EXHIBIT 10.9
EXECUTIVE SEVERANCE BENEFIT AGREEMENT
THIS EXECUTIVE SEVERANCE BENEFIT AGREEMENT dated as of July 1, 1999 by and
between Panolam Group, Inc., (the "Company"), and _______________ Executive;
W I T N E S S E T H:
WHEREAS, the Company desires to create a greater incentive for Executive to
remain in the employ of the Company, particularly in the event of any possible
change or threatened change in control of the Company,
NOW, THEREFORE, in partial consideration of Executive's past and future
services to the Company and the mutual covenants contained herein, the parties
hereto hereby agree as follows:
1. TERMINATION FOLLOWING A CHANGE IN CONTROL
(a) Qualifying Termination. Executive shall be entitled to the compensation
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and benefits listed in Paragraph 1(b), in addition to those accrued as of the
date of termination, if Executive's employment with the Company is terminated
(i) by the Company for any reason other than for Cause or (ii) by Executive for
Good Reason, in each case within one (1) year following the occurrence of a
Change in Control that occurs during the Period of Coverage (in each case a
"Qualified Termination").
(b) Compensation and Benefits
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(i) Salary and Bonus. Executive shall receive (A) a continuation of
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base salary for twelve months following the date of Qualifying Termination
payable, in accordance with the Company's normal payroll method, at an
annual rate equal to the greater of the annual rate of base salary in effect
for Executive at the time of Executive's Qualified Termination or the annual
rate of base salary in effect for Executive immediately before the Change in
Control and (B) a lump sum payment equal to the greater of the last annual
bonus paid to Executive before the date of Qualified Termination or the last
annual bonus payable to Executive before the date of the Change in Control.
Executive shall also be entitled to a pro rata bonus for that portion of any
annual bonus cycle applicable to Executive that occurs before the date of
the Qualifying Termination.
(ii) Health Care Coverage. The Company will provide, under the same
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terms available to its employees, Executive and Executive's eligible
dependents with continued health care coverage under the Company's
medical/dental plan until the earlier of (A) twelve (12) months after the
date of Executive's Qualified Termination or (B) the first
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date that Executive is covered under another employer's health benefit
program that provides substantially the same level of benefit coverage
without exclusion for pre-existing medical conditions. Such coverage will,
for the period of coverage, be in lieu of any other continued health care
coverage to which Executive or Executive's dependents would otherwise be
entitled for such period pursuant to the requirements of Internal Revenue
Code Section 4980B by reason of Executive's termination of employment.
(iii) Accelerated Vesting of Stock Options and Restricted Stock. All
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stock options then outstanding and previously unvested shall fully vest and
be exercisable, during the post-termination exercise period set forth in the
agreement evidencing such stock options, for fully vested shares and all
rights of the Company to repurchase any shares of restricted stock at the
price paid by Executive for such shares shall lapse; provided that such
accelerated vesting and lapse of repurchase rights shall not occur if it and
to the extent that it would prevent a transaction that is intended to
qualify for pooling of accounts accounting treatment to fail to quality for
such treatment.
2. DEFINITIONS
(a) Change in Control. A "Change in Control," for purposes of this
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Agreement, shall mean any of the following:
(i) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) of the Exchange Act) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act),
(excluding however in all cases Genstar Capital Partners II, LP and its
affiliates) of Company Voting Securities representing more than 50% of the
combined voting power of such securities; provided, however, that (A) any
acquisition by the Company or an affiliate thereof or any employee benefit
plan (or related trust) sponsored or maintained by the Company or an
affiliate thereof or (B) any acquisition by any entity with respect to
which, following such acquisition, securities representing 50% or more of
the combined voting power of the then outstanding voting securities are then
thereof beneficially owned, directly or indirectly, by Genstar Capital
Partners II, LP or (C) any acquisition by any entity following which Genstar
Capital Partners II, LP and its affiliates control the Board of Directors of
the acquiring entity or the Company shall not constitute a Ownership Change;
(ii) consummation of a reorganization, merger or consolidation, if,
following such reorganization, merger or consolidation, both (A) Genstar
Capital Partners II, LP and its affiliates beneficially own, directly or
indirectly, less than 50% of the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors of the corporation resulting from such reorganization, merger or
consolidation and do not control the Board of Directors, and (B) an
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individual, entity or group (other than an employee benefit plan sponsored
by the Company or an affiliate thereof) beneficially owns, directly or
indirectly securities representing more than 50% of the combined voting
power of the then outstanding voting securities entitled to vote generally
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in the election of directors of the corporation resulting from such
reorganization, merger or consolidation and controls the Board of Directors,
or
(iii) approval by the stockholders of the Company of (A) a complete
liquidation or dissolution of the Company, or (B) a sale or other
disposition of all or substantially all of the assets of the Company other
than to a corporation with respect to which, following such sale or
disposition, securities representing 50% or more of the combined voting
power of then outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then beneficially owned,
directly or indirectly, by Genstar Capital Partners II, LP or an affiliate,
or an employee benefit plan sponsored by the Company or an affiliate.
