Entry into Severance Benefit Agreement
On February 22, 2023, the Company entered into a Severance Benefit Agreement with J. Tyson Hagale (the “Severance Agreement”). Upon a Change in Control of the Company, the Severance Agreement provides for severance payments and benefits during a “Protected Period” following the Change in Control. The Protected Period is 24 months.
In general, a Change in Control is deemed to occur when (i) a shareholder becomes the beneficial owner of 40% or more of our common stock, (ii) the current directors, as of the date of the agreement, or their successors no longer constitute a majority of the Board of Directors, (iii) after a merger or consolidation with another corporation, less than 65% of the voting securities of the surviving corporation are owned by our former shareholders, (iv) the Company liquidates, sells or otherwise transfers substantially all of its assets to an unrelated third party, or (v) the Company enters into an agreement, including a letter of intent, which contemplates a Change in Control (as described above), or the Company or a person makes a public announcement of an intention to take actions which, if consummated, would result in a Change in Control (as described above).
The payments and benefits under the Severance Agreement are subject to a “double trigger”; that is, they become due only after both (i) a Change in Control of the Company and (ii) the executive officer’s employment is terminated by the Company (except for “cause” or upon disability) or the executive officer terminates his employment for “good reason.”
In general, the executive officer would have “good reason” to terminate his employment if he were required to relocate or experienced a reduction in job responsibilities, title, compensation or benefits, or if the successor company did not assume the obligations of the Severance Agreement. The Company may cure the “good reason” for termination within 30 days of receiving notice from the executive.
Events considered grounds for termination by the Company for “cause” under the Severance Agreement generally include the executive’s (i) conviction of a felony or any crime involving property of the Company, (ii) willful breach of the Company’s Code of Business Conduct or Financial Code of Ethics that causes significant injury to the Company, (iii) willful act or omission involving fraud, misappropriation or dishonesty that causes significant injury to the Company or results in material enrichment to the executive at the Company’s expense, (iv) willful violation of specific written directions of the Board following notice of such violation, or (v) continued, repeated, or willful failure to substantially perform required duties after written notice from the Board.
The Severance Agreement has no fixed termination period but continues as long as the executive is employed by the Company or any successor. However, the Company or the executive has the right to unilaterally terminate the Severance Agreement upon one-year written notice to the other party, so long as the Protected Period is not in effect.
Upon termination of employment by the Company (except for “cause” or upon disability) or by the executive for “good reason” during the Protected Period, the Company will provide the following payments and benefits:
| | |
Severance Benefit | | Timing and/or Amount of Payment |
| Base Salary | | Through the date of termination |
| Cash Bonus under KOIP | | Pro-rata incentive award for the year of termination based upon the results achieved under the KOIP for the year |
| Severance Payments | | 200% of Base Salary (Base Salary is currently $560,000) plus 200% of target bonus amount (currently 80% of Base Salary under the KOIP), each paid in bi-weekly installments over 24 months |
| Continued Benefits | | Continued health insurance and fringe benefits for 24 months, as permitted by the Internal Revenue Code, or bi-weekly cash payments of equal value |
| Additional Retirement Benefit | | Lump sum additional retirement benefit based on the actuarial equivalent of an additional 24 months of continuous service |
All amounts received by the executive as health insurance or fringe benefits from a new, full-time job will reduce the benefits under the Severance Agreement. However, the executive is not required to mitigate the amount of any termination payment or benefit provided under the agreement. The Severance Agreement contains a non-competition covenant for two years after the termination date. If violated,
4
