EXHIBIT 10.1
AMENDED AND RESTATED
CHANGE IN CONTROL AGREEMENT
This Agreement, dated as of May 21, 1998, is made by and between
National Computer Systems, Inc., a Minnesota corporation (the "Company"), and
___________________ (the "Executive"), and supersedes that Change in Control
Agreement dated April 15, 1996.
The Board of Directors of the Company has determined that it is in the
best interests of the Company and its shareholders to assure that the Company
will have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change in Control of the Company. The
Board believes that it is imperative to diminish the inevitable distraction of
the Executive by virtue of the personal uncertainties and risks created by a
pending or threatened Change in Control, to encourage the Executive's full
attention and dedication to the Company currently and in the event of any
threatened or pending Change in Control and to provide the Executive with
compensation and benefit arrangements upon a Change in Control which ensure that
the compensation and benefit expectations of the Executive will be satisfied and
which are competitive with those of other corporations. To accomplish these
objectives, the Board has authorized this Agreement.
In consideration of the premises and the mutual covenants contained in
this Agreement, the Company and the Executive agree as follows:
1. Definitions. The definitions set forth in Exhibit A to this
Agreement are incorporated herein by reference.
2. Term of Agreement. This Agreement shall continue in effect until the
earliest of (i) termination of Executive's employment prior to a Change in
Control, (ii) a Payment Event shall have occurred and the Company shall have
performed all of its obligations and satisfied all of its liabilities under this
Agreement or (iii) January 31 of the year following at least six months' notice
of nonrenewal by either party if such January 31 occurs prior to a Change in
Control.
3. Severance Payments. Upon a Payment Event, in lieu of any further
salary payments and any cash severance benefit otherwise payable to the
Executive, (a) the Company shall pay to the Executive in cash, within 10 days of
the Payment Event, the Severance Payment and (b) for an 24-month period after
the Payment Event or until such earlier time that the Executive becomes
reemployed, the Company shall arrange to provide the Executive with life,
accident and health insurance benefits substantially similar to those that the
Executive was receiving upon a Change in Control. Notwithstanding any provision
of any incentive compensation plan requiring continued employment after the
completed fiscal year or other measuring period as a condition to payment, the
Company shall pay to the Executive an amount, in cash, equal to the amount of
any incentive compensation that was allocated or awarded to the Executive for a
completed fiscal year or other measuring period preceding the occurrence of a
Payment Event not yet paid to the Executive.
4. Acceleration of Vesting.
(a) Stock Awards. Notwithstanding the terms of any option,
restricted stock grant, stock appreciation right, performance share
plan or any other agreement, now existing or hereafter entered into, in
which Executive receives an interest in stock of the Company or a right
to obtain an interest in stock in the Company or whose economic value
depends upon the stock performance of the Company ("Award"), subject to
the passage of time, a future event or the payment of money, such Award
shall accelerate and become fully vested upon a Payment Event as though
all time had passed, all events had occurred and all performances had
been attained.
(b) ESOP. Notwithstanding the terms of the ESOP, all unvested
shares of Common Stock, if any, in the Executive's unvested ESOP
account shall become fully vested upon termination of Executive's
employment following a Change in Control.
5. Gross-Up Payment. Following a Payment Event, 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 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 any
interest and penalties, being collectively referred to as the "Excise Tax"),
then, in addition to any amounts otherwise payable under this Agreement, the
Company shall pay within 30 days of such determination an additional cash
payment (the "Gross-Up Payment") equal to the Excise Tax imposed on the Total
Payments plus any Excise Tax, any other income taxes and FICA taxes (determined
using the highest applicable rate) that may be imposed on the 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 Section 5, 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.
6. Fees and Expenses. The Company shall pay to the Executive reasonable
legal fees and reasonable expenses incurred in good faith by the Executive in
obtaining the Severance Payment (including, but not limited to, all such fees
and expenses, if any, in seeking in good faith to obtain or enforce any benefit
or right provided by this Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application of Section 4999 of the
Code to any payment or benefit provided hereunder). Such payment shall be made
within five business days after delivery of the Executive's written request for
payment accompanied with such evidence of fees and expenses incurred as the
Company reasonably may require.
