EXHIBIT 99.7
CHANGE IN CONTROL AGREEMENT
April 17, 1998
Xx. Xxxxx X. Xxxxxxxx
000 Xxxxxxxx Xxxxxx
Xxxx Xxxxx, Xxxxx 00000-0000
Dear Xx. Xxxxxxxx:
GAINSCO Service Corp. (the "Company") considers it essential to
the best interests of its stockholders to xxxxxx the continuous
employment of key management personnel. In this connection, the Board
of Directors of the Company (the "Board") recognizes that, as is the
case with many publicly held corporations, the possibility of a change
in control may exist and that such possibility, and the uncertainty
and questions which it may raise among management, may result in the
departure or distraction of management personnel to the detriment of
the Company and its stockholders.
The Board has determined that appropriate steps should be taken
to reinforce and encourage the continued attention and dedication of
members of the Company's management, including yourself, to their
assigned duties without distraction in the face of potentially
disturbing circumstances arising from the possibility of a change in
control of the Company, although no such change is now contemplated.
In order to induce you to remain in the employ of the Company and
in consideration of your agreement set forth in Subsection 2(ii)
hereof, the Company agrees that you shall receive the severance
benefits set forth in this letter agreement ("Agreement") in the event
your employment with the Company is terminated subsequent to a "change
in control of the Company" (as defined in Section 2 hereof) under the
circumstances described below.
1. TERM OF AGREEMENT. This Agreement shall commence on its
effective date and shall continue in effect through December 31, 1998;
provided, however, that commencing on January 1, 1999 and each January
thereafter, the term of this Agreement shall automatically be extended
for one additional year unless, not later than the September 30
preceding each such January 1, the Company shall have given notice
that it does not wish to extend this Agreement; provided, further, if
a change in control of the Company shall have occurred during the
original or extended term of this Agreement, this Agreement shall
continue in effect for the later of (i) the original or extended term
or (ii) a period of twenty-four (24) months beyond the month in which
such change in control occurred. Notwithstanding the foregoing, in no
event shall the term of this Agreement extend beyond the date that you
attain sixty-five years of age.
2. CHANGE IN CONTROL. (i) No benefits shall be payable
hereunder unless there shall have been a change in control of the
Company, as set forth below. For purposes of this Agreement, a "change
in control of the Company" shall be deemed to have occurred if (A) any
"person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")),
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other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or 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, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the Company's
then outstanding securities; or (B) during any period of two
consecutive years (not including any period prior to the execution of
this Agreement), individuals who at the beginning of such period
constitute the Board and any new director (other than a director
designated by a person who has entered into an agreement with the
Company to effect a transaction described in clauses (A), (C) or (D)
of this Subsection) whose election by the Board or nomination for
election by the Company's shareholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election
or nomination for election was previously so approved, cease for any
reason to constitute a majority thereof; or (C) the shareholders of
the Company approve a merger or consolidation of the Company with any
other corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately
prior thereto continuing 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, or (D) the shareholders of the Company
approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of all or substantially all
the Company's assets.
(ii) For purposes of this Agreement, a "potential change in
control of the Company" shall be deemed to have occurred if (A) the
Company enters into an agreement, the consummation of which would
result in the occurrence of a change in control of the Company, (B)
any person (including the Company) publicly announces an intention to
take or to consider taking actions which if consummated would
constitute a change in control of the Company; (C) any person, other
than a trustee or other fiduciary holding securities under an employee
benefit plan of the Company or 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, who is or
becomes the beneficial owner, directly or indirectly, of securities of
the Company representing 10% or more of the combined voting power of
the Company's then outstanding securities, increases his beneficial
ownership of such securities by 5% or more of the combined voting
power of the Company's then outstanding securities on the date hereof;
or (D) the Board adopts a resolution to the effect that, for purposes
of this Agreement, a potential change in control of the Company has
occurred. You agree that, subject to the terms and conditions of this
Agreement, in the event of a potential change in control of the
Company, you will remain in the employ of the Company until the
earliest of (i) a date which is six (6) months from the occurrence of
such potential change in control of the Company, (ii) the termination
by you of your employment by reason of Disability or Retirement as
defined in Subsection 3(i), or (iii) the occurrence of a change in
control of the Company.
