Exhibit 10.3
FORM OF
AMENDED AND RESTATED EXECUTIVE
RETENTION AGREEMENT
THIS AMENDED AND RESTATED EXECUTIVE
RETENTION AGREEMENT by and between KĀDANT INC., a Delaware
corporation (the “Company”), and [Name] (the
“Executive”) is made as of December 9, 2008 (the
“Effective Date”).
WHEREAS, the Company and the
Executive are parties to that certain Executive Retention Agreement
dated as of August 8, 2001, as amended and restated effective
as of December 5, 2006 (the “Original
Agreement”);
WHEREAS, the Board of Directors of
the Company (the “Board”) recognizes that, as is the
case with many publicly-held corporations, the possibility of a
change in control of the Company exists and that such possibility,
and the uncertainty and questions which it may raise among key
personnel, may result in the departure or distraction of key
personnel to the detriment of the Company and its
stockholders;
WHEREAS, the Board has determined
that appropriate steps should be taken to reinforce and encourage
the continued employment and dedication of the Company’s key
personnel without distraction from the possibility of a change in
control of the Company and related events and circumstances;
and
WHEREAS, the Board and the Executive
intend that the Original Agreement comply with the provisions of
Section 409A of the Internal Revenue Code (the
“Code”) and for that purpose desire to amend and
restate the Original Agreement; and
NOW, THEREFORE, as an inducement for
and in consideration of the Executive remaining in the
Company’s employ, the Executive and the Company agree as
follows:
1. Key Definitions
.
As used herein, the following terms
shall have the following respective meanings:
1.1 “ Change in Control
” means an event or occurrence set forth in any one or more
of subsections (a) through (d) below (including an event
or occurrence that constitutes a Change in Control under one of
such subsections but is specifically exempted from another such
subsection):
(a) the acquisition by an
individual, entity or group (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 of any capital stock
of the Company if, after such acquisition, such Person beneficially
owns (within the
meaning of Rule 13d-3 promulgated under the
Exchange Act) 20% or more of either (i) the then-outstanding
shares of common stock of the Company (the “Outstanding
Company Common Stock”) or (ii) the combined voting power
of the then-outstanding securities of the Company entitled to vote
generally in the election of directors (the “Outstanding
Company Voting Securities”); provided , however
, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change in Control: (i) any
acquisition by the Company, (ii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by
the Company or any corporation controlled by the Company, or
(iii) any acquisition by any corporation pursuant to a
transaction which complies with clauses (i) and (ii) of
subsection (c) of this Section 1.1; or
(b) such time as the Continuing
Directors (as defined below) do not constitute a majority of the
Board (or, if applicable, the Board of Directors of a successor
corporation to the Company), where the term “Continuing
Director” means at any date a member of the Board
(i) who was a member of the Board on the date of the execution
of this Agreement or (ii) who was nominated or elected
subsequent to such date by at least a majority of the directors who
were Continuing Directors at the time of such nomination or
election or whose election to the Board was recommended or endorsed
by at least a majority of the directors who were Continuing
Directors at the time of such nomination or election;
provided , however , that there shall be excluded
from this clause (ii) any individual whose initial assumption
of office occurred 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
(c) the consummation of a merger,
consolidation, reorganization, recapitalization or statutory share
exchange involving the Company or a sale or other disposition of
all or substantially all of the assets of the Company in one or a
series of transactions (a “Business Combination”),
unless, immediately following such Business Combination, each of
the following two conditions is satisfied: (i) all or
substantially all of the individuals and entities who were the
beneficial owners of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more
than 80% of the then-outstanding shares of common stock and the
combined voting power of the then-outstanding securities entitled
to vote generally in the election of directors, respectively, of
the resulting or acquiring corporation in such Business Combination
(which shall include, without limitation, a corporation which as a
result of such transaction owns the Company or substantially all of
the Company’s assets either directly or through one or more
subsidiaries) (such resulting or acquiring corporation is referred
to herein as the “Acquiring Corporation”) in
substantially the same proportions as their ownership, immediately
prior to such Business Combination, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities,
respectively; and (ii) no Person (excluding the Acquiring
Corporation or any employee benefit plan (or related trust)
maintained or sponsored by the Company or by the Acquiring
Corporation) beneficially owns, directly or indirectly, 20% or more
of the then outstanding shares of common stock of the Acquiring
Corporation, or of the combined voting power of the
then-outstanding securities of such corporation entitled to vote
generally in the election of directors; or
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(d) approval by the stockholders of
the Company of a complete liquidation or dissolution of the
Company.
