Exhibit 10.1
Change-in-Control
Severance Plan for Senior Executives
X-Rite, Incorporated
April 1, 2007
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Contents
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Article 1. Establishment and Term of the Plan
1
Article 2. Definitions
2
Article 3. Severance Benefits
5
Article 4. Noncompetition and Confidentiality
8
Article 5. Excise Taxes
10
Article 6. Contractual Rights and Legal Remedies
11
Article 7. Successors
11
Article 8. Miscellaneous
12
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X-Rite, Incorporated
Change-in-Control Severance Plan
Article 1. Establishment and Term of the Plan
1.1
Establishment of
the Plan. X-Rite, Incorporated, a Michigan
corporation (the "Company"), hereby establishes a severance plan to
be known as
the "X-Rite, Incorporated Change-in-Control Severance Plan for
Senior
Executives" (the "Plan"). The Plan provides severance benefits to
certain
employees (as identified in Appendix A) of the Company ("Executive"
or
"Executives") upon certain terminations of employment from the
Company.
The
Company considers the establishment and maintenance of a sound
and
vital management to be essential to protecting and enhancing the
best interests
of the Company and its shareholders. In this connection, the
Company recognizes
that, as is the case with many publicly held corporations, the
possibility of a
change in control may arise 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 has determined that appropriate steps should
be
taken to reinforce and encourage the continued attention and
dedication of
members of the Company's management to their assigned duties
without distraction
in circumstances arising from the possibility of a Change in
Control of the
Company.
1.2
Plan Term. This
Plan will commence on April 1, 2007 (the "Effective
Date") and shall continue in effect for two full calendar years
(through April
1, 2009) (the "Initial Term").
The
Initial Term of this Plan automatically shall be extended for
two
additional years at the end of the Initial Term, and then again
after each
successive two-year period thereafter (each such two-year period
following the
Initial Term a "Successive Period"). However, the Company may
terminate this
Plan entirely or terminate any individual Executive's participation
in the Plan
at the end of the Initial Term, or at the end of any Successive
Period
thereafter, by giving all Executives (or select Executives if
terminating select
Executives' participation in the Plan) written notice of intent not
to renew,
delivered at least six (6) months prior to the end of such Initial
Term or
Successive Period. If such notice is properly delivered by the
Company, this
Plan or the select Executives' participation in this Plan, as the
case may be,
along with all corresponding rights, duties, and covenants shall
automatically
expire at the end of the Initial Term or the Successive Period then
in progress.
Notwithstanding the foregoing, except in the event of an
Anticipatory
Termination (as defined in Section 3.2), each Executive's
participation in the
Plan shall terminate automatically upon any termination of his or
her employment
with the Company occurring prior to a Change in Control of the
Company.
1.3
Change-in-Control Renewal. In the event that a Change in Control
of
the Company occurs during the Initial Term or any Successive
Period, upon the
effective date of such Change in Control, the term of this Plan
shall
automatically and irrevocably be renewed for a period of
twenty-four (24) full
calendar months from the effective date of such Change in Control.
This Plan
shall thereafter automatically terminate following the twenty-four
(24) month
Change in Control renewal period. Further, this Plan shall be
assigned to, and
shall be assumed by the purchaser or successor of the Company in
such Change in
Control, as further provided in Article 7 herein.
Article 2. Definitions
Wherever
used in this Plan, the following terms shall have the meanings
set forth below and, when the meaning is intended, the initial
letter of the
word is capitalized:
(a)
"Plan" means this X-Rite, Incorporated Change-in-Control
Severance
Plan for Senior Executives.
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(b)
"Base Salary" means, at any time, the then regular annual rate
of
pay which the Executive is receiving as annual salary,
excluding
amounts: (i) received under short-term or long-term incentive
or
other bonus plans, regardless of whether or not the amounts are
deferred, or (ii) designated by the Company as payment toward
reimbursement of expenses.
(c)
"Beneficial Owner" or "Beneficial Ownership" shall have the
meaning ascribed to such term in Rule 13d-3 of the General
Rules
and Regulations under the Exchange Act.
(d)
"Board" or "Board of Directors" means the Board of Directors of
the Company.
