Document:

Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (“Agreement”) is entered into as of the 7th of February 2011, (the “Effective Date”) by and between Osiris Therapeutics, Inc., a Delaware corporation (the “Company”), and Stephen W. Potter, (the “Executive”).

 

WHEREAS, the Company desires to employ the Executive, and the Executive desires to be employed by the Company, on the terms and conditions set forth herein from and after February 7, 2011; and

 

WHEREAS, the board of directors of the Company (the “Board”) has authorized the entry into this Agreement with the Executive.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto agree as follows:

 

1.                          Employment Agreement. On the terms and conditions set forth in this Agreement, the Company agrees to employ the Executive and the Executive agrees to be employed by the Company for the Employment Period set forth in Section 2 hereof and in the position and with the duties set forth in Section 3 hereof.

 

2.                          Term. The initial term of employment under this Agreement shall be for a three-year period commencing on the date hereof (the “Initial Term”). The term of employment shall be automatically renewed for an additional consecutive 12-month period (the “Extended Term”) as of the third and every subsequent anniversary of the date hereof, unless and until either party provides written notice to the other party in accordance with Section 11 hereof not less than 90 days before such anniversary date that such party is terminating the term of employment under this Agreement, which termination shall be effective as of the end of such Initial Term or Extended Term, as the case may be, or until such term of employment is otherwise terminated as hereinafter set forth. Such Initial Term and all such Extended Terms are collectively referred to herein as the “Employment Period.” The parties’ obligations under Sections 6, 8, 9, and 10 hereof shall survive the expiration or termination of the Employment Period.

 

3.                          Position and Duties. The Executive shall initially serve as Sr. Vice President of Operations and Corporate Development during the Employment Period. As such, the Executive shall render executive policy and other

 

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management services to the Company of the type customarily performed by persons serving in a similar, officer capacity, and shall perform the other duties and objectives as the CEO may determine from time to time. The Executive shall report to the CEO.  Objectives of the Executive may be amended by the CEO from time to time.  The Executive shall devote the sufficient efforts and working time to the performance of the Executive’s duties and the advancement of the business and affairs of the Company.

 

4.                          Compensation.

 

(a) Base Salary. During the Employment Period, the Company shall pay to the Executive an annual base salary (the “Base Salary”), which initially shall be at the rate of USD 275,000.16 per year. The Base Salary shall be reviewed no less frequently than annually and may be increased at the discretion of the Board. When the Executive’s Base Salary is increased, the increased amount shall be the Base Salary for the next 12-month period. Except as otherwise agreed in writing by the Executive, the Base Salary shall not be reduced from the amount previously in effect during the Employment Period. The Base Salary shall be payable semimonthly or in such other installments as shall be consistent with the Company’s payroll procedures.

 

(b) Bonus. At the discretion of the Board, the Executive will be eligible to earn a bonus for 2011 in the amount up to USD 100,000. The bonus amount will depend upon performance against mutually agreed targets.

 

(c) Benefits. During the Employment Period, the Executive will be entitled to such other benefits approved by the Board and made available to employees generally. Nothing contained in this Agreement shall prevent the Company from changing insurance carriers or from effecting modifications in insurance coverage or other employee benefits that impact Executive.

 

(d) Vacation: Holidays. The Executive shall be entitled to all public holidays observed by the Company and per Company policy as determined by the Board and fifteen (15) vacation days in accordance with the applicable vacation policies for senior executives of the Company, which shall be taken at a reasonable time or times so as not to negatively impact the operations of the Company. A maximum of fifteen (15) unused vacation days may be carried over for twelve months after the year in which they accrue.

 

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(e) Withholding Taxes and Other Deductions. To the extent required by law, the Company shall withhold from any payments due Executive under this Agreement any applicable federal, state or local taxes and such other deductions as are prescribed by law or Company policy.

 

(f) Equity. Upon the effective date of the Agreement, the Executive shall be granted 100,000 options to purchase Company common stock at the current fair market value based on the close of business market price on the last business day prior to your start date. The options shall vest ratably, one-fourth on each anniversary of the Effective Date for four consecutive years until fully vested.  Upon mutual agreement of the Board and the Executive, stock grants or similar instruments may be substituted in place of stock options.  All unvested shares vest immediately upon a change of control of the Company.

 

5.                          Expenses.  The Executive’s expenses incurred in the performance of his duties hereunder, including the costs of travel, and similar business expenses incurred shall be reimbursed by the Company promptly in accordance with Company expense policies upon periodic presentation by the Executive of an itemized account of such expenses, with appropriate documentation, which shall be reviewed by the audit committee from time to time at its discretion.

 

6.                     Confidentiality: Work Product.

 

(a) Information. The Executive acknowledges that the information, observations and data obtained by the Executive concerning the business and affairs of the Company and its Subsidiaries during the course of the Executive’s performance of services for, or employment with, any of the foregoing Persons (whether or not compensated for such services) are the property of the Company and its Subsidiaries, including information concerning acquisition opportunities in or reasonably related to the business or industry of the Company or its Subsidiaries of which the Executive becomes aware during such period. Therefore, the Executive agrees that he will not at any time (whether during or after the Employment Period) disclose to any unauthorized person or, directly or indirectly, use for the Executive’s own account or the account of any other Person, any of such information, observations or data without the Board’s consent, unless and to the extent that the aforementioned matters become generally known to and available for use by the public other than as a direct or indirect result of the Executive’s acts or omissions to act or the acts or omissions to act of other senior or junior management employees of the Company and its Subsidiaries. The Executive agrees to deliver to the Company at the termination of the Executive’s employment, or at any other time the Company may request in writing (whether during or after the Employment Period), all memoranda, notes,

 

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plans, records, reports and other documents, regardless of the format or media (and copies thereof), relating to the business of the Company and its Subsidiaries and their predecessors (including, without limitation, all acquisition prospects, lists, customer and contact information) which the Executive may then possess or have under the Executive’s control.

