EXHIBIT C-4
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS CHANGE IN CONTROL SEVERANCE AGREEMENT (this "Agreement"), dated as of
May 15, 1998, is made and entered by and between PMC International, Inc., a
Colorado corporation (the "Company"), and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (the "Executive").
RECITALS
WHEREAS, the Executive is a senior executive and key employee of the
Company or one or more of its Subsidiaries and has made and is expected to
continue to make major contributions to the short-term and long-term growth and
financial strength of the Company;
WHEREAS, the Company recognizes that, as is the case for most publicly held
companies, the possibility of a Change in Control (as defined below) exists; and
WHEREAS, the Board (as defined below) has determined that it is in the best
interests of the Company and its stockholders to secure the Executive's
continued services and to ensure the Executive's continued dedication and
objectivity 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 of
the Company, without concern as to whether Executive might be hindered or
distracted by personal uncertainties and risks created by any such possible
Change in Control, and to encourage Executive's full attention and dedication to
the Company.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises, covenants and agreements contained herein, the Company and Executive
hereby agree as follows:
AGREEMENT
1. Certain Defined Terms. In addition to terms defined elsewhere herein, the
following terms have the respective meanings set forth below:
(a) "Base Pay" means the Executive's annual base salary at a rate not less
than the Executive's annual fixed or base compensation as in effect
for Executive immediately prior to the occurrence of a Change in
Control or such higher rate as may be determined from time to time by
the Board or a committee thereof.
(b) "Board" means the Board of Directors of the Company.
(c) "Cause" means that the Executive shall have:
(i) committed a breach of this Agreement or any employment agreement
between the Company or Subsidiary and the Executive and either:
(A) such breach is not cured within thirty (30) days after
notice from the Company specifying the action which constitutes
the breach and demanding its discontinuance, or (B) such breach
is cured and the breach recurs during or after such 30-day
period,
(ii) exhibited willful disobedience of or repeated failure to perform
reasonable directions of the Board,
(iii) committed gross malfeasance in performance of his duties
hereunder,
(iv) committed acts resulting in an indictment charging the Executive
with the commission of a felony,
(v) engaged in fraud, misappropriation, or embezzlement,
(vi) disclosed confidential information in violation of any agreement
between the Company or Subsidiary and the Executive, or
(vii) willfully engaged in conduct materially injurious to the
Company.
(d) "Change in Control" occurs when any of the following events occur
during the Term of this Agreement:
(i) any person or entity other than the Executive or Bedford Capital
Financial Corporation becomes the record or beneficial owner,
directly or indirectly, of more than fifty percent (50%) of the
then outstanding voting stock of the Company,
(ii) the shareholders of the Company approve a merger or
consolidation of the Company with any other entity, other than a
merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent at least eighty percent (80%) of the
combined voting power of the voting securities of the Company or
such surviving entity outstanding immediately after such merger
or consolidation, or
(iii) the shareholders approve an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets.
(e) "Incentive Pay" means an annual amount equal to the average of the
annual bonus paid or payable in regard to services rendered in any
fiscal year during the three fiscal years immediately preceding the
fiscal year in which the Change in Control occurs pursuant to any
annual bonus plan, program or arrangement (whether or not funded) of
the Company or Subsidiary, or any successor thereto. The computation
of Incentive Pay shall include any fiscal years or portions thereof in
which no annual bonus was paid or payable. If the Executive has been
employed for less than three (3) years at the Termination Date, the
denominator used to compute such average shall equal the Executive's
length of employment.
(f) "Severance Period" means the period of time commencing on the date of
the first occurrence of a Change in Control and continuing until the
earliest of (i) the second anniversary of the occurrence of the Change
in Control, (ii) the Executive's death or termination by disability,
or (iii) the Executive's attainment of age 65.
(g) "Subsidiary" means a corporation, company or other entity
(i) more than 50% of whose outstanding shares or securities
(representing the right to vote for the election of directors or
other managing authority are, or
(ii) which does not have outstanding shares or securities (as may be
the case in a partnership, joint venture or unincorporated
association), but more than 50% of whose ownership interest
representing the right generally to make decisions for such other
entity is,
owned or controlled, directly or indirectly, by the Company.
