SEVERANCE AGREEMENT
SEVERANCE AGREEMENT (the "Agreement"), dated as of February
21, 1995, between PHILIPP BROTHERS CHEMICALS, INC., a New York corporation
having its principal office at Xxx Xxxxxx Xxxxx, Xxxx Xxx, Xxx Xxxxxx 00000
("PBC"), and _______________________________________________________.
WHEREAS, the Executive has made and is expected to make a
major contribution to the profitability and growth of PBC and Phibro-Tech, Inc.,
a Delaware corporation ("Phibro-Tech"), and a subsidiary of PBC; and
WHEREAS, PBC considers the continued services of the
Executive to be in the best interests of PBC and its stockholders and wishes to
assure the continued services of the Executive on behalf of PBC.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements hereinafter set forth, the parties hereto agree as follows:
1. Certain Definitions. Capitalized terms not otherwise
defined herein shall have the following meanings:
"Actual or Constructive Termination" means, with
respect to the Executive, the occurrence of any of the following
events: (a) a written communication from the President of PBC or
any Affiliate or from the Chairman of the Board or Chairman of the
Board of Directors of any
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Affiliate or from the Board or the Board of Directors of any Affiliate or any
committee thereof, that the Executive's employment with PBC or such Affiliate
has been, or will shortly be, terminated, (b) a change (objected to in writing
by the Executive within 30 days after such change) in the Executive's title or
office, or in the nature or scope of the Executive's authority, duties,
responsibility or status, or in his reporting responsibilities, location of
work, compensation, employee benefits or perquisites, or (c) the Permanent
Disability of the Executive; provided, however, that no communication referenced
in clause (a) and no change referenced in clause (b) shall be deemed an Actual
or Constructive Termination if the Executive agrees to remain or become an
employee of any Affiliate; provided further, that no change in compensation
referenced in clause (b) shall be deemed an Actual or Constructive Termination
if such change is part of a bona fide plan approved by the Board or the Board of
Directors of any Affiliate employing the Executive to reduce PBC's or such
Affiliate's overall costs and such change in compensation is proportionate to
the changes in compensation experienced by other employees of PBC or such
Affiliate.
"Adjusted Net Income" means, for any fiscal year of
Phibro-Tech, or for any twelve-month period, as the case may be, Net Income for
such year or such period plus the sum of all amounts deducted for Interest
Expense and income taxes.
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"Affiliate" means any entity that, directly or indirectly,
controls, is controlled by or is under common control with PBC.
"Board" means the Board of Directors of PBC.
"Change of Control Event" means the cessation of employment
of the Executive by PBC or any Affiliate (whether at the election of the
Executive or as a result of the Executive's termination by PBC or such
Affiliate) (i) within six months after the date on which any of the following
events (other than the event described in clause (b)) occurs or (ii) within six
months after the date that is three years after the event described in clause
(b) occurs:
(a) Xxxx X. Xxxxxxxx shall cease to be employed by PBC as
the President and Chief Operating Officer having substantially the same
responsibilities as he has on the date hereof, except as a result of his death
or Permanent Disability;
(b) Xxxx X. Xxxxxxxx shall die or become Permanently
Disabled;
(c) An event or transaction, after which Xxxx X. Xxxxxxxx
and his Immediate Family or trusts, all of the beneficial interests in which
shall be held by Xxxx X. Xxxxxxxx or his Immediate Family, are entitled to elect
less than 40% of the directors of PBC;
(d) Xxxx X. Xxxxxxxx and his Immediate Family or
trusts, all of the beneficial interests in which shall be held by
Xxxx X. Xxxxxxxx or his Immediate Family,
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shall be the beneficial owners of less than 50% of the outstanding shares of
Class C common stock or Class E common stock of PBC;
(e) PBC shall, directly or indirectly, be the beneficial
owner of less than 50% of the outstanding shares of common stock of Phibro-Tech
and Xxxx X. Xxxxxxxx and his Immediate Family or trusts, all of the beneficial
interests in which shall be held by Xxxx X. Xxxxxxxx and his Immediate Family,
shall be the beneficial owners of less than 50% of the outstanding shares of
common stock of Phibro-Tech; or
(f) a reorganization, merger, consolidation, acquisition or
other similar transaction, after which all or substantially all of the assets of
Phibro-Tech are controlled by an entity that is not, as of the date hereof, an
Affiliate.
"Class A Common Stock" means the Class A Common Stock, par
value $.0l per share, of Phibro-Tech.
