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Exhibit 10.13
EXECUTIVE SEVERANCE AGREEMENT
AGREEMENT made as of this day of January 26, 2000 by and between Zoll
Medical Corporation, a Massachusetts corporation with its principal place of
business in Burlington, Massachusetts (the Company"), and A. Xxxxxx Xxxxxx of
Xxxxxxxxx, Massachusetts (the "Executive").
1. PURPOSE. The Company considers it essential to the best interests of its
stockholders to xxxxxx the continuous employment of key management personnel.
The Board of Directors of the Company (the "Board") recognizes, however, that,
as is the case with many publicly held corporations, the uncertainty and
questions which may arise among management in connection with a Change in
Control (as defined in Section 2 hereof) may result in the departure or
distraction of management personnel to the detriment of the Company and its
stockholders. Therefore, the Board has determined that appropriate steps should
be taken to reinforce and encourage the continued attention and dedication of
members of the Company's management, including the Executive, to their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control. Nothing in this Agreement
shall be construed as creating an express or implied contract of employment and,
except as otherwise agreed in writing between the Executive and the Company, the
Executive shall not have any right to be retained in the employ of the Company.
2. CHANGE IN CONTROL. A "Change in Control" shall be deemed to have
occurred in any one of the following events:
(a) any "person," as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the "Act") (other than the Company, any of its
Subsidiaries, or any trustee, fiduciary or other person or entity holding
securities under any employee benefit plan or trust of the Company or any of its
Subsidiaries), together with all "affiliates" and "associates" (as such terms
are defined in Rule 12b-2 under the Act) of such person, shall become the
"beneficial owner" (as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, of securities of the Company representing 25% or more of
either (A) the combined voting power of the Company's then outstanding
securities having the right to vote in an election of the Company's Board of
Directors ("Voting Securities") or (B) the then outstanding shares of Stock of
the Company (in either such case other than as a result of an acquisition of
securities directly from the Company); or
(b) persons who, as of the date hereof, constitute the Company's Board of
Directors (the "Incumbent Directors") cease for any reason, including, without
limitation, as a result of a tender offer, proxy contest, merger or similar
transaction, to constitute at least a majority of the Board, provided that any
person becoming a director of the Company subsequent to the date hereof whose
election or nomination for election was approved by a vote of at least a
majority of the Incumbent Directors shall, for purposes of this Agreement, be
considered as Incumbent Director provided, however, that there shall be excluded
for consideration as Incumbent Director any individual whose initial assumption
of office occurred as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents, by or on behalf of a person other than the
Board of Directors; or
(c) the stockholders of the Company shall approve (A) any consolidation or
merger of the Company or any Subsidiary where the shareholders of the Company,
immediately prior to the consolidation or merger, would not, immediately after
the consolidation or merger, beneficially own (as such term is defined in Rule
13d-3 under the Act), directly or indirectly, shares representing in the
aggregate more than 50% of the voting shares of the corporation issuing cash or
securities in the consolidation or merger (or of its ultimate parent
corporation, if any), (B) any sale, lease, exchange or other transfer (in one
transaction or a series of transactions contemplated or arranged by any party as
a single plan) of all or substantially all of the assets of the Company or (C)
any plan or proposal for the liquidation or dissolution of the Company.
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Notwithstanding the foregoing, a "Change in Control" shall not be deemed to
have occurred for purposes of the foregoing clause (a) solely as the result of
an acquisition of securities by the Company which, by reducing the number of
shares of Stock or other Voting Securities outstanding, increases (x) the
proportionate number of shares of Stock beneficially owned by any person to 25%
or more of the shares of Stock then outstanding or (y) the proportionate voting
power represented by the Voting Securities beneficially owned by any person to
25% or more of the combined voting power of all then outstanding Voting
securities; provided, however, that if any person referred to in clause (x) or
(y) of this sentence shall thereafter become the beneficial owner of any
additional shares of Stock or other Voting Securities (other than pursuant to a
stock split, stock dividend, or similar transaction), then a "Change in Control"
shall be deemed to have occurred for purposes of the foregoing clause (a).
