THE COLEMAN COMPANY, INC.
EXECUTIVE SEVERANCE POLICY
Effective Date: February 27, 1998
I. POLICY
It is the intent of this Policy to provide guidelines for the granting of
severance pay and certain other benefits to certain Participants separated
from the The Coleman Company, Inc. (the "Company") and its subsidiaries.
II. APPLICATION AND ELIGIBILITY
This Policy applies to certain terminations of employment of employees
of the Company and its subsidiaries who as of the Effective Date of
the Policy are participants in the Company's management incentive plan
or who are in the positions of country general managers/presidents and
above (the "Participants"). For purposes of this Policy, continued
employment by a Participant with any entity controlled by, controlling
or under common control with the Company (whether before or after a
Change of Control) shall be treated as employment and service with the
Company. This Policy supersedes any and all prior policies or
practices relating to severance pay for such Participants. The
acceptance of any severance pay or benefits under this Policy shall
constitute a waiver of any severance pay the Participant would have
been entitled to under any such superseded policies or practices.
III. ADMINISTRATION
A. EXCLUSIONS
Severance pay or other benefits will not be granted under any
circumstances to a Participant who leaves the Company under the
following circumstances:
1. Resignation without "Good Reason" (as defined below).
2. Retirement under the terms of the Company Retirement Plan, or any
other pension plan that might be provided by the Company (other
than a termination for "Good Reason").
3. Termination by the Company for "Cause" (as defined below).
For purposes of this Policy, with respect to any Participant, "Good
Reason" shall
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mean (i) the assignment to the Participant of any duties
inconsistent in any material respect with the Participant's
position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities
immediately before the Change of Control, or any other action
by the Company which results in a significant diminution in
such position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice
thereof given by the Participant; (ii) any material reduction
in the Participant's annual base salary, opportunity to earn
annual bonuses, or other compensation or employee benefits,
other than as a result of an isolated and inadvertent action
not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the
Participant; (iii) the Company's requiring the Participant to
relocate his or her principal place of business to a location
which is more than 25 miles from his or her previous principal
place of business; (iv) any purported termination of this
Policy otherwise than as expressly permitted by this Policy;
or (v) any failure by the Company to comply with and satisfy
Section V of this Policy. For purposes of this Policy, any
good faith determination of "Good Reason" made by the
Participant shall be conclusive.
For purposes of this Policy, with respect to any Participant,
"Cause" shall mean (i) the willful and continued failure of
the Participant to perform substantially the Participant's
duties with the Company or one of its affiliates (other than
any such failure resulting from incapacity due to physical or
mental illness), after a written demand for substantial
performance is delivered to the Participant which specifically
identifies the manner in which the Company believes that the
Participant has not substantially performed the Participant's
duties, (ii) the willful engaging by the Participant in
illegal conduct or gross misconduct which is materially and
demonstrably injurious to the Company, or (iii) the
Participant's conviction of, or plea of guilty or nolo
contendere to, a felony. For purposes of this definition, no
act or failure to act on the part of the Participant shall be
considered "willful" unless it is done, or omitted to be done,
by the Participant in bad faith or without reasonable belief
that the Participant's action or omission was in the best
interests of the Company. Any act or failure to act based
upon authority given pursuant to a resolution duly adopted by
the Board of Directors of the Company or upon the instructions
of the Chief Executive Officer or a senior officer of the
Company or based upon the advice of counsel for the Company
shall be conclusively presumed to be done, or omitted to be
done, by the Participant in good faith and in the best
interests of the Company.
Severance pay and benefits under this Policy are not granted
where following a Change of Control, the Company or the
acquiror in the Change of Control sells or otherwise disposes
of the business in which the Participant was employed, and the
buyer of the business agrees to continue the Policy as if it
was the Company and either (i) the Participant accepts
employment with the buyer of the business or (ii) the
Participant rejects an offer of employment by the buyer
involving compensation and benefits substantially equivalent,
taken as a whole, to the Participant's compensation
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and benefits with the Company, and an employment location within 25
miles from the Participant's previous principal place of business.
3. B. SEVERANCE PAY
The following schedule determines the number of months of severance
pay ("Severance Period") eligible Participants will receive if they
are terminated without Cause by the Company or terminate for Good
Reason during the 3-year period immediately following a Change of
Control, or are terminated by the Company without Cause prior to a
Change of Control, but following the execution of an agreement,
consummation of which would constitute a Change of Control, if a
Change of Control subsequently occurs (each, a "Severance
Termination").
EXECUTIVE SEVERANCE
GROUP PERIOD
--------- ---------
Group A 12 months
Group B 9 months
Group C 6 months
Group A Participants are Participants with a target incentive level at
50% of base salary and above under the Company's management incentive
plans; Group B Participants are Participants with a target incentive
level at 30% to 49% of base salary; and Group C Participants are other
participants in the Company's management incentive plans, and country
general managers, presidents and higher ranking executives.
