Exhibit 10ac
OFFICER SPECIAL SEVERANCE AGREEMENT
-----------------------------------
THIS AGREEMENT, dated as of this third day of March 2004, by and
between Xxxxxx Corporation, a Massachusetts corporation, (herein referred to as
the "Company") and Xxxx X.. Middleton (the "Officer").
WITNESSETH THAT
---------------
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and its shareholders
for the Company to agree to provide benefits under circumstances described below
to the Officer as one of the elected corporate officers who is responsible for
the policy-making functions of the Company and the overall viability of the
Company's business; and
WHEREAS, the Board recognizes that the possibility of a change in
control of the Company is unsettling to the Officer and wishes to make
arrangements at this time to ensure the Officer's continuing dedication to his
or her duties to the Company and its shareholders notwithstanding the occurrence
of any attempt by outside parties to gain control of the Company; and
WHEREAS, the Board believes it important, should the Company receive
proposals from such outside parties, to enable the Officer, without being
distracted by the uncertainties of the Officer's own employment situation, in
addition to the Officer's regular duties, to participate in the assessment of
such proposals and provision of advice to the Board as to the best interests of
the Company and its shareholders and to take such other action as the Board
determines to be appropriate; and
WHEREAS, the Board also wishes to demonstrate to the Officer that the
Company is concerned for the Officer's welfare and intends to ensure that he or
she as a loyal officer is treated fairly;
NOW, THEREFORE, in consideration of the promises and the mutual
covenants contained herein, the parties hereto agree as follows:
1. Change in Control. The term "Change in Control" shall mean the occurrence
of any one or more of the following prior to the Agreement Termination
Date, as defined in Paragraph 3(a):
(a) The Company receives or should have received a report on Schedule 13D
(or any successor form) filed with the Securities and Exchange
Commission pursuant to Section 13(d) of the Securities Exchange Act of
1934, as amended (hereinafter referred to as the "Act"), disclosing
that any person, group, partnership, association, corporation or other
entity is the beneficial owner, directly or indirectly, of twenty-five
percent (25%) or more of the voting power of the then outstanding
voting securities of the Company;
(b) Any person (as such term is defined in Section 13(d) of the Act),
group, partnership, association, corporation or other entity other
than the Company, a wholly-owned subsidiary of the Company or the
trustee(s) of any qualified retirement plan maintained by the Company
or a wholly-owned subsidiary of the Company, becomes the beneficial
owner of shares pursuant to a tender offer or exchange offer to
acquire voting securities of the Company (or securities convertible
into same) for cash, securities or any other consideration, provided
that after consummation of the offer, the person, group, partnership,
association, corporation or other entity in question is the beneficial
owner (as defined in Rule 13(d)-3 under the Act) directly or
indirectly, of twenty-five percent (25%) or more of the then
outstanding voting securities of the Company (calculated as directed
in paragraph (d) of Rule 13(d)-3 under the Act in the case of rights
to acquire voting securities);
(c) The members of the Board ("Directors") or the shareholders of the
Company approve (i) any consolidation or merger of the Company in
which the Company would not be the continuing or surviving corporation
and pursuant to which shares of voting securities of the Company would
be converted into cash, securities or other property, or (ii) any
sale, lease, exchange or other transfer (in a single transaction or in
a series of related transactions) of all or substantially all the
assets of the Company; or
(d) During any period of twenty-four consecutive months, individuals who
at the beginning of such period constituted the Board cease for any
reason to constitute a majority thereof; provided, however, that any
Director who is not in office at the beginning of such 24-month
period, but whose election was to fill a vacancy caused by death or
retirement and was approved or nominated, as applicable, by a vote of
at least two-thirds of the Directors then still in office who either
were Directors at the beginning of such period or whose election or
nomination for election was previously so approved shall be deemed to
have been in office at the beginning of such period for purposes of
this provision.
