EXECUTIVE TRANSITION AGREEMENT
Exhibit
10.1
THIS
EXECUTIVE TRANSITION AGREEMENT (this “Agreement”) by and between KĀDANT
INC., a Delaware corporation (the “Company”), and
Xxxxxxx X. Xxxxxxxxx (the “Executive”) is made
as of August 17, 2009.
WHEREAS,
the Company and the Executive desire to provide for an orderly transition to the
Executive’s successor as President and Chief Executive Officer (“CEO”) of the Company
beginning on September 1, 2009 and continuing through January 2, 2011 (the
“Retirement
Date”), when (unless sooner terminated as provided for herein) the
Executive will retire and cease to be an employee of the Company;
WHEREAS,
in connection with the foregoing, the Company and the Executive wish to set
forth the terms of such transition in this Agreement;
WHEREAS,
the Company and the Executive are parties to that certain Amended and Restated
Executive Retention Agreement, dated as of December 9, 2008 (the “Executive Retention
Agreement”), which provides certain benefits to the Executive in the
event of a termination of his employment following a Change in Control (as
defined below) of the Company; and
WHEREAS,
the Company and the Executive wish to replace the Executive Retention Agreement
with the benefits and obligations set forth in this Agreement, to be effective
as set forth in this Agreement.
NOW,
THEREFORE, in consideration of the mutual covenants herein contained and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Company and the Executive agree as follows:
1. Employment.
1.1 Except as
hereinafter otherwise provided, the Company shall employ the Executive as the
President and CEO of the Company through August 31, 2009; as the CEO from
September 1, 2009 through January 2, 2010; and as the Executive Chairman from
January 3, 2010 through the Retirement Date. The Executive agrees to
remain in the employment of the Company in such capacities through the
Retirement Date, at which point the Executive shall retire and cease to be an
employee of the Company.
1.2 The
Executive shall work for the Company on a full-time basis through January 2,
2010 and on a part-time basis (on average at least 20 hours per week) from
January 3, 2010 through the Retirement Date.
1.3 As the
Executive Chairman, the Executive shall work under the direction of and on such
matters as may be reasonably assigned to him by the Company’s Board of Directors
or its designee. Such duties may include, but shall not be limited
to, the advancement of the business and interests of the Company, consulting
with the CEO or the Board of Directors as requested on strategic and operational
matters related to the Company, meeting with industry groups and the Company’s
investors and customers as requested by the CEO or the Board of
Directors,
evaluating potential acquisition targets, acting as a liaison between the Board
of Directors and the Company’s management and coordinating logistical matters
related to the Board of Directors (e.g., calling meetings and preparing
agendas).
1.4 The
Executive agrees that, during the specified period of employment, he shall, to
the best of his ability, perform his duties, and shall not engage in any
business, profession or occupation which would conflict with the rendering of
the agreed upon services, either directly or indirectly, without the prior
approval of the Board of Directors.
2. Board
Service. Subject to the fiduciary obligations of the Board of
Directors, the Company shall (a) nominate the Executive to be reelected as a
member of the Board of Directors at the Company’s 2010 Annual Meeting of
Stockholders and (b) appoint the Executive as the Executive Chairman until the
Retirement Date, at which time the Executive will step down as the Executive
Chairman. For the avoidance of doubt, the Executive shall not be
required to resign from the Board of Directors on the Retirement
Date.
3. Compensation. During
the period of his employment by the Company under this Agreement, the Executive
shall be compensated for his services as follows:
3.1 Except as
provided in Section 3.8, (a) during the period commencing on the date of this
Agreement and ending on January 2, 2010, the Executive shall continue to be paid
a base salary at his current annual rate of $647,000 and (b) during the period
commencing on January 3, 2010 and ending on the Retirement Date, the Executive
shall be paid a base salary at an annual rate of $325,000.
3.2 The
Executive shall be eligible to participate in the Company’s Cash Incentive Plan
(a) based on his current target or reference bonus of $800,000 for the fiscal
year ending January 2, 2010 and (b) based on a target or reference bonus of
$400,000 for the fiscal year ending January 1, 2011, in each case subject to the
terms of the Cash Incentive Plan. Any bonus payable to the Executive
under the Cash Incentive Plan shall be paid in accordance with the terms of the
Cash Incentive Plan, but in no event later than March 15 of the fiscal year
following the fiscal year for which the bonus is payable.
3.3 The
Executive acknowledges that he has previously been granted awards under the
Company’s equity incentive plans. The Executive further acknowledges
that the Board of Directors is not obligated to grant additional awards to the
Executive under any of the Company’s equity incentive plans as a result of his
service as Executive Chairman.
3.4 The
Executive’s existing stock options and restricted stock unit awards shall
continue to be governed by the terms of the applicable plans and
agreements. For the avoidance of doubt, the Executive acknowledges
that he shall forfeit all unvested stock options and restricted stock unit
awards on the Retirement Date or such earlier date as his employment terminates
in accordance with this Agreement.