3. TERMINATION FOLLOWING CHANGE IN CONTROL. If any of the
events described in Subsection 2(i) hereof constituting a change in
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control of the Company shall have occurred, you shall be entitled to
the benefits provided in Subsection 4(iii) hereof upon the subsequent
termination of your employment during the term of this Agreement
unless such termination is (A) because of your death, Disability or
Retirement, (B) by the Company for Cause, or (C) by you other than for
Good Reason.
(i) DISABILITY; RETIREMENT. If, as a result of your
incapacity due to physical or mental illness, you shall have been
absent from the full-time performance of your duties with the Company
for a period of six (6) consecutive months, and within thirty (30)
days after written notice of termination is given you shall not have
returned to the full-time performance of your duties, your employment
may be terminated for "Disability." Termination by the Company or you
of your employment based on "Retirement" shall mean termination with
your consent in accordance with the Company's Pension Plan (as
hereafter defined) including early retirement, generally applicable to
its salaried employees, provided, however, that termination based on
"Retirement" shall not include retirement in conjunction with
termination by you for Good Reason.
(ii) CAUSE. Termination by the Company of your employment
for "Cause" shall mean termination upon (A) the willful and continued
failure by you to substantially perform your duties with the Company
(other than any such failure resulting from your incapacity due to
physical or mental illness or any such actual or anticipated failure
after the issuance of a Notice of Termination, by you for Good Reason
as defined in Subsections 3(iv) and 3(iii), respectively) after a
written demand for substantial performance is delivered to you by the
Board, which demand specifically identifies the manner in which the
Board believes that you have not substantially performed your duties,
or (B) the willful engaging by you in conduct which is demonstrably
and materially injurious to the Company, monetarily or otherwise. For
purposes of this Subsection, no act, or failure to act, on your part
shall be deemed "willful" unless done, or omitted to be done, by you
not in good faith and without reasonable belief that your action or
omission was in the best interest of the Company. Notwithstanding the
foregoing, you shall not be deemed to have been terminated for Cause
unless and until there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than
three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board called and held for such purpose (after
reasonable notice to you and an opportunity for you, together with
your counsel, to be heard before the Board), finding that in the good
faith opinion of the Board you were guilty of conduct set forth above
in clauses (A) or (B) of the first sentence of this Subsection and
specifying the particulars thereof in detail.
(iii) GOOD REASON. You shall be entitled to terminate
your employment for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean, without your express written consent, the
occurrence after a change in control of the Company of any of the
following circumstances unless, in the case of paragraphs (A), (E),
(F), (G) or (H), such circumstances are fully corrected prior to the
Date of Termination specified in the Notice of Termination, as defined
in Subsections 3(v) and 3(iv), respectively, given in respect thereof:
(A) the assignment to you of any duties inconsistent
with your present status as President and Chief Executive Officer of
the Company (or such other title or titles as you may be holding
immediately prior to the change in control of the Company) or a
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substantial adverse alteration in the nature or status of your
responsibilities from those in effect immediately prior to the change
in control of the Company;
(B) a reduction by the Company in your annual base
salary as in effect on the date of the change in control of the
Company;
(C) the relocation of the Company's principal
executive offices to a location outside of Fort Worth, Texas (or, if
different, the metropolitan area in which such offices are located
immediately prior to the change in control of the Company) or the
Company's requiring you to be based anywhere other than the Company's
principal executive offices except for required travel on the
Company's business to an extent substantially consistent with your
present business travel obligations;
(D) the failure by the Company, without your consent,
to pay to you any portion of your current compensation, or to pay to
you any portion of an installment of deferred compensation under any
deferred compensation program of the Company, within seven (7) days of
the date such compensation is due;
(E) except as provided below, the failure by the
Company to continue in effect any compensation plan in which you
participate immediately prior to the change in control of the Company
which is material to your total compensation, including but not
limited to the Company's 1995 Stock Option Plan and the Executive
Incentive Compensation Plan or any substitute or additional plans
adopted prior to the change in control, unless an equitable
arrangement (embodied in an ongoing substitute or alternative plan)
has been made with respect to such plan, or the failure by the Company
to continue your participation therein (or in such substitute or
additional plans) on a basis not materially less favorable, both in
terms of the amount of benefits provided and the level of your
participation relative to other participants, as existed at the time
of the change in control;
(F) except as provided below, the failure of GAINSCO,
Inc. to continue to provide you with benefits substantially similar to
those enjoyed by you under the Company's Profit Sharing Plan and Trust
of GAINSCO, Inc. (the "Pension Plan") or under any of the Company's
other deferred compensation plans, life insurance, medical, health and
accident, or disability plans in which you were participating at the
time of the change in control of the Company, the taking of any action
by the Company which would directly or indirectly materially reduce
any of such benefits or deprive you of any material fringe benefit
enjoyed by you at the time of the change in control of the Company, or
the failure by the Company to provide you with the number of paid
vacation days to which you are entitled on the basis of years of
service with the Company in accordance with the Company's normal
vacation policy for officers in effect at the time of the change in
control of the Company;
Page 5
(G) the failure of the Company to obtain a
satisfactory agreement from any successor to assume and agree to
perform this Agreement, as contemplated in Section 5 hereof; or
(H) any purported termination of your employment
which is not effected pursuant to a Notice of Termination satisfying
the requirements of Subsection (iv) below (and, if applicable, the
requirements of Subsection (ii) above); for purposes of this
Agreement, no such purported termination shall be effective.