2. Position and Responsibilities. For such period as the Officer is employed
during the term of this Agreement, the Officer agrees to serve the Company
and/or one or more subsidiaries or affiliates of the Company ("subsidiary")
in a management capacity. From and after the date on which any Change in
Control occurs such service shall involve such duties and responsibilities
at least equal in importance and scope to those of the Officer's position
immediately prior to the date of such Change in Control, as the Board, the
Chairman of the Board, or the Chief Executive Officer may from time to time
in good faith determine, and the Officer shall perform such duties and
responsibilities in good faith.
3. Agreement Termination Date: Term of Agreement.
(a) "Agreement Termination Date" means the third anniversary of the date
as of which this Agreement is dated; provided, however, that the
Agreement Termination Date shall automatically be extended for an
additional one year period on each anniversary of the date as of which
this Agreement is dated unless either party to this Agreement notifies
the other party in writing during the ninety (90) day period preceding
any such anniversary that the Agreement Termination Date shall not be
so extended; and provided, further, that the Agreement Termination
Date may also be extended at any time and for any period in a written
instrument modifying or renewing this Agreement that is in accordance
with Paragraph 11. Should one or more Changes in Control occur at any
time prior to the Agreement Termination Date, all provisions of this
Agreement shall apply and continue in full force and effect in
accordance with their terms for a period beginning with the date on
which the first Change in Control occurs and ending thirty-six (36)
months following the date of the last Change in Control that occurs
prior to the Agreement Termination Date. If no Change in Control
occurs at any time prior to the Agreement Termination Date, this
Agreement shall terminate, except that Paragraphs 4(g) and 9 shall
continue to apply to the extent the Officer disputes the termination
of the Agreement.
(b) The term of this Agreement shall begin on the date as of which this
Agreement is dated and shall continue through (i) the day immediately
preceding the Agreement Termination Date, as defined in the first
sentence of Paragraph 3(a) above, if no Change in Control occurs prior
to the Agreement Termination Date; or (ii) if a Change in Control
occurs prior to the Agreement Termination Date, the last day of the
thirty-six (36) month period following the date of the last Change in
Control that occurs prior to the Agreement Termination Date; provided,
that the terms of this Agreement shall remain in full force and effect
after the date on which the term of this Agreement expires, to the
extent the Officer is then receiving benefits hereunder, until the
date as of which all payments and other benefits to which the Officer
had become entitled hereunder prior to the date on which this
Agreement expires have been paid or provided in full.
4. Severance Benefits. If within any period commencing with the day any Change
in Control occurs and ending thirty-six (36) months after the date of that
Change in Control the Officer's employment is terminated by the Company and
by all subsidiaries, if any, by which the Officer is employed, including
Constructive Termination (as defined in Paragraph 6(b)), but excluding
termination for Cause (as defined in Paragraph 6(a)), the Officer shall be
entitled to the following benefits in addition to any and all other
severance benefits to which the Officer may be entitled under any other
plan, program or policy of the Company (or subsidiary) or agreement between
the Officer and the Company (or subsidiary:
(a) Salary and Bonus Amount. The Company will pay to the Officer within
fifteen (15) business days of such termination of employment a lump
sum cash amount equal to the present value of the product obtained by
multiplying (1) the sum of (i) salary at the annualized rate which was
being paid by the Company and/or subsidiaries to the Officer
immediately prior to the time of such termination or, if greater, at
the time of the Change in Control plus (ii) the annual target bonus
and/or any other cash bonus awards last determined for the Officer or,
if greater, most recently paid prior to the Change in Control, by (2)
two; for purposes of this Paragraph 4, present value shall be
calculated using an interest rate equal to the rate reported for the
auction of thirteen week United States Treasury Bills on the date
coincident with or most immediately preceding the date of such
termination as reported in The Wall Street Journal;
(b) Pension Plan Amount. The Company will pay to the Officer within
fifteen (15) business days of such termination of employment a lump
sum cash amount equal to the lump sum present value of the accrued
benefit that would be payable under the Xxxxxx Corporation Pension
Plan for Salaried Employees (the "Pension Plan"), or any successor
plan, if the Officer remained in full-time, active salaried employment
with the Company for a period of twenty-four (24) consecutive months
following the month in which such termination of employment occurs
minus the lump sum present value of the accrued benefit of the Officer
under said plan as of the date of such termination of employment;
(c) Other Company Benefits. For a period of twenty-four (24) consecutive
months following the month in which such termination of employment
occurs, the Officer shall be entitled, at no greater monthly cost to
the Officer than the Officer's monthly cost immediately prior to such
termination of the Officer's employment, to continue participation in
those benefit programs of the Company (or a subsidiary) available to
the Officers of the Company (or subsidiary) in which the Officer
participated immediately prior to the time of the Officer's
termination of employment, excluding vacation accrual, paid holidays,
salary continuation for short term disability, holiday gifts, and
qualified retirement plans but including such benefits as group term
medical insurance, dental insurance, life insurance, dependent life
insurance, personal and family accident insurance, long term
disability insurance, annual physical examination, vision/hearing
program, prescription drug card program, stock purchase program, U.S.
