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EXHIBIT 10.94
CHANGE OF CONTROL
SEVERANCE AGREEMENT
This Agreement between Xxxxx X. Xxxxx ("you") and VERSAR,
INC.("Company")has been entered into as of January 30, 1999. This Agreement
promises you severance benefits if, following a Change of Control, you are
terminated without Cause or resign for Good Reason during the Term of this
Agreement. Capitalized terms are defined in the last section of this
Agreement.
1. PURPOSE
The Company considers a sound and vital management team to be
essential. Management personnel who become concerned about the possibility that
the Company may undergo a Change in Control may terminate employment or become
distracted. Accordingly, the Board has determined that appropriate steps should
be taken to minimize the distraction executives may suffer from the possibility
of a Change in Control. One step is to enter into this Agreement with you.
2. YOUR AGREEMENT
If one or more Potential Changes in Control occur during the Term of
this Agreement, you agree not to resign for at least six full calendar months
after a Potential Change in Control occurs, except as follows: (a) you may
resign after a Change in Control occurs; (b) you may resign if you are given
Good Reason to do so; and (c) you may terminate employment on account of
retirement on or after 65 or because you become unable to work due to serious
illness or injury.
3. EVENTS THAT TRIGGER SEVERANCE BENEFITS
(a) Termination After a Change in Control
You will receive Severance Benefits under this Agreement if, during
the Term of this Agreement and after a Change in Control has occurred, your
employment is terminated by the Company without Cause (other than on account of
your Disability or death) or you resign for Good Reason.
(b) Termination After a Potential Change in Control
You also will receive Severance Benefits under this Agreement if,
during the Term of this Agreement and after a Potential Change in Control has
occurred but before a Change in Control actually occurs, your employment is
terminated by the Company without Cause or you resign for Good Reason, but only
if either: (i) you are terminated at the direction of a Person who has entered
into an agreement with
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the Company that will result in a Change in Control; or (ii) the event
constituting Good Reason occurs at the direction of such Person.
(c) Successor Fails to Assume This Agreement
You also will receive Severance Benefits under this Agreement if,
during the Term of this Agreement, a successor to the Company fails to assume
this Agreement, as provided in Section 13(a).
4. EVENTS THAT DO NOT TRIGGER SEVERANCE BENEFITS
You will not be entitled to Severance Benefits if your employment ends
because you are terminated for Cause or on account of Disability or because you
resign without Good Reason, retire, or die. Except as provided in Section
3(c), you will not be entitled to Severance Benefits while you remain protected
by this Agreement and remain employed by the Company, its affiliates, or their
successors.
5. TERMINATION PROCEDURES
If you are terminated by the Company after a Change in Control and
during the Term of this Agreement, the Company shall provide you with 30 days'
advance written notice of your termination, unless you are being terminated for
Cause. The notice will indicate why you are being terminated and will set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for your termination. If you are being terminated for Cause, your notice
of termination will include a copy of a resolution duly adopted by the
affirmative vote of not less than 51% of the entire membership of the Board (at
a meeting of the Board called and held for the purpose of considering your
termination (after reasonable notice to you and an opportunity for you and your
counsel to be heard before the Board)) finding that, in the good faith opinion
of the Board, Cause for your termination exists and specifying the basis for
that opinion in detail. If you are purportedly terminated without the notice
required by this Section, your termination shall not be effective.
6. SEVERANCE BENEFITS
(a) In General
If you become entitled to Severance Benefits under this Agreement, you
will receive all of the Severance Benefits described in this Section.
(b) Lump-Sum Payment in Lieu of Future Compensation
In lieu of any further cash compensation for periods after your
employment ends, you will be paid a cash lump sum equal to 2 times your annual
base salary in effect when your employment ends or, if higher, in effect
immediately before the Change in Control, Potential Change in Control, or Good
Reason event for which you terminate employment. In addition, and without
duplication, you will be paid a
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cash lump sum equal to 2 times the higher of the amounts paid to you (if any)
under any existing bonus or incentive plans in the calendar year preceding the
calendar year in which your employment ends or in the calendar year preceding
the calendar year in which the Change in Control occurred (or in which the
Potential Change in Control occurred, if benefits are payable under Section
3(b)hereof).