Your right to terminate your employment pursuant to this Subsection
shall not be affected by your incapacity due to physical or mental
illness. Your continued employment shall not constitute consent to,
or a waiver of rights with respect to, any circumstance constituting
Good Reason hereunder. You may not terminate your employment for Good
Reason pursuant to paragraphs (E) or (F) on account of the
discontinuance of any plan or benefit (without an equitable
substitution) which is part of a uniform, non-discriminatory, Company-wide
reduction in benefits.
(iv) NOTICE OF TERMINATION. Any purported termination of
your employment by the Company or by you shall be communicated by
written Notice of Termination to the other party hereto in accordance
with Section 6 hereof. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the provision
so indicated.
(v) DATE OF TERMINATION, ETC. "Date of Termination" shall
mean (A) if your employment is terminated for Disability, thirty (30)
days after Notice of Termination is given (provided that you shall not
have returned to the full-time performance of your duties during such
thirty (30) day period), and (B) if your employment is terminated
pursuant to Subsection (ii) or (iii) above or for any other reason
(other than Disability), the date specified in the Notice of
Termination (which, in the case of a termination pursuant to
Subsection (ii) above shall not be less than thirty (30) days, and in
the case of a termination pursuant to Subsection (iii) above shall not
be less than fifteen (15) nor more than sixty (60) days, respectively,
from the date such Notice of Termination is given); provided that if
within fifteen (15) days after any Notice of Termination is given, or,
if later, prior to the Date of Termination (as determined without
regard to this proviso), the party receiving such Notice of
Termination notifies the other party that a dispute exists concerning
the termination, the Date of Termination shall be the date on which
the dispute is finally determined, either by mutual written agreement
of the parties, by a binding arbitration award, or by a final
judgment, order or decree of a court of competent jurisdiction (which
is not appealable or with respect to which the time for appeal
therefrom has expired and no appeal has been perfected); provided
further that the Date of Termination shall be extended by a notice of
dispute only if such notice is given in good faith and the party
giving such notice pursues the resolution of such dispute with
reasonable diligence. Notwithstanding the pendency of any such
dispute, the Company will continue to pay you your full compensation
in effect when the notice giving rise to the dispute was given
(including, but not limited to, base salary) and continue you as a
participant in all compensation, benefit and insurance plans in which
you were participating whether or not specifically referenced in this
Agreement when the notice giving rise to the dispute was given, until
Page 6
the dispute is finally resolved in accordance with this Subsection.
Amounts paid under this Subsection are in addition to all other
amounts due under this Agreement and shall not be offset against or
reduce any other amounts due under this Agreement, except as provided
in Subsection 4(iii)(B) below.
4. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
Following a change in control of the Company, as defined by Subsection
2(i), upon termination of your employment or during a period of
Disability you shall be entitled to the following benefits:
(i) During any period that you fail to perform your full-time
duties with the Company as a result of incapacity due to physical
or mental illness, you shall continue to receive your salary at the
rate in effect at the commencement of such period, together with all
other compensation and benefits payable to you during such period,
until this Agreement is terminated pursuant to Section 3(i) hereof.
Thereafter, or in the event your employment shall be terminated by the
Company or by you for Retirement, or by reason of your death, your
benefits shall be determined under the Company's retirement, insurance
and other compensation plans and programs then in effect in accordance
with the terms of such programs.