savings bond program, tax planning and compliance service and tuition
refund program; provided that: (1) provision of other Company benefits
pursuant to this Paragraph 4(c) shall not result in any duplication of
benefits provided by the Company (or subsidiary); (2) to the extent
the Officer is not eligible under the terms of one or more of such
plans or programs that are insured plans or programs, the Company
shall (unless the Officer is then uninsurable) provide the Officer
with substantially similar insurance coverage at no greater monthly
cost to the Officer than if the Officer had continued to participate
in the Company's plan or program' and (3) such benefits shall cease if
and to the extent that any subsequent employer of the Officer provides
substantially equivalent benefits to the Officer at no substantially
greater monthly cost to the Officer than the Officer's monthly cost
for such benefits immediately prior to the Officer's termination of
employment;
(d) Company Car Amount. If the Officer, as of the date of termination of
employment, either was receiving a monthly car allowance or had a
company-leased car, any such car allowance will be discontinued as of
the date of termination of employment and any such company-leased car
must be returned to the Company within thirty (30) days after the date
of termination of employment. Upon such discontinuance or return, the
Officer will receive a single lump sum payment of $5,000 within
fifteen (15) business days following the date of such discontinuance
or return; provided, that if the Officer is entitled to receive a
payment for the same reason and upon the occurrence of substantially
the same event as described in this Paragraph 4(d), the payment
pursuant to this Paragraph 4(d) shall be reduced (but not below $0) by
the amount of such other payment;
(e) Nonqualified Plans. If the Officer participated in any nonqualified
retirement and/or deferred compensation plan(s) of the Company
immediately prior to the time of such termination, the Company shall
not cause or allow the termination of, reduction of benefits under, or
termination or impairment of any arrangement established to secure
payment of benefits under, any such plan with respect to the Officer.
Further, the Company or subsidiaries will provide the Officer with
service credit for benefits under any nonqualified retirement or
deferred compensation plan(s) of the Company, if the Officer
participated in such plan(s) immediately prior to the time of such
termination, equal to two additional years' service accruals upon such
termination of the Officer's employment; and
(f) Outplacement Services. In the event of such termination of employment
of employment, the Company shall provide to the Officer executive
outplacement services provided on a one-to-one basis by a senior
counselor of a firm nationally recognized as a reputable provider of
such services for a minimum sixty (60) hours, plus evaluation testing,
at a location not more than two hundred (200) miles from the primary
personal residence of the Officer; and
(g) Reimbursement of Certain Expenses. The Company will promptly reimburse
the Officer for any and all legal and accounting fees and expenses
(including without limitation any travel and lodging expenses of the
Officer that would be reimbursable in accordance with the then current
Company travel expense reimbursement policy) incurred by the Officer
as a result of such termination of employment in connection with the
interpretation, implementation or enforcement of any of the provisions
of this Agreement (regardless of which party ultimately prevails); and
(h) Limitation on Amounts. Notwithstanding any provision of this Agreement
to the contrary, the aggregate amount that shall be paid pursuant to
this Agreement shall be the maximum amount payable under this
Paragraph 4 that will not (when aggregated with any other payments by
the Company or any subsidiary) result in the imposition of a tax under
Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), or any successor provision; provided, that if all or any part
of the value of benefits under more than one subparagraph of this
Paragraph 4 is treated as a "parachute payment" within the meaning of
Code ss. 280G for purposes of determining whether payments would
result in the imposition of said tax, then the Officer shall have sole
discretion to determine which benefit(s) to forego in order to avoid
the imposition of said tax.
