Exhibit 10-27
AMENDED AND RESTATED SEVERANCE AGREEMENT
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THIS AMENDED AND RESTATED SEVERANCE AGREEMENT (the "Agreement"),
originally dated September 28, 1998, and amended and restated in its entirety
effective as of January 25, 1999, and July 9, 1999, is entered into by and
between Xxxxxxx-Xxxxxxx Company, a California corporation (the "Company"), and
Xxxxx Xxxxxxxx ("Employee").
The Company's Board of Directors has determined that it is appropriate
to reinforce and encourage the continued attention and dedication of Employee to
his assigned duties without distraction in potentially disturbing circumstances
arising from the possibility of a Change in Control (as defined in Section 2(a))
of the Company.
This Agreement sets forth the severance compensation which the Company
agrees to pay to Employee if Employee's employment with the Company terminates
under one of the circumstances described herein.
1. Term.
(a) This Agreement shall terminate, except for any unpaid
obligation of the Company, upon the earliest of (i) three years from September
28, 1998, if a Change in Control has not occurred within such three-year period;
(ii) the termination of Employee's employment by the Company based on death,
Disability (as defined in Section 2(c)) or Cause (as defined in Section 2(d)) or
by Employee other than for Good Reason (as defined in Section 2(e); or (iii)
three years from the date of a Change in Control.
(b) Nothing in this Agreement shall confer upon Employee any
right to continue in the employ of the Company prior to or following a Change in
Control or shall in any way limit the rights of the Company, which are hereby
expressly reserved, to discharge Employee at any time prior to or following the
date of a Change in Control for any reason whatsoever, with or without Cause.
2. Certain Definitions.
(a) Change in Control. A "Change in Control" shall be deemed
to have occurred if (i) there shall be consummated (x) any consolidation or
merger of the Company in which the Company is
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not the continuing or surviving corporation, (y) any other consolidation or
merger to which the Company is a party, regardless of whether shares of the
Company's Common Stock would be converted into cash, securities or other
property, other than a merger of the Company in which the holders of the
Company's Common Stock immediately prior to the merger have the same
proportionate ownership of common stock (or the equivalent fully voting
securities) of the surviving corporation or other entity immediately after the
merger, or (z) any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, of the assets
of the Company, or (ii) the Company consummates (in one or a series of
transactions) the disposition of substantially all of its operating businesses,
or (iii) any "person" (as defined in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended, shall become the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 30% or
more of the Company's outstanding Common Stock, or (iv) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the entire Board of
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Directors of the Company shall cease for any reason to constitute a majority
thereof unless the election, or the nomination for election by the Company's
stockholders, of each new director was approved by a vote of at least two-thirds
of the directors then still in office who were directors at the beginning of the
period.
(b) Triggering Event. A "Triggering Event" shall be deemed to
have occurred if either (i) a Change in Control occurs while Employee is still
an employee of the Company or any of its subsidiaries or (ii) a Change in
Control occurs after the date on which Employee's employment with the Company or
any of its subsidiaries was terminated (x) by the Company other than for death,
Disability or Cause or (y) by Employee for Good Reason, and such termination is
effected by the Company (or the actions or decisions giving rise to Employee's
termination for Good Reason are taken or made by the Company) in anticipation of
a Change in Control (any such termination, action or decision effected, taken or
made within 90 days prior to the date of any such Change in Control shall be
conclusively deemed to be in anticipation of a Change in Control).
(c) Disability. If, as a result of Employee's incapacity due
to physical or mental illness, Employee shall have
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been absent from duties with the Company on a full-time basis for six
consecutive months and within 30 days after written Notice of Termination (as
required by Section 9(b)) is thereafter given by the Company, Employee shall not
have returned to the full-time performance of Employee's duties, the Company may
terminate this Agreement for "Disability."