1.2 “ Change in Control
Date ” means the first date during the Term (as defined
in Section 2) on which a Change in Control occurs. Anything in
this Agreement to the contrary notwithstanding, if (a) a
Change in Control occurs, (b) the Executive’s employment
with the Company is terminated prior to the date on which the
Change in Control occurs, and (c) it is reasonably
demonstrated by the Executive 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, then for all purposes of this Agreement the
“Change in Control Date” shall mean the date
immediately prior to the date of such termination of
employment.
1.3 “ Cause ”
means the Executive’s willful engagement in illegal conduct
or gross misconduct after the Change in Control Date which is
materially and demonstrably injurious to the Company. For purposes
of this Section 1.3, no act or failure to act by the Executive
shall be considered “willful” unless it is done, or
omitted to be done, in bad faith and without reasonable belief that
the Executive’s action or omission was in the best interests
of the Company.
1.4 “ Good Reason
” means the occurrence, without the Executive’s written
consent, of any of the events or circumstances set forth in clauses
(a) through (g) below on or after the Change in Control
Date. Notwithstanding the occurrence of any such event or
circumstance, such occurrence shall not be deemed to constitute
Good Reason if, prior to the Date of Termination specified in the
Notice of Termination (each as defined in Section 3.2(a))
given by the Executive in respect thereof, such event or
circumstance has been fully corrected within 30 days after notice
thereof and the Executive has been reasonably compensated for any
losses or damages resulting therefrom.
(a) the assignment to the Executive
of duties inconsistent in any material respect with the
Executive’s position (including status, offices, titles and
reporting requirements, including but not limited to a change in
any of the foregoing that results in the Executive no longer being
an officer of a public company), authority or responsibilities in
effect immediately prior to the earliest to occur of (i) the
Change in Control Date, (ii) the date of the execution by the
Company of the initial written agreement or instrument providing
for the Change in Control or (iii) the date of the adoption by
the Board of Directors of a resolution providing for the Change in
Control (with the earliest to occur of such dates referred to
herein as the “Measurement Date”) or a material
diminution in such position, authority or
responsibilities;
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(b) a reduction in the
Executive’s annual base salary as in effect on the
Measurement Date or as the same was or may be increased thereafter
from time to time;
(c) the failure by the Company to
(i) continue in effect any material compensation or benefit
plan or program (including without limitation any life insurance,
medical, health and accident or disability plan and any vacation or
automobile program or policy) (a “Benefit Plan”) in
which the Executive participates or which is applicable to the
Executive immediately prior to the Measurement Date, unless an
equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such plan or
program, (ii) continue the Executive’s participation
therein (or in such substitute or alternative plan) on a basis not
materially less favorable than the basis existing immediately prior
to the Measurement Date (iii) award cash bonuses to the
Executive in amounts and in a manner substantially consistent with
past practice in light of the Company’s financial performance
or (iv) continue to provide any material fringe benefit
enjoyed by Executive immediately prior to the Measurement
Date;
(d) a change by the Company in the
location at which the Executive performs his or her principal
duties for the Company to a new location that is both
(i) outside a radius of 50 miles from the Executive’s
principal residence immediately prior to the Measurement Date and
(ii) more than 30 miles from the location at which the
Executive performed his or her principal duties for the Company
immediately prior to the Measurement Date; or a requirement by the
Company that the Executive travel on Company business to a
substantially greater extent than required immediately prior to the
Measurement Date;
(e) the failure of the Company to
obtain the agreement from any successor to the Company to assume
and agree to perform this Agreement, as required by
Section 6.1;
(f) a material breach of this
Agreement; or
(g) any failure of the Company to
pay or provide to the Executive any portion of the
Executive’s compensation or benefits due under any Benefit
Plan within seven days of the date such compensation or benefits
are due, or any material breach by the Company of this Agreement or
any employment agreement with the Executive.
The Executive’s right to
terminate his or her employment for Good Reason shall not be
affected by the Executive’s incapacity due to physical or
mental illness.
1.5 “ Disability
” means the Executive’s absence from the full-time
performance of the Executive’s duties with the Company for
180 consecutive calendar days as a result of incapacity due to
mental or physical illness which is determined to be total and
permanent by a physician selected by the Company or its insurers
and acceptable to the Executive or the Executive’s legal
representative.
