SEVERANCE AGREEMENT
SEVERANCE AGREEMENT (the "Agreement"), dated as of February
21, 1995, between PHIBRO-TECH, INC., a Delaware corporation having its principal
office at Xxx Xxxxxx Xxxxx, Xxxx Xxx, Xxx Xxxxxx 00000 (the "Company"), and I.
XXXXX XXXXX residing at 0000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000(xxx
"Executive").
WHEREAS, the Executive has made and is expected to make
a major contribution to the profitability and growth of the Company; and
WHEREAS, the Company considers the continued services of the
Executive to be in the best interests of the Company and its stockholders and
wishes to assure the continued services of the Executive on behalf of the
Company.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements hereinafter set forth, the parties hereto agree as follows:
1. Certain Definitions. Capitalized terms not otherwise
defined herein shall have the following meanings:
"Actual or Constructive Termination" means, with respect to
the Executive, the occurrence of any of the following events: (a) a written
communication from the Chairman of the Board or Chairman of the Board of
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Directors of any Affiliate or from the Board or Board of Directors of any
Affiliate, that the Executive's employment with the Company or such Affiliate
has been, or will shortly be, terminated by the Company or such Affiliate, (b) a
change (objected to in writing by the Executive within 30 days after such
change) in the Executive's title or office, or in the nature or scope of the
Executive's authority, duties, responsibility or status, or in his reporting
responsibilities, location of work, compensation, employee benefits or
perquisites, or (c) the Permanent Disability of the Executive; provided,
however, no communication referenced in clause (a) and no change referenced in
clause (b) shall be deemed an Actual or Constructive Termination if the
Executive agrees to remain or become an employee of any Affiliate; provided
further, that no change in compensation referenced in clause (b) shall be deemed
an Actual or Constructive Termination if such change is part of a bona fide plan
approved by the Board or the Board of Directors of any Affiliate employing the
Executive to reduce the Company's or such Affiliate's overall costs and such
change in compensation is proportionate to the changes in compensation
experienced by other employees of the Company or such Affiliate.
"Adjusted Net Income" means, for any fiscal year of the
Company, or for any twelve--month period, as the case may be, Net Income for
such year or such period plus the sum
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of all amounts deducted for Interest Expense and income taxes.
"Affiliate" means any entity that, directly or indirectly, controls,
is controlled by or is under common control with the Company.
"Board" means the Board of Directors of the Company.
"Change of Control Event" means the cessation of employment of the
Executive by the Company or any Affiliate (whether at the election of the
Executive or as a result of the Executive's termination by the Company or such
Affiliate) (i) within six months after the date on which any of the following
events (other than the event described in clause (b)) occurs or (ii) within six
months after the date that is three years after the event described in clause
(b) occurs:
(a) Xxxx X. Xxxxxxxx shall cease to be employed by PBC as the
President and Chief Operating Officer having substantially the same
responsibilities as he has on the date hereof, except as a result of his death
or Permanent Disability;
(b) Xxxx X. Xxxxxxxx shall die or become Permanently Disabled;
(c) An event or transaction, after which Xxxx X. Xxxxxxxx and
his Immediate Family or trusts, all of the beneficial interests in which shall
be held by Xxxx X.
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Bendheim or his Immediate Family, are entitled to elect less than 40% of the
directors of PBC;
(d) Xxxx X. Xxxxxxxx and his Immediate Family or trusts, all of the beneficial
interests in which shall be held by Xxxx X. Xxxxxxxx or his Immediate Family,
shall be the beneficial owners of less than 50% of the outstanding shares of
Class C common stock or Class E common stock of PBC;
(e) PBC shall, directly or indirectly, be the beneficial owner of less than 50%
of the outstanding shares of common stock of the Company and Xxxx X. Xxxxxxxx
and his Immediate Family or trusts, all of the beneficial interests in which
shall be held by Xxxx X. Xxxxxxxx and his Immediate Family, shall be the
beneficial owners of less than 50% of the outstanding shares of common stock of
the Company; or
(f) a reorganization, merger, consolidation, acquisition or other similar
transaction, after which all or substantially all of the assets of the Company
are controlled by an entity that is not, as of the date hereof, an Affiliate.
"Class A Common Stock" means the Class A Common Stock, par value $.0l per share,
of the Company.
