CHANGE IN CONTROL EMPLOYMENT AND SEVERANCE AGREEMENT
This Change in Control Employment and Severance Agreement (the
"AGREEMENT") is entered into this 8th day of July, 1999 between Xxxxxxx X.
Xxxxxx ("Executive") and ZAMBA CORPORATION, a Delaware corporation (the
"COMPANY"). This Agreement is intended to provide Executive with the
compensation and benefits described herein upon the occurrence of specific
events following a Change in Control (as hereinafter defined).
Certain capitalized terms used in this Agreement are defined in Article
VII.
The Company and Executive hereby agree as follows:
ARTICLE I
EMPLOYMENT BY THE COMPANY
1.1 Executive is currently employed as the Vice President and Chief
Financial Officer of the Company.
1.2 This Agreement shall become effective upon the occurrence of a
Change in Control.
1.3 The Company and Executive each agree and acknowledge that
Executive is employed by the Company as an "at will" employee and that either
Executive or the Company has the right at any time to terminate Executive's
employment with the Company, with or without cause or advance notice, for any
reason or for no reason. The Company and Executive wish to set forth the
compensation and benefits which Executive shall be entitled to receive in the
event that Executive's employment with the Company terminates under the
circumstances described in Article II of this Agreement.
1.4 The duties and obligations of the Company to Executive under this
Agreement shall be in consideration for Executive's past services to the
Company, Executive's continued employment with the Company and Executive's
execution of the general waiver and release described in Section 4.3.
ARTICLE II
TRIGGERING EVENTS
2.1 Involuntary Termination of Employment During Term
(a) If Executive's employment is involuntarily terminated by
the Company without Cause during the Term, such termination of employment
will be a Triggering Event, and the Company shall pay or provide
Executive the compensation and benefits described in Article III.
(b) If Executive's employment is involuntarily terminated by
the Company for Cause during the Term, such termination of employment
will NOT be a Triggering Event, and Executive will NOT be entitled to
receive any compensation or benefits under the provisions of this
Agreement except as otherwise specifically set forth herein.
2.2 Voluntary Termination of Employment During Term.
25
(a) Executive may voluntarily terminate his employment with the
Company at any time during the Term. If Executive voluntarily terminates
his employment for Good Reason during the Term, such termination of
employment will be a Triggering Event, and the Company shall pay or
provide Executive the compensation and benefits described in Article III.
(b) If Executive voluntarily terminates his employment for any
reason other than Good Reason during the Term, such termination of
employment will NOT be a Triggering Event, and Executive will NOT be
entitled to receive any compensation or benefits under the provisions of
this Agreement except as otherwise specifically set forth herein.
2.3 Death or Disability During Term. If Executive's employment with
the Company terminates on account of death or disability during the Term, such
termination of employment will be a Triggering Event, and the Company shall pay
or provide Executive the compensation and benefits described in Article III.
2.4 Employment Through Term. If Executive's employment continues
through the end of the Term, such continuation of employment will be a
Triggering Event, and the Company shall pay Executive the compensation and
benefits described in Article III.
ARTICLE III
COMPENSATION AND BENEFITS
3.1 Right to Benefits. If a Triggering Event occurs, Executive shall
be entitled to receive the compensation and benefits described in this Agreement
subject to the restrictions and limitations set forth in Article IV. If a
Triggering Event does not occur, Executive shall not be entitled to receive any
compensation and benefits described in this Agreement, except as otherwise
specifically set forth herein.
3.2 Severance Payment. Upon the occurrence of a Triggering Event or,
if later, upon the termination of Executive's employment with the Company
following a Triggering Event, Executive shall receive a lump sum severance
payment equal to the sum of (a) the amount of Executive's Base Salary that would
have been paid with respect to the period beginning on the date of the
Triggering Event and ending with the last day of the Term plus (b) six (6)
months of Base Salary. Such lump sum amount shall be paid no later than thirty
(30) days following the date of the Triggering Event or, if later, the date of
termination of Executive's employment with the Company and shall be subject to
all applicable tax withholding.
