Executive Severance Plan
Morgan Products Ltd.
October 1997
Contents
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Article 1. Establishment, Term, and Purpose 1
Article 2. Definitions 1
Article 3. Participation 6
Article 4. Severance Benefits Other Than Upon a Change in Control 6
Article 5. Severance Benefits Upon a Change in Control 8
Article 6. Excise Tax 10
Article 7. Outplacement Assistance 11
Article 8. The Company's Payment Obligation 11
Article 9. Legal Remedies 12
Article 10. Withholding 12
Article 11. Noncompetition 13
Article 12. Successors and Assignment 13
Article 13. Miscellaneous 14
Morgan Products Ltd.
Executive Severance Plan
Article 1. Establishment, Term, and Purpose
1.1 Establishment of the Plan. Morgan Products Ltd. (hereinafter referred
to as the "Company") hereby establishes a severance plan to be known as the
"Morgan Products Ltd. Executive Severance Plan" (the "Plan"). The Plan provides
severance benefits to certain employees of the Company upon a termination of
employment from the Company, including termination of employment as a result of
a Change in Control of the Company. The Plan is intended to supersede any and
all plans, programs, or agreements providing for severance-related payments.
This specifically includes, but is not limited to the Morgan Products Ltd.
Special Severance/Retention Plan for Executive Officers, the Morgan Products
Ltd. Change-in-Control Severance Policy, and any employment agreement or offer
letter summarizing a Participant's compensation with the Company.
1.2. Term of the Plan. This Plan will commence upon September 8,1997 (the
"Effective Date") and shall continue in effect for three (3) full calendar
years. However, at the end of such three (3) year period and, if extended, at
the end of each additional year thereafter, the term of this Plan shall be
extended automatically for one (1) additional year, unless the Committee
delivers written notice six (6) months prior to the end of such term, or
extended term, to each Participant, that the Plan will not be extended. However,
in the event a Change in Control occurs during the original or any extended
term, this Plan will remain in effect for the longer of: (i) twelve (12) months
beyond the month in which such Change in Control occurred; or (ii) until all
obligations of the Company hereunder have been fulfilled, and until all benefits
required hereunder have been paid to Participants.
In the event the term of the Plan is not extended for any reason, the Plan
will terminate at the end of the term, or extended term, then in progress, and
the Participant will be deemed terminated by the Company without Cause on such
date.
1.3. Purpose of the Plan. The purpose of the Plan is to provide certain
key employees of the Company financial security in the event of a termination of
employment from the Company, including termination of employment as a result of
a Change in Control of the Company.
Article 2. Definitions
Whenever used in this Plan, the following terms shall have the meanings
set forth below and, when the meaning is intended, the initial letter of the
word is capitalized:
2.1 "Base Salary" means an amount equal to a Participant's base annual
salary as of the date of a termination. For this purpose, "Base
Salary" shall not include bonuses, long-term incentive compensation,
or any remuneration other than base annual salary.
2.2 "Beneficial Owner" shall have the meaning ascribed to such term in
Rule 13d-3 of the General Rules and Regulations under the Exchange
Act.
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2.3 "Beneficiary" means the persons or entities designated or deemed
designated by a Participant pursuant to Section 13.2 herein.
2.4 "Board" means the Board of Directors of the Company.
2.5 "Cause" shall mean the occurrence of any one or more of the
following:
(a) The willful and continued failure by a Participant to
substantially perform his or her normal duties (other than any
such failure resulting from the Participant's Disability),
after a written demand for substantial performance is
delivered to the Participant that specifically identifies the
manner in which the Committee believes that the Participant
has not substantially performed his or her duties, and the
Participant has failed to remedy the situation within thirty
(30) business days of receiving such notice; or
(b) The Participant's conviction for committing an act of fraud,
embezzlement, theft, or other act constituting a felony; or
(c) The willful engaging by the Participant in gross negligence
materially and demonstrably injurious to the Company, as
determined by the Committee. However, no act, or failure to
act on the Participant's part, shall be considered "willful"
unless done, or omitted to be done, by the Participant not in
good faith and without reasonable belief that his or her
action or omission was in the best interest of the Company.
