OAK INDUSTRIES INC.
SEVERANCE AGREEMENT
This is an AGREEMENT entered into between Oak Industries Inc. (the
"Company") and -------------- ("Executive") effective as of the first day
of May, 1998.
Executive is a key executive of the Company and a vital part of its
management. In consideration of Executive's continued employment with the
Company, the parties agree as follows:
1. Term; Window Period. The term during which this Agreement (the
"Agreement") will be in effect (the "Term of the Agreement") will be the
three-year period beginning on May 1, 1998 (the "Effective Date").
However, as of May 1, 2001, and as of May 1 of each third year thereafter,
the Term of the Agreement will be automatically extended for a period of
three additonal years unless either party delivers to the other written
notice to the contrary no later than 90 days prior to such May 1. If a
Change of Control (as defined in Exhibit A) occurs during the Term of the
Agreement, the Agreement will remain in effect until all obligations
hereunder have been discharged. The period starting on the date of such a
Change of Control and ending on the third anniversary of the Change of
Control will be a "Window Period" during which special provisions of this
Agreement will apply.
2. Positions and Duties. Subject to the provisions of the Agreement:
2.1 Executive will serve as ------------------- of the Company with
responsibilities consistent with these positions. [Executive will also be
a member of the Board of Directors of the Company (the "Board").]
2.2 Executive will be a full-time employee of the Company and, except for
reasonable work-related travel, will perform his duties at the Company's
headquarters, which shall be no more than 50 miles from Waltham,
Massachusetts.
2.3 Executive will devote his entire business time and attention and his
best efforts to the duties and services of his positions. However,
Executive may serve on boards of directors of other businesses and attend
to personal investments and community and charitable service, provided that
such activities are not competitive with the business of the Company and do
not interfere with the performance of Executive's duties to the Company.
3. Compensation and Benefits. During the Term of the Agreement, the
Company will provide compensation and benefits to Executive as follows:
3.1 Base Salary. The Company will review Executive's base salary
annually, and Executive will receive such increases in base salary, if any,
for each succeeding year as the Board determines in its sole discretion.
(Executive's base salary as so increased will be referred to as "Base
Salary"). Executive's Base Salary will not be decreased during the Term of
the Agreement except as part of a general reduction in which the base
salaries of all executives at or above the senior vice president level have
been decreased and will not be decreased during a Window Period without
Executive's prior written agreement.
3.2 Performance Bonus. Executive will be eligible for an annual
performance bonus based on achievement of objective performance goals
established by the Compensation Committee of the Board. Executive's bonus
for any year ending during a Window Period will not be less than 100
percent of his bonus for the completed year immediately preceding the
Change of Control.
3.3 Plans, Policies and Arrangements. Executive will be entitled to
participate in the following plans, policies and arrangements (or in any
successor or supplemental plans, policies or arrangements) in each case at
a level appropriate to Executive's position and in each case in accordance
with the terms of the pertinent plan, policy or arrangement:
(i) the Oak Industries Salaried Pension Plan, the Oak
Industries Vantage Savings Plan and the Oak Industries
Supplemental Retirement Income Plan (the "SRIP");
(ii) the Company's group medical plan, Supplemental Executive
Medical Plan, long-term disability plan and Executive
Supplemental Long-Term Disability Plan;
(iii) life insurance arrangements provided to executive-level
employees of the Company;
(iv) all Company stock option and restricted stock plans in
which executives participate;
(v) the Company's normal expense reimbursement policies;
(vi) the automobile allowance arrangement for Company
executives; and
(vii) vacation and sick leave in accordance with the
Company's policies.
[3.4 Additional Term Life Insurance. The Company will purchase and keep
in effect (or will reimburse Executive the cost of purchasing and keeping
in effect) term life insurance on Executive's life in an amount of not less
than $1 million (with the death benefit payable to Executive's designated
beneficiary).]
4. Termination of Employment; Severance Benefits.
4.1 Terminability of Employment. Either the Company or Executive may at
any time terminate Executive's employment with the Company after giving 30
days' written notice to the other party. However, if Executive's
employment terminates during the Term of the Agreement, the parties will
be required to discharge the applicable obligations described in this
Section 4 and elsewhere in this Agreement. If Executive's employment
terminates at any time other than during the Term of the Agreement,
Executive will have no rights under the Agreement.