3.5 While the
Executive is an employee of the Company, the Executive shall not be eligible to
receive any additional compensation (cash, equity or otherwise) as a result of
the Executive’s service as a member of the Board of Directors.
2
3.6 The
Executive shall be reimbursed for any and all monies expended by him in
connection with his employment for reasonable and necessary expenses on behalf
of the Company in accordance with the policies of the Company then in
effect.
3.7 Until the
Retirement Date or the earlier termination of this Agreement, the Executive
shall (a) be eligible to participate in the Company’s executive and employee
benefit plans and arrangements that are offered to executive officers and
employees of the Company (including, without limitation, retirement, medical
insurance, dental insurance, life insurance, disability benefits and vacation
(which shall accrue in accordance with the Company’s vacation policy and shall
be adjusted appropriately when the Executive changes from a full-time employee
to a part-time employee)), to the extent he remains eligible to do so under the
terms of such plans and to the extent that the Company continues such plans for
its executive officers and employees, and (b) continue to receive the same
perquisites that are generally provided to other executive officers of the
Company.
3.8 If,
because of adverse business conditions or for other reasons, the Company at any
time puts into effect salary reductions applicable to all executive officers of
the Company generally, the salary payments required to be made under this
Agreement to the Executive during any period in which such general reduction is
in effect may be reduced by the same percentage as is applicable to all
executive officers of the Company generally. Any benefits made
available to the Executive which are related to base salary shall also be
reduced in accordance with any salary reduction.
4. Restrictive
Covenants.
4.1 During
the period of the Executive’s employment with the Company and for a period of
two years following the termination of such employment, the Executive shall not,
directly or indirectly, own, manage, control, operate, be employed by,
participate in or be connected with the ownership, management, operation or
control of any business which competes with the Company or any of its affiliated
companies; provided, however, that the
foregoing shall not apply to ownership of less than 5% of the outstanding stock
of a publicly held corporation, which ownership is disclosed to the Board of
Directors, nor shall it apply to any other relationship which is disclosed to
and approved by the Board of Directors.
4.2 During
the period of the Executive’s employment with the Company and for a period of
two years following the termination of such employment, the Executive shall not,
either alone or in association with others, solicit, divert or take away, or
attempt to divert or take away, the business or patronage of any of the clients,
customers or business partners of the Company that were contacted, solicited or
served by the Company during the 12-month period prior to the termination of the
Executive’s employment with the Company.
4.3 During
the period of the Executive’s employment with the Company and for a period of
two years following the termination of such employment, the Executive shall not,
either alone or in association with others, (a) solicit, induce or attempt to
induce any employee of the Company to terminate his or her employment with the
Company or (b) hire, recruit or
3
attempt
to hire any person who was employed by the Company at any time during the term
of the Executive’s employment with the Company, provided that this
clause (b) shall not apply to the recruitment or hiring of any individual whose
employment with the Company has been terminated for a period of six months or
longer.
4.4 During
the period of the Executive’s employment with the Company and thereafter, the
Executive shall not, without the written consent of the Company, utilize or
disclose to others any proprietary or confidential information of any type or
description, which terminology shall be construed to mean any information
developed or identified by the Company that is intended to give it an advantage
over its competitors or that could give a competitor an advantage if obtained by
it, unless and until such confidential information has become public knowledge
through no fault of the Executive. Such information includes, but is
not limited to, product or process design, specifications, manufacturing
methods, financial or statistical information about the Company, marketing or
sales information about the Company, sources of supply, lists of customers and
the Company’s plans, strategies and contemplated actions. The
Executive shall not disclose any proprietary or confidential information to
others outside the Company or use the same for any unauthorized purposes without
written approval by an executive officer of the Company, either during or at any
time after employment, unless and until such proprietary or confidential
information has become public knowledge without fault by the
Executive.
4.5 During
the period of the Executive’s employment by the Company and for a period of two
years following the termination of such employment, the Executive shall not in
any way whatsoever aid or assist any party seeking to cause, initiate or effect
a Change in Control of the Company without the prior approval of the Board of
Directors.
5. Termination.
5.1 Except
for the covenants set forth in Section 4, which covenants shall remain in effect
for the periods stated therein, and subject to the satisfaction of the
provisions of this Agreement that require payments or the provision of benefits
after the termination of this Agreement, this Agreement shall terminate on the
earlier of the Retirement Date and the occurrence of any of the following
events:
(a) on the
effective date set forth in any resignation submitted by the Executive and
accepted by the Company, or if no effective date is agreed upon, the date of
receipt of such letter;
(b) upon the
death of the Executive;
(c) at the
election of the Company, upon the Disability of the Executive. For
purposes of this Agreement, “Disability” shall
mean the Executive’s absence from the performance of the Executive’s duties with
the Company for 180 consecutive calendar days as a result of incapacity due to
mental or physical illness which is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to the
Executive or the Executive’s legal representative;
4
(d) upon the
termination of the Executive by the Company for Cause. For purposes
of this Agreement, “Cause” shall mean the
Executive’s willful engagement in illegal conduct or gross misconduct that is
materially and demonstrably injurious to the Company, provided that no act
or failure to act by the Executive shall be considered “willful” unless it is
done, or omitted to be done, in bad faith and without reasonable belief that the
Executive’s action or omission was in the best interests of the Company;
or
(e) upon
termination of the Executive by the Company without Cause.
