SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT is made as of the _____ day of ___________,
1999, between Apogee Enterprises, Inc., a Minnesota corporation, with its
principal offices at Northwest Financial Center, 0000 Xxxxxx Xxxxxx Xxxxx, Xxxxx
0000, Xxxxxxxxxxx, Xxxxxxxxx 00000 (the "Company") and
__________________________ ("Executive"), residing at
_______________________________________.
W I T N E S S E T H T H A T:
WHEREAS, this Agreement is intended to specify the financial
arrangements that the Company will provide to Executive upon Executive's
separation from employment with the Company and all subsidiaries of the Company
(collectively, the "Apogee Entities") under any of the circumstances described
herein; and
WHEREAS, this Agreement is entered into by the Company in the belief
that it is in the best interests of the Company and its shareholders to provide
stable conditions of employment for Executive notwithstanding the possibility,
threat or occurrence of certain types of change in control, thereby enhancing
the Company's ability to attract and retain highly qualified people.
NOW, THEREFORE, to assure the Company that it will have the continued
dedication of Executive notwithstanding the possibility, threat or occurrence of
a bid to take over control of the Company, and to induce Executive to remain in
the employ of the Apogee Entities, and for other good and valuable
consideration, the Company and Executive agree as follows:
1. Term of Agreement. The term of this Agreement shall commence on
the date hereof as first written above and shall continue through December 31,
1999; provided that commencing on January 1, 2000 and each January 1 thereafter,
the term of this Agreement shall automatically be extended for one additional
year unless, not later than September 30 of the preceding year, the Board of
Directors of the Company (a majority of which, at such time, shall be composed
of Continuing Directors) shall have authorized, by majority vote, management of
the Company to give notice to Executive, and the Company shall have given such
notice, that the Company does not wish to extend this Agreement; and provided,
further, that, notwithstanding any such notice by the Company not to extend,
this Agreement shall continue in effect for a period of 24 months beyond the
term provided herein if a Change in Control (as defined in Section 3(i) hereof)
shall have occurred during such term.
2. Termination of Employment
(i) Prior to a Change in Control. Prior to a Change in Control, any
Apogee Entity may terminate Executive from employment with such Apogee Entity at
will, with or without Cause (as defined in Section 3(iii) hereof), at any time.
Executive's rights upon termination of employment from all Apogee Entities prior
to a Change in Control shall be governed by the employing Apogee Entity's
standard employment termination policy applicable to Executive in effect at the
time of termination.
(ii) After a Change in Control
(a) From and after the date of a Change in Control during the term of
this Agreement, neither the Company nor the Apogee Entity then employing
Executive shall terminate Executive from employment with the Company or any
Apogee Entity except as provided in this Section 2(ii) or as a result of
Executive's Disability (as defined in Section 3(iv) hereof) or his death.
(b) From and after the date of a Change in Control during the term of
this Agreement, the Company (or the other Apogee Entity then employing
Executive) shall have the right to terminate Executive from employment with
the Apogee Entities at any time during the term of this Agreement for
Cause, by written notice to Executive, specifying the particulars of the
conduct of Executive forming the basis for such termination, such notice to
be effective on the 30th day following delivery thereof to Executive if
Executive has not substantially cured the conduct identified in such
notice.
(c) From and after the date of a Change in Control during the term of
this Agreement: (I) the Company (or the other Apogee Entity then employing
Executive) shall have the right to terminate Executive's employment without
Cause, at any time; and (II) Executive shall, upon the occurrence of such a
termination by the Company or such other Apogee Entity without Cause, or
upon the voluntary termination of Executive's employment by Executive for
Good Reason (as defined in Section 3(ii) hereof), or upon Executive's
voluntary termination of his employment with the Company or such other
Apogee Entity for any reason during the 30-consecutive-day period
commencing on the first anniversary of the date on which the Change in
Control shall have occurred and ending on the 30th day immediately
following the first anniversary on which the Change in Control occurs, be
entitled to receive the benefits provided in Section 4 hereof. Executive
shall evidence a voluntary termination for Good Reason by written notice to
the Company given within 60 days after the date of the occurrence of any
event that Executive knows or should reasonably have known constitutes Good
Reason for voluntary termination. Such notice need only identify Executive
and set forth in reasonable detail the facts and circumstances claimed by
Executive to constitute Good Reason.