For purposes of this Policy, a "Change of Control" of the Company
shall be deemed to occur if Ronald O. Perelman, individually, or his
estate, heirs, personal representatives or any trust created for the
benefit of his wife or children, or any corporation or other entity
which such persons control, directly or indirectly, cease to maintain
beneficial ownership (as defined in Rule 13d-3 of the Securities
Exchange Act of 1934, as amended), individually or in the aggregate,
of securities of the Company sufficient to designate a majority of the
members of the Company's Board of Directors.
Eligible Participants will receive severance pay to which they are
entitled semi-monthly (or monthly) at their base rate of pay in effect
as of the date of employment termination (without giving effect to any
reduction in base salary that otherwise constitutes Good Reason under
this Policy).
Anything in this Policy to the contrary notwithstanding, in the event
it shall be determined that any payment, award, benefit or
distribution by the Company (or any of its affiliated entities) to or
for the benefit of Participant (whether pursuant to this
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Policy or otherwise, but determined without regard to any
additional payments required under this paragraph) (a "Payment")
would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code") or any
corresponding provisions of state or local tax laws, or any
interest or penalties are incurred by the Participant with respect
to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as
the "Excise Tax"), then the Participant shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by the Participant of all taxes (including
any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest
and penalties imposed with respect thereto) and Excise Tax imposed
upon the Gross-Up Payment, the Participant retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
Notwithstanding the foregoing provisions, if it shall be
determined that the Participant is entitled to a Gross-Up Payment,
but that the portion of the Payments that would be treated as
"parachute payments" under Section 280G of the Code does not exceed
110% of the greatest amount (the "Safe Harbor Amount") that could
be paid to the Participant such that the receipt of Payments would
not give rise to any Excise Tax, then no Gross-Up Payment shall be
made to the Participant and the amounts payable under this Policy
shall be reduced so that the Payments, in the aggregate, are
reduced to the Safe Harbor Amount. For purposes of reducing the
Payments to the Safe Harbor Amount, only amounts payable under this
Policy (and no other Payments) shall be reduced. If the reduction
of the amounts payable under this Policy would not result in a
reduction of the Payments to the Safe Harbor Amount, no amounts
payable under this Policy shall be so reduced.
All determinations required to be made, including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination,
shall be made by Ernst & Young which shall provide detailed supporting
calculations both to the Company and the Participant within 15
business days of the receipt of notice from the Participant an
anticipated Payment may give rise to Excise Tax, or such earlier time
as is requested by the Company. In the event that the Accounting Firm
is serving as accountant or auditor for the individual, entity or
group effecting the Change of Control, the Company shall appoint
another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses
of the Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, shall be paid by the Company to the Participant
within five days of the event giving rise to the Excise Tax. Any
determination by the Accounting Firm shall be binding upon the Company
and the Participant.
C. CONTINUATION OF MEDICAL/DENTAL BENEFITS
If a Participant has a Severance Termination, the Participant will be
permitted to continue participation in the Company's group medical
and/or dental benefit plans under COBRA at the contribution level in
effect for active Participants until the end
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of the Severance Period (or if longer, the maximum required period
for continuation coverage under applicable federal law, generally
18 months); PROVIDED, that the Company will continue to pay the
portion of the premiums it was paying prior to the Change of
Control during the Severance Period. However, the Participant will
cease to be eligible for these benefits when the Participant
becomes covered by medical or dental plans of another employer or
becomes eligible for Medicare. Continued participation in the
Company's group plans will be governed by the terms and conditions
of the plans as in effect when employment terminates, provided that
if such plans are amended as to the group of Participants in which
the Participant was included at the time of termination, the newer
provisions shall apply.
In order to remain eligible for continued medical or dental
benefits during the Severance Period, the Participant must
make timely premium payments in the same amount paid by then
current Participants, which amounts will be deducted from the
Participant's severance pay, and must submit such evidence of
non-coverage as the Company may reasonably require. If the
Participant is entitled and elects under applicable federal
law to continue such benefits under COBRA after the Severance
Period, the Participant must make timely COBRA premium
payments as required.
D. PRO RATA ANNUAL BONUS
In the event a Participant has a Severance Termination under
this Policy prior to December 31, 1998, the Participant shall
be paid a pro rata bonus payment under the Company management
incentive plan, upon the earlier of February 28, 1999 or the
date on which Company employees are paid bonuses for 1998
under such plan, equal to the product of (x) the bonus the
Participant would have earned under the management incentive
plan based upon performance had the Participant remained
employed through the plan year, and (y) a fraction, the
numerator of which is the number of days in such year through
the date of termination, and the denominator of which is 365.
E. PENSION CREDIT
In the event a Participant has a Severance Termination under
this Policy, the Company shall pay such Participant, within
fifteen days following the Participant's date of termination,
an amount equal to the excess of (a) the aggregate benefit
under the Company's qualified defined benefit retirement plans
(collectively, the "Retirement Plan") and any excess or
supplemental defined benefit retirement plans in which the
Participant participates (collectively, the "SERP") which the
Participant would have accrued (whether or not vested) if the
Participant's employment had continued for the Separation
Period, over (b) the actual vested benefit, if any, of the
Participant under the Retirement Plan and the SERP, determined
as of the date of termination (with the foregoing amounts to
be computed on an actuarial present value basis, using
actuarial assumptions no less favorable to the Participant
than the most favorable of those in effect for purposes of
computing benefit entitlements under the Retirement Plan and
the SERP at any time from the day before the Effective Date
through the date of
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termination).