(h) "Term" means the period commencing as of the date hereof and expiring
as of the later of (i) the close of business on December 31, 2000, or
(ii) the expiration of the Severance Period; provided, however, that
(A) commencing on January 1, 2000 and each January 1 thereafter, the
term of this Agreement will automatically be extended for an
additional year unless, not later than September 30 of the immediately
preceding year, the Company or the Executive shall have given notice
that it or the Executive, as the case may be, does not wish to have
the Term extended and (B) if, prior to a Change in Control, the
Executive ceases for any reason to be an employee of the Company or
any Subsidiary, thereupon without further action the Term shall be
deemed to have expired and this Agreement will immediately terminate
and be of no further effect. For purposes of this Section 1(h), the
Executive shall not be deemed to have ceased to be an employee of the
Company or any Subsidiary by reason
Exhibit C-4 Page 2
of the transfer of Executive's employment between the Company and any
Subsidiary, or among any Subsidiaries
(i) "Termination Date" means the date on which the Executive's employment
is terminated (the effective date of which shall be the date of
termination, or such other date that may be specified by the Executive
if the termination is pursuant to Section 3(b) or Section 3(c)).
2. Operation of Agreement. This Agreement will be effective and binding
immediately upon its execution, but, anything in this Agreement to the
contrary notwithstanding, this Agreement will not be operative unless and
until a Change in Control occurs. Upon the occurrence of a Change in
Control at any time during the Term, without further action, this Agreement
shall become immediately operative.
3. Termination Following a Change in Control. (a) If the Executive's
employment is terminated by the Company or any Subsidiary during the
Severance Period, the Executive shall receive the benefits described in
Section 4 unless such termination is the result of the occurrence of one or
more of the following events:
(i) The Executive's death,
(ii) If the Executive becomes permanently disabled within the meaning
of, and begins actually to receive disability benefits pursuant
to, the long-term disability plan in effect for, or applicable
to, Executive immediately prior to the Change in Control,
(iii) Retirement of the Executive on or after age 65, or
(iv) Cause.
(b) If the Executive terminates his employment with the Company or its
Subsidiaries during the Severance Period while having Good Reason (as
defined below), the Executive shall receive the benefits described in
Section 4. The Executive shall have Good Reason if such termination is
not made in connection with any reason described in Section 3(a)
above, and if such termination follows the occurrence of:
(i) a reduction in the Executive's Base Pay or Incentive Pay as in
effect immediately prior to the Change in Control (including a
change in performance criteria which impacts negatively on the
Executive's ability to achieve Incentive Pay) under the
Executive's employment agreement with the Company or Subsidiary,
the failure to continue the Executive's participation in any
incentive compensation plan in which he was a participant
immediately prior to the Change in Control unless a plan
providing a substantially similar opportunity is substituted, or
the termination or material reduction of any employee benefit or
perquisite enjoyed by him immediately prior to the Change in
Control, unless comparable benefits or perquisites (determined
in the aggregate) are substituted,
(ii) material diminution in the Executive's duties as in effect
immediately prior to the Change in Control or assignment to the
Executive of duties materially inconsistent with his duties as
in effect immediately prior to the Change in Control,
(iii) the loss of any of the Executive's titles or positions (in his
capacity as an officer of the Company) held immediately prior to
the Change in Control,
(iv) the failure of the Company to obtain the assumption in writing
of its obligation to perform this Agreement by any successor
after a merger, consolidation, sale or similar transaction, or
(v) the Company relocates its principal executive offices, or
requires the Executive to have his principal location of work
changed, to any location that is in excess of fifty (50) miles
from the location thereof immediately prior to the Change in
Control,
Exhibit C-4 Page 3
(vi) Notwithstanding anything contained in this Agreement to the
contrary, any circumstance described in clauses (i) through (v)
of this Section 3(b) shall not constitute Good Reason unless the
Executive gives written notice thereof to the Company in
accordance with Section 13 and the Company fails to remedy such
circumstance within fifteen (15) business days following receipt
of such notice.
(c) Notwithstanding anything contained in this Agreement to the contrary,
in the event of a Change in Control, the Executive may terminate
employment with the Company and any Subsidiary for any reason, or
without reason, during the sixty-day period immediately following the
date one year after the first occurrence of a Change in Control with
the right to severance compensation as described in Section 4.
