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FORM OF
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT (this "Agreement") is made and
entered into as of December 8, 1999, by and between Xxxxxxx Corporation, a
Delaware corporation (the "Corporation"), and ____________________________ (the
"Executive").
W I T N E S S E T H:
WHEREAS, the Executive is currently serving the Corporation in
an executive capacity;
WHEREAS, the Corporation has entered into an Agreement and
Plan of Merger dated as of December 8, 1999 by and among the Corporation, Torque
Acquisition Co., L.L.C. ("VCP") and Torque Merger Sub, Inc. (the "Merger Agree
ment"); and
WHEREAS, the Executive and the Corporation previously entered
into a certain written Executive Agreement, effective as of July 28, 1998 (the
"Prior Agreement"), and now desire to supersede the Prior Agreement in its
entirety, contingent upon consummation (the "Closing") of the Offer (as defined
in Merger Agreement).
NOW, THEREFORE, in consideration of the mutual promises and
covenants set forth herein, the parties agree as follows:
1. EFFECTIVE DATE. Upon the Closing (the "Effective Date"),
this Agreement shall replace and supersede the Prior Agreement and any other
employment contract or executive agreement entered into between the Executive
and the Corporation, in each case, in their entirety, and any rights of any kind
thereunder, whether triggered as a result of the Closing or otherwise, shall
cease to exist. If there is no Closing, this Agreement shall not take effect and
shall be null and void ab initio and the Prior Agreement shall remain in full
force and effect in accordance with its terms.
2. TERM. The term of this Agreement shall commence on the
Effective Date and shall continue in effect indefinitely.
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3. TERMINATION
3.1 Disability. If, as a result of the incapacity of the
Executive due to physical or mental illness, including such incapacity due to
drugs or alcohol (so long as such incapacity due to drugs or alcohol was not
grounds for termination with Cause pursuant to clause (iv) of the definition
thereof), he is absent from his duties with the Corporation on a full-time basis
for six (6) consecutive months, the Corporation may terminate his employment for
"Disability."
3.2 Cause. The Corporation may terminate the Executive's
employment for Cause. "Cause" means a termination of employment of the Execu
tive by the Corporation or any of its subsidiaries due to (i) the willful
failure by the Executive to perform the Executive's duties, to the extent such
failure or breach has not been cured within 10 days after a written demand for
performance is delivered to the Executive by the Board of Directors of the
Corporation (the "Board"), which demand specifically identifies the manner in
which the Board believes that the Executive has not performed the Executive's
duties, (ii) the Executive's willful failure to comply in any material respect
with the lawful directive of the Board or such Executive's superior officer(s),
(iii) the engaging by the Executive in gross negligence or the willful engaging
by the Executive in any other conduct, in each case, which is demonstrably and
materially injurious to the Corporation or its subsidiaries, monetarily or
otherwise, or (iv) the conviction of the Executive of (A) a felony or crime
involving dishonesty or fraud or (B) a crime involving moral turpitude which
would materially injure relationships with customers, suppliers or employees of
the Corporation or otherwise cause a material injury to the Corporation.
