ANACOMP, INC.
CHANGE OF CONTROL SEVERANCE AGREEMENT
This Change of Control Severance Agreement (the "Agreement") is made and
entered into by and between Xxxxxxx Xxxxxx ("Executive") and Anacomp, Inc., an
Indiana corporation ("Company"), effective as of April 28, 2003 (the "Effective
Date").
RECITALS
A. It is expected that Company from time to time will consider the possibility
of an acquisition by another company or other change of control. The Board
of Directors of Company (the "Board") recognizes that such considerations
can be a distraction to Executive and can cause Executive to consider
alternative employment opportunities. The Board has determined that it is
in the best interests of Company and its shareholders to assure that
Company will have the continued dedication and objectivity of Executive,
notwithstanding the possibility, threat or occurrence of a Change of
Control (as defined herein) of Company.
B. The Board believes that it is in the best interests of Company and its
shareholders to provide Executive with an incentive to continue his or her
employment and to motivate Executive to maximize the value of Company upon
a Change of Control for the benefit of its shareholders.
C. The Board believes that it is imperative to provide Executive with certain
severance benefits upon Executive's termination of employment following a
Change of Control. These benefits will provide Executive with enhanced
financial security and incentive and encouragement to remain with Company
notwithstanding the possibility of a Change of Control.
D. Executive and Company are also parties to that certain Executive Employment
Agreement effective as of August 18, 2000, as amended (the "Existing
Agreement"). The Existing Agreement and this Agreement provide certain
benefits to Executive in the event of certain terminations of employment,
and in some circumstances it is possible that severance benefits may be
payable under only the Existing Agreement or only this Agreement. However,
in the event that severance payments would otherwise be payable under both
the Existing Agreement and this Agreement, it is the intention of the
parties that Executive shall not be entitled to receive severance payment
benefits under both the Existing Agreement and this Agreement.
E. Certain capitalized terms used in the Agreement are defined in Section
6 below.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto agree as follows:
1. Term of Agreement. This Agreement shall terminate upon the date that all of
the obligations of the parties hereto with respect to this Agreement have
been satisfied.
2. At-Will Employment. Company and Executive acknowledge that Executive's
employment is and shall continue to be at-will, as defined under applicable
law, except as may otherwise be specifically provided under the terms of
any written formal employment agreement between Company and Executive (an
"Employment Agreement"). If Executive's employment terminates for any
reason, including (without limitation) any termination prior to a Change of
Control, Executive shall not be entitled to any payments, benefits,
damages, awards or compensation other than as provided by this Agreement or
under his or her Employment Agreement.
3. Agreement to Remain with Company for 6 Months Following a Change of
Control. Executive agrees to remain employed with Company (or its successor
corporation) for a period of six months following a "Change of Control" (as
defined herein) unless his or her employment terminates due to death,
Executive's "Disability" (as defined herein), for "Good Reason" (as defined
herein), or is terminated involuntarily by Company during such six month
period.
4. Severance Benefits.
(a) Involuntary Termination Other than for Cause or Voluntary Termination
for Good Reason Following a Change of Control. If within twelve months
following a Change of Control: (i) Executive terminates his or her
employment with Company (or any parent or subsidiary of Company) for
"Good Reason" (as defined herein); or (ii) Company (or any parent or
subsidiary of Company) terminates Executive's employment for other
than "Cause" (as defined herein) and Executive signs and does not
revoke a standard release of claims with Company in a form reasonably
acceptable to Company and Executive agrees to continue to comply with
the surviving provisions of any confidentiality or proprietary rights
agreement signed by Executive in connection with his or her
employment, then Executive shall receive the following severance from
Company:
(i) Severance Payment. Executive shall be entitled to receive a
"Severance Payment" (less applicable withholding taxes) equal to
100% of Executive's annual base salary (as in effect immediately
prior to (A) the Change of Control, or (B) Executive's
termination, whichever is greater) plus 100% of Executive's
Average Bonus Payment (as defined herein) for the fiscal year in
which the Change of Control or Executive's termination occurs,
whichever is greater, less any amount of the bonus that has
already been paid out in the year in which Executive's
termination occurs.