"Class B Common Stock" means the Class B Common Stock, par value $.0l per share,
of the Company.
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"EBIT" means, as of any date, the higher of (i) an amount equal to
(x) the sum of Adjusted Net Income for each of the immediately preceding three
fiscal years of the Company divided by (y) three and (ii) Adjusted Net Income
for the rolling twelve month period ending on the last day of the immediately
preceding fiscal quarter of the Company.
"EBIT Per Share" means, as of any date, an amount equal to (i) EBIT
divided by (ii) the total number of issued and outstanding shares of Class A
Common Stock and Class B Common Stock as set forth in the Company's most
recently prepared quarterly balance sheet.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Extraordinary Event" means (i) the initial public offering of the
Company's common stock pursuant to an effective registration statement filed
under the Securities Act (an "IPO"), (ii) the sale of at least 50% of the issued
and outstanding shares of the Company's common stock by the Company, C.P.
Chemicals, Inc., PBC or their respective successors to a third party (a "Private
Sale") or (iii) the sale of all or substantially all of the assets of the
Company to a third party (an "Asset Sale").
"GAAP" means generally accepted accounting principles
consistently applied.
"Immediate Family" means, with respect to Xxxx X. Xxxxxxxx, a spouse
(except for a spouse with whom Xxxx X.
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Bendheim has entered into any divorce or separation agreement) and any lineal
descendant.
"Interest Expense" means, for any fiscal year or twelve--month
period, the amount properly recorded or recordable as interest expense of the
Company for such year or period, determined in accordance with GAAP.
"Loan Agreement" means the Loan and Security Agreement, dated as of
August 31, 1994, by and among National Westminster Bank NJ, PBC, C.P. Chemicals,
Inc., the Company, Prince Agriproducts, Inc., The Prince Manufacturing Company,
an Illinois corporation, and The Prince Manufacturing Company, a Pennsylvania
corporation, and any extensions, modifications, renewals or refinancings
thereof.
"Net Income" means, for any fiscal year or twelve-- month period, the
net income of the Company for such year or period, determined in accordance with
GAAP, excluding unusual, non--recurring gains or losses requiring disclosure in
the Company's financial statements; provided that net income for any
twelve--month period shall at the Company's option, exercisable in its sole
discretion, be determined by reference to the company's audited income
statements for such period prepared by Xxxxxx Xxxxxx & Company or by another
firm of independent public accountants of recognized national standing selected
by the Company.
"Note Agreement" means the Note Agreement, dated as of
August 15, 1994, between PBC and The Northwestern
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Mutual Life Insurance Company pursuant to which PBC issued and sold its 11%
Senior Notes due June 29, 2004 in the aggregate principal amount of $20,000,000,
and any extensions, modifications, renewals or refinancings thereof.
"PBC' means Philipp Brothers Chemicals, Inc., a New York
corporation.
"Permanent Disability" means, (i) with respect to Xxxx X. Xxxxxxxx,
that he has received written notification from the board of directors of PBC
stating that in its view he has become mentally or physically incapacitated or
disabled, whether totally or partially, so that he is unable substantially to
perform (x) for a period of three consecutive months or (y) for shorter periods
aggregating three months during a six month period, substantially the same
services as he performed for PBC prior to incurring such incapacity or
disability and (ii) with respect to the Executive, that the Executive has
received written notification from the Board or the Board of Directors of any
Affiliate employing the Executive stating that in its view he has become
mentally or physically incapacitated or disabled, whether totally or partially,
so that he is unable substantially to perform (x) for a period of three
consecutive months or (y) for shorter periods aggregating three months during a
six month period, substantially the same services as he performed for the
Company or such Affiliate prior to incurring such incapacity or disability.
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"Permitted Transferee" means, with respect to the Executive, (i) a
member of such Executive's family, which shall include a spouse (except for a
spouse with whom such Executive has entered into any divorce or separation
agreement), any lineal ancestor or descendant or any sibling (collectively, the
"Family"), or (ii) a trust (including a voting trust at any time established by
Executive for the sole benefit of such Executive and/or one or more of such
Executive's Family), all of the beneficial interests in which shall be held by
such Executive or one or more members of such Executive's Family (or, in the
case of a voting trust, all of the voting trust certificates of which are owned
by such Executive and/or one or more members of such Executive's Family).
