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Exhibit 10.12
SENIOR EXECUTIVE SEVERANCE AGREEMENT
AGREEMENT made as of this 21 day of January, 2000 by and between Zoll
Medical Corporation, a Massachusetts corporation with its principal place of
business in Burlington, Massachusetts (the "Company"), and Richard A. Packer of
Westborough, Massachusetts (the "Executive").
1. PURPOSE. The Company considers it essential to the best interests of
its stockholders to foster the continuous employment of key management
personnel. The Board of Directors of the Company (the "Board") recognizes,
however, that, as is the case with many publicly held corporations, the
uncertainty and questions which may arise among management in connection with a
Change in Control (as defined in Section 2 hereof) may result in the departure
or distraction of management personnel to the detriment of the Company and its
stockholders. Therefore, the Board has determined that appropriate steps should
be taken to reinforce and encourage the continued attention and dedication of
members of the Company's management, including the Executive, to their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control. Nothing in this Agreement
shall be construed as creating an express or implied contract of employment and,
except as otherwise agreed in writing between the Executive and the Company, the
Executive shall not have any right to be retained in the employ of the Company.
2. CHANGE IN CONTROL. A "Change in Control" shall be deemed to have
occurred in any one of the following events:
(a) any "person," as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the "Act") (other than the Company, any of its
Subsidiaries, or any trustee, fiduciary or other person or entity holding
securities under any employee benefit plan or trust of the Company or any of its
Subsidiaries), together with all "affiliates" and "associates" (as such terms
are defined in Rule 12b-2 under the Act) of such person, shall become the
"beneficial owner" (as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, of securities of the Company representing 25% or more of
either (A) the combined voting power of the Company's then outstanding
securities having the right to vote in an election of the Company's Board of
Directors ("Voting Securities") or (B) the then outstanding shares of Stock of
the Company (in either such case other than as a result of an acquisition of
securities directly from the Company); or
(b) persons who, as of the date hereof, constitute the Company's Board of
Directors (the "Incumbent Directors") cease for any reason, including, without
limitation, as a result of a tender offer, proxy contest, merger or similar
transaction, to constitute at least a majority of the Board, provided that any
person becoming a director of the Company subsequent to the date hereof whose
election or nomination for election was approved by a vote of at least a
majority of the Incumbent Directors shall, for purposes of this Agreement, be
considered as Incumbent Director provided, however, that there shall be excluded
for consideration as Incumbent Director any individual whose initial assumption
of office occurred as a result of an actual or threatened election contest with
respect to the election or removal of 2 directors or other actual or threatened
solicitation of proxies or consents, by or on behalf of a person other than the
Board of Directors; or
(c) the stockholders of the Company shall approve (A) any consolidation or
merger of the Company or any Subsidiary where the shareholders of the Company,
immediately prior to the consolidation or merger, would not, immediately after
the consolidation or merger, beneficially own (as such term is defined in Rule
13d-3 under the Act), directly or indirectly, shares representing in the
aggregate more than 50% of the voting shares
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of the corporation issuing cash or securities in the consolidation or merger (or
of its ultimate parent corporation, if any), (B) any sale, lease, exchange or
other transfer (in one transaction or a series of transactions contemplated or
arranged by any party as a single plan) of all or substantially all of the
assets of the Company or (C) any plan or proposal for the liquidation or
dissolution of the Company.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to
have occurred for purposes of the foregoing clause (a) solely as the result of
an acquisition of securities by the Company which, by reducing the number of
shares of Stock or other Voting Securities outstanding, increases (x) the
proportionate number of shares of Stock beneficially owned by any person to 25%
or more of the shares of Stock then outstanding or (y) the proportionate voting
power represented by the Voting Securities beneficially owned by any person to
25% or more of the combined voting power of all then outstanding Voting
Securities; provided, however, that if any person referred to in clause (x) or
(y) of this sentence shall thereafter become the beneficial owner of any
additional shares of Stock or other Voting Securities (other than pursuant to a
stock split, stock dividend, or similar transaction), then a "Change in Control"
shall be deemed to have occurred for purposes of the foregoing clause (a).
3. TERMINATING EVENT. A "Terminating Event" shall mean any of the events
provided in this Section 3 occurring subsequent to a Change in Control as
defined in Section 2:
(a) termination by the Company of the employment of the Executive with the
Company for any reason;
or
(b) termination by the Executive of the Executive's employment with the
Company for any reason.
