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EXHIBIT 7
SEVERANCE AGREEMENT
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THIS SEVERANCE AGREEMENT (this "Agreement"), dated as of April
29, 1997, is made and entered by and between Sinter Metals, Inc., a Delaware
corporation (the "Company"), and ___________ (the "Executive").
WITNESSETH:
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WHEREAS, the Executive is a senior executive of the Company
and has made and is expected to continue to make major contributions to the
short- and long-term profitability, growth and financial strength of the
Company;
WHEREAS, the Company recognizes that, as is the case for most
publicly held companies, the possibility of a Change in Control (as defined
below) exists;
WHEREAS, the Company desires to assure itself of both present
and future continuity of management and desires to establish certain minimum
severance benefits for certain of its senior executives, including the
Executive, applicable in the event of a Change in Control;
WHEREAS, the Company wishes to ensure that its senior
executives are not practically disabled from discharging their duties in respect
of a proposed or actual transaction involving a Change in Control; and
WHEREAS, the Company desires to provide additional inducement
for the Executive to continue to remain in the ongoing employ of the Company.
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) "Base Pay" means the Executive's annual base salary at a
rate not less than the Executive's annual fixed or base compensation as
in effect for Executive immediately prior to the occurrence of a Change
in Control or such higher rate as may be determined from time to time
by the Board or a committee thereof.
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(b) "Board" means the Board of Directors of the Company.
(c) "Cause" means that, prior to any termination pursuant to
Section 3(b) or Section 3(c), the Executive shall have committed:
(i) an intentional act of fraud, embezzlement or theft
in connection with his duties or in the course of his employment with
the Company or any Subsidiary;
(ii) intentional wrongful damage to property of the
Company or any Subsidiary;
(iii) intentional wrongful disclosure of secret
processes or confidential information of the Company or any Subsidiary;
(iv) intentional wrongful engagement in any Competitive
Activity; or
(v) a willful failure or refusal to follow the lawful
and proper directives of the Chief Executive Officer of the Company (the "CEO")
consistent with the Executive's position, after receipt by the Executive of
written notice from the CEO specifying in reasonable detail the alleged failure
or refusal and after a reasonable opportunity for the Executive to cure such
alleged failure or refusal;
and any such act shall have been materially harmful to the Company. For
purposes of this Agreement, no act or failure to act on the part of the
Executive shall be deemed "intentional" if it was due primarily to an
error in judgment or negligence, but shall be deemed "intentional" only
if done or omitted to be done by the Executive not in good faith and
without reasonable belief that his action or omission was in the best
interest of the Company. Notwithstanding the foregoing, the Executive
shall not be deemed to have been terminated for "Cause" hereunder
unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less
than three quarters of the Board then in office at a meeting of the
Board called and held for such purpose, after reasonable notice to the
Executive and an opportunity for the Executive, together with his
counsel (if the Executive chooses to have counsel present at such
meeting), to be heard before the Board, finding that, in the good faith
opinion of the Board, the Executive had committed an act constituting
"Cause" as herein defined and specifying the particulars thereof in
detail. Nothing herein will limit the right of the Executive or his
beneficiaries to contest the validity or propriety of any such
determination.
(d) "Change in Control" means the occurrence during the Term
of any of the following events:
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(i) The Company is merged, consolidated or reorganized
into or with another corporation or other legal person, and as a result
of such merger, consolidation or reorganization less than a majority of
the combined voting power of the then-outstanding Voting Stock of such
corporation or person immediately after such transaction are held in
the aggregate by the holders of Voting Stock of the Company immediately
prior to such transaction;
(ii) The Company sells or otherwise transfers all or
substantially all of its assets to another corporation or other legal
person, and as a result of such sale or transfer less than a majority
of the combined voting power of the then-outstanding Voting Stock of
such corporation or person immediately after such sale or transfer is
held in the aggregate by the holders of Voting Stock of the Company
immediately prior to such sale or transfer;
(iii) There is a report filed on Schedule 13D or Schedule
14D-1 (or any successor schedule, form or report), each as promulgated
pursuant to the Exchange Act, disclosing that any person (as the term
"person" is used in Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act) has become the beneficial owner (as the term "beneficial
owner" is defined under Rule 13d-3 or any successor rule or regulation
promulgated under the Exchange Act) of securities representing 20% or
more of the combined voting power of the then-outstanding Voting Stock
of the Company; or
(iv) If, during any period of two consecutive years,
individuals who at the beginning of any such period constitute the
Directors of the Company cease for any reason to constitute at least a
majority thereof; PROVIDED, HOWEVER, that for purposes of this clause
(iv) each Director who is first elected, or first nominated for
election by the Company's stockholders, by a vote of at least
two-thirds of the Directors of the Company (or a committee thereof)
then still in office who were Directors of the Company at the
beginning of any such period will be deemed to have been a Director
of the Company at the beginning of such period.