(e)
"Cause" shall mean the occurrence after a Change in Control of
the
Company of any one or more of the following:
(i) The
Executive's willful failure to substantially perform
his or her duties with the Company (other than any such
failure resulting from the Executive's Disability), after
a written demand for substantial performance is delivered
to the Executive that specifically identifies the manner
in which the Committee believes that the Executive has not
substantially performed his or her duties, and the
Executive has failed to remedy the situation within thirty
(30) business days of such written notice from the
Company;
(ii) Gross
negligence in the performance of the Executive's
duties which results in material financial harm to the
Company;
(iii) The Executive's
conviction of, or plea of guilty or nolo
contendere, to any felony or any other crime involving the
personal enrichment of the Executive at the expense of the
Company;
(iv) The
Executive's willful engagement in conduct that is
demonstrably and materially injurious to the Company,
monetarily or otherwise; or
(v) The
Executive's willful violation of any of the covenants
contained in Article 4.
(f)
"Change in Control" shall occur if any of the following events
occur:
(a) The
acquisition by any individual, entity, or group (other
than the Company, any of its subsidiaries or any employee
benefit plan maintained by the Company or any of its
subsidiaries) of Beneficial Ownership of thirty percent
(30%) or more of the combined voting power of the
Company's then outstanding securities with respect to the
election of Directors of the Company;
(b) The
consummation of a reorganization, merger, or
consolidation of the Company or sale or other disposition
of all or substantially all of the assets of the Company
(a "Corporate Transaction"); excluding, however, a
Corporate Transaction pursuant to which all or
substantially all of the individuals or entities who are
the
Beneficial Owners of the Company immediately prior to
the consummation of the Corporate Transaction will
beneficially own, directly or indirectly, more than sixty
percent (60%) of the combined voting power of the
outstanding voting securities of the entity resulting from
the Corporate Transaction; or
(c) The
individuals who, as of the Effective Date, constitute
the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of such Board; provided,
that any individual who becomes a Director of the Company
subsequent to the Effective Date, whose election, or
nomination for election by the Company's shareholders, was
approved by the vote of at least a majority of the
Directors then comprising the Incumbent Board shall be
deemed a member of the Incumbent Board; and provided
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further, that any individual who was initially elected as
a Director of the Company as a result of an actual or
threatened election contest, as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act, or any other actual or threatened
solicitation of proxies or consents by or on behalf of any
Person other than the Board shall not be deemed a member
of the Incumbent Board.
(g)
"Code" means the U.S. Internal Revenue Code of 1986, as amended
from time to time.
(h)
"Committee" means the Compensation Committee of the Board of
Directors of the Company, or, if no Compensation Committee
exists,
then the full Board of Directors of the Company, or a committee
of
Board members, as appointed by the full Board to administer
this
Plan.
(i)
"Company" means X-Rite, Incorporated, a Michigan corporation,
and
any successor thereto as provided in Article 7 herein.
(j)
"Disability" or "Disabled" shall have the meaning ascribed to
such
term in the Company's governing long-term disability plan, or
if
no such plan exists, at the discretion of the Board.
(k)
"Effective Date of Termination" means the date on which a
Qualifying Termination occurs, as provided in Section 3.2
herein,
which triggers the payment of Severance Benefits hereunder.
(l)
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor act thereto.
(m)
"Good Reason" means, without the Executive's express written
consent, the occurrence after a Change in Control of the
Company
of any one (1) or more of the following:
(i) A
material reduction of the Executive's authorities,
duties, or responsibilities as an executive and/or officer
of the Company from those in effect as of ninety (90)
calendar days prior to the Change in Control, other than
an insubstantial and inadvertent reduction that is
remedied by the Company promptly after receipt of notice
thereof given by the Executive; provided, however, that
any reduction in the foregoing resulting merely from the
acquisition of the Company and its existence as a
subsidiary or division of another entity such as a change
in reporting relationship or title shall not be sufficient
to constitute Good Reason;
(ii) The
Company's requiring the Executive to be based at a
location in excess of fifty (50) miles from the location
of the Executive's principal job location or office
immediately prior to the Change in Control; except for
required travel on the Company's business to an extent
substantially consistent with the Executive's then present
business travel obligations;
(iii) A reduction by
the Company of the Executive's Base Salary
in effect on the Effective Date hereof, or as the same
shall be increased from time to time, in excess of ten
percent (10%); or
(iv) The failure
of the Company to continue in effect, or the
failure to continue the Executive's participation on
substantially the same basis in, any of the Company's
short- and long-term incentive compensation plans, or
employee benefit or retirement plans, policies, practices,
or other compensation arrangements in which the Executive
participates prior to the Change in Control of the Company
unless such failure to continue the plan, policy,
practice, or arrangement pertains to all plan participants
generally; provided, however, that a decrease in the
Executive's Target Annual Total Compensation in excess of
ten percent (10%) shall constitute Good Reason.