5. Other Severance Payments. If the Officer immediately prior to the date of
any Change in Control would be entitled to receive cash severance payments
by reason of termination of employment (if termination then occurred) under
any other plan, program or policy of the Company (or subsidiary) or any
agreement between the Officer and the Company (or subsidiary) (collectively
"policy"), and if there is a reduction in or termination of any such
amounts payable on or after such Change in Control but before the Officer's
employment is terminated, then if the Officer becomes entitled to severance
benefits pursuant to Paragraph 4 above the Officer shall also be entitled
to receive a cash payment that, when aggregated with any amount actually
paid pursuant to any such policy, equals the amount of cash severance
payments that would have been payable pursuant to such policy immediately
prior to the date of such Change in Control. Further, if the Officer
becomes entitled to receive cash severance payments under any such policy
by reason of termination of employment within any period commencing with
the day any Change in Control occurs and ending thirty-six (36) months
after the date of that Change in Control, then to the extent such payments
would be paid later than the date on which payments must be made under
Paragraph 4(a) above the present value (determined as provided in Paragraph
4(a)) of such payments shall be paid no later than the date on which
payments must be made under Paragraph 4(a). In addition, if on the date of
any Change in Control, the Officer is receiving any such payments, the
present value (determined as provided in Paragraph 4(a)) of the remainder
of such payments shall be paid no later than the date on which payments
must be made under Paragraph 4(a).
6. (a) Termination for Cause. "Cause" means only the willful commission by
the Officer of material theft or embezzlement or other serious and
substantial crimes against the Company or subsidiaries. For purposes
of this definition, no act or omission shall be considered to have
been "willful" unless it was not in good faith and the Officer had
knowledge at the time that the act or omission was not in the best
interests of the Company or subsidiaries. Further, the Officer's
attempt to secure employment with another employer shall not
constitute an event of "cause". Finally, any termination of the
Officer's employment by the Company or any subsidiary at a time when
the Officer is unable to perform all or any portion of the Officer's
regular services by reason of any physical or mental impairment not
expected to continue for a period exceeding twelve (12) consecutive
months shall not constitute termination by the Company or subsidiary
for "cause".
(b) Constructive Termination. If the Officer leaves the employ of the
Company or any subsidiary for any reason:
(i) following a reduction in the Officer's position, compensation,
bonus formula, responsibilities, authority, reputation, pension
arrangements, stock option or other incentive compensation
arrangements, or other Company benefits that the Officer would be
entitled to pursuant to Paragraph 4(c) or 4(e) if the Officer's
employment then terminated, or a material reduction in the
Officer's prestige, enjoyed by the Officer prior to the Change in
Control, as determined in good faith by the Officer; provided,
that the Officer's failure immediately following any such
reduction to terminate employment or otherwise to exercise his or
her rights hereunder arising from such reduction shall not
constitute a waiver of the Officer's rights hereunder arising
from such reduction or otherwise impair the Officer's ability to
exercise such rights within one year following any such
reduction;
(ii) following an attempt by the Company or any subsidiary to relocate
the Officer to, or to require the Officer to perform regular
services at, any location that is outside the continental United
States of America; provided, that the Officer's failure
immediately following any such attempt to terminate employment or
otherwise to exercise his or her rights hereunder arising from
such attempt shall not constitute a waiver of the Officer's
rights hereunder arising from such attempt or otherwise impair
the Officer's ability to exercise such rights within one year
following any such attempt;
(iii) within ninety (90) days of the Officer's receipt of notice from
the Company that the Company's ratio of current assets to current
liabilities as reflected on any quarterly or annual statements
filed by the Company with the Securities and Exchange Commission
falls below one and one-quarter (1 1/4) to one (1) or any date
on which the total of -- the Company's long-term debt (including
the current portion due within one year) and its short-term debt
incurred for money borrowed exceeds seventy-five percent (75%) of
the Company's net worth as reflected in such statements filed
with the Securities and Exchange Commission (each, a "Financial
