EXHIBIT 2
SEVERANCE AGREEMENT
AGREEMENT, dated the 31st day of March, 1995, between BEST POWER
TECHNOLOGY, INCORPORATED, a Delaware corporation (the "Company"), and STEVE J.
PAUL ("Paul").
RECITALS
WHEREAS, Paul's employment as Chief Executive Officer of the Company,
pursuant to the Employment Agreement dated May 17, 1993, as amended by the
Amendment to Employment Agreement dated as of June 23, 1994, each between the
Company and Paul (collectively, the "Employment Agreement"), was terminated as
of January 26, 1995; and
WHEREAS, the Company and Paul desire to fully and finally compromise and
settle all differences between them relating to the employment of Paul with the
Company and the termination of that employment.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
herein made, it is agreed as follows:
1. Severance and Settlement Payments.
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(a) On the date of the Company's receipt of a counterpart hereof
executed by Paul, the Company shall make wire transfers of the following
amounts into the Reinhart, Boerner, Van Deuren, Norris & Rieselbach, s.c.
Client Trust Fund for the benefit of Paul:
(i) In severance and in payment of Paul's alleged contractual and other
claims not covered in clause (ii) below, an amount equal to $338,000,
less appropriate employment and income tax withholding; and
(ii) In settlement of Paul's alleged personal injury claims, an amount
equal to $95,000. The Company will not issue a Form 1099 or a Form
W-2 in connection with the amount specified in this clause (ii);
provided, that such amounts shall not be released to Paul until following the
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close of business on the Effective Date (as defined in Section 11 hereof) and
unless the conditions specified in Section 16 shall have been satisfied.
(b) The Company makes no representation or warranty to Paul concerning
the employment or income tax character or consequences (including any related
penalties and interest) to Paul of any of the above payments; and it is further
understood and agreed that any future employment or income tax consequences
(including any related penalties and interest) that may be imposed on or
asserted against Paul will not provide a basis to set aside or in any way alter
this Agreement or the payments to be made hereunder, and that Paul shall be
solely responsible for paying any such taxes that may be imposed or asserted by
any such taxing authority.
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(c) This Agreement shall not be construed to render Paul a "prevailing
party" within the meaning of Sec. 706(k) of Title VII of the Civil Rights Act of
1964, 42 U.S.C. Sec. 2000e-5(k); the Wisconsin Fair Employment Act, Wis. Stat.
Sec. 111.31 et seq.; or any other federal, state, county or municipal statute,
ordinance or other law, precedent or practice providing for or allowing
attorneys' fees and/or costs; nor shall this Agreement be deemed to constitute
a factor supporting the award of attorneys' fees and/or costs under any
thereof. Paul shall be solely responsible for the payment of all his legal
fees and expenses with respect to this Agreement and all other matters
concerning the Company.
(d) Through May 17, 1996, the Company shall use its best efforts to
obtain and keep in full force and effect group health, dental and life
insurance coverage for the benefit of Paul and his dependents, on the same
basis and with the same payments and co-payments as such coverage is now
provided for executive employees of the Company; provided that (i) the period
from May 18, 1996 through November 17, 1997 shall constitute the eighteen (18)
month continuation coverage period for Paul and his qualifying beneficiaries
under Section 4980B of the Internal Revenue Code of 1986, as amended (the
"Code"), and (ii) the Company's performance of this covenant shall be deemed to
satisfy any health insurance continuation coverage obligations of the Company
through November 17, 1997 under Code Section 4980B with respect to Paul and
his qualifying beneficiaries.
(e) Paul hereby acknowledges that he has received all payments due to him
from the Company in respect of the Employment Agreement or otherwise through
the date of this Agreement, and Paul further acknowledges that this
consideration and the payments to be remitted to him on the Effective Date or
thereafter to the extent specified in this Agreement are being provided in
return for his accepting the terms and conditions hereof, including a release,
covenants not to sue, disclose or compete and not revoking under Section 11 so
that this Agreement becomes effective. Paul hereby acknowledges that such
consideration is in part in lieu of that to which he may be entitled to under
any Company plan or policy.
(f) Paul also acknowledges that all of the options to purchase shares of
the Company's common stock heretofore granted to Paul under the Best Power
Technology, Incorporated 1993 Stock Option Plan have terminated and are void
and that the Company shall no longer be obligated to pay any salary, bonus or
premiums on Paul's whole life insurance policy with a face amount of $2,300,000
or make any other payment to or for the benefit of Paul as set forth in the
Employment Agreement.