(c) Incentive Compensation and Options
The Company will pay you a cash lump sum equal to any unpaid incentive
compensation (that is not otherwise paid to you) that you have been allocated
or awarded under any existing bonus or incentive plans for measuring periods
completed before you became entitled to Severance Benefits under this
Agreement. All unvested options to purchase Company common stock will
immediately vest and remain exercisable for the longest period of time
permitted under the applicable stock option plan.
(d) Group Insurance Benefit Continuation
During the period that begins when you become entitled to Severance
Benefits under this Agreement and ends on the last day of the 24th calendar
month beginning thereafter, the Company shall provide, at no cost to you or
your spouse or dependents, the life, disability, accident, and health and
dental insurance benefits (or substantially similar benefits) it was providing
to you and your spouse and dependents immediately before you became entitled to
Severance Benefits under this Agreement (or immediately before a benefit
reduction that constitutes Good Reason, if you terminate employment for that
Good Reason). These benefits shall be treated as satisfying the Company's
COBRA obligations. After benefit continuation under this subsection ends, you
and your spouse and dependents will be entitled to any remaining COBRA rights.
7. TIME FOR PAYMENT
You will be paid your cash Severance Benefits within five days after
you become entitled to Severance Benefits under this Agreement (e.g., within
five days following your termination of employment). If the amount you are due
cannot be finally determined within that period, you will receive the minimum
amount to which you are clearly entitled, as estimated in good faith by the
Company. The Company will pay the balance you are due (together with interest
at the rate provided in Internal Revenue Code Section 1274(b)(2)(B)) as soon as
the amount can be determined, but in no event later than 30 days after you
terminate employment. If your estimated payment exceeds the amount you are
due, the excess will be a loan to you, which you must repay to the Company
within five business days after demand by the Company (together with interest
at the rate provided in Code Section 1274(b)(2)(B)).
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8. PAYMENT EXPLANATION
When payments are made to you, the Company will provide you with a
written statement explaining how your payments were calculated and the basis
for the calculations. This statement will include any opinions or other advice
the Company has received from auditors or consultants as to the calculation of
your benefits. If your benefit is affected by the golden parachute limitation
in Section 10, the Company will provide you with calculations relating to that
limitation and any supporting materials you reasonably need to permit you to
evaluate those calculations.
9. RELATION TO OTHER SEVERANCE PROGRAMS
Your Severance Benefits under this Agreement are in lieu of any
severance or similar benefits that may be payable to you under any other
employment agreement or other arrangement; to the extent any such benefits are
paid to you, they shall be applied to reduce the amount due under this
Agreement. This Agreement constitutes the entire agreement between you and the
Company and its affiliates with respect to such benefits.
10. POTENTIAL LIMITATIONS
(a) Golden Parachute Limitation
Your aggregate payments and benefits under this Agreement and all
other contracts, arrangements, or programs shall not exceed the maximum amount
that may be paid without triggering golden parachute penalties under Section
280G and related provisions of the Internal Revenue Code, as determined in good
faith by the Company's independent auditors. The preceding sentence shall not
apply to the extent the shareholder approval requirements of Code Section
280G(b)(5) are satisfied. If your benefits must be reduced to avoid triggering
such penalties, your benefits will be reduced in the priority order you
designate or, if you fail promptly to designate an order, in the priority order
designated by the Company. If an amount in excess of the limit set forth in
this Section is paid to you, you must repay the excess amount to the Company on
demand, with interest at the rate provided in Code Section 1274(b)(2)(B). You
and the Company agree to cooperate with each other reasonably in connection
with any administrative or judicial proceedings concerning the existence or
amount of golden parachute penalties on payments or benefits you receive.
(b) Section 162(m) Limitation
To the extent payments or benefits under this Agreement would not be
deductible under Code Section 162(m) if made or provided when otherwise due
under this Agreement, they shall be made or provided later, immediately after
Section 162(m) ceases to preclude their deduction, with interest thereon at the
rate provided in Code Section 1274(b)(2)(B).
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(c) Pooling of Interests Limitation
If the Company enters into a business combination transaction that is
intended to qualify for "pooling of interests" accounting treatment and the
transaction would qualify for such treatment but for one or more provisions of
this or any other agreement you have with the Company, then such agreement, to
the extent practicable, shall be interpreted so as to permit such accounting
treatment. To the extent that is not sufficient to preserve pooling of
interests accounting, any provisions of the Agreement that would preclude such
accounting treatment shall be void. All determinations under this Section
shall be made by the accounting firm whose pooling of interests accounting
opinion is required as a condition of the consummation of the business
combination transaction in question.