 

(b) Inventions and Patents. The Executive acknowledges that all inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports and all similar or related information (whether or not patentable) that relate to the actual or anticipated business, research and development or existing or future products or services of the Company or its Subsidiaries that are conceived, developed, made or reduced to practice by the Executive while employed by the Company or any of its predecessors (“Work Product”) belong to the Company and the Executive hereby assigns, and agrees to assign, all of the above to the Company. Any copyrightable work prepared in whole or in part by the Executive in the course of the Executive’s work for any of the foregoing entities shall be deemed a “work made for hire” under the copyright laws, and the Company shall own all rights therein. To the extent that any such copyrightable work is not a “work made for hire,” the Executive hereby assigns and agrees to assign to the Company all right, title and interest, including without limitation, copyright in and to such copyrightable work. The Executive shall promptly disclose such Work Product and copyrightable work to the Board and perform all actions reasonably requested by the Board (whether during or after the Employment Period) to establish and confirm the Company’s ownership (including, without limitation, assignments, consents, powers of attorney and other instruments).

 

7.                     Termination of Employment.

 

(a) Permitted Terminations. The Executive’s employment hereunder may be terminated during the Employment Period without any breach of this Agreement only under the following circumstances:

 

(i)                   Death. The Executive’s employment hereunder shall terminate upon the executive’s death;

 

(ii)                By the Company.   The Company may terminate the Executive’s employment:

 

(A) If the Executive shall have been unable to perform all of the Executive’s duties hereunder by reason of illness, physical or mental disability or other similar incapacity, which inability shall continue for three or more consecutive months or four or more non-

 

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consecutive months; or

 

(B)                   for the failure of Executive to satisfactorily perform the duties and the tasks of the office held by the Executive as reasonably determined by the Board, and such failure is not cured within 30 days after the Executive receives specific written notice thereof from the Board; or

 

(C) for Cause; or

 

(iii)             By the Executive.   The Executive may terminate employment for Good Reason.

 

(b) Termination.  Any termination of the Executive’s employment by the Company or the Executive (other than because of the Executive’s death) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 11 hereof. Termination of the Executive’s employment shall take effect on the Date of Termination.

 

8.      Compensation Upon Termination.

 

(a)  Death. If the Executive’s employment is terminated during the Employment Period as a result of the Executive’s death, the Company shall pay to the Executive’s estate, or as may be directed by the legal representatives of such estate, the Executive’s Base Salary prorated through the Date of Termination and all other accrued and unpaid amounts, if any, to which the Executive is entitled as of the Date of Termination, and the Company shall have no further obligations to the Executive under this Agreement.

 

(b) Disability. If the Company terminates the Executive’s employment during the Employment Period because of the Executive’s disability pursuant to Section 7(a)(ii)(A) hereof, the Company shall pay to the Executive, the Executive’s Base Salary prorated through the Date of Termination and all other accrued and unpaid amounts, if any, to which the Executive is entitled as of the Date of Termination, and the Company shall have no further obligations to the Executive under this Agreement; provided, that payments so made to the Executive during any period that the Executive is unable to perform all of the Executive’s duties hereunder by reason of illness, physical or mental illness or other similar incapacity shall be reduced by the sum of the amounts, if any, payable to the Executive at or prior to the time of any such payment under disability benefit plans of the Company and which amounts were not previously applied to reduce any such payment.

 

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(c) By the Company with Cause or by the Executive without Good Reason. If the Company terminates the Executive’s employment during the Employment Period for Cause pursuant to Section 7(a)(ii)(C) hereof or if the Executive voluntarily terminates the Executive’s employment during the Employment Period other than for Good Reason, the Company shall pay the Executive the Executive’s Base Salary prorated through the Date of Termination and all other accrued and unpaid amounts, if any, to which Executive is entitled as of the Date of Termination, and the Company shall have no further obligations to the Executive under this Agreement.

 

(d) By the Company due to Lack of Performance. If the Company terminates the Executive’s employment during the Employment Period due to Lack of Performance pursuant to Section 7(a)(ii)(B) hereof, the Company shall pay the Executive in a lump sum (A) the Executive’s Base Salary prorated through the Date of Termination and all other accrued and unpaid amounts, if any, to which the Executive is entitled as of the Date of Termination, and (B) an aggregate amount equal to three months of the Executive’s annual Base Salary, payable in a lump sum within 30 days from the Date of Termination, plus all medical, life, and disability benefits, if any, Executive had been receiving immediately preceding the termination for the six-month period following the Date of Termination (the “Severance Period”), provided such medical, life, and disability benefits shall be subject to the mitigation obligations in Section 8(e) below (the “Severance Payments”), and the Company shall have no further obligations to the Executive under this Agreement.

 

(e) By the Company without Cause or by the Executive for Good Reason. If the Company terminates the Executive’s employment during the Employment Period other than for Cause, Lack of Performance, disability or death pursuant to Section 7(a)(i) or (ii) hereof, or the Executive terminates his employment during the Employment Period for Good Reason pursuant to Section 7(a)(iii) hereof, the Company shall pay the Executive in a lump sum (A) the Executive’s Base Salary prorated through the Date of Termination and all other accrued and unpaid amounts, if any, to which the Executive is entitled as of the Date of Termination, and (B) an aggregate amount equal to six months of the Executive’s Base Salary, payable in a lump sum within 30 days from the Date of Termination, plus all medical, life, and disability benefits, if any, Executive had been receiving immediately preceding the termination for six months period following the Date of Termination (the “Severance Period”), provided such medical, life, and disability benefits shall be subject to the mitigation obligations in Section 8(e) below (the “Severance Payments”), and the Company shall have no further obligations to the Executive under this Agreement.

 

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(f) Mitigation. The Company’s obligation to continue to provide the Executive with medical, life, and disability benefits pursuant to Section 8(d) and (f) above shall cease if the Executive becomes eligible to participate in benefits similar to those provided under this Agreement as a result of the Executive’s subsequent employment, whether as part of an organization or as an independent consultant, during the period that the Executive is entitled to receive such benefits.

