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EXHIBIT 10.1
SEVERANCE AGREEMENT
This Severance Agreement (this "Agreement") has been made and entered
into as of the 16th day of February, 2000 by and among Cannondale Corporation, a
Delaware corporation (the "Corporation"), and William A. Luca (the "Executive").
W I T N E S S E T H:
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WHEREAS, the Executive has served as a director and executive
officer of the Corporation, and the Corporation desires to obtain the
Executive's continued commitment to the Corporation; and
WHEREAS, the Corporation and the Executive desire to enter into this
Agreement upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good, valuable and sufficient consideration, the
receipt of which is hereby acknowledged, each of the parties hereto agrees as
follows:
1. Definitions. As used in this Agreement, the following terms
shall have the meanings set forth below:
"Annual Base Salary" shall mean that amount equal to
12 times the highest monthly base salary paid or payable, including any base
salary which has been earned but deferred, to the Executive by the Corporation
and its affiliated companies in respect of the twelve-month period immediately
preceding the month in which the Severance Date occurs.
"Cause" shall mean any termination of the Executive
by the Corporation because the Executive (i) has committed an act of material
willful misconduct in connection with the performance of his duties as an
employee of the Corporation or (ii) is convicted of a crime involving moral
turpitude or a felony.
"Change of Control" shall have the meaning set forth
in Section 2 of the Change-of-Control Employment Agreement.
"Change-of-Control Employment Agreement" shall mean
that certain Change-of-Control Employment Agreement, dated as of February 5,
1998, by and between the Corporation and the Executive.
"Disability" for purposes of Section 2 hereof shall
mean that the Executive has become eligible to receive benefits under any long
term disability plan of the Company.
"Good Reason" shall mean the occurrence, without the
Executive's express written consent, of any of the following circumstances,
unless such circumstances are
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fully corrected within five days after written notice from the Executive: (i)
the failure of the Executive to continue to be retained as an employee of the
Company in a senior executive position with substantially the same duties,
office arrangements and eligibility for benefit programs, including but not
limited to bonuses, as he currently enjoys as of the date of this Agreement;
(ii) a reduction by the Corporation in the Executive's base salary then
currently being paid; or (iii) a relocation of the Executive's office to a
location more than 50 miles from the current executive office of the Corporation
or a change in the Executive's work schedule that requires him to work more than
three days per week in the Corporation's facilities and two days per week at
home.
"Non-Competition Agreement" shall have the meaning
set forth in Section 2 of this Agreement.
"Recent Annual Bonus" shall mean that amount equal to
the Executive's highest profit sharing bonus under the Company's profit sharing
plan for the last three full fiscal years prior to the Severance Date
(annualized in the event that the Executive was not employed by the Company for
the whole of such fiscal year).
"Severance Date" shall have the meaning set forth in
Section 2 of this Agreement.
2. Severance Date. Provided no Change of Control shall have
occurred prior thereto, and provided further that the Company's obligations
under the Change-of-Control Employment Agreement and/or that certain
Non-Competition Agreement, dated as of February 16, 2000 (the "Non-Competition
Agreement"), by and between the Company and the Executive have not been
triggered, the Corporation's and the Executive's obligations under this
Agreement will become effective as of the date on which the Executive's
employment is terminated by the Corporation without Cause or by the Executive
for Good Reason (the "Severance Date"). The termination of the Executive by the
Corporation for Cause, the death of the Executive, the resignation or
termination of the Executive due to Disability and a voluntary resignation by
the Executive without Good Reason will not cause the obligations of the
Corporation under this Agreement to become effective.
3. Obligations of the Corporation. If the obligations of the
Corporation set forth in this Agreement are triggered pursuant to Section 2
above:
(a) The Corporation shall pay to the Executive in a
lump sum in cash within 30 days after the Severance Date the aggregate of the
following amounts:
(i) the sum of (1) the Executive's Annual
Base Salary through the Severance Date to the extent not theretofore
paid; (2) the product of the higher of (I) the Recent Annual Bonus and
(II) the annual profit sharing bonus paid or payable, including any
bonus or portion thereof which has been earned but deferred (and
annualized for any fiscal year consisting of less than twelve full
months or during which the Executive was employed for less than twelve
full months), for the most recently completed fiscal year (such higher
amount being referred to as the "Highest Annual Bonus") and (y) a
fraction, the numerator of which is the number of days in the current
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fiscal year through the Severance Date, and the denominator of which is
365; and (3) 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 theretofore paid;
and
(ii) the amount equal to the product of (i)
five and (ii) the sum of (x) the Executive's Annual Base Salary and (y)
the Highest Annual Bonus.