4. SEVERANCE PAYMENT. In the event a Terminating Event occurs within
thirty-six (36) months after a Change in Control:
(a) the Company shall pay to the Executive an amount equal to two and
one-half (2.5) times the sum of (i) the Executive's base salary immediately
prior to the Terminating 3 Event (or immediately prior to the Change in Control,
if higher) and (ii) the Executive's most recent bonus paid prior to the Change
in Control, payable in one lump-sum payment on the Date of Termination;
(b) the Company shall continue to provide health and dental insurance
coverage to the Executive, on the same terms and conditions as though the
Executive had remained an active employee, for thirty (30) months after the
Terminating Event; and
(c) the Company shall pay to the Executive all reasonable legal and
arbitration fees and expenses incurred by the Executive in obtaining or
enforcing any right or benefit provided by this Agreement, except in cases
involving frivolous or bad faith litigation.
5. ADDITIONAL BENEFITS
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any compensation, payment or distribution by
the Company to or for the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (the "Severance Payments"), 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 Executive
shall be entitled to receive an additional payment (a "Gross-Up Payment") such
that the net amount retained by the Executive, after deduction of any Excise Tax
on the Severance Payments, any Federal, state and local income tax, employment
tax and Excise Tax upon the payment provided by this subsection, and any
interest and/or penalties assessed with respect to such Excise Tax, shall be
equal to the Severance Payments.
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(b) Subject to the provisions of Section 5(c), all determinations required
to be made under this Section 5, including whether a Gross-Up Payment is
required and the amount of such Gross-Up Payment, shall be made by Ernst & Young
LLP or any other nationally recognized accounting firm selected by the Company
(the "Accounting Firm"), which shall provide detailed supporting calculations
both to the Company and the Executive within 15 business days of the Date of
Termination, if applicable, or at such earlier time as is reasonably requested
by the Company or the Executive. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation applicable to individuals
for the calendar year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rates of individual taxation in the
state and locality of the Executive's residence on the Date of Termination, net
of the maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes. The initial Gross-Up Payment, if any,
as determined pursuant to this Section 5(b), shall be paid to the Executive
within five days of the receipt of the Accounting Firm's determination. If the
Accounting Firm determines that no Excise Tax is payable by the Executive, the
Company shall furnish the Executive with an opinion of the Accounting Firm that
failure to report the Excise Tax on the Executive's applicable federal income
tax return would not result in the imposition of a negligence or similar
penalty. Any determination by the Accounting Firm shall be binding upon the
Company and the Executive. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made (an "Underpayment"). In the
event that the Company exhausts its remedies pursuant to Section 5(c) and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has
occurred, consistent with the calculations required to be made hereunder, and
any such Underpayment, and any interest and penalties imposed on the
Underpayment and required to be paid by the Executive in connection with the
proceedings described in Section 5(c), shall be promptly paid by the Company to
or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-up Payment. Such notification shall be given as soon as
practicable but no later than thirty (30) business days after the Executive
knows of such claim and shall apprise the Company of the nature of such claim
and the date on which such claim is requested to be paid. The Executive shall
not pay such claim prior to the expiration of the 30-day period following the
date on which he gives such notice to the Company (or such shorter period ending
on the date that any payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the Company
relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney selected by the Company,
(iii) cooperate with the Company in good faith in order to contest
effectively such claim, and
(iv) permit the Company to participate in any proceedings relating to such
claim; provided, however that the Company shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax, including
interest and penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 5(c), the Company shall control all
proceedings taken in connection 5 with such contest and, at its sole option, may
pursue or forego any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any
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administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive on an
interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax, including interest or
penalties with respect thereto, imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any other
issues raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 5(c), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 5(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon by
the Internal Revenue Service or any other taxing authority after taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 5(c), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
6. TERM. This Agreement shall take effect on the date first set forth
above and shall terminate upon the earlier of (a) the resignation or termination
of the Executive for any reason prior to a Change in Control, or (b) the date
which is thirty-six (36) months after a Change in Control if the Executive is
still employed by the Company.
7. WITHHOLDING. All payments made by the Company under this Agreement
shall be net of any tax or other amounts required to be withheld by the Company
under applicable law.
8. NOTICE AND DATE OF TERMINATION; DISPUTES; ETC.
(a) Notice of Termination. After a Change in Control and during the term
of this Agreement, any purported termination of the Executive's employment
(other than by reason of death) shall be communicated by written Notice of
Termination from one party hereto to the other party hereto in accordance with
this Section 8. For purposes of this Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the Date of Termination.