 

(g) Release. The Executive agrees that, except for such other payments and benefits to which the Executive may be entitled as expressly provided by the terms of this Agreement or any applicable employee benefit plan, the Severance Payments set forth above shall be in lieu of all other claims that the Executive may make by reason of termination of his employment or any such breach of this Agreement and that, as a condition to receiving the Severance Payments, the Executive will execute a release of claims in a form reasonably satisfactory to the Company.

 

(h) Effect on other Benefits. Except as specifically provided in this Agreement, no compensation or other benefits are guaranteed beyond the Date of Termination or termination of this Agreement.

 

9.    Noncompetition and Nonsolicitation.

 

(a) Noncompetition. The Executive acknowledges that in the course of his employment with the Company and its Subsidiaries, he has and will continue to become familiar with the trade secrets of, and other confidential information concerning, the Company and its Subsidiaries, that the Executive’s services will be of special, unique and extraordinary value to the Company and its Subsidiaries and that the Company’s ability to accomplish its purposes and to successfully pursue its business plan and compete in the marketplace depend substantially on the skills and expertise of the Executive. Therefore, and in further consideration of the compensation being paid to the Executive hereunder, the Executive agrees that, during the Employment Period and any Severance Period, although in no event less than two (2) years from the Date of Termination, so long as Severance Payments are made or have been made in accordance with this Agreement (the “Noncompete Period”), he shall not directly or indirectly own, manage, control, participate in, consult with, render services for, or in any manner engage in, any business competing with the Business of the Company or its Subsidiaries in any country where the Company or its Subsidiaries conducts business, or plans to conduct business, provided such plans have been communicated to Executive. For purposes of this Section 11, the “Business” shall mean all commercial or therapeutic use that involves

 

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mesenchymal stem cells (MSCs) or cells substantially similar to mesenchymal stem cells, that is, a homogeneous population of cells that can differentiate along more than one connective tissue lineage as long, regardless of the source; all commercial efforts to deliver or improve the delivery of MSCs for therapeutic purposes; all commercial efforts that would seek to enhance the endogenous in vivo population of MSCs in the body by pharmaceutical or chemical means; any other effort to commercially compete with Osiris to which the Executive has confidential knowledge.  (to cover hiring, business partnerships, vendor relationships, etc.).  Executive acknowledges that this covenant has a unique, very substantial and immeasurable value to Company, that Executive has sufficient assets and skills to provide a livelihood for himself while such covenant remains in force.

 

(b) Nonsolicitation. During the Employment Period and for two (2) years following the Date of Termination, the Executive shall not directly or indirectly through another entity (i) induce or attempt to induce any employee of the Company or any Subsidiary to leave the employ of the Company or such Subsidiary, or in any way willfully interfere with the relationship between the Company or any Subsidiary and any employee thereof or (ii) induce or attempt to induce any customer, supplier, licensee or other business relation of the Company or any Subsidiary to cease doing business with the Company or such Subsidiary, or in any way interfere with the relationship between any such customer, supplier, licensee or business relation and the Company or any Subsidiary.

 

(c) Revision of Restrictions. If, at the time of enforcement of this Section 9, a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum duration, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum duration, scope and area permitted by law.

 

10. Enforcement. The Executive acknowledges that the restrictions imposed on him by Section 6(a), 6(b) and 9 are reasonable and necessary, in view of the nature of the Company’s business, the nature of the services to be provided by the Executive and the Executive’s access to confidential information of the Company, to protect the legitimate interests of the Company and that any breach or threatened breach of any provision thereof will cause irreparable injury to the Company and that money damages will not provide an adequate remedy therefore. Therefore, in the event a breach or threatened breach by the Executive of any provision of Section 6(a), 6(b) or 9, the Company shall be entitled to obtain from any court of competent jurisdiction, in addition to any and all other

 

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rights and remedies existing in its favor, an order of specific performance and/or preliminary or permanent injunctive relief in order to enforce, or prevent any violations of, such provision (without posting a bond or other security).

 

11. Notices. All notices, demands, requests or other communications required or permitted to be given or made hereunder shall be in writing and shall be delivered, telecopied or mailed by first class registered or certified mail, postage prepaid, addressed as follows:

 

(a)                     If to the Company;

 

Osiris Therapeutics, Inc.

7015 Albert Einstein Drive

Columbia, MD 21046

ATTN: CEO

Fax: 443.545. 1704

 

(b)                     If to the Executive:

Stephen Potter

17 Gloucester Street #6

Boston, Mass. 02115

 

or to such other address as may be designated by either party in a notice to the other. Each notice, demand, request or other communication that shall be given or made in the manner described above shall be deemed sufficiently given or made for all purposes three days after it is deposited in the U.S. mail, postage prepaid, or at such time as it is delivered to the addressee (with the return receipt, the delivery receipt, the answer back or the affidavit of messenger being deemed conclusive evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation.

 

12. Severability. The invalidity or unenforceability of any one or more provisions of this Agreement shall not affect the validity or enforceability of the other provisions of this Agreement, which shall remain in full force and effect.

 

13. Survival. It is the express intention and agreement of the parties hereto that the provisions of Sections 6, 8, 9, and 10 hereof shall survive the termination of employment of the Executive. In addition, all obligations of the Company to make payments hereunder shall survive any termination of this Agreement on the terms and conditions set forth herein.

 

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14. Assignment. The rights and obligations of the parties to this Agreement shall not be assignable or delegable, except that (i) in the event of the Executive’s death, the personal representative or legatees or distributes of the Executive’s estate, as the case may be, shall have the right to receive any amount owing and unpaid to the Executive hereunder and (ii) the rights and obligations of the Company hereunder shall be assignable and delegable in connection with any subsequent merger, consolidation, sale or other transfer of all or substantially all of the assets of the Company or similar reorganization of a successor corporation.