5.2 Except as
otherwise expressly provided herein, upon the termination of this Agreement, all
of the Company’s obligations under this Agreement, including, without
limitation, making payments to the Executive, shall immediately cease and
terminate.
5.3 Notwithstanding
the foregoing, in the event of the termination of this Agreement pursuant to
Section 5.1(a) or (d), the Company shall pay to the Executive, in a lump sum in
cash within 30 days after the date of termination of this Agreement, an amount
equal to the sum of (a) the Executive’s base salary through the date of
termination of this Agreement, (b) the annual bonus payable (including any bonus
or portion thereof which has been earned but deferred) to the Executive for the
most recently completed fiscal year (if such bonus has not yet been paid), provided that,
notwithstanding the foregoing, such annual bonus need not be paid within the
30-day period as long as such annual bonus is paid not later than March 15 of
the fiscal year following the fiscal year for which the bonus is payable, and
(c) the amount of any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not previously paid (the sum of the
amounts described in clauses (a), (b) and (c) shall be hereinafter referred to
as the “Accrued
Obligations”).
5.4 Notwithstanding
the foregoing, in the event of the termination of this Agreement pursuant to
Section 5.1(b) or (c), the Company shall (a) pay to the Executive (or the
Executive’s estate, if applicable), in a lump sum in cash within 30 days after
the date of termination of this Agreement, the Accrued Obligations and (b) pay
to the Executive (or the Executive’s estate, if applicable), in a lump sum in
cash within 30 days after the date of termination of this Agreement, an amount
equal to the product of (i) the Executive’s target or reference bonus for the
fiscal year in which this Agreement is terminated and (ii) a fraction, the
numerator of which is the number of days in the current fiscal year through the
date of termination of this Agreement, and the denominator of which is 365 (the
“Pro-Rated
Bonus”).
5.5 Notwithstanding
the foregoing, in the event of the termination of this Agreement pursuant to
Section 5.1(e), the Company shall:
(a) pay to
the Executive, in a lump sum in cash within 30 days after the date of
termination of this Agreement, the Accrued Obligations;
(b) continue to
pay to the Executive through the Retirement Date the compensation (including,
without limitation, base salary, bonus and vacation pay) that the
Executive would have received pursuant to this Agreement had the
Executive remained an employee of the Company through the Retirement Date;
and
5
(c) continue
to provide benefits (including, without limitation, retirement, medical
insurance, dental insurance, life insurance and disability benefits) to the
Executive and the Executive’s family through the Retirement Date at least equal
to those which would have been provided to them if the Executive’s employment
had not been terminated, in accordance with the applicable benefit plans in
effect on the date of termination of this Agreement or, if more favorable to the
Executive and the Executive’s family, in effect generally at any time thereafter
with respect to other executive officers of the Company and its affiliated
companies; provided, however, that if the
Executive becomes reemployed with another employer and is eligible to receive a
particular type of benefits (e.g., medical benefits) from such employer on terms
at least as favorable to the Executive and the Executive’s family as those being
provided by the Company, then the Company shall no longer be required to provide
those particular benefits to the Executive and the Executive’s family; and provided further, however, that (i) if
any particular benefits cannot be provided because of plan or regulatory
restrictions, then the Company will pay to the Executive an amount equal to the
cost the Executive will incur in acquiring such benefits directly as a result of
the Company not providing such benefits and (ii) to the extent the Company
determines that the Executive’s qualifying event for purposes of continuation of
medical benefits under COBRA occurs on the date of termination of this
Agreement, such period of continuation of benefits shall not be counted against
or otherwise reduce the period for which the Company must provide continuation
of medical benefits under this Section 5.5(c) unless the Executive otherwise
agrees.
In
addition, upon termination of this Agreement pursuant to Section 5.1(e), each of
the Executive’s restricted stock unit awards shall become immediately vested to
the same extent that such restricted stock unit awards would have vested had the
Executive remained an employee of the Company through the Retirement
Date. The provision to the Executive of the benefits provided by this
Section 5.5 shall be contingent upon the execution by the Executive of a release
in a form reasonably acceptable to the Company.
5.6 Notwithstanding
the foregoing, in the event of the termination of this Agreement on the
Retirement Date, the Company shall pay to the Executive, in a lump sum in cash
within 30 days after the date of termination of this Agreement, an amount equal
to the sum of (a) the Executive’s base salary through the Retirement Date, (b)
the annual bonus payable to the Executive for the fiscal year ending January 1,
2011, which shall be paid in accordance with Section 3.2, and (c) the amount of
any compensation previously deferred by the Executive (together with any accrued
interest or earnings thereon) and any accrued vacation pay, in each case to the
extent not previously paid.