2.6 "Change in Control" shall mean the occurrence of any one or more of
the following:
(a) Any transaction or series of transactions which, within a
twelve (12) month period, constitute a change of management or
control, which shall be deemed to have occurred whenever:
(i) At least thirty-five percent (35%) of the then
outstanding shares of Common Stock of the Company are,
for cash, property (including, without limitation, stock
in any corporation), or indebtedness, or any combination
thereof, redeemed by the Company or purchased by any
person(s), firm(s) or entity(ies), or exchanged for
shares in any other corporation whether or not
affiliated with the Company, or any combination of such
redemption, purchase or exchange; or
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(ii) During any period of two (2) consecutive years (not
including any period prior to the execution of this
severance policy), individuals who at the beginning of
such period constitute the Board (and any new Director,
whose election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the
Directors then still in office who either were Directors
at the beginning of the period or whose election or
nomination for election was so approved), cease for any
reason to constitute a majority thereof; or
(iii) The stockholders of the Company approve:
(A) A plan of complete liquidation of the Company; or
(B) An agreement for the sale or disposition of all or
substantially all the Company's assets; or
(C) A merger, consolidation, or reorganization of the
Company with or involving any other corporation,
other than a merger, consolidation, or
reorganization that would result in the voting
securities of the Company outstanding immediately
prior thereto continuing to represent (either by
remaining outstanding or by being converted into
voting securities of the surviving entity) at
least sixty-five percent (65%) of the combined
voting power of the voting securities of the
Company (or such surviving entity) outstanding
immediately after such merger, consolidation, or
reorganization.
(b) Any substantial equivalent of any such redemption, purchase,
exchange, transaction or series of transactions, acquisition,
merger or consolidation, which the Board of Directors
reasonably determines constitutes such a change of management
or control.
(c) Solely with respect to the president of a division of the
Company, the sale or disposition of all or substantially all
of the assets of the division, other than a disposition to an
entity controlled by the Company.
For purposes of the foregoing definition the term "control" shall
have the meaning ascribed thereto under the Exchange Act, as
amended, and the regulations thereunder, and the term "management"
shall mean both the Chief Executive Officer and the Chief Operating
Officer of the Company.
2.7 "Change in Control Severance Benefits" means the payment of
severance compensation as provided in Article 5 herein.
2.8 "Code" means the United States Internal Revenue Code of 1986, as
amended.
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2.9 "Committee" means the Compensation Committee of the Board, or any
other committee appointed by the Board to perform the functions of
the Compensation Committee.
2.10 "Company" means Morgan Products Ltd., a Delaware corporation
(including any and all subsidiaries), or any successor thereto as
provided in Article 12 herein.
2.11 "Disability" means permanent and total disability, within the
meaning of Code Section 22(e)(3), as determined by the Committee in
the exercise of good faith and reasonable judgment, upon receipt of
and in reliance on sufficient competent medical advice from one or
more individuals, selected by the Committee, who are qualified to
give professional medical advice, provided, however, that the
Participant must be entitled to disability benefits under the
Company sponsored disability plans or programs.
2.12 "Effective Date" means the date this Plan is approved by the Board,
or such other date as the Board shall designate in its resolution
approving this Plan.
2.13 "Effective Date of Termination" means the date on which a
termination occurs which triggers the payment of Severance Benefits
or Change in Control Severance Benefits hereunder.
2.14 "Exchange Act" means the United States Securities Exchange Act of
1934, as amended.
2.15 "Good Reason" means, without the Participant's express written
consent, the occurrence of any one or more of the following:
(a) Any material reduction in the Participant's Base Salary below
the amount in effect as of the Effective Date.
(b) Any significant reduction in the Participant's benefits
package, except in the case of a reduction which similarly
applies to all executives on a nondiscriminatory basis.
(c) Any material reduction in the Participant's long-term
incentive opportunity with the Company.
(d) Any assignment of new duties that requires the Participant to
relocate his or her domicile more than fifty (50) miles from
the Company's current headquarters.
(e) Any dissolution or liquidation of the Company.
(f) Any significant reduction or diminution in the duties,
responsibilities, or position of the Participant from that in
effect as of the Effective Date, provided that there has been
a Change in Control of the Company, within the six (6) full
calendar month period prior to the effective date of a Change
in Control, or within twelve (12) calendar months following
the effective date of a Change in Control, and provided
further that the sale of a Company division will not
automatically be
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deemed to result in the significant reduction or diminution in
the duties, responsibilities, or position of any Participant
not directly employed by such division without a specific
showing of such reduction or diminution.