 

15. Binding Effect.  Subject to any provisions hereof restricting assignment, this Agreement shall be binding upon the parties hereto and shall inure to the benefit of the parties and their respective heirs, devisees, executors, administrators, legal representatives, successors and assigns.

 

16. Amendment: Waiver. This Agreement shall not be amended, altered or modified except by an instrument in writing duly executed by the parties hereto. Neither the waiver by either of the parties hereto of a breach of or a default under any of the provisions of this Agreement, nor the failure of either of the parties, on one or more occasions, to enforce any of the provisions of this Agreement or to exercise any right or privilege hereunder, shall thereafter be construed as a waiver of any subsequent breach- or default of a similar nature, or as a waiver of any such provisions, rights or privileges hereunder.

 

17. Headings. Section and subsection headings contained in this Agreement are inserted for convenience of reference only, shall not be deemed to be a pan of this Agreement for any purpose, and shall not in any way define or affect the meaning, construction or scope of any of the provisions hereof

 

18. Governing Law. This Agreement, the rights and obligations of the parties hereto, and any claims or disputes relating thereto, shall be governed by and construed in accordance with the laws of the State of Delaware (but not including the choice of law rules thereof), and the parties irrevocably consent to the personal jurisdiction of the state and federal courts in Delaware.

 

19. Entire Agreement: Agreement Replaced. This Agreement constitutes the entire agreement between the parties respecting the employment of Executive, there being no representations, warranties or commitments except as set forth herein.

 

20. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which shall be deemed to constitute one and the same instrument.

 

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21. Attorney’s Fees. In the case of a formal dispute hereunder brought in any forum of competent jurisdiction, the prevailing party shall be entitled to recover from the non-prevailing party, all reasonable legal fees, and expense and costs incurred in connection with such dispute, including any appeal therefrom.

 

22. Furtherance of Agreement. Executive agrees to execute any documents or take any other actions reasonably necessary or otherwise requested by Company to effectuate the intent of all provisions under this Agreement.

 

23.               Definitions.

 

“Agreement” means this Employment Agreement.

 

“Base Salary” is defined in Section 4(a) above.

 

“Beneficial Owner” means a beneficial owner within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended.

 

“Board” means the board of directors of the Company.

 

“Business” is defined in Section 9 above.

 

“Cause” means (i) the commission of a felony or a crime involving moral turpitude or the commission of any other act or omission involving dishonesty or fraud with respect to the Company or any of its Subsidiaries or any of their customers or suppliers, (ii) conduct tending to bring the Company or any of its Subsidiaries into substantial public disgrace or disrepute, (iii) gross negligence or willful misconduct with respect to the Company or any of its Subsidiaries or (iv) any breach of a material Section of this Agreement.

 

“Code”   means   the   Internal   Revenue   Code   of 1986,   as amended, and the regulations thereunder.

 

“Company” means Osiris Therapeutics, Inc., its subsidiaries, affiliates, and its successors and assigns.

 

“Date of Termination” means (i) if the Executive’s employment is terminated by the Executive’s death, the date of the Executive’s death; (ii) if the Executive’s employment is terminated because of the Executive’s

 

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disability pursuant to Section 7(a)(ii)(A) hereof, the effective date of Notice of Termination; (iii) if the Executive’s employment is terminated by the Company for Lack of Performance pursuant to section 7(a)(ii)(B), or for Cause pursuant with section 7(a)(ii)(C) hereof or by the Executive for Good Reason pursuant to section 7(a)(iii) hereof, the date specified in the Notice of Termination; or (iv) if the executive’s employment is terminated during the Employment Period other than pursuant to section 7(a), the date on which the notice of Termination is given.

 

“Effective Date” means January 17, 2011.

 

“Employment Period” is defined in Section 2 above.

 

“Executive” means Stephen Potter.

 

“Extended Term” is defined in Section 2 above.

 

“Good Reason” means (i) the Company’s failure to perform or observe any of the material terms or provisions of this Agreement, and the continued failure of the Company to cure such default within 30 days after written demand for performance has been given to the Company by the Executive, which demand shall describe specifically the nature of such alleged failure to perform or observe such material terms or provisions; (ii) a material reduction in the scope of the Executive’s responsibilities and duties; or (iii) in the absence of a written agreement between Company and Executive, a material reduction in Executive’s base pay or incentive compensation.

 

“Initial Acquirer” means any individual, or entity organized under the laws of any jurisdiction for the purpose of investing in securities of entities engaged in the Business.

 

“Initial Term” is defined in Section 2 above.

 

“Lack of Performance” means the failure of Executive to satisfactorily perform the duties and the tasks of the office held by the Executive as reasonably determined by the Board, and such failure is not cured within 30 days after the executive receives specific written notice thereof from the Board.

 

“Noncompete Period” is defined in Section 9(a) above.

 

“Notice of Termination” is defined in Section 7(b) above.

 

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“Person” means an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.

 

“Severance Payments” is defined in Section 8(d) and (e) above.

 

“Severance Period” is defined in Section 8(d) and (e) above.

 

“Subsidiary” means any corporation of which the Company owns securities having a majority of the ordinary voting power in electing the board of directors directly or through one or more subsidiaries.

 

“Work Product” is defined in Section 6(b) above.

 

IN WITNESS WHEREOF, the undersigned have duly executed this Agreement, or have caused this Agreement to be duly executed on their behalf, as of the day and year first hereinabove written.

 

	
 
    	
Osiris   Therapeutics, Inc.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   C. RANDAL MILLS
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
C.   Randal Mills
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
President &   CEO
    
	
 
    	
 
    	
 
    
	
 
    	
Date:
    	
February 4,   2011
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
The   Executive:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   STEPHEN W. POTTER
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
Stephen   W. Potter
    
	
 
    	
 
    	
 
    
	
 
    	
Date:
    	
February 4,   2011
    

 

13Exhibit 10.1

 

Plan Document

 

 

KEMET Executive Secured Benefit Plan

 

EFFECTIVE January 1, 2011

 

 

KEMET Executive Secured Benefit Plan

 

Effective as of January 1, 2011, KEMET Corporation (the “Company”) hereby establishes the KEMET Executive Secured Benefit Plan (the “Plan”) for the benefit of certain Executives and their beneficiaries.