Termination Event"); provided, that if at any time the Company is
no longer required to file such statements or fails to file such
statements, the Company shall cause to be prepared in accordance
with generally accepted accounting principles consistently
applied quarterly financial statements (within forty-five (45)
days of the end of the Company's fiscal quarter) and annual
financial statements (within sixty (60) days of the end of the
Company's fiscal year) of the Company indicating the information
required to determine whether either Financial Termination Event
has occurred; and provided, further, that the Company shall
provide written notice to the Officer within five (5) business
days after the date any such statement is filed (or has been
completed, if not filed) if either Financial Termination Event
has occurred; and provided, further, that the Financial
Termination Event shall not have resulted from economic
conditions generally adverse to the Company or its markets but
rather shall have resulted from deliberate mismanagement of the
Company's affairs by, or a diminution of the Company's assets on
the part of, the person(s) controlling the Company subsequent to
the Change of Control;
(iv) at any time within twelve (12) months after the Company notifies
the Officer in writing that the Agreement Termination Date shall
not be extended, as provided in Paragraph 3(a); or
(v) at any time within twelve (12) months following the date the
Officer knows that the Company has breached any of the terms of
this Agreement;
in each of the foregoing cases regardless of whether the Officer is
entitled to elect, or elects, retirement upon leaving the employ of
the Company or any subsidiary, such termination of employment shall
constitute termination by the Company or subsidiary for reasons other
than Cause.
Finally, if the Officer is employed by the Company and also by one or
more subsidiaries and if the Officer's employment is terminated by one
or more but not by all of such employing entities, such termination of
the Officer's employment shall constitute termination by all such
employing entities if termination by less than all such employing
entities results in any reduction described in Paragraph 6(b)(i) above
and if the Officer leaves the employ of the one or more employing
entities by which the Officer's employment was not terminated.
Any such termination shall constitute "Constructive Termination".
7. Consolidation or Merger. If the Company is at any time before or after a
Change in Control merged or consolidated into or with any other
corporation, association, partnership or other entity (whether or not the
Company is the surviving entity), or if substantially all of the assets
thereof are transferred to another corporation, association, partnership or
other entity, the provisions of this Agreement will be binding upon and
inure to the benefit of the corporation, association, partnership or other
entity resulting from such merger or consolidation or the acquirer of such
assets (collectively, "acquiring entity") unless the Officer voluntarily
elects not to become an employee of the acquiring entity as determined in
good faith by the Officer. Furthermore, in the event of any such
consolidation or transfer of substantially all of the assets of the
Company, the Company shall enter into an agreement with the acquiring
entity that shall provide that such acquiring entity shall assume this
Agreement and all obligations and liabilities under this Agreement;
provided, that the Company's failure to comply with this provision shall
not adversely affect any right of the Officer hereunder. This Paragraph 7
will apply in the event of any subsequent merger or consolidation or
transfer of assets.
In the event of any merger, consolidation or sale of assets described
above, nothing contained in this Agreement will detract from or otherwise
limit the Officer's right to or privilege of participation in any
restricted stock plan, bonus or incentive plan, stock option or purchase
plan, profit sharing, pension, group insurance, hospitalization or other
compensation or benefit plan or arrangement which may be or become
applicable to officers of the corporation resulting from such merger or
consolidation or the corporation acquiring such assets of the Company.
In the event of any merger, consolidation or sale of assets described
above, references to the Company in this Agreement shall, unless the
context suggests otherwise, be deemed to include the entity resulting from
such merger or consolidation or the acquirer of such assets of the Company.
8. Payments. All payments provided for in this Agreement shall be paid in cash
in United States funds from the general funds of the Company and its
subsidiaries drawn on the United States location of a bank and paid in bank
or cashier's check. The Company shall not be required to establish a
special or separate fund or other segregation of assets to ensure such
payments.
