Exhibit 10(y)
SEVERANCE PROTECTION AGREEMENT
THIS SEVERANCE PROTECTION AGREEMENT is made and effective as of October 1,
2002, by and between Invacare Corporation, an Ohio corporation with its
principal place of business at Xxx Xxxxxxxx Xxx, Xxxxxx, Xxxx 00000 ("Invacare"
or the "Company"), and Xxxxxx X. Xxxxxx (the "Executive").
WITNESSETH:
WHEREAS, Executive is considered a key employee of the Company; and
WHEREAS, the Company desires to retain and motivate Executive consistent
with the terms of this Agreement; and
WHEREAS, the Company and Executive, in order to insure Executive's
continued attention and dedication to his duties, desire to execute this
Agreement in accordance with the terms hereof;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the Company and Executive agree as follows:
1. Acknowledgement of Position. The Company currently employs Executive as
President and Chief Operating Officer of the Company, having those duties and
responsibilities, and the authority, customarily possessed by the President and
Chief Operating Officer of a major corporation and such additional duties as
have been and may be assigned to him from time to time by the Chief Executive
Officer and/or the Board of Directors of the Company (the "Board") which are
consistent with the positions of President and Chief Operating Officer of a
major corporation. Service by Executive on the boards of other companies shall
not be deemed to be a violation of this Agreement, provided such service does
not significantly interfere with the confidentiality provisions or performance
of his duties hereunder.
2. Termination of Employment.
A. Termination Due to Death or Disability. In the event that
Executive's employment with the Company is terminated due to his death or
disability as defined in Section 3 hereof, respectively, his estate or his
beneficiaries, as the case may be, shall be entitled to any payments or
benefits (including salary, etc.) accrued but unpaid at the time of
Executive's termination due to his death or disability, all as payable
under Company plans in effect at the time of termination. If Executive dies
or becomes disabled during the term of this Agreement, the duties of the
Company and Executive, one to the other, under this Agreement shall
terminate as of the date of Executive's death, except as provided above.
B. Termination by the Company for Cause or Resignation by Executive
other than for Good Reason. Upon Executive's resignation other than for
"Good Reason" as defined in Section 3, or upon the termination of
Executive's employment by the Company for "Cause" as defined in Section 3,
Executive shall be entitled to any payments or benefits accrued but unpaid
at the time of Executive's termination by the Company for Cause or
resignation by Executive other than for Good Reason, all as payable under
Company plans in effect at the time of termination.
C. Termination by the Company other than for Cause or Resignation of
Executive for Good Reason. Upon Executive's termination by the Company
other than for "Cause" as defined in Section 3 of this Agreement, or by
Executive for "Good Reason" as described in Section 3 of this Agreement,
Executive shall be entitled to the following amounts and benefits:
(i) Compensation payable to the extent of three times the amount
of Executive's then applicable annual base salary to be paid in three
(3) equal annual installments commencing 30 days after cessation of
employment;
(ii) 75% of Executive's target bonus for the year in which
employment terminates to be paid in three (3) equal annual
installments commencing 30 days after cessation of employment;
(iii) Any then-outstanding stock option grant or award shall
immediately vest in full as of the date of termination of employment
(notwithstanding any provision therein contained); and
(iv) The exercise period of any unexercised stock option shall be
extended until the earlier of two (2) years after the date of
termination of employment or expiration of the option (notwithstanding
any provision therein contained). In addition, Executive shall be
permitted to exercise any such option by means of a cashless exercise
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program, so long as (a) such program is allowed under all applicable
laws and regulations, and (b) the Company is not required to recognize
additional compensation expense as a result thereof.
In the event Executive violates any of the Restrictive Covenants,
as defined in Section 11 of this Agreement, Executive shall no longer
be entitled to receive any further cash severance amounts pursuant to
subclauses (i) and (ii) above, and thereafter subclauses (iii) and
(iv) shall terminate and instead, the treatment of Executive's options
will be governed by the terms of the option plans and agreements
thereunder.
