EXHIBIT 10.2
SEVERANCE
AGREEMENT
This SEVERANCE
AGREEMENT (this “ Agreement ”) is entered into as
of the 4th day of April, 2008 (the “ Effective Date ”), by and between
Force Protection, Inc., a Nevada corporation (the “
Company ”), and Mark
Edwards (“ Executive
”).
W I T N E S S E T
H:
WHEREAS, the
Executive currently serves as a key employee of the Company and the
Executive’s services and knowledge are valuable to the
Company in connection with the management of one or more of the
Company’s principal operating facilities, divisions,
departments or Subsidiaries (as defined in Section 1
);
WHEREAS, the Board
(as defined in Section 1 ) has determined that it is in
the best interests of the Company and its stockholders to improve
upon the existing severance protections for its key employees and
to provide an additional inducement to secure the Executive’s
continued services and, in the event of any threat or occurrence
of, or negotiation or other action that could lead to, or create
the possibility of, a Change in Control (as defined in
Section 1 ) of the Company, to ensure the
Executive’s continued and undivided dedication to the
Executive’s duties when faced with the possibility of
Change in Control; and
WHEREAS, the Board
has authorized the Company to enter into this Agreement.
NOW, THEREFORE, for
and in consideration of the promises and the mutual covenants and
agreements herein contained, the Company and the Executive hereby
agree as follows:
1.
Definitions .
As used in this Agreement, the following terms shall have the
respective meanings set forth below:
(a)
“ Board ” means
the Board of Directors of the Company.
(b)
“ Cause ” means
(i) the Executive’s material breach of the
Executive’s duties and responsibilities (other than as a
result of the Executive’s Disability) which is
(x) demonstrably willful and deliberate on the
Executive’s part, (y) committed in bad faith or without
reasonable belief that such breach is in the best interests of the
Company and (z) not remedied within ten (10) days after
receipt of written notice from the Company specifying such breach;
(ii) the Executive’s indictment for, conviction of, or
plea of nolo contendere to, a felony; or (iii) the
Executive’s gross negligence or any act of theft, fraud,
misappropriation, malfeasance or dishonesty by the Executive in
connection with the performance of the Executive’s duties to
the Company which is demonstrably willful and deliberate on the
Executive’s part.
Cause shall not exist unless and until the
Company has delivered to the Executive a copy of a resolution duly
adopted by a majority of the entire Board at any duly called
meeting of the Board (after reasonable notice to the Executive and
an opportunity for the Executive, together with counsel, to be
heard before the Board), finding that in the good faith opinion of
the Board an event set forth in clauses (i), (ii) or
(iii) has occurred and specifying the particulars thereof in
detail.
The
Company must notify the Executive of any event constituting Cause
(in accordance with the provisions of Section 14(b) )
within ninety (90) days following the Board’s (excluding, if
applicable, the Executive) knowledge of its existence or such event
shall not constitute Cause under this Agreement.