3.3 Health Insurance Coverage. Upon the occurrence of a Triggering
Event or, if later, upon the termination of Executive's employment with the
Company following a Triggering Event, to the extent permitted by the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") and by the
Company's group health insurance policy, Executive and his covered dependents
will be eligible to continue their health insurance benefits at their own
expense. If Executive elects COBRA continuation coverage, the Company shall pay
Executive's and covered dependents' COBRA continuation premiums for six (6)
months following the date Executive's coverage as an active employee under the
Company's group health policy ceases, provided that the Company's obligation to
make such payments shall terminate immediately if Executive becomes eligible for
other health insurance benefits at the expense of a new employer. Executive
agrees to notify the Company, in writing, immediately upon acceptance of any
employment which provides health insurance benefits. This Section 3.3 provides
only for the Company's payment of COBRA continuation premiums for the period
specified above. This Section 3.3 is not intended to affect, nor does it affect,
the rights of Executive, or
26
Executive's covered dependents, under any applicable law with respect to
health insurance continuation coverage.
3.4 Stock Option Acceleration. Executive's stock options under the
Company's 1993 Equity Incentive Plan which are outstanding as of the date of the
Triggering Event (the "Stock Options") shall become fully vested and exercisable
upon the occurrence of a Triggering Event or upon the termination of Executive's
employment during the Term which does not otherwise constitute a Triggering
Event, notwithstanding the then existing provisions of the relevant Stock Option
agreements, which provisions are expressly modified by this Agreement. The
period of time during which the Stock Options shall remain exercisable, and all
other terms and conditions of the Stock Options, shall be as specified in the
relevant Stock Option agreements.
3.5 Mitigation. Except as otherwise specifically provided herein,
Executive shall not be required to mitigate damages or the amount of any payment
provided under this Agreement by seeking other employment or otherwise, nor
shall the amount of any payment provided for under this Agreement be reduced by
any compensation earned by Executive as a result of employment by another
employer or by retirement benefits after the date of the Triggering Event, or
otherwise.
ARTICLE IV
LIMITATIONS AND CONDITIONS ON BENEFITS; AMENDMENT OF AGREEMENT
4.1 Other Severance Benefits; Withholding of Taxes. The benefits
provided under this Agreement are in lieu of any other benefit provided under
any employment contract or severance plan of the Company in effect at the time
of a Triggering Event. The Company shall withhold appropriate federal, state or
local income and employment taxes from any payments hereunder.
4.2 Obligations of Executive. During the Term, Executive agrees not to
personally solicit any of the Company's employees to become employed elsewhere
or provide the names of such employees to any other company which Executive has
reason to believe will solicit such employees.
4.3 Employee Agreement and Release Prior to Receipt of Certain
Benefits. Prior to the receipt of any benefits under Section 3.2 above,
Executive shall execute an effective employee agreement and release in the form
attached hereto as Exhibit A. Such employee agreement and release shall
specifically relate to all of Executive's rights and claims in existence at the
time of its execution. It is understood that Executive has twenty-one (21) days
to consider whether to execute such employee agreement and release and Executive
may revoke such employee agreement and release within seven (7) days after
execution of such employee agreement and release. If Executive does not execute
such employee agreement and release within the twenty-one (21) day period, or if
Executive revokes such employee agreement and release within the seven (7) day
period, no benefits shall be payable under Section 3.2 above. Nothing in this
Agreement shall limit the scope or time of applicability of such employee
agreement and release once it is executed and not timely revoked.