(d) Except as otherwise described in Section 4, a termination by the
Company pursuant to Section 3(a) or by the Executive pursuant to
Section 3(b) or Section 3(c) will not affect any rights that the
Executive may have pursuant to any agreement, policy, plan, program or
arrangement of the Company providing benefits, which rights shall be
governed by the terms thereof.
4. Severance Compensation. Any amounts and benefits to which the Executive is
entitled under this Agreement shall be offset and reduced by any other
amount of severance benefits to be received by the Executive upon
termination of employment under any employment agreement between the
Executive and the Company (or Subsidiary) or any other severance plan,
policy, agreement or arrangement of the Company or Subsidiary. The amounts
and benefits to which the Executive is entitled pursuant to Section 3 of
this Agreement are:
(a) A cash payment payable during each month of the Continuation Period
(as defined below) in an amount equal to 1/12 of the sum of Base Pay
and Incentive Pay, and commencing on the first day of the month
following the Termination Date,
(b) A lump-sum cash payment which the Company will pay within ten (10)
business days after the expiration of the Continuation Period (as
defined below) equal to the Company matching contributions that would
have been made under the Company's 401(k) savings plan(s) on the
amounts described in Section 4(a) if the Executive had continued in
employment and participated to the fullest extent under such plan(s).
For this purpose, the Company matching contribution rate shall be
determined using the rate of Company matching contribution in effect
at the Change in Control, or the rate in effect on the Termination
Date if greater.
(c) For a period of twenty-seven (27) months following the Termination
Date (the "Continuation Period"), the Company will arrange to provide
the Executive with continued medical, group life, and dental benefits
substantially similar, and subject to the same employee contribution
requirement, to those that the Executive was receiving or entitled to
receive immediately prior to the Termination Date (or, if greater,
immediately prior to the Change in Control). If and to the extent that
the Company determines that any benefit described in this Section 4(c)
cannot be paid or provided under any policy, plan, or program or
arrangement of the Company or any Subsidiary, as the case may be, then
the Company will itself make a lump-sum payment to the Executive equal
to the actuarial value of the Company's cost of providing such
benefits. Benefits otherwise receivable by the Executive pursuant to
this Section 4(c) will be reduced to the extent comparable welfare
benefits are actually received by the Executive from another employer
during the Continuation Period following the Executive's Termination
Date, and any such welfare benefits actually received by the Executive
shall be reported by the Executive to the Company.
Provided, however, notwithstanding any other agreement between the Company
or Subsidiary and the Executive to the contrary, any payments due under
this Section 4 that are rendered non-deductible by the Company (or any
Subsidiary) solely by virtue of the $1,000,000 limit on applicable employee
remuneration established under 162(m) of the Internal Revenue Code of 1986,
as amended, during the tax year of the Change in Control, shall not be
payable until the next following tax year of the Company or its successor.
Such payment shall then be made within ten (10) business days following the
start of such tax year.
Exhibit C-4 Page 4
5. Excess Parachute Payment Limitations. In the event that the Executive would
be subject to a tax pursuant to Section 4999 of the Internal Revenue Code,
as amended, (the "Code"), as a result of an excess parachute payment, or a
deduction would not be allowed to the Company or any Subsidiary for all or
any part of such payment by reason of Section 280G of the Code, such
payment shall be reduced. In the event such reduction is required, the
amounts payable to the Executive under this Agreement, or any other
agreement, plan or program, of the Company or any Subsidiary, shall be
reduced to an amount such that the present value of all payments in the
nature of compensation which are contingent upon a Change in Control total
an amount not greater than three (3) times the Executive's base amount less
one dollar, as any such terms are defined or applied in Section 280G of the
Code and the proposed regulations thereunder. The determinations to be made
with respect to this Section 5 shall be made by the public accounting firm
that is retained by the Company as of the date immediately prior to the
Change in Control (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within
fifteen (15) business days of being requested to do so by the Company. All
fees and expenses of the Accounting Firm shall be borne solely by the
Company.