A Participant's right to terminate employment for Good Reason shall
not be affected by the Participant's incapacity due to Disability. A
Participant's continued employment shall not constitute consent to,
or a waiver of rights with respect to, any circumstance constituting
Good Reason herein.
2.16 "Notice of Termination" shall mean a written notice which shall
indicate the specific termination provision in this Plan relied
upon, and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Participant's employment under the provision so indicated.
2.17 "Participant" means an executive of the Company who is named by the
Committee as a Participant in the Plan, as set forth in Article 2
herein.
2.18 "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, including a "group" as defined in Section 13(d).
2.19 "Plan" has the meaning ascribed to such term in Section 1.1 hereof.
2.20 "Retention Period" means the period of time beginning on the
Effective Date of this Plan, and ending on the earlier to occur of:
(a) the termination of the Plan; or (b) six (6) months prior to the
effective date of a Change in Control.
2.21 "Retirement" means a voluntary termination of a Participant's
employment other than for Good Reason following the time when: (a)
the Participant has attained age sixty-two (62); or (b) the
Participant has attained age fifty-five (55) and has completed at
least seven (7) full years of continuous service with the Company.
2.22 "Severance Benefits" means the payment of severance compensation as
provided in Article 4 herein.
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Article 3. Participation
3.1. Eligible Employees. Individuals eligible to participate in the Plan
shall include all key employees of the Company other than the Chief Executive
Officer, as determined by the Committee in its sole discretion.
3.2. Participation. Subject to the terms of the Plan, the Committee may,
from time to time select from all eligible employees those who shall participate
in the Plan.
Article 4. Severance Benefits Other Than Upon a Change in Control
4.1. Right to Severance Benefits. Subject to the provisions herein, each
Participant shall be entitled to receive from the Company Severance Benefits as
described in Section 4.2 herein, if, during the Retention Period, the
Participant's employment with the Company shall be terminated by the Company
without Cause, or voluntarily by the Executive for Good Reason.
A Participant shall not be entitled to receive Severance Benefits under
Section 4.2 hereof if he or she is terminated for Cause, or if his or her
employment with the Company ends due to death, Disability, Retirement, or due to
a voluntary termination of employment by the Participant without Good Reason.
4.2. Description of Severance Benefits. In the event that a Participant
becomes entitled to receive Severance Benefits, as provided in Section 4.1
herein, the Participant shall receive the following Severance Benefits:
(a) One (1) times the sum of: (i) the Participant's Base Salary;
and (ii) the greater of: (a) the Participant's average annual
bonus earned over the three (3) full fiscal years prior to the
Effective Date of Termination; or (b) the Participant's target
annual bonus established for the bonus plan year in which the
Participant's Effective Date of Termination occurs.
(b) An amount equal to the Participant's unpaid targeted annual
bonus, established for the plan year in which the
Participant's Effective Date of Termination occurs, multiplied
by a fraction, the numerator of which is the number of days
the Participant was employed by the Company in the
then-existing fiscal year through the Effective Date of
Termination, and the denominator of which is three hundred
sixty-five (365) less, in the case of a Participant who began
employment with the Company after the beginning of the fiscal
year, the number of days from the beginning of the fiscal year
to the date the Participant commenced employment with the
Company; provided, however, that such bonus amount shall in no
event be less than any bonus amount guaranteed to the
Participant under any other agreement between the Company and
the Participant.
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(c) A continuation of the welfare benefits of medical insurance,
dental insurance, and group term life insurance for one (1)
full year after the Effective Date of Termination. These
benefits shall be provided to Participants at the same premium
cost, and at the same coverage level, as in effect as of the
Participant's Effective Date of Termination.
However, in the event the premium cost and/or level of
coverage shall change for all employees of the Company, the
cost and/or coverage level, likewise, shall change for each
Participant in a corresponding manner.
The continuation of these welfare benefits shall be
discontinued prior to the end of the one (1) year period in
the event the Participant has available substantially similar
benefits from a subsequent employer, as determined by the
Committee.
(d) A cash payment of vacation earned prior to the Effective Date
of Termination, but not taken by the Participant.
(e) All outstanding long-term incentive awards shall be subject to
the treatment provided under the applicable long-term
incentive plan of the Company.
4.3. Termination Due to Disability. If a Participant's employment is
terminated due to Disability during the term of this Plan, the Participant shall
receive his or her Base Salary and accrued vacation through the Effective Date
of Termination. All other benefits provided to the Participant shall be
determined in accordance with the Company's disability, retirement, insurance,
and other applicable plans and programs then in effect.