3.3 Good Reason. The Executive may voluntarily terminate his
employment for Good Reason. "Good Reason" shall mean:
(a) Without the Executive's express written consent, the
assignment to him of any duties materially inconsistent with his positions,
duties, responsibilities and status with the Corporation immediately prior to
the Effective Date, or a material change in his reporting responsibilities,
titles or offices as in effect immediately prior to the Effective Date, or any
removal of him from or any failure to re-elect him to any of such positions,
except in connection with the termination of his employment for Cause,
Disability or Retirement or as a result of his death or by the Executive other
than for Good Reason. For purpose of this
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Agreement, the Executive's removal from a position of inside director of the
Corporation or any of its subsidiaries shall not be considered Good Reason;
(b) A reduction by the Corporation in the Executive's base
salary as in effect immediately prior to the Effective Date, except for
across-the-board salary reductions similarly affecting all members of the
Corporation's management;
(c) A failure by the Corporation to continue its Annual
Management Incentive Compensation Plan as it is in effect immediately prior to
the Effective Date, or to continue the Executive as a participant in the Plan on
at least as favorable a basis to him as immediately prior to the Effective Date;
(d) The relocation of the principal executive offices of
the Corporation, or of the division or subsidiary the Executive serves, as the
case may be, to a location outside the Greater Rochester area, or such other
area in which such division or subsidiary executive office is located, or the
Corporation's requiring him to be based anywhere other than at such principal
executive offices except for reasonable required travel on the Corporation's
business;
(e) The failure by the Corporation to continue in effect
the same or a comparable fringe benefit or compensation plan, retirement plan,
life insurance plan, health and accident plan or disability plan in which the
Executive is participating immediately prior the Effective Date (or plans
providing him with substantially similar benefits) except as such change is
prompted in good faith by a change in the law, the taking of any action by the
Corporation which would adversely affect his participation in or materially
reduce his benefits under any such plans or deprive him of any material fringe
benefit enjoyed by him immediately prior to the Effective Date, or the failure
by the Corporation to provide him with the number of paid vacation days to which
he is then entitled on the basis of years of service with the Corporation in
accordance with the Corporation's normal vacation policy in effect immediately
prior to the Effective Date (except for across-the-board changes similarly
affecting all members of the Corporation's management).
(f) Provided that the Executive is a party to the
Stockholders' Agreement to be entered into by and among the Corporation, VCP,
certain members of the management of the Corporation and certain other
stockholders of the Corporation in connection with the transactions contemplated
by the Merger Agreement (the "Stockholders' Agreement"), the failure by the
Corporation to include the
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Executive in any new plans or benefits to which he would normally be eligible
based on past practice and his position relative to other participants in such
plan or benefit.
Notwithstanding the foregoing, in no event shall Good
Reason exist if (i) with respect to clauses (c) and (e) above, the aggregate
benefits that are offered the Executive are at least as favorable to the
Executive when compared to those which existed for the Executive's benefit
immediately prior to such change and (ii) the Executive has delivered a written
notice to the Corporation identifying in detail the basis for Good Reason to
exist promptly upon his becoming aware of the event giving rise to such Good
Reason and an opportunity for the Corporation to cure such event for a period of
30 days.
3.4 Date of Termination. "Date of Termination" shall mean (i)
if the Executive's employment is terminated for Disability, thirty (30) days
after notice of termination is given, (ii) if his employment is terminated
pursuant to Section 3.2, the date specified in the notice of termination, and
(iii) if his employment is terminated for any other reason, the date on which a
notice of termination is given.
4. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
4.1 During any period that the Executive fails to perform his
duties hereunder as a result of incapacity due to physical or mental illness, he
shall continue to receive his full base salary at the rate then in effect and
any awards under the Annual Management Incentive Compensation Plan paid during
such period until his employment is terminated pursuant to Section 3.1.
Thereafter, his benefits shall be determined in accordance with the
Corporation's Disability Income Insurance Plan, or a substitute plan then in
effect.
4.2 If the Executive's employment is terminated for Cause, the
Corporation shall pay him the unpaid portion of his base salary through the Date
of Termination at the rate then in effect and shall have no further obligations
to him under this Agreement. Such payment shall be made no later than the fifth
business day following the Executive's Date of Termination.
