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EXHIBIT 10.1
SEVERANCE COMPENSATION AGREEMENT
dated as of June 16, 1999, between
▇▇▇▇ Industries, Inc. a California corporation (the
"Company") and ▇▇▇▇▇▇▇ ▇. Doll (the "Executive").
The Company's Board of Directors has determined that it is appropriate
to reinforce and encourage the continued attention and dedication of members of
the Company's management, including the Executive, to their assigned duties
without distraction in potentially disturbing circumstances arising from the
possibility of a change in control of the Company.
This Agreement sets forth the severance compensation, which the Company
agrees it will pay to the Executive if the Executive's employment with the
Company terminates under one of the circumstances described herein following a
Change in Control of the Company (as defined herein).
1. Term. This Agreement shall terminate, except to the extent that any
obligation of the Company hereunder remains unpaid as of such time, upon the
termination of the Executive's employment with the Company based on death,
Disability (as defined in Section 4(a)), Retirement (as defined in Section 4(b))
or Cause (as defined in Section 4(c)) or by the Executive other than for Good
Reason (as defined in Section 4(d)).
2. Change in Control. For purposes of this Agreement, a Change in
Control of the Company shall be deemed to have occurred if (i) there shall be
consummated (x) any consolidation or merger of the Company, other than a merger
of the Company in which the holders of the Company's Common Stock immediately
prior to the merger have at least seventy-five percent (75%) ownership of the
voting capital stock of the surviving corporation immediately after the merger,
or (y) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all, or substantially all, of the assets of
the Company, or (ii) the stockholders of the Company approve any plan or
proposal for the liquidation or dissolution of the Company, or (iii) any person
(as such term is used in Section 13(d) and 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")), shall become the beneficial owner
(within the meaning of Rule 13d-3 under the Exchange Act) of thirty percent
(30%) or more of the Company's outstanding Common Stock, or (iv) during any
period of two consecutive years, individuals who at the beginning of such period
constitute the entire Board of Directors shall cease for any reason (except
death) to constitute a majority thereof unless the election, or the nomination
for election by the Company's stockholders, of each new director was approved by
a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period. For purposes of this Section 2, the
occurrence of two or more of the events constituting a Change in Control which
are the result of the same of related transaction(s) shall be deemed a single
Change in Control and its date shall be the date the first such event occurred.
For example, a merger in which former shareholders of the Company received less
than 75% of the voting capital stock of the surviving corporation followed by a
change in the Company's Board of Directors falling within clause (iv) above and
contemplated by said merger shall be deemed a single Change in Control.
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3. Severance Compensation upon Termination of Employment. Following a
Change in Control, if (a) the Company shall terminate the Executive's employment
other than by reason of death, Disability (as hereafter defined), Retirement (as
hereafter defined), or Cause (as hereafter defined) or (b) the Executive shall
terminate his employment for Good Reason (as hereafter defined), then the
Company shall pay to the Executive as severance pay in a lump sum, in cash, on
the fifth business day following the Date of Termination, an amount equal to
145% of the highest compensation paid to the Executive by the Company and any of
its subsidiaries during any 12 consecutive calendar months in the 36 calendar
months immediately preceding the latest Change in Control of the Company.
Notwithstanding the foregoing but subject to the last paragraph of Section 4(d)
and Section 4(f), no severance payment shall be made to the Executive unless his
termination of employment occurs within eighteen months of the occurrence of a
Change in Control. For purposes of this Section 3, "compensation paid" shall
include base salary, bonuses and the value of the "spread" between the exercise
price (purchase price, if restricted stock) and closing price on NYSE of the
Company's common stock on the date that, under the Company's employee stock
option plans, any option was granted to Executive times (i) the number of shares
subject to such option which became vested during any such 12 month period.
Notwithstanding anything in this Section 3 to the contrary, Executive
shall not be entitled to any payment pursuant to this Agreement in the event
Executive should terminate his employment within 90 days of the occurrence of a
"Change in Control" for "Good Reason" even if "Good Reason" exists; provided
that, during said 90 day period, Executive continues to receive the same rate of
compensation that he was receiving immediately prior to any such "Change in
Control" and his employment location remains the same. Nothing in the foregoing
sentence shall prevent Executive from terminating his employment for "Good
Reason" following a "Change in Control" after said 90 day period, and, receiving
full payments pursuant to this Agreement.
