SEVERANCE AGREEMENT
Exhibit 10.1
THIS SEVERANCE AGREEMENT (this “Agreement”) is entered into as of March 1, 2011 between XXXXX
INDUSTRIES, INC., an Ohio corporation (the “Company”) and XXXX X. XXX (the “Executive”).
RECITALS:
| A. | The Company and the Executive are parties to an Amended and Restated Employment Agreement dated as of June 20, 2008, as amended (the “Employment Agreement”), which agreement will expire on May 31, 2011. | ||
| B. | The Company desires to establish certain minimum severance benefits for key management personnel, including the applicable benefits in the event of the Executive’s termination of employment following a Change in Control. | ||
| C. | After expiration of the Employment Agreement, the Executive’s employment by the Company is employment-at-will and this Agreement is not intended to create, and will not be construed as creating, an express or implied contract of employment. |
NOW, THEREFORE, the Company and the Executive agree as follows:
1. CERTAIN DEFINED TERMS. In addition to terms defined elsewhere herein, the following terms
have the following meanings when used in this Agreement with initial capital letters:
(a) “Annual Bonus” means the bonus paid to executives or other employees of the Company
pursuant to a formal or informal bonus plan or individual bonus arrangement.
(b) “Base Salary” means the Executive’s annual base salary rate as in effect from time to
time.
(c) “Board” means the Board of Directors of the Company.
(d) “Cause” means:
(i) commission by the Executive (evidenced by a conviction or written, voluntary and
freely given confession) of a criminal act constituting a felony involving fraud or moral
turpitude;
(ii) commission by the Executive of a material breach or material default of any of the
Executive’s agreements or obligations under any provision of this Agreement, which is not
substantially cured in all material respects within thirty (30) days after the Board gives
written notice thereof to the Executive; or
(iii) commission by the Executive, when carrying out the Executive’s Duties under this
Agreement, of acts or the omission of any act, which both (A) constitutes gross negligence
or willful misconduct and (B) results in material economic harm to the Company or has a materially adverse effect on the Company’s operations,
properties or business relationships.
(e) “Change in Control” means a change in control of the Company of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated
under the Securities Exchange Act of 1934, as amended, as in effect on the date of this Agreement
(the “Exchange Act”), whether or not the Company is then subject to such reporting requirement;
provided that, without limitation, a Change in Control shall be deemed to have occurred if:
(i) any “person” (as defined in Sections 13(d) and 14(d) of the Exchange Act) becomes
the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing twenty percent (20%) or more of the
combined voting power of the Company’s then outstanding securities; provided that a Change
in Control shall not be deemed to occur under this clause (i) by reason of the acquisition
of securities by the Company or an employee benefit plan (or any trust funding such a plan)
maintained by the Company;
(ii) during any period of one (1) year there shall cease to be a majority of the Board
comprised of “Continuing Directors” as hereinafter defined; or
(iii) there occurs (A) a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of the
surviving entity) more than eighty percent (80%) of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after such merger
or consolidation, or (B) the approval by the stockholders of the Company of a plan of
complete liquidation of the Company, or (C) the sale or disposition by the Company of more
than fifty percent (50%) of the Company’s assets. For purposes of this Subsection
1(e)(iii), a sale of more than fifty percent (50%) of the Company’s assets includes a sale
of more than fifty percent (50%) of the aggregate value of the assets of the Company and
its subsidiaries or the sale of stock of one or more of the Company’s subsidiaries with an
aggregate value in excess of fifty percent (50%) of the aggregate value of the Company and
its subsidiaries or any combination of methods by which more than fifty percent (50%) of the
aggregate value of the Company and its subsidiaries is sold.
(iv) For purposes of this Agreement, a “Change in Control” will be deemed to occur:
(A) on the day on which a twenty percent (20%) or greater ownership
interest described in Subsection 1(e)(i) is acquired, provided that a
subsequent increase in such ownership interest after it first equals or
exceeds twenty percent (20%) shall not be deemed a separate Change in
Control;
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(B) on the day on which “Continuing Directors”, as hereinafter defined,
cease to be a majority of the Board as described in Subsection 1(e)(ii);
(C) on the day of a merger, consolidation or sale of assets as
described in Subsection 1(e)(iii); or
(D) on the day of the approval of a plan of complete liquidation as
described in Subsection 1(e)(iii).