4.3 If the Executive's employment is terminated by the Corpora
tion other than pursuant to Section 3.1 or 3.2 or by the Executive pursuant to
Section 3.3, the Corporation shall pay or provide to the Executive (a) an amount
equal to the product of (i) the bonus that would have been paid to the Executive
in respect of the
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year in which the Date of Termination occurs under the Corporation's Annual
Management Incentive Compensation Plan had the Executive's employment continued
until the last day of such year and (ii) a fraction, the numerator of which is
the number of days in the year in which the Date of Termination occurs prior to
the Date of Termination and the denominator of which is 365, such amount to be
paid at the same time bonuses are paid to other management employees of the
Corporation in respect of such year, (b) a lump sum payment no later than the
fifth business day following the Date of Termination equal to any unpaid portion
of the Executive's base salary through the Date of Termination at the rate in
effect immediately preceding such Date of Termination (without giving effect to
any salary reduction which gave rise to such termination if such termination was
by the Executive for Good Reason), (c) continued payment of the Executive's base
salary, at the highest rate in effect during the twenty-four (24) months
immediately preceding the Date of Termination, for the period commencing on the
Date of Termination and ending on the second anniversary of the Date of
Termination (the "Benefit Period"), (d) on the first day of each month during
the Benefit Period, an amount equal to one twenty-fourth (1/24) of the lump sum
actuarial equivalent (determined using the same methods and assumptions utilized
under the Corporation's defined benefit retirement plans and programs as in
effect on the date hereof) of the additional retirement pension to which the
Executive would have become entitled under the terms of such retirement plans or
programs without regard to "vesting" thereunder, had the Execu tive accumulated
two additional years of continuous service and age after the Date of Termination
at the compensation level in effect on the Date of Termination under such
retirement plans or programs), and (e) on the first day of each month during the
Benefit Period, an amount equal to the amount the Corporation would have contrib
uted in respect of such month on the Executive's behalf under any of the Corpora
tion's defined contribution plans, determined under the provisions of such plans
as in effect on the date hereof, as if the Executive's compensation during such
month was one twelfth (1/12) of the highest annual compensation actually
received by the Executive in the two years immediately preceding the Executive's
Date of Termination, and as if the Executive were to continue, where relevant,
to contribute at the highest rate at which the Executive had contributed during
the two years immediately preceding the Executive's Date of Termination.
4.4 If the Executive's employment is terminated by the Corpora
tion other than pursuant to Section 3.1 or 3.2 or by the Executive pursuant to
Section 3.3, the Corporation shall, in addition to the foregoing, continue to
provide the Executive with all health, dental, life insurance, disability and
other welfare benefits until the second anniversary of the Date of Termination
to the extent the Corporation
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is contractually permitted to do so under then existing plans and policies, and
in the event the Corporation is unable to do so, then the Corporation will
otherwise obtain such benefits for the Executive, provided that the Corporation
will not be required to spend more than $35,000 per year to provide such
benefits which are not contractually permitted under then existing plans and
policies. Such benefits shall be substantially the same as the benefits offered
to the Company's executives generally, including family coverage, during this
two (2) year period but at no cost to the Executive. In addition, the
Corporation shall provide financial planning services to the Executive following
the Date of Termination through the second anniversary of the date severance
payments are made pursuant to Section 4.3(b) at the reimburse ment rates in
effect immediately preceding the Effective Date.
4.5 The Executive shall not be required to mitigate the amount
of any payment provided for in this Article by seeking other employment. The
payment pursuant to Section 4.3 shall be in lieu of any severance payments
pursuant to general Corporation termination policies.
4.6 If the Executive's employment is terminated by the Corpora
tion other than pursuant to Section 3.1 or 3.2 or by the Executive pursuant to
Section 3.3, in either case within one (1) year following the Effective Date,
then if the payments to Executive under this Agreement and any other plan or
agreement would be (except for this provision) subject to the excise tax imposed
by sections 280G and 4999 of the Internal Revenue Code, the amount payable
pursuant to this Agreement shall be reduced to the extent necessary to avoid the
imposition of such tax.
4.7 The Corporation shall be entitled to withhold from any
amounts payable hereunder such amount or amounts, if any, as are required by law
as well as any amounts necessary to satisfy any outstanding monetary obligations
owing by Executive to the Corporation.