 

The Plan is not a qualified pension plan under Section 401(a) of the Internal Revenue Code of 1986 as amended (the “Code”); however, the Company intends that the Plan be an “employee welfare benefit plan” as defined in the Employee Retirement Income Security Act of 1974 as amended (“ERISA”).

 

This document sets forth rights and obligations of the Company and each Participant with respect to the Plan as provided below.

 

ARTICLE I

 

Definitions

 

Wherever used in this Plan, the following terms shall have the following meanings, unless a different meaning is clearly required by the context.

 

1.01         “Board” means the Board of Directors of the Company as constituted from time to time or the Compensation Committee of the Board of Directors. Accordingly, any action that the Board (as defined herein) is permitted or required to take with respect to the Plan may be taken by either the Board of Directors or the Compensation Committee of the Board of Directors.

 

1.02         “Company” means KEMET Corporation and its successors.

 

1.03         “Company Contribution” means the amount of any contribution made by the Company to the Plan on an after-tax basis with respect to a Participant as provided in Section 4.04 herein and deposited with the Designated Insurance Carrier in order to purchase life insurance policies on the life of that Participant.

 

1.04         “Compensation” means an Executive’s base salary and any annual bonus paid by the Company and/or its subsidiaries during the Plan Year, including any employee elective deferrals of base salary or annual bonus under a Code Section 125 cafeteria plan, Code Section 401(k) qualified cash or deferred arrangement or Code Section 132 (f) arrangement. Compensation shall exclude other amounts paid to or for the benefit of an Executive by the Company or its subsidiaries, including without limitation Company Contributions.

 

1.05         “Contribution” means the amount of Participant Contribution and Company Contribution, if any, made to the Plan.

 

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1.06         “Designated Insurance Carrier” means an insurance company selected by the Company in its sole and absolute discretion.

 

1.07         “Effective Date” means January 1, 2011.

 

1.08         “Employee” means any person employed by the Company or one of its subsidiaries who receives stated remuneration other than a pension, severance pay, retainer or fee under contract.

 

1. 09        “Executive” means an Employee whose annual base salary for the Plan Year is equal to or greater than the compensation amount published in Internal Revenue Service pronouncements used to determine whether an individual is a highly compensated employee, as defined by code Section 414(q), for the relevant year.

 

1.10         “Participant” means any Executive who has become eligible to participate in the Plan in accordance with Article III of the Plan, and who has not ceased to have rights to a benefit hereunder.

 

1.11         “Participant Contribution” means the amount of after-tax Compensation, contributed to the Plan by a Participant pursuant to his payroll deduction directive and deposited with the Designated Insurance Carrier in order to purchase life insurance on the life of said Participant in accordance with the terms of the Plan.

 

1.12         “Participation Letter Agreement” means the individual written agreement between the Company and a Participant with respect to rights and benefits hereunder, as executed by the Participant and the Company.

 

1.13         “Plan” means the KEMET Executive Secured Benefit Plan as set forth herein and as may be amended from time to time, together with the Participation Letter Agreement with respect to any Participant.

 

1.14         “Plan Administrator” means the committee or person appointed by the Board to administer the Plan pursuant to Article VII herein.

 

1.15         “Plan Year” means the 12-month period commencing on January 1 and ending on the next December 31 while the Plan remains in effect.

 

1.16         “Policy” means a life insurance contract issued by the Designated Insurance Carrier on the life of a Participant.

 

1.17         “Total Disability” means a Participant’s disability as defined in the Social Security Act and determined by the Social Security Administration.

 

For purposes of the Plan, unless the context requires otherwise, the masculine includes the feminine, the singular the plural, and vice-versa.

 

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ARTICLE II

 

Purpose & Scope

 

2.01         PURPOSE

 

The purpose of the Plan is to provide a Company-sponsored program pursuant to which each Participant shall, and the Company may, make certain contributions to be deposited with a Designated Insurance Carrier in order to purchase life insurance on behalf of the Participant. The Participant Contribution and any Company Contribution are taxable income to the Participant for the year in which such contributions are made on behalf of the Participant.  Each Participant will be responsible for all federal, state and local taxes on such contributions.

 

2.02         SCOPE

 

The Plan is intended as a statement of agreement between the Company and each participating Executive under which, in consideration of the continued satisfactory service of said Executive, the Company agrees to deposit the Contributions with the Designated Insurance Carrier on behalf of the Participant.

 

ARTICLE III

 

Eligibility and Participation

 

3.01         ELIGIBLE CLASS OF EXECUTIVES

 

Eligibility for participation in the Plan shall be limited to those Executives designated in writing by the Board, in its sole and absolute discretion, who have executed the Participation Letter Agreement and otherwise satisfy the requirements of this Article III.

 

3.02         ELIGIBILITY SERVICE

 

Each Executive designated in accordance with Section 3.01 above must be employed full-time with the Company in order to become a Participant.

 

3.03         ENTRY DATE

 

(a)         Each Executive who has satisfied the requirements of Sections 3.01 and 3.02 above shall become a Participant on the first day of the calendar quarter, or as soon thereafter as administratively feasible, coinciding with or next following his completion of said requirements.

 

(b)        The provisions of this Article III are subject to the provisions of the Participant Letter Agreement.

 

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ARTICLE IV

 

Contributions

 

4.01         PURCHASE OF POLICY

 

The Company will apply for a Policy on the life of the Participant from the Designated Insurance Carrier. The Policy and all incidents of ownership thereto shall at all times be owned by the Participant and his designated assigns, if any.