3. Definitions
(i) A "Change in Control" shall mean:
(a) a change in control of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or successor provision thereto, whether or not the Company
is then subject to such reporting requirement including, without
limitation, any of the following events:
(I) the consummation of any consolidation or merger of the
Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's common stock
would be converted into cash,
securities, or other property, other than a merger of the Company in
which the holders of the Company's common stock immediately prior to
the consolidation or merger have the same proportionate ownership of
common stock of the surviving corporation immediately after the
merger; or
(II) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company;
(b) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) is or becomes the "Beneficial Owner" (as defined in Rule
13d-3 promulgated under the Exchange Act), directly or indirectly, of
securities of the Company representing 35% or more of the combined voting
power of the Company's then outstanding securities;
(c) the Continuing Directors (as defined in Section 3(v) hereof) cease
to constitute a majority of the Company's Board of Directors; or
(d) the majority of the Continuing Directors determine in their sole
and absolute discretion that there has been a change in control of the
Company.
(ii) "Good Reason" shall mean the occurrence of any of the following
events, except for the occurrence of such an event in connection with the
termination or reassignment of Executive's employment by the Company (or any
other Apogee Entity then employing Executive) for Cause, for Disability or for
death:
(a) the assignment to Executive of employment duties or
responsibilities which are not of comparable responsibility and status as
the employment duties and responsibilities held by Executive immediately
prior to a Change in Control, or a change in Executive's titles or offices
as in effect immediately prior to a Change in Control of the Company, or
any removal of Executive from or any failure to reelect or reappoint
Executive to any of such positions, except in connection with the
termination of his employment for Disability, retirement or Cause, or as a
result of Executive's death, or by Executive other than for Good Reason;
(b) a reduction by the Company (or any other Apogee Entity then
employing Executive) in Executive's base salary as in effect immediately
prior to a Change in Control or as the same may be increased from time to
time during the term of this Agreement or the Company's (or any other
Apogee Entity then employing Executive) failure to increase Executive's
base salary (within 12 months of Executive's last increase in base salary)
after a Change in Control of the Company in an amount which at least
equals, on a percentage basis, the average percentage increase in base
salary for all executive officers of the Company effected during the
preceding 12 months;
(c) any failure by the Company (or any other Apogee Entity then
employing Executive) to continue in effect any incentive plan or
arrangement (including, without limitation, any incentive compensation
plan, long-term incentive plan, bonus or contingent bonus arrangements or
credits, the right to receive performance awards, or similar incentive
compensation benefits) in which Executive is participating, or is eligible
to participate, at the time of a Change in Control of the Company (or any
other plans or arrangements providing Executive with substantially similar
benefits) or the taking of any action by the Company (or such other Apogee
Entity), including an amendment or modification to any such plan or
arrangement (except as may be required by applicable law), which would
adversely affect Executive's participation in any such plan or arrangement;
(d) the Company's (or any other Apogee Entity then employing
Executive) requiring Executive to be based anywhere other than within 50
miles of Executive's office location immediately prior to a Change in
Control, except for requirements of temporary travel on the Company's
business to an extent substantially consistent with Executive's business
travel obligations immediately prior to a Change in Control;
(e) except to the extent otherwise required by applicable law, the
failure by the Company (or any other Apogee Entity then employing
Executive) to continue in effect any benefit or compensation plan, stock
ownership plan, stock purchase plan, bonus plan, life insurance plan,
health-and-accident plan or disability plan in which Executive is
participating or is eligible to participate immediately prior to a Change
in Control (or plans providing Executive with substantially similar
benefits), the taking of any action by the Company (or such other Apogee
Entity) which would adversely affect Executive's participation in, or
materially reduce Executive's benefits under, any of such plans or deprive
Executive of any material fringe benefit enjoyed by Executive immediately
prior to such Change in Control;
(f) the failure by the Company (or any other Apogee Entity then
employing Executive) to provide Executive with the number of paid vacation
days to which Executive is entitled immediately prior to such Change in
Control in accordance with the Company's (or any other Apogee Entity's)
vacation policy as then in effect;
(g) the failure by the Company to obtain, as specified in Section 5(i)
hereof, an assumption of the obligations of the Company to perform this
Agreement by any successor to the Company; or
(h) any material breach by the Company of this Agreement.