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2. Term of Agreement . This
Agreement, and all rights and obligations of the parties hereunder,
shall take effect upon the Effective Date and shall expire upon the
first to occur of (a) the expiration of the Term (as defined
below) if a Change in Control has not occurred during the Term,
(b) the date 24 months after the Change in Control Date, if
the Executive is still employed by the Company as of such later
date, or (c) the fulfillment by the Company of all of its
obligations under Sections 4 and 5.2 if the Executive’s
employment with the Company terminates within 24 months following
the Change in Control Date. “Term” shall mean the
period commencing as of the Effective Date and continuing in effect
through December 31, 2011; provided , however ,
that commencing on January 1, 2012 and each January 1,
thereafter, the Term shall be automatically extended for one
additional year unless, not later than 90 days prior to the
scheduled expiration of the Term (or any extension thereof), the
Company shall have given the Executive written notice that the Term
will not be extended.
3. Employment Status; Termination
Following Change in Control .
3.1 Not an Employment
Contract . The Executive acknowledges that this Agreement does
not constitute a contract of employment or impose on the Company
any obligation to retain the Executive as an employee and that this
Agreement does not prevent the Executive from terminating
employment at any time. If the Executive’s employment with
the Company terminates for any reason and subsequently a Change in
Control shall occur, the Executive shall not be entitled to any
benefits hereunder except as otherwise provided pursuant to
Section 1.2.
3.2 Termination of Employment
.
(a) If the Change in Control Date
occurs during the Term, any termination of the Executive’s
employment by the Company or by the Executive within 24 months
following the Change in Control Date (other than due to the death
of the Executive) shall be communicated by a written notice to the
other party hereto (the “Notice of Termination”), given
in accordance with Section 7. Any Notice of Termination shall:
(i) indicate the specific termination provision (if any) of
this Agreement relied upon by the party giving such notice,
(ii) to the extent applicable, 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 and (iii) specify the Date of Termination (as
defined below). The effective date of an employment termination
(the “Date of Termination”) shall be the close of
business on the date specified in the Notice of Termination (which
date may not be less than 15 days or more than 120 days after the
date of delivery of such Notice of Termination), in the case of a
termination other than one due to the Executive’s death, or
the date of the Executive’s death, as the case may be. In the
event the Company fails to satisfy the requirements of
Section 3.2(a) regarding a Notice of Termination, the
purported termination of the Executive’s employment pursuant
to such Notice of Termination shall not be effective for purposes
of this Agreement.
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(b) The failure by the Executive or
the Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or Cause
shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting any such fact or circumstance in
enforcing the Executive’s or the Company’s rights
hereunder.
(c) Any Notice of Termination for
Cause given by the Company must be given within 90 days of the
occurrence of the event(s) or circumstance(s) that constitute(s)
Cause. Prior to any Notice of Termination for Cause being given
(and prior to any termination for Cause being effective), the
Executive shall be entitled to a hearing before the Board of
Directors of the Company at which the Executive may, at the
Executive’s election, be represented by counsel and at which
the Executive shall have a reasonable opportunity to be heard. Such
hearing shall be held on not less than 15 days prior written notice
to the Executive stating the Board of Directors’ intention to
terminate the Executive for Cause and stating in detail the
particular event(s) or circumstance(s) that the Board of Directors
believes constitutes Cause for termination.
(d) Any Notice of Termination for
Good Reason given by the Executive must be given within 90 days of
the first occurrence of the event(s) or circumstance(s) that
constitute(s) Good Reason .
4. Benefits to Executive
.
4.1 Stock Acceleration . If
the Change in Control Date occurs during the Term, then, effective
upon the Change in Control Date, (a) each outstanding option
to purchase shares of Common Stock of the Company held by the
Executive shall become immediately exercisable in full and will no
longer be subject to a right of repurchase by the Company and
(b) each outstanding restricted stock award shall be deemed to
be fully vested and will no longer be subject to a right of
repurchase by the Company.
4.2 Compensation . If the
Change in Control Date occurs during the Term and the
Executive’s employment with the Company terminates within 24
months following the Change in Control Date, the Executive shall be
entitled to the following benefits:
(a) Termination Without Cause or
for Good Reason . If the Executi