Notwithstanding the foregoing provisions of Section 1(d)(iii) unless
otherwise determined in a specific case by majority vote of the Board,
a "Change in Control" shall not be deemed to have occurred for purposes
of Section 1(d)(iii) solely because (A) the Company, (B) a Subsidiary,
or (C) any Company-sponsored employee stock ownership plan or any other
employee benefit plan of the Company or any Subsidiary either files or
becomes obligated to file a report or a proxy statement under or in
response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or
any successor schedule, form or report or item therein)
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under the Exchange Act disclosing beneficial ownership by it of shares
of Voting Stock, whether in excess of 20% or otherwise, or because the
Company reports that a change in control of the Company has occurred or
will occur in the future by reason of such beneficial ownership.
(e) "Competitive Activity" means the Executive's participation
as an employee, officer, director or partner, without the written
consent of the Board in the management, operation or control of any
business enterprise if such enterprise is engaged in the powder
metallurgy business in any geographic area in which the Company or any
of its subsidiaries is engaged in such business. "Competitive Activity"
will not include the mere ownership of less than five percent of the
outstanding Voting Stock in any such enterprise and the exercise of
rights appurtenant thereto.
(f) "Employee Benefits" means the perquisites, benefits and
service credit for benefits as provided under any and all employee
retirement income and welfare benefit policies, plans, programs or
arrangements in which Executive is entitled to participate, including
without limitation any stock option, stock purchase, stock
appreciation, savings, pension, supplemental executive retirement, or
other retirement income or welfare benefit, deferred compensation,
incentive compensation, group or other life, health, medical/hospital
or other insurance (whether funded by actual insurance or self-insured
by the Company), disability, expense reimbursement and other employee
benefit policies, plans, programs or arrangements that may now exist or
any equivalent successor policies, plans, programs or arrangements that
may be adopted hereafter by the Company, providing perquisites,
benefits and service credit for benefits at least as great in the
aggregate as are payable thereunder prior to a Change in Control.
(g) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(h) "Incentive Pay" means an annual amount equal to not less
than the highest aggregate annual cash bonus, cash incentive or other
payments of cash compensation, in addition to Base Pay, made or to be
made in regard to services rendered in any calendar year during the
three calendar years immediately preceding the year in which the Change
in Control occurred pursuant to any bonus, incentive, profit-sharing,
performance, discretionary pay or similar agreement, policy, plan,
program or arrangement (whether or not funded) of the Company, or any
successor thereto providing benefits at least as great as the benefits
payable thereunder prior to a Change in Control.
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(i) "Severance Period" means the period of time commencing on
the date of the first occurrence of a Change in Control and continuing
until the earliest of (i) the second anniversary of the occurrence of
the Change in Control, (ii) the Executive's death, or (iii) the
Executive's attainment of age 65,
(j) "Subsidiary" means an entity in which the Company directly
or indirectly beneficially owns 50% or more of the outstanding Voting
Stock.
(k) "Term" means the period commencing as of the date hereof
and expiring as of the later of (i) the close of business on December
31, 2000, or (ii) the expiration of the Severance Period; PROVIDED,
HOWEVER, that (A) commencing on January 1, 1998 and each January 1
thereafter, the term of this Agreement will automatically be extended
for an additional year unless, not later than September 30 of the
immediately preceding year, the Company or the Executive shall have
given notice that it or the Executive, as the case may be, does not
wish to have the Term extended and (B) subject to the last sentence of
Section 8, if, prior to a Change in Control, the Executive ceases for
any reason to be an employee of the Company and any Subsidiary,
thereupon without further action the Term shall be deemed to have
expired and this Agreement will immediately terminate and be of no
further effect. For purposes of this Section 1(k), the Executive shall
not be deemed to have ceased to be an employee of the Company and any
Subsidiary by reason of the transfer of Executive's employment between
the Company and any Subsidiary, or among any Subsidiaries.