(b) Except as expressly provided in Section 9 below
or otherwise, for three years after the Severance Date, or such longer period as
may be provided by the terms of the appropriate plan, program, practice or
policy, the Corporation shall continue benefits to the Executive and/or the
Executive's family at least equal to those which would have been provided to
them in accordance with the plans, programs, practices and policies described in
Section 4(b)(iv) of the Change-of-Control Employment Agreement, excluding
insurance for disability, wage continuation, accidental death or dismemberment
and business travel, as if the Executive's employment had not been terminated
or, if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Corporation and its
affiliated companies and their families, provided, however, that if the
Executive becomes re-employed with another employer and is eligible to receive
medical or other welfare benefits under another employer provided plan, the
medical and other welfare benefits described herein shall be secondary to those
provided under such other plan during such applicable period of eligibility. For
purposes of determining eligibility (but not the time of commencement of
benefits) of the Executive for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive shall be considered to have
remained employed until three years after the Severance Date and to have retired
on the last day of such period.
4. Obligations of the Executive. If the obligations of the Executive
set forth in this Agreement are triggered pursuant to Section 2 above:
(a) The Executive agrees that he shall not, for a
period of two years following the Severance Date (the "Non-Competition Period"),
without the prior written consent of the Company, directly or indirectly
(whether as a sole proprietor, partner, venturer, stockholder, director,
officer, consultant, member, employee or in any other capacity as principal or
agent or through any person, corporation, partnership, entity or employee acting
as nominee or agent) conduct or engage in or be interested in or associated with
any firm, association, syndicate, partnership, company, corporation or other
entity which conducts or engages in the bicycle or motorcycle manufacturing,
marketing or distribution business, or any other business engaged in by the
Company on the Severance Date, in any geographic areas in which the Company is
then so engaged in business, nor shall Executive interfere with, disrupt or
attempt to disrupt the relationship, contractual or otherwise, between the
Company, on the one hand, and any customer, supplier, lessor or lessee of the
Company, on the other hand, nor shall the Executive directly or indirectly
solicit or induce any Company employee to leave the employ of the Company or
hire or attempt to hire any such employee to provide any services to any person
or entity that competes with the Company or is preparing to compete with the
Company, or with which the Company is preparing to compete; provided, however,
that this Section 4 shall not
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prohibit the Executive from owning beneficially or of record not more than 1% of
the outstanding equity securities of any entity whose equity securities are
registered under the Securities Exchange Act of 1934, as amended, or are listed
for trading on any United States or foreign stock exchange or quotation system.
(b) It is the desire and intent of the parties that
the provisions of this Section 4 shall be enforced in the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which employment is sought. Accordingly, if any particular portion of this
Section 4 shall be adjudged to be invalid or unenforceable, the court shall have
the power to amend the duration or geographic scope of this Section 4 or delete
therefrom the portion determined to be invalid or unenforceable, such amendment
or deletion to apply only with respect to the operation of this paragraph in the
particular jurisdiction in which such adjudication is made.
5. No Participation in Bonus Program or Stock Purchase Plan.
After the Severance Date, except to the extent provided in this Agreement, the
Executive is not eligible for any form of cash bonus or to participate in the
Corporation's employee stock purchase plan. The Corporation will immediately
refund to the Executive all amounts withheld under the Corporation's employee
stock purchase plan through the Severance Date, and any further withholding will
cease.
6. Vesting and Payout of the 401(k) Plan. The Executive will
continue to vest all amounts in the 401(k) Plan through the Severance Date.