(iii) "Cause" shall mean termination by the Company (or any other
Apogee Entity then employing Executive) of Executive's employment based upon (a)
the willful and continued failure by Executive substantially to perform his
duties and obligations (other than any such failure resulting from his
incapacity due to physical or mental illness or any such actual or anticipated
failure resulting from Executive's termination for Good Reason) or (b) the
willful engaging by Executive in misconduct which is materially injurious to the
Company, monetarily or otherwise. For purposes of this Section 3(iii), no
action or failure to act on Executive's part shall be considered "willful"
unless done, or omitted to be done, by Executive in bad faith and without
reasonable belief that his action or omission was in the best interests of the
Company.
(iv) "Disability" shall mean any physical or mental condition which
would qualify Executive for a disability benefit under any long-term disability
plan maintained by the Company
(or any other Apogee Entity then employing Executive) either before or after a
Change in Control.
(v) "Continuing Director" shall mean any person who is a member of the
Board of Directors of the Company, who is not an Acquiring Person (as
hereinafter defined) or an Affiliate or Associate (as hereinafter defined) of an
Acquiring Person, or a representative of an Acquiring Person or of any such
Affiliate or Associate, and who (a) was a member of the Board of Directors on
the date of this Agreement as first written above or (b) subsequently becomes a
member of the Board of Directors, if such person's initial nomination for
election or initial election to the Board of Directors is recommended or
approved by a majority of the Continuing Directors. For purposes of this
Section 3(v): "Acquiring Person" shall mean any "person" (as such term is used
in Sections 13(d) and 14(d) of the Exchange Act) who or which, together with all
Affiliates and Associates of such person, is the Beneficial Owner of 10% or more
of the shares of Common Stock of the Company then outstanding, but shall not
include the Company, any subsidiary of the Company or any Executive benefit plan
of the Company or of any subsidiary of the Company or any entity holding shares
of Common Stock organized, appointed or established for, or pursuant to the
terms of, any such plan; and "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 promulgated under the
Exchange Act.
4. Benefits upon Termination under Section 2(ii)(c) After a Change
in Control
(i) Upon the termination (voluntary or involuntary) of the employment
of Executive pursuant to Section 2(ii)(c) hereof, Executive shall be entitled to
receive the benefits specified in this Section 4. The amounts due to Executive
under subparagraphs (a), (b), (c) or (d) of this Section 4(i) shall be paid to
Executive not later than one business day prior to the date that the termination
of Executive's employment becomes effective (the "Employment Termination Date").
All benefits to Executive pursuant to this Section 4(i) shall be subject to any
applicable income, payroll or other taxes required by law to be withheld.
(a) The Company shall pay to Executive (x) the full base salary earned
by him and unpaid through the date that the termination of Executive's
employment becomes effective, at the rate in effect at the time written
notice of termination (voluntary or involuntary) was given, (y) any amount
earned by Executive as a bonus with respect to the fiscal year of the
Company preceding the termination of his employment if such bonus has not
theretofore been paid to Executive, and (z) an amount representing credit
for any vacation earned or accrued by him but not taken;
(b) In lieu of any further base salary payments to Executive for
periods subsequent to the date that the termination of Executive's
employment becomes effective, the Company shall pay as severance pay to
Executive (a ASeverance Payment") a lump-sum cash amount equal to the sum
of:
(I) an amount equal to the bonus Executive earned with respect
to the fiscal year of the Company preceding the termination of his
employment, or Executive's maximum target bonus for the fiscal year in
which the Employment Termination Date occurs, whichever is greater
(the "Target Bonus"), multiplied by a fraction, the numerator of which
is equal to the number of full months in the year
Executive terminates employment that have elapsed at the Employment
Termination Date, and the denominator of which is twelve (12), plus
(II) eighteen (18) times the sum of (A) Executive's monthly base
salary (as in effect in the month preceding the month in which the
termination becomes effective or as in effect in the month preceding
the Change in Control, whichever is higher) and (B) one-twelfth (1/12)
of the Target Bonus;
(c) Notwithstanding any provision to the contrary in the Amended and
Restated 0000 Xxxxxx Enterprises, Inc. Partnership Plan (the "Partnership
Plan") (or in any other agreement or plan in existence between the Company
and Executive at the Employment Termination Date), any rights Executive may
have at any time under the Partnership Plan and which are deferred at the
time of the Employment Termination Date shall immediately become vested and
the Company shall pay to Executive any amounts due or which have been
