EXHIBIT 10.1
CET SERVICES, INC.
SEVERANCE AGREEMENT
This Severance Agreement (the "Agreement") is made and entered into by
and between Xxxx X. Xxxxx ("Executive") and CET Services, Inc. (the
"Company"), effective as of September 24, 2007 (the "Effective Date").
RECITALS
1. The Executive has provided many years of valuable service to the
Company.
2. The Board of Directors believes that it is in the best interests of
the Company to reward the past services of Executive by providing Executive
with certain severance benefits upon Executive's termination of employment.
3. The Board of Directors also deems it to be in the best interest of
the Company to obtain the agreement of Executive to assist the Company
following a termination of employment.
4. Certain capitalized terms used in the Agreement are defined in
Section 7 below.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. Term of Agreement. This Agreement will have a term of three (3)
years commencing on the Effective Date. On the third anniversary of the
Effective Date, and on each annual anniversary of the Effective Date
thereafter, this Agreement automatically will renew for an additional one
(1)-year term unless either party provides the other party with written
notice of non-renewal at least thirty (30) days prior to the date of
automatic renewal.
2. At-Will Employment. The Company and Executive acknowledge that
Executive's employment is and will continue to be at-will, as defined under
applicable law, except as may otherwise be specifically provided under the
terms of any written formal employment agreement between the Company and
Executive (an "Employment Agreement") and subject to the terms of this
Agreement. If Executive's employment terminates for any reason during the
term of this Agreement, Executive will not be entitled to any payments,
benefits, damages, awards or compensation other than as provided by this
Agreement or under Executive's employment arrangements.
3. Severance Benefits.
(a) Termination without Cause or Resignation. If the Company or its
Affiliates terminate Executive's employment with the Company or its
Affiliates, respectively, without Cause or Executive resigns from such
employment, and Executive signs and does not revoke a separation agreement
and release of claims with the Company (in a form acceptable to the Company),
then Executive will receive the following severance from the Company:
(i) Accrued Compensation. Within ten days following
termination in accordance with this Section 3(a), the Company shall pay
Executive all accrued but unpaid vacation, expense reimbursements, wages, and
other benefits due to Executive under any Company-provided plans, policies,
and arrangements.
(ii) Severance Payment. Within ten days following termination
in accordance with this Section 3(a), Executive shall receive a lump sum
severance payment (less applicable withholding taxes) equal to one-half of
Executive's annual base salary as in effect immediately prior to Executive's
termination date.
(iii) Continued Employee Benefits. Executive shall receive
Company-paid coverage for a period of six (6) months following termination
under this Section 3(a) for Executive and Executive's eligible dependents
under the Company's Benefit Plans. However, such Benefit Plans shall not
include any vacation or sick leave benefits applicable to the period after
termination of employment.
(iv) Stock Grant. Unless Executive advises the Company in
writing that Executive chooses not to accept the stock grant, within 30 days
following termination in accordance with this Section 3(a), the Company shall
grant 32,500 shares of the Company's common stock to Executive and issue a
certificates to Executive representing such shares. Executive shall provide
the Company such documents and representations as may be reasonable or
necessary for the Company to establish compliance with applicable securities
laws in connection with the stock grant.
(b) Termination for Cause. If Executive's employment with the
Company or its Affiliates is terminated for Cause by the Company, then
Executive will not be entitled to receive severance or other benefits except
for those (if any) as may then be established under the Company's then
existing severance and benefits plans and practices or pursuant to other
written agreements with the Company, including, without limitation, any
employment agreement.
(c) Disability; Death. If the Company terminates Executive's
employment as a result of Executive's Disability, or Executive's employment
terminates due to his death, then Executive, or Executive's estate as the
case may be, shall be entitled to receive severance or other benefits as
provided in Section 3(a).
(d) Exclusive Remedy. In the event of a termination of Executive's
employment as set forth in Section 3(a), the provisions of this Section 3 are
intended to be and are exclusive and in lieu of any other rights or remedies
to which Executive or the Company may otherwise be entitled, whether at law,
tort, contract, or in equity. Executive will be entitled to no benefits,
compensation or other payments or rights upon termination of employment other
than those benefits expressly set forth in this Section 3.
