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NS GROUP, INC. FORM 10-Q MARCH 31, 2001 EXHIBIT 10.1
CHANGE OF CONTROL SEVERANCE AGREEMENT
AGREEMENT by and between NS Group, Inc., a Kentucky Corporation (the
"Company"), and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇ (the "Employee"), dated as of the 9th day of
March, 2001.
The Company wishes to assure that it will have the continued dedication of
the Employee notwithstanding the possibility, threat or occurrence of a Change
of Control (as defined below) of the Company. The Company believes it is
imperative to diminish the inevitable distraction of the Employee by virtue of
the personal uncertainties and risks created by a pending or threatened Change
of Control, to encourage the Employee's full attention and dedication to the
Company upon a Change of Control, and to provide the Employee with compensation
arrangements upon a Change of Control which provide the Employee with individual
financial security and which are competitive with those of other corporations
and, in order to accomplish these objectives, the Company desires to enter into
this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. CERTAIN DEFINITIONS
(a) "Affiliate" of any specified Person means (i) any other Person
which, directly or indirectly, is in control of, is controlled
by or is under common control with such specified Person or
(ii) any other person who is a director or officer (A) of such
specified Person, (B) of any subsidiary of such specified
Person or (C) of any Person described in clause (i) above or
(iii) any person in which such Person has, directly or
indirectly, a 5 percent or greater voting or economic interest
or the power to control. For the purposes of this definition,
"control" of a Person means the power, direct or indirect, to
direct or cause the direction of the management or policies of
such Person whether through the ownership of voting
securities, or by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to
the foregoing.
(b) "Agreement Period" shall mean the period as defined in Section
2 of this Agreement.
(c) "Board of Directors"' shall mean the Board of Directors of the
Company as constituted from time to time.
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(d) "Change of Control" shall mean:
(i) the direct or indirect sale, lease, exchange or other
transfer of all or substantially all of the assets of
the Company to any Person or entity or group of Persons
or entities acting in concert as a partnership or other
group ("Group of Persons") other than a Person described
in clause (i) of the definition of Affiliate;
(ii) the consummation of any consolidation or merger of the
Company with or into another corporation with the effect
that the stockholders of the Company immediately prior
to the date of the consolidation or merger hold less
than 51% of the combined Voting Power of the outstanding
voting securities of the surviving entity of such merger
or the corporation resulting from such consolidation
ordinarily having the right to vote in the election of
directors (apart from rights accruing under special
circumstances) immediately after such merger or
consolidation;
(iii) the stockholders of the Company shall approve any plan
or proposal for the liquidation or dissolution of the
Company;
(iv) a Person or Group of Persons acting in concert as a
partnership, limited partnership, syndicate or other
group shall, as a result of a tender or exchange offer,
open market purchases, privately negotiated purchases or
otherwise, have become the direct or indirect beneficial
owner (within the meaning of Rule 13d-3) under the
Securities Exchange Act of 1934, as amended (the
"Exchange Act") ("Beneficial Owner") of securities of
the Company representing 30% or more of the combined
Voting Power of the then outstanding securities of the
Company ordinarily (and apart from rights accruing under
special circumstances) having the right to vote in the
election of directors;
(v) a Person or Group of Persons, together with any
Affiliates thereof, shall succeed in having a sufficient
number of its nominees elected to the Board of Directors
of the Company such that such nominees, when added to
any existing director remaining on the Board of
Directors of the Company after such election who is an
Affiliate of such Person or Group of Persons, will
constitute a majority of the Board of Directors of the
Company; provided that the Person or Group of Persons
referred to in clauses (i), (iv) and (v) shall not mean
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any Group of Persons with respect to
which ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ is the Beneficial Owner of the
majority of the voting equity interests.
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(e) "Cause" for termination of the Employee's employment shall be
defined as (i) commission by Employee of any felony criminal
act, a crime involving moral turpitude, or a crime of fraud or
dishonesty; (ii) acts by Employee constituting gross
negligence or willful misconduct to the detriment of the
Company; (iii) conduct which is detrimental to the reputation,
goodwill or business operation of the Company; (iv) Employee's
misfeasance or nonfeasance in the performance of his duties;
or (v) Employee's failure or refusal to comply with the lawful
directions of the Company's Board of Directors or with the
policies, standards and regulations of the Company.