 

4.02         FUNDING

 

The Plan is funded exclusively by Participant Contributions and any Company Contributions. All Participant Contributions shall be deposited with the Designated Insurance Carrier within 7 days after the end of the payroll period for which Participant Contributions are deducted from his pay or, with respect to Participant Contributions made directly to the Plan Administrator by valid personal check for good funds, within 7 days after receipt of the check by the Plan Administrator. Any Company Contributions shall be deposited with the Designated Insurance Carrier not later than 60 days after the end of the Plan Year.

 

The Contributions delivered to the Designated Insurance Carrier shall be credited to the individual Participant’s premium account within the time frames established by the Designated Insurance Carrier for purposes of maintaining Policies currently paid and in force. Further, any premium returns, demutualization proceeds, or vendor contract rebates shall be credited to the Participant’s individual Policy.

 

4.03         PARTICIPANT CONTRIBUTION

 

(a)         Each Participant may elect to make Participant Contributions to the Plan in an amount not to exceed 50 percent of his base salary plus  50 percent of his incentive compensation, in whole multiples of one percent of his Compensation or in a fixed amount; provided, however, the Participant Contribution for any individual Participant shall be in an amount not less than $5,000 with respect to any Plan Year.

 

(b)        The amount of Participant Contributions made by payroll deduction to be deposited with the Designated Insurance Carrier with respect to any Plan Year shall be deducted after deduction of all payroll taxes withheld on behalf of the Participant for that Plan Year.

 

(c)         Participant Contributions shall be by payroll deduction, authorized by the Participant on a form acceptable to the Company, or may be made directly to the Plan Administrator by the Participant by personal check.

 

4.04         COMPANY CONTRIBUTIONS

 

(a)         For each Plan Year, the Company, at the sole and absolute discretion of the Board, may make Company Contributions on behalf of eligible Participants. The

 

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Board, in its sole and absolute discretion, shall determine the amount of the Company Contribution, which may be zero. For purposes of this paragraph, a Participant is eligible to receive an allocation of Company Contributions (other than a matching contribution) for a Plan Year only if he is employed by the Company or one of its subsidiaries on the last day of such Plan Year. A Participant is eligible to receive an allocation of a Company Contribution that is a matching contribution only if the Participant is employed by the Company or one of its subsidiaries on the date that the Participant Contribution that is being matched is made.

 

(b)        The amount of Company Contribution, if any, to be deposited with the Designated Insurance Carrier with respect to any Plan Year shall be taxable wage income to Participants. The Company is authorized to deduct from a Participant’s other compensation all applicable payroll taxes due to be paid or withheld with respect to Company Contributions on behalf of the Participant for that Plan Year.

 

(c)         The Company, at the sole and absolute discretion of the Board, may make additional Company Contributions on behalf of any individual Participant(s) at any time during the Plan Year.

 

ARTICLE V

 

Vesting

 

5.01         PARTICIPANT CONTRIBUTIONS

 

The Participant shall be vested, at all times, in 100 percent of the value of his Participant Contributions including any gains and losses on same.

 

5.02         COMPANY CONTRIBUTIONS

 

(a)         At the time the Company first makes any contribution to the Plan, the Board shall determine the vesting schedule with respect to Company Contributions and how to compute service for vesting purposes.

 

(b)        Notwithstanding the provisions of paragraph (a) above, in the event of a Participant’s Total Disability or death while in the employ of the Company, he shall become 100 percent vested in the amount of any Company Contributions that had been made on his behalf.

 

(c)         Notwithstanding the provisions of paragraph (a) above, if the Plan terminates in its entirety pursuant to Section 9.02 herein, each Participant in the employ of the Company on the date of termination shall become 100 percent vested in the amount of any Company Contributions that had been made on his behalf.

 

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ARTICLE VI

 

Policies

 

6.01         PURCHASE OF POLICY

 

The Company shall not be in default in the performance of its obligations under the Plan to purchase a Policy on the life of a Participant should the Designated Insurance Carrier decline coverage for the Participant for any reason whatsoever including, but not limited to, uninsurability as the result of increased health risk or any other standard in the underwriting process established by the Designated Insurance Carrier to determine the insurability of a Participant.

 

6.02         OWNERSHIP OF POLICY

 

The Participant shall be the sole owner of the Policy. The Participant shall have all incidents of ownership with respect to the Policy including, but not limited to, the right to make any loans, withdrawals or investments of the cash value of the Policy except as to limitations set forth under Section 6.03 hereof. The Company shall not be responsible for any interest or taxes on any loans or withdrawals made from the Policy by the Participant.

 

6.03         LIMITATIONS ON OWNERSHIP OF POLICY

 

This Section 6.03 shall apply only if Company contributions are made to the Plan. With respect to the nonvested portion of any Company Contributions, the Participant shall take no action, without the Company’s written consent, with respect to the Policy that would in any way compromise or jeopardize the Company’s right to be repaid the Company Contributions at any time that the Participant has not satisfied the vesting requirement.  This includes, but is not limited to, making loans against the Policy or taking withdrawals from the Policy’s cash surrender value in excess of the vested portion of the Company Contribution. Subject to the foregoing provisions of this Section 6.03, the Participant shall have the right to surrender or cancel the Policy and to receive the Policy’s full cash surrender value directly from the Designated Insurance Carrier. Upon any surrender or cancellation of the Policy, when the Company Contribution vesting requirement is not satisfied, the Company shall have the unqualified right to receive that portion of the cash value equal to the total amount of the nonvested Company Contribution. If the cash value is less than the amount due the Company, the Participant shall immediately pay to the Company, without demand and notice, the shortfall and such obligation shall become a personal liability to the Participant.  Such obligation shall include accrued interest at 15 percent per annum on the shortfall amount from the date on which the Policy was surrendered, cancelled or otherwise terminated until such time as the repayment of all of the nonvested portion of Company Contributions are recovered by the Company (“Accrued Shortfall Interest Penalty”). In addition to the Accrued Shortfall Interest Penalty, the Company shall be permitted to recover all attorney fees and

 

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other reasonable expenses incurred by the Company in order to collect the nonvested Company Contributions.