11. DISABILITY
Following a Change in Control, while you are absent from work as a
result of physical or mental illness, the Company will continue to pay you your
full salary and provide you all other compensation and benefits payable to you
under the Company's compensation or benefit plans, programs, or arrangements.
These payments will stop if and when your employment is terminated by the
Company for Disability or at the end of the Term of this Agreement, whichever
is earlier. Severance Benefits under this Agreement are not payable if you are
terminated on account of your Disability.
12. EFFECT OF REEMPLOYMENT
Your Severance Benefits will not be reduced by any other compensation
you earn or could have earned from another source.
13. SUCCESSORS
(a) Assumption Required
In addition to obligations imposed by law on a successor to the
Company, during the Term of this Agreement the Company will require any
successor to all or substantially all of the business or assets of the Company
expressly to assume and to agree to perform this Agreement in the same manner
and to the same extent that the Company was required to perform. If the
Company fails to obtain such an assumption and agreement before the effective
date of a succession, you will be entitled to Severance Benefits as if you were
terminated by the Company without Cause on the effective date of that
succession.
(b) Heirs and Assigns
This Agreement will inure to the benefit of, and be enforceable by,
your personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees, and legatees. If you die while any amount is
still payable to
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you under this Agreement, that amount will be paid to the executor, personal
representative, or administrator of your estate.
14. AMENDMENTS
This Agreement may be modified only by a written agreement executed by
you and an authorized officer of the Company.
15. GOVERNING LAW
This Agreement creates a "top hat" employee benefit plan subject to
the Employee Retirement Income Security Act of 1974, and it shall be
interpreted, administered, and enforced in accordance with that law; the
Company is the "plan administrator." To the extent that state law is
applicable, the statutes and common law of the State of Virginia(excluding its
choice of laws statutes or common law) shall apply.
16. CLAIMS [ERISA REQUIREMENT]
(a) When Required; Attorneys' Fees
You do not need to present a formal claim to receive benefits payable
under this Agreement. However, if you believe that your rights under this
Agreement are being violated, you must file a formal claim with the Company in
accordance with the procedures set forth in this Section. The Company will pay
your reasonable attorneys' fees and related costs in enforcing your rights
under this Agreement.
(b) Initial Claim
Your claim must be presented to the Company in writing. Within 30
days after receiving the claim, a claims official appointed by the Company will
consider your claim and issue his or her determination thereon in writing. With
your consent, the initial claim determination period can be extended further.
If you can establish that the claims official failed to respond to your claim
in a timely manner, you may treat the claim as having been denied by the claims
official.
(c) Claim Decision
If your claim is granted, the benefits or relief you are seeking will
be provided. If your claim is wholly or partially denied, the claims official
shall, within three days, provide you with written notice of the denial,
setting forth, in a manner calculated to be understood by you: (i) the specific
reason or reasons for the denial; (ii) specific references to the provisions on
which the denial is based; (iii) a description of any additional material or
information necessary for you to perfect your claim, together with an
explanation of why the material or information is necessary; and (iv) an
explanation of the procedures for appealing denied claims. If you establish
that the
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claims official has failed to respond to your claim in a timely manner, you may
treat the claim as having been denied by the claims official.
(d) Appeal of Denied Claims
You may appeal the claims official's denial of your claim in writing
to an appeals official designated by the Company (which may be a person,
committee, or other entity) for a full and fair appeal. You must appeal a
denied claim within five days after your receipt of written notice denying your
claim, or within 60 days after such written notice was due, if the written
notice was not sent. In connection with the appeals proceeding, you (or your
duly authorized representative) may review pertinent documents and may submit
issues and comments in writing. You may only present evidence and theories
during the appeal that you presented during the initial claims stage, except
for information the claims official requested you to provide to perfect the
claim. You will irrevocably waive any theories you do not in good faith pursue
through the appeal stage, such as by failing to file a timely appeal request.
(e) Appeal Decision
The decision by the appeals official will be made within 60 days after
your appeal request, unless special circumstances require an extension of time,
in which case the decision will be rendered as soon as possible, but not later
than ten days after your appeal request, unless you agree to a greater
extension of that deadline. The appeal decision will be in writing, set forth
in a manner calculated to be understood by you; it will include specific
reasons for the decision, as well as specific references to the pertinent
provisions of this Agreement on which the decision is based. If you do not
receive the appeal decision by the date it is due, you may deem your appeal to
have been denied.