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Unless the Executive becomes Disabled, the Executive's right to
terminate employment for Good Reason shall not be affected by
the
Executive's incapacity due to physical or mental illness. The
Executive's continued employment shall not constitute consent
to,
or a waiver of rights with respect to, any circumstance
constituting Good Reason herein.
(n)
"Notice of Termination" shall mean a written notice which shall
indicate the specific termination provision in this Plan relied
upon, and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated.
(o)
"Person" shall have the meaning ascribed to such term in
Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and
14(d)
thereof, including a "group" as defined in Section 13(d).
(p)
"Qualifying Termination" means any of the events described in
Section 3.2 herein, the occurrence of which triggers the
payment
of Severance Benefits hereunder.
(q)
"Severance Benefits" mean the severance benefits as provided in
Section 3.3(a) through 3.3(f) herein.
(r)
"Target Annual Total Compensation" shall mean the sum of all
elements of the Executive's pay and benefits including the
Executive's Base Salary, target annual short-term incentives,
target annualized long-term incentive grants, employee benefits
and retirement plans. For purposes of measuring target
annualized
long-term incentive grant, the awards shall be measured on
their
date of grant using reasonable assumptions, including, but not
limited to, fair value principles such as those identified in
Statement of Financial Accounting Standards No. 123,
Share-Based
Payment; the value of such awards shall be annualized over the
frequency of their grant. In the case of employee benefit and
retirement plans, the annual value of such plans shall be
measured using reasonable assumptions (including reasonable
actuarial assumptions as necessary).
Article 3. Severance Benefits
3.1
Right to
Severance Benefits. The Executive shall be entitled to
receive from the Company Severance Benefits as described in Section
3.3 herein,
if during the term of this Plan there has been a Change in Control
of the
Company and if, within twenty-four (24) calendar months immediately
thereafter,
the Executive's employment with the Company shall end for any
reason specified
in Section 3.2 herein as being a Qualifying Termination. The
Severance Benefits
described in Section 3.3(a), 3.3(b), 3.3(c), and 3.3(d), (and
Section 3.3(f) if
applicable) herein shall be paid in cash to the Executive in a
single lump sum
as soon as practicable following the Qualifying Termination, but,
in no event
later than thirty (30) calendar days from such date; provided,
however, that if
it is determined that Section 8.7 of this plan is applicable, the
timing of such
payments shall be as provided in Section 8.7.
3.2
Qualifying
Termination. The occurrence of any one or more of the
following events (a "Qualifying Termination") within twenty-four
(24) calendar
months immediately following a Change in Control of the Company
shall trigger
the payment of Severance Benefits to the Executive, as such
benefits are
described under Section 3.3 herein:
(a) The Company's termination of the Executive's employment
without Cause; or
(b) The Executive's termination of employment for Good Reason.
A
Qualifying Termination shall also include a termination by the
Company
within six (6) months prior to a Change in Control if such
termination occurs at
the request of any party involved in, or otherwise in connection
with or in
anticipation of, the Change in Control transaction (an
"Anticipatory
Termination"); in such event, the date of the Qualifying
Termination shall be
deemed to be the date of the Change in Control. A Qualifying
Termination shall
not include a termination of the Executive's employment within
twenty-four (24)
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calendar months after a Change in Control by reason of death,
Disability, the
Executive's voluntary termination without Good Reason, or the
Company's
termination of the Executive's employment for Cause.
3.3
Description of
Severance Benefits. In the event that the Executive
becomes entitled to receive Severance Benefits as provided in
Sections 3.1 and
3.2 herein, the Company shall, in lieu of and to the exclusion of
any severance
pay and benefits payable by the Company under the Executive's
Employment
Agreement with the Company, pay to the Executive and provide the
Executive with
the following:
(a) A
lump-sum cash amount equal to the Executive's unpaid Base
Salary, accrued vacation pay, unreimbursed business
expenses, and all
other items earned by and owed to the
Executive through and including the Effective Date of
Termination. Such payment shall constitute full
satisfaction for these amounts owed to the Executive.
(b) Any
amount payable to the Executive under the annual
short-term incentive plan then in effect in respect of the
most recently completed fiscal year, to the extent not
theretofore paid. Such payment shall constitute fu