4.2 Termination upon Death or Disability. If Executive ceases to be an
employee of the Company as a result of death or disability, the Company
will have no further obligation or liability to Executive hereunder other
than for Base Salary earned and unpaid at the date of termination, a pro-
rata portion of his target bonus (provided for in Section 3.2 above) for
the year of termination and compensation for accrued vacation. The Term of
the Agreement will end when those amounts are paid. However, nothing in
this Agreement is intended to interfere with the rights of Executive and
his family or beneficiaries under other applicable plans, policies or
arrangements of the Company. For purposes of this Section 4.2, the Company
may terminate Executive's employment for "disability" if, because of
physical or mental incapacity, Executive is unable for a period of ------
consecutive days to perform the material duties of his position and it is
determined by a qualified physician chosen by the Company (and, if during a
Window Period, approved by the Executive or his conservator) to be probable
that such incapacity will continue for an additional ------ consecutive
days.
4.3 Termination by the Company for Cause or by Executive Without Good
Reason. If the Company terminates Executive's employment for Cause (as
defined in this Section 4.3) or if Executive terminates his employment
other than for Good Reason (as defined in Section 4.4), the Company will
have no further obligation or liability to Executive hereunder other than
for Base Salary earned and unpaid at the date of termination and
compensation for accrued vacation, and the Term of the Agreement will end
when those amounts are paid.
"Cause" means (a) willful malfeasance or gross negligence in the
performance by Executive of his duties, resulting in harm to the Company,
(b) fraud or dishonesty by Executive with respect to the Company, or (c)
Executive's conviction of a felony.
4.4 By the Company Without Cause or By Executive for Good Reason.
(a) Entitlement to Severance Benefits. If, during the Term of the
Agreement, the Company terminates Executive's employment without
Cause, or if Executive terminates his employment for Good Reason, the
Company will, subject to Section 5 below, provide severance benefits
to Executive as set forth below in this Section 4.4.
"Good Reason" means (i) failure by the Company to maintain Executive
in the positions described in Section 2 or assignment to Executive of
duties materially inconsistent with such positions, (ii) failure by
the Company to provide Executive with the compensation and benefits
described in Section 3, or (iii) relocation of Executive's principal
place of work to a location more than 50 miles from its location
immediately prior to the Change of Control.
(b) Normal Severance Benefits. Except as provided in paragraph
(c), the Company will provide severance benefits as follows:
(i) The Company will pay to Executive within 30 days of the
termination a lump-sum cash amount equal to -----% of the sum
of (A) Executive's annual Base Salary in effect immediately
prior to the termination (or, if his Base Salary has been
reduced within 60 days of the termination, his Base Salary in
effect prior to the reduction), plus (B) the average of the
bonuses earned by Executive for the period of two years
completed immediately prior to the termination (for this
purpose, annualizing bonuses paid for less than a full year's
employment).
(ii) The Company will also pay to Executive within 30 days of
the termination a pro-rata portion of his target bonus
(provided for in Section 3.2 above) for the year of
termination.
(iii) The Company will continue for a period of ------- years
from the date of termination to provide Executive with the
benefits set forth in paragraphs (ii) and (iii) of Section 3.3
above. To the extent that the Company is unable to provide
such benefits to Executive under its existing plans and
arrangements, it will pay Executive cash amounts equal to
Executive's cost of obtaining such benefits.
(iv) For the ------ year period following termination of
employment, stock options held by Executive will become
exercisable and restricted stock held by Executive will become
vested according to their original schedules as though
Executive had remained employed by the Company.
(c) Severance Benefits Following a Change of Control. If the
termination occurs during a Window Period, the Company will, instead
of the benefits prescribed in paragraph (b), provide severance
benefits to Executive as follows:
(i) The Company will pay to Executive within 30 days of the
termination a lump-sum cash amount equal to 300% of the sum of
(A) Executive's annual Base Salary in effect immediately prior
to the termination (or, if his Base Salary has been reduced
within 60 days of the termination or at any time after the
Change of Control, his Base Salary in effect prior to the
reduction), plus (B) the average of the bonuses earned by
Executive for the period of two years completed immediately
prior to the termination or immediately prior to the Change of
Control, whichever is higher (for this purpose, annualizing
bonuses paid for less than a full year's employment).
(ii) The Company will also pay to Executive within 30 days of
the termination a pro-rata portion of his target bonus
(provided for in Section 3.2 above) for the year of
termination.
(iii) The Company will continue for a period of three years
from the date of termination to provide Executive with the
benefits set forth in paragraphs (ii), (iii) and (vi) of
Section 3.3 above. To the extent the Company is unable to
provide such benefits to Executive under its existing plans and
arrangements, it will either arrange to provide Executive with
substantially similar benefits upon comparable terms or pay
Executive cash amounts equal to Executive's cost of obtaining
such benefits.
(iv) Notwithstanding any contrary provision of the plans or
arrangements under which they are granted, (A) all options to
purchase Company stock held by Executive will immediately
become exercisable and will not terminate prior to the time
they would have terminated had Executive remained in the employ
of the Company and (B) all restricted stock held by Executive
under restricted stock plans and arrangements of the Company
will immediately become fully vested.