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4. Assistance after Termination of Employment. After the date of
Executive's employment as set forth in Section 3(a), Executive agrees that
Executive will provide, as requested by the Company, up to one hundred eighty
(180) hours of service to the Company during the twelve (12) month period
commencing on the date of termination.
5. Code Section 409A.
(a) Distributions. Notwithstanding anything to the contrary in this
Agreement, if Executive is a "specified employee" within the meaning of
Section 409A of the Internal Revenue Code of 1986, as amended (the "Code")
and the final regulations and any guidance promulgated thereunder ("Section
409A") at the time of Executive's termination, and the severance payable to
Executive, if any, pursuant to this Agreement, when considered together with
any other severance payments or separation benefits which may be considered
deferred compensation under Section 409A (together, the "Deferred
Compensation Separation Benefits") will not and could not under any
circumstances, regardless of when such termination occurs, be paid in full by
the fifteenth day of the third month of the Company's fiscal year following
Executive's termination, then only that portion of the Deferred Compensation
Separation Benefits which do not exceed the Section 409A Limit (as defined
below) may be made within the first six (6) months following Executive's
termination of employment in accordance with the payment schedule applicable
to each such payment or benefit. For these purposes, each severance payment
and benefit is hereby designated as a separate payment and will not
collectively be treated as a single payment. Any portion of the Deferred
Compensation Separation Benefits in excess of the Section 409A Limit shall
accrue and, to the extent such portion of the Deferred Compensation
Separation Benefits would otherwise have been payable within the first six
(6) months following Executive's termination of employment, will become
payable on the first payroll date that occurs on or after the date six (6)
months and one (1) day following the date of Executive's termination of
employment. All subsequent Deferred Compensation Separation Benefits, if any,
will be payable in accordance with the payment schedule applicable to each
payment or benefit.
(b) Amendment. This provision is intended to comply with the
requirements of Section 409A so that none of the severance payments and
benefits to be provided hereunder will be subject to the additional tax
imposed under Section 409A, and any ambiguities herein will be interpreted to
so comply. The Company and Executive agree to work together in good faith to
consider amendments to this Agreement and to take such reasonable actions
which are necessary, appropriate or desirable to avoid imposition of any
additional tax or income recognition prior to actual payment to Executive
under Section 409A.
6. Excise Tax Gross-Up. In the event that the benefits provided for in
this Agreement constitute "parachute payments" within the meaning of Section
280G of the Code and will be subject to the excise tax imposed by Section
4999 of the Code, then Executive will receive (i) a payment from the Company
sufficient to pay such excise tax, and (ii) an additional payment from the
Company sufficient to pay the federal and state income and employment taxes
and additional excise taxes arising from the payments made to the Executive
by the Company pursuant to this sentence. Unless Executive and the Company
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agree otherwise in writing, the determination of Executive's excise tax
liability, if any, and the amount, if any, required to be paid under this
Section 6 will be made in writing by independent auditors selected by the
Chairman of the Compensation Committee (the "Accountants"), whose
determination will be conclusive and binding upon Executive and the Company
for all purposes. For purposes of making the calculations required by this
Section 6, the Accountants may make reasonable assumptions and approximations
concerning applicable taxes and may rely on reasonable, good faith
interpretations concerning the application of Sections 280G and 4999 of the
Code. The Company and Executive will furnish to the Accountants such
information and documents as the Accountants may reasonably request in order
to make a determination under this Section 6. The Company will bear all costs
the Accountants may reasonably incur in connection with any calculations
contemplated by this Section 6.
7. Definition of Terms. The following terms referred to in this
Agreement will have the following meanings:
(a) Affiliate. "Affiliate" means the Company and any other parent
or subsidiary corporation of the Company, as such terms are defined in
Section 424(e) and (f) of the Code.