(b) Date of Termination. "Date of Termination", with respect to any
purported termination of the Executive's employment after a Change in Control
and during the term of this Agreement, shall mean 30 days after the Notice of
Termination is given (provided, that if the Executive's employment is terminated
for disability, the Executive shall not have returned to the full-time
performance of the Executive's duties during such 30-day period). In the case of
a termination by the Executive, the Date of Termination shall not be less than
15 days from the date such Notice of Termination is given. Notwithstanding
Section 3(a) of this Agreement, in the event that the Executive gives a Notice
of Termination to the Company, the Company may unilaterally accelerate the Date
of Termination and such acceleration shall not result in a Terminating Event for
purposes of Section 3(a) of this Agreement.
(c) No Mitigation. The Company agrees that, if the Executive's employment
by the Company is terminated during the term of this Agreement, the Executive is
not required to seek other employment or to attempt in any way to reduce any
amounts payable to the Executive by the Company pursuant to Sections 4(a), (b)
and (c) hereof. Further, the amount of any payment provided for in this
Agreement shall not be reduced by any compensation earned by the Executive as
the result of employment by another employer, by retirement benefits, by offset
against any amount claimed to be owed by the Executive to the Company or
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otherwise.
(d) Settlement and Arbitration of Disputes. Any controversy or claim
arising out of or relating to this Agreement or the breach thereof shall be
settled exclusively by arbitration in accordance with the laws of the
Commonwealth of Massachusetts by three arbitrators, one of whom shall be
appointed by the Company, one by the Executive and the third by the first two
arbitrators. If the first two arbitrators cannot agree on the appointment of a
third arbitrator, then the third arbitrator shall be appointed by the American
Arbitration Association in the City of Boston. Such arbitration shall be
conducted in the City of Boston in accordance with the rules of the American
Arbitration Association for commercial arbitrations, except with respect to the
selection of arbitrators which shall be as provided in this Section 8(d).
Judgment upon the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof.
9. SUCCESSOR TO EXECUTIVE. This Agreement shall inure to the benefit of
and be enforceable by the Executive's personal representatives, executors,
administrators, heirs, distributees, devisees and legatees. In the event of the
Executive's death after a Terminating Event but prior to the completion by the
Company of all payments due him under Section 4(a), (b) and (c) of this
Agreement, the Company shall continue such payments to the Executive's
beneficiary designated in writing to the Company prior to his death (or to his
estate, if the Executive fails to make such designation).
10. ENFORCEABILITY. If any portion or provision of this Agreement shall to
any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
11. WAIVER. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
12. NOTICES. Any notices, requests, demands and other communications
provided for by this agreement shall be sufficient if in writing and delivered
in person or sent by registered or certified mail, postage prepaid, to the
Executive at the last address the Executive has filed in writing with the
Company, or to the Company at its main office, attention of the Board of
Directors.
13. EFFECT ON OTHER PLANS. An election by the Executive to resign after a
Change in Control under the provisions of this Agreement shall not be deemed a
voluntary termination of employment by the Executive for the purpose of
interpreting the provisions of any of the Company's benefit plans, programs or
policies. Nothing in this Agreement shall be construed to limit the rights of
the Executive under the Company's benefit plans, programs or policies except as
otherwise provided in Section 5 hereof, and except that the Executive shall have
no rights to any severance benefits under any severance pay plan.
14. AMENDMENT. This Agreement may be amended or modified only by a written
instrument signed by the Executive and by a duly authorized representative of
the Company.
15. GOVERNING LAW. This is a Massachusetts contract and shall be construed
under and be governed in all respects by the laws of the Commonwealth of
Massachusetts .
16. OBLIGATIONS OF SUCCESSORS. The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform if no such succession had
taken place.
17. CONFIDENTIAL INFORMATION. The Executive shall never use, publish or
disclose in a manner adverse to the Company's interests, any proprietary or
confidential information relating to (a) the business, operations or
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properties of the Company or any subsidiary or other affiliate of the Company,
or (b) any materials, processes, business practices, technology, know-how,
research, programs, customer lists, customer requirements, or other information
used in the manufacture, sale or marketing of any of the respective products or
services of the Company or any subsidiary or other affiliate of the Company;
provided, however, that no breach or alleged breach of this Section 17 shall
entitle the Company to fail to comply fully and in a timely manner with any
other provision hereof. Nothing in this Agreement shall preclude the Company
from seeking money damages, or equitable relief by injunction or otherwise
without the necessity of proving actual damage to the Company, for any breach by
the Executive hereunder.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument
by the Company by its duly authorized officer, and by the Executive, as of the
date first above written.
ZOLL MEDICAL CORPORATION
By: /s/ Daniel M. Mulvena
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Name: Daniel M. Mulvena
Title: Chairman, Compensation Committee
/s/ Richard A. Packer
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Richard A. Packer