3. Definitions.
A. Disability.
The term "disability" as used in this Agreement shall mean
Executive's inability, due to a mental or physical condition, to
continue to provide services to the Company substantially consistent
with past practice for a period of at least ninety (90) consecutive
days, as evidenced by a written certification as to such condition
from a physician designated by Executive and reasonably acceptable to
the Board.
B. Good Reason.
Executive shall have "Good Reason" to terminate his employment
under this Agreement if one or more of the events listed in (a)
through (f) of this Section occurs and, based upon that event,
Executive gives notice of his intention to terminate his employment
effective on a date that is within 90 days of the occurrence of that
event:
(i) Executive is subjected to Demotion or Removal;
(ii) Executive's Annual Base Salary, which shall mean his
salary for the most recent fiscal year of the Company, is
reduced;
(iii) Executive's opportunity for incentive compensation as
an officer or employee of the Company is reduced from the level
of his opportunity for such incentive compensation for the prior
year, without his prior written consent;
(iv) Executive is excluded from full participation in any
benefit plan or arrangement maintained for senior executives of
the Company generally;
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(v) Executive determines in good faith that his
responsibilities, duties, or authority as an officer or employee
of the Company are at any time materially reduced from those then
currently held by him and the shortfall or reduction has not been
cured within 90 days after the Executive gives notice to the
Board of Directors of the Company of his election to terminate
his employment for Good Reason based upon that shortfall or
reduction; or
(vi) Executive's principal place of employment is relocated
more than 35 miles from Xxx Xxxxxxxx Xxx, Xxxxxx, Xxxx without
his prior written consent.
C. Cause.
The employment of Executive by the Company shall have been
terminated for "Cause" if any of the following has occurred:
(i) Executive shall have been convicted of a felony;
(ii) Executive commits an act or series of acts of
dishonesty in the course of Executive's employment which are
materially inimical to the best interests of the Company and
which constitutes the commission of a felony, all as determined
by the vote of three-fourths of all of the members of the Board
(exclusive of the Executive, if the Executive is a Director of
the Company), which determination is confirmed by a panel of
three arbitrators appointed and acting in accordance with the
rules of the American Arbitration Association for the purpose of
reviewing that determination;
(iii) any federal or state regulatory agency with
jurisdiction over the Company has issued a final order, with no
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further right of appeal, that has the effect of suspending,
removing, or barring Executive from continuing his service as an
officer or Director of the Company;
(iv) after being notified in writing by the Board to cease
any particular Competitive Activity, Executive shall
intentionally continue to engage in such Competitive Activity
while Executive remains in the employ of the Company; or
(v) Executive shall fail to devote his full business time to
the business of the Company (excluding for these purposes any
services performed for any charitable organizations, or
organizations where he is participating as the Company's
representative), which failure continues after 30 days following
the Company's notice to Executive specifying such failure, during
which time he will have the right to cure.
E. Demotion or Removal.
Executive shall be deemed to have been subjected to
"Demotion or Removal" if (other than by voluntary resignation or
with Executive's written consent) Executive ceases to hold the
highest position as an employee/officer of Invacare held by him
at any time during the effectiveness of this Agreement with all
of the duties, authority, and responsibilities of that office as
in effect at any time during the effectiveness of this Agreement.
F. Competitive Activity.
Executive shall be deemed to have engaged in "Competitive
Activity" if Executive engages in any business or business
activity (other than as a Director, officer, or employee of the
Company) that violates Section 7 hereof.
4. Notice of Termination.
Any termination of Executive's employment by the Company or by Executive
shall be communicated by written Notice of Termination to the other party
hereto, which shall set forth the effective date of such termination (not
earlier than the date of mailing, or delivery by other means, of the notice).