(v) For purposes of this Subsection 1(e), the words “Continuing Directors” mean
individuals who at the beginning of any period (not including any period prior to the date
of this Agreement) of one (1) year constitute the Board and any new Director(s) whose
election by the Board or nomination for election by the Company’s stockholders was approved
by a vote of at least a majority of the Directors then still in office who either were
Directors at the beginning of the period or whose election or nomination for election was
previously so approved.
(f) “Code” means the Internal Revenue Code of 1986, as amended.
(g) “Compensation Committee” means the Compensation Committee of the Board or its successor.
(h) “Director” means a member of the Board.
(i) “Disability” means a physical or mental incapacity that prevents the Executive from
performing his duties for a period of one hundred eighty (180) consecutive days in any period of
two (2) consecutive fiscal years of the Company.
(j) “Duties” means the duties and responsibility customarily required of the highest ranking
executive officer of a major corporation or such additional duties as may be assigned from time to
time to the Executive by the Board which are consistent with the position of President and Chief
Executive Officer.
(k) “Effective Date” means June 1, 2011.
(l) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
(m) “Good Reason” means the occurrence of one or more of the following conditions arising
without the consent of the Executive:
(i) a material diminution in the Executive’s annual Base Salary or a material
diminution in the Executive’s overall compensation package in the aggregate (but
disregarding as a part of the overall compensation package the Executive’s benefit under the
Company’s Supplemental Executive Retirement Plan), in either case below the level in effect
on the Effective Date; provided, however, that for purposes of this Section 1(m)(i) a
material diminution will not be deemed to have occurred if the diminution results either
from changes to the Executive’s participation level under the
Long Term Incentive Plan or from the failure to achieve applicable performance targets under a
performance based plan or program;
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(ii) a reduction or series of reductions in the aggregate value of the life insurance,
accidental death, long term disability, short term disability, medical, dental and vision
benefits and expense reimbursement policy available to the Executive as of the Effective
Date which, in the aggregate is material;
(iii) a material diminution in the Executive’s Duties;
(iv) a requirement that the Executive report to anyone other than the Board;
(v) a material change in the geographic location at which the Executive must perform
his Duties;
(vi) any other action or inaction that constitutes a material breach by the Company of
this Agreement or any other agreements under which the Executive provides services to the
Company (specifically including a failure of the purchaser in a Change in Control
transaction, to assume this Agreement in accordance with Section 12 hereof).
In order for a condition to constitute a Good Reason, the Executive must provide written
notification to the Company of the existence of the condition within forty-five (45) days of the
initial existence of the condition (or within forty-five (45) days following the Executive actually
becoming aware of such condition, if later), upon the notice of which the Company shall have a
period of thirty (30) days during which it may remedy the condition. Furthermore, to constitute a
Good Reason, the Executive must voluntarily terminate employment with the Company within one
hundred eighty (180) days following the initial existence of the condition (or within one hundred
eighty (180) days following the Executive actually becoming aware of such condition, if later), but
in no event later than February 13 of the year following the date of the initial existence of the
condition or, if later, the date the Executive becomes aware of the condition. The parties agree
that “Good Reason” will not be deemed to have occurred merely because the Company becomes a
subsidiary or division of another entity following a “Change in Control”, as defined herein,
provided the Executive continues to serve as the Chief Executive Officer of such subsidiary or
division and such subsidiary or division is comparable in size to the organization consisting of
the Company and its subsidiaries prior to the Change in Control.
(n) “Term” means the period commencing on the Effective Date and ending on the earlier of: (i)
the Termination Date; or (ii) the Executive’s death or Disability.
(o) “Termination Date” means the date on which the Executive’s employment is terminated (the
effective date of which will be the date of termination).