5.7 For the
avoidance of doubt, if the Executive shall become entitled to any payments or
other benefits pursuant to the Executive Retention Agreement or Section 6.3(b)
of this Agreement, the payments and other benefits provided for by Sections 5.3
through 5.6 of this Agreement shall not be payable or provided to the
Executive.
6
5.8 For the
avoidance of doubt, the termination of the Executive’s employment as a result of
the expiration of this Agreement on the Retirement Date shall not be considered
a termination of this Agreement pursuant to Section 5.1(a) or (e).
6. Change in
Control. The Company and the Executive hereby agree that the
Executive Retention Agreement shall remain in full force and effect from the
date of this Agreement through January 2, 2010 and shall thereupon terminate in
its entirety; provided, however, that if the
Company enters into a definitive agreement with respect to a Change in Control
on or before January 2, 2010 and (i) the Change in Control is consummated and
(ii) the Executive’s employment with the Company is terminated, in each case, on
or before April 30, 2010, then the Executive shall be entitled to the benefits,
if any, and subject to the obligations set forth in the Executive Retention
Agreement and the terms and conditions of this Section 6 shall not
apply. The terms and conditions of this Section 6 shall become
effective and shall be binding on the Company and the Executive as of January 3,
2010 (but not prior to such date), unless the proviso contained in the preceding
sentence shall apply.
6.1 Key
Definitions. As used herein, the following terms shall have
the following respective meanings:
(a) “Change in Control”
means an event or occurrence set forth in any one or more of clauses (i) through
(iv) below (including an event or occurrence that constitutes a Change in
Control under one of such clauses but is specifically exempted from another such
clause):
(i) the
acquisition by an individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
“Exchange
Act”)) (a “Person”) of
beneficial ownership of any capital stock of the Company if, after such
acquisition, such Person beneficially owns (within the meaning of Rule 13d-3
promulgated under the Exchange Act) 20% or more of either (A) the
then-outstanding shares of common stock of the Company (the “Outstanding Company Common
Stock”) or (B) the combined voting power of the then-outstanding
securities of the Company entitled to vote generally in the election of
directors (the “Outstanding Company Voting
Securities”); provided, however, that for
purposes of this Section 6.1(a)(i), the following acquisitions shall not
constitute a Change in Control: (x) any acquisition by the Company; (y) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company; or (z)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (A) and (B) of Section 6.1(a)(iii);
(ii) such time
as the Continuing Directors (as defined below) do not constitute a majority of
the Board of Directors (or, if applicable, the Board of Directors of a successor
corporation to the Company), where the term “Continuing Director”
means at any date a member of the Board of Directors (A) who was a member of the
Board of Directors on August 17, 2009 or (B) who was nominated or elected
subsequent to such date by at least a majority of the directors who were
Continuing Directors at the time of such nomination or election or whose
election to the Board of Directors was recommended or endorsed by at least a
majority of the directors who were Continuing Directors at the time of
such nomination or election; provided, however, that there
shall be excluded from this clause (B) 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;
7
(iii) the
consummation of a merger, consolidation, reorganization, recapitalization or
statutory share exchange involving the Company or a sale or other disposition of
all or substantially all of the assets of the Company in one or a series of
transactions (a “Business
Combination”), unless, immediately following such Business Combination,
each of the following two conditions is satisfied: (A) all or substantially all
of the individuals and entities who were the beneficial owners of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 80% of the then-outstanding shares of common stock and the
combined voting power of the then-outstanding securities entitled to vote
generally in the election of directors, respectively, of the resulting or
acquiring corporation in such Business Combination (which shall include, without
limitation, a corporation which as a result of such transaction owns the Company
or substantially all of the Company’s assets either directly or through one or
more subsidiaries) (such resulting or acquiring corporation is referred to
herein as the “Acquiring
Corporation”) in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, respectively; and (B) no
Person (excluding the Acquiring Corporation or any employee benefit plan (or
related trust) maintained or sponsored by the Company or by the Acquiring
Corporation) beneficially owns, directly or indirectly, 20% or more of the then
outstanding shares of common stock of the Acquiring Corporation, or of the
combined voting power of the then-outstanding securities of such corporation
entitled to vote generally in the election of directors; or
(iv) approval
by the stockholders of the Company of a complete liquidation or dissolution of
the Company.
(b) “Change in Control
Date” means the first date during the Term (as defined below) on which a
Change in Control occurs. Anything in this Agreement to the contrary
notwithstanding, if (i) a Change in Control occurs, (ii) the Executive’s
employment with the Company is terminated prior to the date on which the Change
in Control occurs and (iii) it is reasonably demonstrated by the Executive that
such termination of employment (A) was at the request of a third party who has
taken steps reasonably calculated to effect a Change in Control or (B) otherwise
arose in connection with or in anticipation of a Change in Control, then for all
purposes of this Agreement the “Change in Control Date” shall mean the date
immediately prior to the date of such termination of employment.