3a. Limitation on Payments under Certain Circumstances. Notwithstanding
anything contained in this Agreement to the contrary, in the event that any
payment or benefit (within the meaning of Section 280G (b) (2) of the Internal
Revenue Code (the "Code") to Executive or for his benefit paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise in connection with, or arising out of, Executive's employment with the
Company or a Change of Control within the meaning of Section 280G of the Code (a
"Payment" or "Payments") would be subject to the excise tax imposed by Section
4999 of the Code (the "Excise Tax"), then any Payment due Executive under this
Agreement may be reduced (but not below zero) but only to the extent necessary
such that no portion thereof shall be subject to the Excise Tax (the "Section
4999 Limit"). All determinations required to be made under this Section 3a
(each, a "Determination") shall be made, at the Company's expense, by a
nationally recognized accounting firm designated by the Company, which may be
the accounting firm then auditing the financial records of the Company (the
"Accounting Firm"). The Accounting Firm shall provide its calculations, together
with detailed supporting documentation, both to the Company and Executive before
payment of the severance payment under Section 3 or such other time as requested
by the Company or Executive. Within ten (10) calendar days of the delivery of
the Determination to Executive, Executive shall have the right to dispute the
Determination. The existence of any Dispute shall not in any way affect his
right to receive payments in accordance with the
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Determination. If there is no dispute, the Determination shall be final subject
to the following paragraph.
As a result of the uncertainty in the application of Sections 4999 and
280G of the Code, it is possible that Payments either will have been made or
will not have been made by the Company in a manner inconsistent with the
limitations provided by this Section 3a (an "Excess Payment" or "Underpayment").
If it is established pursuant to (a) a final determination of a court or (b) a
proceeding before the Internal Revenue Service that an Excess Payment has been
made, such Excess Payment shall be deemed for all purposes to be a loan made on
the date Executive received the Excess Payment and Executive shall repay the
Excess Payment to the Company on demand, together with interest thereon at the
applicable federal rate (as defined in Section 1274(d) of the Code) from the
date of his receipt of such Excess Payment until the date of repayment. If it is
determined (a) by the Accounting Firm, the Company or the Internal Revenue
Service, (b) a final determination by a court or (c) upon the resolution to
Executive's satisfaction of the Dispute that an Underpayment has occurred, the
Company shall pay to Executive the amount of such Underpayment together with
interest on such amount at the applicable federal rate from the date such amount
should have been paid to Executive.
4. Certain Definitions.
a. Disability. The term "Disability" as used in this Agreement
shall mean as a result of the Executive's incapacity due to physical or mental
illness, the Executive shall have been absent from his duties with the Company
on a full-time basis for six months.
b. Retirement. The term "Retirement" as used in this Agreement
shall mean termination by the Company or the Executive of the Executive's
employment based on the Executive's having reached age 70 or such other age as
shall have been fixed in any arrangement established with the Executive's
consent with respect to the Executive.
c. Cause. For purposes of this Agreement, the term "Cause" shall
mean (i) the willful and continued failure by the Executive to substantially
perform his duties as an employee (other than any such failure resulting from
the Executive's incapacity due to physical or mental illness), or (ii) the
willful engaging by the Executive in misconduct which is materially injurious to
the Company, monetarily or otherwise. For purposes of the foregoing sentence, no
act, or failure to act, of the Executive's part shall be considered "willful"
unless done, or omitted to be done, by him not in good faith and without
reasonable belief that his act or omission was in the best interest of the
Company. Notwithstanding the foregoing even if facts exist which constitute
"Cause", the Executive may not be terminated for Cause 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 three-quarters of the entire membership
of the Company's Board of Directors at a meeting of the Board called and held
for the purpose (after reasonable notice to the Executive and an opportunity for
the Executive, together with the Executive's counsel, to be heard before the
Board), finding that in the good faith opinion of the Board the Executive was
guilty of conduct set forth in the second sentence of this Section 4(c) and
specifying the particulars thereof in detail.