(b) Period of Coverage. The "Period of Coverage" shall be the period
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commencing with the date of this Agreement and ending on July 1, 2000, unless
either (i) the Company, by written action of its Board of Directors, extends the
period or (ii) the Company has entered into a definitive agreement to consummate
a transaction that would constitute a Change in Control, in which case the
period of coverage will continue until the date specified by the Board of
Directors or the date on which the pending transaction is consummated or
abandoned, respectively.
(c) Good Reason. "Good Reason" means (i) a change in Executive's position
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with the Company which materially reduces Executive's level of responsibility or
the nature of Executive's functions or (ii) a reduction in Executive's base
salary or a material reduction in Executive's overall level of compensation
(including base salary, benefits and bonus opportunity) or (iii) a relocation of
Executive's principal place of employment by more than fifty (50) miles without
Executive's consent.
(d) Group. A "Group" means any two or more persons acting as a
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partnership, limited partnership, syndicate, or other group acting in concert
for the purpose of acquiring, holding or disposing of voting stock of the
Company.
(e) Cause. "Cause" means Executive's conviction of any felony, Executive's
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commission of any act of fraud or embezzlement, Executive's unauthorized use or
disclosure of confidential information or trade secrets of the Company or its
subsidiaries, or any other intentional misconduct on Executive's part which
adversely affects or threatens to adversely affect the business or affairs of
the Company in a material manner.
3. LIMITATION OF BENEFITS
If any compensation under this Agreement, alone or together with other
compensation payable to Executive, would in the determination of counsel or
other advisor mutually acceptable to the Company and Executive, constitute a
parachute payment within the meaning of Section 280G of the Code that would
subject Executive to an excise tax under Section 4999 of the Code or any
successor provisions, the Company shall pay Executive an additional amount in
cash, which when added to such compensation, provides Executive with the same
net after-tax compensation (considering Executive's federal and state income tax
brackets and the excise tax
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on such compensation and such additional payment) that Executive would realize
from such compensation (without such additional payment) if no excise tax
applied.
4. RESTRICTIVE COVENANTS OF EXECUTIVE
(a) Prohibited Acts. During any period that Executive is receiving
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benefits under Paragraph 1 of this Agreement:
(i) Executive will not directly or indirectly encourage or solicit any
individual to leave the Company's employ for any reason or interfere in any
other manner with the employment relationships at the time existing between
the Company and its current or prospective employees.
(ii) Executive will not induce or attempt to induce any customer,
supplier, distributor, licensee or other business relation of the Company to
cease doing business with the Company or in any way interfere with the
existing business relationship between any such customer, supplier,
distributor, licensee or other business relation and the Company.
(b) Proprietary Information. Executive hereby acknowledges that the
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Company may, from time to time during Executive's employment with the Company,
disclose to Executive confidential information pertaining to the Company's
business and affairs. All information and data, whether or not in writing, of a
private or confidential nature concerning the business or financial affairs of
the Company (collectively, "Proprietary Information") is and will remain the
sole and exclusive property of the Company. In connection with such Proprietary
Information, Executive agrees as follows:
(i) Executive will not, during Executive's employment with the Company
or at any time thereafter, disclose to any third party or directly or
indirectly make use of any such Proprietary Information other than in
connection with, and in furtherance of, the Company's business and affairs.