(l) "Termination Date" means the date on which the Executive's
employment is terminated (the effective date of which shall be the date
of termination).
(m) "Voting Stock" means securities entitled to vote generally
in the election of directors.
2. OPERATION OF AGREEMENT. This Agreement will be effective
and binding immediately upon its execution, but, anything in this Agreement to
the contrary notwithstanding, this Agreement will not be operative unless and
until a Change in Control occurs. Upon the occurrence of a Change in Control at
any time during the Term, without further action, this Agreement shall become
immediately operative.
3. TERMINATION FOLLOWING A CHANGE IN CONTROL. (a) In the event
of the occurrence of a Change in Control, the Executive's employment may be
terminated by the Company during the Severance Period and the Executive shall be
entitled to the benefits provided by Section 4 unless such termination is the
result of the occurrence of one or more of the following events:
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(i) The Executive's death;
(ii) If the Executive becomes permanently disabled
within the meaning of, and begins actually to receive disability
benefits pursuant to, the long-term disability plan in effect for, or
applicable to, Executive immediately prior to the Change in Control; or
(iii) Cause.
If, during the Severance Period, the Executive's employment is terminated by the
Company or any Subsidiary other than pursuant to Section 3(a)(i), 3(a)(ii) or
3(a)(iii), the Executive will be entitled to the benefits provided by Section 4
and, if applicable, Section 5.
(b) In the event of the occurrence of a Change in Control, the
Executive may terminate employment with the Company and any Subsidiary during
the Severance Period with the right to severance compensation as provided in
Section 4 and, if applicable, Section 5 upon the occurrence of one or more of
the following events (regardless of whether any other reason for such
termination exits or has occurred, including without limitation other
employment):
(i) Failure to elect or reelect or otherwise to maintain the
Executive in the office or the position, or a substantially equivalent
office or position, of or with the Company and/or a Subsidiary, as the
case may be, which the Executive held immediately prior to a Change in
Control;
(ii) (A) A significant diminution in the nature or scope of
the authorities, powers, functions, responsibilities or duties attached
to the position with the Company and any Subsidiary which the Executive
held immediately prior to the Change in Control, (B) a reduction in the
Executive's Base Pay, (C) a reduction in the Executive's opportunity
for Incentive Pay, or (D) the termination or denial of the Executive's
rights to Employee Benefits or a reduction in the scope or value
thereof, any of which is not remedied by the Company within 10 calendar
days after receipt by the Company of written notice from the Executive
of such change, reduction or termination, as the case may be; provided
however, that the Executive agrees that changes resulting solely from
the fact that the Company is not an independent public company
following a Change in Control shall not provide the basis for the
Executive to terminate his employment with the Company;
(iii) A determination by the Executive (which determination
will be conclusive and binding upon the parties hereto provided it has
been made in good faith and
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in all events will be presumed to have been made in good faith unless
otherwise shown by the Company by clear and convincing evidence) that a
change in circumstances has occurred following a Change in Control,
including, without limitation, a change in the scope of the business or
other activities for which the Executive was responsible immediately
prior to the Change in Control, which has rendered the Executive
substantially unable to carry out, has substantially hindered
Executive's performance of, or has caused Executive to suffer a
substantial reduction in, any of the authorities, powers, functions,
responsibilities or duties attached to the position held by the
Executive immediately prior to the Change in Control, which situation
is not remedied within 10 calendar days after written notice; provided
however, that the Executive agrees that changes resulting solely from
the fact that the Company is not an independent public company
following a Change in Control shall not provide the basis for the
Executive to terminate his employment with the Company;
(iv) The liquidation, dissolution, merger, consolidation or
reorganization of the Company or transfer of all or substantially all
of its business and/or assets, unless the successor or successors (by
liquidation, merger, consolidation, reorganization, transfer or
otherwise) to which all or substantially all of its business and/or
assets have been transferred (directly or by operation of law) assumed
all duties and obligations of the Company under this Agreement pursuant
to Section 11(a);
(v) The Company relocates its principal executive offices, or
requires the Executive to have his principal location of work changed,
to any location that is in excess of 25 miles from the location thereof
immediately prior to the Change in Control; or
(vi) Without limiting the generality or effect of the
foregoing, any material breach of this Agreement by the Company or any
successor thereto.
