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EXHIBIT 10.1
FORM OF
STAY PAY and SEVERANCE AGREEMENT
THIS Stay Pay and Severance Agreement ("Agreement") dated as of June
6, 1996 is by and between Argo-Tech Corporation, a Delaware corporation (the
"Company") and [name of executive] (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive is a senior executive of the Company and has
made, and is expected to continue to make, major contributions to the
profitability, growth and financial strength of the Company;
WHEREAS, the Company desires to assure itself of both present and
future continuity of management and desires to establish conditions for the
payment of certain special compensation payments intended to induce the
Executive to remain in the employ of the Company;
WHEREAS, the Executive is willing to continue in the employ of the
Company on the terms and subject to the conditions set forth in this Agreement;
NOW THEREFORE, the Company and the Executive agree as follows:
1. Definitions. The terms defined in this Section 1 shall, for
all purposes of this Agreement, have the meanings herein specified, unless the
context expressly or by necessary implication requires otherwise:
(a) "Cause" shall mean one or more of the following:
(i) the knowing commission in the course of the
Executive's employment of any act of fraud,
embezzlement or theft in connection with Executive's
duties or in the course of Executive's employment;
(ii) conviction of a felony (from which, through lapse of
time or otherwise, no successful appeal shall have
been made), whether or not committed in the course of
the Executive's employment;
(iii) the willful refusal to carry out reasonable
instructions of the Chairman of the Board of
Directors of the Company (or, in the case of the
Chairman of the Board, the reasonable instructions of
the Board) which has a material adverse effect upon
the Company; and
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(iv) the willful disclosure of any trade secrets or
confidential corporate information to persons not
authorized to know same.
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 a majority of the
Board of Directors of the Company (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, to be heard before the Board),
finding that, in the good faith opinion of the Board, the Executive
had committed an act set forth above in this Section 1(a)(i) through
(iv), inclusive, and specifying the particulars thereof in detail.
Nothing herein shall limit the right of the Executive or his
beneficiaries to contest the validity or propriety of any such
determination.
(b) A "Change in Control" shall have occurred if any of the
following events shall occur:
(i) The Company is merged or 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
securities of such corporation or person immediately
after such transaction are held in the aggregate by
the holders of "Voting Stock" (as that term is
hereafter defined) of the Company immediately prior
to such transaction;
(ii) A majority of the Company's Voting Stock is
transferred to a corporation or other legal person
other than the current holders of the Company's
Voting Stock;
(iii) The Company sells or otherwise transfers all or
substantially all of its assets to any other
corporation or other legal person and less than a
majority of the combined voting power of the
then-outstanding securities 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;
(iv) If there is a report filed on Schedule 13D or 14D-1
pursuant to the Securities Exchange Act of 1934 (the
"Act"), disclosing that any person (under Section
13(d)(3) or Section 14(d)(2) of the Act) has become
the beneficial owner (under Rule 13d-3) of securities
representing 20% or more of the then outstanding
Voting Stock of the Company; or
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(v) The Company shall file a report or proxy statement
with the SEC pursuant to the Act disclosing under
Item 1 of Form 8-K thereunder or Item 6(e) of
Schedule 14A thereunder (or any successor schedule,
etc.) that a change in control of the Company has or
may have occurred or will or may occur in the future
pursuant to any then-existing contract or
transaction.
Anything in this subsection 1(b) to the contrary
notwithstanding, a Change in Control shall not be deemed to
occur because (A) an entity in which the Company directly or
indirectly controls a majority of the voting securities, (B)
any Company sponsored employee stock ownership plan or
employee benefit plan (or entity holding voting shares
pursuant to such plan) or (C) former and current employees of
the Company either directly or indirectly or both own a
majority of the Voting Stock of the Company.
For the purpose of this Section 1(b), a corporation controlled
by a corporate holder of Voting Stock shall be deemed to be
the same holder of Voting Stock. A legal person with respect
to which a holder of Voting Stock could make a "Permitted
Disposition" pursuant to Section 3.01 of that certain 1994
Stockholders' Agreement dated May 17, 1994 among certain of
the holders of Voting Stock shall be deemed to be the same
holder of Voting Stock.
(c) "Voting Stock" shall mean the Company's Class A, B and C
Common Stock, par value $0.01.