(ii) Executive agrees that Executive will use all files, letters,
memoranda, reports, records, data or other written, reproduced or other
tangible manifestations of the Proprietary Information, whether created by
Executive or others, to which Executive has access during Executive's
employment with the Company, only in the performance of Executive's duties
with the Company. Executive will return all such materials (whether written,
printed or otherwise reproduced or recorded) to the Company immediately upon
the Change in Control of Executive's employment with the Company or upon any
earlier request by the Company, without retaining any copies, notes or
excerpts thereof.
(iii) Executive's obligations under this Paragraph will continue in
effect after Executive's termination of employment with the Company,
whatever the reason or reasons for termination, and the Company will have
the right to communicate with any future or prospective employer concerning
Executive's continuing obligations under this paragraph.
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(c) Remedies. Executive acknowledges that monetary damages may not be
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sufficient to compensate the Company for any economic loss which may be incurred
by reason of Executive's breach of the foregoing restrictive covenants.
Accordingly, in the event of any such breach, Executive shall not be entitled to
any compensation or benefits otherwise payable under this Agreement and the
Company shall be entitled to any further remedies available to the Company at
law, be entitled to obtain equitable relief in the form of an injunction
precluding Executive from continuing to engage in such breach.
5. ARBITRATION
Any controversy between Executive and the Company involving the construction
or application of any of the terms, provisions, or conditions of this Agreement
or otherwise arising out of or relating to this Agreement shall be settled by
arbitration in accordance with the then current applicable rules of the American
Arbitration Association, and judgment on the award rendered by the arbitrator(s)
may be entered by any court having jurisdiction thereof. The location of the
arbitration shall be in Connecticut. Each party shall bear its own expenses in
settling such controversy, including the expenses of arbitration and reasonable
attorney fees.
6. MISCELLANEOUS
(a) Captions. The captions in this Agreement are not part of the
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provisions hereof, are merely for the purpose of reference and shall have no
force or effect.
(b) Governing Law. This Agreement is made in, and shall be governed by and
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construed in accordance with the laws of, the State of Connecticut.
(c) Amendment or Modification. This Agreement contains the entire
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agreement of the parties with respect to the subject matter hereof and no
amendment or modification shall be effective unless made in writing executed by
an authorized officer of the Company and Executive.
(d) Beneficiaries. This Agreement shall be binding on and inure to the
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benefit of the successors, assigns, heirs, devisees and personal representatives
of the parties, including any successor to the Company by merger or combination
and any purchaser of substantially all of the assets of the Company. Should
Executive die before receipt of all benefits which Executive becomes entitled
under this agreement, the payment of such benefits will be made, on the due date
or dates hereunder had Executive survived, to the executors or administrators of
Executive's estate.
(e) Notices. All notices given hereunder shall be in writing and shall be
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sent by registered or certified mail or delivered by hand and, if intended for
the Company, shall be addressed to it (if sent by mail) or delivered to it (if
delivered by hand) at its principal office for the attention of the Secretary of
the Company or at such other address and for the attention of such other person
of which the Company shall have given notice to Executive in the manner herein
provided; and, if intended for Executive, shall be delivered personally or shall
be addressed
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(if sent by mail) at the then current residence address as reflected in the
personnel records of the Company, or at such other address or to such designee
of which Executive shall have given notice to the Company in the manner herein
provided. Each such notice shall be deemed to be given on the date received at
the address of the addressee or, if delivered personally, on the date so
delivered.
(f) Distributions. The benefits to which Executive may become entitled
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under this agreement will be paid, when due, from the general assets of the
Company. Executive's right (or the right of the executors or administrators of
Executive's estate) to receive any such payments will at all times be that of a
general creditor of the Company and will have no priority over the claims of
other general creditors of the Company. The benefits provided under this
agreement are intended to be unfunded for purposes of the Employee Retirement
Security Act of 1974.
(g) Rights and Remedies. All rights and remedies provided pursuant to this
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letter agreement or by law will be cumulative, and no such right or remedy will
be exclusive of any other. A party may pursue any one or more rights or remedies
hereunder or may seek damages or specific performance in the event of another
party's breach hereunder or may pursue any other remedy by law or equity,
whether or not stated in this letter agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
PANOLAM GROUP, INC.
By _____________________________________
Chairman, Compensation Committee
EXECUTIVE:
________________________________________
(Signature)
________________________________________
(Print Name)
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