4.4. Termination Due to Retirement or Death. If a Participant's employment
is terminated by reason of Retirement or death, the Participant, or where
applicable, the Participant's Beneficiaries, shall receive the Participant's
Base Salary and accrued vacation through the Effective Date of Termination. All
other benefits provided to the Participant or the Participant's Beneficiaries
shall be determined in accordance with the Company's retirement, survivor's
benefits, insurance, and other applicable programs of the Company then in
effect; provided, however, that the Committee, at its sole discretion, shall
have the authority to provide for full or partial payout in connection with a
termination of employment by reason of Retirement or death.
4.5. Termination for Cause or by a Participant Other Than for Good Reason.
If a Participant's employment is terminated either: (a) by the Company for
Cause; or (b) by the Participant other than for Good Reason, the Company shall
pay the Participant his or her unpaid Base Salary and accrued vacation through
the Effective Date of Termination, at the rate then in effect, plus all other
amounts to which the Participant is entitled under any compensation plans of the
Company, at the time such payments are due, and the Company shall have no
further obligations to the Participant under this Plan.
4.6. Notice of Termination. Any termination by the Company for Cause or by
a Participant for Good Reason shall be communicated by Notice of Termination at
least sixty (60) days prior to the date on which such termination shall be
effective.
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4.7. Form and Timing of Severance Benefits. All cash payments set forth in
this Article 4 shall be made in one (1) lump sum, within forty-five (45) days
after the Effective Date of Termination.
Article 5. Severance Benefits Upon A Change in Control
5.1. Right to Change in Control Severance Benefits. A Participant shall be
entitled to receive from the Company Change in Control Severance Benefits, as
described in Section 5.2 herein, if there has been a Change in Control of the
Company and if, within the six (6) full calendar month period prior to the
effective date of a Change in Control, or within twelve (12) calendar months
following the effective date of a Change in Control, the Participant's
employment with the Company shall end as a result of either an involuntary
termination of the Participant's employment by the Company for reasons other
than Cause, or by voluntary termination by the Participant for Good Reason.
Participants shall not be entitled to receive Change in Control Severance
Benefits if they are terminated for Cause, or if their employment with the
Company ends due to death, Disability, or Retirement, or due to a voluntary
termination of employment by the Participant without Good Reason.
5.2. Description of Change in Control Severance Benefits. In the event
that a Participant becomes entitled to receive Change in Control Severance
Benefits, as provided in Section 5.1 herein, the Company shall pay to the
Participant and provide him or her with the following:
(a) An amount equal to two (2) times the sum of (i) the
Participant's Base Salary; and (ii) the greater of: (a) the
Participant's average annual bonus earned over the three (3)
full fiscal years prior to the Effective Date of Termination;
or (b) the Participant's target annual bonus established for
the bonus plan year in which the Participant's Effective Date
of Termination occurs.
(b) An amount equal to the Participant's unpaid Base Salary and
accrued vacation pay through the Effective Date of
Termination.
(c) An amount equal to the Participant's unpaid targeted annual
bonus, established for the plan year in which the
Participant's Effective Date of Termination occurs, multiplied
by a fraction, the numerator of which is the number of days
the Participant was employed by the Company in the
then-existing fiscal year through the Effective Date of
Termination, and the denominator of which is three hundred
sixty-five (365) less, in the case of a Participant who began
employment after the beginning of the fiscal year; the number
of days from the beginning of the fiscal year to the date the
Participant commenced employment with the Company; provided,
however, that such amount shall in no event be less than any
bonus amount guaranteed to the Participant under any other
agreement between the Company and the Participant.
(d) A continuation of the welfare benefits of medical insurance,
dental insurance, and group term life insurance for two (2)
full years after the Effective Date of
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Termination. These benefits shall be provided to Participants
at the same premium cost, and at the same coverage level, as
in effect as of the Participant's Effective Date of
Termination.
However, in the event the premium cost and/or level of
coverage shall change for all employees of the Company, the
cost and/or coverage level, likewise, shall change for each
Participant in a corresponding manner.
The continuation of these welfare benefits shall be
discontinued prior to the end of the two (2) year period in
the event the Participant has available substantially similar
benefits from a subsequent employer, as determined by the
Committee.