27
4.4 Certain Additional Payments. If it shall be determined, either by
the Company or by a final determination of the Internal Revenue Service, that
any payment or distribution by the Company to or for the benefit of Executive,
whether paid or payable or distributed or distributable pursuant to the terms of
this Agreement (including, without limitation, the value ascribed to option
acceleration pursuant to Section 3.4 above) or otherwise (the "Payments"), would
cause Executive to become subject to the excise tax imposed by Section 4999 of
the Code (the "Excise Tax"), then the Company shall pay to Executive, within the
later of ninety (90) days of the date of the Triggering Event or ninety (90)
days of the date of determination referred to above, an additional amount (the
"Gross-Up Payment") such that the net amount retained by Executive, after
deduction of any Excise Tax and any federal (and state and local) income and
employment taxes on the Gross-Up Payment, shall be equal to the Payments. For
purposes of determining the amount of the Gross-Up Payment, Executive shall be
deemed to pay federal, state and local income taxes at the highest nominal
marginal rate of federal, state and local income taxation in the calendar year
in which the Gross-Up Payment is made, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes. If the Excise Tax is subsequently determined, whether by the Company or
by a final determination of the Internal Revenue Service, to be less than the
amount taken into account to determine the amount of the Gross-Up Payment, then
Executive shall repay to the Company at that time the portion of the Gross-Up
Payment attributable to such reduction (plus an amount equal to any tax
reduction, whether of the Excise Tax, any applicable income tax, or any
applicable employment tax, which Executive may enjoy as a result of such initial
repayment). If the Excise Tax is subsequently determined, whether by the Company
or by a final determination of the Internal Revenue Service, to be more than the
amount taken into account to determine the amount of the Gross-Up Payment, then
the Company shall pay to Executive an additional amount, which shall be
determined using the same methods as were used for calculating the Gross-Up
Payment, with respect to such excess. For purposes of this Section 4.4, a
determination of the Internal Revenue Service as to the amount of Excise Tax for
which Executive is liable shall not be treated as final until the time that
either (i) the Company agrees to acquiesce in the determination of the Internal
Revenue Service or (ii) the determination of the Internal Revenue Service has
been upheld in a court of competent jurisdiction and the Company decides not to
appeal such judicial decision or such decision is not appealable. If the Company
chooses to contest the determination of the Internal Revenue Service, then all
costs, attorneys' fees, and other expenses shall be paid by the Company.
4.5 Amendment or Termination. This Agreement may be amended or
terminated only upon the mutual written consent of the Company and Executive.
28
ARTICLE V
OTHER RIGHTS AND BENEFITS NOT AFFECTED
5.1 Nonexclusivity. Nothing in the Agreement shall prevent or limit
Executive's continuing or future participation in any benefit, bonus, incentive
or other plans, programs, policies or practices provided by the Company and for
which Executive may otherwise qualify, nor shall anything herein limit or
otherwise affect such rights as Executive may have under any stock option or
other agreements with the Company; PROVIDED, HOWEVER, that in accordance with
Section 4.1 above, any benefits provided hereunder shall be in lieu of any other
severance payments to which Executive may otherwise be entitled, including,
without limitation, under any employment contract or severance plan, and
benefits under this Agreement shall be offset to the extent necessary to give
effect to this proviso. Except as otherwise expressly provided herein, amounts
which are vested benefits or which Executive is otherwise entitled to receive
under any plan, policy, practice or program of the Company at or subsequent to
the effective date of a Change in Control shall be payable in accordance with
such plan, policy, practice or program.
5.2 Employment Status. This Agreement does not constitute a contract
of employment, nor does it impose on Executive any obligation to remain as an
employee or on the Company any obligation (i) to retain Executive as an
employee, (ii) to change the status of Executive as an at will employee, or
(iii) to change the Company's policies regarding termination of employment.
ARTICLE VI
NON-ALIENATION OF BENEFITS
No benefit hereunder shall be subject to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or charge, and any attempt to do so
shall be void.
ARTICLE VII
DEFINITIONS
For purposes of the Agreement, the following terms shall have the
meanings set forth below:
7.1 "Agreement" means this Change in Control Severance Agreement.
7.2 "Base Salary" means Executive's salary (excluding bonus, any other
incentive or other payments and stock option exercises) at the rate paid by the
Company in consideration for Executive's service on the day prior to the
effective date of a Change in Control or at such higher rate as may be in effect
during the Term and which is includable in the gross income of Executive for
federal income tax purposes or which would have been includable in gross income
except for an election either under Section 125 or 402(e)(3) of the Code or
under the terms of a nonqualified deferred compensation arrangement sponsored by
the Company.