3.TERMINATING EVENT. A "Terminating Event" shall mean any of the events
provided in this Section 3 occurring subsequent to a Change in Control as
defined in Section 2:
(a) termination by the Company of the employment of the Executive with the
Company for any reason other than (A) a willful act of dishonesty by the
Executive with respect to any material matter involving the Company or any
subsidiary or affiliate, or (B) conviction of the Executive of a crime involving
moral turpitude, or (C) the gross or willful failure by the Executive to
substantially perform the Executive's duties with the Company (other than any
such failure after Executive gives notice of termination for good reason), which
failure is not cured within 30 days after a written demand for substantial
performance is received by the Executive from the Board of Directors of the
Company which specifically identifies the manner in which the Board of Directors
believes the Executive has not substantially performed the Executive's duties;
or (D) the failure by the Executive to perform his full-time duties with the
Company by reason of his death, disability or retirement; provided, however,
that a Terminating Event shall not be deemed to have occurred pursuant to this
Section 3(a) solely as a result of the Executive being an employee of any direct
or indirect successor to the business or assets of the Company, rather than
continuing as an employee of the Company following a Change in Control. For
purposes of clauses (A) and (C) of this Section 3(a), no act, or failure to act,
on the Executive's part shall be deemed "willful" unless done, or omitted to be
done, by the Executive without reasonable belief that the Executive's act, or
failure to act, was in the best interest of the Company and its subsidiaries and
affiliates. For purposes of clause (D) of this Section 3(a), Section 6 and
Section 8(b) hereof, "disability" shall mean the Executive's incapacity due to
physical or mental illness which has caused the Executive to be absent from the
full-time performance of his duties with the Company for a period of six (6)
consecutive months if the Company shall have given the Executive a Notice of
Termination and, within thirty (30) days after such Notice of Termination is
given, the Executive shall not have returned to the full-time performance of his
duties. For purposes of clause (D) of this Section 3(a) and Section 6,
"retirement" shall mean termination of the Executive's employment in accordance
with the Company's normal retirement policy, not including early retirement,
generally applicable to its salaried employees, as in effect immediately prior
to the Change in Control, or in accordance with any retirement arrangement
established with respect to the Executive with the Executive's express written
consent;
(b) termination by the Executive of the Executive's employment with the
Company for Good Reason.
Good Reason shall mean the occurrence of any of the following events:
(i) a substantial adverse change, not consented to by the Executive,
in the nature or scope of the Executive's responsibilities, authorities, powers,
functions or duties from the nature or scope of the responsibilities,
authorities, powers, functions or duties exercised by the Executive immediately
prior to the Change in Control; or
(ii) a reduction in the Executive's annual base salary as in effect on
the date hereof or as the same may be increased from time to time except for
across-the-board salary reductions similarly affecting all or substantially all
management employees; or
(iii) the relocation of the Company's offices at which the Executive
is principally employed
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immediately prior to the date of a Change in Control to a location more than 50
miles from such offices, or the requirement by the Company for the Executive to
be based anywhere other than the Company's offices at such location, except for
required travel on the Company's business to an extent substantially consistent
with the Executive's business travel obligations immediately prior to the Change
in Control; or
(iv) the failure by the Company to pay to the Executive any portion of
his compensation or to pay to the Executive any portion of an installment of
deferred compensation under any deferred compensation program of the Company
within 15 days of the date such compensation is due without prior written
consent of the Executive; or
(v) the failure by the Company to obtain an effective agreement from
any successor to assume and agree to perform this Agreement, as required by
Section 16.
4. SEVERANCE PAYMENT. In the event a Terminating Event occurs within twelve
(12) months after a Change in Control,
(a) the Company shall pay to the Executive an amount equal to one (1) times
the sum of (i) the Executive's base salary immediately prior to the Terminating
Event (or immediately prior to the Change in Control, if higher) and (ii) the
Executive's most recent bonus paid prior to the Change in Control, payable in
one lump-sum payment on the Date of Termination;
(b) the Company shall continue to provide health and dental insurance
coverage to the Executive, on the same terms and conditions as though the
Executive had remained an active employee, for twelve (12) months after the
Terminating Event; and
(c) the Company shall pay to the Executive all reasonable legal and
arbitration fees and expenses incurred by the Executive in obtaining or
enforcing any right or benefit provided by this Agreement, except in cases
involving frivolous or bad faith litigation.
5. ADDITIONAL BENEFITS.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any compensation, 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 or
otherwise, (the "Severance Payments"), would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), the following provisions shall apply:
(i) If the Severance Payments, reduced by the sum of (1) the Excise
Tax and (2) the total of the Federal, state, and local income and employment
taxes payable by the Covered Employee on the amount of the Severance Payments
which are in excess of the Threshold Amount, are greater than or equal to the
Threshold Amount, the Executive shall be entitled to the full benefits payable
under this Agreement.
