EXHIBIT 10.x
SEVERANCE AGREEMENT
AGREEMENT made as of this 3rd day of January, 2000 by and between MTS
Systems Corporation, a Minnesota corporation ("MTS") and Xxxxxxxx X. Xxxxx (the
"Executive").
WHEREAS, MTS desires to employ Executive as its Vice President and
Executive is willing to become employed by MTS in such capacity; and
WHEREAS, Executive is expected to make a significant contribution to
the profitability, growth and financial strength of MTS; and
WHEREAS, MTS considers the establishment and maintenance of a sound and
vital management and an orderly succession plan to be essential to protecting
and enhancing the best interests of MTS and its shareholders; and
WHEREAS, this Agreement is consistent with the requirements of the
executive/high policymaking exception to the Age Discrimination in Employment
Act, 29 U.S.C. Section 631(c)(1) (the "Executive Exemption"), benefits in
connection therewith are pursuant to pension, profit sharing and deferred
compensation plans as defined therein, and Executive, by virtue of his or her
duties and responsibilities on behalf of MTS, qualifies under said exception for
mandatory retirement on or after his or her 65th birthday; and
WHEREAS, MTS is providing Executive, simultaneously with this
Agreement, in addition to Executive's employment with MTS and the special
benefits associated therewith, additional consideration in the form of a Change
in Control Agreement, to provide additional benefits to Executive in the event
of a change in control;
NOW THEREFORE, in consideration of the foregoing and other respective
covenants and agreements of the parties herein contained, the parties hereto
agree as follows:
1. Term of Agreement. This Agreement shall commence on the date hereof
and shall continue in effect until the earlier of (a) the date on which the
Executive and MTS agree in writing to terminate this Agreement, or (b) the Date
of Termination indicated in paragraph 2, 3, or 4 hereunder. If a change in
control occurs, as defined in that certain agreement between the Executive and
MTS of even date herewith (the "Change in Control Agreement", attached as
Exhibit 1), this Agreement shall be superseded by the provisions of the Change
in Control Agreement except as provided in the following sentence. MTS's right
under this Agreement to terminate the Executive's employment pursuant to the
Executive Exemption shall not be superceded by the Change in Control Agreement
and the Executive
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shall be entitled to receive the benefits to which he is entitled under
subparagraph 4(d) hereunder if such termination occurs.
2. Termination by Reason of Death or Disability. In the event of the
Executive's death or disability during the Term of this Agreement, Executive
shall be entitled to such benefits provided under any policy, plan or program
governing death or disability maintained by MTS and covering such Executive and
this Agreement shall not apply. The determination of disability and the amount
and entitlement of benefits shall be governed by the terms of such policy, plan
or program. In the event of the Executive's disability, the Executive's Date of
Termination shall be the date on which Executive has been unable, by reason of
physical or mental disability, to perform the services required of him or her
for his or her position, even with reasonable accommodation, for the period of
time indicated in MTS's group long term disability plan (in which the Executive
is a participant) during which a participant must be disabled before benefits
become payable. In connection with Executive's termination due to disability, a
qualified physician must certify the disability and MTS shall at all times
comply with the Americans With Disabilities Act and any other applicable
disability discrimination law.
3. Resignation or Termination for Cause.
(a) The Executive may resign his or her employment or MTS may
terminate the Executive's employment for Cause, effective as of the
Date of Termination set forth in the Notice of Termination. If
Executive resigns or his or her employment is terminated by MTS for
Cause, MTS shall pay to Executive his or her full base salary through
the Date of Termination at the rate in effect at the time of Notice of
Termination is given and MTS shall have no further obligation to
Executive under this Agreement.
(b) Termination by MTS of Executive's employment for "Cause"
shall mean termination as a result of:
(i) the conviction of the Executive by a court of
competent jurisdiction for felony criminal conduct; or
(ii) willful misconduct by the Executive; or
(iii) violation by the Executive of any employment
agreement applicable to the Executive.
4. Termination Other Than for Cause. MTS may terminate Executive's
employment for a reason other than Cause, including pursuant to the Executive
Exemption on or after Executive's 65th birthday, effective as of the Date of
Termination set forth in the Notice of Termination. If Executive's employment is
terminated by MTS other than for Cause, death or disability, Executive shall be
entitled, subject to subparagraph 4(d)(v) and paragraph 9 of this Agreement, to
the benefits described in subparagraphs (a), (b) and (c) below and, if
applicable, subparagraph (d) below.
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(a) Executive shall be paid a monthly Severance Payment equal
to the Executive's Monthly Gross Income, as defined in subparagraph (i)
below for 6 months. If Executive's employment is terminated pursuant to
the Executive Exemption as described in subparagraph 4(d) hereunder,
"12" shall be substituted for "15" in the preceding sentence.