2. SEVERANCE COMPENSATION.
(a) If the Executive’s employment is terminated by the Company other than for Cause or is
terminated by the Executive for Good Reason, including following a
Change in Control, then the following severance provisions shall apply:
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(i) provide the following benefits:
(A) for the applicable period under Code Section 4980B (the “COBRA
Period”) following the Termination Date, coverage under the Company’s group
medical and dental plans (the “Health Care Plans”) all at the levels being
provided to the Executive immediately prior to the Termination Date, or if
any of such benefits have decreased during the one year period ending on the
Termination Date, at the highest level in effect during such one year
period; and
(B) for the one year period commencing on the Termination Date, pay for
executive outplacement services for the Executive from a nationally
recognized executive outplacement firm at the level provided for the most
senior executives.
(ii) any time prior to June 1, 2014:
(A) pay to the Executive within thirty (30) days following the
Termination Date a single sum payment in an amount equal to three (3) times
his annual Base Salary in effect on the Termination Date (or if such annual
Base Salary has decreased during the one year period ending on the
Termination Date, at the highest rate in effect during such period);
(B) pay to the Executive within thirty (30) days following the
Termination Date a single sum payment in an amount equal to three (3) times
his Annual Bonus at the highest rate in effect during the prior three (3)
year period plus the pro rata portion of the Target Bonus for the period
commencing on the first day of the fiscal year in which the employment of
the Executive is terminated and ending on the Termination Date;
(C) for a period of three (3) years, beginning with the month following
the Termination Date, provide an automobile allowance not to exceed one
hundred ten percent (110%) of the automobile allowance paid to the Executive
in the calendar year preceding the year of his termination of employment for
the purpose of paying expenses related to the cost of acquisition,
maintenance, fuel and liability insurance associated with the Executive’s
automobile (the “Automobile Allowance”);
(D) for a period of three (3) years, beginning with the month following
the Termination Date, provide long term disability coverage, including long
term disability protection under policies that are the same or substantially
similar to those in effect as of the date hereof (the “Disability
Coverage”);
(E) for a period of three (3) years, beginning with the month following
the Termination Date, provide life insurance protection under policies that are the same or substantially similar to those in effect
as of the date hereof (the “Life Insurance Coverage”); and
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(F) For a period of eighteen (18) months commencing from the last day
of the COBRA Period, provide coverage under the Health Care Plans (the
“Health Care Coverage”).
(iii) any time during the period from June 1, 2014 until June 1, 2015:
(A) pay to the Executive within thirty (30) days following the
Termination Date a single sum payment in an amount equal to two (2) times
his annual Base Salary in effect on the Termination Date (or if such annual
Base Salary has decreased during the one year period ending on the
Termination Date, at the highest rate in effect during such period);
(B) pay to the Executive within thirty (30) days following the
Termination Date a single sum payment in an amount equal to two (2) times
his Annual Bonus at the highest rate in effect during the prior two (2) year
period plus the pro rata portion of the Target Bonus for the period
commencing on the first day of the fiscal year in which the employment of
the Executive is terminated and ending on the Termination Date;
(C) for a period of two (2) years, beginning with the month following
the Termination Date, provide the Automobile Allowance;
(D) for a period of two (2) years, beginning with the month following
the Termination Date, provide the Disability Coverage;
(E) for a period of two (2) years, beginning with the month following
the Termination Date, provide the Life Insurance Coverage;
(F) For a period of six (6) months commencing from the last day of the
COBRA Period, provide the Health Care Coverage.