(c)
“ Change in Control
” means the occurrence of any one of the following
events:
(i)
any “person” (as such term is defined in
Section 3(a)(9) of the Securities Exchange Act of 1934
(the “ Exchange Act ”) and
as used in Sections 13(d)(3) and 14(d)(2) of the Exchange
Act) is or becomes a “beneficial owner” (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 35% or more of the combined
voting power of the Company’s then outstanding securities
eligible to vote for the election of the Board (the “
Company Voting Securities
”); provided , however , that the event
described in this paragraph (i) shall not be deemed to be a
Change in Control by virtue of any of the following
acquisitions: (A) by the Company or any Subsidiary;
(B) by any employee benefit plan (or related trust) sponsored
or maintained by the Company or any Subsidiary; (C) by any
underwriter temporarily holding securities pursuant to an offering
of such securities; (D) pursuant to a Non-Control Transaction
(as defined in paragraph (iii) below); or (E) a
transaction (other than one described in paragraph
(iii) below) in which Company Voting Securities are acquired
from the Company, if a majority of the Incumbent Board (as defined
in paragraph (ii) below) approves a resolution providing
expressly that the acquisition pursuant to this clause
(E) does not constitute a Change in Control under this
paragraph (i);
(ii)
individuals who, on February 29, 2008, constitute the Board
(the “ Incumbent
Board ”) cease for any reason to constitute at least
a majority thereof, provided that any person becoming a director
subsequent to February 29, 2008, whose election or nomination
for election was approved by a vote of at least two-thirds of the
directors comprising the Incumbent Board (either by a specific vote
or by approval of the proxy statement of the Company in which such
person is named as a nominee for director, without objection to
such nomination) shall be considered a member of the Incumbent
Board; provided , however , that no individual
initially elected or nominated as a director of the Company as a
result of an actual or threatened election contest with respect to
directors or any other actual or threatened solicitation of proxies
or consents by or on behalf of any person other than the Board
shall be deemed to be a member of the Incumbent Board;
(iii)
the consummation of a merger, consolidation, share exchange or
similar form of corporate transaction involving the Company or any
of its Subsidiaries that requires the approval of the
Company’s stockholders (whether for such transaction or the
issuance of securities in the transaction or otherwise) (a “
Reorganization ”),
unless immediately following such Reorganization:
(A) more than 60% of the total voting power of (x) the
corporation resulting from such Reorganization (the “
Surviving Company ”),
or (y) if applicable, the ultimate parent corporation that
directly or indirectly has beneficial ownership of 95% of the
voting securities eligible to elect directors of the Surviving
Company (the “ Parent
Company ”), is represented by Company Voting
Securities that were outstanding immediately prior to such
Reorganization (or, if applicable, is represented by shares into
which such Company Voting Securities were converted pursuant to
such Reorganization), and such voting power among the holders
thereof is in substantially the same proportion as the voting power
of such Company Voting Securities among holders thereof immediately
prior to the Reorganization; (B) no person (other than any
employee benefit plan (or related trust) sponsored or maintained by
the Surviving Company or the Parent Company) is or becomes the
beneficial owner, directly or indirectly, of 35% or more of the
total voting power of the outstanding voting securities eligible to
elect directors of the Parent Company (or, if there is no Parent
Company, the Surviving Company); and (C) at least a majority
of the members of the board of directors of the Parent Company (or,
if there is no Parent Company, the Surviving Company) following the
consummation of the Reorganization were members of the Incumbent
Board at the time of the Board’s approval of the execution of
the initial agreement providing for such Reorganization (any
Reorganization which satisfies all of the criteria specified in
(A), (B) and (C) above shall be deemed to be a “
Non-Control Transaction
”);
(iv)
the stockholders of the Company approve a plan of complete
liquidation or dissolution; or
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(v)
the consummation of a sale (or series of sales) of all or
substantially all of the assets of the Company and its Subsidiaries
to an entity that is not an affiliate of the Company.
Notwithstanding
the foregoing, a Change in Control shall not be deemed to occur
solely because any person acquires beneficial ownership of 35% or
more of the Company Voting Securities as a result of the
acquisition of Company Voting Securities by the Company which
reduces the number of Company Voting Securities outstanding;
provided, that, if after such acquisition by the Company such
person becomes the beneficial owner of additional Company Voting
Securities that increases the percentage of outstanding Company
Voting Securities beneficially owned by such person, a Change in
Control shall then occur.
(d)
“ Change in Control
Termination Period ” means the period of time
beginning with a Change in Control and ending at the end of the
Window Period.
(e)
“ Date of Termination
” means (i) the effective date on which the
Executive’s employment with the Company terminates, as
specified in a prior written notice by the Company or the
Executive, as the case may be, to the other, delivered pursuant to
Section 14 , or (ii) if the Executive’s
employment with the Company terminates by reason of death, the date
of death of the Executive.
(f)
“ Disability ”
means the Executive’s incapacity due to physical or mental
illness, as evidenced by a written statement from a licensed
physician acceptable to the Company or by the insurance company
which insures the Company’s long-term disability plan in
which the Executive is eligible to participate which confirms the
Executive’s inability to perform due to such physical or
mental illness.