4.8 In the event of any delay in payment of the amounts due
the Executive, the Corporation shall pay interest on the amounts delayed at the
rate of prime (as reported in the Wall Street Journal during the relevant
period) plus one percent.
4.9 The Corporation may fund some or all of the payments
called for by this Agreement by establishing an irrevocable trust under the
direction and control of an independent trustee. The amounts potentially due
shall be separately stated (and updated for changes) to enable the Executive,
Corporation and trustee to
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know the amount due the Executive. The agreement with such trustee shall provide
that upon receipt of a statement by the Executive that a Termination has
occurred, such trustee (to the extent possible in terms of the trust's funding)
shall make payment to the Executive on the fifth business day following receipt
of such notice pursuant to the terms of this Agreement. Any funds set aside in
such trust shall at all times remain subject to the claims of the creditors of
the Corporation. The creation of such trust shall not lessen the contractual
obligation of the Corporation under this Agreement, except that no payments
shall be duplicated. Any funds attributable to the Executive remaining in such
trust after all payments have been made to the Executive (or the possibility of
payments shall have been extinguished) shall revert to the Corporation.
4.10 The Executive hereby agrees that if his employment with
the Corporation terminates other than (a) on account of his death or Disability,
(b) by the Corporation for Cause or (c) by him other than for Good Reason, then
for the two-year period commencing on the Date of Termination the Executive
shall not compete with the Corporation. For purposes of the foregoing, competing
with the Corpora tion means to engage in any activity or render any service,
directly or indirectly (whether as principal, director, officer, investor,
employee, consultant or otherwise), for or on behalf of any person or entity if
said activity or service directly or indirectly consists of any product or
service the Corporation or its subsidiaries offers for sale to customers during
the period commencing on the Effective Date and ending on the Executive's Date
of Termination (or similar product or service) or if such activity would
otherwise involve the participation by the Executive, directly or indirectly, in
any business engaged in by the Corporation during the period commencing on the
Effective Date and ending on the Executive's Date of Termination, whether as an
officer, director, employee, partner, sole proprietor, agent representative,
independent contractor, consultant, franchisor, franchisee, creditor, or
otherwise; provided, however, that ownership of less than 3% of any class of
securities which is traded on a national securities exchange or in the
over-the-counter market shall not, in and of itself, constitute competing with
the Corporation.
The Executive hereby agrees that if the Executive's employment
with the Corporation is terminated by the Corporation for Cause or by the
Executive other than for Good Reason, then the Executive shall be subject to the
provisions of this Section 4.10 for the one-year period ending on the first
anniversary of the Date of Termination.
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In addition, for a period of one year after the date of
termination, the Executive shall not, directly or indirectly, (i) induce or
attempt to induce any employee of the Corporation or any of its subsidiaries to
leave their employ or in any way interfere with the relationship between the
Corporation or any of its subsidiaries and any of their employees, (ii) hire any
person who was an employee of the Corporation or any subsidiary at any time
during the Executive's employment with the Corporation or (iii) induce or
attempt to induce any supplier, licencee, licensor, franchisee or other business
relation of the Corporation or any of its subsidiaries to cease doing business
with them or in any way interfere with the relationship between the Corporation
or any of its subsidiaries and any such person or business relation.
The parties hereto agree that the Corporation would suffer
irreparable harm from a breach by the Executive of any of the covenants or
agreements contained in this Section 4.10. In the event of any alleged or
threatened breach by the Executive of any of the provisions of this Section
4.10, the Corporation or its successor assigns may, in addition to all other
rights and remedies existing in its favor, apply to any court of the competent
jurisdiction for specific performance and/or injunctive or other relief in order
to enforce or prevent any violations of the provisions hereof (including the
extension of the non-compete period and other restrictions set forth in this
Section 4.10 by a period equal to the length of the violation of this Section
4.10). In the event of an alleged breach or violation by the Executive of any of
the provisions of this Section 4.10, the non-compete period and other
restrictions set forth in this Section 4.10 shall be tolled until such alleged
breach or violation has been duly cured. The Executive agrees that these
restrictions are reasonable. In addition, in the event the Executive is in
breach of this Agree ment, the Corporation shall be entitled to withhold the
severance payments referred to in Section 4.3 above.