7.3 "Cause" means either of the following: (i) an intentional or
grossly negligent act by Executive causing material harm to the Company or (ii)
Executive's conviction of, or plea of "guilty" or "no contest" to, a felony.
7.4 "Change in Control" means the consummation of any one of the
following events: (i) a sale of all or substantially all of the assets of the
Company; (ii) a merger or consolidation in which the Company is not the
surviving corporation (other than a transaction the principal purpose of which
is to change the state of the Company's incorporation or a transaction in which
the voting securities of the Company are exchanged for beneficial ownership of
at least fifty percent (50%) of the voting securities of the controlling
acquiring corporation); (iii) a merger or consolidation in which the
29
Company is the surviving corporation and less than fifty percent (50%) of the
voting securities of the Company which are outstanding immediately after the
consummation of such transaction are beneficially owned, directly or
indirectly, by the persons who owned such voting securities immediately prior
to such transaction; (iv) any transaction or series of related transactions
after which any person (as such term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934), other than any employee benefit plan (or
related trust) sponsored or maintained by the Company or any subsidiary of
the Company, becomes the beneficial owner of voting securities of the Company
representing fifty percent (50%) or more of the combined voting power of all
of the voting securities of the Company; or (v) the liquidation or
dissolution of the Company.
7.5 "Code" means the Internal Revenue Code of 1986, as amended.
7.6 "Company" means Zamba Corporation, a Delaware corporation, and any
successor thereto.
7.7 "Disability" means a disability which qualifies Executive as
disabled for purposes of receiving benefits under the Company's long term
disability plan applicable to Executive.
7.8 "Good Reason" means that any one of the following actions has been
taken by the Company without Executive's express written consent and such action
has not been promptly reversed within thirty (30) days following written notice
from Executive to the Company: (i) a material reduction in Executive's job
responsibilities given Executive's prior position and responsibilities with the
Company, it being deemed that a position with a different title but providing
similar activities, given the size of the combined company, shall not be
considered a material reduction in Executive's job responsibilities; (ii) any
reduction in Executive's compensation and aggregate benefits as in effect
immediately prior to such reduction; (iii) relocation of Executive's workplace
to a facility or location more than twenty-five (25) miles from Executive's
workplace immediately prior to such relocation; (iv) any purported termination
of Executive's employment which is not effected by reason of death, disability,
or Cause; (v) the failure or refusal of a successor to the Company to assume the
Company's obligations under this Agreement, as provided in Section 8.7 below; or
(vi) a material breach by the Company or any successor to the Company of any of
the material provisions of this Agreement
7.9 "Term" means the period beginning on the effective date of a
Change in Control and ending thirteen (13) months thereafter.
7.10 "Triggering Event" means an event described in Section 2.1(a),
2.2(a), 2.3 or 2.4 above. No other event shall be a Triggering Event for
purposes of this Agreement.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Notices. Any notices provided hereunder must be in writing and
such notices or any other written communication shall be deemed effective upon
the earlier of personal delivery (including personal delivery by telex or
facsimile) or the third day after mailing by first class mail, to the Company at
its primary office location and to Executive at his address as listed in the
Company's payroll records. Any payments made by the Company to Executive under
the terms of this Agreement shall be delivered to Executive either in person or
at his address as listed in the Company's payroll records.
8.2 Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or
30
rule in any jurisdiction, such invalidity, illegality or unenforceability
will not affect any other provision or any other jurisdiction, but this
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provisions had never been contained
herein.
8.3 Waiver. If either party should waive any breach of any provisions
of this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
8.4 Complete Agreement. This Agreement, including Exhibit A,
constitutes the entire agreement between Executive and the Company and it is the
complete, final, and exclusive embodiment of their agreement with regard to this
subject matter. It is entered into without reliance on any promise or
representation other than those expressly contained herein.
8.5 Counterparts. This Agreement may be executed in separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
Agreement.
8.6 Headings. The headings of the Articles and Sections hereof are
inserted for convenience only and shall neither be deemed to constitute a part
hereof nor to affect the meaning thereof.