(c) “Good Reason” means
the occurrence, without the Executive’s written consent, of any of the events or
circumstances set forth in clauses (i) through (vii) below on or after the
Change in Control Date. Notwithstanding the occurrence of any such
event or circumstance, such occurrence shall not be deemed to constitute Good
Reason if, prior to the Date of Termination specified in the Notice of
Termination (each as defined in Section 6.2(a)) given by the Executive in
respect thereof, such event or circumstance has been fully corrected within 30
days after notice thereof and the Executive has been reasonably compensated for
any losses or damages resulting therefrom:
8
(i) the
assignment to the Executive of duties inconsistent in any material respect with
the Executive’s position (including status, offices, titles and reporting
requirements, including, but not limited to, a change in any of the foregoing
that results in the Executive no longer being an officer of a public company),
authority or responsibilities in effect immediately prior to the earliest to
occur of (A) the Change in Control Date, (B) the date of the execution by the
Company of the initial written agreement or instrument providing for the Change
in Control or (C) the date of the adoption by the Board of Directors of a
resolution providing for the Change in Control (with the earliest to occur of
such dates referred to herein as the “Measurement Date”) or
a material diminution in such position, authority or
responsibilities;
(ii) a
reduction in the Executive’s annual base salary as in effect on the Measurement
Date or as the same was or may be increased thereafter from time to
time;
(iii) the
failure by the Company to (A) continue in effect any material compensation or
benefit plan or program (including, without limitation, any life insurance,
medical, health and accident or disability plan and any vacation policy) (a
“Benefit Plan”)
in which the Executive participates or which is applicable to the Executive
immediately prior to the Measurement Date, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been made with
respect to such plan or program, (B) continue the Executive’s participation
therein (or in such substitute or alternative plan) on a basis not materially
less favorable than the basis existing immediately prior to the Measurement
Date, (C) award cash bonuses to the Executive in amounts and in a manner
substantially consistent with past practice in light of the Company’s financial
performance or (D) continue to provide any material fringe benefit enjoyed by
the Executive immediately prior to the Measurement Date;
(iv) a change by the Company
in the location at which the Executive performs his principal duties for the
Company to a new location that is both (A) outside a radius of 50 miles from the
Executive’s principal residence immediately prior to the Measurement Date and
(B) more than 30 miles from the location at which the Executive performed his
principal duties for the Company immediately prior to the Measurement Date; or a
requirement by the Company that the Executive travel on Company business to a
substantially greater extent than required immediately prior to the Measurement
Date;
(v) the
failure of the Company to obtain the agreement from any successor to the Company
to assume and agree to perform this Agreement, as required by Section
10.1;
(vi) a
material breach by the Company of this Agreement; or
(vii) any failure of the Company to
pay or provide to the Executive any portion of the Executive’s compensation or
benefits due under any Benefit Plan within seven days of the date such
compensation or benefits are due.
9
The
Executive’s right to terminate his employment for Good Reason shall not be
affected by the Executive’s incapacity due to physical or mental
illness.
(d) “Term” means the
period commencing on the date that the terms and conditions of this Section 6
become effective in accordance with the introduction to Section 6 and ending on
the date that this Agreement terminates pursuant to Section 5.1.
6.2 Termination of Employment
Following Change in Control.
(a) If the
Change in Control Date occurs during the Term, any termination of the
Executive’s employment by the Company or by the Executive (other than due to the
death or Disability of the Executive) within 12 months following the Change in
Control Date, but not later than the Retirement Date, shall be communicated by a
written notice to the other party hereto (the “Notice of
Termination”), given in accordance with Section 11. Any Notice
of Termination shall: (i) indicate the specific termination provision (if any)
of this Agreement relied upon by the party giving such notice; (ii) to the
extent applicable, set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive’s employment under
the provision so indicated; and (iii) specify the Date of Termination (as
defined below). The effective date of an employment termination
following a Change in Control Date (the “Date of Termination”)
shall be the close of business on the date specified in the Notice of
Termination (which date may not be less than 15 days or more than 120 days after
the date of delivery of such Notice of Termination), in the case of a
termination other than one due to the Executive’s death or Disability, or the
date of the Executive’s death or Disability, as the case may be. In
the event the Company fails to satisfy the requirements of this Section 6.2(a)
regarding a Notice of Termination, the purported termination of the Executive’s
employment pursuant to such Notice of Termination shall not be effective for
purposes of this Agreement.
(b) The
failure by the Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Good
Reason or Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company, respectively,
from asserting any such fact or circumstance in enforcing the Executive’s or the
Company’s rights hereunder.
(c) Any
Notice of Termination for Cause given by the Company following a Change in
Control Date must be given within 90 days of the occurrence of the event(s) or
circumstance(s) that constitute(s) Cause. Prior to any Notice of
Termination for Cause being given (and prior to any termination for Cause being
effective) following a Change in Control Date, the Executive shall be entitled
to a hearing before the Board of Directors at which the Executive may, at the
Executive’s election, be represented by counsel and at which the Executive shall
have a reasonable opportunity to be heard. Such hearing shall be held
on not less than 15 days prior written notice to the Executive stating the Board
of Directors’ intention to terminate the Executive for Cause and stating in
detail the particular event(s) or circumstance(s) that the Board of Directors
believes constitutes Cause for termination.