(g)
“ Good Reason ”
means, without the Executive’s express written consent, the
occurrence of any of the following events following a Change in
Control:
(i)
(A) any change in the authority, duties or responsibilities
that is inconsistent in any material and adverse respect with the
Executive’s authority, position(s), duties, responsibilities
or status with the Company immediately prior to such Change in
Control (including any material and adverse diminution of such
duties or responsibilities) or (B) a material and adverse
change in the Executive’s reporting responsibilities, titles
or offices with the Company as in effect immediately prior to such
Change in Control;
(ii)
a material reduction by the Company in the Executive’s rate
of annual base salary or annual target bonus opportunity (including
any material and adverse change in the formula for such annual
bonus target) as in effect immediately prior to such Change in
Control or as the same may be increased from time to time
thereafter;
(iii)
any requirement of the Company that the Executive be based anywhere
more than fifty (50) miles from the place of business where the
Executive is located at the time of the Change in Control;
(iv)
the failure of the Company to continue in effect any employee
benefit plan or compensation plan in which the Executive is
participating immediately prior to such Change in Control and which
is material to the Executive’s overall compensation, unless
the Executive is permitted to participate in other plans providing
the Executive with benefits or compensation which are not
materially less, or the taking of any action by the Company which
would materially and adversely affect the Executive’s
participation in or materially and adversely reduce the
Executive’s benefits under any such plan; or
(v)
a material breach by the Company of this Agreement or any other
material agreement in effect between the Executive and the
Company.
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Any event
described in this Section 1(g) which occurs prior
to a Change in Control, but was at the request of a third party who
had indicated an intention or taken steps reasonably calculated to
effect a Change in Control and who effectuates a Change in Control,
shall constitute Good Reason following a Change in Control for
purposes of this Agreement (treating the date of such event as the
date of the Change in Control) notwithstanding that it occurred
prior to the Change in Control. For purposes of this
Agreement, any good faith determination of Good Reason made by the
Executive shall be conclusive; provided , however ,
that an isolated, insubstantial and inadvertent action taken in
good faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive shall not
constitute Good Reason. The Executive must provide notice of
termination of employment (in accordance with the provisions of
Section 14(b) ) within ninety (90) days of the
Executive’s knowledge of an event constituting Good Reason or
such event shall not constitute Good Reason under this
Agreement. The Company shall have thirty (30) days following
its receipt of a notice of termination of employment from the
Executive to remedy the condition the Executive claimed to provide
a basis for such termination in the notice of
termination.
(h)
“ Nonqualifying
Termination ” means a termination of the
Executive’s employment (i) by the Company for Cause,
(ii) by the Executive for any reason other than (x) for
Good Reason during the Change in Control Termination Period or
(y) for any reason during the Window Period, (iii) as a
result of the Executive’s death, or (iv) by the Company
due to the Executive’s absence from the Executive’s
duties with the Company on a full-time basis for at least one
hundred thirty (130) business days during any consecutive twelve
month period as a result of the Executive’s Disability.
(i)
“ Subsidiary ”
means any corporat i on or
other entity in which the Company has a direct or indirect
ownership interest of 50% or more of the total combined voting
power of the then outstanding securities or interests of such
corporation or other entity entitled to vote generally in the
election of directors or in which the Company has the right to
receive 50% or more of the distribution of profits or 50% of the
assets on liquidation or dissolution.
(j)
“ Window Period
” means the thirty (30) day period immediately following the
six (6) month anniversary of a Change in Control.
2.
Obligations of the
Executive . The Executive agrees that if a
Change in Control shall occur, the Executive shall not voluntarily
leave the employ of the Company without Good Reason until ninety
(90) days following such Change in Control.
3.
Severance Payments .
