Exhibit 10.1
EXECUTIVE TRANSITION
AGREEMENT
THIS EXECUTIVE TRANSITION AGREEMENT (this
“ Agreement ”) by and between KĀDANT INC.,
a Delaware corporation (the “ Company ”), and
William A. Rainville (the “ Executive ”) is made
as of August 17, 2009.
WHEREAS, the Company and the Executive desire to
provide for an orderly transition to the Executive’s
successor as President and Chief Executive Officer (“
CEO ”) of the Company beginning on September 1, 2009
and continuing through January 2, 2011 (the “ Retirement
Date ”), when (unless sooner terminated as provided for
herein) the Executive will retire and cease to be an employee of
the Company;
WHEREAS, in connection with the foregoing, the
Company and the Executive wish to set forth the terms of such
transition in this Agreement;
WHEREAS, the Company and the Executive are
parties to that certain Amended and Restated Executive Retention
Agreement, dated as of December 9, 2008 (the “ Executive
Retention Agreement ”), which provides certain benefits
to the Executive in the event of a termination of his employment
following a Change in Control (as defined below) of the Company;
and
WHEREAS, the Company and the Executive wish to
replace the Executive Retention Agreement with the benefits and
obligations set forth in this Agreement, to be effective as set
forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual
covenants herein contained and other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the Company and the Executive agree as
follows:
1.1
Except as hereinafter otherwise provided, the Company shall employ
the Executive as the President and CEO of the Company through
August 31, 2009; as the CEO from September 1, 2009 through January
2, 2010; and as the Executive Chairman from January 3, 2010 through
the Retirement Date. The Executive agrees to remain in
the employment of the Company in such capacities through the
Retirement Date, at which point the Executive shall retire and
cease to be an employee of the Company.
1.2
The Executive shall work for the Company on a full-time basis
through January 2, 2010 and on a part-time basis (on average at
least 20 hours per week) from January 3, 2010 through the
Retirement Date.
1.3
As the Executive Chairman, the Executive shall work under the
direction of and on such matters as may be reasonably assigned to
him by the Company’s Board of Directors or its
designee. Such duties may include, but shall not be
limited to, the advancement of the business and interests of the
Company, consulting with the CEO or the Board of Directors as
requested on strategic and operational matters related to the
Company, meeting with industry groups and the Company’s
investors and customers as requested by the CEO or the Board
of
Directors,
evaluating potential acquisition targets, acting as a liaison
between the Board of Directors and the Company’s management
and coordinating logistical matters related to the Board of
Directors (e.g., calling meetings and preparing
agendas).
1.4
The Executive agrees that, during the specified period of
employment, he shall, to the best of his ability, perform his
duties, and shall not engage in any business, profession or
occupation which would conflict with the rendering of the agreed
upon services, either directly or indirectly, without the prior
approval of the Board of Directors.
2.
Board Service . Subject to the fiduciary
obligations of the Board of Directors, the Company shall (a)
nominate the Executive to be reelected as a member of the Board of
Directors at the Company’s 2010 Annual Meeting of
Stockholders and (b) appoint the Executive as the Executive
Chairman until the Retirement Date, at which time the Executive
will step down as the Executive Chairman. For the
avoidance of doubt, the Executive shall not be required to resign
from the Board of Directors on the Retirement Date.
3.
Compensation . During the period of his
employment by the Company under this Agreement, the Executive shall
be compensated for his services as follows:
3.1
Except as provided in Section 3.8, (a) during the period commencing
on the date of this Agreement and ending on January 2, 2010, the
Executive shall continue to be paid a base salary at his current
annual rate of $647,000 and (b) during the period commencing on
January 3, 2010 and ending on the Retirement Date, the Executive
shall be paid a base salary at an annual rate of
$325,000.
3.2
The Executive shall be eligible to participate in the
Company’s Cash Incentive Plan (a) based on his current target
or reference bonus of $800,000 for the fiscal year ending January
2, 2010 and (b) based on a target or reference bonus of $400,000
for the fiscal year ending January 1, 2011, in each case subject to
the terms of the Cash Incentive Plan. Any bonus payable
to the Executive under the Cash Incentive Plan shall be paid in
accordance with the terms of the Cash Incentive Plan, but in no
event later than March 15 of the fiscal year following the fiscal
year for which the bonus is payable.