10
(d) Any Notice of
Termination for Good Reason given by the Executive following a Change in Control
Date must be given within 90 days of the first occurrence of the event(s) or
circumstance(s) that constitute(s) Good Reason.
6.3 Benefits to
Executive.
(a) Stock
Acceleration. If the Change in Control Date occurs during the
Term, then, effective upon the Change in Control Date, (i) each outstanding
option to purchase shares of Common Stock of the Company held by the Executive
shall become immediately exercisable in full and will no longer be subject to a
right of repurchase by the Company and (ii) each outstanding share of restricted
stock and each restricted stock unit award shall be deemed to be fully vested
and will no longer be subject to a right of repurchase or forfeiture by the
Company.
(b) Compensation upon
Termination for Good Reason or Without Cause. Subject to the
provisions of Section 6.2, if the Change in Control Date occurs during the Term
(or the Change in Control Date occurred on or before January 2, 2010 while the
Executive Retention Agreement was still in effect) and this Agreement is
terminated pursuant to Section 5.1(a) where the reason for the resignation is
Good Reason or pursuant to Section 5.1(e), and, in either case, such termination
occurs within 12 months following the Change in Control Date, but not later than
the Retirement Date, then, in lieu of the benefits provided by Section 5.3 or
5.5, as the case may be:
(i) the
Company shall pay to the Executive, in a lump sum in cash within 30 days after
the Date of Termination, an amount equal to the sum of (A) the Accrued
Obligations, (B) the Pro-Rated Bonus and (C) an amount equal to (x) two
multiplied by (y) the sum of (1) the Executive’s highest annual base salary
between January 3, 2010 and the Date of Termination and (2) the Executive’s
target or reference bonus for the fiscal year ending January 1,
2011;
(ii) for two
years after the Date of Termination, or such longer period as may be provided by
the terms of the appropriate plan, program, practice or policy, the Company
shall continue to provide benefits (including, without limitation, retirement,
medical insurance, dental insurance, life insurance and disability benefits) to
the Executive and the Executive’s family at least equal to those which would
have been provided to them if the Executive’s employment had not been
terminated, in accordance with the applicable benefit plans in effect on the
Measurement Date or, if more favorable to the Executive and the Executive’s
family, in effect generally at any time thereafter with respect to other
executive officers of the Company and its affiliated companies; provided, however, that if the
Executive becomes reemployed with another employer and is eligible to receive a
particular type of benefits (e.g., medical benefits) from such employer on terms
at least as favorable to the Executive and the Executive’s family as those being
provided by the Company, then the Company shall no longer be required to provide
those particular benefits to the Executive and the Executive’s family; and provided further, however, that (A) if
any particular benefits cannot be provided because of plan or regulatory
restrictions, then the Company will pay to the Executive an amount equal to the
cost the Executive will incur in acquiring such benefits directly as a result of
the Company not providing such benefits and (B) to the extent the Company
determines that the Executive’s
11
qualifying
event for purposes of continuation of medical benefits under COBRA occurs on the
Executive’s Date of Termination, such period of continuation of benefits shall
not be counted against or otherwise reduce the period for which the Company must
provide continuation of medical benefits under this Section 6.3(b)(ii) unless
the Executive otherwise agrees;
(iii) the Company shall timely
pay or provide to the Executive any other amounts or benefits required to be
paid or provided or which the Executive is eligible to receive following the
Executive’s termination of employment under any plan, program, policy, practice,
contract or agreement of the Company and its affiliated companies, in each case
to the extent not previously paid or provided; and
(iv) if not
already vested, the Executive shall be deemed fully vested as of the Measurement
Date in any Company retirement plans or other written agreements between the
Executive and the Company relating to pay or other benefits upon retirement in
which the Executive was a participant, party or beneficiary immediately prior to
the Change in Control, and any additional plans or agreements in which the
Executive became a participant, party or beneficiary after the Change in Control
and before the Date of Termination. In addition to the foregoing, for purposes
of determining the amounts to be paid to the Executive under such plans or
agreements, the years of service with the Company and the age of the Executive
under all such plans and agreements shall be deemed increased by 24 months. For
purposes of this Section 6.3(b)(iv), the term “plans” includes,
without limitation, the Company’s qualified pension plan, non-qualified pension
plans, profit-sharing plans and 401(k) plans, and any companion, successor or
amended plans. In the event the terms of the plans referenced in this
Section 6.3(b)(iv) do not for any reason coincide with the provisions of this
Section 6.3(b)(iv) (e.g., if plan amendments would cause disqualification of
qualified plans), the Executive shall be entitled to receive from the Company,
under the terms of this Agreement, an amount equal to all amounts the Executive
would have received, at the time the Executive would have received such amounts,
had all such plans continued in existence as in effect on the date of this
Agreement after being amended to coincide with the terms of this Section
6.3(b)(iv).
