those
providing major medical and hospitalization benefits, dental benefits and vision
benefits), such three-(3) year period shall be extended to the time that the
Executive attains age 65 (and provided further that the Executive may then be
entitled to certain retiree health insurance under Section 3(c) hereof). To the
extent such participation or entitlement is not possible for any reason
whatsoever, equivalent benefits shall be provided by the Company to the
Executive.
(b) AUTOMOBILE BENEFIT. If the Executive is entitled to the
use of a Company-owned automobile at the time of a Change of Control, then title
to such automobile shall be transferred to the Executive (upon termination of
employment as described in Section 7 above) free and clear of all liens and
encumbrances (or, if the Company does not own such automobile at the time of
termination, then the Company shall arrange for the purchase, for the benefit of
the Executive, of a similar make, model and year of automobile).
(c) EXECUTIVE SPLIT DOLLAR LIFE INSURANCE PROGRAM. Provided
that the Company is obligated, pursuant to Section 3(b) hereof, to pay premiums
on a policy or policies issued in favor of the Executive following a Change of
Control, then the Company shall, in the same manner, continue making such
premium payments until the later of (i) the Executive attains the age of 55; or
(ii) three (3) years following the Executive's termination of employment
(provided, however, that the Company shall not be obligated to make any such
payments after the Executive attains age 65).
(d) DEFERRED COMPENSATION PLANS. Any vesting requirement
imposed under the provisions of, or rules relating to, the Company's Deferred
Compensation and Deferred Bonus Plans, (including, but not limited to, vesting
conditions requiring that the Executive attain the age of 55 and/or complete
five years of service following a deferral) shall be waived and the Executive
shall be fully vested in all deferrals made under such plans.
8. EXCISE TAX-ADDITIONAL PAYMENT.
(a) Notwithstanding anything in this Agreement or any written
or unwritten policy of the Company to the contrary, (i) if it shall be
determined that any payment or distribution by the Company to or for the benefit
of the Executive, whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement, any other agreement between the Company
and the Executive or otherwise (a "Payment"), would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, (the
"Code") or any interest or penalties with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), or (ii) if the Executive shall
otherwise become obligated to pay the Excise Tax in respect of a Payment, then
the Company shall pay to the Executive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including any Excise Tax, imposed upon the Gross-Up
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Payment, the Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon such Payment.
(b) All determinations and computations required to be made
under this Section 8, including whether a Gross-Up Payment is required under
clause (ii) of paragraph 8(a) above, and the amount of any Gross-Up Payment,
shall be made by the Company's regularly engaged independent certified public
accountants (the "Accounting Firm"). The Company shall cause the Accounting Firm
to provide detailed supporting calculations both to the Company and the
Executive within 15 business days after such determination or computation is
requested by the Executive. Any initial Gross-Up Payment determined pursuant to
this Section 8 shall be paid by the Company to the Executive within five days of
the receipt of the Accounting Firm's determination. A determination that no
Excise Tax is payable by the Executive shall not be valid or binding unless
accompanied by a written opinion of the Accounting Firm to the Executive that
the Executive has substantial authority not to report any Excise Tax on his
federal income tax return. Any determination by the Accounting Firm shall be
binding upon the Company and the Executive, except to the extent the Executive
becomes obligated to pay an Excise Tax in respect of a Payment. In the event
that the Company or the subsidiary exhausts or waives its remedies pursuant to
paragraph 8(c) and the Executive thereafter shall become obligated to make a
payment of any Excise Tax, and if the amount thereof shall exceed the amount, if
any, of any Excise Tax computed by the Accounting Firm pursuant to this
paragraph 8(b) in respect to which an initial Gross-Up Payment was made to the
Executive, the Accounting Firm shall within 15 days after Notice thereof
determine the amount of such excess Excise Tax and the amount of the additional
Gross-Up Payment to the Executive. All expenses and fees of the Accounting Firm
incurred by reason of this Section 8 shall be paid by the Company.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of a Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten business days after the Executive
knows of such claim and shall apprise the Company of the nature of such claim
and the date on which such claim is requested to be paid. The Executive shall
not pay such claim prior to the expiration of the 30-day period following the
date on which it gives such notice to the Company (or such shorter period ending
on the date that any payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested
relating to such claim,
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
PROVIDED, HOWEVER, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax, including
interest and penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this paragraph 8(c), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
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conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company or the subsidiary shall determine; PROVIDED, HOWEVER, that if the
Company or the subsidiary directs the Executive to pay such claim and sue for a
refund, the Company or the subsidiary shall advance the amount of such payment
to the Executive, on an interest-free basis and shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or income tax,
including interest or penalties with respect thereto, imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and FURTHER PROVIDED, that any extension of the statue of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, control of the contest by the Company shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company or the subsidiary pursuant to paragraph 8(c), the
Executive becomes entitled to receive any refund with respect to such claim, the
Executive shall (subject to compliance with the requirements of Section 8 by the
Company or the subsidiary) promptly pay to the Company or the subsidiary the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company or the subsidiary pursuant to paragraph 8(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
9. NO OBLIGATION TO MITIGATE DAMAGES; NO EFFECT ON OTHER CONTRACTUAL
RIGHTS.