(iv) any time during the period from June 1, 2015 until June 1, 2016:
(A) pay to the Executive within thirty (30) days following the
Termination Date a single sum payment in an amount equal to one (1) times
his annual Base Salary in effect on the Termination Date;
(B) pay to the Executive within thirty (30) days following the
Termination Date a single sum payment in an amount equal to one (1) times
his Annual Bonus earned during the prior one (1) year period plus the pro
rata portion of the Target Bonus for the period commencing on the first day
of the fiscal year in which the employment of the Executive is terminated
and ending on the Termination Date;
(C) for a period of one (1) year, beginning with the month following
the Termination Date, provide the Automobile Allowance;
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(D) for a period of one (1) year, beginning with the month following
the Termination Date, provide the Disability Coverage; and
(E) for a period of one (1) year, beginning with the month following
the Termination Date, provide the Life Insurance Coverage;
(v) With respect to Subsections 2(a)(ii)(C), 2(a)(iii)(C), or 2(a)(iv)(C), the
Automobile Allowance provided to the Executive during any calendar year during the Term will
not affect the Automobile Allowance payable to him in any other calendar year. The
Executive’s right to receive the Automobile Allowance is not subject to liquidation or
exchange for any other benefit, whether under this Agreement or otherwise. With respect to
Subsections 2(a)(ii)(D), 2(a)(iii)(D), or 2(a)(iv)(D), the Disability Coverage provided to
the Executive during any calendar year during the Term will not affect the Disability
Coverage provided to him in any other calendar year. The Executive’s right to receive the
Disability Coverage is not subject to liquidation or exchange for any other benefit, whether
under this Agreement or otherwise. With respect to Subsections 2(a)(ii)(E), 2(a)(iii)(E),
or 2(a)(iv)(E), the Life Insurance Coverage provided to the Executive during any calendar
year during the Term will not affect the Life Insurance Coverage provided to him in any
other calendar year. The Executive’s right to receive the Life Insurance Coverage is not
subject to liquidation or exchange for any other benefit, whether under this Agreement or
otherwise. With respect to Subsections 2(a)(ii)(F) and 2(a)(iii)(F), the Health Care
Coverage provided to the Executive during any calendar year during the Term will not affect
the Health Care Coverage provided to him in any other calendar year. The Executive’s right
to receive the Health Care Coverage is not subject to liquidation or exchange for any other
benefit, whether under this Agreement or otherwise.
(b) If the Executive’s employment with the Company is terminated by reason of the Executive’s
death or Disability during the Term, the Executive or his surviving spouse shall be entitled to
receive (i) the Base Salary and Annual Bonus accrued and unpaid to the date of death or Disability,
(ii) any amounts payable under any employee benefit plan of the Company in accordance with the
terms of such plan, and (iii) if the Executive and/or his surviving spouse and dependents properly
elect continued medical coverage in accordance with Code Section 4980B (“COBRA”), the Company shall
pay the entire cost of the premiums for such continued medical coverage (the “Medical Coverage”)
for the longer of (A) the maximum required period of coverage under Code Section 4980B(f) or (B)
(x) thirty-six (36) months if at any time prior to June 1, 2014, or (y) twenty-four (24) months if
such death or disability occurs at any time during the period from June 1, 2014 until June 1, 2015,
provided, however, that such Medical Coverage provided to the Executive in any calendar year during
such period will not affect the Medical Coverage provided to him in any other calendar year and the
Executive’s right to receive the Medical Coverage is not subject to liquidation or exchange for any
other benefit, whether under this Agreement or otherwise.
(c) If the Executive’s employment hereunder is terminated:
(i) by reason of the Executive’s death or Disability; or
(ii) by the Company other than for Cause or by the Executive for Good Reason;
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The Executive will become fully vested in all outstanding stock options, restricted stock,
restricted stock units or similar awards and any such award shall be then and thereafter fully
exercisable until the termination of such options pursuant to their terms.
(d) If the Executive’s employment hereunder is terminated by the Company for Cause or
terminated by the Executive other than for Good Reason, then no further compensation or benefits
will be provided to the Executive by the Company under this Agreement following the Termination
Date other than payment of compensation earned prior to the Termination Date but not yet paid.
(e) Notwithstanding anything contained in this Agreement to the contrary, if the Executive
breaches any of the Executive’s obligations under Sections 6 or 7 hereof, and such breach is not
substantially cured in all material respects within thirty (30) days after the Board gives written
notice thereof to the Executive, no further severance payments or other benefits will be payable to
the Executive under this Section 2.
3. TERMINATION FOLLOWING A CHANGE IN CONTROL. At any time within the one hundred eighty (180)
days following a Change in Control, but in no event later than February 13 of the year following
the date of the Change in Control, if the Executive is terminated by the Company without Cause, the
Executive’s employment is terminated by him for Good Reason, or this Agreement is not assumed by an
assignee or transferee that is the successor to all or substantially all of the assets of the
Company pursuant to Section 12 hereof then in addition to the payments and benefits outlined in
Section 2 hereof the Executive will also be entitled to the following benefits:
(a) The Executive will become fully vested in all outstanding stock options, restricted stock,
restricted stock units or similar awards, but only to the extent not previously forfeited or
terminated.