7. No Mitigation. The Company agrees that if a Payment Event occurs,
the Executive is not required to seek other employment or to attempt in any way
to reduce any amounts payable to the Executive by the Company. The amount of any
payment or benefit provided for in Section 3 (other than clause (b)) shall not
be reduced by any compensation earned by the Executive as the result of
employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by the Executive to the Company or any Subsidiary, or
otherwise.
8. Miscellaneous.
(a) Governing Law. All matters relating to the interpretation,
construction, validity and enforcement of this Agreement shall be
governed by the internal laws of the State of Minnesota without giving
effect to any choice or conflict of law provision or rule (whether of
the State of Minnesota or any other jurisdiction) that would cause the
application of laws of any jurisdiction other than the State of
Minnesota.
(b) Entire Agreement. This Agreement contains the entire
agreement of the parties relating to the subject matter hereof and
supersedes all prior agreements and understandings with respect to such
subject matter, and the parties hereto have made no agreements,
representations or warranties relating to the subject matter of this
Agreement which are not set forth herein.
(c) Amendments. No amendment or modification of this Agreement
shall be deemed effective unless made in writing and signed by the
parties hereto.
(d) No Waiver. No term or condition of this Agreement shall be
deemed to have been waived, nor shall there be any estoppel to enforce
any provisions of this Agreement, except by a statement in writing
signed by the party against whom enforcement of the waiver or estoppel
is sought. Any written waiver shall not be deemed a continuing waiver
unless specifically stated, shall operate only as to the specific term
or condition waived and shall not constitute a waiver of such term or
condition for the future or as to any act other than that specifically
waived.
(e) Successor to Company. In addition to any obligations
imposed by law upon any successor to the Company, the Company will
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business
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.
(f) Successor to Executive. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive shall die while
any amount would still be payable to the Executive hereunder (other
than amounts which, by their terms, terminate upon the death of the
Executive) if the Executive had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to the executors, personal representatives or
administrators of the Executive's estate.
(g) Notices. 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 prepaid, addressed to the respective addresses set forth below,
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 actual receipt:
To the Company:
Corporate Secretary
National Computer Systems, Inc.
X.X. Xxx 0000
Xxxxxxxxxxx, XX 00000
To the Executive:
--------------------------
National Computer Systems, Inc.
00000 Xxxxxxx Xxxxx Xxxxx
Xxxx Xxxxxxx, XX 00000
(h) Counterparts. This Agreement may be simultaneously
executed in any number of counterparts, and such counterparts executed
and delivered, each as an original, shall constitute but one and the
same instrument.
(i) Severability. To the extent any provision of this
Agreement shall be invalid or unenforceable, it shall be considered
deleted herefrom and the remainder of such provision and of this
Agreement shall be unaffected and shall continue in full force and
effect.
(j) Captions and Headings. The captions and paragraph headings
used in this Agreement are for convenience of reference only and shall
not affect the construction or interpretation of this Agreement or any
of the provisions hereof.
IN WITNESS WHEREOF, Executive and the Company have executed this
Agreement as of the date set forth in the first paragraph.
NATIONAL COMPUTER SYSTEMS, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxxxx
Its: Chairman, President and Chief
Executive Officer
------------------------------
Executive
EXHIBIT A
"Acquiring Person" shall mean any Person who or which, alone or
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding,
but shall not include the Company, any Subsidiary of the Company or any employee
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. For purposes of this Agreement, any
calculation of the number of shares of Common Stock outstanding at any
particular time, including for purposes of determining the particular percentage
of such outstanding shares of Common Stock of which any Person is the Beneficial
Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i)
of the General Rules and Regulations under the Exchange Act.
"Affiliate" and "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Exchange Act.
"Applicable Incentive Amount" means two times the amounts payable to
the Executive pursuant to all Incentive Compensation Plans if performance had
been at Target Level at the end of the applicable performance periods.