(f) Procedures
The Company will adopt procedures by which initial claims and appeals
will be considered and resolved; different procedures may be established for
different claims. All procedures will be designed to afford you full and fair
consideration of your claim.
17. LIMITATION ON EMPLOYEE RIGHTS
This Agreement does not give you the right to be retained in the
service of the Company.
18. VALIDITY
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
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19. COUNTERPARTS
This Agreement may be executed in several counterparts, each of which
will be deemed an original, but all of which will constitute one and the same
instrument.
20. GIVING NOTICE
(a) To the Company
All communications from you to the Company relating to this Agreement
must be sent to the Company to its principal business office in Springfield,
Virginia, in writing, by registered or certified mail, or delivered personally.
(b) To You
All communications from the Company to you relating to this Agreement
must be sent to you in writing, by registered or certified mail, or delivered
personally, addressed as indicated at the end of this Agreement.
31. DEFINITIONS
(a) Agreement
"Agreement" means this contract, as amended.
(b) Beneficial Owner
"Beneficial Owner" has the meaning set forth in Rule 13d-3 under the
Exchange Act.
(c) Board
"Board" means the Board of Directors of the Company.
(d) Cause
"Cause" means any of the following:
(1) you fail to carry out assigned duties after being given prior
warning and an opportunity to remedy the failure,
(2) you breach any material term of any employment agreement with
the Company,
(3) you engage in fraud, dishonesty, willful misconduct, gross
negligence, or breach of fiduciary duty (including without
limitation any failure to
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disclose a conflict of interest)in the performance of your duties
for the Company, or
(4) you are convicted of a felony or crime involving moral turpitude.
(e) Change in Control
"Change in Control" means the first of the following to occur after
the date of this Agreement, excluding any event that is Management Action:
(1) Acquisition of Controlling Interest. Any Person becomes the
Beneficial Owner, directly or indirectly, of securities of the
Company representing 25% or more of the combined voting power
of the Company's then outstanding securities. In applying the
preceding sentence, securities acquired directly from the
Company or its affiliates with the company's approval by or
for the Person shall not be taken into account.
(2) Change in Board Control. During the term of this Agreement,
individuals who constituted the Board as of the date of this
Agreement (or their approved replacements, as defined in the
next sentence) cease for any reason to constitute a majority
of the Board. A new director shall be considered an "approved
replacement" director if his or her election (or nomination
for election) was approved by a vote of at least two-thirds of
the directors then still in office who either were directors
at the beginning of the period or were themselves approved
replacement directors.
(3) Merger Approved. The shareholders of the Company approve a
merger or consolidation of the Company with any other
corporation unless: (a) the voting securities of the Company
outstanding immediately before the merger or consolidation
would continue to represent (either by remaining outstanding
or by being converted into voting securities of the surviving
entity) at least 75% of the combined voting power of the
voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation;
and (b) no Person acquires more than 25% of the combined
voting power of the Company's then outstanding securities.
(4) Sale of Assets. The shareholders of the Company approve an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets.
(f) Code
"Code" means the Internal Revenue Code of 1986, as amended.
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(g) Company
"Company" means Versar, Inc. and any successor to its business or
assets that (by operation of law, or otherwise) assumes and agrees to perform
this Agreement. However, for purposes of determining whether a Change in
Control has occurred in connection with such a succession, the successor shall
not be considered to be the Company.
(h) Disability
"Disability" means that, due to physical or mental illness: (i) you
have been absent from the full-time performance of your duties with the Company
for substantially all of a period of six consecutive months; (ii) the Company
has notified you that it intends to terminate you on account of Disability; and
(iii) you do not resume the full-time performance of your duties within 30 days
after receiving notice of your intended termination on account of Disability.
(i) Exchange Act
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
(j) Good Reason
"Good Reason" means the occurrence of any of the following without
your express written consent:
(1) Demotion. Your duties and responsibilities are substantially
and adversely altered from those in effect immediately before
the Change in Control (or, with respect to Section 3(b), the
Potential Change in Control), other than merely as a result of
the Company ceasing to be a public company, a change in your
title, or your transfer to an affiliate.
(2) Pay Cut. Your annual base salary is reduced.