"Class B Common Stock" means the Class B Common Stock, par
value S.0l per share, of Phibro-Tech.
"EBIT" means, as of any date, the higher of (i) an amount
equal to (x) the sum of Adjusted Net Income for each of the immediately
preceding three fiscal years of Phibro-Tech divided by (y) three and (ii)
Adjusted Net Income for the rolling twelve month period ending on the last day
of the immediately preceding fiscal quarter of Phibro-Tech.
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"EBIT Per Share" means, as of any date, an amount
equal to (i) EBIT divided by (ii) the total number of issued and outstanding
shares of Class A Common Stock and Class B Common Stock as set forth in
Phibro-Tech's most recently prepared quarterly balance sheet.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Extraordinary Event" means (i) the initial public offering
of Phibro-Tech's common stock pursuant to an effective registration statement
filed under the Securities Act (an "IPO"), (ii) the sale of at least 50% of the
issued and outstanding shares of Phibro-Tech's common stock by PhibroTech, C.P.
Chemicals, Inc., PBC or their respective successors to a third party (a "Private
Sale") or (iii) the sale of all or substantially all of the assets of Phibro-
Tech to a third party (an "Asset Sale").
"GAAP" means generally .accepted accounting principles
consistently applied.
"Immediate Family" means, with respect to Xxxx X. Xxxxxxxx,
a spouse (except for a spouse with whom Xxxx X. Xxxxxxxx has entered into any
divorce or separation agreement) and any lineal descendant.
"Interest Expense" means, for any fiscal year or
twelve-month period, the amount properly recorded or recordable as interest
expense of Phibro-Tech for such year or period, determined in accordance with
GAAP.
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"Loan Agreement" means the Loan and Security Agreement,
dated as of August 31, 1994, by and among National Westminster Bank NJ, PBC,
C.P. Chemicals, Inc., Phibro-Tech, Prince Agriproducts, Inc., The Prince
Manufacturing Company, an Illinois corporation, and The Prince Manufacturing
Company, a Pennsylvania corporation, and any extensions, modifications, renewals
or refinancings thereof.
"Net Income" means, for any fiscal year or twelve-month
period, the net income of Phibro-Tech for such year or period, determined in
accordance with GAAP, excluding unusual, non-recurring gains or losses
requiring disclosure in Phibro-Tech's financial statements; provided that net
income for any twelve-month period shall at PBC's option, exercisable in its
sole discretion, be determined by reference to Phibro-Tech's audited income
statements for such period prepared by Xxxxxx Xxxxxx & Company or by another
firm of independent public accountants of recognized national standing selected
by PBC.
"Note Agreement" means the Note Agreement, dated as of
August 15, 1994, between PBC and The Northwestern Mutual Life Insurance Company
pursuant to which PBC issued and sold its 11% Senior Notes due June 29, 2004 in
the aggregate principal amount of $20,000,000, and any extensions,
modifications, renewals or refinancings thereof.
"Permanent Disability" means, (i) with respect to Xxxx X.
Xxxxxxxx, that he has received written notification
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from the board of directors of PBC stating that in its view he has become
mentally or physically incapacitated or disabled, whether totally or partially,
so that he is unable substantially to perform (x) for a period of three
consecutive months or (y) for shorter periods aggregating three months during a
six month period, substantially the same services as he performed for PBC prior
to incurring such incapacity or disability and (ii) with respect to the
Executive, that the Executive has received written notification from the Board
or the Board of Directors of any Affiliate employing the Executive stating that
in its view he has become mentally or physically incapacitated or disabled
whether totally or partially, so that he is unable substantially to perform (x)
for a period of three consecutive months or (y) for shorter periods aggregating
three months during a six month period, substantially the same services as he
performed for PBC or such Affiliate prior to incurring such incapacity or
disability.
"Permitted Transferee" means, with respect to the Executive,
(i) a member of such Executive's family, which shall include a spouse (except
for a spouse with whom such Executive has entered into any divorce or separation
agreement), any lineal ancestor or descendant or any sibling (collectively, the
"Family"), or (ii) a trust (including a voting trust at any time established by
Executive for the sole benefit of such Executive and/or one or more of such
Executive's Family), all of the beneficial interests
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which shall be held by such Executive or one or more members of such Executive's
Family (or, in the case of a voting trust, all of the voting trust certificates
of which are owned by such Executive and/or one or more members of such
Executive's Family).
"Prime Rate" means the rate of interest listed as the prime
rate and published in the Wall Street Journal.
