EXECUTIVE TRANSITION AGREEMENT
Exhibit
10.2
THIS
EXECUTIVE TRANSITION AGREEMENT (this “Agreement”) by and between KĀDANT
INC., a Delaware corporation (the “Company”), and Xxxxxx
X. Xxxxxxx (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 Chief Operating Officer (“COO”) of the Company
beginning on September 1, 2009 and continuing through September 1, 2010 (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 his
position as COO 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
upon the Executive’s transition to a non-officer employee of the Company, 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
Executive Vice President and COO of the Company through August 31, 2009 and as a
non-officer employee of the Company, with a title, if any, to be determined by
the Chief Executive Officer (“CEO”) of the Company,
from September 1, 2009 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 August 31,
2009 and on a part-time basis (on average at least 20 hours per week) from
September 1, 2009 through the Retirement Date.
1.3 From
September 1, 2009 through the Retirement Date, the Executive shall work under
the direction of and on such matters as may be reasonably assigned to him by the
CEO or COO. 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 COO as requested on strategic and operational matters related to the
Company, meeting with industry groups and the Company’s customers as requested
by the CEO or COO, evaluating potential acquisition targets and undertaking
special assignments agreed to between the Executive and the CEO or
COO.
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. Compensation. During
the period of his employment by the Company under this Agreement, the Executive
shall be compensated for his services as follows:
2.1 Except as
provided in Section 2.6, (a) during the period commencing on the date of this
Agreement and ending on August 31, 2009, the Executive shall continue to be paid
a base salary at his current annual rate of $288,000 and (b) during the period
commencing on September 1, 2009 and ending on the Retirement Date, the Executive
shall be paid a base salary at an annual rate of $144,000.
2.2 The
Executive shall be eligible to participate in the Company’s Cash Incentive Plan
(a) based on his current target or reference bonus of $175,000 for the fiscal
year ending January 2, 2010 and (b) based on a target or reference bonus of
$60,000 for the fiscal year ending January 1, 2011 (based on the portion of such
fiscal year elapsed through the Retirement Date), in each case subject to the
terms of the Cash Incentive Plan. Provided that the Executive remains
an employee of the Company through the Retirement Date, the Executive shall be
eligible to participate in the Cash Incentive Plan for the fiscal year ending
January 1, 2011 regardless of whether the Executive is an employee of the
Company through the end of such fiscal year. 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.
2.3 The
Executive’s existing restricted stock unit awards shall continue to be governed
by the terms of the applicable plans and agreements; provided, however, that if the
Executive remains an employee of the Company through the Retirement Date, the
restricted stock unit award granted to the Executive on March 3, 2008 shall vest
in full as of the Retirement Date. For the avoidance of doubt, the
Executive acknowledges that he shall forfeit all unvested restricted stock unit
awards on the Retirement Date or such earlier date as his employment terminates
in accordance with this Agreement.
2.4 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.
2.5 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
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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.
2.6 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.
3.
Restrictive
Covenants.
3.1 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.
3.2 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.
3.3 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 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.
3.4 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,
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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.
3.5 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.
4. Termination.
4.1 Except
for the covenants set forth in Section 3, 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;
(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.
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4.2 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.
4.3 Notwithstanding
the foregoing, in the event of the termination of this Agreement pursuant to
Section 4.1(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”).
4.4 Notwithstanding
the foregoing, in the event of the termination of this Agreement pursuant to
Section 4.1(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 either
365 (for the fiscal year ending January 2, 2010) or 242 (for the fiscal year
ending January 1, 2011) (the “Pro-Rated
Bonus”).
4.5 Notwithstanding the foregoing, in
the event of the termination of this Agreement pursuant to Section 4.1(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
(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
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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 4.5(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 4.5 shall be contingent upon the execution by the Executive of a release
in a form reasonably acceptable to the Company.
4.6 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 2.2, 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.
4.7 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 5.3(b)
of this Agreement, the payments and other benefits provided for by Sections 4.3
through 4.6 of this Agreement shall not be payable or provided to the
Executive.