(3) Relocation. Your principal office is transferred to another
location, which increases your one-way commute to work by more
than 50 miles, based on your residence when the transfer was
announced or, if you consent to the transfer, the Company
fails to pay (or reimburse you) for all reasonable moving
expenses you incur in changing your principal residence in
connection with the relocation and to indemnify you against
any loss you may realize when you sell your principal
residence in connection with the relocation in an arm's-length
sale for adequate consideration. For purposes of the
preceding sentence, your "loss" will be the difference between
the actual sales price of your residence and the higher of:
(a) your aggregate investment in the residence; or (b) the
fair market value of the residence, as determined
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by a real estate appraiser designated by you and satisfactory
to the Company.
(4) Breach of Promise. The Company fails to pay you any present or
deferred compensation within seven days after it is due.
(5) Discontinuance of Compensation Plan Participation. The Company
fails to continue, or continue your participation in, any
compensation plan in which you participated immediately before
the Change in Control (or, with respect to Section 3(b), the
Potential Change in Control) that is material to your total
compensation, unless an equitable substitute arrangement has
been adopted or made available on a basis not materially less
favorable to you than the plan in effect immediately before
the Change in Control (or the Potential Change in Control, if
applicable), both as to the benefits you receive and your
level of participation relative to other participants.
(6) Discontinuance of Benefits. The Company stops providing you
with benefits that, in the aggregate, are substantially as
valuable to you as those you enjoyed immediately before the
Change in Control (or, with respect to Section 3(b), the
Potential Change in Control) under the Company's pension,
savings, deferred compensation, life insurance, medical,
health, disability, accident, vacation, and fringe benefit
plans, programs, and arrangements.
(7) Improper Termination. You are purportedly terminated, other
than pursuant to a notice of termination satisfying the
requirements of Section 5.
(8) Notice of Prospective Action. You are officially notified or
it is officially announced that the Company will take any of
the actions listed above during the Term of this Agreement.
However, an event that is or would constitute Good Reason shall cease to be
Good Reason if: (a) you do not terminate employment within 180 days after the
event occurs; (b) the Company reverses the action or cures the default that
constitutes Good Reason before you terminate employment; or (c) you were a
primary instigator of the Good Reason event and the circumstances make it
inappropriate for you to receive benefits under this Agreement (e.g., you agree
temporarily to relinquish your position on the occurrence of a merger
transaction you negotiate). If you have Good Reason to terminate employment,
you may do so even if you are on a leave of absence due to physical or mental
illness or any other reason.
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(k) Management Action
"Management Action" means any event, circumstance, or transaction
occurring during the six-month period following a Potential Change in Control
that results from the action of a Management Group.
(l) Management Group
"Management Group" means any entity or group that includes, is
affiliated with, or is wholly or partly controlled by one or more executive
officers of the Company in office before a Potential Change in Control.
(m) Person
"Person" has the meaning given in Section 3(a)(9) of the Exchange Act,
as modified and used in Section 13(d) of that Act, and shall include a "group,"
as defined in Rule 13d-5 promulgated thereunder. However, a Person shall not
include: (i) the Company or any of its subsidiaries; (ii) a trustee or other
fiduciary holding securities under an employee benefit plan of the Company or
any of its subsidiaries; (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities; or (iv) a corporation owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company.
(n) Potential Change in Control
"Potential Change in Control" means that any of the following has
occurred during the term of this Agreement, excluding any event that is
Management Action:
(1) Agreement Signed. The Company enters into an agreement that
will result in a Change in Control.
(2) Notice of Intent to Seek Change in Control. The Company or any
Person publicly announces an intention to take or to consider
taking actions that will result in a Change in Control.
(3) Board Declaration. With respect to this Agreement, the Board
adopts a resolution declaring that a Potential Change in
Control has occurred.
(o) Severance Benefits
"Severance Benefits" means your benefits under Section 6 of this Agreement.
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(p) Term of this Agreement
"Term of this Agreement" means the period that commences on the date
of this Agreement and ends on the earlier of:
(1) Expiration. January 31, 2,002; or
(2) Change in Control. The last day of the 24th calendar month
beginning after the calendar month in which a Change in
Control occurred during the Term of this Agreement. After a
Change in Control occurs, the end of the Term of this
Agreement shall solely be determined under this Section
21(p)(2).
IN WITNESS WHEREOF, the parties have executed this Agreement as if the date set
forth above.
Date 1/30/99 By: Versar, Inc.
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Name: /S/ Xxxxxxxx X. Xxxxx
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Title: Chairman & CEO
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Date 1/30/99 /S/ Xxxxx X. Xxxxx
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Xxxxx X. Xxxxx
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