(b) The Executive will have available the expenses of enforcement provided in Section 4
hereof. For the avoidance of doubt, this specific reference to the availability of expenses of
enforcement in the event of a Change in Control shall not be interpreted to limit the availability
of expenses of enforcement in other circumstances.
4. EXPENSES OF ENFORCEMENT. The Executive shall not be required to incur the expenses
associated with the enforcement of the Executive’s rights under this Agreement by litigation or
other legal action. Therefore, the Company shall pay, or cause to be paid, on a current basis,
reasonable attorney fees and expenses incurred by the Executive to enforce the provisions of this
Agreement. The Executive shall be required to repay any such amounts to the Company to the extent
that a court of competent jurisdiction issues a final and non-appealable order setting forth the
determination that the claims of the Executive were frivolous.
5. WITHHOLDING OF TAXES. The Company may withhold from any amounts payable under this
Agreement all federal, state, city, or other taxes as the Company is required to withhold pursuant
to any applicable law, regulation or ruling.
6. CONFIDENTIAL INFORMATION. The Executive agrees that the Executive will not, during the
Term or at any time thereafter, either directly or indirectly, disclose or make known to any other
person, firm, or corporation any confidential information, trade secret or
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proprietary information of the Company in violation of that certain Non Competition and Non
Disclosure Agreement between the Company and the Executive dated July 18, 2000 (the “Non
Competition and Non Disclosure Agreement”).
7. NON-COMPETITION. Pursuant to the Non Competition and Non Disclosure Agreement, the
Executive hereby acknowledges and reaffirms that, during the Term, and for three (3) years
thereafter, the Executive shall not compete with the Company as more fully set forth in the Non
Competition and Non Disclosure Agreement.
8. ARBITRATION. The following arbitration rules shall apply to this Agreement:
(a) In the event that the Executive’s employment shall be terminated by the Company during the
Term or the Company shall withhold payments or provision of benefits because the Executive is
alleged to be engaged in activities prohibited by Section 6 or 7 hereof or for any other reason,
the Executive shall have the right, in addition to all other rights and remedies provided by law,
at his election either to seek arbitration in the metropolitan area of Akron, Ohio, under the
Commercial Arbitration Rules of the American Arbitration Association by serving a notice to
arbitrate upon the Company or to institute a judicial proceeding, in either case within one hundred
and twenty (120) days after having received notice of termination of his employment.
(b) Without limiting the generality of Subsection 8(a), this Subsection 8(b) shall apply to
termination asserted to be for “Cause” or for “Good Reason”. In the event that (i) the Company
terminates the Executive’s employment for Cause, or (ii) the Executive resigns his employment for
Good Reason, the Company and the Executive each shall have thirty (30) days to demand of the
American Arbitration Association in writing (with a copy to the other party hereto) that
arbitration be commenced to determine whether Cause or Good Reason, as the case may be, existed
with respect to such termination or resignation. The parties hereto shall have thirty (30) days
from the date of such written request to select such third party arbitrator. Upon the expiration
of such thirty (30) day period, the parties hereto shall have an additional thirty (30) days in
which to present to such third party arbitrator such arguments, evidence or other material (oral or
written) as may be permitted and in accordance with such procedures as may be established by such
third party arbitrator. The third party arbitrator shall furnish a written summary of his findings
to the parties hereto not later than thirty (30) days following the last day on which the parties
were entitled to present arguments, evidence or other material to the third party arbitrator.
During the period of resolution of a dispute under this Subsection 8(b), the Executive shall
receive no compensation by the Company (other than payment by the Company of premiums due before or
during such period on any insurance coverage applicable to the Executive hereunder) and the
Executive shall have no duties for the Company. If the arbitrator determines that the Company did
not have Cause to terminate the Executive’s employment or that the Executive had Good Reason to
resign his employment, as the case may be, the Company shall promptly pay the Executive in a lump
sum any compensation to which the Executive would have been entitled, for the period commencing
with the date of the Executive’s termination or resignation and ending on the date of such
determination, had his employment not been terminated or had he not resigned.