5. Expenses.
In the event either party to this Agreement shall be forced to enforce the
terms of this Agreement, the party successfully enforcing such terms shall be
entitled to reimbursement of its reasonable legal and accounting fees from the
other party hereto.
6. Term; Change of Control.
This Agreement's term shall begin on the effective date written above and
shall terminate three (3) years thereafter or upon a Change of Control of the
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Company as defined in the Change of Control Agreement between Executive and the
Company dated as of April 1, 2000, as the same may be amended ("Change of
Control Agreement"); provided, however, that if such Change in Control does not
occur, then the term of this Agreement automatically shall extend for additional
one (1) year terms unless terminated by either party upon ninety (90) days
written notice. For purposes of this Agreement, "Change in Control" shall have
the meaning ascribed to it in the above referenced Change of Control Agreement.
The Company and Executive acknowledge that if a Change of Control occurs,
Executive will thereafter be protected to the extent and on the terms provided
in the Change of Control Agreement.
7. Noncompetition.
Executive agrees that from the date hereof until the end of the two (2)
year period commencing on the date of his cessation of employment with the
Company or the two (2) year period after the last payment due to Executive
hereunder, whichever occurs later (the "Noncompetition Period"), he will not,
either directly or indirectly, in any capacity whatsoever, (a) compete with the
Company by soliciting any customer of the Company by whatever method or (b)
operate, control, advise, be employed and/or engaged by, perform any consulting
services for, invest in (other than the purchase of no more than 5 percent of
the publicly traded securities of a company whose securities are traded on a
national stock exchange) or otherwise become associated with, any person,
company or other entity who or which, at any time during the Noncompetition
Period, competes with the Company. As used above, "compete" is defined as the
marketing, distribution or sale of products substantially similar to or directly
competitive with those sold by the Company in any geographical area in which the
Company maintains offices, sales agents, has customers or otherwise conducts
business, at the time of Executive's cessation of employment. Executive further
expressly represents and understands that if Executive's employment is
terminated, this Agreement will prohibit Executive from future employment with
all major companies that compete with the Company, as defined in this Agreement,
and as such, will constrain some of Executive's overall possibilities for future
employment. By Executive's signature to this Agreement, Executive expressly
represents that his training, education and background are such that his ability
to earn a living shall not be impaired by the restriction in this Agreement.
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8. Nondisclosure.
Executive agrees at all times to hold as secret and confidential (unless
disclosure is required pursuant to court order, subpoena, in a governmental
proceeding, arbitration, or pursuant to other requirement of law) any and all
proprietary knowledge, technical information, business information,
developments, trade secrets and confidences of the Company or its business,
including, without limitation, (a) information or business secrets relating to
the products, customers, business, conduct or operations of the Company or any
of its respective clients, customers, consultants or licensees; and (b) any of
the Company's customer lists, pricing and purchasing information or policies
(collectively, "Confidential Information"), of which he has acquired knowledge
during or after his employment with the Company, to the extent that such matters
(i) have not previously been made public or are not thereafter made public by or
through the Executive, or (ii) do not otherwise become available to Executive,
in either case, via a source not bound by any confidentiality obligations to the
Company. The phrase "made public" as used in this Agreement shall apply to
matters within the domain of the general public or the Company's industry.
Executive agrees not to use, directly or indirectly, such knowledge for his own
benefit or for the benefit of others and not to disclose any of such
Confidential Information without the prior written consent of the Company. At
the cessation of employment with the Company, Executive agrees to promptly
return to the Company any and all written Confidential Information received from
the Company which relates in any way to any of the foregoing items covered in
this paragraph and to destroy any transcripts or copies Executive may have of
such Confidential Information unless an alternative method of disposition is
approved by the Company.