7. Mitigation. The
Executive shall not be required to mitigate the amount of any payment or
benefits provided for by this Agreement by seeking other employment or
otherwise. Further, except as provided in Sections 5.5(c) and 6.3(b)(ii), the
amount of any payment or benefits provided for in this Agreement shall not be
reduced by any compensation earned by the Executive as a 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.
8. Payments Subject to Section
409A. Subject to the provisions in this Section 8, any
severance payments or benefits under this Agreement shall begin only upon the
date of the Executive’s “separation from service” (determined as set forth
below) which occurs on or after the date of termination of the Executive’s
employment. The following rules shall apply with respect to
distribution of the payments and benefits, if any, to be provided to the
Executive under this Agreement:
12
8.1 It is
intended that each installment of the severance payments and benefits provided
under this Agreement shall be treated as a separate “payment” for purposes of
Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the
guidance issued thereunder (“Section
409A”). Neither the Company nor the Executive shall have the
right to accelerate or defer the delivery of any such payments or benefits
except to the extent specifically permitted or required by Section
409A.
8.2 If, as of
the date of Executive’s “separation from service” from the Company, the
Executive is not a “specified employee” (within the meaning of Section 409A),
then each installment of the severance payments and benefits shall be made on
the dates and terms set forth in this Agreement.
8.3 If, as of
the date of the Executive’s “separation from service” from the Company, the
Executive is a “specified employee” (within the meaning of Section 409A),
then:
(a) Each
installment of the severance payments and benefits due under this Agreement
that, in accordance with the dates and terms set forth herein, will in all
circumstances, regardless of when the separation from service occurs, be paid
within the Short-Term Deferral Period (as hereinafter defined) shall be treated
as a short-term deferral within the meaning of Treasury Regulation
§1.409A-1(b)(4) to the maximum extent permissible under Section
409A. For purposes of this Agreement, the “Short-Term Deferral
Period” means the period ending on the later of the fifteenth day of the
third month following the end of the Executive’s tax year in which the
separation from service occurs and the fifteenth day of the third month
following the end of the Company’s tax year in which the separation from service
occurs; and
(b) Each
installment of the severance payments and benefits due under this Agreement that
is not described in Section 8.3(a) and that would, absent this Section 8.3(b),
be paid within the six-month period following the Executive’s “separation from
service” from the Company shall not be paid until the date that is six months
and one day after such separation from service (or, if earlier, the Executive’s
death), with any such installments that are required to be delayed being
accumulated during the six-month period and paid in a lump sum on the date that
is six months and one day following the Executive’s separation from service and
any subsequent installments, if any, being paid in accordance with the dates and
terms set forth herein; provided, however, that the
preceding provisions of this sentence shall not apply to any installment of
severance payments and benefits if and to the maximum extent that such
installment is deemed to be paid under a separation pay plan that does not
provide for a deferral of compensation by reason of the application of Treasury
Regulation §1.409A-1(b)(9)(iii) (relating to separation pay upon an
involuntary separation from service). Any installments that qualify
for the exception under Treasury Regulation §1.409A-1(b)(9)(iii) must be paid no
later than the last day of the Executive’s second taxable year following the
taxable year in which the separation from service occurs.
8.4 The
determination of whether and when the Executive’s separation from service from
the Company has occurred shall be made in a manner consistent with, and based on
the presumptions set forth in, Treasury Regulation
§1.409A-1(h). Solely for purposes of this Section 8.4, the “Company” shall
include all persons with whom the Company would be considered a single employer
under Sections 414(b) and 414(c) of the Code.
13
8.5 All
reimbursements and in-kind benefits provided under this Agreement shall be made
or provided in accordance with the requirements of Section 409A to the extent
that such reimbursements or in-kind benefits are subject to Section 409A,
including, where applicable, the requirements that (a) any reimbursement is for
expenses incurred during the Executive’s lifetime (or during a shorter period of
time specified in this Agreement), (b) the amount of expenses eligible for
reimbursement during a calendar year may not affect the expenses eligible for
reimbursement in any other calendar year, (c) the reimbursement of an eligible
expense will be made on or before the last day of the calendar year following
the year in which the expense is incurred and (d) the right to reimbursement is
not subject to set off or liquidation or exchange for any other
benefit.
8.6 This
Agreement is intended to comply with the provisions of Section 409A and the
Agreement shall, to the extent practicable, be construed in accordance
therewith. The Company makes no representation or warranty and shall
have no liability to the Executive or any other person if any provisions of this
Agreement are determined to constitute deferred compensation subject to Section
409A and do not satisfy an exemption from, or the conditions of, Section
409A.
9. Disputes.
9.1 Settlement of Disputes;
Arbitration. All claims by the Executive for benefits under
this Agreement shall be directed to and determined by the Board of Directors of
the Company and shall be in writing. Any denial by the Board of
Directors of a claim for benefits under this Agreement shall be delivered to the
Executive in writing and shall set forth the specific reasons for the denial and
the specific provisions of this Agreement relied upon. The Board of
Directors shall afford a reasonable opportunity to the Executive for a review of
the decision denying a claim. Any further dispute or controversy
arising under or in connection with this Agreement shall be settled exclusively
by arbitration in Boston, Massachusetts, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be
entered on the arbitrator’s award in any court having jurisdiction.
9.2 Expenses. Except
with respect to any claim or contest regarding the validity or enforceability
of, or liability under, Section 4, the Company agrees to pay as incurred, to the
full extent permitted by law, all legal, accounting and other fees and expenses
which the Executive may reasonably incur as a result of any claim or contest
(regardless of the outcome thereof) by the Company, the Executive or others
regarding the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive regarding the amount of any payment or benefits
pursuant to this Agreement), plus in each case interest on any delayed payment
at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the
Code.
14
10. Successors.
10.1 Successor to
Company. 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 expressly to assume
and agree to perform this Agreement to the same extent that the Company would be
required to perform it if no such succession had taken place. Failure
of the Company to obtain an assumption of this Agreement at or prior to the
effectiveness of any succession shall be a breach of this Agreement and shall
constitute Good Reason if the Executive elects to terminate employment, 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, the “Company” shall mean
the Company as defined above and any successor to its business or assets as
aforesaid which assumes and agrees to perform this Agreement, by operation of
law or otherwise.
10.2 Successor to
Executive. This Agreement shall inure to the benefit of and be
enforceable by the Executive’s personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees. If the Executive should die while any amount would still be
payable to the Executive or the Executive’s family hereunder if the Executive
had continued to live, all such amounts, unless otherwise provided herein, shall
be paid in accordance with the terms of this Agreement to the executors,
personal representatives or administrators of the Executive’s
estate. Neither the Executive nor, in the event of his death, the
executors, personal representatives or administrators of the Executive’s estate,
shall have the power to transfer, assign, mortgage or otherwise encumber in
advance any of the payments provided for in this Agreement, nor shall any
payments nor assets or funds of the Company be subject to seizure for the
payment of any debts, judgments, liabilities, bankruptcy or other
actions.
11. Notice. All notices,
instructions and other communications given hereunder or in connection herewith
shall be in writing. Any such notice, instruction or communication
shall be sent either (a) by registered or certified mail, return receipt
requested, postage prepaid, or (b) prepaid via a reputable nationwide overnight
courier service, in each case addressed to the Company, at Xxx Xxxxxxxxxx Xxxx
Xxxxx, Xxxxxxxx, Xxxxxxxxxxxxx 00000 and to the Executive at the Executive’s
principal residence as currently reflected on the Company’s records (or to such
other address as either the Company or the Executive may have furnished to the
other in writing in accordance herewith). Any such notice,
instruction or communication shall be deemed to have been delivered five
business days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, or one business day after it is sent via a reputable
nationwide overnight courier service. Either party may give any notice,
instruction or other communication hereunder using any other means, but no such
notice, instruction or other communication shall be deemed to have been duly
delivered unless and until it actually is received by the party for whom it is
intended.
15
12. Miscellaneous.
12.1 Severability. 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.
12.2 Injunctive
Relief. The Company and the Executive agree that any breach of
this Agreement by the Company or the Executive is likely to cause the other
party substantial and irrevocable damage and therefore, in the event of any such
breach, in addition to such other remedies which may be available, the Company
or the Executive, as applicable, shall have the right to specific performance
and injunctive relief.
12.3 Governing
Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the internal laws of the
Commonwealth of Massachusetts, without regard to conflicts of law
principles.
12.4 Waivers. No
waiver by the Company or the Executive at any time of any breach of, or
compliance with, any provision of this Agreement to be performed by the other
party shall be deemed a waiver of that or any other provision at any subsequent
time.
12.5 Counterparts. This
Agreement may be executed in counterparts, each of which shall be deemed to be
an original but both of which together shall constitute one and the same
instrument.
12.6 Tax
Withholding. Any payments provided for hereunder shall be paid
net of any applicable tax withholding required under federal, state or local
law.
12.7 Entire
Agreement. Except with respect to the Executive Retention
Agreement, which shall remain in full force and effect through January 2, 2010,
and any non-disclosure or invention assignment agreement entered into between
the Company and the Executive, this Agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto in respect of the
subject matter contained herein, and any prior agreement of the parties hereto
in respect of the subject matter contained herein is hereby terminated and
cancelled.
12.8 Amendments. This
Agreement may be amended or modified only by a written instrument executed by
both the Company and the Executive.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
16
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day
and year first set forth above.
|
By:
/s/Xxxx X.
Xxxxxxxxx
|
|
|
Xxxx X.
Xxxxxxxxx
|
|
|
Chairman,
Compensation Committee
|
|
|
EXECUTIVE
|
|
|
/s/Xxxxxxx X. Xxxxxxxxx
|
|
|
Xxxxxxx
X. Xxxxxxxxx
|
17