(a) The Executive shall not be required to mitigate damages or
the amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment provided for under
this Agreement be reduced by any compensation earned by the Executive as the
result of employment by another employer after the Date of Termination, or
otherwise.
(b) The provisions of this Agreement, and any payment provided
for hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's existing rights, or rights which would accrue solely as
a result of the passage of time, under any Benefit Plan, Incentive Plan or
Securities Plan, employment agreements or other contract, plan or arrangement.
10. SUCCESSOR TO THE COMPANY.
(a) The Company will require any successor or assign (whether
direct or indirect, by purchase, merger, consolidation or otherwise) of all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to the Executive, expressly, absolutely and
unconditionally to assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if no
such succession or assignment had taken place. Any failure of the Company to
obtain such agreement prior to the effectiveness of any such succession or
assignment shall be a material breach of this Agreement and shall entitle the
Executive to terminate the Executive's employment for Good
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Reason. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor or assign to its business and/or assets
as aforesaid which executes and delivers the agreement provided for in this
Section 10 or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal and legal representatives, executors,
administrators, successors, heirs, distributes, devisees and legatees. If the
Executive should die while any amounts are still payable to him hereunder, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Executive's devisee, legatee, or other
designee or, if there be no such designee, to the Executive's estate.
11. NO GUARANTY OF EMPLOYMENT. Nothing in this Agreement shall be
deemed to entitle the Executive to continued employment with the Company prior
to a Change of Control, and the rights of the Company to terminate the
employment of the Executive, prior to a Change of Control, shall continue as
fully as if this Agreement were not in effect.
12. NOTICE. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt registered, postage prepaid, as follows:
If to the Company:
Attn: General Counsel
Winnebago Industries, Inc.
605 W. Crystal Lake Road
P.O. Box 152
Forest City, IA 50436
If to the Executive:
Robert J. Olson
36778 Holtan Lane
Forest City, IA 50436
or such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
13. MISCELLANEOUS. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. This Agreement shall be governed by and construed
in accordance with the laws of the State of Iowa.
14. VALIDITY. The invalidity or unenforceability of any provisions of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
15. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
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16. LEGAL FEES AND EXPENSES. The Company shall pay all legal fees and
expenses which the Executive may incur as a result of the Company's contesting
the validity, enforceability or the Executive's interpretation of, or
determinations under, this Agreement.
17. CONFIDENTIALITY. The Executive shall retain in confidence any and
all confidential information known to the Executive concerning the Company and
its business so long as such information is not otherwise publicly disclosed.
IN WITNESS WHEREOF, the parties have executed this agreement on the
date set out above.
COMPANY:
WINNEBAGO INDUSTRIES, INC.
By:
--------------------------------------
Bruce D. Hertzke
Chairman of the Board, Chief Executive
Officer and President
EXECUTIVE:
------------------------------------------
Robert J. Olson
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