"Prime Rate" means the rate of interest listed as the prime rate and
published in the Wall Street Journal.
"Promissory Note" means the limited recourse promissory note executed
by the Executive in favor of the Company as of the date hereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means, collectively, (i) the shares of Class B Common Stock
issued to the Executive as of the date hereof, (ii) any shares of common stock
issued in connection with such shares as a result of a stock split, stock
dividend, recapitalization or other capital reorganization,
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(iii) any shares of Class A Common Stock issued upon conversion of any of the
foregoing shares ("Conversion Shares") and (iv) any shares of common stock
issued in connection with such Conversion Shares as a result of a stock split,
stock dividend, recapitalization or other capital reorganization. The term
"Shares" shall not include shares of common stock of the Company purchased by
the Executive on the open market or in a private transaction from any person
other than his Permitted Transferee.
"Stockholders Agreement" means the Stockholders Agreement, dated
February 21, 1995, between the Company and the individuals listed on the
signature page thereto.
2. Company's Obligation to Pay Severance and Catch--up Payment;
Computation of Severance Amount and Catch--up Payment. (a) Upon the occurrence
of (i) an Actual or Constructive Termination or (ii) a Change of Control Event,
the Executive shall be entitled to a cash payment from the Company in an amount
(the "Severance Amount") equal to the excess of (i) the product of (x) 7.84
multiplied by (y) EBIT Per Share multiplied by (z) the number of Shares owned by
the Executive and his Permitted Transferees which have not been registered
pursuant to an effective registration statement filed under the Securities Act
(the "Owned Shares") over (ii) (x) the consideration paid to the Executive under
the Stockholders Agreement with respect to the purchase of such Owned Shares (A)
in cash or (B) by issuance to the
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Executive of a subordinated promissory note of the Company bearing
interest at the Prime Rate (a "Subordinated Note") or (y) if the Company has
exercised its remedies under the Pledge Agreement, dated the date hereof,
between the Company and the Executive, following an Event of Default (as defined
in the Promissory Note), the greater of (A) the amount of indebtedness
outstanding under the Promissory Note or (B) the amount recovered by the Company
upon the sale or other disposition of the Owned Shares pursuant to the Pledge
Agreement. The Company shall pay the Severance Amount to the Executive on the
date (i) that payments with respect to the Owned Shares are made under the
Stockholders Agreement or (ii) that is five days after the date the Owned Shares
are sold or disposed of by the Company pursuant to the Pledge Agreement. The
Company's obligation under this Section 2(a) to pay the Severance Amount to the
Executive shall terminate upon payment of such amount and under no circumstances
shall the Company be required to pay any amount to the Executive under this
Section 2(a) upon the occurrence of any subsequent Actual or Constructive
Termination or Change of Control Event.
(b) If an Extraordinary Event occurs within 12 months after the
occurrence of an Actual or Constructive Termination, the Management Stockholder
shall be entitled to the applicable additional payment described in Section 2(c)
below (a "Catch-up Payment"). The Catch-up Payment shall be
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paid by the Company on the later of (i) the date the Severance Amount is
required to be paid in accordance with the second sentence of Section 2(a) and
(ii) thirty (30) days after the relevant Extraordinary Event.
(c) In the case of an IPO, the Management Stockholder shall be
entitled to a Catch--up Payment equal to (i) the excess, if any, of (x) the
product of (A) the offering price per share of the class of common stock of the
Company sold in the Initial Public Offering (net of underwriting discounts and
commissions) and (B) the number of Owned Shares over (y) the Severance Amount.
In the case of a Private Sale, the Management Stockholder shall be entitled to a
Catch-up Payment equal to (i) the excess, if any, of (x) the product of (A) the
sale price per share of the class of common stock of the Company sold in the
Private Sale (provided that if any portion of the consideration is not cash or
other property having a readily ascertainable value, the value of such property
for purposes of determining the sale price per share shall be determined by the
Board reasonably and in good faith and, at the request of the Executive, the
Board shall provide adequate documentation of the basis for its determination)
and (B) the number of Owned Shares over (y) the Severance Amount. In the case of
an Asset Sale, the Management Stockholder shall be entitled to a Catch-up
Payment equal to (i) the excess, if any, of (x) the product of (A) an amount
equal to the quotient
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obtained by dividing (I) the aggregate purchase price of the Asset Sale
(provided that if any portion of the consideration is not cash or other property
having a readily ascertainable value, the value of such property for purposes of
determining such aggregate purchase prices shall be determined by the Board
reasonably and in good faith and, at the request of the Executive, the Board
shall provide adequate documentation of the basis for its determination) by (II)
the total number of shares of the Company's common stock issued and outstanding
at the time of the Asset Sale and (B) the number of Owned Shares (y) the
Severance Amount.