If, at the time of enforcement of any of the provisions of
this Section 4.10, a court holds that the restrictions stated therein are
unreasonable under the circumstances then existing, the parties hereto agree
that the maximum period, scope or geographical area reasonable under such
circumstances shall be substituted for the stated period, scope or area.
The Executive agrees that the covenants made in this Section
4.10 shall be construed as an agreement independent of any other provision of
this Agreement and shall survive any order of a court of competent jurisdiction
terminating any other provision of this Agreement.
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5. SUCCESSORS: BINDING AGREEMENT.
5.1 This Agreement shall be binding on the successors and
assigns of the Corporation. The Corporation will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation, by agreement
to expressly assume and agree to perform this Agreement in the same manner and
to the same extent that the Corporation would be required to perform it if no
such succession had taken place, a copy of which agreement shall be delivered to
the Executive prior to or contemporaneously with such succession. Failure of
the Corporation to obtain such agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle the Executive
to compensation from the Corporation in the same amount and on the same terms as
he would be entitled hereunder if he terminated his employment for Good Reason,
except that for purposes of implementing the foregoing the date on which any
such succession becomes effective shall be deemed the Date of Termination. As
used in this Agreement, "Corporation" shall include any successor to
substantially all of the business and/or assets of the Corporation.
5.2 This Agreement shall inure to the benefit of and be
enforce able by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive dies while any amounts would still be payable to him hereunder if he
had not then died, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to his devisee, legatee, or
other designee or, if there be no such designee, to his estate.
6. NOTICE. All notices and other communications provided
for in this Agreement shall be in writing and shall be deemed to have been duly
given when delivered or when mailed by United States registered or certified
mail, postage prepaid, addressed to the respective addresses on file, except
that all notices to the Corporation shall be directed to the attention of the
Chief Executive Officer with a copy to the Secretary, or to such other address
as either party may have furnished to the other in writing in accordance
herewith, such notices of change of address to be effective only upon receipt.
7. LEGAL EXPENSE. If, with respect to any alleged failure
by the Corporation to comply subsequent to the Effective Date with any of the
terms of this Agreement, the Executive hires legal counsel with respect to this
Agreement or institutes any negotiations or institutes or responds to legal
action to assert or defend
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the validity of, enforce his rights under, or recover damages for breach of this
Agreement and if the Executive substantially prevails on at least one material
issue relating to such proceeding, the Corporation shall reimburse the
Executive, no later than five (5) days following the conclusion of such
proceeding, for his actual expenses for reasonable attorney's fees and
disbursements, together with such additional payment, if any, as may be
necessary so that the net-after-tax payment to the Executive equal such fees and
disbursements.
8. MISCELLANEOUS.
8.1 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 Chief Executive Officer or such other
officer as is specifically designated by the Board pursuant to a Special Board
Vote (as defined in the Stockholders' Agreement). No waiver by either party
hereto at any time of any breach by the other party 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.
8.2 The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of New
York.
8.3 The masculine gender, when used herein, shall include
the feminine.
8.4 This Agreement shall not create any right in the
Executive to employment, nor does it create any rights under the Corporation's
1981 Stock Plan, or under any other plan except as specifically provided herein.
8.5 The article and section headings in this Agreement are
for convenience only and do not affect the meaning of the Agreement.
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8.6 The invalidity or unenforceability of any provision 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.
8.7 The language used in this Agreement shall be deemed to
be language chosen by the parties hereto to express their mutual intent, and no
rule of strict construction shall be applied against any party.
XXXXXXX CORPORATION
By:______________________________
Its: [Chief Executive Officer]
_________________________________
Executive
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