(ii) If the Threshold Amount is less than (x) the Severance Payments,
but greater than (y) the Severance Payments reduced by the sum of (1) the Excise
Tax and (2) the total of the Federal, state, and local income and employment
taxes on the amount of the Severance Payments which are in excess of the
Threshold Amount, then the benefits payable under this Agreement shall be
reduced (but not below zero) to the extent necessary so that the maximum
Severance Payments shall not exceed the Threshold Amount. To the extent that
there is more than one method of reducing the payments to bring them within the
Threshold Amount, the Executive shall determine which method shall be followed;
provided that if the Executive fails to make such determination within 45 days
after the Company has sent the Executive written notice of the need for such
reduction, the Company may determine the amount of such reduction in its sole
discretion.
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For the purposes of this Section 5, "Threshold Amount" shall mean three times
the Executive's "base amount" within the meaning of Section 280G(b)(3) of the
Code and the5regulations promulgated thereunder less one dollar ($1.00); and
"Excise Tax" shall mean the excise tax imposed by Section 4999 of the Code, or
any interest or penalties incurred by the Executive with respect to such excise
tax. (b) The determination as to which of the alternative provisions of Section
5(a) shall apply to the Executive shall be made by Ernst & Young LLP or any
other nationally recognized accounting firm selected by the Company (the
"Accounting Firm"), which shall provide detailed supporting calculations both to
the Company and the Executive within 15 business days of the Date of
Termination, if applicable, or at such earlier time as is reasonably requested
by the Company or the Executive. For purposes of determining which of the
alternative provisions of Section 5(a) shall apply, the Executive shall be
deemed to pay federal income taxes at the highest marginal rate of federal
income taxation applicable to individuals for the calendar year in which the
determination is to be made, and state and local income taxes at the highest
marginal rates of individual taxation in the state and locality of the
Executive's residence on the Date of Termination, net of the maximum reduction
in federal income taxes which could be obtained from deduction of such state and
local taxes. Any determination by the Accounting Firm shall be binding upon the
Company and the Executive.
6. TERM. This Agreement shall take effect on the date first set forth above
and shall terminate upon the earlier of (a) the termination by the Company of
the employment of the Executive because of (A) a willful act of dishonesty by
the Executive with respect to any material matter involving the Company or any
subsidiary or affiliate, or (B) conviction of the Executive of a crime involving
moral turpitude, or (C) the gross or willful failure by the Executive to
substantially perform the Executive's duties with the Company, or (D) the
failure by the Executive to perform his full-time duties with the Company by
reason of his death, disability (as defined in Section 3(a)) or retirement (as
defined in Section 3(a)), (b) the resignation or termination of the Executive
for any reason prior to a Change in Control, (c) the resignation of the
Executive after a Change in Control for any reason other than the occurrence of
any of the events enumerated in Section 3(b)(i)-(v) of this Agreement, or (d)
the date which is twelve (12) months after a Change in Control if the Executive
is still employed by the Company.
7. WITHHOLDING. All payments made by the Company under this Agreement shall
be net of any tax or other amounts required to be withheld by the Company under
applicable law.
8. NOTICE AND DATE OF TERMINATION; DISPUTES; ETC.
(a) NOTICE OF TERMINATION. After a Change in Control and during the term of
this Agreement, any purported termination of the Executive's employment (other
than by reason of death) shall be communicated by written Notice of Termination
from one party hereto to the other party hereto in accordance with this Section
8. For purposes of this Agreement, a "Notice of Termination" shall mean a notice
which shall indicate the specific termination provision in this Agreement relied
upon and the Date of Termination. Further, a Notice of 6 Termination pursuant to
one or more of clauses (A) through (C) of Section 3(a) hereof is required to
include a copy of a resolution duly adopted by the affirmative vote of not less
than two-thirds (2/3) of the entire membership of the Board at a meeting of the
Board (after reasonable notice to the Executive and an opportunity for the
Executive, accompanied by the Executive's counsel, to be heard before the Board)
finding that, in the good faith opinion of the Board, the termination met the
criteria set forth in one or more of clauses (A) through (C) of Section 3(a)
hereof.
(b) DATE OF TERMINATION. "Date of Termination", with respect to any
purported termination of the Executive's employment after a Change in Control
and during the term of this Agreement, shall mean (i) if the Executive's
employment is terminated for disability, 30 days after the Notice of Termination
is given (provided that the Executive shall not have returned to the full-time
performance of the Executive's duties during such 30-day period) and (ii) if the
Executive's employment is terminated for any other reason, the date specified in
the Notice of Termination. In the case of a termination by the Company other
than a termination pursuant to one or more of clauses (A) through (C) of Section
3(a) (which may be effective immediately), the Date of Termination shall be 30
days after the Notice of Termination is given. In the case of a termination by
the Executive, the Date of Termination shall not be less than 15 days from the
date such Notice of Termination is given. Notwithstanding Section 3(a) of this
Agreement, in the event that the Executive gives a
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Notice of Termination to the Company, the Company may unilaterally accelerate
the Date of Termination and such acceleration shall not result in a Terminating
Event for purposes of Section 3(a) of this Agreement.