"Promissory Note" means the limited recourse promissory note
executed by the Executive in favor of Phibro-Tech as of the date hereof.
"Securities Act" means the Securities Act of 1933, as
amended.
"Shares" means, collectively, (i) the shares of Class B
Common Stock issued to the Executive as of the date hereof, (ii) any shares of
common stock issued in connection with such shares as a result of a stock split,
stock dividend, recapitalization or other capital reorganization, (iii) any
shares of Class A Common Stock issued upon conversion of any of the foregoing
shares ("Conversion Shares") and (iv) any shares of common stock issued in
connection with such Conversion Shares as a result of a stock split, stock
dividend, recapitalization or other capital reorganization. The term "Shares"
shall not include shares of common stock of Phibro-Tech purchased by the
Executive on the open market or in a private transaction from any person other
than his Permitted Transferee.
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"Stockholders Agreement" means the Stockholders Agreement,
dated February 21, 1995, between Phibro-Tech and the individuals listed on the
signature page thereto.
2. Company's Obligation to Pay Severance and Catch-up
Payment: Computation of Severance Amount and Catchup Payment. (a) Upon the
occurrence of (i) an Actual or Constructive Termination or (ii) a Change of
Control Event, the Executive shall be entitled to a cash payment from PBC in an
amount (the "Severance Amount") equal to the excess of (i) the product of (x)
7.84 multiplied by (y) EBIT Per Share multiplied by (z) the number of Shares
owned by the Executive and his Permitted Transferees which have not been
registered pursuant to an effective registration statement filed under the
Securities Act (the "Owned Shares") over (ii) (x) the consideration paid to the
Executive under the Stockholders Agreement with respect to the purchase of such
Owned Shares (A) in cash or (B) by issuance to the Executive of a subordinated
promissory note of PBC bearing interest at the Prime Rate (a "Subordinated
Note") or (C) by cancellation of the existing indebtedness of the Executive to
Phibro-Tech under the Promissory Note, or (y) if Phibro-Tech has exercised its
remedies under the Pledge Agreement, dated the date hereof, between Phibro-Tech
and the Executive, following an Event of Default (as defined in the Promissory
Note), the greater of (A) the amount of indebtedness outstanding under the
Promissory Note or (B) the amount recovered by Phibro-Tech upon the sale or
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other disposition of the Owned Shares pursuant to the Pledge Agreement. PBC
shall pay the Severance Amount to the Executive on the date (i) that payments
with respect to the Owned Shares are made under the Stockholders Agreement or
(ii) that is five days after the date the Owned Shares are sold or disposed of
by Phibro-Tech pursuant to the Pledge Agreement. PBC's obligation under this
Section 2(a) to pay the Severance Amount to the Executive shall terminate upon
payment of such amount and under no circumstances shall PBC be required to pay
any amount to the Executive under this Section 2(a) upon the occurrence of any
subsequent Actual or Constructive Termination or Change of Control Event.
(b) If an Extraordinary Event occurs within 12 months after
the occurrence of an Actual or Constructive Termination, the Management
Stockholder shall be entitled to the applicable additional payment described in
Section 2(c) below (a "Catch-up Payment"). The Catch-up Payment shall be paid
by PBC on the later of (i) the date the Severance Amount is required to be paid
in accordance with the second sentence of Section 2(a) and (ii) thirty (30) days
after the relevant Extraordinary Event.
(c) In the case of an IPO, the Management Stockholder shall
be entitled to a Catch-up Payment equal to (i) the excess, if any, of (x) the
product of (A) the offering price per share of the class of common stock of
PhibroTech sold in the Initial Public Offering (net of underwriting discounts
and commissions) and (B) the number of
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Owned Shares over (y) the Severance Amount. In the case of a Private Sale, the
Management Stockholder shall be entitled to a Catch-up Payment equal to (i) the
excess, if any, of (x) the product of (A) the sale price per share of the class
of common stock of Phibro-Tech sold in the Private Sale (provided that if any
portion of the consideration is not cash or other property having a readily
ascertainable value, the value of such property for purposes of determining the
sale price per share shall be determined by the Board reasonably and in good
faith and, at the request of the Executive, the Board shall provide adequate
documentation of the basis for its determination) and (B) the number of Owned
Shares (y) the Severance Amount. In the case of an Asset Sale, the Management
Stockholder shall be entitled to a Catch-up Payment equal to (i) the excess, if
any, of (x) the product of (A) an amount equal to the quotient obtained by
dividing (I) the aggregate purchase price of the Asset Sale (provided that if
any portion of the consideration is not cash or other property having a readily
ascertainable value, the value of such property for purposes of determining such
aggregate purchase prices shall be determined by the Board reasonably and in
good faith and, at the request of the Executive, the Board shall provide
adequate documentation of the basis for its determination) by (II) the total
number of shares of Phibro-Tech's common stock issued and outstanding at the
time of the Asset Sale and (B) the number of Owned Shares (y) the Severance
Amount.