4.8 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 4.1(a) or (e).
5. Change in
Control. The Company and the Executive hereby agree that (a)
the Executive Retention Agreement shall remain in full force and effect from the
date of this Agreement through August 31, 2009 and shall thereafter be
terminated in its entirety and (b) as of September 1, 2009, but not prior to
such date, the terms and conditions of this Section 5 shall become effective and
shall be binding on the Company and the Executive. For the avoidance
of doubt, (i) if a Change in Control occurs on or before August 31, 2009 and the
Executive’s employment with the Company is subsequently terminated on or before
August 31, 2009, then the Executive shall be
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entitled
to the benefits, if any, and subject to the obligations set forth in the
Executive Retention Agreement and (ii) if a Change in Control occurs at any time
while this Agreement is in effect and the Executive’s employment with the
Company is subsequently terminated on or after September 1, 2009, but not later
than the Retirement Date, then the Executive shall be entitled to the benefits,
if any, and subject to the obligations set forth in this Section 5.
5.1 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 5.1(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 5.1(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;
(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
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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 5.2(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:
(i) the
assignment to the Executive of duties inconsistent in any material respect with
the Executive’s duties, 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;
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(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
9.1;
(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.
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 September 1, 2009 and ending on the date that this
Agreement terminates pursuant to Section 4.1.
5.2 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”),
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given in
accordance with Section 10. 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 5.2(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.
(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.
5.3 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.
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(b) Compensation upon
Termination for Good Reason or Without Cause. Subject to the
provisions of Section 5.2, if the Change in Control Date occurs during the Term
(or the Change in Control Date occurred on or before August 31, 2009 while the
Executive Retention Agreement was still in effect) and this Agreement is
terminated pursuant to Section 4.1(a) where the reason for the resignation is
Good Reason or pursuant to Section 4.1(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 4.3 or
4.5, 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) (x) if the Change in Control Date
is on or before January 2, 2010, an amount equal to the sum of (1) the aggregate
base salary that the Executive would have received during the fiscal year ending
January 2, 2010 if the Executive had remained an employee of the Company through
the end of such fiscal year (taking into account the terms of this Agreement)
and (2) the Executive’s target or reference bonus for the fiscal year ending
January 2, 2010 or (y) if the Change in Control Date is on or after January 3,
2010, an amount equal to 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 one
year 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 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 5.3(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
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(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 12 months. For
purposes of this Section 5.3(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 5.3(b)(iv) do not for any reason coincide with the provisions of this
Section 5.3(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
5.3(b)(iv).
6. 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 4.5(c) and 5.3(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.
7. Payments Subject to Section
409A. Subject to the provisions in this Section 7, 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:
7.1 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.
7.2 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.
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7.3 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 7.3(a) and that would, absent this Section 7.3(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.
7.4 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 7.4, 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.
7.5 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.
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7.6 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.
8. Disputes.
8.1 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.
8.2 Expenses. Except
with respect to any claim or contest regarding the validity or enforceability
of, or liability under, Section 3, 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.
9. Successors.
9.1 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.
9.2 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.
10. 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.
11. Miscellaneous.
11.1 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.
11.2 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.
11.3 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.
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11.4 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.
11.5 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.
11.6 Tax
Withholding. Any payments provided for hereunder shall be paid
net of any applicable tax withholding required under federal, state or local
law.
11.7 Entire
Agreement. Except with respect to the Executive Retention
Agreement, which shall remain in full force and effect through August 31, 2009,
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.
11.8 Amendments. This
Agreement may be amended or modified only by a written instrument executed by
both the Company and the Executive.
[REMAINDER
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IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day
and year first set forth above.
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By:
/s/ Xxxx X.
Xxxxxxxxx
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Xxxx
X. Xxxxxxxxx
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Chairman,
Compensation Committee
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EXECUTIVE
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/s/ Xxxxxx X.
Xxxxxxx
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Xxxxxx X.
Xxxxxxx
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