8.7 Successors and Assigns. This Agreement is intended to bind and
inure to the benefit of and be enforceable by Executive and the Company, and
their respective successors, assigns, heirs, executors and administrators,
except that Executive may not delegate any of his duties hereunder and he may
not assign any of his rights hereunder without the written consent of the
Company, which consent shall not be withheld unreasonably.
8.8 Attorneys' Fees. If either party hereto brings any action to
enforce his or its rights hereunder, the prevailing party in any such action
shall be entitled to recover his or its reasonable attorneys' fees and costs
incurred in connection with such action.
8.9 Choice of Law. All questions concerning the construction, validity
and interpretation of this Agreement will be governed by the law of the State of
Minnesota.
8.10 Construction of Plan. In the event of a conflict between the text
of the Agreement and any summary, description or other information regarding the
Agreement, the text of the Agreement shall control.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year written above.
ZAMBA CORPORATION, XXXXXXX X. XXXXXX
A DELAWARE CORPORATION EXECUTIVE
By: /s/ Xxxx Xxxxxxxxx /s/ Xxxxxxx X. Xxxxxx
------------------------------ ------------------------------
Name: Xxxx Xxxxxxxxx
--------------------------------
Title: President and CEO
-------------------------------
Exhibit A: Employee Agreement and Release
31
EXHIBIT A
EMPLOYEE AGREEMENT AND RELEASE
I UNDERSTAND AND AGREE COMPLETELY TO THE TERMS SET FORTH IN THE FOREGOING
AGREEMENT.
Except as otherwise set forth in this Agreement, I hereby release,
acquit and forever discharge the Company, its parents and subsidiaries, and
their officers, directors, agents, servants, employees, shareholders,
successors, assigns and affiliates, of and from any and all claims,
liabilities, demands, causes of action, costs, expenses, attorneys fees,
damages, indemnities and obligations of every kind and nature, in law,
equity, or otherwise, known and unknown, suspected and unsuspected, disclosed
and undisclosed (other than any claim for indemnification I may have as a
result of any third party action against me based on my employment with the
Company), arising out of or in any way related to agreements, events, acts or
conduct at any time prior to and including the date I sign this Agreement,
including but not limited to: all such claims and demands directly or
indirectly arising out of or in any way connected with my employment with the
Company or the termination of that employment, including but not limited to,
claims of intentional and negligent infliction of emotional distress, any and
all tort claims for personal injury, claims or demands related to salary,
bonuses, commissions, stock, stock options, or any other ownership interests
in the Company, vacation pay, fringe benefits, expense reimbursements,
severance pay, or any other form of compensation; claims pursuant to any
federal, state or local law or cause of action including, but not limited to,
the federal Civil Rights Act of 1964, as amended; the federal Age
Discrimination in Employment Act of 1967, as amended ("ADEA"); the federal
Americans with Disabilities Act of 1990; state laws comparable to the
foregoing federal laws; tort law; contract law; wrongful discharge;
discrimination; fraud; defamation; emotional distress; and breach of the
implied covenant of good faith and fair dealing; provided, however, that
nothing in this paragraph shall be construed in any way to release the
Company from its obligation to indemnify me pursuant to the Company's
Indemnification Agreement.
I acknowledge that I am knowingly and voluntarily waiving and
releasing any rights I may have under the ADEA. I also acknowledge that the
consideration given for the waiver and release in the preceding paragraph
hereof is in addition to anything of value to which I was already entitled. I
further acknowledge that I have been advised by this writing, as required by
the ADEA, that: (A) my waiver and release do not apply to any rights or
claims that may arise after the date I sign this Agreement; (B) I have the
right to consult with an attorney prior to executing this Agreement; (C) I
have twenty-one (21) days to consider this Agreement (although I may choose
to voluntarily execute this Agreement earlier); (D) I have seven (7) days
following the execution of this Agreement by the parties to revoke the
Agreement; and (E) this Agreement shall not be effective until the date upon
which the revocation period has expired, which shall be the eighth day after
this Agreement is executed by me, provided that the Company has also executed
this Agreement by that date ("Effective Date").
By:
----------------------------------
Date:
--------------------------------
32