(v) Executive's benefits under the SRIP will immediately
become fully vested.
5. Limitations on Severance Benefits.
5.1 Except as provided in Section 5.2 below, the payments and benefits to
which Executive will be entitled under Section 4 of this Agreement will be
reduced to the extent necessary to prevent Executive from becoming liable
for the excise tax levied on certain "excess parachute payments" under
section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"). If a reduction is made under this Section 5.1, Executive will
have the right to determine which payments and benefits will be reduced.
5.2 The limitations of Section 5.1 will not apply if --
(i) the present value, net of all federal, state, and other
income and excise taxes, of all payments and benefits to which
Executive is entitled hereunder without such limitations,
exceeds
(ii) the present value, net of all federal, state, and other
income and excise taxes, of all payments and benefits to which
Executive would be entitled hereunder if such limitations
applied.
5.3 Determinations under this Section 5 will be made by the firm of
certified public accountants then serving as the Company's auditor unless
Executive has reasonable objections to the use of that firm, in which case
the determinations will be made by a comparable firm chosen by Executive
after consultation with the Company. The determinations of such firm will
be binding upon the Company and Executive.
6. Withholding. All payments required to be made by the Company to
Executive under this Agreement will be subject to the withholding of such
amounts, if any, relating to tax and other payroll deductions as may be
required by law.
7. Fees and Expenses. In the event of Executive's termination of
employment during a Window Period, the Company will pay any and all fees
and expenses (including legal fees and other costs of arbitration or
litigation) that may be incurred by Executive in enforcing his rights under
this Agreement. If the termination of employment does not occur during a
Window Period, the Company will pay that amount of such fees and expenses
that bears the same ratio to the total fees and expenses as the dollar
amount of payments and benefits determined to be payable to Executive bears
to the total dollar amount of payments and benefits in dispute.
8. No Duty to Mitigate. Benefits payable under this Agreement as a
result of termination of Executive's employment will be considered
severance pay in consideration of his past service and his continued
service from the Effective Date, and his entitlement thereto will neither
be governed by any duty to mitigate his damages by seeking further
employment nor offset by any compensation that he may receive from other
employment.
9. Confidentiality and Exclusivity. Executive agrees to maintain the
confidentiality of the Company's (and its related entities and projects)
books, records, financial information, technical information, business
plans and/or strategies, and other confidential matters unless required to
make disclosure in the performance of his duties for the Company or as a
result of a legal proceeding or other legally mandated cause. In the event
of termination without Good Reason by Executive, other than such a
termination occurring during a Window Period, Executive will not for two
years following termination act as an executive-level employee with any
company that directly competes against the Company. The parties recognize
and agree that should the Company be required to pursue a claim against
Executive under this Section 9, the Company will likely be required to seek
injunctive relief as well as damages at law. Accordingly, Section 11,
Arbitration, will not apply to any action by the Company against Executive
for violation of this Section 9. Executive agrees for purposes of any
disputes arising under this Section 9 to submit to the exclusive
jurisdiction of the federal and state courts in the Commonwealth of
Massachusetts.
10. Indemnification. To the extent permitted by law, the Company will
defend, indemnify and hold Executive harmless from and against any and all
losses, liabilities, damages, expenses (including attorneys' fees and
costs), actions, causes of action or proceedings arising directly or
indirectly from Executive's performance of this Agreement or services as an
employee of the Company. Executive may retain his own counsel to defend
himself in such actions, and the Company will pay for the reasonable costs
and expense of such counsel. This indemnification is in addition to any
right of indemnification to which Executive may be entitled under the
Company's Articles of Incorporation and By-laws and any insurance policies
that may be maintained by the Company.
11. Arbitration. Except as otherwise provided in Section 9, any dispute
or controversy between the parties involving the construction or
application of any terms, covenants or conditions of this Agreement, or any
claim arising out of or relating to this Agreement, or any claim arising
out of or relating to Executive's employment by the Company that is not
resolved within ten days by the parties will be settled by arbitration in
Boston, Massachusetts, in accordance with the rules of the American
Arbitration Association then in effect, and judgment upon the award
rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof. The Company and Executive agree that the
arbitrator(s) will have no authority to award punitive or exemplary damages
or so-called consequential or remote damages such as damages for emotional
distress. Any decision of the arbitrator(s) will be final and binding upon
the parties. Upon request the arbitrator(s) shall submit written findings
of fact and conclusions of law. The parties agree and understand that they
hereby waive their rights to a jury trial of any dispute or controversy
relating to the matters specified above in this Section 11.