3.3
The Executive acknowledges that he has previously been granted
awards under the Company’s equity incentive
plans. The Executive further acknowledges that the Board
of Directors is not obligated to grant additional awards to the
Executive under any of the Company’s equity incentive plans
as a result of his service as Executive Chairman.
3.4
The Executive’s existing stock options and restricted stock
unit awards shall continue to be governed by the terms of the
applicable plans and agreements. For the avoidance of
doubt, the Executive acknowledges that he shall forfeit all
unvested stock options and restricted stock unit awards on the
Retirement Date or such earlier date as his employment terminates
in accordance with this Agreement.
3.5
While the Executive is an employee of the Company, the Executive
shall not be eligible to receive any additional compensation (cash,
equity or otherwise) as a result of the Executive’s service
as a member of the Board of Directors.
3.6
The Executive shall be reimbursed for any and all monies expended
by him in connection with his employment for reasonable and
necessary expenses on behalf of the Company in accordance with the
policies of the Company then in effect.
3.7
Until the Retirement Date or the earlier termination of this
Agreement, the Executive shall (a) be eligible to participate in
the Company’s executive and employee benefit plans and
arrangements that are offered to executive officers and employees
of the Company (including, without limitation, retirement, medical
insurance, dental insurance, life insurance, disability benefits
and vacation (which shall accrue in accordance with the
Company’s vacation policy and shall be adjusted appropriately
when the Executive changes from a full-time employee to a part-time
employee)), to the extent he remains eligible to do so under the
terms of such plans and to the extent that the Company continues
such plans for its executive officers and employees, and (b)
continue to receive the same perquisites that are generally
provided to other executive officers of the Company.
3.8
If, because of adverse business conditions or for other reasons,
the Company at any time puts into effect salary reductions
applicable to all executive officers of the Company generally, the
salary payments required to be made under this Agreement to the
Executive during any period in which such general reduction is in
effect may be reduced by the same percentage as is applicable to
all executive officers of the Company generally. Any
benefits made available to the Executive which are related to base
salary shall also be reduced in accordance with any salary
reduction.
4.
Restrictive Covenants .
4.1
During the period of the Executive’s employment with the
Company and for a period of two years following the termination of
such employment, the Executive shall not, directly or indirectly,
own, manage, control, operate, be employed by, participate in or be
connected with the ownership, management, operation or control of
any business which competes with the Company or any of its
affiliated companies; provided , however , that the
foregoing shall not apply to ownership of less than 5% of the
outstanding stock of a publicly held corporation, which ownership
is disclosed to the Board of Directors, nor shall it apply to any
other relationship which is disclosed to and approved by the Board
of Directors.
4.2
During the period of the Executive’s employment with the
Company and for a period of two years following the termination of
such employment, the Executive shall not, either alone or in
association with others, solicit, divert or take away, or attempt
to divert or take away, the business or patronage of any of the
clients, customers or business partners of the Company that were
contacted, solicited or served by the Company during the 12-month
period prior to the termination of the Executive’s employment
with the Company.
4.3
During the period of the Executive’s employment with the
Company and for a period of two years following the termination of
such employment, the Executive shall not, either alone or in
association with others, (a) solicit, induce or attempt to induce
any employee of the Company to terminate his or her employment with
the Company or (b) hire, recruit or
attempt to hire
any person who was employed by the Company at any time during the
term of the Executive’s employment with the Company,
provided that this clause (b) shall not apply to the
recruitment or hiring of any individual whose employment with the
Company has been terminated for a period of six months or
longer.