(ii) If your employment shall be terminated by the Company
for Cause or by you other than for Good Reason, Disability, death or
Retirement, the Company shall pay you your full base salary through
the Date of Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you are entitled
under any compensation or benefit plan of the Company at the time such
payments are due, and the Company shall have no further obligations to
you under this Agreement.
(iii) If your employment by the Company shall be
terminated (a) by the Company other than for Cause, Retirement or
Disability or (b) by you for Good Reason, then you shall be entitled
to the benefits provided below:
(A) the Company shall pay you your full base salary
through the Date of Termination at the rate in effect at the time
Notice of Termination is given, plus all other amounts to which you
are entitled under any compensation plan of the Company, at the time
such payments are due, except as otherwise provided below; and
(B) in lieu of any further salary payments to you for
periods subsequent to the Date of Termination, the Company shall pay
as severance pay to you a lump sum cash severance payment in an amount
equal to two times your "base amount" (within the meaning of section
280G(b)(3) of the Internal Revenue Code of 1986, as amended (the
"Code")), provided, however, that such severance payment shall be no
less than 1.25 times the amount reported on your Form W-2 statement
issued by the Company with respect to the year preceding that in which
the Date of Termination occurs. Notwithstanding any other provision
of this Agreement, in the event that any payment or benefit received
Page 7
or to be received by you in connection with a change in control or the
termination of your employment (whether payable pursuant to the terms
of this Agreement or any other plan, arrangement or agreement with the
Company, its successors, any person whose actions result in a change
in control or any person affiliated with (or which, as a result of the
completion of the transactions causing a change in control, will
become affiliated) the Company or such person within the meaning of
section 1504 of the Code) (all such payments and benefits being
hereinafter called the "Severance Payments") would not be deductible
(in whole or in part), by the Company, an affiliate or any person
making such payment or providing such benefit as a result of section
280G of the Code, then, to the extent necessary to make such portion
of the Severance Payments deductible (and after taking into account
any reduction in the Severance Payments provided by reason of section
280G of the Code in such other plan, arrangement or agreement), (A)
the cash Severance Payments shall first be reduced (if necessary, to
zero), and (B) all other non-cash Severance Payments shall next be
reduced. For purposes of this limitation (i) no portion of the
Severance Payments the receipt or enjoyment of which you shall have
effectively waived in writing prior to the Date of Termination shall
be taken into account, (ii) no portion of the Severance Payments shall
be taken into account which in the opinion of tax counsel selected by
the Company's independent auditors and reasonably acceptable to you
does not constitute a "parachute payment" within the meaning of section
280G(b)(2) of the Code, including by reason of section 280G(b)(4)(A)
of the Code, (iii) the Severance Payments shall be reduced only to the
extent necessary so that the Severance Payments (other than those
referred to in clauses (i) or (ii)) in their entirety constitute
reasonable compensation for services actually rendered within the
meaning of section 280G(b)(4)(B) of the Code or are otherwise not
subject to disallowance as deductions, in the opinion of tax counsel
referred to in clause (ii); and (iv) the value of any non-cash benefit
or any deferred payment or benefit included in the Severance 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.
(C) the payment provided for in paragraph (B) above,
shall be made not later than the fifth day following the Date of
Termination, provided, however, that if the amount of such payment
cannot be finally determined on or before such day, the Company shall
pay to you on such day an estimate, as determined in good faith by the
Company, of the minimum amount of such payment and shall pay the
remainder of such payment (together with interest at the rate provided
in section 1274(b)(2)(B) of the Code) as soon as the amount thereof
can be determined but in no event later the thirtieth day after the
Date of Termination. In the event that the amount of the estimated
payment exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to you, payable on
the fifth day after demand by the Company (together with interest at
the rate provided in section 1274(b)(2)(B) of the Code).
(D) the Company also shall pay to you all legal fees
and expenses incurred by you as a result of such termination
(including all such legal fees and legal expenses, if any, incurred in
contesting or disputing any such termination or in seeking to obtain
or enforce any right or benefit provided by this Agreement or in
connection with any tax audit or proceeding to the extent attributable
Page 8
to the application of section 4999 of the Code to any payment or
benefit provided hereunder). Such payments shall be made at the later
of the times specified in paragraph (C) above, or within five (5) days
after your request for payment accompanied with such evidence of fees
and expenses incurred as the Company reasonably may require.
