SIMPSON INDUSTRIES, INC.
47603 Halyard Drive
Plymouth, Michigan 48170-2429
September 1, 1997
Mr. Vinod M. Khilnani
Simpson Industries, Inc.
47603 Halyard Drive
Plymouth, Michigan 48170-2429
Dear Vinod:
Simpson Industries, Inc. (the "Company") considers a
dedicated and vital management team to be essential for
protecting and enhancing the best interests of the Company and
its shareholders. In this connection, the Company recognizes
that the possibility of a change in control may exist and that
such possibility, and the uncertainty and questions which it may
raise among management, may result in the departure or
distraction of management personnel to the detriment of the
Company and its shareholders. Accordingly, the Board of
Directors of the Company (the "Board") has determined that
appropriate steps should be taken to reinforce and encourage the
continued attention and dedication of members of the Company's
senior management, including yourself, to their assigned duties
without distraction in the face of the potentially disturbing
circumstances arising from the possibility of change in control
of the Company.
This letter agreement sets forth the severance benefits
which the Company agrees will be provided to you in the event
your employment with the Company is terminated subsequent to a
"Change in Control of the Company" (as defined in Section 3
hereof) under the circumstances described below.
1. Company's Right to Terminate. The Company may
terminate your employment at any time, subject to providing the
benefits hereinafter specified in accordance with the terms
hereof and subject to any other benefits which the Company has
agreed in writing to provide you.
2. Term of Agreement. This Agreement shall commence
on the date hereof and shall continue in effect until
December 31, 1998; provided, however, that commencing on
January 1, 1999 and each January 1 thereafter, the term of this
Agreement shall automatically be extended for one additional year
unless at least 30 days prior to such January 1 date, the Company
shall have given notice that it does not wish to extend this
Agreement; and provided, further, that this Agreement shall
continue in effect beyond the term provided herein if a change in
control of the Company as defined in Section 3 hereof, shall have
occurred during such term.
3. Change in Control. No benefits shall be payable
hereunder unless there shall have been a change in control of the
Company, as set forth below, and your employment by the Company
shall thereafter have been terminated in accordance with Section
4 below. For purposes of this Agreement, a "Change in Control of
the Company" shall mean a Change in Control of a nature that
would be required to be reported in response to the requirements
of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended ("Exchange Act")
provided that, without limitation, such a Change in Control shall
be deemed to have occurred if (i) any "person" [as such term is
used in Sections 13(d) and 14(d) of the Exchange Act] is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the
Company representing 25 percent or more of the combined voting
power of the Company's then outstanding securities; or
(ii) during any period of two consecutive calendar years,
individuals who at the beginning of such period constitute the
Board cease for any reason to constitute at least a majority
thereof unless the election or the nomination for election by the
Company's shareholders, of each new director was approved by a
vote of at least two-thirds of the directors then still in office
who were directors at the beginning of the period.
4. Termination Following Change in Control. If any of
the events described in Section 3 hereof constituting a Change in
Control of the Company shall have occurred, you shall be entitled
to the benefits provided in Section 5 hereof upon the subsequent
termination of your employment within two years from the date of
such Change in Control unless such termination is (a) because of
your death, (b) by the Company for Cause or Disability or (c) by
you other than for Good Reason.
(i) Disability. Termination by the Company
of your employment based on "Disability" shall mean
termination because of your absence from your duties
with the Company on a full time basis for 180
consecutive calendar days, as a result of your
incapacity due to physical or mental illness, unless
within 30 days after Notice of Termination (as
hereinafter defined) is given following such absence you
shall have returned to the full time performance of your
duties.
(ii) Cause. Termination by the Company of
your employment for "Cause" shall mean termination upon
(A) the willful and continued failure by you to
substantially perform your duties with the Company
(other than any such failure resulting from your
incapacity due to physical or mental illness), after a
demand for substantial performance is delivered to you
by the Chief Executive Officer of the Company or by the
Chairman of the Board of Directors which specifically
identifies the manner in which such executive believes
that you have not substantially performed your duties,
or (B) the willful engaging by you in misconduct which
is materially injurious to the Company, monetarily or
otherwise. For purposes of this paragraph, no act, or
failure to act, on your part shall be considered
"willful" unless done, or omitted to be done, by you not
in good faith and without reasonable belief that your
action or omission was in the best interest of the
Company. Notwithstanding the foregoing, you shall not
be deemed to have been terminated for Cause unless and
until there shall have been delivered to you a copy of a
Notice of Termination from the Chief Executive Officer
of the Company after reasonable notice to you and an
opportunity for you, together with your counsel, to be
heard before the Chief Executive Officer, finding that
in the good faith option of such executive you were
guilty of conduct set forth above in clauses (A) or (B)
of the first sentence of this paragraph and specifying
the particulars thereof in detail.