(ii) Options; Restricted Stock. As provided in Company's existing
stock option agreements, all of Executive's then outstanding
options to purchase shares of the Company's Common Stock
("Options") shall immediately vest and became exercisable.
Additionally, any shares of the Company's Common Stock then held
by Executive subject to a Company repurchase right ("Restricted
Stock") shall immediately vest and Company's right of repurchase
with respect to such shares of Restricted Stock shall lapse. The
Options shall remain exercisable following the termination of
employment for the period prescribed in the respective option
agreements.
(iii)Continued Executive Benefits. Company will pay: (A) the premiums
required to continue Executive's group health, dental and vision
care coverage at the same ratio of Company's premium payment to
Executive as was in effect immediately prior to the Change of
Control, under the applicable provisions of the Consolidated
Omnibus Budget Reconciliation Act of 1985 ("COBRA"), provided
that Executive elects to continue and remains eligible for these
benefits under COBRA; and (B) the premiums required to continue
Executive's long-term disability and life insurance coverage at
the same ratio of Company's premium payment to Executive as was
in effect immediately prior to the Change of Control, provided
the benefit plans allow Executive to convert these policies to an
individual policy (continued coverage under Section 4(a)(iii)(A)
& (B) above collectively referred to as "Company-Paid Coverage").
If such coverage included Executive's dependents immediately
prior to the Change of Control, such dependents shall also be
covered at Company expense. Executive's portion of the premiums
shall be deducted from the severance payment described in Section
4(a)(i) above. Company-Paid Coverage shall continue until the
earlier of: (i) twelve months from the date of Executive's
termination, or (ii) the date upon which Executive and his or her
dependents become covered under another employer's group health,
dental, vision, long-term disability or life insurance plans that
provide Executive and his or her dependents with comparable
benefits and levels of coverage.
(b) Timing of Severance Payments. The severance payment described in
Section 4(a)(i) above shall be paid by Company to Executive within
fifteen business days following a termination covered by Section 4(a)
above.
(c) Voluntary Resignation; Termination for Cause. If Executive's
employment with Company terminates (i) voluntarily by Executive other
than for Good Reason or (ii) for Cause by the Company, then Executive
shall not be entitled to receive severance or other benefits except
for those (if any) as may then be established under the Company's then
existing severance and benefits plans and practices or pursuant to
other written agreements with Company.
(d) Termination Apart from Change of Control. In the event Executive's
employment is terminated for any reason, either prior to the
occurrence of a Change of Control or after the twelve month period
following a Change of Control, then Executive shall be entitled to
receive severance and any other benefits only as may then be
established under Company's existing written severance and benefits
plans and practices or pursuant to other written agreements with
Company.
(e) Exclusive Remedy. In the event of a termination of Executive's
employment within twelve months following a Change of Control, the
provisions of this Section 4 are intended to be and are exclusive and
in lieu of any other rights or remedies to which Executive or Company
may otherwise be entitled, whether at law, tort or contract, in
equity, or under this Agreement. Executive shall be entitled to no
benefits, compensation or other payments or rights upon termination of
employment following a Change of Control other than those benefits
expressly set forth in this Section 4.
(f) No Duplicative Payments. In the event that Executive would be entitled
to severance payments under this Agreement and also under any Company
policy or any other agreement with Company (including the Existing
Agreement), then the terms of this Agreement shall control Company's
payment obligations, to the exclusion of any other agreement or
Company policy. In case of such overlap, in order to receive the
severance benefits under Section 4 hereof, Executive shall be required
to waive any payments resulting from his severance under the Existing
Agreement.