 

6.04         INVESTMENTS AND INDEMNIFICATION

 

(a)           Under no circumstances shall the Company, its employees, agents, subsidiaries or assigns be liable for the performance of any investment option selected by the Participant or act as guarantor of any account invested within the Policy. Under no circumstances shall such an entity or individual provide any advice with respect to a Participant’s investment inside any Policy. The Participant assumes all investment risk and agrees to hold harmless the Company, its employees, agents, subsidiaries and assigns for the performance of all investments in the Policy.

 

(b)           Under no circumstances shall the Company, its employees, agents, subsidiaries or assigns be liable for the acts or omissions of the Designated Insurance Carrier. For example, the Company, its employees, agents, subsidiaries and assigns shall not be liable for any illustrations, performance projections on any proposed or issued insurance policy provided to the Participant by the Designated Insurance Carrier. All such illustrations and projections shall be considered those of the Designated Insurance Carrier and shall not be reviewed nor endorsed in any manner by the Company.

 

(c)           Any Participant shall look solely to the Designated Insurance Carrier for any liability with respect to any death benefit paid by the Designated Insurance Carrier on the Participant’s Policy or the value thereof.

 

6.05         ASSIGNMENT

 

Subject to the provisions of Section 6.03 herein, the Participant shall have the right to assign any part or all of the Participant’s vested interest in any Policy and the Plan to any person or entity (including a trust) by execution of a written assignment delivered to the Company and the Designated Insurance Carrier.  The Company shall have no authority to assign, sell, surrender, change the insured or transfer ownership of the Policy or borrow against the cash surrender value of the Policy.

 

6.06         PREMIUM PAYMENTS

 

The Company shall deliver the Participant Contributions and any Company Contributions to the Designated Insurance Carrier as provided in this Plan to pay premiums on the Policy. The Company shall have no liability with respect to any additional contributions. The Participant is responsible to ensure that sufficient premiums are paid on the Policy to prevent a lapse or termination of the Policy, and the Company shall have no liability with respect to the lapse or termination of the Policy on account of a failure to pay sufficient premiums.

 

6.07         TERMINATION OF PARTICIPATION

 

The Participant or the Company may terminate a Participant’s participation in the Plan with or without the consent of the other party by giving notice in writing to the other party (the “Notice of Termination”). A Participant’s participation will also cease

 

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immediately if and when the Participant ceases to meet the eligibility requirements for the Plan. The Plan will continue with respect to any Participant until either the Plan is terminated in its entirety pursuant to Section 9.02 herein or by delivery of Notice of Termination or such Participant’s voluntary or involuntary termination of employment with the Company (collectively hereinafter referred to as the “Terminating Event”). The Terminating Event shall immediately and forever release the Company from any further obligations under the Plan, other than providing a Notice of Termination if required hereunder.  Section 6.03, Section 6.04, Section 7.02 and any other provisions of this Plan that by their nature would have effect after termination shall survive any Termination Event. Termination of participation in the Plan shall not, by itself, affect a Participant’s rights with respect to a Policy owned by the Participant.

 

6.08         DESIGNATED INSURANCE CARRIER

 

The Designated Insurance Carrier shall be bound only by the terms of the Policy. No provision of the Plan shall in any way enlarge, change, vary, or in any other way affect the obligations of the Designated Insurance Carrier. The Designated Insurance Carrier shall not be bound by or be deemed to have notice of the provisions of the Plan.

 

ARTICLE VII

 

Administration

 

7.01         ADMINISTRATION

 

The Plan shall be administered and interpreted by the Plan Administrator. Said Plan Administrator has the sole and absolute authority and discretion to administer the Plan in accordance with its terms, to interpret any provision of the Plan and to decide any issue that may affect a person’s rights and obligations under the Plan. All such interpretations and decisions shall be final, conclusive and binding upon a Participant and any other person who makes a claim with respect to participation or benefits under the Plan.

 

7.02         POWERS AND DUTIES

 

The Plan Administrator may establish procedures, correct any defect, supply any information, or reconcile any inconsistency in such manner and to such extent as it shall deem to be necessary or advisable to carry out the purposes of the Plan; provided, however, that any such procedure, discretionary act, interpretation or construction shall be applied in a nondiscriminatory manner based on uniform principals consistently applied. The Plan Administrator shall have all the powers and authority necessary or appropriate to accomplish its duties under the Plan.

 

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The Plan Administrator shall be charged with the duties of the general administration of the Plan, including, but not limited to, the following (but only to the extent such duties are not otherwise performed by the Designated Insurance Carrier):

 

(a)           The discretion to determine all questions relating to the eligibility of any Executive to receive benefits under the Plan;

 

(b)           To compute and make determinations with respect to the amount of benefits with respect to any Participant hereunder;

 

(c)           To maintain all necessary records for the administration of the Plan;

 

(d)           To interpret the provisions of the Plan and to make and publish such rules for the regulation of the Plan as are consistent with the terms hereof;

 

(e)           To prepare and implement a procedure to notify Executives that they have been selected as eligible to participate in the Plan; and

 

(f)            To assist any Participant regarding his rights, benefits, or elections available under the Plan.

 

To the maximum extent permitted under applicable law, the Company shall indemnify, hold harmless and defend the Plan Administrator from any liability which the Plan Administrator may incur in connection with the performance of its duties in connection with the Plan, so long as the Plan Administrator was acting in good faith and within what the Plan Administrator reasonably understood to be the scope of its duties.

 

7.03         THIRD-PARTY ADMINISTRATION

 

The Company, at its sole and absolute discretion, may delegate any administrative matter under the Plan to any third-party administrator. Initially, Mahoney & Associates, a Massachusetts Business Trust, will assist the Company and the Plan Administrator with administrative matters and will act as the third-party administrator for the Plan. Any appointed third-party administrator shall be held harmless by the Company from all Plan related liabilities, except those that are caused by the intentional misconduct or grossly negligent acts of the third-party administrator. The Company shall be held harmless by the third-party administrator from all Plan related liabilities pertaining to the duties of said Plan Administrator, except those that are caused by the intentional misconduct or grossly negligent acts of the Company.