(c) Notwithstanding anything contained in this Agreement to
the contrary, in the event of a Change in Control at a time during which Xxxxxx
X. Xxxxxxxx is the Chief Executive Officer of the Company and during the one
year period immediately following such Change in Control Xx. Xxxxxxxx'
employment with the Company is terminated, the Executive may terminate
employment with the Company and any Subsidiary for any reason, or without
reason, during the 30-day period following the termination of Xx. Xxxxxxxx'
employment with the Company with the right to severance compensation as provided
in Section 6 and, if applicable, Section 7. It is expressly acknowledged that
the Executive may exercise his rights under this Section 3(c) notwithstanding
that the Company may have terminated the
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Executive's employment pursuant to Section 3(a).
(d) A termination by the Company pursuant to Section 3(a) or
by the Executive pursuant to Section 3(b) or Section 3(c) will not affect any
rights that the Executive may have pursuant to any agreement, policy, plan,
program or arrangement of the Company providing Employee Benefits, which rights
shall be governed by the terms thereof; provided however, that in the event that
the Executive's employment with the Company is terminated during the Severance
Period, the Executive acknowledges that he shall not be entitled to severance
benefits under any other plan, policy, practice or agreement of the Company
other than this Agreement.
4. SEVERANCE COMPENSATION. (a) If, following the occurrence of
a Change in Control, the Company terminates the Executive's employment during
the Severance Period other than pursuant to Section 3(a), or if the Executive
terminates his employment pursuant to Section 3(b) or Section 3(c), the Company
will pay to the Executive the following amounts within 10 business days after
the Termination Date and continue to provide to the Executive the following
benefits:
(i) A lump sum payment in an amount equal to $________.
(ii) For a period of twenty-four months following the
Termination Date (the "Continuation Period"), the Company will arrange
to provide the Executive with Employee Benefits that are welfare
benefits (but not stock option, stock purchase, stock appreciation or
similar compensatory benefits) substantially similar to those that the
Executive was receiving or entitled to receive immediately prior to the
Termination Date (or, if greater, immediately prior to the reduction,
termination, or denial described in Section 3(b)(ii)). If and to the
extent that any benefit described in this Section 4(a)(ii) is not or
cannot be paid or provided under any policy, plan, program or
arrangement of the Company or any Subsidiary, as the case may be, then
the Company will itself pay or provide for the payment to the
Executive, his dependents and beneficiaries, of such Employee Benefits.
Without otherwise limiting the purposes or effect of Section 5,
Employee Benefits otherwise receivable by the Executive pursuant to
this Section 4(a)(ii) will be reduced to the extent comparable welfare
benefits are actually received by the Executive from another employer
during the Continuation Period following the Executive's Termination
Date, and any such benefits actually received by the Executive shall be
reported by the Executive to the Company.
(b) Without limiting the rights of the Executive at law or in
equity, if the Company fails to make any payment or provide any benefit required
to be made or provided hereunder on
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a timely basis, the Company will pay interest on the amount or value thereof at
an annualized rate of interest equal to the so-called composite "prime rate" as
quoted from time to time during the relevant period in the Northeast Edition of
THE WALL STREET JOURNAL. Such interest will be payable as it accrues on demand.
Any change in such prime rate will be effective on and as of the date of such
change.
(c) Notwithstanding any provision of this Agreement to the
contrary, the parties' respective rights and obligations under this Section 4
and under Sections 5 and 7 will survive any termination or expiration of this
Agreement or the termination of the Executive's employment following a Change in
Control for any reason whatsoever.
5. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Anything in
this Agreement to the contrary notwithstanding, in the event that this Agreement
shall become operative and it shall be determined (as hereafter provided) that
any payment (other than the payment or payments provided for in this Section 5)
or distribution by the Company or any of its affiliates to or for the benefit of
the Executive, whether paid or payable or distributed or distributable pursuant
to the terms of this Agreement or otherwise pursuant to or by reason of any
other agreement, policy, plan, program or arrangement, including without
limitation any stock option, stock appreciation right or similar right, or the
lapse or termination of any restriction on or the vesting or exercisability of
any of the foregoing (a "Payment"), would be subject to the excise tax imposed
by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code")
(or any successor provision thereto) by reason of being considered "contingent
on a change in ownership or control" of the Company, within the meaning of
Section 280G of the Code (or any successor provision thereto) or to any similar
tax imposed by state or local law, or any interest or penalties with respect to
such tax (such tax or taxes, together with any such interest and penalties,
being hereafter collectively referred to as the "Excise Tax"), then the
Executive shall be entitled to receive an additional payment or payments
(collectively, a "Gross-Up Payment"). The Gross-Up Payment shall be in an amount
such that, after payment by the Executive of all taxes (including any interest
or penalties imposed with respect to such taxes), including any Excise Tax
imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payment. The intent of
this Section 5 is that the Executive shall suffer no detriment as a result of
the imposition of the Excise Tax on any Payment and it shall be construed
accordingly.