(c) NO MITIGATION. The Company agrees that, if the Executive's employment
by the Company is terminated during the term of this Agreement, the Executive is
not required to seek other employment or to attempt in any way to reduce any
amounts payable to the Executive by the Company pursuant to Sections 4(a), (b)
and (c) hereof. Further, the amount of any payment provided for in this
Agreement shall not be reduced by any compensation earned by the Executive as
the result of employment by another employer, by retirement benefits, by offset
against any amount claimed to be owed by the Executive to the Company or
otherwise.
(d) SETTLEMENT AND ARBITRATION OF DISPUTES. Any controversy or claim
arising out of or relating to this Agreement or the breach thereof shall be
settled exclusively by arbitration in accordance with the laws of the
Commonwealth of Massachusetts by three arbitrators, one of whom shall be
appointed by the Company, one by the Executive and the third by the first two
arbitrators. If the first two arbitrators cannot agree on the appointment of a
third arbitrator, then the third arbitrator shall be appointed by the American
Arbitration Association in the City of Boston. Such arbitration shall be
conducted in the City of Boston in accordance with the rules of the American
Arbitration Association for commercial arbitrations, except with respect to the
selection of arbitrators which shall be as provided in this Section 8(d).
Judgment upon the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof.
9. SUCCESSOR TO EXECUTIVE. This Agreement shall inure to the benefit of and
be enforceable by the Executive's personal representatives, executors,
administrators, heirs, distributees, devisees and legatees. In the event of the
Executive's death after a Terminating Event but prior to the completion by the
Company of all payments due him under Section 4(a), (b) and (c) of this
Agreement, the Company shall continue such payments to the Executive's
beneficiary designated in writing to the Company prior to his death (or to his
estate, if the Executive fails to make such designation).
10. ENFORCEABILITY. If any portion or provision of this Agreement shall to
any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
11. WAIVER. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
12. NOTICES. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by registered or certified mail, postage prepaid, to the
Executive at the last address the Executive has filed in writing with the
Company, or to the Company at its main office, attention of the Board of
Directors.
13. EFFECT ON OTHER PLANS. An election by the Executive to resign after a
Change in Control under the provisions of this Agreement shall not be deemed a
voluntary termination of employment by the Executive for the purpose of
interpreting the provisions of any of the Company's benefit plans, programs or
policies. Nothing in this Agreement shall be construed to limit the rights of
the Executive under the Company's benefit plans, programs or policies except as
otherwise provided in Section 5 hereof, and except that the Executive shall have
no rights to any severance benefits under any severance pay plan.
14. AMENDMENT. This Agreement may be amended or modified only by a written
instrument signed by the Executive and by a duly authorized representative of
the Company.
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15. GOVERNING LAW. This is a Massachusetts contract and shall be construed
under and be governed in all respects by the laws of the Commonwealth of
Massachusetts .
16. OBLIGATIONS OF SUCCESSORS. The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform if no such succession had
taken place.
17. CONFIDENTIAL INFORMATION. The Executive shall never use, publish or
disclose in a manner adverse to the Company's interests, any proprietary or
confidential information relating to (a) the business, operations or properties
of the Company or any subsidiary or other affiliate of the Company, or (b) any
materials, processes, business practices, technology, know-how, research,
programs, customer lists, customer requirements or other information used in the
manufacture, sale or marketing of any of the respective products or services of
the Company or any subsidiary or other affiliate of the Company; provided,
however, that no breach or alleged breach of this Section 17 shall entitle the
Company to fail to comply fully and in a timely manner with any other provision
hereof. Nothing in this Agreement shall preclude the Company from seeking money
damages, or equitable relief by injunction or otherwise without the necessity of
proving actual damage to the Company, for any breach by the Executive hereunder.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument
by the Company by its duly authorized officer, and by the Executive, as of the
date first above written.
ZOLL MEDICAL CORPORATION
By: /s/ Xxxxxx X. Xxxxxxx
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Name: Xxxxxx X. Xxxxxxx
Title: Chairman, Compensation Committee
/s/ A. Xxxxxx Xxxxxx
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A. Xxxxxx Xxxxxx