2. Stay Payment. In the event a Change in Control occurs and the
Executive remains employed by the Company on a full time basis through the
effective date of the Change in Control, the Company shall pay to the
Executive, in a single lump sum within thirty (30) days of such effective date,
an amount (such amount being called the "Stay Payment") equal to twenty-five
percent of the sum of:
(a) an amount equal to the highest annual base salary received by
the Executive during the five (5) year period immediately
preceding such effective date; and
(b) the amount of the highest "bonus" or "incentive payment" paid
to the Executive during the five (5) year period immediately
preceding the date of such Change in Control.
The Stay Payment is initiated to induce the Executive to remain in the
full-time employ of the Company during the pendency of a Change in Control and
is in addition to the "Basic Severance Payment" and the "Additional Severance
Payment" (as such terms are hereinafter defined).
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3. Basic Severance Payment. In the event the Executive's
full-time employment with the Company is terminated by the Company without
Cause, either before or after a Change in Control, the Company will pay the
Executive, in a single lump sum to be paid within thirty (30) days following
termination, an amount (such amount being called the "Basic Severance Payment")
equal to the sum of:
(a) an amount equal to the highest annual base salary received by
the Executive during the five (5) year period immediately
preceding the date of termination; and
(b) the amount of the highest "bonus" or "incentive payment" paid
to the Executive during the five (5) year period immediately
preceding the date of termination.
Anything in this Agreement to the contrary notwithstanding, a
voluntary termination of employment by the Executive following:
(x) a reduction of five percent (5%) or more in the Executive's
base salary which is not the result of a policy or decision of
the Company generally to reduce the level of base salaries of
a substantial number of officers or employees of the Company;
or
(y) the Executive's ceasing to be employed in a position with the
Company which involves at least substantially the same level
of responsibilities or duties as those performed by Executive
on the date hereof,
shall be deemed to be an involuntary termination without Cause.
4. Additional Severance Payment After Change in Control. In the
event a Change in Control occurs and, within the six-month period following the
effective date of such Change in Control, the Executive's full-time employment
with the Company is terminated by the Company without Cause, or the Executive
voluntarily terminates employment under the circumstances set out in the last
paragraph of Section 3 above, the Company will pay to the Executive, in
addition to the Basic Severance Payment and the Stay Payment, amounts equal to
the amounts of base salary Executive would have received had Executive
continued to be employed by the Company at the rate of base salary at which the
Executive had been employed during the month preceding such termination, to be
paid at the same intervals as such amounts had been paid prior to such
termination, such payments to cease upon the sixth month anniversary of the
effective date of such Change in Control (any partial period being paid
pro-rata; such amount to be paid pursuant to this Section 4 being referred to
as the "Additional Severance Payment").
The Additional Severance Payment is to be in addition to the Basic
Severance Payment and the Stay Payment.
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5. Benefits. In the event that Executive's full-time employment
with the Company is terminated by the Company without Cause, or the Executive
voluntarily terminates employment under the circumstances set out in the last
paragraph of Section 3 above, either before or after a Change in Control, the
Company shall arrange to provide Executive, during a period of twelve (12)
months following the termination, with group and/or executive life, health,
medical/hospital, dental and vision insurance benefits (the "Insurance
Benefits") substantially similar to those which Executive was receiving or
entitled to receive immediately prior to the date of termination (and if and to
the extent that such Insurance Benefits shall not or cannot be paid or provided
under any policy, plan, program or arrangement of the Company or any successor
to the business of the Company, then the Company shall itself pay or provide
for the payment to Executive, Executive's dependents and beneficiaries, of such
Insurance Benefits). Without otherwise limiting the purposes or effect of
Section 6 hereof, Insurance Benefits payable to Executive pursuant to this
Section 5 shall be reduced to the extent comparable Insurance Benefits are
actually received by Executive from another employer during the twelve (12)
month period covered by this Section 5.
6. No Set-Off. There shall be no right of set-off or
counterclaim in respect of any claim, debt or obligation against any payment to
or benefit for the Executive provided for in this Agreement.
7. Taxes. The Executive shall be responsible for the payment of
all taxes imposed upon the payments made, or benefits received, hereunder. The
Company may withhold from any amounts payable under this Agreement all federal,
state, city or other taxes as shall be required pursuant to any law or
government regulation or ruling.
8. Interest on Overdue Payments. Without limiting the rights of
the Executive at law or in equity, if the Company fails to make any payment
required to be made hereunder on a timely basis, the Company shall pay interest
equal to eighteen percent (18%) per annum.
9. Termination. In the event the Executive's full-time
employment with the Company terminates without any of the events described in
Sections 2, 3, 4 or 5 having occurred, no amounts shall be due hereunder and
this Agreement shall thereupon terminate.