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d. Good Reason. For purposes of this Agreement, "Good Reason"
shall mean any of the following (done without the Executive's express written
consent):
(a) the assignment to the Executive by the Company of
duties inconsistent with the Executive's position, duties, responsibilities and
status with the Company immediately prior to the latest Change in Control of the
Company, or a change in the Executive's titles or offices as in effect
immediately prior to the latest Change in Control of the Company, or any removal
of the Executive from or any failure to reelect the Executive to any of such
positions (duties performed, and titles at, a subsidiary corporation shall be
deemed inconsistent) except in connection with the termination of his employment
for Disability, Retirement or Cause or as a result of the Executive's death or
by the Executive other than for Good Reason;
(b) a reduction by the Company in the Executive's base
salary as in effect on the date of the latest Change in Control or the Company's
failure to increase (within 12 months of the Executive's last increase in base
salary) the Executive's base salary after the latest Change in Control of the
Company in an amount which at least equals, on a percentage basis, the average
annual percentage increase in base salary for all officers of the Company
effected in the preceding 48 months;
(c) any failure by the Company to provide to Executive
compensation and benefit plans, arrangements, policies and procedures which,
taken as a whole, are no less favorable (including on an after-tax basis) than
those, taken as a whole, provided by the Company immediately prior to the latest
Change in Control;
(d) the Executive's relocation to any place other than the
location at which the Executive performed the Executive's duties prior to the
latest Change in Control of the Company, except (a) for a relocation of no more
than twenty (20) miles and (b) for required travel by the Executive on the
Company's business to an extent substantially consistent with the Executive's
business travel obligations at the time of the latest Change in Control of the
Company;
(e) any failure by the Company to provide the Executive
with the number of paid vacation days to which the Executive is entitled at the
time of the latest Change in Control of the Company;
(f) any material breach by the Company of any provision of
this agreement;
(g) any failure by the Company to obtain the assumption of
this Agreement by any successor or assign of the Company (as defined in Section
6(a)); and
(h) any purported termination of the Executive's
employment, which is not effected pursuant to a Notice of Termination satisfying
the requirements of Section 4(e), and for purposes of this Agreement, no such
purported termination shall be effective.
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Following a Change in Control, at any time after the occurrence of an
event(s) which Executive believes, in good faith, constitutes Good Reason, the
Executive may (but is not obligated to) give written notice to the Company
setting forth in reasonable detail the facts and circumstances claimed to be a
basis for termination for Good Reason pursuant to Section 3. If the Company
disagrees that such facts and circumstances exist and/or do not constitute Good
Reason, the Company shall so notify Executive within thirty (30) days of the
giving of such notice of Good Reason. The Company's responsive notice shall be
in writing and shall also set forth in reasonable detail the reasons why it
denies Executive's Good Reason claim. Failure by the Company to give Executive a
responsive notice within such thirty (30) day period shall constitute an
admission by the Company that Good Reason does exist. The giving of such notice
of Good Reason by Executive tolls the eighteen month period referred to in the
penultimate sentence of the first paragraph of Section 3 until the earlier of
(i) the date that Executive's employment is terminated or (ii) the date that it
is determined that Good Reason does not exist by mutual agreement of the
parties, award of the arbitration or a final judgment of a court of competent
jurisdiction (the time for appeal therefrom having expired and no appeal having
been perfected).
e. Notice of Termination. Any termination by the Company pursuant
to Section 4(a), 4(b) or 4(c) shall be communicated by a Notice of Termination.
For purposes of this Agreement, a "Notice of Termination" shall mean a written
notice which shall indicate those specific termination provisions in this
Agreement relied upon and which sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated. For purposes of this Agreement, no
such purported termination by the Company shall be effective without such Notice
of Termination.
f. Date of Termination. "Date of Termination" shall mean (i) if
this Agreement is terminated by the Company for Disability, 30 days after Notice
of Termination is given to the Executive (provided that the Executive shall not
have returned to the performance of the Executive's duties on a full-time basis
during such 30-day period) or (ii) if the Executive's employment is terminated
for any other reason, the date on which a Notice of Termination is given,
provided that if within 30 days after any Notice of Termination is given to the
Executive by the Company, or to the Company by the Executive, the Executive or
the Company (as the case may be) notifies the other that a dispute exists
concerning the termination, the Date of Termination shall be the date the
dispute is finally determined, whether by mutual agreement by the parties, award
of the arbitrator, or upon final judgment of a court of competent jurisdiction
(the time for appeal therefrom having expired and no appeal having been
perfected). During the existence of any dispute, the eighteen month period
referred to in the penultimate sentence of the first paragraph of Section 3
shall be tolled.