(iii) Good Reason. Termination by you of your
employment for "Good Reason" shall mean termination
based on:
(A) the assignment to you of any duties
inconsistent with your position, duties,
responsibilities and status with the Company
immediately prior to a Change in Control, or a
change in your reporting responsibilities, titles
or offices as in effect immediately prior to a
Change in Control, or any removal of you from or
any failure to re-elect you to any of such
positions, except in connection with the
termination of your employment for Cause or
Disability or as a result of your death or by you
other than for Good Reason;
(B) a reduction by the Company in your base
salary as in effect on the date hereof or as the
same may be increased from time to time;
(C) a failure by the Company to continue the
Company's incentive bonus plans as the same may be
modified from time to time but substantially in the
form currently in effect (the "Plans"), or a
failure by the Company to continue you as a
participant in the Plans on at least the present
basis or to pay you the amounts which you would be
entitled to receive based on the Company's
performance in accordance with the Plans;
(D) the Company's requiring you to be based
anywhere other than your present location or the
Company's principal executive offices except for
required travel on the Company's business to an
extent substantially consistent with your present
business travel obligations, or in the event you
consent to any such relocation, the failure by the
Company to pay (or reimburse you for) all
reasonable moving expenses incurred by you or to
indemnify you against any loss realized in the sale
of your principal residence in connection with any
such relocation;
(E) the failure by the Company to continue
in effect any benefit, retirement or compensation
plan, savings and profit sharing plan, stock
ownership plan, stock purchase plan, stock option
plan, life insurance plan, health- and-accident
plan, dental plan or disability plan in which you
are participating at the time of a Change in
Control of the Company (or plans pro- viding you
with no less favorable benefits), the taking of any
action by the Company which would adversely affect
your participation in or materially reduce your
benefits under any of such plans or deprive you of
any material fringe benefit enjoyed by you at the
time of the Change in Control, or the failure by
the Company to provide you with the number of paid
vacation days to which you are then entitled in
accordance with the Company's normal vacation
policy in effect on the date hereof;
(F) the failure by the Company to obtain the
assumption of the agreement to perform this
Agreement by any successor as contemplated in
Section 6 hereof; or
(G) any purported termination of your
employment which is not effected pursuant to a
Notice of Termination satisfying the requirements
of paragraph (iv) below [and, if applicable,
paragraph (ii) above]; and for purposes of this
Agreement, no such purported termination shall be
effective.
(iv) Notice of Termination. Any purported
termination by the Company pursuant to paragraph (i) or
(ii) above or by you pursuant to paragraph (iii) above
shall be communicated by written Notice of Termination
to the other party hereto. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice
which shall indicate the specific termination provision
in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under
the provision so indicated.
(v) Date of Termination. "Date of Termination"
shall mean (A) if your employment is terminated for
Disability, 30 days after Notice of Termination is given
(provided that you shall not have returned to the
performance of your duties on a full-time basis during
such 30 day period), (B) if your employment is
terminated pursuant to paragraph (ii) above, the date
specified in the Notice of Termination, and (C) if your
employment is terminated for any other reason, the date
on which a Notice of Termination is given; provided if
within 30 days after any Notice of Termination is given
the party receiving such Notice of Termination notifies
the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date
on which the dispute is finally determined, either by
mutual written agreement of the parties, by a binding
and final arbitration award or by a final judgment,
order or decree of a court of competent jurisdiction
(the time for appeal therefrom having expired and no
appeal having been perfected).
5. Compensation upon Termination or During Disability.
(i) During any period that you fail to perform
your duties hereunder as a result of incapacity due to
physical or mental illness, you shall continue to
receive your full base salary at the rate then in effect
and any bonus payments under the Plans paid during such
period until this Agreement is terminated pursuant to
paragraph 4(i) hereof. Thereafter, your benefits shall
be determined in accordance with the Company's long-term
disability plan then in effect.