(i) For purposes of this Agreement, Monthly Gross
Income shall mean the sum of the following amounts, subject to
applicable federal and state withholding.
(A) 1/12 of the highest average base salary
for any 12-consecutive month period during the 36
calendar month period ending immediately prior to the
Date of Termination; plus
(B) the monthly average of the total
Management Variable Compensation (MVC) earned during
the lesser of the 3 most recent or the actual number
of fiscal years participating in the MVC plan ending
immediately prior to the Date of Termination; plus
(C) the product of the average percentage of
MTS profit sharing contributions to the MTS Systems
Corporation Profit Sharing Retirement Plan and Trust
(as a percent of Compensation as defined in the Plan
up to the federal limit) for the lesser of the 3 most
recent or the actual number of participating Plan
Years ending immediately prior to the Date of
Termination multiplied by the sum of (A) and (B)
above.
(b) Executive shall be entitled to continue any of said
benefits which qualify as group health and life insurance benefits for
continuation coverage under the Comprehensive Omnibus Budget
Reconciliation Act ("COBRA") or applicable state law and pursuant to
the terms of the plan. Following the Executive's Date of Termination
and while severance payments are being paid to the Executive or, if
earlier, until Executive is covered under other group plans, MTS shall
continue to pay the employer share of the Executive's MTS group life
and health insurance premiums. All premium payments made on Executive's
behalf following his or her Date of Termination and Executive's
continued participation in the plans are contingent upon Executive
making the appropriate timely written elections to continue his or her
group benefits following his or her Date of Termination, said group
benefits continuing in effect for active MTS employees, Executive
continuing to be eligible under the terms of the plans and applicable
laws, and Executive's payment of the employee portion of the premiums
for such benefits. Benefits otherwise receivable by Executive pursuant
to this subparagraph (b) shall be reduced or eliminated to the extent
comparable benefits are actually received by Executive during such
period from a source outside MTS, and any such benefits actually
received by Executive shall be reported to MTS.
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(c) The Executive's rights under any existing Employee Stock
Option Agreement and any future such agreements, including particularly
his or her vesting rights and his or her right to exercise his or her
options following his or her termination of employment, shall continue
to be fully effective hereunder. In addition, if the Executive's
termination of employment occurs pursuant to the Executive Exemption on
or after he has reached his or her 65th birthday, the Executive shall
continue to vest in any stock options in which he is not fully vested,
as though he were continuing his or her employment with MTS as an
active employee, subject at all times to the exercise times and other
terms and conditions set forth in said Stock Option Agreements and to
Executive's signing the release agreement described in paragraph 9
herein.
(d) If Executive's termination of employment occurs pursuant
to the Executive Exemption on or after he has reached his or her 65th
birthday, Executive shall be entitled to receive the lump sum
equivalent of the amount necessary to purchase a $44,000 pre-tax
straight life annuity, said lump sum to be taken from MTS contributions
and earnings thereon to Executive's accounts in MTS sponsored pension,
profit sharing, and deferred compensation plans, as applicable. If
Executive is entitled to less than that amount from the applicable MTS
plans in which he is a participant as of his or her Date of
Termination, then MTS shall make an additional contribution on
Executive's behalf to Executive's Deferral Account in the MTS Systems
Corporation Executive Deferred Compensation Plan, pursuant to Section
3.4 of said Plan. The amount to which Executive is entitled under
subparagraph 4(a) of this Agreement shall be reduced by MTS's Section
3.4 contribution to the MTS Systems Corporation Executive Deferred
Compensation Plan, as described in subparagraph (v) below. Calculation
of the Executive's benefit shall be as follows:
(i) The benefits to which Executive is entitled, as
of his or her Date of Termination, under all MTS sponsored
pension, profit sharing and deferred compensation plans shall
be added together.
(ii) Amounts in said plans, as determined in
accordance with 29 Code of Federal Regulations ss. 1627.17,
attributable to Social Security, employee contributions,
contributions of prior employers, and rollover contributions,
shall be subtracted from the subparagraph (i) amount and the
resulting figure shall be the "Qualified Retirement Benefit".
(iii) MTS shall determine the lump sum equivalent of
the amount necessary to purchase a straight life annuity for
Executive, effective as of his or her Date of Termination,
which would provide Executive with $44,000 a year for life
(the "ADEA Benefit"). MTS shall retain a certified actuary to
determine said lump sum equivalent amount, using the
applicable mortality table and applicable interest rate under
Section 417(e) of the Internal Revenue Code and Regulations
issued thereunder.