(g) The Company agrees that through May 17, 1996 Paul shall be accorded
the published discount on products of the Company granted to its executive
employees generally.
(h) The Company agrees that, in the event the Company proposes to amend
Article Eight of its Certificate of Incorporation in a manner that would reduce
or eliminate the indemnification provided by the Company to its officers and
directors, the Company
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will prior to or concurrently with the effectiveness of any such amendment
provide to Paul a written indemnity agreement obligating the Company to
indemnify Paul to the same extent he is now indemnified under Article Eight of
the Certificate of Incorporation.
(i) The Company hereby grants to Paul an option to purchase 21,533 shares
of the Company's common stock pursuant to the Company's Director Stock Option
Plan at a price per share equal to $13.48, exercisable during the ninety day
period commencing on May 17, 1996 by notice to the Company and payment of the
indicated exercise price against delivery of the shares bearing appropriate
legends unless such shares are then the subject of an effective registration
statement. Notwithstanding the foregoing, such option shall terminate and be
null and void with no compensation to Paul therefor in the event that (x) the
Company's Board of Directors approves a Transaction (as defined in Section
1(j)), (y) such Transaction is completed on or before October 15, 1995 and (z)
the cash amount described in such Section is paid to Paul.
(j) Subject to satisfaction of the conditions specified below, the
Company hereby grants to Paul the right to receive in cash the positive amount,
if any, equal to the product of (A) 21,533 and (B) the positive difference, if
any, determined by subtracting (w) $13.48 from (x) the Average Value Received
for each share of the Company's common stock in a Transaction. As used herein,
the term "Transaction" means a sale of all or substantially all of the
Company's assets, the completion of a tender offer for at least 80% of the
Company's issued and outstanding capital stock in a manner approved by its
Board of Directors, a merger to which the Company is a party and pursuant to
which its stockholders immediately prior to such merger own less than half of
the issued and outstanding capital stock of the entity resulting from such
transaction, or any similar transaction involving in substance a sale of the
Company; and the term "Average Value Received" means (y) the aggregate fair
market value of all cash and securities received in a Transaction, valued as of
the time of such receipt and through the use of valuation techniques approved
by the Company's Board of Directors, divided by (z) the number of shares of the
Company's common stock with respect to which such consideration is payable,
whether in one or more steps. The foregoing grant to Paul is subject to the
conditions that (1) the final announced step of a Transaction must be completed
on or prior to October 15, 1995, and (2) in the event that the other party to
the Transaction and the Company's Board of Directors both determine to account
for such Transaction as a pooling of interests, such payment must not adversely
affect such characterization (and if it would adversely affect such
characterization, the foregoing grant to Paul shall be null and void and Paul
shall receive no compensation therefor). If such cash amount is payable, it
shall be paid to Paul upon completion of the final step of the related
Transaction (or, at the election of the other party to such Transaction, at
such earlier time as it may choose to make such payment).
(k) The Company shall use its reasonable best efforts to hold regular
meetings of its Board of Directors at least once each calendar quarter. Prior
to each such meeting, a full agenda and other discussion materials will be
circulated to all Directors; and drafts of the minutes
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of each such meeting will be circulated to all Directors promptly thereafter.
2. Confidentiality of Information; Covenant Not to Compete.
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(a) Notwithstanding the termination of the Employment Agreement and his
employment thereunder, Paul shall be subject to the confidentiality and
noncompetition obligations set forth in the Company's Employee Confidentiality,
Invention, and Copyright Agreement and the Employment Agreement, respectively,
except that all of Paul's obligations not to compete with the Company shall
expire on May 17, 1998. In addition, Paul shall not disclose the terms of
this Agreement to anyone other than his wife, attorney or tax advisor except as
required by law, and he shall advise such persons that they may not disclose
the terms of this Agreement to anyone except as required by law. The parties
agree that, promptly following the Effective Date, the Company shall be
entitled to issue a press release in substantially the form of Annex I hereto.
The Company agrees that it will not issue any other press release or make any
other public disclosure concerning this Agreement without Paul's prior written
consent except as set forth in such press release or, to the extent
additionally required by law, a factual description of the existence and terms
of this Agreement and/or the inclusion of this Agreement as an exhibit to the
Company's filings with the Securities and Exchange Commission.
(b) Paul shall refrain from publishing or communicating, whether orally
or in writing, any remarks disparaging or derogatory of the Company or any of
its employees, officers, directors or shareholders, including, without
limitation, any remarks concerning the business affairs of the Company or the
character or qualifications of any such individuals. The Company shall refrain
from publishing or communicating (and the Company shall advise the members of
its Board of Directors that they may not publish or communicate), whether
orally or in writing, any remarks disparaging or derogatory of Paul, including,
without limitation, any remarks concerning his character or qualifications.
Each party to this Agreement shall refrain from directly or indirectly causing,
encouraging, soliciting or otherwise participating with any other person,
entity or group to take any action which such party is prohibited from taking
under this Agreement.
3. Release.
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(a) Except as provided in Sections 1(g) and 5, Paul hereby releases, and
hereby waives any claims or rights that he may have against, the Company or any
of its employees, officers, directors or agents for any act or omission that
occurs before the Effective Date of this Agreement, including, without
limitation, any liability or obligation for any expense, damage or loss that he
might otherwise claim based on the following:
(1) his employment with the Company or the termination of that
employment;
(2) any Company policy, plan, practice, contract or
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agreement, including, without limitation, the Employment Agreement,
the Best Power Technology, Incorporated 1993 Stock Option Plan and
the Best Power Technology, Incorporated Annual Incentive Plan;
(3) any tort alleged by, or personal injury sustained by, him;
(4) any policies, practices, laws or agreements governing the
payment of wages, commissions or other compensation;
(5) any laws governing employment discrimination including, but not
limited to, Title VII of the Civil Rights Act, the Age Discrimination in
Employment Act, the Employee Retirement Income Security Act, the Americans
with Disabilities Act and the Wisconsin Fair Employment Act;
(6) any laws or agreements that provide for punitive, exemplary or
statutory damages; and
(7) any laws or agreements that provide for payment of attorney
fees, costs or expenses.
Paul understands that his release of the Company and its employees,
officers, directors and agents and his waiver of these claims applies to his
heirs, estate, executors, administrators and representatives, and he hereby
represents that he has not assigned any such claims or authorized any other
person or entity to assert such claims on his or their behalf.
This Agreement does not prevent Paul from asserting any legal rights he
may have as a shareholder of the Company or from discharging any duties he may
have as a Director of the Company.
(b) The Company hereby releases, and hereby waives any claims or rights
that it may have against, Paul for any act or omission that occurred before the
Effective Date of this Agreement. The Company understands that its release of
Paul and its waiver of such claims applies to its successors and assigns, and
the Company hereby represents that it has not assigned any such claims or
authorized any other person or entity to assert such claims on its behalf.
4. No Entitlement. Paul hereby resigns as an officer and director of
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each subsidiary of the Company. Paul shall not now or hereafter be entitled to
employment or reemployment with the Company or any subsidiary or to a
directorship with any subsidiary. Notwithstanding any other provision of this
Agreement, the Company may reemploy Paul if mutually agreed.
5. Claims Not Waived. This Agreement does not waive any claims that
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Paul may have arising under (a) any worker's compensation law, or any plan
currently maintained by the Company that provides for retirement benefits; (b)
this Agreement; or (c)
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the Certificate of Incorporation or By-laws of the Company.
6. Nonadmission. Nothing in this Agreement is meant to suggest that the
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Company or Paul has violated any law or contract, that Paul has any valid claim
against the Company or that the Company has any valid claim against Paul.
7. Voluntary Agreement. Paul hereby acknowledges and states that he has
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entered into this Agreement knowingly and voluntarily.
8. Consulted An Attorney. Paul hereby represents that he has consulted
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with an attorney of his choice about this Agreement and any matter that it
covers before signing this Agreement.
9. Covenant Not to Sue.
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(a) Paul understands that this Agreement prohibits him from initiating a
lawsuit against the Company or any of its employees, officers, directors or
agents for any claim waived or released in Section 3, and prohibits him from
recovering any amounts or obtaining any remedy for himself for any claim waived
or released in Section 3 through an action or proceeding brought by others.
(b) The Company understands that this Agreement prohibits the Company
from initiating a lawsuit against Paul for any claim waived or released in
Section 3, and prohibits the Company from recovering any amount or obtaining
any remedy for the Company for any claim waived or released in Section 3
through an action or proceeding brought by others.
10. Complete Agreement. This document contains the entire agreement
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between Paul and the Company relating to the subject matter hereof. This
Agreement supersedes and displaces any prior agreements and discussions between
Paul and the Company relating to such matters, and neither Paul nor the Company
may rely on any such prior agreements or discussions. No waiver or amendment
to this Agreement shall be effective unless in writing, signed by the party or
parties to be bound.
