EXHIBIT 10.2
AMENDED AND RESTATED SEVERANCE AGREEMENT
This Agreement, dated December 8, 1998, is made by and between National
Computer Systems, Inc., a Minnesota corporation (the "Company"), and Xxxxxxx X.
Xxxxxxxx (the "Executive"), and supersedes that certain Amended and Restated
Severance Agreement dated May 23, 1996 between the Company and Executive.
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
indefinitely.
3. Severance Payments. If Executive's employment is involuntarily
terminated other than for Cause or if Executive voluntarily terminates his
employment within 60 days after the occurrence of a Severance Event, in lieu of
any cash severance benefit otherwise payable to the Executive, (a) for a period
of two years from the termination of Executive's employment and subject to
normal tax withholding, (i) the Company shall continue Executive's base salary
and (ii) the Company shall arrange to provide the Executive with the insurance,
fringe benefits and perquisites (which currently include monthly country club
dues, investment planning services, tax preparation services and an annual
physical) that Executive would have received if he had remained employed upon
the same terms and conditions existing before the Severance Event and (b) the
Company shall pay the Executive the Applicable Bonus Amount within 90 days of
termination of Executive's employment. 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
Severance 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 termination of
Executive's employment following a Change in Control 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. Upon the occurrence of a Change in Control, the
Company shall cause its independent auditors promptly to review, at the
Company's sole expense, the applicability of Section 4999 of the Code to the
Total Payments to be received by Executive. If such auditors determine that 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 payments and other benefits provided by this Agreement (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 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 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, except that certain
Supplemental Executive Retirement Agreement dated October 1, 1994
between Executive and the Company.
(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:
National Computer Systems, Inc.
X.X. Xxx 0000
Xxxxxxxxxxx, XX 00000
To the Executive:
Xxxxxxx X. Xxxxxxxx
0000 Xxxxxxx Xxxxx
Xxxxxxxxxxx, 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/ Xxxxx X. Xxx /s/ Xxxxxxx X. Xxxxxxxx
Xxxxx X. Xxx Xxxxxxx X. Xxxxxxxx
Its Director and Chairman --
Compensation Committee
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 Bonus 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 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.
"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.
"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.
"Severance Event" means (i) Executive's duties are reassigned
inconsistent with his duties as Chairman and Chief Executive Officer of the
Company, (ii) the Company reduces, in a manner not agreed to by Executive,
Executive's base salary and/or the target percentage of Executive's defined MIP,
(iii) Executive is required to relocate in a manner not agreed to by Executive,
(iv) a substantial reduction in benefits or perquisites or other involuntary
material adverse change in the terms and conditions of Executive's employment or
(v) a Change in Control resulting in an involuntary change in Executive's
responsibilities or an infringement on Executive's ability to perform the role
of Chairman and Chief Executive Officer.
"Person" means any individual, firm, corporation or other entity, and
shall include any successor (by merger or otherwise) of such entity.
"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.
"Total Payments" means any payment for benefits received or to be
received by Executive payable pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with the Company as a result of the
termination of Executive's employment with the Company.