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(iv) If the Qualified Retirement Benefit exceeds the
ADEA Benefit, the Executive shall have the option (but is not
required) to receive the Qualified Retirement Benefit in a
lump sum, as provided under the applicable plans, within 60
days following his or her Date of Termination. The Executive
may elect to receive the Qualified Retirement Benefit in
either a lump sum or a series of periodic payments pursuant to
the terms of the applicable plans. The Executive may also
receive the payments and benefits set forth in subparagraphs
4(a) and (b) of this Agreement provided he executes the
release agreement required in paragraph 9 of this Agreement.
The benefits set forth in subparagraph 4(c) shall at all times
be available to the Executive.
(v) If the Qualified Retirement Benefit is less than
the ADEA Benefit, MTS shall make a contribution to Executive's
Deferral Account in the MTS Systems Corporation Executive
Deferred Compensation Plan, pursuant to Section 3.4 of said
Plan, in an amount equal to the difference between the
Qualified Retirement Benefit and the ADEA Benefit (the
"Qualified Retirement Benefit Supplement"). The Executive
shall have the option (but is not required) to receive the
Qualified Retirement Benefit and, if applicable, the Qualified
Retirement Benefit Supplement from said Plan within 60 days
following his or her Date of Termination. The Executive may
elect to receive the Qualified Retirement Benefit and, if
applicable, the Qualified Retirement Benefit Supplement, in
either a lump sum or a series of periodic payments pursuant to
the terms of the applicable plans. The payments to Executive
described in subparagraph 4(a) of this Agreement shall be
reduced by the amount of MTS's contribution to Executive's
Deferral Account in the MTS Systems Corporation Executive
Deferred Compensation Plan, pursuant to Section 3.4 of said
Plan, to create the Qualified Retirement Benefit Supplement.
All payments remaining in subparagraph 4(a) after this
reduction and the subparagraph 4(b) and (c) benefits shall be
paid to Executive in accordance with the terms of those
subparagraphs, provided Executive executes the release
agreement required in paragraph 9 of this Agreement.
(vi) Executive's Qualified Retirement Benefit and, if
applicable, the Qualified Retirement Benefit Supplement, shall
be nonforfeitable and not subject to reduction or elimination
by MTS for any reason.
5. No Mitigation. Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other employment
or otherwise; nor shall the amount of any payment or benefit provided for in
this Agreement be reduced by any compensation earned by Executive as the result
of employment by another employer or by retirement benefits after the Date of
Termination or otherwise except as specifically provided herein.
6. Non-Competition and Confidentiality.
(a) Executive agrees that, as a condition of receiving
benefits under this Agreement, he will not render services directly or
indirectly to any competing
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organization located in any market in which MTS is doing business as of
Executive's Date of Termination for the period of time during which
Executive is receiving benefits under this Agreement or the Change in
Control Agreement, in connection with the design, implementation,
development, manufacture, marketing, sale, merchandising, leasing,
servicing or promotion of any "Conflicting Product" which as used
herein means any product, process, system or service of any person,
firm, corporation, organization other than MTS, in existence or under
development, which is the same as or similar to or competes with, or
has a usage allied to, a product, process, system, or service produced,
developed, or used by MTS.
(b) Executive further agrees and acknowledges his or her
existing obligation that, at all times during and subsequent to his or
her employment with MTS, he will not divulge or appropriate to his or
her own use or the uses of others any secret or confidential
information pertaining to the business of MTS, or any of its
subsidiaries, obtained during his or her employment by MTS or any of
its subsidiaries.
(c) If Executive violates his or her obligations under
subparagraphs (a) and (b) above, any remaining payments or benefits
otherwise due Executive pursuant to subparagraphs 4(a) and (b) of this
Agreement shall not be paid. This subparagraph (c) specifically does
not apply to the subparagraph 4(a) reduction amount equal to the
Qualified Retirement Benefit Supplement, as described in subparagraph
4(d)(v).
7. Binding Agreement. This Agreement shall inure to the benefit of and
be enforceable by Executive's personal or legal representatives, heirs, and
designated beneficiaries. If Executive should die while any amount would still
be payable to Executive 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 Executive's designated beneficiaries, or, if
there is no such designated beneficiary, to the Executive's estate.
8. Notice of Termination.
(a) Any purported termination of Executive's employment by
either Executive or MTS under this Agreement, except as otherwise
provided in paragraph 2 of this Agreement, shall be communicated by
written notice to the other party.
(b) For purposes of this Agreement, "Date of Termination"
shall mean the date specified in the written Notice of Termination
which shall not be less than 10 nor more than 60 days from the date
such Notice of Termination is given.