Except as otherwise provided in Section 4 and
subject to Section 6 and Section 19 , if
the Executive’s employment with the Company is terminated
other than by reason of a Nonqualifying Termination, then the
Company shall pay or provide the Executive (or the
Executive’s beneficiary or estate) with the following
payments or benefits:
(a)
a lump-sum cash amount within thirty (30) days following the Date
of Termination equal to the sum of: (i) the Executive’s
base salary through the Date of Termination, and any accrued
vacation, in each case to the extent not theretofore paid;
(ii) any unpaid bonus accrued with respect to the fiscal year
ending on or preceding the Date of Termination; and
(iii) subject to presentment of appropriate documentation, any
unreimbursed expenses incurred through the Date of Termination in
accordance with Company policy (collectively, the “
Accrued Amounts
”);
(b)
a lump-sum cash amount within the calendar year next following the
calendar year during which the Date of Termination occurs equal to
the product of (i) the annual bonus the Executive would have
been paid based on the achievement of actual performance goals and
(ii) a fraction, the numerator of which is the number of days
in the fiscal year in which the Date of Termination occurs through
the Date of Termination and the denominator of which is three
hundred sixty-five (365) (the “ Pro-Rata Bonus ”);
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(c)
a lump-sum cash amount within thirty (30) days following the Date
of Termination equal to one times the sum of (A) the
Executive’s annual base salary and (B) the greatest of
(1) the Executive’s target bonus for the fiscal year in
which the Executive’s Date of Termination occurs and
(2) the average of the actual bonuses earned by the Executive
in respect of the two (2) preceding fiscal years of the
Company immediately preceding the fiscal year in which the Date of
Termination occurs;
(d)
subject to (A) the Executive’s timely election of
continuation coverage under the Consolidated Budget Omnibus
Reconciliation Act of 1985, as amended (“ COBRA ”), (B) the
Executive’s continued co-payment of the employee portion of
any contribution or premium at the same level and cost to the
Executive as if the Executive were an employee of the Company
(excluding, for purposes of calculating cost, an employee’s
ability to pay premiums with pre-tax dollars) and (C) the
Executive’s continued eligibility for COBRA continuation
coverage, the Company will pay for a period of up to twelve (12)
months following the Date of Termination the portion of the
Executive’s COBRA premium equivalent to what the Company
would have paid if the Executive were an employee of the
Company. Notwithstanding the foregoing, in the event the
Executive fails to pay any required contribution or premium or
becomes employed with another employer and becomes eligible to
receive substantially similar or improved medical, dental or vision
benefits from such employer (whether or not the Executive accepts
such benefits), the Company’s obligations under this
Section 3(d) shall immediately cease, except that
the Company’s obligation to continue to make available
continuation coverage under COBRA at the full COBRA rates shall be
determined in accordance with COBRA. The Executive will
notify the Company of the Executive’s eligibility for
medical, dental or vision benefits from a subsequent employer
within thirty (30) days of such eligibility; and
(e)
with respect to outstanding equity awards held by the Executive as
of the Date of Termination, all stock options and stock
appreciation rights that would become vested and exercisable if the
Executive had continued to be employed with the Company during the
twelve (12) month period commencing on the Date of Termination
shall vest and become exercisable and the restrictions on all
restricted stock awards, restricted stock units and other equity or
incentive awards that would have lapsed if the Executive had
continued to be employed with the Company during the twelve (12)
month period commencing on the Date of Termination shall lapse and
such awards shall become immediately payable; and
(f)
all other payments, benefits or fringe benefits to which the
Executive shall be entitled under the terms of any applicable
compensation arrangement or benefit, equity or fringe benefit plan
or program or grant (the “ Other Benefits ”).
4.