12. Rights of Survivors If Executive dies after becoming entitled to
benefits under Section 4 following termination of employment but before all
such benefits have been provided, (a) all unpaid cash amounts will be paid
to the beneficiary that has been designated by Executive in writing (the
"beneficiary"), or if none, to Executive's estate, (b) all applicable
insurance coverage will be provided to Executive's family as though
Executive had continued to live, and (c) any stock options that become
exercisable under Section 4.4(b)(iii) or Section 4.4(c)(iv) will be
exercisable by the beneficiary, or if none, the estate.
13. Successors. This Agreement will inure to and be binding upon the
Company's successors. The Company will require any successor to all or
substantially all of the business and/or assets of the Company by sale,
merger or consolidation (where the Company is not the surviving
corporation), lease or otherwise, by agreement in form and substance
satisfactory to Executive, to assume this Agreement expressly. This
Agreement is not otherwise assignable by the Company.
14. Subsidiaries. For purposes of this Agreement, employment by a
corporation or other entity that is controlled directly or indirectly by
the Company will be deemed to be employment by the Company. Thus,
references in the Agreement to "Company" include such corporations or other
entities where appropriate in the context.
15. Amendment or Modification; Waiver. Except as provided in clause (1)
of Exhibit A, this Agreement may not be amended unless agreed to in writing
by Executive and the Company. No waiver by either party of any breach of
this Agreement will be deemed a waiver of a subsequent breach.
16. Severability. In the event that any provision of this Agreement is
determined to be invalid or unenforceable, the remaining provisions shall
remain in full force and effect to the fullest extent permitted by law.
17. Controlling Law. This Agreement will be controlled and interpreted
pursuant to Massachusetts law.
18. Superseded Agreement. This Agreement supersedes in its entirety the
Employment Agreement between Executive and the Company dated May 1, 1996.
19. Notices. Any notices required or permitted to be sent under this
Agreement are to be delivered by hand or mailed by registered or certified
mail, return receipt requested, and addressed as follows:
If to the Company:
Oak Industries Inc.
0000 Xxxxxx Xxxxxx, Xxxxx Xxxxxxxx
Xxxxxxx, XX 00000
If to Executive:
----------------------
----------------------
----------------------
Either party may change its address for receiving notices by giving notice
to the other party.
In witness whereof, the parties hereto have executed this Agreement as of
the date first set forth above.
-----------------------
[EXECUTIVE]
OAK INDUSTRIES INC.
By:---------------------
Exhibit A
"Change of Control" means the occurrence of any of the following events:
(1) any Person becomes the owner of 20% or more of the Company's
Common Stock; provided, however, that the Board of Directors of the
Company may unilaterally amend this clause (1) to increase the 20%
threshold to any percentage up to, but not exceeding, 50%; or
(2) individuals who, as of the Effective Date, constitute the Board
of Directors of the Company (the "Continuing Directors") cease for
any reason to constitute at least a majority of such Board; provided,
however, that any individual becoming a director after the Effective
Date whose election or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the
Continuing Directors will be deemed to be a Continuing Director, but
excluding for this purpose any such individual whose initial
assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Securities and Exchange Act of
1934 (the "Exchange Act")) or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the
Board; or
(3) approval by the shareholders of the Company of a reorganization,
merger, consolidation or other transaction that will result in the
transfer of ownership of more than 50% of the Company's Common Stock;
or
(4) liquidation or dissolution of the Company or sale of
substantially all of the Company's assets.
In addition, for purposes of this definition the following terms have the
meanings set forth below:
"Common Stock" means the then outstanding Common Stock of the Company plus,
for purposes of determining the stock ownership of any Person, the number
of unissued shares of Common Stock which such Person has the right to
acquire (whether such right is exercisable immediately or only after the
passage of time) upon the exercise of conversion rights, exchange rights,
warrants or options or otherwise. Notwithstanding the foregoing, the term
Common Stock does not include shares of preferred stock or convertible debt
or options or warrants to acquire shares of Common Stock (including any
shares of Common Stock issued or issuable upon the conversion or exercise
thereof) to the extent that the Board expressly so determines in any future
transaction or transactions.
A Person will be deemed to be the "owner" of any Common Stock of which such
Person would be the "beneficial owner," as such term is defined in Rule
13d-3 promulgated by the Securities and Exchange Commission under the
Exchange Act.
"Person" has the meaning used in Section 13(d) of the Exchange Act, except
that "Person" does not include (i) the Executive, an Executive Related
Party, or any group of which the Executive or Executive Related Party is a
member, or (ii) the Company or a wholly owned subsidiary of the Company or
an employee benefit plan (or related trust) of the Company or of a wholly
owned subsidiary.
An "Executive Related Party" means any affiliate or associate of the
Executive other than the Company or a subsidiary of the Company. The terms
"affiliate" and "associate" have the meanings given in Rule 12b-2 under the
Exchange Act; the term "registrant" in the definition of "associate" means,
in this case, the Company.