"Beneficial Owner" means beneficial owner (as defined in Rule 13d-3
under the Exchange Act) and "beneficially own" has a meaning correlative
therewith.
"Cause" means (i) the willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company or a Subsidiary,
as such duties may be defined from time to time, or abide by the written
policies of the Company or of the Executive's primary employer (other than any
such failure resulting from the Executive's termination for Good Reason by the
Executive) after a written demand for substantial performance is delivered to
the Executive by the Board of Directors which demand specifically identifies the
manner in which the Board of Directors believes that the Executive has not
substantially performed the Executive's duties or has not abided by written
policies, or (ii) the willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company or its Subsidiaries,
monetarily or otherwise. For purposes of clauses (i) and (ii) of this
definition, no act, or failure to act, on the Executive's part shall be deemed
"willful" unless done, or omitted to be done, by the Executive not in good faith
and without reasonable belief that the Executive's act, or failure to act, was
in the best interest of the Company and its Subsidiaries.
"Change in Control" means (i) a public announcement (which, for
purposes of this definition, shall include, without limitation, a report filed
pursuant to Section 13(d) of the Exchange Act) is made by the Company or any
Person that such Person has become an Acquiring Person, unless approved by the
Board of Directors, (ii) a public announcement (which, for purposes of this
definition, shall include, without limitation, a report filed pursuant to
Section 13(d) of the Exchange Act) is made by the Company or any Person that
such Person beneficially owns more than 50% of the Common Stock, regardless of
whether approved by the Board of Directors, (iii) a tender or exchange offer by
any Person (other than the Company, any Subsidiary of the Company or any
employee 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) is commenced (within the meaning of
Rule 14d-2(a) of the General Rules and Regulations under the Exchange Act), if,
upon the consummation thereof, such Person would be an Acquiring Person, (iv)
the Company enters into a merger, consolidation or statutory share exchange with
any other Person in which the surviving entity would not have as its directors
at least 60% of the Continuing Directors and would not have at least 60% of its
common stock owned by the common shareholders of the Company prior to such
merger, consolidation or statutory share exchange, or (v) a sale or disposition
of all or substantially all of the assets of the Company or the dissolution of
the Company.
"Code" means the Internal Revenue Code of 1986, as the same may be
amended from time to time.
"Common Stock" means the Company's Common Stock, $.03 par value per
share.
"Continuing Director" means any Person who is a member of the Board of
Directors of the Company, is not an Acquiring Person or an Affiliate or
Associate of an Acquiring Person or a representative of an Acquiring Person or
of any such Affiliate or Associate, and was a member of the Board of Directors
immediately prior to a Change in Control. A Continuing Director also means any
Person who subsequently becomes a member of the Board of Directors of the
Company and is not an Acquiring Person or an Affiliate or Associate of an
Acquiring Person or a representative of an Acquiring Person or of any such
Affiliate or Associate, 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; provided that any Person who first becomes
a member of the Board of Directors of the Company in connection with a
transaction described by clause (iv) of the definition of "Change in Control"
shall not be a Continuing Director.
"Disability" means any physical or mental illness or impairment that
renders Executive unable to substantially perform all of such Executive's duties
and services hereunder in a satisfactory manner for a period of 60 consecutive
days.