(f) "Company" as used herein includes NS Group, Inc. and any of
its subsidiaries and divisions and, as provided by Section
12(b) hereof, any successor.
(g) "Date of Termination" shall be the date on which the Notice of
Termination is actually received by the addressee, or
alternatively, if the Notice of Termination specifies a date
other than the date of receipt of such notice then that
specified date shall be the Date of Termination.
(h) "Effective Date" shall mean the first date on which a Change
of Control occurs; provided, however, that if the Employee's
employment is terminated by the Company prior to the date on
which a Change of Control occurs, and the Employee can
reasonably demonstrate that such termination by the Company
was in contemplation of a Change of Control, then for all
purposes of this Agreement the "Effective Date" shall mean the
date immediately prior to the date of such termination.
(i) "Good Reason" means: (i) any material adverse change in
compensation to the Employee; (ii) substantial decrease in the
nature or scope of the Employee's duties, responsibilities,
powers, authority, title, position or status; (iii)
unreasonable travel requirements; (iv) any relocation required
on the part of Employee, without his consent, outside of a
50-mile radius from his primary residence on the Effective
Date; or (v) material breach by the Company of an employment,
compensation or similar agreement between the Employee and the
Company.
(j) "Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or
political subdivision thereof or any other entity within the
meaning of Section 13(d)(3) or 14(d) (2) of the Exchange Act.
(k) "Voting Power" shall mean the voting power of all securities
of a Person then outstanding generally entitled to vote for
the election of directors of
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the Person (or, where appropriate, for the election of persons
performing similar functions).
2. AGREEMENT PERIOD
The Company hereby agrees to provide the Employee with the protections and
benefits enumerated in Section 3 of this Agreement for the period commencing on
the Effective Date and ending on the third anniversary of the Effective Date.
3. OBLIGATIONS OF THE COMPANY UPON TERMINATION
(a) Notice of Termination. Any termination after the Effective
Date by the Company or by the Employee shall be communicated
by Notice of Termination, within ten (10) business days after
the later of the date of employment termination or the date of
Change of Control, to the other party hereto given in
accordance with Section 13(c) of this Agreement. For purposes
of this Agreement, a "Notice of Termination" means a written
notice which (i) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of
the Employee's employment, and (ii) if the termination date is
other than the date of receipt of such notice, specifies the
termination date.
(b) Termination by the Company for Cause; Termination by the
Employee for Other Than Good Reason. If during the Agreement
Period, the Employee's employment is terminated by the Company
for Cause, by the Employee other than for Good Reason, or by
reason of death or disability, this Agreement shall terminate
without further obligations to the Employee.
(c) Termination by the Company other than for Cause; Termination
by the Employee for Good Reason. If, during the Agreement
Period, the Company shall terminate the Employee's employment
other than for Cause, or the employment of the Employee shall
be terminated by the Employee for Good Reason, the Employee
shall be entitled to the following payments and benefits:
(i) The Company shall pay to the Employee in a lump sum in
cash within thirty (30) days after the Date of
Termination the aggregate of two (2) times the amount of
the Employee's base salary in effect on the Date of
Termination two (2) times the average amount of the
Employee's annual bonus payments made in the (5) five
years prior to the Date of Termination, plus a payment
equal to a pro rata portion (based on the whole number
of months worked in the fiscal year by the Employee
prior to the Date of Termination and, if applicable
performance targets have not been met on the Date of
Termination, based on a reasonable estimate of the
amount of
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bonus to be earned for the full year) of the Employee's
annual bonus for the year of termination.
(ii) For two (2) years after the Date of Termination, the
Company shall continue providing medical, dental, life
and disability insurance benefits to the Employee in an
amount equivalent to that which would have been provided
to the Employee had the Employee's employment not been
terminated. The Employee shall not be obligated to pay
higher fees for such benefits than he or she was paying,
at the Date of Termination. In the event it is not
possible to provide this continued coverage, the Company
shall provide the Employee with a cash payment in the
amount necessary for the Employee to purchase equivalent
insurance for two (2) years after the Date of
Termination.