Change in Control Severance
Payments . If a Change in Control occurs and
the Executive’s employment with the Company is terminated
(x) other than by reason of a Nonqualifying Termination
(1) during the Change in Control Termination Period or
(2) prior to the Change in Control Termination Period and the
Executive reasonably demonstrates that such termination was at the
request of a third party who had indicated an intention or taken
steps reasonably calculated to effect such Change in Control and
who effectuates such Change in Control (or such termination was
otherwise in anticipation of such Change in Control) or (y) by
the Executive for any reason during the Window Period, then,
subject to Section 6 and Section 19 the
Company shall pay or provide the Executive (or the
Executive’s beneficiary or estate) with the following
payments or benefits:
(a)
a lump-sum cash amount within thirty (30) days following the Date
of Termination (or, if later, the date of the Change in Control)
equal to the sum of the Accrued Amounts;
(b)
a lump-sum cash amount within the calendar year next following the
calendar year during which the Date of Termination occurs equal to
the Pro-Rata Bonus;
(c)
a lump-sum cash amount within thirty (30) days following the Date
of Termination (or, if later, the date of the Change in Control)
equal to one and one-half times the sum of: (A) the
Executive’s
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highest rate of annual base salary during the
12-month period prior to the Date of Termination; and (B) the
greatest of (1) the Executive’s target bonus for the
fiscal year in which the Executive’s Date of Termination
occurs, (2) the Executive’s target bonus for the fiscal
year in which the Change in Control occurs and (3) the average
of the actual bonuses earned by the Executive in respect of the two
(2) preceding fiscal years of the Company immediately
preceding the fiscal year in which the Change in Control
occurs;
(d)
COBRA continuation coverage pursuant to Section 3(d) ,
except that the Company will pay the portion of the
Executive’s COBRA premium equivalent to what the Company
would have paid if the Executive were an employee of the Company
for a period of up to eighteen (18) months following the Date of
Termination instead of for up to twelve (12) months;
(e)
with respect to outstanding equity awards held by the Executive as
of the Date of Termination, all stock options and stock
appreciation rights shall vest and become exercisable and the
restrictions on all restricted stock awards, restricted stock units
and other equity or incentive awards shall lapse and such awards
shall become immediately payable; and
(f)
the Other Benefits.
Notwithstanding anything herein to the
contrary, if the Executive becomes entitled to , and
receives, payments and benefits pursuant to Section 3
and thereafter becomes entitled to payments and benefits pursuant
to this Section 4 , payments and benefits due under
this Section 4 shall be reduced by any amounts received
pursuant to Section 3 .
5.
Payments Upon Non-Qualifying
Termination of Employment . If the
Executive’s employment with the Company shall terminate by
reason of a Nonqualifying Termination, then the Company shall pay
to the Executive (or the Executive’s beneficiary or estate)
within thirty (30) days following the Date of Termination, a
lump-sum cash amount equal to the Accrued Amounts (other than the
amount described in Section 3(a)(ii) ) and provide the
Other Benefits.
6.
Release Required;
Resignations . Any amounts payable pursuant
to this Agreement (other than Accrued Amounts and Other Benefits)
shall only be payable if the Executive executes and delivers to the
Company (and does not revoke) a general release of claims in a form
substantially in the form of Exhibit A attached hereto.
In addition, upon any termination of the Executive’s
employment with the Company, the Executive shall promptly resign
from any position as an officer, director or fiduciary of any
Company-related entity.
7.
Certain Additional Payments by the
Company . (a) Anything in this
Agreement to the contrary notwithstanding, in the event it shall be
determined that any payment, award, benefit or distribution (or any
acceleration of any payment, award, benefit or distribution) by the
Company (or any of its affiliated entities) or any entity which
effectuates a Change in Control (or any of its affiliated entities)
to or for the benefit of the Executive (whether pursuant to the
terms of this Agreement or otherwise, but determined without regard
to any additional payments required under this
Section 7 ) (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 interest or
penalties are incurred by the Executive 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 Company shall pay the Executive an additional payment (a
“ Gross-Up Payment
”) in an amount such that, after payment by the Executive of
all taxes (including any interest or penalties imposed with respect
to such taxes) including, without limitation, any income and
employment taxes (and any interest and penalties imposed with
respect thereto) and any Excise Tax imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments. For
purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to (i) pay federal income taxes at
the highest marginal rates of federal income taxation for the
calendar year in which the Gross-Up Payment is to be made, and
(ii) pay applicable state and local income taxes at the
highest marginal rate of taxation for the calendar year in which
the Gross-Up
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