EXHIBIT 10.8
AMENDED AND RESTATED
SEVERANCE PAY AGREEMENT
This Agreement is made as of the 21st day of October, 1997, between
Fourth Shift Corporation, 0000 Xxxxxxxxxxxxx Xxxxx, Xxxxxxxxxxxxx Xxxxx, Xxxxx
000, Xxxxxxxxxxx, XX 00000 (such corporation, together with its subsidiaries,
hereinafter called the "Company") and X. X. Xxxxxxx (hereinafter called
"Executive"), residing at 00 Xxx Xxxxx Xxxxx, Xxxxxxxx, Xxxxxxxxxx 00000.
WITNESSETH THAT:
WHEREAS, it is the purpose of this Agreement to specify the financial
arrangements that the Company will provide to the Executive upon Executive's
separation from employment with the Company under the circumstances described
herein; and
WHEREAS, this Agreement is adopted in the belief that it is in the
best interests of the Company and its shareholders to provide stable conditions
of employment for Executive, thereby minimizing personnel turnover and enhancing
the Company's ability to recruit highly qualified people; and
WHEREAS, Executive is a party to that certain Severance Pay Agreement
dated as of April 16, 1996 (the "Prior Agreement") and the Company wishes to
revise and restate such Agreement to ensure the continued attention of Executive
in the event of a Change of Control of the Company, as defined herein.
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 Company, and for other good and valuable consideration, the
Company and Executive agree as follows:
1. RESTATEMENT/TERM OF AGREEMENT.
This Agreement restates and replaces the Prior Agreement effective as
of the date hereof. This Agreement shall be for a two-year term commencing on
the date hereof and shall be automatically renewed for additional two-year terms
thereafter unless canceled in writing by either party hereto at least 60 days
prior to expiration of the initial or any renewal term; provided that this
Agreement shall continue for at least two years after a Change of Control that
occurs during the term of this Agreement.
2. TERMINATION OF EMPLOYMENT.
(i) If a Change in Control (as defined in Section 3(i) hereof) occurs
during the term of this Agreement and any of the following events occur within
two years after such Change of Control, (x) all stock options in the Company (or
its successor as a result of the Change of Control) held by the terminated
Executive shall be accelerated so that they are fully exercisable by the
terminated Executive for the period after termination specified in such stock
options and (y) the terminated Executive shall be entitled to receive the cash
payment provided in Section 4 hereof:
(a) the Company shall have exercised its right to terminate the
Executive without cause; or
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(b) the Executive shall have voluntarily exercised his option to
terminate his employment for Good Reason (as defined in Section 3(ii)
hereof). Notice of election of this option must identify the Executive who
desires to terminate his employment and set forth in reasonable detail the
facts and circumstances claimed to constitute Good Reason.
(ii) From and after the date of a Change in Control, the Company shall
have the right to terminate Executive from employment at any time during the
term of this Agreement for Cause (as defined in Section 3(iii) hereof), by
written notice to the Executive, specifying the particulars of the conduct of
Executive forming the basis for such termination, and Executive shall not be
entitled to any payment pursuant to Section 4 for termination for Cause.
(iii) From and after the date of a Change in Control during the
term of this Agreement, Executive shall not be removed from employment with the
Company except as provided in Section 2(i) or (ii) hereof or as a result of
Executive's Disability (as defined in Section 3(iv) hereof) or his death.
Executive's rights upon termination of employment prior to a Change in Control
or after the expiration of the term of this Agreement shall be governed by the
standard employment termination policy applicable to Executive in effect at the
time of termination.
Any notice given by Executive pursuant to this Section 2 shall be
effective ten (10) business days after the date it is given by Executive.
3. DEFINITIONS
(i) A "Change in Control" shall mean the occurrence of any of the
following events as a result of a transaction or series of transactions:
(a) a change in control of the Company of a nature 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
("Exchange Act"), whether or not the Company is then subject to such
reporting requirement;
(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 30% or more of the combined
voting power of the Company's then outstanding securities;
(c) individuals who at the date hereof constitute the Board of
Directors of the Company cease to constitute a majority thereof,
PROVIDED THAT such change is the direct or indirect result of a proxy
fight and contested election for positions on the Board; or
(d) the Board of Directors of the Company determines, in its 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:
(a) the assignment to Executive of employment responsibilities
which are not of comparable responsibility and status as the employment
responsibilities held by Executive immediately prior to a Change in
Control. The assignment of Executive to an office that does not, or
responsibilities that do not, include the office and responsibilities
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of chief executive or principal executive of a publicly traded company
will not constitute assignment of comparable responsibility within the
meaning of this provision.
(b) a reduction by the Company in Executive's compensation
(including targeted bonus compensation) as in effect immediately prior
to a Change in Control;
(c) the Company's requiring Executive to be based anywhere other
than within fifty (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;
(d) except to the extent otherwise required by applicable law, the
failure by the Company 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 immediately prior to a Change in Control (or
plans providing Executive with substantially similar benefits), the
taking of any action by the Company 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, or the failure by the Company 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
vacation policy as then in effect; or
(e) 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.
Notwithstanding the foregoing, none of the forgoing events shall be
considered "Good Reason" if it occurs in connection with the Executive's
death or disability.
