EXHIBIT 10.1
SEVERANCE
AGREEMENT
This SEVERANCE AGREEMENT (this “
Agreement ”) is
entered into as of the 25th day of June, 2008 (the “
Effective Date ”), by
and between Force Protection, Inc., a Nevada corporation (the
“ Company ”),
and Charles Mathis (“ Executive ”).
WITNESSETH:
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
(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.
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 12-month
period as a result of the Executive’s Disability.
(i)
“ Subsidiary”
means any corporation 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 ”);
(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 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 (3a)(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 Payment is to be made, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such
state and local taxes.
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