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9. EMPLOYMENT AT WILL. The parties hereto acknowledge and confirm that the Executive’s
employment by the Company is employment-at-will, and is subject to termination by the Executive or
by the Company at any time with Cause or without Cause. With this Agreement, the parties hereto do
not intend to create, and have not created, a contract of employment, express or implied, between
the Executive and the Company. The Executive acknowledges that such employment-at-will status
cannot be modified except in a specific writing that has been authorized or ratified by the Board.
10. EMPLOYMENT ACTIONS. This Agreement is not intended to create, and will not be construed
as creating, an express or implied contract of employment. Nothing contained herein will prevent
the Company at any time from terminating the Executive’s right and obligation to perform services
to the Company or prevent the Company from removing the Executive from any position which the
Executive holds with the Company, provided, however, that no such action shall affect the
obligation of the Company to make payments and provide benefits if and to the extent required under
this Agreement. The payments and benefits provided in this Agreement will be full and complete
liquidated damages for any such employment action taken by the Company.
11. NOTICES. For purposes of this Agreement, all communications provided for herein shall be
in writing and shall be deemed to have been duly given when hand delivered or mailed by United
States Express mail, postage prepaid, addressed as follows:
| (a) | If the notice is to the Company: | ||
| Xxxxx Industries, Inc. 0000 Xxxxx Xxxx Xxxxxx Xxxxx, XX 00000 Attn: Chairman of the Compensation Committee |
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| With a Copy to: |
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| Benesch, Friedlander, Xxxxxx & Xxxxxxx, LLP 000 Xxxxxx Xxxxxx, Xxxxx #0000 Xxxxxxxxx, XX 00000-0000 Attn: Xxxxx X. Xxxxxxx, Esq. |
| (b) | If the notice is to the Executive: | ||
| Xx. Xxxx X. Xxx 0000 Xxxxx Xxxx Xxxxx, XX 00000 |
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| With a Copy to: | |||
| Xxxxx & Berne LLP 0000 Xxxx 0xx Xxxxxx, Xxxxx 0000 Xxxxxxxxx, XX 00000 Attn: Xxxxxx X. Xxxxxxxxx, Esq. |
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or to such other address as either party hereto may have furnished to the other in writing and in
accordance herewith; except that notices of change of address shall be effective only upon receipt.
12. ASSIGNMENT; BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit
of the parties to this Agreement and their respective successors, heirs (in the case of the
Executive) and permitted assigns. No rights or obligations of the Company under this Agreement may
be assigned or transferred by the Company except that such rights or obligations may be assigned or
transferred in connection with the sale or transfer of all or substantially all of the assets of
the Company, provided that the assignee or transferee is the successor to all or substantially all
of the assets of the Company and such assignee or transferee expressly assumes the liabilities,
obligations and duties of the Company, as contained in this Agreement, either contractually or as a
matter of law. The Company further agrees that, in the event of a sale or transfer of assets as
described in the preceding sentence, it shall be a condition precedent to the consummation of any
such transaction that the assignee or transferee expressly assumes the liabilities, obligations and
duties of the Company hereunder. No rights or obligations of the Executive under this Agreement
may be assigned or transferred by the Executive other than the Executive’s rights to compensation
and benefits, which may be transferred only by will or operation of law, except as provided in this
Section 12.
The Executive shall be entitled, to the extent permitted under any applicable law, to select
and change a beneficiary or beneficiaries to receive any compensation or benefits payable hereunder
following the Executive’s death by giving the Company written notice thereof. In the absence of
such a selection, any compensation or benefit payable under this Agreement following the death of
the Executive shall be payable to the Executive’s spouse, or if such spouse shall not survive the
Executive, to the Executive’s estate. In the event of the Executive’s death or a judicial
determination of the Executive’s incompetence, reference in this Agreement to the Executive shall
be deemed, where appropriate, to refer to the Executive’s beneficiary, estate or other legal
representative.
13. INVALID PROVISIONS. Any provision of this Agreement that is prohibited or unenforceable
shall be ineffective to the extent, but only to the extent, of such prohibition or unenforceability
without invalidating the remaining portions hereof and such remaining portions of this Agreement
shall continue to be in full force and effect. In the event that any provision of this Agreement
shall be determined to be invalid or unenforceable, the parties hereto will negotiate in good faith
to replace such provision with another provision that will be valid or enforceable and that is as
close as practicable to the provisions held invalid or unenforceable.