5. No Obligation to Mitigate Damages; No Effect on Other Contractual
Rights.
a. The Executive shall not be required to mitigate damages or the
amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment provided for under
this Agreement be reduced by any compensation earned by the Executive as the
result of employment by another employer after the Date of Termination, or
otherwise.
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b. The provisions of this Agreement, and any payment provided for
hereunder, shall not reduce any amounts, otherwise payable, or in any way
diminish the Executive's existing rights, or rights which would accrue solely as
a result of the passage of time, under any employment agreement or other
contract, plan or arrangement, including but not limited to rights under that
certain Severance Compensation Agreement dated as of April 20, 1998, as amended,
between the Company and Executive, which Agreement shall remain in full force or
effect.
6. Successor to the Company.
a. The Company will require any successor or assign (whether
direct or indirect, by purchase, merger, consolidation 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, absolutely and
unconditionally 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 it if no
such succession or assignment had taken place. Any failure of the Company to
obtain such agreement prior to the effectiveness of any such succession or
assignment shall be a material breach of this Agreement and shall entitle the
Executive to terminate the Executive's employment for Good Reason. As used in
this Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor or assign to its business and/or assets as aforesaid which executes
and delivers the agreement provided for in this Section 6 or which otherwise
becomes bound by all the terms and provisions of this Agreement by operation of
law. If at any time during the term of this Agreement the Executive is employed
by any corporation a majority of the voting securities of which is then owned by
the Company, the term "Company" shall in addition include such employer unless
the context otherwise requires. In such event, the Company agrees that it shall
pay or shall cause such employer to pay any amounts owed to the Executive
pursuant to Section 3 hereof.
b. This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal and legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive should die while any amounts are still payable to him hereunder, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Executive's devisee, legatee, or other
designee or, if there be no such designee, to the Executive's estate.
7. Other Severance Provisions. In addition to severance payments under
Section 3 above, Executive also will receive health and life insurance following
termination of his employment in the same plan as provided to such Executive
immediately prior to such Executive's termination or a substantially similar
plan initiated by the Company thereafter. The Company shall pay for such health
and life insurance, provided that the Executive shall pay for any portion at the
same rates as would have been paid as if he were still employed by the Company.
Continuation coverage under this Section 7 shall continue for a period of three
years; provided, however, that such continuation coverage shall end as of the
date the Executive becomes covered under any other group health and or life plan
that is not maintained by the Company and which provides substantially similar
benefits to the Company's plan.
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8. Legal Fees. The Company shall pay all legal fees, costs of litigation
and other expenses incurred in good faith by the Executive as a result of the
Company's refusal to make the severance payment to which the Executive becomes
entitled under this Agreement, or as a result of the Company's contesting the
validity, enforceability or interpretation of this Agreement or of the
Executive's right to benefits hereunder; provided, however, that if the Company
is the prevailing party, it shall be obligated to pay only its own attorneys'
fees and costs, witness expenses and court costs.
9. Arbitration. The Executive shall have the right and option to elect
(in lieu of litigation) to have any dispute or controversy arising under or in
connection with this Agreement settled by arbitration, conducted before a panel
of three arbitrators sitting in Los Angeles, in accordance with rules of the
American Arbitration Association then in effect. Judgment may be entered on the
award of the arbitrator in any court having jurisdiction. All expenses of such
arbitration, including the fees and expenses of the counsel for the Executive,
shall be borne by the Company; provided, however, that if the Company is the
prevailing party, it shall be entitled to recover from the Executive one-half
(?) of the arbitrators' and transcript expenses and shall be obligated to pay
only its own attorneys' fees and costs, witness expenses and other costs.
10. Notice. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, as follows:
If to the Company:
▇▇▇▇ Industries, Inc.
▇▇▇▇ ▇.▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
If to the Executive:
▇▇▇▇▇▇▇ ▇. Doll
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
or such other address as either Party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
11. Miscellaneous. No provisions 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 by the other party hereto of, or failure to
comply with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or
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dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not set forth expressly in this Agreement. This Agreement shall be governed
by and construed in accordance with the laws of the State of California.
12. Validity. 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.
13. 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 instrument.
14. Confidentiality. The Executive shall retain in confidence any and
all confidential information known to the Executive concerning the Company and
its business so long as such information is not otherwise publicly disclosed.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
▇▇▇▇ Industries, Inc.
By:_____________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
Executive:
By:_____________________________________
▇▇▇▇▇▇▇ ▇. Doll, Executive
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