(c) Notice of Termination and all other communications
provided for in the Agreement shall be deemed to have been duly given
when delivered or mailed by United States registered or certified mail,
return receipt requested, postage pre-paid, addressed to the last known
residence address of the Executive or in the case of MTS, to its
principal office to the attention of each of the then directors of MTS
with a copy to its Secretary, or to such other address as either party
may have furnished to the
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other in writing in accordance herewith, except that notice of change
of address shall be effective only upon receipt.
9. Release of Claims. Executive's right to the benefits and payments
described in subparagraphs 4(a), (b) and (c) of this Agreement, except as
otherwise provided in subparagraph 4(d)(v) hereof, is contingent upon
Executive's execution of a severance release agreement which shall be provided
to Executive by MTS with or following his or her Notice of Termination. The
severance release agreement shall require a full release of all claims which
Executive may have against MTS or any MTS affiliate or individual associated
with MTS, to the extent permitted by and consistent with applicable laws. Such
release agreement shall prohibit Executive from recovering any amount in
connection with a charge or lawsuit filed against MTS or any MTS affiliate,
employee, shareholder, officer, director or other agent by Executive, EEOC or
any other agency or entity on Executive's behalf based upon any act occurring
prior to execution of said release agreement. The release agreement will be
available for Executive's review, consideration and execution at least 45 days
prior to his or her Date of Termination.
10. Injunctive Relief. Executive consents that, in the case of any
violation or threatened violation of paragraph 6 of this Agreement, MTS may
apply for and secure injunctive relief, temporary or provisional, in court,
without bond but upon due notice, pending final resolution on the merits
pursuant to arbitration as set forth in paragraph 11 hereof. No waiver of any
violation of this Agreement shall be implied from any failure by MTS to take
action under this paragraph.
11. Arbitration. Any and all claims or disputes between Executive and
MTS (including the validity, scope, and enforceability of this paragraph),
except as otherwise provided under paragraph 10 or prohibited under applicable
law, shall be submitted for arbitration and resolution to an arbitrator. No
demand for arbitration may be made after the date when the institution of legal
or equitable proceedings based on such claim or dispute would be barred by the
applicable statute of limitation. The arbitrator shall be selected by mutual
agreement of the parties. Unless otherwise provided for in this Agreement, the
Expedited Labor Arbitration Rules of the American Arbitration Association shall
apply. If the parties are unable to agree upon an arbitrator, any such dispute
shall be solely and finally settled by arbitration in accordance with the
Expedited Labor Arbitration Rules of the American Arbitration Association
("AAA"). The parties agree that no punitive damages shall be awarded hereunder.
The parties also agree that all awards, decisions and remedies in favor of a
winning party hereunder with respect to any issue shall be proportional to the
violation caused by the losing party with respect to that issue. All costs in
conducting the arbitration, including but not limited to the arbitration filing
fee, the arbitrator's fees and expenses, and the reasonable attorney's fees and
expenses of the prevailing party (including the attorney's fees and costs
incurred by the prevailing party in seeking or resisting temporary or
provisional court relief as set out in paragraph 10 above), shall be the
responsibility of the losing party. In the event there is more than one issue in
dispute and there is no one prevailing party with respect to all issues in
dispute, costs and attorney's fees shall be prorated by the arbitrator according
to the relative dollar value of each issue. The arbitrator's Award shall be
final and binding. In the event either party must resort to the judicial process
to enforce the provisions of this Agreement, the award of an arbitrator or
equitable relief
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granted by an arbitrator, the party seeking enforcement shall be entitled to
recover from the other party all costs of litigation including, but not limited
to, reasonable attorney's fees and court costs. The arbitration proceedings and
Award shall be maintained by both parties as strictly confidential, except as
otherwise required by court order and with respect to the parties' attorneys and
tax advisors, and, with respect to MTS, members of its management, and, with
respect to Executive, his or her family.
12. Miscellaneous.
(a) No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the parties. No waiver by either party hereto
at any time of any breach by the other party to this Agreement of, or
compliance with, any other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or
similar time.
(b) No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been
made by either party which are not expressly set forth in this
Agreement.
(c) The validity, interpretation, construction and performance
of this Agreement shall be governed by the laws of the State of
Minnesota.
(d) Any provision of this Agreement which conflicts with
applicable law shall be modified to the extent necessary to ensure its
enforceability. The invalidity or unenforceability or 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.
This Agreement supersedes any and all prior oral and written
understandings and agreements between the Executive and MTS.
IN WITNESS WHEREOF, MTS, through its authorized officer, and the
Executive have executed this Agreement as of the day and date first above
written.
EXECUTIVE: MTS SYSTEMS CORPORATION
/s/ Xxxxxxxx X. Xxxxx By /s/ Xxxxxx X. Xxxxx, Xx.
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Xxxxxxxx X. Xxxxx
Its Chairman and CEO
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