4.4
During the period of the Executive’s employment with the
Company and thereafter, the Executive shall not, without the
written consent of the Company, utilize or disclose to others any
proprietary or confidential information of any type or description,
which terminology shall be construed to mean any information
developed or identified by the Company that is intended to give it
an advantage over its competitors or that could give a competitor
an advantage if obtained by it, unless and until such confidential
information has become public knowledge through no fault of the
Executive. Such information includes, but is not limited
to, product or process design, specifications, manufacturing
methods, financial or statistical information about the Company,
marketing or sales information about the Company, sources of
supply, lists of customers and the Company’s plans,
strategies and contemplated actions. The Executive shall
not disclose any proprietary or confidential information to others
outside the Company or use the same for any unauthorized purposes
without written approval by an executive officer of the Company,
either during or at any time after employment, unless and until
such proprietary or confidential information has become public
knowledge without fault by the Executive.
4.5
During the period of the Executive’s employment by the
Company and for a period of two years following the termination of
such employment, the Executive shall not in any way whatsoever aid
or assist any party seeking to cause, initiate or effect a Change
in Control of the Company without the prior approval of the Board
of Directors.
5.1
Except for the covenants set forth in Section 4, which covenants
shall remain in effect for the periods stated therein, and subject
to the satisfaction of the provisions of this Agreement that
require payments or the provision of benefits after the termination
of this Agreement, this Agreement shall terminate on the earlier of
the Retirement Date and the occurrence of any of the following
events:
(a)
on the effective date set forth in any resignation submitted by the
Executive and accepted by the Company, or if no effective date is
agreed upon, the date of receipt of such letter;
(b)
upon the death of the Executive;
(c)
at the election of the Company, upon the Disability of the
Executive. For purposes of this Agreement, “
Disability ” shall mean the Executive’s absence
from the 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;
(d)
upon the termination of the Executive by the Company for
Cause. For purposes of this Agreement, “
Cause ” shall mean the Executive’s willful
engagement in illegal conduct or gross misconduct that is
materially and demonstrably injurious to the Company,
provided that 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; or
(e)
upon termination of the Executive by the Company without
Cause.
5.2
Except as otherwise expressly provided herein, upon the termination
of this Agreement, all of the Company’s obligations under
this Agreement, including, without limitation, making payments to
the Executive, shall immediately cease and terminate.
5.3
Notwithstanding the foregoing, in the event of the termination of
this Agreement pursuant to Section 5.1(a) or (d), the Company shall
pay to the Executive, in a lump sum in cash within 30 days after
the date of termination of this Agreement, an amount equal to the
sum of (a) the Executive’s base salary through the date of
termination of this Agreement, (b) the annual bonus payable
(including any bonus or portion thereof which has been earned but
deferred) to the Executive for the most recently completed fiscal
year (if such bonus has not yet been paid), provided that,
notwithstanding the foregoing, such annual bonus need not be paid
within the 30-day period as long as such annual bonus is paid not
later than March 15 of the fiscal year following the fiscal year
for which the bonus is payable, and (c) the amount of any
compensation previously deferred by the Executive (together with
any accrued interest or earnings thereon) and any accrued vacation
pay, in each case to the extent not previously paid (the sum of the
amounts described in clauses (a), (b) and (c) shall be hereinafter
referred to as the “ Accrued Obligations
”).
5.4
Notwithstanding the foregoing, in the event of the termination of
this Agreement pursuant to Section 5.1(b) or (c), the Company shall
(a) pay to the Executive (or the Executive’s estate, if
applicable), in a lump sum in cash within 30 days after the date of
termination of this Agreement, the Accrued Obligations and (b) pay
to the Executive (or the Executive’s estate, if applicable),
in a lump sum in cash within 30 days after the date of termination
of this Agreement, an amount equal to the product of (i) the
Executive’s target or reference bonus for the fiscal year in
which this Agreement is terminated and (ii) a fraction, the
numerator of which is the number of days in the current fiscal year
through the date of termination of this Agreement, and the
denominator of which is 365 (the “ Pro-Rated Bonus
”).
