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Form of Severance Agreement
KEMET Corporation
August 1, 1996
[Senior Manager ]
[Address ]
Re: Change in Control Severance Compensation Agreement
Dear _______________:
The board of directors (the "Board") of KEMET Corporation (the "Company") has
determined that it is in the best interests of the Company and its shareholders
to assure the continued dedication to the Company of senior management
personnel, notwithstanding any possibility, threat or occurrence of a Change in
Control of the Company (as defined below). Accordingly, in order to encourage
your continued attention and dedication to your assigned duties regardless of
any such possibility, threat or occurrence, the Board has authorized the Company
to enter into this "Change in Control Severance Compensation Agreement" (the
"Agreement") in order to provide you with certain compensation and other
benefits in the event that your employment with the Company is terminated as a
result of a Change in Control of the Company.
The terms and conditions of this Agreement are as follows:
1. Term of the Agreement. (A) The Term of this Agreement shall commence on
the date first set forth above and shall end on August 1, 1998. In addition,
the Term of this Agreement shall automatically end upon the occurrence of any of
the following:
(i) Your death or receipt of a Notice of Termination due to Disability;
(ii) Your attainment of your Retirement Date; or
(iii) A determination by the Board that you are no longer eligible to receive
the benefits set forth in this Agreement and your receipt of notice of any such
determination; provided, that such a determination shall have no effect if made
after a Change in Control of the Company or as a result of negotiations
occurring in connection with a Change in Control of the Company.
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(B) In the event of a Change in Control of the Company, the Term of this
Agreement shall be automatically extended to the earlier of: (i) the date that
is two (2) years from the date such Change in Control of the Company occurred;
or (ii) the occurrence of an event described in Paragraph 1(A)(i) or 1(A)(ii)
above.
2. Change in Control of the Company. For purposes of this Agreement, a
"Change in Control of the Company" shall mean any of the following events:
(A) The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of fifteen percent (15%) or
more of either (i) the then outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock"), or (ii) the combined voting power of
the then outstanding voting securities of the Company entitled to vote generally
in the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subparagraph (A), the following
acquisitions shall not constitute a Change in Control of the Company: (1) any
acquisition directly from the Company; (2) any acquisition by the Company; (3)
any acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company; (4) any
acquisition of Outstanding Company Common Stock or Outstanding Company Voting
Securities by Citicorp Venture Capital, Ltd. or any other party to the Voting
Agreement dated as of _____________, as amended; or (5) any acquisition by any
corporation pursuant to a transaction which complies with clauses (1), (2) and
(3) of subparagraph (C) below;
(B) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding for this purpose
any such individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board;
(C) Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, (1) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than fifty
percent (50%) of, respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting securities entitled to
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vote generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns the Company
or all or substantially all of the Company's assets either directly or through
one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may
be, (2) no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, fifteen percent (15%) or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination, and (3) at least a majority of the members of
the board of directors of the corporation resulting from such Business
Combination were members of the Board at the time of the execution of the
initial agreement, or of the action of the Board, providing for such Business
Combination;
(D) Approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company.
3. Termination of Employment Following Change in Control of the Company.
(A) Termination. If a Change in Control of the Company occurs, you shall be
entitled, upon the subsequent termination of your employment with the Company
("Termination"), to the benefits described in Paragraph 4 below, unless such
Termination is: (i) by you other than for Good Reason; (ii) by the Company for
Cause or because of your Disability; or (iii) because of your death or
attainment of your Retirement Date. Any Termination (except a Termination
resulting from your death) shall be made by written Notice of Termination from
the party initiating such Termination to the other party to this Agreement.
(B) Notice of Termination. A Notice of Termination shall mean a written
document stating the specific provision in this Agreement upon which a
Termination is based and otherwise setting forth the facts and circumstances
which provide the basis for a Termination.
(C) Date of Termination. The Date of Termination shall mean: (i) if the
Termination occurs as a result of Disability, thirty (30) days after a Notice of
Termination is given; (ii) if the Termination occurs for Good Reason, the date
specified in the Notice of Termination; and (iii) if the Termination occurs for
any other reason, the date on which the Notice of Termination is given.
(D) Good Reason. A Termination for Good Reason shall mean a Termination as a
result of:
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(i) The assignment to you, without your express written consent, of any
duties inconsistent with your position, duties, responsibilities and status with
the Company immediately prior to a Change in Control of the Company, or a change
in your titles or offices (if any) in effect immediately prior to a Change in
Control of the Company, or any removal of you from, or any failure to reelect
you to, any of such positions, except in connection with your Termination for
Cause, death, Disability, or as a result of your attainment of your Retirement
Date.
(ii) A reduction by the Company in your base salary as in effect on April 1,
1996, or as the same may be increased from time to time thereafter;
(iii) The failure of the Company to continue in effect any compensation,
welfare or benefit plan in which you are participating at the time of a Change
in Control of the Company, without substituting therefor plans providing you
with substantially similar benefits at substantially the same cost to you; or
the taking of any action by the Company which would adversely affect your
participation in or materially reduce your benefits or increase the cost to you
under any of such plans or deprive you of any material fringe benefit enjoyed by
you at the time of the Change in Control of the Company;
(iv) Any purported Termination for Cause or Disability without grounds
therefor; or
(v) The relocation of your primary work location to a location that is more
than 20 miles from your primary work location immediately prior to the Change in
Control of the Company.