 

7.04         TAX WITHHOLDING

 

The Company or the Designated Insurance Carrier shall have the right to deduct from any benefit owed to the Participant under the Plan any federal, state, or local taxes required by law to be withheld.

 

9

 

ARTICLE VIII

 

ERISA Provisions

 

8.01         CLAIMS PROCEDURE

 

The provisions of this Article VIII apply to the extent any determination with respect to a claim is to be made by the Plan Administrator.

 

(a)         Submitting a Claim. In order to receive a benefit under the Plan, the Participant or such Participant’s beneficiary (the “Claimant”) must submit a written application to the Plan Administrator on a form provided by the Company. Written or electronic notice of the disposition of the claim shall be furnished to the Claimant within 90 days after the claim is filed. If the Plan Administrator needs additional time (up to 90 days) to process the claim, written notice shall be provided to the Claimant within the initial 90-day period. Such notice shall indicate the special circumstances which require an extension of time and the day by which the Plan Administrator expects to render a decision.

 

(b)        Denial of Claim.  If the claim is denied in whole or in part, the Plan Administrator shall deliver a written notice to the Claimant. The notice will be calculated to be understood by the Claimant and will set forth: (1) the specific reason or reasons for the denial; (2) references to the pertinent provisions of the Plan on which the denial is based; (3) a description of any additional material or information necessary for the Claimant to perfect the claim and an explanation of why that material or information is necessary; (4) appropriate information as to the steps to be taken if the Claimant wishes to submit the claim for review; (5) the time limit for requesting a review of the claim; and (6) a statement of the Claimant’s right to bring a civil action under section 502(a) of ERISA following an adverse determination upon review. The notice shall be delivered to the Claimant within 90 days after receipt of the claim by the Plan Administrator, unless the Plan Administrator determines that special circumstances require an extension of time. Under these circumstances, the Plan Administrator may extend the applicable time for an additional 90 days. If an extension is required, the Plan Administrator will provide to the Claimant a notice prior to the extension and the date by which the Plan Administrator expects to make a decision regarding the claim.

 

(c)         Request for Review of a Denied Claim. If a claim has been denied in whole or in part pursuant to Section 8.01(b), the Claimant shall have 60 days following receipt of the denial to request a review of the denial. A request for review shall be in writing and addressed to the Plan Administrator at the Company’s then principal place of business. If the claimant so requests, the Plan Administrator shall conduct a hearing within 60 days. Whether or not the Claimant requests such a hearing, the Claimant may submit pertinent documents and written issues and comments. The Claimant will be provided, upon request and free of charge, reasonable access to, and copies of, all

 

10

 

documents, records, and other information relevant to his claim.

 

(d)        Decision Upon Review. The Plan Administrator shall review the denial of the claim, and shall furnish the Claimant with a final decision on review within 60 days after receipt of the Claimant’s request for review, unless the Plan Administrator determines that special circumstances require an extension of time for processing the request for review. In that case the Plan Administrator may extend the applicable time for an additional 60 days. If an extension is required, the Plan Administrator will notify the Claimant of the extension and the date by which a decision on review is expected. The decision on review shall be in written or electronic form, shall be written in a manner calculated to be understood by the Claimant, and shall include (1) specific reasons for the decision; (2) specific references to the pertinent provisions of the Plan on which the decision is based; (3) a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claim for benefits; and (4) a statement of the Claimant’s right to bring an action under section 502(a) of ERISA. If the written decision on review is not furnished to the Claimant within the 60-day period (or the 120-day period in the event that the Plan Administrator requires an extension of time for processing the review), the claim shall be deemed denied on review.

 

ARTICLE IX

 

General Provisions

 

9.01         AMENDMENT

 

The Plan Administrator has the right at any time and from time to time, and retroactively if necessary or appropriate, to amend in whole or in part any or all provisions of the Plan. No amendment shall have the effect of reducing any Participant’s ownership interest in or existing rights under any Policy previously purchased on behalf of such Participant under the Plan or otherwise change the vesting schedule with respect to any Company Contributions previously made with respect to such Participant. Any amendment shall be made by written resolutions of the Plan Administrator.

 

9.02         TERMINATION OR SUSPENSION OF ENTIRE PLAN

 

The Company intends to maintain the Plan indefinitely. However, the Company reserves the right, and without the consent of any Participant, spouse, beneficiary, or other person claiming a right under the Plan, to terminate the Plan in its entirety or discontinue contributions under the Plan at any time and for any reason.

 

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9.03         HEADINGS

 

The titles of the Articles and Sections herein are for convenience of reference only and shall not be construed as a part of the Plan, or have any effect upon the meaning of the provisions of the Plan.

 

9.04         SEPARABILITY

 

If any provision of the Plan, as currently in effect or as amended from time to time, or the application thereof, shall to any extent be invalid or unenforceable, the remaining provisions of the Plan and the application thereof, shall not be affected thereby and shall be valid and enforced to the extent permitted by law.

 

9.05         CONSTRUCTION

 

The law of the state of South Carolina, where the Company’s principal executive offices are located, will determine all questions arising with respect to the provisions of the Plan except to the extent superseded by Federal law.

 

9.06         BINDING EFFECT

 

The Plan shall be binding upon, and shall inure to the benefit of, the Company, Participants and their respective successors and assigns.

 

IN WITNESS WHEREOF, the Company has caused this document to be executed by its duly authorized officer effective the 1st day of January, 2011.

 

 

	
 
    	
 
    	
KEMET Corporation
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By: 
    	
/s/ LARRY C. MCADAMS
    
	
 
    	
 
    	
 
    
	
 
    	
Name: 
    	
Larry C. McAdams
    
	
 
    	
 
    	
 
    
	
 
    	
Title: 
    	
Vice President, Human   Resources
    

 

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