promised under the Partnership Plan to Executive;
(d) The Company shall also pay to Executive all legal fees and
expenses incurred by Executive as a result of such termination of
employment (including all fees and expenses, if any, incurred by Executive
in seeking to obtain or enforce any right or benefit provided to Executive
by this Agreement whether by arbitration or otherwise);
(e) Notwithstanding any other agreement in existence between the
Company and Executive at the Employment Termination Date, all stock options
or shares of restricted stock owned or held by Executive or promised to be
payable to Executive by the Company shall be immediately vested in
Executive without further restriction and Executive shall be treated at
that time as the unrestricted owner of such Company stock options and
stock, subject to applicable constraints under federal and state securities
laws; and
(f) Any and all contracts, agreements or arrangements between the
Company and/or any other Apogee Entity and Executive prohibiting or
restricting Executive from owning, operating, participating in, or
providing employment or consulting services to, any business or company
competitive with the Company or such other Apogee Entity at any time or
during any period after the Employment Termination Date, shall be deemed
terminated and of no further force or effect as of the Employment
Termination Date, to the extent, but only to the extent, such contracts,
agreements or arrangements so prohibit or restrict Executive; provided
that, the foregoing provision shall not constitute a license or right to
use any proprietary information of the Company or such other Apogee Entity
and shall in no way affect any such contracts, agreements or arrangements
insofar as they relate to nondisclosure and nonuse of proprietary
information of the Company or such other Apogee Entity notwithstanding the
fact that such nondisclosure and nonuse may prohibit or restrict Executive
in certain competitive activities.
(ii) Executive shall not be required to mitigate the amount of any
payment provided for in this Section 4 by seeking other employment or otherwise.
The amount of any payment or benefit provided in this Section 4 shall not be
reduced by any compensation earned by Executive as a result of any employment by
another employer.
(iii) In the event that any payment or benefit received or to be
received by Executive in connection with a Change in Control of the Company or
termination of Executive's employment (whether payable pursuant to the terms of
this Agreement or any other plan, contract, agreement or arrangement with the
Company, with any person whose actions result in a Change in Control of the
Company or with any person constituting a member of an "affiliated group" as
defined in Section 280G(d)(5) of the Internal Revenue Code of 1986, as amended
(the "Code"), with the Company or with any person whose actions result in a
Change in Control of the Company (collectively, the "Total Payments")) would not
be deductible (in whole or in part) by the Company or such other person making
such payment or providing such benefit solely as a result of Section 280G of the
Code, the Severance Payment payable to Executive pursuant to Section 4(i)(b)
hereof shall be reduced until no portion of the Total Payments is not deductible
solely as a result of Section 280G of the Code or the Severance Payment is
reduced to zero; provided, however, that the Severance Payment shall not be
reduced hereunder if an amount equal to the Severance Payment (without reduction
under this Section 4(iii)) less applicable excise taxes under Section 4999 of
the Code exceeds the amount of the Severance Payment after reduction in
accordance with the preceding provisions of this Section 4(iii). For purposes
of this limitation, (a) no portion of the Total Payments the receipt or
enjoyment of which Executive shall have effectively waived in writing prior to
the date of payment of the Severance Payment shall be taken into account; (b) no
portion of the Total Payments shall be taken into account which in the opinion
of tax counsel selected by the Company and acceptable to Executive does not
constitute a "parachute payment" within the meaning of Section 280G(b)(2) of the
Code; (c) the Severance Payment shall be reduced only to the extent necessary so
that the Total Payments (other than those referred to in the immediately
preceding clause (b)) in their entirety constitute reasonable compensation
within the meaning of Section 280G(b)(4)(B) of the Code, in the opinion of the
tax counsel referred to in the immediately preceding clause (b); (d) the value
of any benefit provided by Section 4(i)(f) of this Agreement shall not be taken
into account in computing Total Payments; and (e) the value of any other non-
cash benefit or of any deferred cash payment included in the Total Payments
shall be determined by the Company's independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code. In case of uncertainty
as to whether all or some portion of a payment is or is not payable to Executive
under this Agreement, the Company shall initially make the payment to Executive,
and Executive agrees to refund to the Company any amounts ultimately determined
not to have been payable under the terms hereof.