After the Severance Date, the Executive may elect either a lump-sum distribution
or a direct rollover of his vested amounts under the Corporation's employee
savings incentive plan, in accordance with the governing plan documents as in
effect from time to time and applicable IRS requirements.
7. Stock Options. If the obligations of the Corporation set
forth in this Agreement are triggered pursuant to Section 2 above, the
Executive's stock options shall be exercisable pursuant to the terms and
conditions of the relevant stock option plan and any stock option agreement
entered into by the Executive pursuant to such stock option plan. Under no
circumstances will the vesting of the Executive's stock options be accelerated
due to any terms or conditions contained in this Agreement.
8. Loan Forgiveness. If during the term of this Agreement, the
Executive is terminated without Cause or voluntarily resigns with Good Reason,
then the entire principal amount of that certain Amended and Restated Promissory
Note dated as of July 27, 1999 (the "Note"), including any principal amount that
may be added after the original date of the Note, and accrued interest and other
charges, if any, shall immediately be forgiven and the Executive shall have no
further liability under the Note.
9. Continuation of Medical Benefits. Regardless of whether the
obligations of the Corporation set forth in Section 2 above have been triggered,
upon any termination of the Executive's employment with the Corporation for any
reason, including without limitation termination by the Corporation for Cause or
without Cause or voluntary termination by the Employee for Good Reason or
without Good Reason, medical benefits for the Executive (and his
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spouse) will be continued by the Company until such time as Medicare coverage
begins for the Executive (and, with respect to his spouse, for his spouse) on
terms and conditions not less favorable in any material respect than the
Executive's medical benefits as of the date of this Agreement.
10. Full Settlement. The Corporation's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any setoff, counterclaim, recoupment, defense
or other claim, right or action which the Corporation may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Corporation agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may incur as a result of any contest
(regardless of the outcome thereof) by the Corporation, the Executive or others
of the validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of any
contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
federal rate provided for in Section 7872 (f)(2)(A) of the Internal Revenue Code
of 1986, as amended.
11. Governing Law; Forum. This Agreement is delivered in the
State of Connecticut and shall be construed and enforced in accordance with and
governed by the laws of the State of Connecticut, without giving effect to its
conflict of laws rules or principles. Each of the parties hereto (i) agrees that
any action, proceeding or claim against it arising out of or in any way related
to this Agreement shall be brought and enforced in the courts of the State of
Connecticut or the United States of America for the District of Connecticut;
(ii) irrevocably submits to such jurisdiction; and (iii) irrevocably waives any
objection to such jurisdiction or to either of such forums as an inconvenient
forum.
12. Notices. All notices and other communications hereunder
shall be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
William A. Luca
c/o Cannondale Corporation
16 Trowbridge Drive
Bethel, Connecticut 06810
If to the Corporation:
Cannondale Corporation
16 Trowbridge Drive
Bethel, Connecticut 06810
Attention: Chief Executive Officer
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or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
13. Counterparts, Entire Agreement; Amendments. This Agreement
may be signed in counterparts, each of which together shall constitute one and
the same instrument. This Agreement supersedes all prior agreements other than
the Change-of-Control Employment Agreement and Non-Competition Agreement and,
together with the Change-of-Control Employment Agreement and Non-Competition
Agreement, constitute the entire understanding of the parties hereto with
respect to the subject matter hereof. This Agreement may not be amended except
by a writing executed by all parties hereto.
14. Assignment. This Agreement shall be binding upon the
parties and their respective heirs, legal representatives, estates, successors
and assigns, as the case may be, and shall inure to the benefit of the parties
and their respective heirs, legal representatives, estates, successors and
permitted assigns; provided, however, this Agreement may not be assigned by any
party hereto without the prior written consent of the other party.
15. Authorization. The Corporation represents and warrants to
the Executive that the person executing this Agreement has been authorized to do
so and that this Agreement constitutes the legal, valid and binding obligation
of such company, enforceable against such company in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
CANNONDALE CORPORATION
By: /s/ JOSEPH S. MONTGOMERY
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Name: Joseph S. Montgomery
Title: Chief Executive Officer
THE EXECUTIVE
/s/ WILLIAM A. LUCA
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William A. Luca
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