(b) Benefit Plans. "Benefit Plans" means plans, policies or
arrangements that the Company sponsors (or participates in) and that
immediately prior to Executive's termination of employment provide Executive
and/or Executive's eligible dependents with medical, dental, vision and
similar benefits. Benefit Plans do not include any other type of benefit
(including, but not by way of limitation, disability, life insurance or
retirement benefits). A requirement that the Company provide Executive and
Executive's eligible dependents with coverage under the Benefit Plans will
not be satisfied unless the coverage is no less favorable than that provided
to executives of the Company at any applicable time during the period
Executive is entitled to receive severance pursuant to Section 3. The Company
may, at its option, satisfy any requirement that the Company provide coverage
under any Benefit Plan by (i) reimbursing Executive's premiums under Title X
of the Consolidated Budget Reconciliation Act of 1985, as amended ("COBRA")
after Executive has properly elected continuation coverage under COBRA (in
which case Executive will be solely responsible for electing such coverage
for his eligible dependents), or (ii) providing coverage under a separate
plan or plans providing coverage that is no less favorable or by paying
Executive a lump-sum payment which is, on an after-tax basis, sufficient to
provide Executive and Executive's eligible dependents with equivalent
coverage under a third party plan that is reasonably available to Executive
and Executive' s eligible dependents.
(c) Cause. "Cause" will mean:
(i) A willful failure by Executive to perform Executive's
duties to the Company;
(ii) A willful act by Executive that constitutes misconduct
and that is injurious to the Company;
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(iii) Circumstances where Executive willfully imparts material
confidential information relating to the Company or its business to
competitors or to other third parties other than as authorized in the course
of carrying out Executive's duties;
(iv) A material and willful violation by Executive of a
federal or state law or regulation applicable to the business of the Company;
or
(v) Executive's conviction or plea of guilty or no contest to
a felony.
No act or failure to act by Executive will be considered "willful"
unless committed without good faith and without a reasonable belief that the
act or omission was in the Company's best interest.
(d) Change of Control. "Change of Control" means the occurrence of
any of the following:
(i) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing fifty percent (50%) or
more of the total voting power represented by, or fifty percent (50%) or more
of the fair value of, the Company's then outstanding voting securities;
(ii) Any action or event occurring within a one (1)-year
period, as a result of which less than a majority of the directors are
Incumbent Directors. "Incumbent Directors" will mean directors who either (A)
are directors of the Company as of the date hereof, or (B) are elected, or
nominated for election, to the Board with the affirmative votes of a majority
of the Incumbent Directors at the time of such election or nomination;
(iii) The consummation of 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 or
resulting entity, including any parent holding company) at least fifty
percent (50%) of the total voting power represented by the voting securities
of the Company or such surviving or resulting entity outstanding immediately
after such merger or consolidation; or
(iv) The consummation of the sale, lease or other disposition
by the Company of all or substantially all the Company's assets.
(e) Disability. "Disability" will mean that Executive has been
unable to perform his Company duties as the result of his incapacity due to
physical or mental illness, and such inability, at least twenty-six (26)
weeks after its commencement, is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to Executive
or Executive's legal representative (such agreement as to acceptability not
to be unreasonably withheld). Termination resulting from Disability may only
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be effected after at least thirty (30) days' written notice by the Company of
its intention to terminate Executive's employment. In the event that
Executive resumes the performance of substantially all of Executive's duties
hereunder before the termination of Executive's employment becomes effective,
the notice of intent to terminate will automatically be deemed to have been
revoked.
(f) Section 409A Limit. "Section 409A Limit" will mean the lesser
of two (2) times: (i) Executive's annualized compensation based upon the
annual rate of pay paid to Executive during the Company's taxable year
preceding the Company's taxable year of Executive's termination of employment
as determined under Treasury Regulation 1.409A-1(b)(9)(iii)(A)(1) and any
Internal Revenue Service guidance issued with respect thereto; or (ii) the
maximum amount that may be taken into account under a qualified plan pursuant
to Section 401(a)(17) of the Code for the year in which Executive's
employment is terminated.