3. Restrictions on Cash Payments. If the Company's ability to make
cash payments with respect to its obligations under Sections 2(a) or 2(c) is
restricted or limited under the terms of the Note Agreement or the Loan
Agreement, the Company shall (i) make cash payments required by Sections 2(a) or
2(c) to the Executive on an equal and ratable basis with all the other
obligations of the Company to the extent permitted by the Note Agreement and the
Loan Agreement, and (ii) deliver to the Executive a Subordinated Note in a
principal amount equal to (x) the excess of the Severance Amount (or, if
applicable, the Catch-up Payment) over (y) the amount paid pursuant to clause
(i) above. If the Company is not permitted under the terms of the Note Agreement
or the Loan Agreement to pay any portion of the
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Severance Amount or Catch--up Payment in cash, the Company shall deliver to the
Executive a Subordinated Note in a principal amount equal to the Severance
Amount (or, if applicable, the Catch-up Payment).
4. Executive Misconduct. If the Executive shall have committed an act
of theft or intentional fraud against the Company or any Affiliate, then the
Company may deduct from any amounts payable under Section 2 (including, without
limitation, under Section 2(c)) an amount equal to the loss suffered by the
Company and such Affiliate as a result of the Executive's theft or intentional
fraud determined by the Board in good faith.
5. Term. This Agreement shall terminate on the earlier of (i) the
date the Executive and his Permitted Transferees cease to own any Shares or (ii)
the date all Shares owned by the Executive and his Permitted Transferees have
been registered pursuant to an effective registration statement filed under the
Securities Act.
6. Other Agreements. To the extent this Agreement may conflict with
any previous agreements or understandings between the Company and the Executive,
the terms and provisions of this Agreement shall govern.
7. Notice. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and if sent by
personal delivery, registered or certified mail, return receipt requested,
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overnight courier service, telex or facsimile transmission and shall be deemed
transmitted on the fifth day following the date when deposited in the mail, on
the day following the date of delivery to a courier service (postage or charges
prepaid) or when personally delivered or transmitted by facsimile machine to the
Executive at the address shown in this Agreement or any later address he has
filed in writing with the Company or, in the case of the Company, at the address
shown in this Agreement or at the principal executive offices, attention of the
Secretary.
8. Governing Law. THE PROVISIONS OF THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED THEREIN.
9. Waiver: Amendment. Any provision of this Agreement may be waived
at any time by the party entitled to the benefits thereof, and this Agreement
may be amended or supplemented at any time. No such amendment or supplement
shall be effective unless in writing and signed by the parties or, in the case
of a waiver, by the party granting the waiver.
10. Successors. This Agreement shall be binding upon and inure to the
benefit of the Executive, the Company and any successor organization which shall
succeed to substantially all of the business and assets of the Company, whether
by means of merger, consolidation, acquisition of
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all or substantially all of the assets of the Company, or otherwise, including
by operation of law. The Company will require any successor organization, which
is a purchaser of all or substantially all of the business or assets of the
Company, by written agreement addressed to the Executive, to assume and agree to
perform this Agreement.
11. Severability. The invalidity or unenforceability of any provision
of this Agreement in any respect shall not affect the validity or enforceability
of such provision in any other respect or of any other provision of this
Agreement, all of which shall remain in full force and effect; this Agreement
shall be deemed rewritten to the minimum extent necessary to cure such
invalidity or unenforceabi1ity.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first above written.
PHIBRO-TECH, INC.
By: /s/ Xxxx X. Xxxxxxxx
---------------------------
Xxxx X. Xxxxxxxx
Chief Executive Officer
EXECUTIVE
/s/ I. Xxxxx Xxxxx
--------------------------
Name: I. Xxxxx Xxxxx