(E) Cause. A Termination for Cause shall mean (i) a Termination as a result
of the willful and continued failure by you for a significant period of time
substantially to perform your duties with the Company (other than any such
failure resulting from your Disability), after a demand for substantial
performance is delivered to you in writing by the Board or its designate which
specifically identifies the manner in which the Board or its designate believes
that you have not substantially performed your duties, or (ii) the willful
engaging by you in gross misconduct materially and demonstrably injurious to the
Company. No act, or failure to act, on your part shall be considered "willful"
unless done, or omitted to be done, by you, not in good faith and without
reasonable belief that your action or omission was in the best interest of the
Company. The burden for establishing the validity of any termination for Cause
shall rest upon the Company. No Termination shall be deemed to be for Cause
unless and until there shall have been delivered to you a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of the
entire membership of the Board called and held for such purpose (after
reasonable notice is provided to you and you are given an opportunity, together
with counsel, to be heard before the Board), finding that, in the good faith
opinion of the Board, you are guilty of the conduct described in subclauses (i)
or (ii) above, and specifying the particulars thereof in detail.
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(F) Disability. A Disability shall mean that, as a result of your incapacity
due to physical or mental illness, you shall have been unable to perform your
duties with the Company for a period of six (6) months, and have no prospect of
returning to employment with the Company within an additional six (6) months;
provided, that the Company shall have made a reasonable accommodation of any
such incapacity pursuant to, and shall otherwise have complied in all respects
with, the provisions of the Americans with Disabilities Act of 1990.
(G) Retirement Date. Your "Retirement Date" shall mean the date on which you
attain [age 70-1/2], [or the date you retire in accordance with the terms of the
"Retirement Program Plan for Employees of Kemet Electronics Corporation and its
Participating Subsidiaries" (the "Retirement Plan")].
4. Benefits. (A) In the event of your Termination for any reason except
those set forth in Paragraphs 3(A)(i), 3(A)(ii) and 3(A)(iii) above, the Company
shall pay to you the following amounts in a lump sum payment on the Date of
Termination:
(i) An amount that is eighteen (18) times your monthly base salary at the
rate in effect at the time a Notice of Termination is given.
(ii) An amount that is the difference between (1) the amount otherwise
payable to you under the terms of the Retirement Plan calculated as of your
Termination Date, and (2) such amount calculated as of your Termination Date but
determined as though you had completed an additional one (1) year of service and
were one (1) year older. This benefit will be in addition to the benefits, if
any, to which you are entitled under any other retirement plans maintained by
the Company.
(iii) The Company shall maintain in full force and effect, for a period of
eighteen (18) months following your Date of Termination, all life insurance and
medical insurance plans and programs (the "Company Programs") in which you are
entitled to participate immediately prior to the Date of Termination, provided
that your continued participation is possible under the terms and provisions of
such Company Programs. In the event that your participation in any Company
Program is not permitted under the terms and provisions thereof, the Company
will use its reasonable best efforts to provide you with, or arrange coverage
for you which is substantially similar to (including comparable terms), the
coverage that you would have received under the applicable Company Program.
Notwithstanding the foregoing, the Company's obligations under this Paragraph
4(A)(iii) shall terminate with respect to any Company Program on the date that
you first become eligible, after your Date of Termination, for the same type of
coverage under another employer's plan.
(iv) The Company shall pay all legal fees and expenses incurred by you as a
result of your Termination (including all such fees and expenses, if any,
incurred in contesting or disputing your Termination or in seeking to obtain or
enforce any rights or benefits provided by this Agreement).
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(v) The Company shall pay the costs of reasonable outplacement services until
you are employed on a full-time basis, provided that payment by the Company of
such costs shall not exceed $15,000.
(B) You shall not be required to mitigate the amount of any payment provided
for in this Paragraph 4 by seeking other employment or otherwise, nor shall the
amount of any payment provided for in this Paragraph 4 be reduced by any
compensation earned by you as a result of employment by another employer after
the Date of Termination, or otherwise, except as specifically provided in
Paragraph 4(A)(iii).
5. Miscellaneous.
(A) Limitation of Effect. This Agreement shall have no effect on any
termination of your employment prior to a Change in Control of the Company, or
upon any termination of your employment at any time as a result of your
Disability, attainment of your Retirement Date, or death; and upon the
occurrence of any such events, you shall receive only those benefits to which
you would have been otherwise entitled prior to a Change in Control of the
Company.
(B) Successors. (i) The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, to assume and
agree to perform this Agreement in the same manner and to the same extent that
the Company would be required to perform this Agreement if no such succession
had taken place. Failure of the Company to obtain such assumption or agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement.
(ii) This Agreement shall inure to the benefit of and be enforceable by your
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If you should die while any amounts would
still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee or, if there
be no such designee, to your estate.
(C) Notice. Notices provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered in person or mailed by
United States registered mail, return receipt requested, postage prepaid, to the
respective addresses set forth on the first page of this Agreement, or to such
other address as either party may have furnished to the other in writing, except
that notices of change of address shall be effective only upon receipt by the
other party. All notices to the Company shall be directed to the attention of
Xxxxx X. Xxxxxx, Senior Vice President.
(D) Modifications. No provision of this Agreement may be modified, waived or
discharged unless such modification, waiver, or discharge is agreed to in
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writing and is signed by you and the Company. No waiver by either party hereto
at any time of any breach by the other party hereto of, 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.
(E) Interpretation. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
South Carolina. The invalidity or unenforceability of any provisions 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.
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If you agree that the foregoing correctly sets forth the agreement between us,
please sign the enclosed copy of this Agreement in the space indicated below and
return it to the Company.
Very truly yours,
KEMET Corporation
By:_____________________________
Name:___________________________
Title:__________________________
Agreed to as of the
day and year first
written above:
_______________________________
Employee
_______________________________
Date