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3. Restrictions on Cash Payments. If PBC's ability to make
cash payments with respect to its obligations under Sections 2(a) or 2(c) is
restricted or limited under the terms of the Note Agreement or the Loan
Agreement, PBC shall (i) make cash payments required by Sections 2(a) or 2(c) to
the Executive on an equal and ratable basis with all the other obligations of
PBC to the extent permitted by the Note Agreement and the Loan Agreement, and
(ii) deliver to the Executive a Subordinated Note in a principal amount equal to
(x) the excess of the Severance Amount (or, if applicable, the Catch-up Payment)
over (y) the amount paid pursuant to clause (i) above. If PBC is not permitted
under the terms of the Note Agreement or the Loan Agreement to pay any portion
of the Severance Amount or Catch-up Payment in cash, PBC shall deliver to the
Executive a Subordinated Note in a principal amount equal to the Severance
Amount (or, if applicable, the Catch-up Payment).
4. Executive Misconduct. If the Executive shall have
committed an act of theft or intentional fraud against PBC or any Affiliate,
then PBC may deduct from any amounts payable under Section 2 (including, without
limitation, under Section 2(c)), an amount equal to the loss suffered by PBC and
such Affiliate as a result of the Executive's theft or intentional fraud
determined by the Board in good faith.
5. Salary Reallocation. PBC shall cause any Affiliate
that shall, after the date hereof, pay the base
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salary of the Executive, or any portion thereof, to assume and agree to the
obligations of PBC hereunder and to notify the Executive in writing of the
assumption of such obligations. An Affiliate's obligation to pay the Severance
Amount shall be in proportion to the portion of the Executive's base salary paid
by such Affiliate.
6. Term. This Agreement shall terminate on the earlier of
(i) the date the Executive and his Permitted Transferees cease to own any Shares
or (ii) the date all Shares owned by the Executive and his Permitted Transferees
have been registered pursuant to an effective registration statement filed under
the Securities Act.
7. Other Agreements. To the extent this Agreement may
conflict with any previous agreements or understandings between PBC and the
Executive, the terms and provisions of this Agreement shall govern.
8. Notice. Any notices, requests, demands and other
communications provided for by this Agreement shall be sufficient if in writing
and if sent by personal delivery, registered or certified mail, return receipt
requested, overnight courier service, telex or facsimile transmission and shall
be deemed transmitted on the fifth day following the date when deposited in the
mail, on the day following the date of delivery to a courier service (postage or
charges prepaid) or when personally delivered or transmitted by facsimile
machine to the Executive at the address shown in this Agreement or any later
address he has filed in
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writing with PBC or, in the case of PBC, at the address shown in this Agreement
or at the principal executive offices, attention of the Secretary.
9. Governing Law. THE PROVISIONS OF THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED THEREIN.
10. Waiver: Amendment. Any provision of this Agreement may
be waived at any time by the party entitled to the benefits thereof, and this
Agreement may be amended or supplemented at any time. No such amendment or
supplement shall be effective unless in writing and signed by the parties or, in
the case of a waiver, by the party granting the waiver.
11. Successors. This Agreement shall be binding upon and
inure to the benefit of the Executive, PBC and any successor organization which
shall succeed to substantially all of the business and assets of PBC, whether by
means of merger, consolidation, acquisition of all or substantially all of the
assets of PBC, or otherwise, including by operation of law. PBC will require any
successor organization, which is a purchaser of all or substantially all of the
business or assets of PBC, by written agreement addressed to the Executive, to
assume and agree to perform this Agreement.
12. Severability. The invalidity or
unenforceability of any provision of this Agreement in any respect
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shall not affect the validity or enforceability of such provision in any other
respect or of any other provision of this Agreement, all of which shall remain
in full force and effect; this Agreement shall be deemed rewritten to the
minimum extent necessary to cure such invalidity or unenforceability.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
PHILIPP BROTHERS CHEMICALS, INC.
By:
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Xxxx X. Xxxxxxxx
President
EXECUTIVE
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Name:
