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Exhibit 10.6
SEVERANCE AND
NON-COMPETITION AGREEMENT
THIS SEVERANCE AND NON-COMPETITION AGREEMENT (this "Agreement") between
CURTIS INDUSTRIES, INC., a Delaware corporation (the "Company"), and A. KEITH
DREWETT (the "Executive") is dated the 28th day of February, 1996.
A. Executive is a key employee of the Company, who provides highly
valuable services to the Company and possesses, and has access to, confidential
and proprietary information concerning the Company .
B. The Board of Directors of the Company (the "Board") has determined
that it is in the best interests of the Company and its stockholders to assure
that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change in Control (as
defined below) of the Company. The Board believes it is imperative to diminish
any distraction of the Executive by virtue of the personal uncertainties and
risks created by a pending or threatened Change in Control and to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change in Control, and to provide the
Executive with compensation and benefits arrangements upon a Change in Control
which will encourage the Executive to continue to provide services to the
Company (or its successor) after a Change in Control, thereby enhancing the
value of the Company in the event of a sale resulting in a Change in Control.
C. The Board and the Executive deem it to be in their respective best
interests to clarify and amend their existing severance arrangements and to
assure the Company of protection of its proprietary information and limited
protection against competition from the Executive on termination of the
Executive's employment.
Now, therefore, the parties, for the mutual consideration provided in
this Agreement, agree to be legally bound to the terms hereof.
1. CERTAIN DEFINITIONS.
a. "Affiliate" has the meaning ascribed in Rule 12b-2
promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
b. "Cause" means
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(1) the Executive's fraud, dishonesty,
willful misconduct or deliberate injury to the Company or any
Subsidiary (as defined below); or
(2) the Executive's intentional and repeated
refusal or failure to perform duties consistent with the
position of the Executive with the Company.
c. "Change in Control" means:
(1) The acquisition by any person (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act) (a "Person") of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of
securities representing a majority of the then outstanding
voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that the following
acquisitions will not constitute a Change in Control; (A) any
acquisition by the Company, (B) any acquisition by any
employee benefit plan (or related trust) sponsored or
maintained by the Company or any Person controlled by the
Company, (C) any acquisition by a Person who is an officer or
director of the Company on the date of this Agreement
("Current Officer or Director") or an Affiliate of any such
Person or (D) any acquisition by any Person pursuant to a
transaction which complies with clauses (A), (B) and (C) of
subsection (3) of this Section 1(c); or
(2) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination
for election by the Company's stockholders, was approved by a
vote of at least a majority of the directors then comprising
the Incumbent Board will be considered as though such
individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or
removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(3) Approval by the stockholders of the
Company of a reorganization, merger or consolidation (a
"Business Combination") (other than a Business Combination
with a Person that is an affiliate of a Current Officer or
Director) in each case, unless, following such Business
Combination, (A) all or substantially all of the Persons who
were the beneficial owners, respectively, of the Outstanding
Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more
than 60% of the combined voting power of the then outstanding
voting securities entitled to vote generally in the election
of directors of the entity resulting from such Business
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Combination (including, without limitation, an entity
which, as a result of such transaction, owns the Company
through one or more subsidiaries) and (B) no Person (excluding
any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination and
any current Officer or Director or any affiliate of a Current
Officer or Director) beneficially owns, directly or
indirectly, 20% or more of combined voting power of the then
outstanding voting securities of such corporation without
counting any such ownership that existed prior to the Business
Combination; or
(4) Approval by the stockholders of the
Company of (A) a complete liquidation or dissolution of the
Company or (B) the sale or other disposition of all or
substantially all of the assets of the Company, other than to
a Person who is an affiliate of a Current Officer or Director
or a Person, with respect to which following such sale or
other disposition, [a] more than 60% of the combined voting
power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors is beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who
were the beneficial owners of the Outstanding Company Voting
Securities immediately prior to such sale or other
disposition, and [b] less than 20% of the combined voting
power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly,
by any Person (excluding any employee benefit plan (or related
trust) of the Company or such corporation and any current
Officer or Director or any affiliate of a Current Officer or
Director), without counting any such ownership that existed
prior to the sale or disposition.
d. "Compensation" means an amount equal to the higher
of the (A) then current annual rate of base salary or (B)
annual rate of base salary in effect immediately prior to such
then current rate; provided, that, if termination occurs after
a Change in Control, Compensation means the greatest of (i)
the higher of the two base salaries set forth above or (ii)
the annual rate of the base salary in effect immediately prior
to the Change in Control.
e. "Constructive Termination Without Cause" means a
termination of the Executive's employment by the Executive
following the occurrence, without his prior written consent,
of one or more of the following events (except in connection
with a termination of the Executive's employment for one of
the other reasons specified in Section 2, below):
(1) a reduction in the Executive's
Compensation, or a significant diminution in benefits
or perquisites following a Change in Control, unless,
in the case of termination or reduction of any such
benefit or perquisite, (A) there is substituted a
comparable benefit or perquisite that is economically
equivalent to
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such benefit or perquisite prior to its termination
or reduction, (B) the termination or reduction of the
benefit or perquisite affects members of the senior
management of the Company generally and occurs prior
to, and not in connection with or in anticipation of,
a Change in Control, or (C) the termination or
reduction of the benefit or perquisite occurs
pursuant to the Executive's direction or consent;
(2) a significant diminution in the
Executive's duties, responsibilities, titles or
position or the assignment to the Executive of duties
and responsibilities (A) inconsistent with the titles
or positions held by the Executive on the date of
this Agreement, as changed in connection with
promotions, if any, or (B) that are illegal, immoral
or unethical;
(3) the relocation of the Executive's
principal place of employment to a location that is
more than thirty (30) miles outside of Cuyahoga
County;
(4) the failure of the Company to obtain the
unconditional assumption, in writing or by operation
of law, of the Company's obligation to the Executive
under this Agreement by any successor prior to or at
the time of a reorganization, merger, consolidation,
disposition of all or substantially all of the assets
of the Company or similar transaction; or
(5) a termination for any reason during the
thirty (30) day period immediately following the
first anniversary of a Change in Control.
A Constructive Termination Without Cause will not
take effect unless: (i) the Executive has delivered written
notice to the Board within sixty (60) days after acquiring
knowledge of one of the events described in this subsection
1e, providing a basis for Constructive Termination Without
Cause, stating which one of these events has occurred; (ii)
within thirty (30) days after receipt of such notice the
Company has not remedied such event and provided the Executive
with written notice of such remedy; and (iii) if the Company
has not remedied such event within such period and provided
such notice, the Executive has notified the Company in writing
that he is terminating his employment; provided, however, that
a Constructive Termination Without Cause pursuant to clause
(5) of this subsection 1(e) will take effect at the expiration
of such thirty (30) day period if the Executive has delivered
and not withdrawn written notice thereof within such period.
The failure of the Executive to effect a Constructive
Termination Without Cause as to any one event described in
this subsection 1(e) above will not affect the Executive's
entitlement to effect a Constructive Termination Without Cause
as to any other such event.
f. "Disability" means the illness or other mental or
physical incapacity of the Executive, resulting in the
inability, as determined in good faith by the Board, to
perform substantially his duties for a period of one hundred
eighty (180) days in any twelve
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(12) month period.
g. "Subsidiary" means any entity in an unbroken chain
of entities beginning with the Company, if each of the
entities other than the last entity in the unbroken chain owns
equity possessing fifty percent (50%) or more of the total
combined voting power in one of the other entities in such
chain.
2. TERMINATION OF EMPLOYMENT.
a. TERMINATION BY DEATH. In the event that the
Executive's employment is terminated by death, his estate or
designated beneficiary, as the case may be, will be entitled
to:
(1) Compensation through the date of death;
(2) annual bonuses earned or awarded for
prior periods but not yet paid including the pro rata
portion of any bonus earned under any applicable
bonus plan for the portion of the year elapsed to the
date of death;
(3) reimbursement, in accordance with
Company policy as in effect from time to time, of any
business expenses incurred by the Executive but not
yet paid on the date of death; and
(4) other benefits accrued and earned by the
Executive through the date of termination in
accordance with the applicable plans and programs of
the Company.
b. TERMINATION DUE TO DISABILITY. In the event that
the Executive's employment is terminated due to Disability,
the Executive will be entitled to:
(1) Compensation through the date of
termination of employment;
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(2) any bonuses earned or awarded for prior
periods but not yet paid including the pro rata
portion of any bonus earned under any applicable
bonus plan for the portion of the year elapsed to the
date of termination;
(3) continuation of the medical benefits to
which the Executive and his dependents were entitled
at the time of termination, for a period of twelve
(12) months following termination of employment;
(4) reimbursement, in accordance with
Company policy as in effect from time to time, of any
business expenses incurred by the Executive but not
yet paid on the date of termination of employment;
and
(5) other benefits accrued and earned by the
Executive through the date of termination of
employment in accordance with the applicable plans
and programs of the Company.
c. TERMINATION BY THE COMPANY FOR CAUSE. In the event
that the Executive's employment is terminated for Cause, the
Executive will be entitled to:
(1) Compensation through the date of
termination for Cause;
(2) any annual bonuses awarded but not yet
paid;
(3) reimbursement, in accordance with
Company policy as in effect from time to time, of any
business expenses incurred by the Executive but not
yet paid on the date of termination of employment;
and
(4) other benefits accrued and earned by the
Executive through the date of termination in
accordance with applicable plans and programs of the
Company.
d. TERMINATION WITHOUT CAUSE. In the event that the
Company terminates Executive's employment for reasons other
than death, Disability or Cause, or the Executive terminates
employment in connection with a Constructive Termination
Without Cause, the Executive will be entitled to:
(1) Compensation for a period of twelve (12)
months, payable in accordance with the Company's
regular payroll practices for senior management, as
in effect from time to time;
(2) any bonuses earned or awarded for prior
periods but not yet paid including the pro rata
portions of any bonus earned under any applicable
bonus plan for the portion of the year elapsed to the
date of
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termination of employment;
(3) continued participation in all employee
benefit plans or programs in which the Executive was
participating on the date of termination of
employment, until the earlier of: (i) the expiration
of twelve (12) months after termination of
employment, and (ii) the date the Executive receives
equivalent coverage and benefits under other plans
and programs of a subsequent employer;
(4) reimbursement, in accordance with
Company policy as in effect from time to time, of any
business expenses incurred by the Executive but not
yet paid on the date of termination of employment;
and
(5) other benefits accrued and earned by the
Executive through the period ending twelve (12)
months after termination of employment in accordance
with applicable plans and programs of the Company.
e. TERMINATIONS WITHOUT CAUSE FOLLOWING A CHANGE IN
CONTROL. Anything to the contrary in this Agreement
notwithstanding, in the event of a Termination Without Cause,
a Constructive Termination Without Cause or a termination due
to Death or Disability within two (2) years following a Change
in Control, the Executive (or his estate or designated
beneficiary) will
be entitled to:
(1) Compensation for a period of twenty-four
(24) months, payable in accordance with the Company's
regular payroll practices for senior management, as
in effect from time to time;
(2) any bonuses earned for prior periods but
not yet paid including the pro rata portion of any
bonus earned under any applicable bonus plan for the
portion of the year elapsed to the date of
termination of employment;
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(3) continued participation in all employee
benefit plans or programs in which the Executive was
participating on the date of termination of
employment, until the earlier of: (i) the expiration
of twenty-four (24) months after termination of
employment, and (ii) the date the Executive receives
equivalent coverage and benefits under other plans
and programs of a subsequent employer;
(4) reimbursement, in accordance with
Company policy as in effect from time to time, of any
business expenses incurred by the Executive but not
yet paid on the date of termination of employment;
and
(5) other benefits accrued and earned by the
Executive through the period ending twenty-four (24)
months after termination of employment in accordance
with applicable plans and programs of the Company.
Termination of employment after the two (2) year period referred to in the first
paragraph of this subsection 2e will be subject to subsections a through d of
this Section 2.
3. LIMITATION OF PAYMENTS. If any compensation payments under
this Agreement would result in an "excess parachute payment" within the meaning
of Section 280G(b), then compensation payments under this Agreement will be
limited to the highest amount permitted without resulting in an "excess
parachute payment".
4. COVENANT NOT TO COMPETE.
a. During the term of the Executive's employment with
the Company or its successors and for a period of twelve (12)
months following termination of employment, the Executive will
not:
(1) directly or indirectly, as an employee,
agent, lender, investor or otherwise in any manner,
engage in business competition with the Company or
its Subsidiaries or have any interest in any person,
firm or corporation that directly or indirectly
engages in competition with the Company or its
Subsidiaries, other than ownership of up to one
percent (1%) of the stock of a publicly-held entity;
(2) employ, assist in employing, or
otherwise associate in business with, any then (at
the time of termination) employee, officer or agent
of the Company or its Subsidiaries; provided,
however, that Executive may employ, assist in
employing or associate with any employee, officer or
agent of the Company whose employment or other
engagement has been terminated by the Company, or who
has resigned under circumstances which would
constitute a Constructive Termination Without Cause
as
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defined in this Agreement; or
(3) induce any person who is an employee,
officer or agent of the Company or any of its
Subsidiaries to terminate said relationship.
b. For the purposes of this Agreement, the phrase
"engage in business competition" with the Company or its
Subsidiaries means, engaging in (1) the distribution of
industrial maintenance products, fasteners, automotive
replacement parts and security products (including, without
limitation, key blanks, key duplicating machines and key code
cutters), to the extent such distribution would target the
same types of customers or product sales opportunities that
the Company or its Subsidiaries have targeted, or actively
considered, studied or investigated targeting, during the
Executive's employment with the Company or (2) engaging in
direct competition with any other business of the Company or
its Subsidiaries as conducted at the time of termination of
employment.
c. All records of the accounts of customers and any
other records and books relating in any way whatsoever to the
customers or suppliers of the Company or its Subsidiaries, and
all records, pricing information, price lists, drawings,
product specifications, computer printouts, marketing plans or
information, data, samples, models, engineering data or other
trade secrets (or copies or extracts thereof) or
investigations, research, or business touching the operations
of the Company or its Subsidiaries, whether prepared by the
Executive or otherwise coming into the Executive's possession,
constitute proprietary and confidential information of the
Company (the "Confidential Information"), are and will remain
at all times hereafter the exclusive property of the Company,
and the Executive will not, at any time during or after
employment with the Company, disclose, divulge, copy or
otherwise use in any manner whatsoever any of the Confidential
Information. On termination of employment, the Executive will
return all such written Confidential Information, together
with all copies thereof, to the Company.
d. The remedy at law for any breach of this Section 4
will be inadequate and the damages flowing from such breach
are not readily susceptible to being measured in monetary
terms. Therefore, it is acknowledged that on proof of a
violation of any legally enforceable provision of this Section
4, the Company and its Subsidiaries will be entitled to
immediate injunctive relief and may obtain a temporary order
restraining any threatened or future breach, in addition to
any other available legal or equitable remedies. In the event
of any breach of this Section 4, the Company will be relieved
of any obligation to pay any amounts then due and owing to the
Executive.
e. THE RESTRICTIONS IMPOSED BY THIS SECTION 4 ARE
REASONABLE, DESIGNED TO LIMIT UNFAIR COMPETITION, DO NOT
STIFLE THE EXECUTIVE'S SKILL AND
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EXPERIENCE AND WILL NOT OPERATE AS A BAR TO THE EXECUTIVE'S
MEANS OF SUPPORT. IN THE EVENT THAT THE EXECUTIVE VIOLATES ANY
LEGALLY ENFORCEABLE PROVISIONS OF THIS SECTION 4 AS TO WHICH
THERE IS A SPECIFIC TIME PERIOD DURING WHICH THE EXECUTIVE IS
PROHIBITED FROM TAKING CERTAIN ACTIONS OR FROM ENGAGING IN
CERTAIN ACTIVITIES, AS SET FORTH IN SUCH PROVISION, THEN, IN
SUCH EVENT, SUCH VIOLATION WILL TOLL THE RUNNING OF SUCH TIME
PERIOD FROM THE DATE OF SUCH VIOLATION UNTIL SUCH VIOLATION
WILL CEASE.
f. This Section 4 is of the essence of this Agreement
and will be construed independently from all other provisions
of this Agreement. Any claim Executive may have against the
Company, whether based on a breach of this Agreement or
otherwise, will not constitute a defense to the enforcement of
this Section 4.