(iii) Within ten (10) business days after the later of the
date of employment termination or the date of Change of
Control, the Company shall provide, at no cost to the
Employee, individual outside assistance for the Employee
in finding other employment. Such obligation may be
fulfilled by the Company through the retention of an
outplacement service for use by the Employee.
4. NON-REDUCTION OF TERMINATION BENEFITS
In the event the Company's independent auditors (the "Accounting Firm")
shall determine that any payment or distribution by the Company to or for the
benefit of the Employee made pursuant to Section 3 of this Agreement would be
nondeductible by the Company for Federal income tax purposes because of Section
280G of the Internal Revenue Code of 1986 ("Code"), as amended, then the Company
shall nonetheless pay to Employee all payments and distributions under Section
3. If the Accounting Firm makes such a determination, the Company shall promptly
provide the Employee with notice to that effect with a copy of the detailed
calculation thereof. The Employee shall pay all taxes on all such payments and
distributions under Section 3 that are imposed on Employee, including the excise
tax under Section 280G of the Code.
5. FUNDING OF GRANTOR TRUST
The Board of Directors of the Company shall have the option to establish a
so-called "Rabbi Trust" upon the occurrence, or in anticipation, of a Change of
Control to secure for the Employee the benefits provided pursuant to Section 3
of this Agreement. If the Board of Directors elects to do so, the Company shall,
immediately upon the occurrence of a Change of Control, make an irrevocable
contribution to the Rabbi Trust in an amount that is sufficient to pay the
Employee the benefits to which such Employee would be entitled pursuant to the
terms of this Agreement as of the date on which the Change of Control occurred.
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6. NON-EXCLUSIVITY OF RIGHTS
Nothing in this Agreement shall prevent or limit the Employee's continuing
or future participation in any benefit, bonus, incentive or other plan or
program provided by the Company or any of its affiliated companies and for which
the Employee may qualify, nor shall anything herein limit or otherwise affect
such rights that the Employee may have under any stock option or other
agreements with the Company. Amounts which are vested benefits or which the
Employee is otherwise entitled to receive under any plan or program of the
Company at or subsequent to the Date of Termination shall be payable in
accordance with such plan or program.
7. NO SETOFF; COOPERATION
The Company's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Employee or others.
8. CONFIDENTIAL INFORMATION
Employee specifically agrees that he will not at any time, whether during
his employment or for a period of two (2) years after such employment ends for
any reason, disclose or communicate to any third party or use for any purpose
(other than during his employment by the Company for proper business purposes)
any secret, proprietary or confidential information, or trade secret, relating
to the business of Company, or any subsidiary or affiliate of Company, including
business methods and techniques, research data, marketing and sales information,
customer lists, know-how, and any other information, process or technique or
information, customer lists, know-how, and any other information, process or
technique or information concerning the business of Company, or any subsidiary
or affiliate of Company, their manner and method of operation, their plans or
other data not disclosed to the general public or known within the industry,
regardless of whether such information or trade secret was acquired prior to or
after execution of this Agreement.
9. NON-SOLICITATION
Employee shall not, either directly or indirectly, by or for himself, or
as agent of another, or through others as his agent, in any way seek to induce,
bring about, promote, facilitate or encourage the discontinuance of or in any
way solicit for himself or others, those persons or entities who are employees
of the Company, or any subsidiary or affiliate of the Company.