(d) Cause. For purposes of this Agreement only, the Company
shall have "Cause" to terminate Employee's employment hereunder only on the
basis of fraud, misappropriation, embezzlement or willful engagement by Employee
in misconduct which is demonstrably and materially injurious to the Company and
its subsidiaries taken as a whole. An act, or omission of Employee shall not be
considered "willful" unless done, or omitted to be done, by Employee without
good faith and a reasonable belief that the act or omission was in the best
interests of the Company and its subsidiaries. Employee may not be terminated
for Cause unless and until there shall have been delivered to Employee a copy of
a resolution duly adopted by affirmative vote of not less than three-quarters of
the entire membership of the Company's Board of Directors at a meeting of
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the Board called and held for that purpose (after reasonable notice to Employee
and an opportunity for Employee, together with Employee's counsel, to be heard
before the Board), finding Employee was guilty of the conduct set forth in the
first sentence of this Section, and specifying the particulars thereof in
detail. Notwithstanding the foregoing, Employee shall have the right to contest
such termination for Cause (for purposes of this Agreement) by arbitration in
accordance with the provisions of Section 8.
(e) Good Reason. For purposes of this Agreement, "Good Reason"
shall mean any of the following (without Employee's express written consent):
(i) the assignment to Employee by the Company of
duties inconsistent with, or a substantial alteration in the nature or status
of, Employee's responsibilities immediately prior to a Change in Control other
than any such alteration primarily attributable to the fact that the Company's
securities are no longer publicly traded;
(ii) a reduction by the Company in Employee's base
salary in effect on the date of a Change in Control or as the same may be
increased from time to time during the term of this Agreement;
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(iii) failure by the Company to continue in effect
without substantial change any compensation, incentive, welfare or benefit plan
or arrangement, as well as any plan or arrangement whereby Employee may acquire
securities of the Company, in which Employee is participating at the time of a
Change in Control (or any other plans providing Employee with substantially
similar benefits, hereinafter referred to as "Benefit Plans"), or the taking of
any action by the Company which would adversely affect Employee's participation
in or materially reduce Employee's benefits under any such Benefit Plan or
deprive Employee of any material fringe benefit enjoyed by Employee at the time
of a Change in Control; unless an equitable substitute arrangement (embodied in
an ongoing substitute or alternative Benefit Plan) has been made for the benefit
of Employee with respect to the Benefit Plan in question. For purposes of the
foregoing, Benefit Plans shall include, but not be limited to, the Company's
Employee Stock Ownership Plan, Employees' Profit Sharing and Investment Plan,
Deferred Compensation (401K) Plan, 1991 Stock Option and Incentive Plan, Top
Management Incentive Bonus Plan, and/or any other plan or arrangement to receive
and exercise stock options or stock appreciation rights, incentive, bonus or
other award plans, group life insurance plans, medical, dental, accident and
disability plans;
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(iv) a relocation of the Company's principal
executive offices to a location outside the San Francisco-Oakland-San Xxxx Bay
Area, or Employee's relocation to any place other than the principal executive
offices of the Company, except for required travel by Employee on Company
business to an extent substantially consistent with Employee's business travel
obligations at the time of a Change in Control;
(v) any material breach by the Company of any
provision of this Agreement;
(vi) any failure by the Company to obtain the
assumption of this Agreement by any successor or assign of the Company as
required in Section 6;
(vii) any purported termination of Employee's
employment which is not effected pursuant to a Notice of Termination satisfying
the requirements of Section 9(b) below. For purposes of this Agreement, no such
purported termination shall be effective.
(f) Date of Termination. "Date of Termination" shall mean (i)
for Disability, 30 days after Notice of Termination is given to Employee
(provided Employee has not returned to the performance of Employee's duties on a
full-time basis during such 30-day period), or (ii) if Employee's employment is
terminated
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for any other reason, the date on which notice is given by the Company or
Employee, as the case may be.