(e) All outstanding long-term incentive awards shall be subject to
the treatment provided under the applicable long-term
incentive plan of the Company.
5.3. Termination for Disability. Following a Change in Control of the
Company, if a Participant's employment is terminated due to Disability, the
Participant shall receive his or her Base Salary and accrued vacation through
the Effective Date of Termination. All other benefits provided to the
Participant shall be determined in accordance with the Company's disability,
retirement, insurance, and other applicable plans and programs then in effect.
5.4. Termination for Retirement or Death. Following a Change in Control of
the Company, if a Participant's employment is terminated by reason of his or her
Retirement or death, the Participant, or where applicable, the Participant's
Beneficiaries, shall receive the Participant's Base Salary and accrued vacation
through the Effective Date of Termination. All other benefits provided to the
Participant or the Participant's Beneficiaries shall be determined in accordance
with the Company's retirement, survivor's benefits, insurance, and other
applicable programs of the Company then in effect.
5.5. Termination for Cause or by a Participant Other Than for Good Reason
or Retirement. Following a Change in Control of the Company, if a Participant's
employment is terminated either: (i) by the Company for Cause; or (ii) by the
Participant (other than for Retirement) and other than for Good Reason, the
Company shall pay the Participant his or her full Base Salary and accrued
vacation through the Effective Date of Termination, at the rate then in effect,
plus all other amounts to which the Participant is entitled under any
compensation plans of the Company, at the time such payments are due, and the
Company shall have no further obligations to the Participant under this Plan.
5.6. Notice of Termination. Any termination by the Company for Cause or by
a Participant for Good Reason shall be communicated by Notice of Termination at
least sixty (60) days prior to the date on which such termination shall be
effective.
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5.7. Form and Timing of Change in Control Severance Benefits. The Change
in Control Severance Benefits described in Sections 5.2(a), (b) and (c) herein
shall be paid in cash to the Participant in a single lump sum as soon as
practicable following the Effective Date of Termination, but in no event beyond
thirty (30) days from such date.
Article 6. Excise Tax
6.1. Excise Tax. Notwithstanding any other provision of this Plan, if any
portion of the severance benefits or any other payment under this Plan, or under
any other agreement with or plan of the Company (in the aggregate "Total
Payments") would constitute an "excess parachute payment," then the payments to
be made to the Participant under the Plan shall be reduced such that the value
of the aggregate Total Payments that the Participant is entitled to receive
shall be one dollar ($1) less than the maximum amount which the Participant may
receive without becoming subject to the tax imposed by Section 4999 of the
Internal Revenue Code of 1986 (the "Code"), or which the Company may pay without
loss of deduction under Section 280G(a) of the Code.
However, the payments to be made to the Participant under this severance
policy shall be reduced if and only if so reducing the payments results in the
Participant receiving a greater net benefit than he would have received had a
reduction not occurred and an excise tax been paid by the Participant pursuant
to Code Section 4999.
For purposes of this severance policy, the terms "excess parachute
payment" and "parachute payments" shall have the meanings assigned to them in
Section 280G of the Code, and such "parachute payments" shall be valued as
provided therein.
6.2. Procedure for Establishing Limitation on Termination Payment. Within
sixty (60) days following delivery of the notice of termination or notice by the
Company to the Participant of its belief that there is a payment or benefit due
to the Participant which will result in an "excess parachute payment" as defined
in Section 280G of the Code, the Participant and the Company, at the Company's
expense, shall obtain the opinion of such legal counsel, which need not be
unqualified, as the Participant may choose, which sets forth: (i) the amount of
the Participant's "annualized includible compensation for the base period" (as
defined in Code Section 280G(d)(1)); (ii) the present value of the Total
Payments; and (iii) the amount and present value of any "excess parachute
payment." The opinion of such legal counsel shall be supported by the opinion of
a certified public accounting firm and, if necessary, a firm of recognized
executive compensation consultants. Such opinion shall be binding upon the
Company and the Participant.
In the event that such opinion determines that there would be an "excess
parachute payment," the severance benefits hereunder or any other payment
determined by such counsel to be includible in Total Payments shall be reduced
or eliminated as specified by the Participant in writing delivered to the
Company within thirty (30) days of his receipt of such opinion, or, if the
Participant fails to so notify the Company, then as the Company shall reasonably
determine, so that under the basis of calculations set forth in such opinion,
there will be no "excess parachute payment."