(iv) Upon the occurrence of a Change in Control, the Company shall
cause its independent auditors promptly to review, at the Company's sole
expense, the applicability of Section 4999 of the Code to the Total Payments to
be received by Executive. If such auditors determine that, after taking into
account the provisions of Section 4(iii) hereof, any of the Total Payments would
be subject to the excise tax imposed by Section 4999 of the Code, or any
interest or penalties with respect to such tax (such excise tax, together with
interest and penalties, are collectively referred to as the "Excise Tax"), then,
in addition to any amounts payable under foregoing provisions of this Section 4,
the Company shall pay an additional cash payment (a "Gross-Up Payment") within
30 days of such determination equal to the Excise Tax imposed on the Total
Payments, without regard to any Excise Tax or any other income taxes that may be
imposed on such Gross-Up Payment. If no determination by the Company's auditors
is made prior to the time a tax return reflecting the Total Payments is required
to be filed by Executive, Executive will be entitled to receive a Gross-Up
Payment calculated on the basis of the Total Payments reported by him in such
tax return, within 30
days of the filing of such tax return. In all events, if any tax authority
determines that a greater Excise Tax should be imposed on the Total Payments
than is determined by the Company's independent auditors or reflected in
Executive's tax return pursuant to this subparagraph (iv), Executive shall be
entitled to receive the full Gross-Up Payment calculated on the basis of the
amount of Excise Tax determined to be payable by such tax authority from the
Company within 30 days of such determination.
5. Successors and Binding Agreement
(i) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of the Company), by agreement in
form and substance satisfactory to Executive, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle
Executive to compensation from the Company in the same amount and on the same
terms as Executive would be entitled hereunder if Executive terminated his
employment after a Change in Control for Good Reason, except that for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Employment Termination Date. As used in this
Agreement, "Company" shall mean the Company and any successor to its business
and/or assets which executes and delivers the agreement provided for in this
Section 5(i) or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law.
(ii) This Agreement is personal to Executive, and Executive may not
assign or transfer any part of his rights or duties hereunder, or any
compensation due to him hereunder, to any other person. Notwithstanding the
foregoing, this Agreement shall inure to the benefit of and be enforceable by
Executive's personal or legal representatives, executors, administrators, heirs,
distributees, devisees and legatees.
6. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
the Minneapolis-St. Xxxx metropolitan area, in accordance with the applicable
rules of the American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court having jurisdiction. In the
event that Executive engages counsel to arbitrate any dispute hereunder (which
arbitration results in an award to Executive of any kind) or to enforce such an
award, all costs and expenses incurred by Executive, including reasonable
attorney's fees and expenses, with respect to such arbitration or enforcement
thereof shall be reimbursed to Executive by the Company promptly upon
Executive's submission of a request therefor.
7. Modification; Waiver. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in a writing signed by Executive and such officer as may be
specifically designated by the Board of Directors of the Company. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any
prior or subsequent time.
8. Notice. All notices, requests, demands and all other
communications required or permitted by either party to the other party by this
Agreement (including, without limitation, any notice of termination of
employment and any notice of an intention to arbitrate) shall be in writing and
shall be deemed to have been duly given when delivered personally or received by
certified or registered mail, return receipt requested, postage prepaid, at the
address of the other party, as first written above (directed to the attention of
the Board of Directors and Corporate Secretary in the case of the Company).
Either party hereto may change its address for purposes of this Section 8 by
giving 15 days' prior notice to the other party hereto.
9. Severability. If any term or provision of this Agreement or the
application hereof to any person or circumstances shall to any extent be invalid
or unenforceable, the remainder of this Agreement or the application of such
term or provision to persons or circumstances other than those as to which it is
held invalid or unenforceable shall not be affected thereby, and each term and
provision of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
10. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11. Governing Law. This Agreement has been executed and delivered in
the State of Minnesota and shall in all respects be governed by, and construed
and enforced in accordance with, the laws of the State of Minnesota, including
all matters of construction, validity and performance.
12. Effect of Agreement; Entire Agreement. The Company and Executive
understand and agree that this Agreement is intended to reflect their agreement
only with respect to payments and benefits upon termination in certain cases and
is not intended to create any obligation on the part of either party to continue
employment. This Agreement supersedes any and all other oral or written
agreements or policies made relating to the subject matter hereof and
constitutes the entire agreement of the parties relating to the subject matter
hereof; provided that this Agreement shall not supersede or limit in any way
Executive's rights under any benefit plan, program or arrangements in accordance
with their terms.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in its name by a duly authorized director and officer, and Executive
has hereunto set his hand, all as of the date first written above.
APOGEE ENTERPRISES, INC.
By
Its
EXECUTIVE