9. Nonsolicitation/Noninterference/Nondisparagement.
Executive agrees that during the period that is coterminous with the
Noncompetition Period (the "Nonsolicitation Period"), he will not at any time,
without the prior written consent of the Company, directly or indirectly
solicit, induce, or attempt to solicit or induce any employee, former employee
(as herein defined), agent, consultant, or other significant representative of
the Company for the purpose of providing employment opportunities or to
terminate such individual's relationship with the Company. Executive further
covenants and agrees that, during the Nonsolicitation Period, he will not,
without the prior written consent of the Company, directly or indirectly, induce
or attempt to induce any actual or prospective customers or suppliers of the
Company to terminate, alter or change its relationship with the Company or
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otherwise interfere with any relationship between the Company and any of its
actual or prospective suppliers or customers. A "former employee" shall mean any
person who was employed by the Company at any time during the one (1) year
period prior to Executive's cessation of employment with the Company. Executive
further covenants that at all times after cessation of his employment with the
Company, Executive shall refrain from making any statements (whether oral,
written or electronic) to any person or organization, including, but not limited
to, members of the press and media, and other members of the public, which would
disparage the Company or its officers, Directors or affiliates.
10. Intellectual Property Assignment.
Executive agrees that all ideas, improvements, computer programs, code, or
flowcharts, inventions, and discoveries that are directly related to the
business of the Company either as previously conducted or as conducted at any
time during Executive's employment, that Executive may have made or that
Executive may make or conceive, alone or jointly with others, prior to or during
Executive's employment with the Company shall be the sole property of the
Company, and Executive agrees:
(A) to promptly disclose any such ideas, improvements, inventions, and
discoveries to the Company; and
(B) to treat such ideas, improvements, inventions, and discoveries as
the trade secrets of the Company; and
(C) not to disclose such ideas, improvements, inventions, and
discoveries to anyone, both during and after Executive's employment with
the Company, without the Company's prior written approval.
Executive hereby assigns all of Executive's right, title and interest, in and to
any such ideas, improvements, inventions, or discoveries, including any
potential patent rights and any additional rights conferred by law upon
Executive as the author, designer, or inventor thereof, to (a) vest full title
in the idea, improvement, invention, or discovery in the Company, and (b) to
enable the Company to seek, maintain or enforce patent or other protection
thereon anywhere in the world.
Executive agrees that the Company is the author (owner) of any work of
authorship or copyrightable work ("Work") created by Executive, in whole or in
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part, during Executive's employment by the Company and directly relating to the
business of the Company as previously conducted or as conducted at any time
during Executive's employment. Executive acknowledges that each writing and
other literary Work , each drawing and other pictorial and/or graphic Work and
any audio-visual Work, created by Executive, in whole or in part, and directly
relating to his position or responsibilities with the Company has been prepared
by Executive for the Company as a Work for hire. Executive agrees that in the
event that such Work is not considered Work for hire, Executive hereby assigns
all copyright and any other rights conferred in law unto Executive in and to
such Work to the Company. Executive agrees that at the request of the Company,
Executive will execute any documents deemed necessary by the Company to (a) vest
full title to the Work in the Company, and (b) enable the Company to register,
maintain, or enforce copyrights in the Work anywhere in the world. Executive
will treat any such Work as the trade secrets of the Company and will not
disclose it to anyone both during and after Executive's employment by the
Company, without the Company's prior written approval.
11. Severability.
In the event that Sections 7, 8, 9 or 10 (the "Restrictive Covenants")
hereof shall be found by a court of competent jurisdiction to be invalid or
unenforceable as written as a matter of law, the parties hereto agree that such
court(s) may exercise its discretion in reforming such provision(s) to the end
that Executive shall be subject to noncompetition, nondisclosure,
nonsolicitation/noninterference, nondisparagement and intellectual property
assignment covenants that are reasonable under the circumstances and enforceable
by the Company.