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The calculations, notices, and opinion provided for herein shall be based
upon the conclusive presumption that; (i) the compensation and benefits provided
for herein; and (ii) any other compensation earned prior to the effective date
of termination by the Participant pursuant to the Company's compensation
programs (if such payments would have been made in the future in any event, even
though the timing of such payment is triggered by the Change in Control), are
reasonable.
6.3. Subsequent Imposition of Excise Tax. If, notwithstanding compliance
with the provisions herein, it is ultimately determined by a court or pursuant
to a final determination by the Internal Revenue Service that any portion of the
Total Payments is considered to be a "parachute payment," subject to excise tax
under Section 4999 of the Code, which was not contemplated to be a "parachute
payment" at the time of payment (so as to accurately determine whether a
limitation should have been applied to the Total Payments to maximize the net
benefit to the Participant), the Participant shall be entitled to receive a lump
sum cash payment sufficient to place the Participant in the same net after-tax
position, computed by using the "Special Tax Rate" as such term is defined
below, that the Participant would have been in had such payment not been subject
to such excise tax, and had the Participant not incurred any interest charges or
penalties with respect to the imposition of such excise tax. For purposes of
this severance policy, the "Special Tax Rate" shall be the highest effective
Federal and state marginal tax rates applicable to the Participant in the year
in which the payment contemplated under this severance policy is made.
Article 7. Outplacement Assistance
Following a termination of employment in which Severance Benefits or
Change in Control Severance Benefits are payable hereunder the Participant shall
be reimbursed by the Company for the costs of all outplacement services obtained
by the Participant within the two (2) year period after the Effective Date of
Termination; provided, however, that the total reimbursement shall be limited to
an amount equal to fifteen percent (15%) of the Participant's Base Salary as of
the effective date of termination.
Article 8. The Company's Payment Obligation
8.1. Payment Obligations Absolute. The Company's obligation to make the
payments and the arrangements provided for herein shall be absolute and
unconditional, and shall not be affected by any circumstances, including,
without limitation, any offset, counterclaim, recoupment, defense, or other
right which the Company may have against Participants or anyone else. All
amounts payable by the Company hereunder shall be paid without notice or demand.
Each and every payment made hereunder by the Company shall be final, and the
Company shall not seek to recover all or any part of such payment from
Participants or from whomsoever may be entitled thereto, for any reasons
whatsoever.
Participants shall not be obligated to seek other employment in mitigation
of the amounts payable or arrangements made under any provision of this Plan,
and the obtaining of any such other employment shall in no event effect any
reduction of the Company's obligations to make the payments and arrangements
required to be made under this Plan, except to the extent provided in Sections
4.2(c) and 5.2(d) herein.
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8.2. Contractual Rights to Benefits. This Plan establishes and vests in
each Participant a contractual right to the benefits to which he or she is
entitled hereunder. However, nothing herein contained shall require or be deemed
to require, or prohibit or be deemed to prohibit, the Company to segregate,
earmark, or otherwise set aside any funds or other assets, in trust or
otherwise, to provide for any payments to be made or required hereunder.
Article 9. Legal Remedies
9.1. Payment of Legal Fees. To the extent permitted by law, the Company
shall pay all legal fees, costs of litigation, prejudgment interest, and other
expenses incurred in good faith by the Participant as a result of the Company's
refusal to provide the Severance Benefits or Change in Control Severance
Benefits to which the Participant becomes entitled under this Plan, or as a
result of the Company's contesting the validity, enforceability, or
interpretation of this Plan, or as a result of any conflict between the parties
pertaining to this Plan; provided, however, that the Company shall be reimbursed
by the Participant for all such fees and expenses in the event the Participant
fails to prevail with respect to any one (1) material issue of dispute in
connection with such legal action.
9.2. Arbitration. Subject to the following sentences, participants 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 Plan settled by
arbitration, conducted before a panel of three (3) arbitrators sitting in a
location selected by the Participant within fifty (50) miles from the location
of his job with the Company, in accordance with the rules of the American
Arbitration Association then in effect. The Participant shall not have the right
to elect to have any dispute which arise under Article 11 of this Plan settled
by arbitration, but rather, the Company or the Participant shall have the right
to institute judicial proceedings in any court of competent jurisdiction with
respect to such dispute or claim. If judicial proceedings are instituted, the
parties agree that such proceedings shall not be stayed or delayed pending the
outcome of any arbitration proceeding hereunder.