14. ALTERNATIVE SATISFACTION OF COMPANY’S OBLIGATIONS. In the event this Agreement provides
for payments or benefits to or on behalf of the Executive which cannot be provided under the
Company’s benefit plans, policies or arrangements either because such plans, policies or
arrangements no longer exist or no longer provide such benefits or because provision of such
benefits to the Executive would adversely affect the tax qualified or tax advantaged status of such
plans, policies or arrangements for the Executive or other participants therein, the Company may
provide the Executive with an “Alternative Benefit”, as defined in this Section 14, in lieu
thereof. The Alternative Benefit is a benefit or payment which places the Executive and the
Executive’s dependents or beneficiaries, as the case may be, in at
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least as good of an economic position as if the benefit promised by this Agreement (a) were
provided exactly as called for by this Agreement, and (b) had the favorable economic, tax and legal
characteristics customary for plans, policies or arrangements of that type. Furthermore, if such
adverse consequence would affect the Executive or the Executive’s dependents, the Executive shall
have the right to require that the Company provide such an Alternative Benefit. Notwithstanding
the foregoing, if provision of an alternative benefit would constitute a violation of Internal
Revenue Code Section 409A, the Parties will be left to their legal remedies.
15. ENTIRE AGREEMENT, MODIFICATION. Subject to the provisions of Section 16 hereof, this
Agreement contains the entire agreement between the parties hereto with respect to the employment
of the Executive by the Company and supersedes all prior and contemporaneous agreements,
representations, and understandings of the parties hereto, whether oral or written. No
modification, amendment, or waiver of any of the provisions of this Agreement shall be effective
unless in writing, specifically referring hereto, and signed by both parties hereto.
16. NON-EXCLUSIVITY OF RIGHTS. Notwithstanding the foregoing provisions of Section 15,
nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation
in any benefit, bonus, incentive or other plan, program, policy or practice provided by the Company
for its executive officers, nor shall anything herein limit or otherwise affect such rights as the
Executive has or may have under any stock option, restricted stock or other agreements with the
Company or any of its subsidiaries. Amounts which the Executive or the Executive’s dependents or
beneficiaries, as the case may be, are otherwise entitled to receive under any such plan, policy,
practice or program shall not be reduced by this Agreement unless specifically provided.
17. WAIVER OF BREACH. The failure at any time to enforce any of the provisions of this
Agreement or to require performance by the other party hereto of any of the provisions of this
Agreement shall in no way be construed to be a waiver of such provisions or to affect either the
validity of this Agreement or any part of this Agreement or the right of either party hereto
thereafter to enforce each and every provision of this Agreement in accordance with the terms of
this Agreement.
18. GOVERNING LAW. This Agreement has been made in, and shall be governed and construed in
accordance with the laws of, the State of Ohio. The parties hereto agree that this Agreement is
not an “employee benefit plan” or part of an “employee benefit plan” which is subject to the
provisions of the Employee Retirement Income Security Act of 1974, as amended.
19. REPRESENTATION. The Company represents and warrants that it is fully authorized and
empowered to enter into this Agreement and that the performance of its obligations under this
Agreement will not violate any agreement between it and any other person, firm or organization.
20. SUBSIDIARIES AND AFFILIATES. Notwithstanding any contrary provision of this Agreement, to
the extent it does not adversely affect the Executive, the Company may provide the compensation and
benefits to which the Executive is entitled hereunder through one or more subsidiaries or
affiliates.
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21. NO MITIGATION OR OFFSET. In the event of any termination of employment, the Executive
shall be under no obligation to seek other employment. Amounts due the Executive under this
Agreement shall not be offset by any remuneration attributable to any subsequent employment he may
obtain.
22. COMPLIANCE WITH SECTION 409A OF THE CODE. Certain payments contemplated by this Agreement
may be “deferred compensation” for purposes of Section 409A of the Code. Accordingly, the following
provisions shall be in effect for purposes of avoiding or mitigating any adverse tax consequences
to the Executive under Section 409A:
(a) A termination of employment will not be deemed to have occurred for purposes of any
provision of this Agreement providing for the payment of any amounts or benefits upon or following
a termination of employment unless such termination is also a “separation from service” within the
meaning of Code Section 409A, for purposes of any such provision of this Agreement, references
herein to “termination”, “termination of employment” or similar terms will mean “separation from
service”.