12. Acknowledgment.
Executive specifically acknowledges that the Restrictive Covenants are
reasonable, appropriate, and necessary as to duration, scope, and geographic
area in view of the nature of the relationship between Executive and the Company
and the investment by the Company of significant time and resources in the
training, development, and employment of Executive. Executive warrants and
represents that in the event that any of the Restrictive Covenants become
operative, he will be able to engage in other activities for the purpose of
earning a livelihood, and shall not be impaired by these restrictions.
Executive further acknowledges that the remedy at law for any breach of
these covenants, including monetary damages to which the Company may be
entitled, will be inadequate and that the Company, its successors and/or
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assigns, shall be entitled to injunctive relief against any breach without bond.
Such injunctive relief shall not be exclusive, but shall be in addition to any
other rights or remedies which the Company may have for any such breach.
Executive further acknowledges that he is an "at will" employee of the
Company and nothing expressed or implied in this Agreement shall create any
right or duty on the part of the Company or Executive to have Executive continue
as an officer of the Company or to remain in the employment of the Company.
14. Limitation of Payment.
Notwithstanding anything in this Agreement to the contrary, if receipt of
any of the benefits hereunder would subject Executive to tax under Section 4999
of the Internal Revenue Code of 1986, as amended (or similar successor statute)
(hereafter "Section 4999"), the Company shall promptly pay to Executive a "gross
up" amount that would allow the Executive to receive the net after-tax amount he
would have received but for the application of said Section 4999 to any payments
hereunder, including any payments made pursuant to this Section 14.
15. Successor to Invacare.
The Company shall not consolidate with or merge into any other corporation,
or transfer all or substantially all of its assets to another corporation,
unless such other corporation shall assume this Agreement in a signed writing
and deliver a copy thereof to Executive. Upon such assumption, the successor
corporation shall become obligated to perform the obligations of the Company
under this Agreement and the term "Company" as used in this Agreement shall be
deemed to refer to such successor corporation.
16. Notices.
Notices and all other communications provided for in this Agreement shall
be in writing and shall be deemed to have been duly given when delivered in
person or by confirmed facsimile transmission (Chairman of the Board of the
Company in the case of notices to the Company and to Executive in the case of
notices to the Executive) or mailed by United States registered mail, return
receipt requested, postage prepaid, addressed as follows (or to such other
address as may be specified in accordance herewith):
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If to Company:
Invacare Corporation
000 Xxxxxxxxx Xxxxxx
X.X. Xxx 0000
Xxxxxx, XX 00000-0000
Attention: Chairman of the Board
If to Executive:
Xxxxxx X. Xxxxxx
00000 Xxxx Xxxx
Xxx Xxxxxxx, Xxxx 00000
17. Entire Agreement; Supercession.
Except as otherwise specifically provided herein, this Agreement, including
its attachments, contains the entire agreement between the parties concerning
the subject matter hereof and incorporates and supersedes any and all prior
discussions or agreements, written or oral, the parties may have had with
respect to such subject matter; provided, however, that except as expressly
provided otherwise herein, nothing in this Agreement shall affect any rights
Executive or anyone claiming through Executive may have in respect of either (a)
any employee benefit plan which provides benefits to or in respect of the
Executive or (b) any other agreements the Executive may have with the Company or
an Affiliate, including the Change of Control Agreement, except to the extent
any such employee benefit plan or other agreement provides benefits which are
duplicative of those provided under this Agreement.
18. Post-Mortem Payments; Designation of Beneficiary.
In the event that, following the termination of Executive's employment with
the Company, the Executive is entitled to receive any payments pursuant to this
Agreement and Executive dies, such payments shall be made to the Executive's
beneficiary designated hereunder. At any time after the execution of this
Agreement, the Executive may prepare, execute, and file with the Secretary of
the Company a copy of the Designation of Beneficiary form attached to this
Agreement as Exhibit A. Executive shall thereafter be free to amend, alter or
change such form; provided, however, that any such amendment, alteration or
change shall be made by filing a new Designation of Beneficiary form with the
Secretary of the Company. In the event Executive fails to designate a
beneficiary, following the death of Executive all payments of the amounts
specified by this Agreement which would have been paid to the Executive's
designated beneficiary pursuant to this Agreement shall instead be paid to
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Executive's spouse, if any, if she survives Executive or, if there is no spouse
or she does not survive Executive, to Executive's estate.