(ii) If your employment shall be terminated for
Cause, the Company shall pay you your full base salary
through the Date of Termination at the rate in effect at
the time Notice of Termination is given and the Company
shall have no further obligation to you under this
Agreement.
(iii) If your employment by the Company shall be
terminated (A) by the Company other than for Cause or
Disability or (B) by you for Good Reason, then you shall
be entitled to the benefits provided below:
(A) the Company shall pay you your full base
salary through the Date of Termination at the rate
in effect at the time Notice of Termination is
given and the amount, if any, with respect to any
year then ended which pursuant to the Plans would
have accrued to you on the basis of the Company's
performance but which has not yet been paid to you;
(B) From the date of Termination through a
period of 24 months following the Change in Control
or until your normal retirement date (whichever
first occurs), you shall be entitled to receive as
severance pay (i) a monthly payment equal to your
monthly salary for the last full month immediately
preceding termination, plus 1/12 of the average of
the short-term incentive bonus payments paid to you
or accrued with respect to each of the two years
preceding termination; (ii) continued treatment as
an "employee" under any stock option, employee
benefit or other compensation arrangement (for the
remaining period); (iii) full benefits under each
employee welfare benefit plan in which you were
entitled to participate immediately prior to date
of termination; (iv) the right to immediately
exercise in full all outstanding stock options;
(v) full credit under the Company's retirement
plans for service through the remaining period.
(C) The Company shall also pay to you all
legal fees and expenses incurred by you as a result
of any controversy over this Agreement, to the
extent you are successful in legal proceedings
against the Company.
(iv) Notwithstanding the foregoing, no payments
shall be provided under subsection (iii) to the extent
that they would (A) constitute an "excess parachute
payment" under Section 280G of the Internal Revenue
Code, (B) disqualify an employee benefit plan or trust
under the Internal Revenue Code, or (C) cause an
employee benefit plan or trust to violate the Employee
Income Retirement Security Act of 1974, as amended.
6. Successors; Binding Agreement.
(i) The Company will require any successor
(whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company, to
expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Company
would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such
agreement prior to the effectiveness of any succession
shall be a breach of this Agreement and shall entitle
you to compensation from the Company in the same amount
and on the same terms as you would be en- titled
hereunder if you terminated your employment for Good
Reason, except that for purposes of implementing the
foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. As
used in this Agreement, "Company" shall mean the Company
as hereinbefore defined and any successor to its
business and/or assets as aforesaid which executes and
delivers the agreement provided for in this paragraph 6
or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law.
(ii) This Agreement shall inure to the benefit
of and be enforceable by your personal or legal
representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If you
should die while any amount would still be payable to
you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid
in accordance with the terms of this Agreement to your
devisee, legatee or other designee or, if there be no
such designee, to your estate.
7. Notice. For the purposes of this Agreement,
notices and all other communications provided for in the
Agreement shall be in writing and shall be deemed to have been
duly given when delivered or mailed by United States registered
mail, returned receipt requested, postage prepaid, addressed to
the respective addresses set forth on the first page of this
Agreement, provided that all notices to the Company shall be
directed to the attention to the Chief Executive Officer of the
Company with a copy to the Secretary of the Company, or to such
other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of
address shall be effective only upon receipt.
8. Miscellaneous. No provisions of this Agreement may
be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing signed by you
and such officer as may be specifically designated by the Board
of Directors of the Company. No waiver by either party hereto at
any time of any breach by the other party hereto of, or
compliance with, any condition of this Agreement to be performed
by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions or representations, oral or
otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not set forth
expressly in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed
by the laws of the State of Michigan.
9. Validity. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
10. Arbitration. Any dispute or controversy arising
under or in connection with this Agreement shall be settled
exclusively by arbitration in Oakland County, Michigan in
accordance with the rules of the American Arbitration Association
then in effect. Judgment may be entered on the arbitrator's
award in any court having jurisdiction.
To confirm your acceptance, kindly sign and return to
the Company the enclosed copy of this letter which will then
constitute our agreement on this subject.
Sincerely,
SIMPSON INDUSTRIES, INC.
By:_________________________
Roy E. Parrott, President
Agreed to this _____________
day of September _____, 1997
____________________________
Vinod M. Khilnani