3. Severance Compensation upon Termination of Employment in Connection
with a Change in Control. No compensation shall be payable under this Agreement
unless and until a Triggering Event has occurred. Upon the occurrence of a
Triggering Event, the provisions of this Agreement shall be binding on and shall
inure to the benefit of the surviving or resulting corporation, or (in the case
of a Change in Control of the kind referred to in Section 2(a)(i)(y)) the
corporation to which the applicable assets of the Company have been transferred;
provided, however, that (a) Employee may treat the occurrence of a Triggering
Event as a material breach of this Agreement and may terminate this Agreement
upon written notice given (in accordance with Section 9(b)) within 120 days of
the occurrence of a Change in Control, unless Employee's employment has
theretofore been terminated for death, Disability or Cause, and (b) Employee may
terminate this Agreement for Good Reason at any time prior to the second
anniversary of a Change in Control and during the remainder of the term of this
Agreement as specified in Section 1(a). Upon such termination by Employee under
this Section 3, or upon the termination of Employee's employment by the Company
without Cause at any time prior to the second anniversary of a Change in
Control, the Company shall:
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(i) pay to Employee as severance pay in a lump sum, in cash,
on the fifth day following the Date of Termination, an amount equal to the
aggregate of (x) 299.999% of Employee's "Base Compensation" (as defined below),
plus (y) an amount equal to (A) the amount previously determined by the Board as
Employee's target bonus for the calendar year in which Notice of Termination is
given by Employee or the Company, as the case may be, multiplied by (B) a
fraction, the numerator of which shall be the number of days that have elapsed
during such calendar year, through and including the date on which such Notice
of Termination is given, and the denominator of which shall be 365; provided,
however, that if the lump sum severance payment under this Section 3, either
alone or together with other payments (or the value of other benefits) which
Employee has the right to receive from the Company in connection with a Change
in Control, would not be deductible (in whole or in part) by the Company as a
result of such lump sum payment constituting a "parachute payment" (as defined
in Section 280G of the Internal Revenue Code of 1986, as amended (collectively
the "Code")), such lump sum severance payment (or, at Employee's election, such
other payments and/or benefits, or a combination of such other payments and/or
benefits and such lump sum severance payment) shall be reduced to the largest
amount as will result in no portion of the lump sum severance payment under this
Section 3 not being fully deductible by the Company as a result of Section 280G
of the
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Code. The determination of the amount of any such required reduction pursuant to
the foregoing provision, and the valuation of any non-cash benefits for purposes
of such determination, shall be made exclusively by the firm that was acting as
the Company's auditors prior to the Change in Control (whose fees and expenses
shall be borne by the Company), and such determination shall be conclusive and
binding. The term "Base Compensation" shall mean an average of the annual cash
compensation paid to Employee by the Company and any of its subsidiaries in the
form of salary or bonuses (including any amount that is subject of an elective
deferral by Employee) during the five taxable years immediately preceding the
Change in Control which was includable in gross income (or would have been so
included but for any such elective deferral) by Employee for federal income tax
reporting purposes; and
(ii) arrange to provide Employee, for a thirty-six month
period (or such shorter period as Employee may elect), with disability,
accident, group life, medical and dental insurance, all of which shall be
prepaid, substantially similar to those insurance benefits which Employee is
receiving immediately prior to a termination by Employee under this Section 3.
Benefits otherwise receivable by Employee pursuant to this Section 3 shall be
reduced to the extent comparable benefits are actually received by Employee
during such thirty-six month period (or such shorter period elected by
Employee), and any such benefits
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actually received by Employee shall be reported by Employee to the Company.
Notwithstanding any other provision of this Agreement, if during the
term of this Agreement and while Employee is employed by Company, any persons
shall enter into any agreement one of the purposes of which is to effect a
transaction or transactions (the "Transaction") that would constitute, or be
part of, a Change in Control, the Company shall be obligated unconditionally to
pay or provide to Employee the severance pay in Section 3(i) and the benefits in
Section 3(ii) on the date of the consumation of the Transaction (whether or not
Employee is then employed by the Company and without regard to the reason for
any termination of Employee's employment, provided that such payments and
benefits shall not be paid or provided if Employee is terminated for cause prior
to the consumation of the Transaction) and such funds shall be deposited in an
escrow account seven calendar days prior to the consumation of the Transaction
with irrevocable instructions to pay such funds to Employee on the consumation
of the Transaction.