19. Representations and Warranties of the Company.
The Company represents and warrants to Executive that (i) the Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Ohio; (ii) the Company has the power and authority to enter
into and carry out this Agreement, and there exists no contractual or other
restriction upon its so doing; (iii) the Company has taken such corporate action
as is necessary or appropriate to enable it to enter into and perform its
obligations under this Agreement; and (iv) this Agreement constitutes the legal,
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms.
20. Governing Law.
All questions concerning the construction, validity and interpretation of
this Agreement and the exhibits hereto will be governed by and construed in
accordance with the internal laws of the State of Ohio, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
Ohio or any other jurisdiction) that would cause the application of the laws of
any jurisdiction other than the State of Ohio.
21. Assignment.
Neither the Company nor Executive shall assign this Agreement without the
prior written consent of the other party hereto.
22. Entire Agreement; Amendments; Waivers.
This Agreement contains the entire agreement between the parties hereto
with respect to the subject matter hereof and replaces or supersedes any
previous agreements on such subject matter. It may not be changed orally, but
only by agreement, in writing, signed by each of the parties hereto. The terms
or covenants of this Agreement may be waived only by a written instrument
specifically referring to this Agreement, executed by the party waiving
compliance. Any such waiver, amendment or modification on behalf of the Company,
unless otherwise specified herein, may be authorized either by a simple majority
of the Board (excluding Executive for all purposes) or a majority of the
Compensation Committee members. The failure of the Company at any time, or from
time to time, to require performance of any of Executive's obligations under
this Agreement shall in no manner affect the Company's right to enforce any
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provision of this Agreement at a subsequent time; and the waiver by the Company
of any right arising out of any breach shall not be construed as a waiver of any
right arising out of any subsequent breach.
23. Headings.
The headings in this Agreement are intended solely for convenience of
reference and shall be given no effect in the construction or interpretation of
this Agreement.
24. Counterparts.
This Agreement may be executed in multiple counterparts each of which shall
be deemed an original but all of which together shall constitute one and the
same document.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
INVACARE CORPORATION
"Invacare"
/s/A. Xxxxxxx Xxxxx,III
---------------------
A. Xxxxxxx Xxxxx, III
Chairman of the Board
XXXXXX X. XXXXXX
"Executive"
/s/XXXXXX X. XXXXXX
---------------------
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Exhibit A
to Severance Protection Agreement
DESIGNATION OF BENEFICIARY
To: Invacare Corporation
Attention: Secretary
I, the undersigned Xxxxxx X. Xxxxxx, am a party to a certain Severance
Protection Agreement with Invacare Corporation, an Ohio corporation, dated as of
October 1, 2002 (the "Agreement"). Pursuant to the Agreement, I have the right
to designate a person or persons to receive, in the event of my death, any
amounts that might become payable to me under the Agreement. I hereby exercise
this right and direct that, upon my death, any amounts payable to me under the
Agreement shall be distributed in the proportions set forth below to the
following person(s) if he, she or they survive me, namely:
Beneficiary Relationship Percent Share
------------------------- ------------------------- -------------
Xxxxxx X. Xxxxxx
Revocable Trust
If none of the above-designated person(s) survives me, any amounts payable
under the Agreement shall be distributed to Xxxxxx X. Xxxxxx Revovable Trust.
Any and all previous designations of beneficiary made by me are hereby
revoked, and I hereby reserve the right to revoke this designation of
beneficiary.
Date: October 6, 2002 /s/ Xxxxxx X. Xxxxxx
----------------
Xxxxxx X. Xxxxxx
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