All payments made by the Company to the Officer or the Officer's
dependents, beneficiaries or estate will be subject to the withholding of
such amounts relating to tax and/or other payroll deductions as may be
required by law.
9. Arbitration. In the event of a dispute between the parties as to the
interpretation or application of this Agreement, such dispute may be
submitted by the Officer or by the Company to binding arbitration before an
impartial arbitrator pursuant to the Rules of Commercial Arbitration of the
American Arbitration Association. The Officer shall be reimbursed promptly
by the Company for all travel and lodging expenses (that would be
reimbursable in accordance with the then current Company travel expense
reimbursement policy) incurred in connection with any such arbitration. In
addition, if the Officer prevails in any such arbitration proceeding, the
Company shall reimburse the Officer promptly for 100% of the fees and
expenses the Officer incurs in connection with any such arbitration,
including legal fees and filing and arbitrator's fees; if the Company
prevails in any such arbitration proceeding, the Company shall reimburse
the Officer promptly for 80% of the fees and expenses the Officer incurs in
connection with any such arbitration, including legal fees and filing and
arbitrator's fees; and if each party prevails in part, the Company shall
reimburse the Officer promptly for such percentage, not less than 80% and
not more than 100%, of the fees and expenses the Officer incurs in
connection with such arbitration, including legal fees and filing and
arbitrator's fees, as the arbitrator shall determine.
10. Assignment; Payment on Death. The provisions of this Agreement shall be
finding upon and shall inure to the benefit of the Officer, the Officer's
executors, administrators, legal representatives and assigns and the
Company and its successors.
There shall be no right of set-off or counterclaim, in respect of any
claim, debt or obligation, against any payments to the Officer, the
Officer's dependents, beneficiaries or estate provided for in this
Agreement.
In the event that the Officer becomes entitled to payments under this
Agreement and subsequently dies, all amounts payable to the Officer
hereunder and not yet paid to the Officer at the time of the Officer's
death shall be paid to the Officer's beneficiary. No right or interest to
or in any payments shall be assignable by the Officer; provided, however,
that this provision shall not preclude the Officer from designating one or
more beneficiaries to receive any amount that may be payable after the
Officer's death and shall not preclude the legal representatives of the
Officer's estate from assigning any right hereunder to the person or
persons entitled thereto under the Officer's will or, in the case of
intestacy, to the person or persons entitled thereto under the laws of
intestacy applicable to the Officer's estate. The term "beneficiary" as
used in this Agreement shall mean the beneficiary or beneficiaries so
designated by the Officer to receive such amount or, if no such beneficiary
is in existence at the time of the Officer's death, the legal
representative of the Officer's estate.
No right, benefit or interest hereunder shall be subject to anticipation,
alienation, sale, assignment, encumbrance, charge, pledge, hypothecation,
or set-off in respect of any claim, debt or obligation, or to execution,
attachment, levy or similar process, or assignment by operation of law. Any
attempt, voluntary or involuntary, to effect any action specified in the
immediately preceding sentence shall, to the full extent permitted by law,
be null, void and of no effect.
11. Modification. This Agreement may be modified only in a written instrument
agreed to and executed by the Company and the Officer.
12. Severability. If any provision of this Agreement shall, for any reason, be
held to be invalid, illegal, or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement, and this Agreement shall be construed as if
such invalid, illegal or unenforceable provision had never been contained
herein.
13. Headings of No Effect. The paragraph headings contained in this Agreement
are included solely for convenience or reference and shall not in any way
affect the meaning or interpretation of any of the provisions of this
Agreement.
14. Governing Law. This Agreement and its validity, interpretation, performance
and enforcement shall be governed by the laws of the Commonwealth of
Massachusetts.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its officers thereto duly authorized, and the Officer has signed
this Agreement, all as of the date first above written.
XXXXXX CORPORATION
By: /s/WEBoomer
----------------------
Xxxxxx X. Xxxxxx, CEO