"ESOP" means the Company's Employee Stock Ownership Plan as in effect
on the date hereof or hereafter amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Good Reason" means (i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position (including status,
office, title and reporting requirement), authority, duties or responsibilities
or any other action by the Company which results in a diminution in such
position, authority, duties or responsibilities, excluding for this purpose an
isolated, insubstantial and inadvertent action not taken in bad faith and which
is remedied by the Company promptly after receipt of notice thereof given by the
Executive; (ii) the Company's requiring the Executive to be based at any office
or location further than 60 miles from Executive's place of employment
immediately prior to a Change in Control; (iii) any purported termination by the
Company of the Executive's employment otherwise than as expressly permitted by
this Agreement; (iv) any failure by the Company to comply with and satisfy
Section 8(e) of this Agreement, provided that such successor has received at
least ten days prior written notice from the Company or the Executive of the
requirements of Section 8(e) of the Agreement; (v) a reduction in the
Executive's annual base salary as in effect on the date hereof or as the same
may be increased from time to time; (vi) the failure by the Company or a
Subsidiary to pay to the Executive any portion of the Executive's compensation
within seven days of the date of such compensation is due; (vii) the failure by
the Company or a Subsidiary to continue in effect any compensation plan in which
the Executive participates immediately prior to the Change in Control which is
material to the Executive's total compensation unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan or arrangement) has been
made with respect to such plan, or the failure by the Company or a Subsidiary to
continue the Executive's participation therein (or in such substitute or
alternative plan or arrangement) on a basis not materially less favorable, both
in terms of the amount of benefits provided and the level of the Executive's
participation relative to other participants, as existed at the time of the
Change in Control; or (viii) the failure by the Company or a Subsidiary to
continue to provide the Executive with benefits substantially similar to those
enjoyed by the Executive under any of the Company's or a Subsidiary's
retirement, life insurance, medical, health and accident, or disability plans in
which the Executive was participating at the time of the Change in Control, the
taking of any action by the Company or a Subsidiary which would directly or
indirectly materially reduce any of such benefits or deprive the Executive of
any material fringe benefit enjoyed by the Executive at the time of the Change
in Control, or the failure by the Company or a Subsidiary to provide the
Executive with the number of paid vacation days to which the Executive is
entitled on the basis of years of service with the Company and its Subsidiary in
accordance with the Company's or a Subsidiary's normal vacation policy in effect
at the time of the Change in Control.
"Incentive Compensation Plans" means any incentive compensation plan of
the Company in which Executive participates that has a performance period
commencing (i) coincident with or (ii) most recently prior to, whichever
applies, the date on which the Change in Control or Severance Event occurs,
assuming that the Executive was continuously employed by the Company or a
Subsidiary until the last day of the performance period.
"Payment Event" means the occurrence of a Change in Control coincident
with or followed (i) at any time before the end of the 24th month immediately
following the month in which the Change in Control occurred, by the termination
of the Executive's employment with the Company or a Subsidiary for any reason
other than (A) by the Executive without Good Reason, (B) by the Company as a
result of the Disability of the Executive or for Cause or (C) as a result of the
death of the Executive or (ii) in the event the Executive remains continuously
employed by the Company or a Subsidiary until the end of the 24th month
immediately following the month in which the Change in Control occurred, the
termination of the Executive's employment with the Company or a Subsidiary, at
any time during the three-month period immediately following the expiration of
such 24-month period, for any reason other than (A) by the Company as a result
of the Disability of the Executive or (B) as a result of the death of the
Executive. Any transfer of the Executive's employment from the Company to a
Subsidiary, from a Subsidiary to the Company, or from one Subsidiary to another
Subsidiary shall not constitute a termination of the Executive's employment for
purposes of this Agreement.
"Person" means any individual, firm, corporation or other entity, and
shall include any successor (by merger or otherwise) of such entity.
"Severance Payment" means an amount equal to the higher of (a) two
times Executive's annual base salary in effect immediately prior to the
occurrence of the Change in Control plus two times the Applicable Incentive
Amount or (b) two times Executive's annual base salary in effect immediately
prior to the occurrence of the Payment Event plus two times the Applicable
Incentive Amount.
"Subsidiary" means a corporation or other entity or enterprise, whether
incorporated or unincorporated, of which at least a majority of the securities
or other interests having by their terms ordinary voting power to elect a
majority of the board of directors or others serving similar functions with
respect to such corporation or other entity or enterprise is owned, directly or
indirectly, by the Company.
"Target Level" means that (a) all of Executive's personal goals and
objectives as set forth in any Incentive Compensation Plan performance goal
sheet or addendum applicable to the Executive are accomplished and (b) the
"Target" for Company's financial goals and objectives specified in any such
sheet or addendum are achieved.