4. No Obligation to Mitigate Damages. Employee shall not be required to
mitigate damages or the amount of any payment provided for 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
Employee
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as a result of employment by another employer or by retirement benefits after
the Date of Termination, or otherwise, except to the extent provided in Section
3 above.
5. No Effect on Other Contractual Rights. The provisions of this
Agreement, and any payment provided for hereunder, shall not reduce any amounts
otherwise payable, or in any way diminish Employee's existing rights, or rights
which would accrue solely as a result of the passage of time, under any Benefit
Plan, employment agreement or other contract, plan or arrangement, except that
the provisions of this Agreement and any payment provided for hereunder, shall
be in lieu of payments otherwise due to Employee under any of the Company's
severance pay policies on account of Employee's termination of employment upon
(or in anticipation of, as set forth in Section 2(b)) the occurrence of a Change
in Control.
6. Successor to the Company. The Company shall require any successor or
assign (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 satisfactory to Employee, expressly, absolutely and
unconditionally to 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 or assignment had taken place. As used in this Agreement,
"Company" shall mean the
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Company as hereinbefore defined and any successor or assign to its business
and/or assets which executes and delivers the agreement provided for in this
Section 6 or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law.
7. Heirs of Employee. This Agreement shall inure to the benefit of and
be enforceable by Employee's personal and legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Employee should die while any amounts are still payable to Employee hereunder,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to Employee's devisee, legatee, or other
designee or, if there be no such designee, to Employee's estate.
8. Arbitration. Any dispute, controversy or claim arising under or in
connection with this Agreement, or the breach hereof, shall be settled
exclusively by arbitration in accordance with the Commercial Arbitration Rules
of the American Arbitration Association then in effect. Judgment upon the award
rendered by Arbitrator(s) may be entered in any court having jurisdiction
thereof. Any arbitration held pursuant to this Section 8 shall take place in San
Francisco, California.
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9. Notice.
(a) General. For purposes 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, as follows:
If to the Company:
Xxxxxxx-Xxxxxxx Company
0000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: President of the Company
If to Employee:
Xxxxx Xxxxxxxx
0000 Xxxxxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxxxx 00000
or such other address as either party may have furnished to the other
in writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
(b) Notice of Termination. Any purported termination of
employment shall be communicated by a written Notice of Termination to Employee
in accordance with paragraph (a) of this Section 9, and shall state the specific
termination provisions in this Agreement relied upon, and set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Employee's employment.
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10. Nonwaiver, Complete Agreement, Governing Law. No provisions of this
Agreement may be modified, waived or discharged unless in writing signed by both
parties. No waiver by either party hereto at any time of any breach by the other
party of, or compliance with, any condition or provision of this agreement shall
be deemed a waiver of similar or 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 set forth expressly in this Agreement.
This Agreement shall be governed by and construed in accordance with the laws of
the State of California.
11. Legal Fees and Expenses. The Company shall pay all reasonable legal
fees and expenses which Employee may incur as a result of the Company's
contesting the validity, enforceability or Employee's good faith interpretation
of, or good faith determinations under, this Agreement; provided, however, that
the Company shall not pay any legal fees and expenses incurred by Employee in
contesting the termination of Employee's employment for Cause if, as a result of
such contest, it is determined that Employee was in fact terminated for Cause.
12. Confidentiality. Employee shall retain in confidence any and all
confidential information known to Employee concerning
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the Company and its business so long as such information is not otherwise
publicly disclosed.
13. Validity. The invalidity or unenforceability of any provisions of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
14. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
XXXXXXX-XXXXXXX COMPANY, a
California corporation
By /s/ W. Xxxxx Xxxxxxx
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President and CEO
/s/ Xxxxx X. Xxxxxxxx
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Xxxxx X. Xxxxxxxx
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