Except as provided above for claims or disputes under Article 11, judgment
may be entered on the award of the arbitrator in any court having proper
jurisdiction. All expenses of such arbitration, including the fees and expenses
of the counsel for the Participant, shall be borne by the Company; provided,
however, that the Company shall be reimbursed by the Participant for all such
fees and expenses in the event the Participant fails to prevail with respect to
any one (1) material issue of dispute in connection with such legal action.
Article 10. Withholding
The Company shall be entitled to withhold from any amounts payable under
this Plan all taxes as legally shall be required (including, without limitation,
any United States federal taxes, and any other state, city, or local taxes).
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Article 11. Noncompetition
11.1.Prohibition on Competition. Without the prior written consent of the
Company, during the term of this Plan, and for a period of two (2) years
following the payment of Severance Benefits or Change in Control Severance
Benefits under this Plan, Participants shall not, as an employee or an officer,
engage directly or indirectly in any business or enterprise which is "in
competition" with the Company or its successors or assigns. For purposes of this
Plan, a business or enterprise will be deemed to be "in competition" if it is
engaged in any significant business activity of the Company or its subsidiaries
within the United States of America.
However Participants shall be allowed to purchase and hold for investment
less than two percent (2%) of the shares of any corporation whose shares are
regularly traded on a national securities exchange or in the over-the-counter
market.
11.2.Disclosure of Information. Participants recognize that they have
access to and knowledge of certain confidential and proprietary information of
the Company which is essential to the performance of their duties as employees
of the Company. Participants will not, during or after the term of their
employment by the Company, in whole or in part, disclose such information to any
person, firm, corporation, association, or other entity for any reason or
purpose whatsoever, nor shall he make use of any such information for their own
purposes.
11.3.Covenants Regarding Other Employees. During the term of this Plan,
and for a period of two (2) years following the payment of Severance Benefits or
Change in Control Severance Benefits under this Plan, each Participant agrees
not to attempt to induce any employee of the Company to terminate his or her
employment with the Company, accept employment with any competitor of the
Company, or to interfere in a similar manner with the business of the Company.
Article 12. Successors and Assignment
12.1.Successors to the Company. The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation, or otherwise)
of all or substantially all of the business and/or assets of the Company or of
any division or subsidiary thereof to expressly assume and agree to perform the
Company's obligations under this Plan in the same manner and to the same extent
that the Company would be required to perform them if no such succession had
taken place. Failure of the Company to obtain such assumption and agreement
prior to the effective date of any such succession shall be a breach of this
Plan and shall entitle Participants to compensation from the Company in the same
amount and on the same terms as they would be entitled to hereunder if they had
terminated their employment with the Company voluntarily for Good Reason. Except
for the purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Effective Date of Termination.
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12.2.Assignment by the Participant. This Plan shall inure to the benefit
of and be enforceable by each Participant's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees, and
legatees. If a Participant dies while any amount would still be payable to him
or her hereunder had he or she continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Plan, to the Participant's Beneficiary. If the Participant has not named a
Beneficiary, then such amounts shall be paid to the Participant's devisee,
legatee, or other designee, or if there is no such designee, to the
Participant's estate.
Article 13. Miscellaneous
13.1.Employment Status. Except as may be provided under any other
agreement between a Participant and the Company, the employment of the
Participant by the Company is "at will," and, prior to the effective date of a
Change in Control, may be terminated by either the Participant or the Company at
any time, subject to applicable law.
13.2.Beneficiaries. Each Participant may designate one or more persons or
entities as the primary and/or contingent Beneficiaries of any Severance
Benefits or Change in Control Severance Benefits owing to the Participant under
this Plan. Such designation must be in the form of a signed writing acceptable
to the Committee. Participants may make or change such designations at any time.
13.3.Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine, the feminine
shall include the masculine, the plural shall include the singular, and the
singular shall include the plural.
13.4.Severability. In the event any provision of this Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included. Further, the captions
of this Plan are not part of the provisions hereof and shall have no force and
effect.
13.5.Modification. No provision of this Plan may be modified, waived, or
discharged unless such modification, waiver, or discharge is agreed to in
writing and signed by each affected Participant and by an authorized member of
the Committee, or by the respective parties' legal representatives and
successors.
13.6.Applicable Law. To the extent not preempted by the laws of the United
States, the laws of the state of Illinois, shall be the controlling law in all
matters relating to this Plan.
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