6. No Mitigation Obligation. The Executive will not be required to mitigate
the amount of any payment provided for in this Agreement by seeking other
employment, nor will any profits, income, earnings or other benefits from
any source whatsoever create any mitigation, offset, reduction or any other
obligation on the part of the Executive hereunder or otherwise, except as
expressly provided in Section 4 and Section 8 of this Agreement.
7. Legal Fees and Expenses. If any contest or dispute shall arise under this
Agreement involving the failure or refusal of the Company to perform fully
in accordance with the terms hereof, the Company shall reimburse the
Executive, on a current basis, for all legal fees and expenses, if any,
incurred by the Executive in connection with such contest or dispute
regardless of the result thereof.
8. Competitive Activity.
(a) Notwithstanding any other provision of this Agreement or any other
agreement between the Company and the Executive to the contrary,
during the continuance of his employment by the Company and for a
period of twenty-four (24) months after termination of his employment
(the "Non-Compete Period"), the Executive shall not (i) anywhere in
the United States, engage in any business which competes directly or
indirectly with the Company or (ii) directly or indirectly, use,
disseminate, or disclose for any purpose other than for the purposes
of the Company's business, any of the Company's confidential
information or trade secrets, unless such disclosure is compelled in a
judicial proceeding. Upon termination of his employment, all
documents, records, notebooks, and similar repositories of records
containing information relating to any trade secrets or confidential
information then in the Executive's possession or control, whether
prepared by him or by others, shall be left with the Company or
returned to the Company upon its request. In the event the Executive
violates this Section 8, the remaining monthly payments provided for
under Section 4(a) and Section 4(c) shall cease.
(b) During the Non-Compete Period, the Executive will not (i) directly or
indirectly cause, or attempt to cause, to leave the employ of the
Company any employee of the Company that is an employee of the Company
at any time during the period beginning six months before the date of
this Agreement and ending at the end of the Non-Compete Period, (ii)
directly or indirectly solicit any customer of the Company as to which
the Executive obtained knowledge during his affiliation with the
Company as a member of the leadership team of the Company or with any
affiliate of the Company, (iii) knowingly or recklessly interfere or
attempt to interfere with any transaction in which the Company was
involved during the term of this Agreement, or (iv) in any other way
knowingly or recklessly interfere with the relationship between the
Company and any of its employees, customers or suppliers.
9. Employment Rights. Nothing expressed or implied in this Agreement will
create any right or duty on the part of the Company or the Executive to
have the Executive remain in the employment of the Company or any
Subsidiary prior to or following any Change in Control.
10. Release. Payment of the severance compensation set forth in Section 4
hereto is conditioned upon the Executive executing and delivering to the
Company a general release to be provided by the Company.
Exhibit C-4 Page 5
11. Withholding of Taxes. The Company may withhold from any amounts payable
under this Agreement all federal, state, city or other taxes as the Company
is required to withhold pursuant to any law or government regulation or
ruling.
12. Successors and Binding Effect. This Agreement is a personal service
agreement and may not be assigned by the Company or the Executive, except
that the Company may assign this Agreement to a successor by merger,
consolidation, sale of assets or other reorganization. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors, assigns, and legal
representatives.
13. Notices. Any notice required or permitted to be given under this Agreement
shall be directed to the appropriate party in writing and mailed or
delivered, if to the Company, to ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or to the Company's then principal office, if
different, and if to the Executive, to ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
14. Applicable Law. This Agreement is entered into in the State of Colorado and
for all purposes shall be governed by the laws of the State of Colorado.
15. Validity. If any provision of this Agreement or the application of any
provision hereof to any person or circumstances is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and the
application of such provision to any other person or circumstances will not
be affected, and the provision so held to be invalid, unenforceable or
otherwise illegal will be reformed to the extent (and only to the extent)
necessary to make it enforceable, valid or legal.
16. Representation by Counsel. The parties hereto acknowledge that they have
had the opportunity to consult with counsel and have done so to the extent
they deemed appropriate during the negotiation, preparation and execution
of this Agreement.
17. Counterparts. This instrument may be executed in one or more counterparts,
each of which shall be deemed an original.
18. Amendment. This Agreement may not be amended except by an instrument in
writing executed by each of the parties hereto.
Exhibit C-4 Page 6
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
and delivered as of the date first above written.
PMC INTERNATIONAL, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President & CEO
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Exhibit C-4 Page 7