10. EXCLUSIVE REMEDY
The Employee's rights to severance benefits pursuant to Section 3 hereof
shall apply only in the events specified in this Agreement and shall be the
Employee's sole and exclusive remedy for any termination of the Employee's
employment by the Company other than for Cause or by the Employee for Good
Reason. The payments, severance benefits and severance protections provided to
the Employee pursuant to this Agreement are provided in lieu of any severance
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payments, severance benefits and severance protections provided in any
employment agreement or any other plan or policy of the Company, except (i) as
may be expressly provided in writing under the terms of any plan or policy of
the Company; or (ii) as provided in any Non-Qualified Stock Option Agreement
between the Company and the Employee and any Salary Continuation Agreement
between the Company and the Employee; or (iii) as may be provided in a written
agreement between the Company and the Employee entered into on or after the date
of this Agreement. In no event shall the Employee be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Employee under any of the provisions of this Agreement.
11. STATEMENT OF INTENTION
It is the intention of the parties hereto that, prior to the Effective
Date, this Agreement shall not create any rights or obligations in the Employee
or the company, or require any payments by the Company to the Employee.
12. SUCCESSORS
(a) The Employee. This Agreement is personal to the Employee and
without the prior written consent of the Company shall not be
assignable by the Employee otherwise than by will or the laws
of descent and distribution. This Agreement shall inure to the
benefit of and be enforceable by the Employee's legal
representatives.
(b) The Company. This Agreement shall inure to the benefit of and
be binding upon the Company and its successors. 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 expressly assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place.
As used in this Agreement, "Company" shall include any successor to its
business and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
13. MISCELLANEOUS
(a) Interpretation. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of
Kentucky, without reference to principles of conflict of laws.
The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect.
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(b) Legal Fees. In the event of any litigation involving this
Agreement, and if the Employee is successful in such
litigation, the Company will reimburse the Employee for all
legal fees and expenses paid by the Employee in prosecuting or
defending such litigation.
(c) Notices. All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other
party or by registered or certified mail, return receipt
requested, postage prepaid, addressed to the Employee at the
Employee's address on the payroll records of the Company and
to the Company as follows:
NS Group, Inc.
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
And to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(d) Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(e) Withholding Taxes. The Company may withhold from any amounts
payable under this Agreement such Federal, state or local
taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
(f) No Waiver. The failure of the Employee or the Company to
insist upon strict compliance with any provision hereof shall
not be deemed to be a waiver of such provision or any other
provision thereof.
(g) Entire Agreement. This Agreement contains the entire
understanding of the Company and the Employee with respect to
the subject matter hereof. This Agreement may not be amended
or modified otherwise than by a written agreement executed by
the parties hereto or their respective successors and legal
representatives.
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(h) Dispute /Resolution Procedures. If any question shall arise in
regard to the interpretation of any provision of this
Agreement or as to the rights and obligations of either of the
parties hereunder, the Employee and a designated
representative of the Company shall meet to negotiate and
attempt to resolve such question in good faith. The Employee
and such representative may, if they so desire, consult
outside experts for assistance in arriving at a resolution. In
the event that a resolution is not achieved within fifteen
(15) days after their first meeting, then either party may
submit the question for final resolution by binding
arbitration in accordance with the rules and procedures of the
American Arbitration Association applicable to commercial
transactions, and any judgment thereon may be entered in any
court having jurisdiction thereof. The arbitration shall be
held in Covington, Kentucky. In the event of any arbitration,
the Employee shall select one arbitrator, the Company shall
select one arbitrator and the two arbitrators so selected
shall select a third arbitrator, any two of which arbitrators
together shall make the necessary determinations. All
out-of-pocket costs and expenses of the parties in connection
with such arbitration, including, without limitation, the fees
of the arbitrators and any administration fees and reasonable
attorney's fees and expenses, shall be borne by the parties in
such proportions as the arbitrators shall decide that such
expenses should, in equity, be apportioned.
IN WITNESS WHEREOF, the Employee and the Company have executed this
Agreement as of the day and year first above written.
I HAVE READ THIS CHANGE OF CONTROL SEVERANCE AGREEMENT AND, UNDERSTANDING ALL
ITS TERMS, INCLUDING THAT THIS AGREEMENT CONTAINS A BINDING ARBITRATION
PROVISION WHICH MAY BE ENFORCED BY THE PARTIES, I SIGN IT AS MY FREE ACT AND
DEED.
Employee:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇
Company:
NS GROUP, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
President and Chief Executive Officer
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