F. OTHER EMPLOYEE BENEFITS
The provisions of other Participant benefit and/or
compensation programs (other than severance policies and
practices), including, but not limited to, vacation pay and
the Company's management incentive plan, with respect to
benefits available upon termination of employment will apply;
provided, that upon a Severance Termination the Participant
shall be paid out his or her accrued vacation. This Policy is
not intended to describe the provisions or administrative
practices of any other Participant benefit and/or compensation
program, policy or plan. Any benefits that may be available
under any other such program, policy or plan must be
determined solely in accordance with the terms and
administrative provisions of such program, policy or plan.
G. EMPLOYMENT CONTRACTS OR OTHER WRITTEN AGREEMENTS IN EFFECT
If on the date of termination an employment contract or other
written agreement between an eligible Participant and the
Company is in effect, then unless otherwise provided by the
terms of such written agreement the Participant will be
permitted to choose between (i) the severance pay and benefits
provided in such employment contract or agreement, or (ii) the
severance pay and benefits payable in accordance with this
Policy.
H. NO MITIGATION
The obligations of the Company to pay the severance benefits
under this Policy shall be absolute and unconditional and
shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or
other right which the Company or any of its subsidiaries may
have against any Participant. In no event shall a Participant
be obligated to seek other employment or take any other action
by way of mitigation of the amounts payable to a Participant
under any of the provisions of this Plan, nor shall the amount
of any payment hereunder be reduced by any compensation earned
by a Participant as a result of employment by another
employer, except as specifically provided in this Policy. The
Company agrees to pay as incurred, to the full extent
permitted by law, all legal fees and expenses which a
Participant may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company, the
Participant or others as to the validity or enforceability of,
or liability or entitlement under, any provision of this
Policy.
IV. AMENDMENT OR TERMINATION OF POLICY
The Company reserves the right to amend, modify or terminate this
Policy or any portion of it at any time, and for any reason, by action
of the Company's Board of Directors (or officers expressly authorized
by the Board); provided, that this Policy may not be terminated or
amended in any manner that could adversely affect the rights of any
Participant (i) following
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a Change of Control, (ii) at the request of a third party who has
taken steps reasonably calculated to effect a Change of Control, or
(iii) otherwise in connection with or in anticipation of a Change of
Control.
V. SUCCESSOR TO COMPANY
This Policy shall bind any successor of the Company, its assets or its
businesses (whether direct or indirect, by purchase, merger,
consolidation or otherwise), in the same manner and to the same extent
that the Company would be obligated under this Policy if no succession
had taken place.
In the case of any transaction in which a successor would not by the
foregoing provision or by operation of law be bound by this Policy,
the Company shall require such successor expressly and unconditionally
to assume and agree to perform the Company's obligations under this
Policy, in the same manner and to the same extent that the Company
would be required to perform if no such succession had taken place.
The term "Company," as used in this Policy, shall mean the Company as
hereinbefore defined and any successor or assignee to the business or
assets which by reason hereof becomes bound by this Policy.
VI. OTHER IMPORTANT INFORMATION
A. SOURCE OF PLAN BENEFITS
This Plan is intended to be an unfunded plan maintained
primarily for the purpose of providing deferred compensation
for a select group of management or highly compensated
employees, within the meaning of Section 401 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
All payments under this Policy will be made from the Company's
general assets. Benefits under this Policy are not insured
under Title IV of ERISA.
B. PROCEDURE FOR CLAIMING BENEFITS
Severance benefits are awarded in appropriate circumstances
without application. However, if a Participant believes that
he or she is entitled to severance benefits under this Policy
and such benefits are not awarded, the Participant must
present a written claim for such benefits to the Company as
the "Plan Administrator". If the Plan Administrator
determines that the claim should be denied, the Plan
Administrator must provide the Participant with notice of the
denial, written in clear and precise terms and giving specific
reasons for the denial within 30 days. Within 90 days after
the Participant is notified of the denial of his or her
application, the Participant also has the right to appeal to
the Plan Administrator for a full and fair review of any such
denial. The Participant also has the right to review any
relevant documents and to submit issues and comments in
writing to the Plan Administrator. If the Participant needs
more time, the Plan Administrator may allow the Participant
more than 90 days to file a request for review. The Plan
Administrator shall conduct a hearing and/or
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take such other steps as the Plan Administrator deems
appropriate for a full and fair review of the appeal from the
denial of a claim. The Plan Administrator will issue, within
60 days after the request for review is received, a written
decision which shall include specific reasons for the decision
and references to the pertinent plan provisions on which the
decision is based. This decision shall be written in a manner
calculated to be understood by the Participant. Nothing
herein shall prevent the Participant from contesting any
decision by the Plan Administrator in a court of appropriate
jurisdiction.
C. GOVERNING LAW
The validity, interpretation, construction and performance of
this Policy shall be governed by the laws of the State of
Delaware, without reference to principles of conflicts of law,
except to the extent pre-empted by federal law.
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