10. No Mitigation Obligation. The 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 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 set forth in Section 5 hereof.
11. Deferred Compensation. In the event a portion of the
Executive's compensation has been deferred pursuant to any deferred
compensation plan or arrangement, such deferred portion shall be included in
the Executive's base salary or "bonus" or "incentive payment" for the period
with respect to which the compensation was deferred.
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12. Legal Fees and Expenses. It is the intent of the Company that
the Executive not be required to incur the expenses associated with the
enforcement of Executive's rights under this Agreement by litigation or other
legal action 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 any action to declare this Agreement void
or unenforceable, or institutes any litigation designed to deny, or to recover
from, the Executive the benefits 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 represent the Executive in connection with 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 confidential relationship shall exist
between the Executive and such counsel. The Company shall pay or cause to be
paid and shall be solely responsible for any and all attorneys' and related
fees and expenses incurred by the Executive as a result of the Company's
failure to perform this Agreement or any provision hereof or as a result of the
Company or any person contesting the validity or enforceability of this
Agreement or any provision hereof as aforesaid.
13. Employment Rights. Nothing either expressed or implied in
this Agreement shall 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 either
prior to or after any Change in Control.
14. Successors and Binding Agreement. (a) The Company shall
require any successor (whether direct or indirect, by purchase, merger,
consolidation, reorganization or otherwise) to all or substantially all of the
business and/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
shall 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 and/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 shall not otherwise be assignable, transferable or
delegable by the Company.
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(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees and/or 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 Section 14(a) hereof. Without limiting the generality of
the foregoing, the Executive's right to receive payments hereunder shall not be
assignable, transferable or delegable, whether by pledge, creation of a
security interest or otherwise, other than by a transfer by will or by the laws
of descent and distribution and, in the event of any attempted assignment or
transfer contrary to this Section 14(c), the Company shall have no liability to
pay any amount so attempted to be assigned, transferred or delegated.
(d) The Company and the Executive recognize that neither party
will have an adequate remedy at law for breach by the other of any of the
agreements contained herein and, in the event of any such breach, the Company
and the Executive hereby agree and consent that the other shall be entitled to
a decree of specific performance, mandamus or other appropriate remedy to
enforce performance of this Agreement.
15. Notice. For all purposes of this Agreement, all
communications including without limitation notices, consents, requests or
approvals, provided for herein shall be in writing and shall be deemed to have
been duly given when delivered or five business days after having been mailed
by United States registered or certified mail, return receipt requested,
postage prepaid, 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
change of address shall be effective only upon receipt.
16. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Ohio, without giving effect to the principles of conflict of laws of such
State.
17. 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
shall not be affected, and the provision so held to be invalid, unenforceable
or otherwise illegal shall be reformed to the extent (and only to the extent)
necessary to make it enforceable, valid and legal.
18. 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 any time of any breach
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by the other party hereto or compliance with any condition or provision of this
Agreement to be performed by such other party shall 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.
19. 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.
[20. Prior Agreement. This Agreement is not intended to supersede
that certain letter agreement dated [date of prior agreement] accepted by
Executive [date of acceptance] (the "Employment Agreement") between the
Executive and the Company. Any payments required hereunder shall be in
addition to those required thereunder.][appears only in Xxxxxxx X. Xxxxxxxx and
Xxxx X. Xxxx'x Stay Pay and Severance Agreements]
21. 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 or distribution by the Company 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 (a "Payment"), would be
subject to the excise tax imposed by Section 4999 (or any successor thereto) of
the Internal Revenue Code, or any interest or penalties with respect to such
excise tax (such excise tax, together with any such interest and penalties, are
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"); provided, however, that no Gross-Up Payment shall be made
with respect to the Excise Tax, if any, attributable to (i) any incentive stock
option, as defined by Section 422 of the Code ("ISO") granted prior to the
execution of this Agreement, or (ii) any stock appreciation or similar right,
whether or not limited, granted in tandem with any ISO described in clause (i).
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.
(b) The Company and the Executive shall each cooperate with each
other in connection with the determination of the amount of Gross-Up Payment
provided for in Subsection 21(a) hereof. Such cooperation shall include
without limitation providing the other party access to and copies of any books,
records and documents in the possession of the Company or the Executive, as the
case may be, that are reasonably requested by the other party.
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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.
ARGO-TECH CORPORATION
By: /s/ Xxxx X. Xxxx
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[name of executive]
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