SEVERANCE AND NONCOMPETITION AGREEMENT
Exhibit 10.2
THIS SEVERANCE AND NONCOMPETITION AGREEMENT (this “Agreement”) is made by
and between Spartech Corporation, a Delaware corporation (together with its subsidiaries, the
“Company”) and Xxxxxxxx X. Xxxx
(“Employee”) effective as of the 8th day of September, 2010.
In consideration of the terms and conditions hereof, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and
Employee agree as follows:
1. Severance.
(a) If Employee’s employment with the Company is terminated by the Company for any reason
other than for Cause, or if Employee’s employment with the Company is terminated by the Company for
any reason other than for Cause within 24 months following a Change in Control, or if Employee
terminates her employment with the Company for Good Reason, Employee shall be entitled to receive
as a severance payment to be paid in equal installments over the twenty-four months following
Employee’s termination, and in accordance with the Company’s normal payroll practices, an aggregate
amount equal to: (i) twenty-four months’ base salary at the highest rate paid to Employee during
the three years prior to Employee’s termination, plus (ii) two times the average annual bonus
awarded to Employee for the three fiscal years ended prior to Employee’s termination (or for the
period of Employee’s employment by the Company if less than three years); provided, however, in the
event the termination occurs during the first fiscal year of Employee’s employment and prior to the
award of an annual bonus, the calculation of the bonus portion of the severance payment under this
subsection 1(a)(ii) shall be based on Employee’s target bonus for the fiscal year in which
termination occurs. In addition to the foregoing severance payment, Employee shall be entitled to
receive during the twenty-four months following Employee’s termination continuing health insurance
benefits at least equal to the benefits received by Employee at the time of termination.
(b) As used herein:
“Cause” means, in each case in the reasonable discretion of the Company’s board of directors
(the “Board”): (i) Employee being charged with commission of a crime that constitutes a felony
(provided that if following Employee’s termination the charges are dropped or Employee is acquitted
then Employee shall be entitled to the severance payment); (ii) acts of Employee which constitute
willful fraud or dishonesty on the part of Employee in connection with her duties; (iii) Employee
willfully engaging in conduct materially injurious to the Company or gross misconduct, including
but not limited to the willful or grossly negligent failure or refusal of Employee to comply with
the lawful instruction of the Board, after a written demand for compliance is delivered to Employee
by the Board which specifically identifies the manner in which the Board believes that Employee has
violated this provision; (iv) Employee’s failure, whether or not intentional, to fully comply with:
(a) the Company’s Code of Business Conduct and Ethics for Directors, Officers and Employees, (b)
the Company’s Code of Ethics for Chief Executive Officer and Senior Financial Officers; or (c) the
Company’s Statement of Policy Regarding Securities Trades by Company Personnel; or (v) Employee’s
failure to fully cooperate in good faith with any internal, governmental or regulatory
investigation involving or in any way related to the Company or its operations. Any act or failure
to act based upon authority given pursuant to a resolution duly adopted by the Board or based on
the advice of a senior officer or counsel for the Company shall be conclusively presumed to be
done, or omitted to be done, by Employee in good faith and in the best interests of the Company.
“Change in Control” means the successful consummation of a transaction resulting in a change
in the ownership or effective control of the Company or ownership of a substantial portion of the
assets of the
Company within the meaning of Section 409A(a)(2)(C)(v) of the Internal Revenue Code of 1986,
as amended, or any successor statute (“Code”).
“Good Reason” means any of the following: (i) one or more reductions of Employee’s base salary
amounting to 10% or more from Employee’s highest previous base salary, provided that any reduction
which is generally consistent with across-the-board reductions in pay of the Company as a whole
shall not be counted for this purpose unless a Change in Control has occurred; (ii) the Company’s
requiring Employee to be based at any office or location greater than 50 miles from the principal
executive offices of the Company; (iii) after a Change in Control, a relocation of the principal
offices of the Company more than 50 miles from its present location; or (iv) one or more other
actions by the Company which collectively amount to a constructive discharge of Employee.
(c) If Employee is a “specified employee” (within the meaning of Code Section
409A(a)(2)(B)(i)) of the Company at the time of her termination of employment with the Company and
if the separation payments under Section (a) are on account of her “involuntary separation of
service” (as defined in Treasury Regulation Section 1.409A-1(n), or a successor regulation),
Employee shall receive payments during the six (6) month period immediately following the date of
such termination as otherwise provided under Section (a) for such six month period except that the
total amount of such payments shall not exceed the lesser of the amount specified under (i)
Treasury Regulation Section 1.409A-1(9)(iii)(A)(1) or (ii) Treasury Regulation Section
1.409A-1(9)(iii)(A)(2) or successor regulations. To the extent the amounts otherwise payable during
such six (6) month period under Section (a) exceed the amounts payable under the immediately
preceding sentence, such excess amounts, together with interest on such amounts from the date of
Employee’s termination of employment with the Company to the date of payment, shall be paid in a
single sum on the first regular payroll date of the Company immediately following the six (6) month
anniversary of the date of such termination. If the Company reasonably determines that such
termination is not an involuntary separation from service, amounts otherwise payable during such
six (6) month period immediately following the date of Employee’s termination under Section (a),
together with interest on such amounts from the date of Employee’s termination of employment with
the Company to the date of payment, shall be paid in a single sum on the first payroll date of the
Company immediately following the six (6) month anniversary of such termination. For purposes of
this Section (c), “interest” means the prime rate, as announced from time to time by the Company’s
primary commercial bank during the six month period described above, plus two percentage points,
compounded annually.
2. Nondisclosure. During the period of Employee’s employment with the Company, and
after the termination thereof for any reason, Employee agrees to use her best efforts to maintain
and protect the secrecy of the Confidential Information and not to directly or indirectly undertake
or attempt to undertake: (i) any disclosure of any Confidential Information to any other person or
entity; (ii) to use any Confidential Information for Employee’s own purposes; (iii) to make any
copies or reproductions of any Confidential Information; (iv) to authorize or permit any other
person or entity to use, copy, disclose, publish or distribute any Confidential Information; or (v)
any activity the Company is prohibited from undertaking or attempting to undertake by any of its
present or future clients, customers, suppliers, vendors, consultants, agents or contractors. As
used herein, “Confidential Information” means any knowledge, information or property relating to,
or used or possessed by, the Company, and includes, without limitation, the following: trade
secrets; manufacturing or production know-how, methods and processes, patents, copyrights, software
(including, without limitation, all programs, specifications, applications, routines, subroutines,
techniques and ideas for formulas); concepts, data, drawings, designs and documents; names of
clients, customers, employees, agents, contractors, and suppliers; marketing information; financial
information and other business records; and all copies of any of the foregoing, including notes,
extracts, memoranda prepared or directed to be prepared by Employee based on any Confidential
Information. Employee agrees that all information possessed by Employee, or disclosed to Employee,
or to which Employee obtains access during the course of Employee’s employment with the
2
Company shall be presumed to be Confidential Information under the terms of this Agreement.
Confidential Information shall not include any information which is publicly available or which is
generally known to persons employed in the plastics processing business. Upon termination of
Employee’s employment with the Company for any reason, Employee agrees not to retain or remove from
the Company’s premises any Confidential Information whatsoever, and to surrender the same to the
Company, wherever it is located, immediately upon termination of Employee’s employment.
3. Noncompetition/Nonsolicitation. Employee agrees that, during the term of Employee’s
employment with the Company and for a period of one (1) year after the termination of
Employee’s
employment with the Company (whether such termination is with or without Cause or Good Reason
or
results from Employee’s resignation) Employee shall not, directly or indirectly, in any market
in which
the Company then is engaged in business activities (the “Geographic Area”): (i) engage in,
consult with,
be employed by or be connected with any business or activity which directly or indirectly
competes with
the Company’s business (a “Competing Business”), (ii) canvass, solicit or accept any business
from any
of the Company’s current or former clients, (iii) own any interest in any Competing Business
(provided,
however, Employee may own up to 1% of the outstanding equity interests of any publicly traded
Competing Business); (iv) assist others to open or operate any Competing Business; (v)
solicit,
recommend or induce any employee of the Company to terminate her employment with the Company;
or
(vi) solicit, recommend or induce any customers, suppliers or any other person or entity which
has a
business relationship with the Company to discontinue, reduce or modify such relationship..
Employee
agrees and acknowledges that the Geographic Area is reasonable in scope and that the one (1)
year period
is reasonable in length. Employee has agreed to the foregoing noncompetition agreement
because: (a)
Employee recognizes that the Company has a legitimate interest in protecting the
confidentiality of its
business secrets (including the Confidential Information), (b) Employee agrees that such
noncompetition
agreement is not oppressive to Employee nor injurious to the public, and (c) the Company has
provided
specialized and valuable training and information to Employee.
4. Injunction. Because the award of monetary damages would be an inadequate remedy, in
the
event of a breach or threatened breach by Employee of any of the provisions of this Agreement,
the
Company shall be entitled to an injunction restraining Employee from undertaking any such
breach or
threatened breach. Nothing herein shall be construed as prohibiting the Company from pursuing
any
other remedies for such breach or threatened breach, including the recovery of damages from
Employee.
5. Amendment. No amendment, whether express or implied, to this Agreement shall be
effective
unless it is in writing and signed by both parties hereto.
6. Waiver. No consent or waiver, express or implied, by the Company to or of any
breach or
default by Employee in the performance of her agreements hereunder shall operate as a
consent to or
waiver of any other breach or default in the performance of the same or any other
obligations of
Employee hereunder. The Company’s failure to complain of any such breach or default shall
not
constitute a waiver by the Company of its rights hereunder, irrespective of how long such
failure
continues.
7. Governing Law; Venue. This Agreement shall be governed by, and construed under, the
laws of
the State of Delaware. Each of the parties submits to the jurisdiction of the state court
sitting in St. Louis
County, Missouri or federal court sitting in St. Louis, Missouri, in any action or proceeding
arising out of
or relating to this Agreement and agrees that all such claims may be heard and determined in
any such
court.
8. Severability. The invalidity or unenforceability of any provision hereof shall in
no way affect
the validity or enforceability of any other provision. In addition, should any time or area
restriction
contained herein be found by a court to be unreasonable, such restriction shall nevertheless
remain as to
the time or area such court finds reasonable, and as so amended, shall be enforced.
3
9. Miscellaneous. This Agreement shall apply to all periods when Employee is employed
by the Company. This Agreement is binding upon and shall inure to the benefit of the parties’
heirs, representatives, affiliates, successors or assigns. The use of any gender shall include all
other genders.
| SPARTECH CORPORATION | EMPLOYEE | |||||||||||
By:
|
/s/ Xxxxxx X. Xxxxxxx | By: | /s/ Xxxxxxxx X. Xxxx | |||||||||
| Name: | Xxxxxx X. Xxxxxxx | Xxxxxxxx X. Xxxx | ||||||||||
| Title: | Chair, Compensation Committee | |||||||||||
4