(b) Subject to the provisions of Section 5(f), all
determinations required to be made under this Section 5, including whether an
Excise Tax is payable by the Executive and the amount of such Excise Tax and
whether a Gross-Up Payment is
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required to be paid by the Company to the Executive and the amount of such
Gross-Up Payment, if any, shall be made by a nationally recognized accounting
firm (the "Accounting Firm") selected by the Executive in his sole discretion.
The Executive shall direct the Accounting Firm to submit its determination and
detailed supporting calculations to both the Company and the Executive within 30
calendar days after the Termination Date, if applicable, and any such other time
or times as may be requested by the Company or the Executive. If the Accounting
Firm determines that any Excise Tax is payable by the Executive, the Company
shall pay the required Gross-Up Payment to the Executive within five business
days after receipt of such determination and calculations with respect to any
Payment to the Executive. If the Accounting Firm determines that no Excise Tax
is payable by the Executive, it shall, at the same time as it makes such
determination, furnish the Company and the Executive an opinion that the
Executive has substantial authority not to report any Excise Tax on his federal,
state or local income or other tax return. As a result of the uncertainty in the
application of Section 4999 of the Code (or any successor provision thereto) and
the possibility of similar uncertainty regarding applicable state or local tax
law at the time of any determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made (an "Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts or fails
to pursue its remedies pursuant to Section 5(f) and the Executive thereafter is
required to make a payment of any Excise Tax, the Executive shall direct the
Accounting Firm to determine the amount of the Underpayment that has occurred
and to submit its determination and detailed supporting calculations to both the
Company and the Executive as promptly as possible. Any such Underpayment shall
be promptly paid by the Company to, or for the benefit of, the Executive within
five business days after receipt of such determination and calculations.
(c) The Company and the Executive shall each provide the
Accounting Firm access to and copies of any books, records and documents in the
possession of the Company or the Executive, as the case may be, reasonably
requested by the Accounting Firm, and otherwise cooperate with the Accounting
Firm in connection with the preparation and issuance of the determinations and
calculations contemplated by Section 5(b). Any determination by the Accounting
Firm as to the amount of the Gross-Up Payment shall be binding upon the Company
and the Executive.
(d) The federal, state and local income or other tax returns
filed by the Executive shall be prepared and filed on a consistent basis with
the determination of the Accounting Firm with respect to the Excise Tax payable
by the Executive. The Executive shall make proper payment of the amount of any
Excise Payment, and at the request of the Company, provide to the Company true
and correct copies (with any amendments) of his
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federal income tax return as filed with the Internal Revenue Service and
corresponding state and local tax returns, if relevant, as filed with the
applicable taxing authority, and such other documents reasonably requested by
the Company, evidencing such payment. If prior to the filing of the Executive's
federal income tax return, or corresponding state or local tax return, if
relevant, the Accounting Firm determines that the amount of the Gross-Up Payment
should be reduced, the Executive shall within five business days pay to the
Company the amount of such reduction. If after filing the Executive's federal
income tax return, or corresponding state or local tax return, if relevant, the
Accounting Firm determines that the amount of the Gross-Up Payment should be
reduced, the Executive, at the direction of the Company, following procedures
similar to those described in Section 7(f) shall file a claim for refund. The
Executive will promptly pay to the Company the amount of any refund received
(together with any interest paid or credited thereon after any taxes applicable
thereto).
(e) The fees and expenses of the Accounting Firm for its
services in connection with the determinations and calculations contemplated by
Section 5(b) shall be borne by the Company. If such fees and expenses are
initially paid by the Executive, the Company shall reimburse the Executive the
full amount of such fees and expenses within five business days after receipt
from the Executive of a statement therefor and reasonable evidence of his
payment thereof.