(iv) You shall not be required to mitigate the amount of
any payment provided for in this Section 4 by seeking other employment
or otherwise, nor shall the amount of any payment or benefit provided
for in this Section 4 be reduced by any compensation earned by you as
the result of employment by another employer, by retirement benefits,
by offset against any amount claimed to be owed by you to the Company,
or otherwise.
(v) In addition to all other amounts payable to you under
this Section 4, you shall be entitled to receive all benefits payable
to you, at the respective time or times such payments are due, under
the Pension Plan[s], and any other plan or agreement relating to
retirement benefits.
5. SUCCESSORS; 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 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 assumption and
agreement prior to the effectiveness of any such succession shall be a
breach of this Agreement and shall entitle you to compensation from
the Company in the same amount and on the same terms as you would be
entitled to hereunder if you terminate your employment for Good Reason
following a change in control of the Company, except that for purposes
of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in
this Agreement, "Company" shall mean the Company as hereinbefore
defined and any successor to its business and/or assets as aforesaid
which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees. If you should die while any amount would still be payable
to you hereunder if you had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with
terms of this Agreement to your devisee, legatee or other designee or,
if there is no such designee, to your estate.
6. Notice. For the purpose of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered or mailed
by United States registered mail, return receipt requested, postage
pre-paid, addressed as follows:
Page 9
If to the Company:
GAINSCO Service Corp.
Attn: Chairman of the Board
000 Xxxxxxxx Xxxxxx
Xxxx Xxxxx, Xxxxx 00000-0000
If to you:
Xxxxx X. Xxxxxxxx
000 Xxxxxxxx Xxxxxx
Xxxx Xxxxx, Xxxxx 00000-0000
or to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notice of change
of address shall be effective only upon receipt.
7. MISCELLANEOUS. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing and signed by you and such officer
as may be duly authorized to act on the Company's behalf. No waiver
by either party hereto at any time of any breach by the other party
hereto of, or non-compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver
of similar of dissimilar provisions or conditions at the same or at
any prior or subsequent time. No agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not expressly set
forth in this Agreement. The validity, interpretation, construction
and performance of this Agreement shall be governed by the laws of the
State of Texas. All references to sections of the Exchange Act or the
Code shall be deemed also to refer to any successor provisions to such
sections. Any payments provided for hereunder shall be paid net of
any applicable withholding required under federal, state or local law.
The obligations of the Company under Subsections 4(i), 4(ii),
4(iii)(D) and 4(v) shall survive the expiration of the term of this
Agreement.
8. VALIDITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provisions of this Agreement, which shall
remain in full force and effect.
9. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all
of which together will constitute one and the same instrument.
10. ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be settled, at the Company's
expense, exclusively by arbitration in Tarrant County, Texas in
accordance with the rules of the American Arbitration Association then
in effect. Judgment may be entered on the arbitrator's award in any
court having jurisdiction; provided, however, that you shall be
Page 10
entitled to seek specific performance of your right to be paid until
the Date of Termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
If this letter sets forth our agreement on the subject matter
hereof, kindly signed and return to the Company the enclosed copy of
this letter which will then constitute our agreement on this subject.
Sincerely,
GAINSCO Service Corp.
By: /s/ Xxxx X. Xxxxxxx
___________________________
Agreed to effective the
17th day of April, 1998
/s/ Xxxxx X. Xxxxxxxx
______________________________
Xxxxx X. Xxxxxxxx
GUARANTEE
GAINSCO, INC., a Texas corporation, unconditionally guarantees
payment and performance in full of all obligations of GAINSCO Service
Corp. ("Service Corp.") under the above and foregoing change in
control agreement (the "Change in Control Agreement") between Service
Corp. and Xxxxx X. Xxxxxxxx and any renewals or extensions thereof
whether or not the terms of the Change in Control Agreement are
modified.
This guarantee is a continuing guarantee and may not be revoked
by the guarantor without the written consent of Xxxxx X. Xxxxxxxx and
shall expire only when the Change in Control Agreement and all
renewals or extensions of it have terminated.
GAINSCO, INC.
By: /s/ Xxxx X. Xxxxxxx
__________________________
Chairman of the Board