(iii) "Cause" shall mean termination by the Company 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
(b) the willful engaging by Executive in misconduct which is materially
injurious to the Company monetarily or otherwise. For purposes of this
paragraph, no act, 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 his 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 the long-term
disability plan of the Company.
4. BENEFITS UPON TERMINATION UNDER SECTION 2(i)
Upon the termination of the employment of Executive pursuant to Section
2(i) hereof, Executive shall be entitled to receive the benefits specified in
this Section 4. The amounts due to Executive under subparagraphs (a) and (b)
of this Section 4 shall be paid to Executive not later than one business day
prior to the date that the termination of Executive's employment becomes
effective. Any payments due under this Agreement will be paid to Executive
or Oranco, as instructed by Executive, at Executive's sole discretion.
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(a) The Company shall pay to Executive:
(i) 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;
(ii) 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;
(iii) an amount equal to a pro rata portion, based on number of
days elapsed, of the bonus Executive would have earned for the year in
which termination is effective, assuming for such purposes that the Company
achieves targeted performance; and
(iv) 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
(i) Pay as severance pay to Executive a lump-sum cash amount
equal to three (3) times Executive's average annualized cash and equivalent
compensation for the period consisting of the Executive's most recent five
taxable years ending before the date on which a Change in Control occurs
(or such portion of such period during which Executive performed services
for the Company);
(ii) Arrange to provide Executive and Executive's dependents (if
applicable) with welfare benefits (including, without limitation, medical,
life, and individual disability insurance coverage), perquisites and other
employee benefits, for the 36 months following such termination, that
provide substantially similar benefits, in terms of aggregate monetary
value, to Executive and Executive's dependents (if applicable) at
substantially similar costs to Executive as the welfare benefits,
perquisites and other employee benefits in effect immediately prior to the
Change in Control (or as in effect following the Change in Control, if
greater).
(c) The Company shall also pay to Executive all legal fees and
expenses incurred by Executive in seeking to obtain or enforce any right or
benefit provided to Executive by this Agreement, including any and all expenses
of arbitration in accordance with Section 12 below.
(d) Executive shall not be required to mitigate the amount of any
payment provided for in this Section 4 by seeking other employment or
otherwise. Except as provided in Section 4(b)(ii), 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.
(e) In the event Executive becomes entitled to payments under this
Section 4, 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
such payments. If such auditors shall determine that any payment or
distribution of any type by the Company to Executive or for Executive's benefit,
whether paid or payable or distributed or distributable pursuant to the terms of
this Agreement or otherwise (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 excise tax (such excise tax, together with any such
interest and penalties, are collectively referred to as the "Excise Tax"), then
Executive shall be entitled to receive an additional
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cash payment (a "Gross-Up Payment") within 30 days of such determination
equal to an amount such that after payment by Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including any Excise Tax, imposed upon the Gross-Up Payment, Executive would
retain an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Total Payments. For purposes of the foregoing determination, Executive's
tax rate shall be deemed to be the highest statutory marginal state and
Federal tax rate (on a combined basis) (including Executive's share of
F.I.C.A. and Medicare taxes) then in effect. 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 Executive 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 upon the Total Payments than is
determined by the Company's independent auditors or reflected in Executive's
tax return pursuant to this Section 6, 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; BINDING AGREEMENT; ASSIGNMENT.
(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 Termination Date. 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 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. 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 shall be deemed a waiver of similar
or dissimilar provisions or conditions at the same or at any prior or subsequent
time.
7. 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) shall be in writing and shall be deemed to have been duly given
when
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delivered personally or mailed by regular, certified or registered mail,
return receipt requested, at the address of the other party, as follows:
If to the Company, to:
Fourth Shift Corporation
0000 Xxxxxxxxxxxxx Xxxxx
Xxxxxxxxxxxxx Xxxxx
Xxxxx 000
Xxxxxxxxxxx, XX 00000
Attn.: Controller
If to Executive, to:
X. X. Xxxxxxx
00 Xxx Xxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Either party hereto may change its address for purposes of this Section 7 by
giving fifteen (15) days' prior notice to the other party hereto.
8. 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.
9. HEADINGS. The headings in this Agreement are inserted for
convenience or reference only and shall not be a part of or control or affect
the meaning of this Agreement.
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/ARBITRATION. 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.
Notwithstanding the foregoing, any dispute as to the occurrence of a "Change
of Control," or as to "Good Reason," shall be settled by final and binding
arbitration in accordance with the Center for Public Resources Rules for
Non-Administered Arbitration of Business Disputes in effect as of the date of
this Agreement by a sole arbitrator. The arbitration shall be governed by
the United States Arbitration Act, 9 U.S.C. - 1-16, and judgment upon the
award rendered by the arbitrator may be entered by any court having
jurisdiction thereof. The place of arbitration shall be Minneapolis,
Minnesota. The arbitrator is empowered to award damages in excess of
compensatory damages.
12. ENTIRE AGREEMENT. This Agreement supersedes any and all other
oral or written agreements or policies made relating to the subject matter
hereof, including the Prior Agreement;
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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 officer, and Executive has hereunto set his
hand, all as of the date first written above.
Fourth Shift Corporation
By /s/ XXXXX X. XXXXXX
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Its VP & CFO
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/s/ XXXXXX XXXXXX XXXXXXX
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X. X. Xxxxxxx
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