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Exhibit
10.16
CHANGE IN CONTROL
SEVERANCE AGREEMENT
This Change in Control
Severance Agreement (the “Agreement”) is entered into
as of February 5, 2007 (the “Effective Date”), by
and between Theodore K. Zampetis (the “Executive”) and
Shiloh Industries, Inc., a Delaware corporation (the
“Company”).
W I T N E S S E T H
:
WHEREAS, the Board of
Directors of the Company (the “Board”) has determined
that it is in the best interest of the Company and its stockholders
to assure that the Company will have the continued dedication of
the Executive notwithstanding the possibility or occurrence of a
Change in Control (as defined below) of the Company;
WHEREAS, the Board
believes that it is desirable to diminish the inevitable
distraction of the Executive by virtue of the personal
uncertainties and risks created by a potential and possible Change
in Control and to encourage the Executive’s full attention
and dedication to the Company currently and in the event of any
Change in Control; and
WHEREAS, the Board
also believes that it is desirable to provide the Executive with
compensation and benefits in the event that there is a Change in
Control under the circumstances described in this
Agreement;
NOW, THEREFORE, in
consideration of the premises and the respective agreements
contained herein and other good and valuable consideration, the
receipt of which is mutually acknowledged, the Executive and the
Company hereby agree as follows:
1. Definitions . The
following definitions shall apply for all purposes under this
Agreement:
(a) Change in Control
. “Change in Control” means the occurrence of any of
the following events commencing on the Effective Date hereof
(“Change in Control Period”):
(i) The acquisition, directly
or indirectly, in one or more transactions, by any individual,
person or group of persons, within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”) (a
“Person”), of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act), individually or
in the aggregate, of thirty-five percent (35%) or more of
either the then outstanding shares of common stock of the Company
(the “Outstanding
Company Common Stock”)
or the then combined voting power of the Company’s
outstanding voting securities entitled to vote generally in the
election of directors (the “Outstanding Company Voting
Securities”); provided, however, that for purposes of this
Section 1(a)(i) the following acquisitions shall not
constitute, or be deemed to cause a Change in Control of the
Company: (A) any acquisition directly or indirectly,
individually or in the aggregate by any one or more of the
following entities: MTD Products Inc, MTD Holdings Inc, any
subsidiaries or related parties thereof or any employee benefit
plan sponsored thereby (collectively, the “MTD
Entities” or individually a “MTD Entity”);
(B) any increase in such percentage ownership of such Person
to thirty-five percent (35%) or more resulting solely from any
acquisition of shares directly by the Company; (C) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation
controlled by the Company; or (D) any acquisition by any
corporation pursuant to a transaction which complies with clauses
(A), (B) and (C) of Section 1(a)(iii)
below;
(ii) A change in the
composition of the Board of the Company as a result of which fewer
than a majority of the directors are Incumbent Directors.
“Incumbent Directors” shall mean directors who either:
(A) are directors of the Company as of the Effective Date
hereof; (B) are elected, or nominated for election, to the
Board of the Company with the affirmative votes of at least a
majority of the directors of the Company who are Incumbent
Directors described in (A) above at the time of such election
or nomination; or (C) are elected, or nominated for election,
to the Board of the Company with the affirmative votes of at least
a majority of the directors of the Company who are Incumbent
Directors described in (B) above at the time of such election
or nomination. Notwithstanding the foregoing, “Incumbent
Directors” shall not include an individual whose election or
nomination is in connection with an actual or threatened proxy
contest relating to the election of directors to the
Company;
(iii) Consummation of a
reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the
Company (a “Business Combination”), in each case,
unless, following such Business Combination, (A) the MTD
Entities or a MTD Entity, individually or in the aggregate, or all
or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior
to such Business Combination, beneficially own, directly or
indirectly, more than fifty percent (50%) of, respectively,
the then outstanding shares of common stock and the combined voting
power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including a
corporation which as a result of such transaction owns the Company
or all or substantially all of the Company’s assets either
directly or through one or more subsidiaries) in
increased or substantially
the same proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be,
(B) no Person (excluding a MTD Entity or MTD Entities,
individually or in the aggregate, any corporation resulting from
such Business Combination or any employee benefit plan (or related
trust) sponsored or maintained by the Company or such corporation
resulting from such Business Combination) beneficially owns,
directly or indirectly, individually or in the aggregate, fifty
percent (50%) or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then
outstanding voting securities of such corporation except to the
extent that such ownership existed prior to the Business
Combination, and (C) at least a majority of the members of the
Board of the corporation resulting from such Business Combination
were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for
such Business Combination; or
(iv) Approval by the
stockholders of the Company of the complete liquidation or
dissolution of the Company.
