Exhibit 10.1
SEVERANCE
AGREEMENT
This SEVERANCE AGREEMENT
(this “ Agreement ”) is entered into as
of the 4 th
day of May, 2009 (the “
Effective Date ”), by and between Force
Protection, Inc., a Nevada corporation (the “
Company ”), and James J. Grazioplene (“
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
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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 two (2) years
following such Change in Control.
(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
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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 initial existence of an event
constituting Good Reason (including any such event which occurs
prior to a Change in Control
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pursuant to the first sentence of this
paragraph) 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 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 for the calendar
year during which the Date of Termination occurs based on the
achievement of actual performance goals and (ii) a fraction,
the numerator of which the number 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 on the 55th day 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; provided, however,
that if any such award is subject to Section 409A (as defined
in Section 19 , below), the provisions of this
Section 3(e) will not result in the immediate
payment of such award if such payment would result in the
imposition of tax, interest and/or penalties upon the Executive
under Section 409A, in which case such payment shall be made
at the earliest time such payment can be made without resulting in
the imposition of tax, interest and/or penalties upon the Executive
under Section 409A; 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
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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 on the 55th day 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; provided, however, that if any
such award is subject to Section 409A (as defined in
Section 19 , below), the provisions of this
Section 3(e) will not result in the immediate
payment of such award if such payment would result in the
imposition of tax, interest and/or penalties upon the Executive
under Section 409A, in which case such payment shall be made
at the earliest time such payment can be made without resulting in
the imposition of tax, interest and/or penalties upon the Executive
under Section 409A; 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 under this Section 4
shall be promptly paid following the Change in Control (and in no
event later than the March 15th of the
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calendar year following the calendar year in
which the Change in Control occurs) and such payments and benefits
shall be reduced by any amounts received pursuant to
Section 3 . In addition, the Executive’s right to
receive the lump sum cash payment pursuant to Sections 3(c)
or 4(c) shall terminate on March 15th of
the calendar year following the calendar year in which the Window
Period commenced, and no such amount shall be payable
thereafter.
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) if the Executive is terminated
by the Company for Cause) 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, and such release becomes irrevocable within
fifty-five (55) days following the Executive’s Date of
Termination.
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 r