(f) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service or any other taxing authority that, if
successful, would require the payment by the Company of a Gross-Up Payment. Such
notification shall be given as promptly as practicable but no later than 10
business days after the Executive actually receives notice of such claim and the
Executive shall further apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid (in each case, to the extent
known by the Executive). The Executive shall not pay such claim prior to the
earlier of (i) the expiration of the 30-calendar-day period following the date
on which he gives such notice to the Company and (ii) the date that any payment
of amount with respect to such claim is due. If the Company notifies the
Executive in writing prior to the expiration of such period that it desires to
contest such claim, the Executive shall:
(i) provide the Company with any written records or documents
in his possession relating to such claim reasonably requested by the Company;
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time, including
without limitation accepting legal representation with respect to such claim by
an attorney
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competent in respect of the subject matter and reasonably selected by the
Company;
(iii) cooperate with the Company in good faith in order
effectively to contest such claim; and
(iv) permit the Company to participate in any proceedings
relating to such claim;
PROVIDED, HOWEVER, that the Company shall bear and pay directly all costs and
expenses (including interest and penalties) incurred in connection with such
contest and shall indemnify and hold harmless the Executive, on an after-tax
basis, for and against any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limiting the foregoing provisions of this
Section 5(f), the Company shall control all proceedings taken in connection with
the contest of any claim contemplated by this Section 5(f) and, at its sole
option, may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim
(provided, however, that the Executive may participate therein at his own cost
and expense) and may, at its option, either direct the Executive to pay the tax
claimed and xxx for a refund or contest the claim in any permissible manner, and
the Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; PROVIDED, HOWEVER, that if the
Company directs the Executive to pay the tax claimed and xxx for a refund, the
Company shall advance the amount of such payment to the Executive on an
interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income or other tax, including interest
or penalties with respect thereto, imposed with respect to such advance; and
PROVIDED FURTHER, HOWEVER, that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Executive with respect
to which the contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of any such contested claim
shall be limited to issues with respect to which a Gross-Up Payment would be
payable hereunder and the Executive shall be entitled to settle or contest, as
the case may be, any other issue raised by the Internal Revenue Service or any
other taxing authority.
(g) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 5(f), the Executive receives any
refund with respect to such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 5(f)) promptly pay to the Company the
amount of such refund (together with any interest paid or
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credited thereon after any taxes applicable thereto). If, after the receipt by
the Executive of an amount advanced by the Company pursuant to Section 5(f), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial or refund prior to the expiration
of 30 calendar days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of any such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid by the Company to the Executive pursuant to this Section 5.
6. NO MITIGATION OBLIGATION. The Company hereby acknowledges
that it will be difficult and may be impossible for the Executive to find
reasonably comparable employment following the Termination Date. Accordingly,
the payment of the severance compensation by the Company to the Executive in
accordance with the terms of this Agreement is hereby acknowledged by the
Company to be reasonable, and the Executive will not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other employment
or otherwise, nor will any profits, income, earnings or other benefits from any
source whatsoever create any mitigation, offset, reduction or any other
obligation on the part of the Executive hereunder or otherwise, except as
expressly provided in the last sentence of Section 4(a)(ii).
7. LEGAL FEES AND EXPENSES. It is the intent of the Company
that the Executive not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement or defense of Executive's rights
under this Agreement by litigation or otherwise because the cost and expense
thereof would substantially detract from the benefits intended to be extended to
the Executive hereunder. Accordingly, if it should appear to the Executive that
the Company has failed to comply with any of its obligations under this
Agreement or in the event that the Company or any other person takes or
threatens to take any action to declare this Agreement void or unenforceable, or
institutes any litigation or other action or proceeding designed to deny, or to
recover from, the Executive the benefits provided or intended to be provided to
the Executive hereunder, the Company irrevocably authorizes the Executive from
time to time to retain counsel of Executive's choice, at the expense of the
Company as hereafter provided, to advise and represent the Executive in
connection with any such interpretation, enforcement or defense, including
without limitation the initiation or defense of any litigation or other legal
action, whether by or against the Company or any director, officer, stockholder
or other person affiliated with the Company, in any jurisdiction.
Notwithstanding any existing or prior attorney-client relationship between the
Company and such counsel, the Company irrevocably consents to the Executive's
entering into an attorney-client relationship with such counsel, and in that
connection the Company and the Executive agree that a
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confidential relationship shall exist between the Executive and such counsel.