(b) The intent of the parties hereto is that payments and benefits under this Agreement comply
with or be exempt from Code Section 409A and the regulations and guidance promulgated thereunder
and, accordingly, to the maximum extent permitted, this Agreement will be interpreted to be in
compliance therewith or exempt therefrom. In no event whatsoever will the Company be liable for
any additional tax, interest or penalty that may be imposed on the Executive by Code Section 409A
or damages for failing to comply with Code Section 409A.
(c) To the extent any provisions of this Agreement would otherwise contravene one or more
requirements or limitations of Code Section 409A, then the Company and the Executive may, within
any applicable time period provided under the Treasury Regulations issued under Code Section 409A,
effect through mutual agreement the appropriate amendments to those provisions which are necessary
in order to bring the provisions of this Agreement into compliance with Code Section 409A, provided
such amendments shall not reduce the dollar amount of any such item of deferred compensation or
adversely affect the vesting provisions applicable to such item or otherwise reduce the present
value of that item. If any legislation is enacted during the term of this Agreement which imposes a
dollar limit on deferred compensation, then the Executive will cooperate with the Company in
restructuring any items of compensation under this Agreement that are deemed to be deferred
compensation subject to such limitation, provided such restructuring shall not reduce the dollar
amount of any such item or adversely affect the vesting provisions applicable to such item or
otherwise reduce the present value of that item.
(d) Notwithstanding any provision to the contrary in this Agreement, if (i) the Company, in
its good faith discretion, determines that any payments or benefits described in this Agreement
would constitute non-exempt deferred compensation for purposes of Section 409A of the Code, and
(ii) the Executive is a “specified employee” (within the meaning of Section 409A of the Code and
the Treasury Regulations thereunder) at the time of his termination of employment, then such
payments or benefits shall not be made or paid to the Executive prior to the earlier of (A) the
expiration of the six (6) month period measured from the date of such “separation from service” or
(B) the date of his death (the “Delay Period”). Upon the expiration of the Delay Period, all
payments deferred pursuant to this Subsection 22(d) shall be paid in a
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lump sum to the Executive, and any remaining payments due under this Agreement shall be paid
in accordance with the normal payment dates specified for them herein.
(e) For purposes of Code Section 409A, the Executive’s right to receive any installment
payment pursuant to this Agreement will be treated as a right to receive a series of separate and
distinct payments.
(f) Whenever a payment under this Agreement specifies a payment period with reference to a
number of days (e.g., “payment will be made within thirty (30) days following the Termination
Date”), the actual date of payment within the specified period will be determined solely by the
Company.
(g) Notwithstanding any other provision herein to the contrary, in no event will any payment
that constitutes non-exempt deferred compensation subject to Code Section 409A, as determined in
good faith by the Company, be subject to offset, counterclaim, or recoupment by any other amount
payable to the Executive unless otherwise permitted by Code Section 409A.
(h) To the extent that reimbursements or other in-kind benefits under this Agreement
constitute non-exempt deferred compensation for purposes of Code Section 409A, (i) all expenses or
other reimbursements hereunder shall be made on or prior to the last day of the taxable year
following the taxable year in which such expenses were incurred by the Executive, (ii) any right to
such reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another
benefit, and (iii) no such reimbursement, expenses eligible for reimbursement, or in-kind benefits
provided in any taxable year shall in any way affect the expenses eligible for reimbursement, or
in-kind benefits to be provided, in any other taxable year.
[Remainder of the page intentionally left blank, signature page follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and
delivered as of the date first above written.
| XXXXX INDUSTRIES, INC. (the “Company”) |
||||
| By: | /s/ Xxx X. Xxxxxxx | |||
| Its: | Chairman of the Compensation Committee | |||
| /s/ Xxxx X. Xxx | ||||
| XXXX X. XXX | ||||
| (the “Executive”) | ||||
[Signature page to Severance Agreement]
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