5. PAYMENTS AND WITHHOLDING TAXES. All payments to the
Executive or the Executive's estate or beneficiaries, as the case may be, will
be made in accordance with the Company's regular payroll and reimbursement
practices in effect from time to time and will be subject to withholding on
account of federal, state and local taxes as required by law. If any payment
hereunder is insufficient to provide the amount of such taxes required to be
withheld, the Company may withhold such taxes from any other payment due to the
Executive or such estate or beneficiaries.
6. NO MITIGATION. The Executive will have no obligation to
mitigate damages, or seek other employment or compensation in the event of
termination of employment governed by this Agreement, and, except as otherwise
expressly provided, payments due to the Executive under this Agreement will not
be offset by compensation from other sources.
7. ASSIGNABILITY; BINDING NATURE. This Agreement will be
binding on and inure to the benefit of the Company and the Executive and their
respective successors, heirs (in the case of the Executive) and assigns.
8. ENTIRE AGREEMENT. Except to the extent otherwise provided
herein, this Agreement contains the entire understanding and agreement between
the parties concerning the subject matter hereof and supersedes any prior
agreements, whether written or oral, between the parties concerning the subject
matter hereof, including, but not limited, to the letter agreement dated June 5,
1992 between the Company and the Executive.
9. AMENDMENT OR WAIVER. No provision in this Agreement may be
amended unless such amendment is agreed to in writing and signed by both the
Executive and an authorized officer of the Company. No waiver by either party of
any breach by the other party of any condition or provision contained in this
Agreement to be performed by such other party will be deemed a waiver of a
similar or dissimilar condition or provision at the same or any prior or
subsequent time. Any waiver must be in writing and signed by the Executive or an
authorized
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officer of the Company, as the case may be. The failure by either party to
enforce any provision or provisions of this Agreement will not in any way be
construed by a waiver of any such provision or provisions or as to any future
violations thereof, nor prevent that party thereafter from enforcing each and
every other provision of this Agreement. The rights granted the parties in this
Agreement are cumulative and the waiver of any single remedy will not constitute
a waiver of such party's rights to assert all other legal remedies available.
10. SEVERABILITY. If any provision or portion of this
Agreement is determined to be invalid or unenforceable for any reason, in whole
or in part, the remaining provisions of this Agreement will be unaffected
thereby and will remain in full force and effect to the fullest extent permitted
by law.
11. SURVIVORSHIP. The respective rights and obligations of the
parties hereunder will survive any termination of the Executive's employment
with the Company to the extent necessary to the intended preservation of such
rights and obligations as described in this Agreement.
12. BENEFICIARIES/REFERENCES. The Executive will be entitled
to select (and change, to the extent permitted under any applicable law) a
beneficiary or beneficiaries to receive any compensation or benefit payable
hereunder following the Executive's death by giving the Company written notice
thereof. In the event of the Executive's death or of a judicial determination of
incompetence, reference in this Agreement to the Executive will be deemed, as
appropriate, to refer to his beneficiary, estate or other legal representative.
13. NOTICE. All notices under this Agreement must be given in
writing, personally delivered, or by facsimile transmission with an appropriate
answer back received, or by mail. If by mail, notice must be mailed by
registered or certified mail, post prepaid, return receipt requested, and will
be deemed to have been given on the date following the date it is posted. Notice
to the Corporation is to be addressed to its then principal office. Notice to
the Executive is to be addressed to the Executive's address as it appears on the
records of the Company, or to such other address for either party as may be
designated pursuant to this Section 13.
14. GOVERNING LAW/JURISDICTION. This Agreement will be
governed by and construed and interpreted in accordance with the laws of Ohio,
without reference to principles of conflict of laws.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement on
the date first above written.
CURTIS INDUSTRIES, INC.
BY: /s/ Livio Borghese
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ITS:
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EXECUTIVE
/s/ A. Keith Drewett
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A. Keith Drewett
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