5.5
Notwithstanding the foregoing, in the event of the termination of
this Agreement pursuant to Section 5.1(e), the Company
shall:
(a)
pay to the Executive, in a lump sum in cash within 30 days after
the date of termination of this Agreement, the Accrued
Obligations;
(b) continue to
pay to the Executive through the Retirement Date the compensation
(including, without limitation, base salary, bonus and vacation
pay) that the Executive would have received pursuant to this
Agreement had the Executive remained an employee of the Company
through the Retirement Date; and
(c)
continue to provide benefits (including, without limitation,
retirement, medical insurance, dental insurance, life insurance and
disability benefits) to the Executive and the Executive’s
family through the Retirement Date at least equal to those which
would have been provided to them if the Executive’s
employment had not been terminated, in accordance with the
applicable benefit plans in effect on the date of termination of
this Agreement or, if more favorable to the Executive and the
Executive’s family, in effect generally at any time
thereafter with respect to other executive officers of the Company
and its affiliated companies; provided , however ,
that if the Executive becomes reemployed with another employer and
is eligible to receive a particular type of benefits (e.g., medical
benefits) from such employer on terms at least as favorable to the
Executive and the Executive’s family as those being provided
by the Company, then the Company shall no longer be required to
provide those particular benefits to the Executive and the
Executive’s family; and provided further ,
however , that (i) if any particular benefits cannot be
provided because of plan or regulatory restrictions, then the
Company will pay to the Executive an amount equal to the cost the
Executive will incur in acquiring such benefits directly as a
result of the Company not providing such benefits and (ii) to the
extent the Company determines that the Executive’s qualifying
event for purposes of continuation of medical benefits under COBRA
occurs on the date of termination of this Agreement, such period of
continuation of benefits shall not be counted against or otherwise
reduce the period for which the Company must provide continuation
of medical benefits under this Section 5.5(c) unless the Executive
otherwise agrees.
In addition,
upon termination of this Agreement pursuant to Section 5.1(e), each
of the Executive’s restricted stock unit awards shall become
immediately vested to the same extent that such restricted stock
unit awards would have vested had the Executive remained an
employee of the Company through the Retirement Date. The
provision to the Executive of the benefits provided by this Section
5.5 shall be contingent upon the execution by the Executive of a
release in a form reasonably acceptable to the Company.
5.6
Notwithstanding the foregoing, in the event of the termination of
this Agreement on the Retirement Date, the Company shall pay to the
Executive, in a lump sum in cash within 30 days after the date of
termination of this Agreement, an amount equal to the sum of (a)
the Executive’s base salary through the Retirement Date, (b)
the annual bonus payable to the Executive for the fiscal year
ending January 1, 2011, which shall be paid in accordance with
Section 3.2, and (c) the amount of any compensation previously
deferred by the Executive (together with any accrued interest or
earnings thereon) and any accrued vacation pay, in each case to the
extent not previously paid.
5.7
For the avoidance of doubt, if the Executive shall become entitled
to any payments or other benefits pursuant to the Executive
Retention Agreement or Section 6.3(b) of this Agreement, the
payments and other benefits provided for by Sections 5.3 through
5.6 of this Agreement shall not be payable or provided to the
Executive.
5.8
For the avoidance of doubt, the termination of the
Executive’s employment as a result of the expiration of this
Agreement on the Retirement Date shall not be considered a
termination of this Agreement pursuant to Section 5.1(a) or
(e).
6.
Change in Control . The Company and the Executive
hereby agree that the Executive Retention Agreement shall remain in
full force and effect from the date of this Agreement through
January 2, 2010 and shall thereupon terminate in its entirety;
provided , however , that if the Company enters into
a definitive agreement with respect to a Change in Control on or
before January 2, 2010 and (i) the Change in Control is consummated
and (ii) the Executive’s employment with the Company is
terminated, in each case, on or before April 30, 2010, then the
Executive shall be entitled to the benefits, if any, and subject to
the obligations set forth in the Executive Retention Agreement and
the terms and conditions of this Section 6 shall not
apply. The terms and conditions of this Section 6 shall
become effective and shall be binding on the Company and the
Executive as of January 3, 2010 (but not prior to such date),
unless the proviso contained in the preceding sentence shall
apply.
6.1
Key Definitions . As used herein, the following
terms shall have the following respective meanings:
(a)
“ Change in Control ” means an event or
occurrence set forth in any one or more of clauses (i) through (iv)
below (including an event or occurrence that constitutes a Change
in Control under one of such clauses but is specifically exempted
from another such clause):
(i) 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, aft