8. Successors.
(a) The Company's Successors. Any successor to the Company (whether
direct or indirect and whether by purchase, merger, consolidation,
liquidation or otherwise) or to all or substantially all of the Company's
business and/or assets, or otherwise in connection with a Change of Control
shall assume the obligations under this Agreement and agree expressly to
perform the obligations under this Agreement in the same manner and to the
same extent as the Company would be required to perform such obligations in
the absence of a succession. For all purposes under this Agreement, the term
"Company" will include any successor to the Company's business and/or assets
which executes and delivers the assumption agreement described in this
Section 8(a) or which becomes bound by the terms of this Agreement by
operation of law.
(b) Executive's Successors. The terms of this Agreement and all
rights of Executive hereunder will inure to the benefit of, and be
enforceable by, Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
9. Notice.
(a) General. Notices and all other communications contemplated by
this Agreement will be in writing and will be deemed to have been duly given
when personally delivered or when mailed by U.S. registered or certified
mail, return receipt requested and postage prepaid. In the case of Executive,
mailed notices will be addressed to him at the home address which he most
recently communicated to the Company in writing. In the case of the Company,
mailed notices will be addressed to its corporate headquarters, and all
notices will be directed to the attention of its President.
(b) Notice of Termination. Any termination by the Company for Cause
or by Executive for Good Reason will be communicated by a notice of
termination to the other party hereto given in accordance with Section 9(a)
of this Agreement. Such notice will indicate the specific termination
provision in this Agreement relied upon, will set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination under
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the provision so indicated, and will specify the termination date (which will
be not more than thirty (30) days after the giving of such notice).
10. Miscellaneous Provisions.
(a) No Duty to Mitigate. Executive will not be required to mitigate
the amount of any payment contemplated by this Agreement, nor will any such
payment be reduced by any earnings that Executive may receive from any other
source.
(b) Waiver. No provision of this Agreement will be modified, waived
or discharged unless the modification, waiver or discharge is agreed to in
writing and signed by Executive and by an authorized officer of the Company
(other than Executive). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by the other
party will be considered a waiver of any other condition or provision or of
the same condition or provision at another time.
(c) Headings. All captions and section headings used in this
Agreement are for convenient reference only and do not form a part of this
Agreement.
(d) Entire Agreement. This Agreement, together with any Employment
Agreement, constitutes the entire agreement of the parties hereto and
supersedes in their entirety all prior representations, understandings,
undertakings or agreements (whether oral or written and whether expressed or
implied) of the parties with respect to the subject matter hereof. Except as
provided in Section 5 of this Agreement, no waiver, alteration, or
modification of any of the provisions of this Agreement will be binding
unless in writing and signed by duly authorized representatives of the
parties hereto and which specifically mention this Agreement.
(e) Choice of Law. The validity, interpretation, construction and
performance of this Agreement will be governed by the laws of the State of
Colorado (with the exception of its conflict of laws provisions). Any claims
or legal actions by one party against the other arising out of the
relationship between the parties contemplated herein (whether or not arising
under this Agreement) will be commenced or maintained in any state or federal
court located in the jurisdiction where Executive resides, and Executive and
the Company hereby submit to the jurisdiction and venue of any such court.
(f) Severability. The invalidity or unenforceability of any
provision or provisions of this Agreement will not affect the validity or
enforceability of any other provision hereof, which will remain in full force
and effect.
(g) Withholding. All payments made pursuant to this Agreement will
be subject to withholding of applicable income and employment taxes.
(h) Counterparts. This Agreement may be executed in counterparts,
each of which will be deemed an original, but all of which together will
constitute one and the same instrument.
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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the day and
year set forth above.
COMPANY
CET SERVICES, INC.
By: /s/ Xxxxxx X. Xxxxx
Xxxxxx X. Xxxxx, President
EXECUTIVE
/s/ Xxxx X. Xxxxx
Xxxx X. Xxxxx
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