(b) Just Cause .
“Just Cause” shall mean any of the following committed
by the Executive (or omitted to be done by the Executive) that
occur on or after the Effective Date:
(i) Material breach of this
Agreement or of the Executive’s Employment Agreement with the
Company, if any, then in effect between the Executive and the
Company;
(ii) A conviction of or plea
of “guilty” or “no contest” to a felony
under the laws of the United States or any state
thereof;
(iii) Any material violation
or breach of the Company’s Code of Business Conduct and
Ethics, as determined by the Board; or
(iv) Any serious misconduct
or negligence in the course of the Executive’s employment, as
determined by the Board.
(c) Affiliate and
Control . For purposes of this Agreement,
“Affiliate” and “control” shall have the
respective meanings assigned to such terms in Rule 12b-2
promulgated under the Exchange Act.
2. Change in Control
Payment and Other Benefits .
(a) Eligibility for Change
in Control Payment . The Executive shall be entitled to receive
the change in control payment (the “Payment”) and
benefits set forth in this Section 2 from the Company if a
Change in Control occurs.
(b) Termination Prior to a
Change in Control . Anything in this Agreement to the contrary
notwithstanding, if a Change in Control occurs and not more than
180 days prior to the date on which the Change in Control occurs,
the Executive’s employment with the Company is terminated by
the Company, such termination of employment will be deemed to be a
termination of employment after a Change in Control for purposes of
this Agreement if the Executive has reasonably demonstrated that
such termination of employment (i) was at the request of a
third party who has taken steps reasonably calculated to effect a
Change in Control, or (ii) otherwise arose in connection with
or in anticipation of a Change in Control.
(c) Change in Control
Payment . For all purposes under this Agreement, upon the
Executive becoming eligible for the Payment as provided above, the
Company shall, within five business days after the Change in
Control (the “Payment Date”), pay to the Executive
$1,900,000.00 (one million, nine hundred thousand dollars) in cash;
provided, however, if the Executive’s employment is
terminated within two days of the Change in Control, the Payment
Date shall be five days after the expiration of any revocation
period relating to the release of claims and covenant not to sue
described in Section 2(h) below.
(d) Accrued
Compensation . In addition to the Payment provided above, the
Executive will also receive on the Payment Date, a lump cash
payment for:
(i) Any accrued and unpaid
salary through the payment Date and/or bonuses earned for any
completed performance period but not yet paid;
(ii) A pro-rated portion of
the Executive’s target bonus for the fiscal year in which the
Change in Control occurred; and
(iii) Any earned, unused
vacation.
(e) Other Compensation
Programs . Neither a Change in Control nor the termination of
employment as described in this Section 2(b) will not affect
any rights that the Executive may have pursuant to any agreement,
policy, plan, program or arrangement of the Company providing for
benefits, which rights will be governed by the terms thereof.
Notwithstanding any provision to the contrary in any applicable
plan, program or agreement, upon the occurrence of a Change in
Control, all equity
incentive awards held by the
Executive will become fully vested and all stock options held by
the Executive will become fully exercisable.
(f) Health Coverage .
If the Executive is entitled to the Payment under
Section 2(a), the Company shall either (i) maintain the
Executives health care coverage at a level of benefit equal to or
better than the level of benefit enjoyed by the Executive
immediately prior to the Change in Control, or (ii) if the
Executive’s employment with the Company is terminated for any
reason during the 18-month period following a Change in Control,
reimburse the Executive for the full cost of any group health
continuation coverage that the Company is otherwise required to
offer under the Consolidated Omnibus Budget Reconciliation Act of
1986 (“COBRA”) until the earlier of the date that
(A) the Executive becomes covered by comparable health
coverage offered by another employer, or (B) is eighteen
months (18) months after the Payment Date.