Without respect to whether the Executive prevails, in whole or in part, in
connection with any of the foregoing, the Company will pay and be solely
financially responsible for any and all reasonable attorneys' and related fees
and expenses incurred by the Executive in connection with any of the foregoing.
8. COMPETITIVE ACTIVITY. During a period ending at the later
of (a) three years following the first occurrence of a Change in Control, and
(b) one year following the Termination Date, if the Executive shall have
received or shall be receiving benefits under Section 4 and, if applicable,
Section 5, the Executive shall not, without the prior written consent of the
Company engage in any Competitive Activity.
9. EMPLOYMENT RIGHTS. Nothing expressed or implied in this
Agreement will create any right or duty on the part of the Company or the
Executive to have the Executive remain in the employment of the Company or any
Subsidiary prior to or following any Change in Control. Any termination of
employment of the Executive or the removal of the Executive from the office or
position in the Company or any Subsidiary following the commencement of any
discussion with a third person that ultimately results in a Change in Control
shall be deemed to be a termination or removal of the Executive after a Change
in Control for purposes of this Agreement.
10. 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 law or government regulation
or ruling.
11. SUCCESSORS AND BINDING AGREEMENT. (a) The Company will
require any successor (whether direct or indirect, by purchase, merger,
consolidation, reorganization or otherwise) to all or substantially all of the
business or assets of the Company, by agreement in form and substance
satisfactory to the Executive, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent the Company would be
required to perform if no such succession had taken place. This Agreement will
be binding upon and inure to the benefit of the Company and any successor to the
Company, including without limitation any persons acquiring directly or
indirectly all or substantially all of the business or assets of the Company
whether by purchase, merger, consolidation, reorganization or otherwise (and
such successor shall thereafter be deemed the "Company" for the purposes of this
Agreement), but will not otherwise be assignable, transferable or delegable by
the Company.
(b) This Agreement will inure to the benefit of and be
enforceable by the Executive's personal or legal representatives,
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executors, administrators, successors, heirs, distributees and legatees.
(c) This Agreement is personal in nature and neither of the
parties hereto shall, without the consent of the other, assign, transfer or
delegate this Agreement or any rights or obligations hereunder except as
expressly provided in Sections 11(a) and 11(b). Without limiting the generality
or effect of the foregoing, the Executive's right to receive payments hereunder
will not be assignable, transferable or delegable, whether by pledge, creation
of a security interest, or otherwise, other than by a transfer by Executive's
will or by the laws of descent and distribution and, in the event of any
attempted assignment or transfer contrary to this Section 11(c), the Company
shall have no liability to pay any amount so attempted to be assigned,
transferred or delegated.
12. NOTICES. For all purposes of this Agreement, all
communications, including without limitation notices, consents, requests or
approvals, required or permitted to be given hereunder will be in writing and
will be deemed to have been duly given when hand delivered or dispatched by
electronic facsimile transmission (with receipt thereof confirmed), or five
business days after having been mailed by United States registered or certified
mail, return receipt requested, postage prepaid, or three business days after
having been sent by a nationally recognized overnight courier service such as
Federal Express, UPS, or Purolator, addressed to the Company (to the attention
of the Secretary of the Company) at its principal executive office and to the
Executive at his principal residence, or to such other address as any party may
have furnished to the other in writing and in accordance herewith, except that
notices of changes of address shall be effective only upon receipt.
13. GOVERNING LAW. The validity, interpretation, construction
and performance of this Agreement will be governed by and construed in
accordance with the substantive laws of the State of Delaware, without giving
effect to the principles of conflict of laws of such State.
14. VALIDITY. If any provision of this Agreement or the
application of any provision hereof to any person or circumstances is held
invalid, unenforceable or otherwise illegal, the remainder of this Agreement and
the application of such provision to any other person or circumstances will not
be affected, and the provision so held to be invalid, unenforceable or otherwise
illegal will be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid or legal.
15. MISCELLANEOUS. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and the Company. No waiver by
either party hereto at
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any time of any breach by the other party hereto or compliance with any
condition or provision of this Agreement to be performed by such other party
will be deemed a waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. No agreements or representations, oral
or otherwise, expressed or implied with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement. References to Sections are to references to Sections of this
Agreement.
16. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same agreement.
[Executed on Following Page]
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IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed and delivered as of the date first above written.
SINTER METALS, INC.
By:
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Xxxxxx X. Xxxxxxxx
Chairman and
Chief Executive Officer
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Executive