11. Effective Date and Revocation. This Agreement shall not be effective
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until seven (7) days after it has been signed and dated by Paul and sent to the
Company or its representative (such seventh day after Paul's signing, dating
and sending of this Agreement being the "Effective Date" hereof), provided that
the Company's offer represented by this Agreement shall be revoked unless this
Agreement is so signed, dated and sent prior to 5:00 p.m. (Milwaukee time) on
March 31, 1995. Until the Effective Date, Paul may revoke his acceptance of
this Agreement by delivering to the Secretary of the Company and to Reinhart,
Boerner, Van Deuren, Norris & Rieselbach, s.c., a written statement stating
that he wishes to revoke this Agreement or not be bound by it. In such event,
or in the event that the conditions specified in Section 16 are not timely
satisfied, neither party shall be bound hereby, all agreements of the parties
herein shall be deemed void ab initio, and Paul shall cause the funds deposited
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into escrow pursuant to Section 1(a) to be forthwith returned to the Company
with interest.
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12. Final and Binding Effect. Paul understands that if this Agreement
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becomes effective it will have a final and binding effect and that by signing
and not timely revoking this Agreement he may be giving up legal rights.
13. Representations. By signing this Agreement, Paul represents that he
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has read this Agreement and understands all of its terms. By signing this
Agreement, the Company represents that this Agreement has been authorized by
the Executive Committee of the Company's Board of Directors.
14. Construction of Agreement. Each provision of this Agreement shall be
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considered separate and independent from the other provisions of this
Agreement, and no invalidity of a provision shall affect any other provision of
this Agreement. This Agreement has been the subject of extensive negotiations
between the parties and is their mutual product; accordingly, no rule of strict
construction shall be applied against the Company. Except as set forth above
in this Section, customary principles of contract construction shall apply to
this Agreement and are incorporated herein.
15. Notices. All notices and other communications hereunder or in
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connection herewith shall be deemed to have been duly given if in writing and
(i) in the case of Section 11, delivered personally or by facsimile, confirmed
by overnight delivery, or (ii) in any other case, delivered personally or sent
by registered or certified mail, return receipt requested, and first-class
postage prepaid:
(a) If to the Company:
Best Power Technology, Incorporated
P.O. Box 280
Route 1 Box 106 Highway 80
Necedah, Wisconsin 54646
Attention: Corporate Secretary
With a copy to:
Thomas C. Judge
Michael, Best & Friedrich
135 South LaSalle Street
Suite 1610
Chicago, Illinois 60603-4391
(or at such other address or with a copy to such other person or
addresses as may have been designated from time to time by notice in
writing); or
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(b) If to Paul:
Steve J. Paul
1522 Lakeview Drive
Tomah, Wisconsin 54660
With a copy to:
Robert F. Henkle, Jr.
Reinhart, Boerner, Van Deuren,
Norris & Rieselbach, s.c.
1000 North Water Street
Suite 2100
Milwaukee, Wisconsin 53202
(or at such other address or with a copy to such other person or
addresses as may have been designated from time to time by notice in
writing).
16. Release of Funds.Concurrently with its execution and delivery of this
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Agreement, the Company is being furnished with a letter from Paul's counsel,
Reinhart, Boerner, Van Deuren, Norris & Rieselbach, s.c., setting forth certain
acknowledgements and agreements with respect to this Agreement, the funds
described in Section 1(a) and related matters. The Company and Paul hereby
authorize such counsel to release to Paul the funds described in Section 1(a)
following the close of business on the Effective Date, but only upon the
receipt by such counsel of (a) a certification by Paul to the effect that Paul
affirms and does not revoke his acceptance of this Agreement, that he has fully
performed his obligations hereunder since the date of his signing, dating and
sending hereof, and that he has no knowledge of a breach hereof by the Company
and (b) a certification by the Company to the effect that it has not received
notice of revocation of this Agreement from Paul, that it has fully performed
its obligations under this Agreement since the date hereof, and that it has no
knowledge of a breach hereof by Paul. In the event that (i) Paul revokes his
acceptance of this Agreement pursuant to Section 11 or (ii) any of the
certifications described above in this Section are not provided in the
respective forms required by the close of business on the Effective Date
(unless, in the case of clause (ii), waived by both parties hereto), the
Company's deposit pursuant to Section 1(a) and any interest accrued thereon
shall forthwith be remitted by such firm by wire transfer to the Company.
17. Receipt. Paul hereby acknowledges receipt of this Agreement
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on March 31, 1995.
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BEST POWER TECHNOLOGY, INCORPORATED
By: /s/ Dennis E. Burke
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Executive Vice President - Administration
/s/ Steve J. Paul
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Steve J. Paul
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