In addition, the Company
shall pay to the Executive, in a lump sum on the Payment Date, an
amount equal to the difference between (A) the Company’s
reasonable determination of present value of the continuation of
the benefits described in this Section 2(f) for 24 months and
(B) the Company’s reasonable determination of the
present value of the benefits the Executive will receive under
Section 2(f)(ii) above.
(g) Mitigation .
Except as may be expressly provided elsewhere in this Agreement,
the Executive shall not be required to mitigate the amount of any
payment or benefit contemplated by this Section 2 (whether by
seeking new employment or in any other manner). No such payment
shall be reduced by earnings that the Executive may receive from
any other source.
(h) Conditions . All
payments and benefits provided under this Section 2 are
conditioned on the Executive’s continuing compliance with
this Agreement (including, but not limited to Section 4
hereof) and the Executive’s Employment Agreement if any, and,
if the Executive’s employment is terminate within two days of
a Change in Control, the Executive’s execution (and
effectiveness) of a release of claims and covenant not to sue
substantially in the form provided in Exhibit A upon termination of
employment.
(i) Special Provisions
under Section 409A of the Code . Notwithstanding anything
to the contrary contained herein, if any payment hereunder would
occur at a time that does not qualify the payment as a short-term
deferral under Section 409A of the Internal Revenue Code of
1986, as amended (the “Code”), the Executive will
receive such payment upon the earlier of (i) six months
following the Executive’s “separation from
service” with the Company (as such phrase is defined in
Section 409A of the Code) or (ii) the Executive’s
death.
3. Tax Effect of
Payments .
(a) Excise Taxes . If
it is determined that any payment or distribution of any type to or
for the Executive’s benefit made by the Company, by any of
its affiliates, by any person who acquires ownership or effective
control or ownership of a substantial portion of the
Company’s assets (within the meaning of Section 280G of
the Internal Revenue Code of 1986, as amended, and the regulations
thereunder (the “Code”)) or by any affiliate of such
person, whether paid or payable or distributed or distributable
pursuant to the terms of an employment agreement or otherwise (the
“Total Payments”), would be subject to the excise tax
imposed by Section 4999 of the Code or any interest or
penalties with respect to such excise tax (such excise tax,
together with any such interest or penalties, are collectively
referred to as the “Excise Tax”), then the Executive
shall be entitled to receive an additional payment (an
“Excise Tax Restoration Payment”) in an amount that
shall fund the payment by the Executive of any Excise Tax on the
Total Payments as well as all income taxes imposed on the excise
Tax Restoration Payment, any Excise Tax imposed on the Excise Tax
Restoration Payment and any interest or penalties imposed with
respect to taxes on the Excise Tax Restoration Payment or any
Excise Tax. The Excise Tax Restoration Payment shall be calculated
applying the then highest marginal tax rates.
(b) Determination by
Auditors . All mathematical determinations and all
determinations of whether any of the Total Payments are
“parachute payments” (within the meaning of
Section 280G of the Code) that are required to be made under
this Section 3, shall be made by the independent auditors
retained by the Company most recently prior to the Change in
Control (the “Auditors”), who shall provide their
determination (the “Determination”), together with
detailed supporting calculations regarding the amount of any
relevant matters, both to the Company and to the Executive within
thirty (30) days of the Payment Date, if applicable, or such
earlier time as is requested by the Company or by the Executive. If
the Auditors determine that no Excise Tax is payable and that no
Excise Tax restoration payment is required, the Auditors shall
furnish the Executive with a written statement that such Auditors
have concluded that no Excise Tax is payable (including the reasons
therefore) and that the Executive has substantial authority not to
report any Excise Tax on the Executive’s federal income tax
return. Any determination by the Auditors shall be binding upon the
Company and the Executive, absent manifest error. The Company shall
pay the fees and costs of the Auditors.
4. Non-Competition
Agreement . During the course of the Executive’s
employment with the Company, the Executive has gained access to or
knowledge of, or has worked on the development or creation of,
confidential and proprietary information, including:
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