5. Limitation on Payments. In the event that the severance and other benefits
provided for in this Agreement or otherwise payable to Executive (i)
constitute "parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code") and (ii) but for
this Section 5, would be subject to the excise tax imposed by Section 4999
of the Code, then Executive's severance benefits under Section 4(a) shall
be either:
(a) delivered in full, or
(b) delivered as to such lesser extent which would result in no portion of
such severance benefits being subject to excise tax under Section 4999
of the Code, whichever of the foregoing amounts, taking into account
the applicable federal, state and local income taxes and the excise
tax imposed by Section 4999, results in the receipt by Executive on an
after-tax basis, of the greatest amount of severance benefits,
notwithstanding that all or some portion of such severance benefits
may be taxable under Section 4999 of the Code. Unless Company and
Executive otherwise agree in writing, any determination required under
this Section 5 shall be made in writing by Company's independent
public accounts immediately prior to Change of Control (the
"Accountants"), whose determination shall be conclusive and binding
upon Executive and Company for all purposes. For purposes of making
the calculations required by this Section 5, the Accountants may make
reasonable assumptions and approximations concerning applicable taxes
and may rely on reasonable, good faith interpretations concerning the
application of Sections 280G and 4999 of the Code. Company and
Executive shall furnish to the Accountants such information and
documents as the Accountants may reasonably request in order to make a
determination under this Section. Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section 5. Notwithstanding anything herein to the
contrary, Employee may agree to reduce the amount of payments and/or
benefits otherwise owed to him or her if such reduction would increase
the after tax benefits to him or her.
6. Definition of Terms. The following terms referred to in this Agreement
shall have the following meanings:
(a) Average Bonus Payment. "Average Bonus Payment" means the average of
the bonuses paid to the individual over the last three fiscal years
prior to the date of determination; except that if the computation is
being made as of a date before September 30, 2003, then the Average
Bonus Payment is the average of the bonuses paid to the individual
over the last two fiscal years.
(b) Cause. "Cause" shall mean (i) an act of personal dishonesty taken by
Executive in connection with his or her responsibilities as an
Executive and intended to result in substantial personal enrichment of
Executive, (ii) Executive being convicted of a felony, (iii) a willful
act by Executive which constitutes gross misconduct and which is
injurious to Company, (iv) following delivery to Executive of a
written demand for performance from the Company which describes the
basis for the Company's reasonable belief that Executive has not
substantially performed his or her duties, continued violations by
Executive of Executive's obligations to Company which are demonstrably
willful and deliberate on Executive's part, (v) Executive's death; or
(vi) Executive's Disability.
(c) Change of Control. "Change of Control" means the occurrence of any of
the following:
(i) Any "person" (as such term is used in Section 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended) becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act),
directly or indirectly, of securities of Company representing
fifty percent (50%) or more of the total voting power represented
by Company's then outstanding voting securities; or
(ii) Any action or event occurring within a two-year period, as a
result of which fewer than a majority of the directors are
Incumbent Directors. "Incumbent Directors" shall mean directors
who either (A) are directors of Company as of the date hereof, or
(B) are elected or nominated for election, to the Board with the
affirmative votes of at least a majority of the Incumbent
Directors at the time of such election or nomination (but shall
not include an individual whose election or nomination is in
connection with an actual or threatened proxy contest relating to
the election of directors of Company); or
(iii)The consummation of a merger or consolidation of Company with
any other corporation, other than a merger or consolidation which
would result in the voting securities of Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity) at least fifty percent (50%)
of the total voting power represented by the voting securities of
Company or such surviving entity outstanding immediately after
such merger or consolidation; or
(iv) The consummation of the sale, lease or other disposition by
Company of all or substantially all Company's assets; or
(v) Adoption by the shareholders of a plan of liquidation or approval
by shareholders of a proposal to dissolve of the Company.
Notwithstanding the foregoing, if either of the parties who are
grandfathered under the Company's Rights Plan (i.e., Xxxxxxxxxx Capital Partners
(and its affiliates) and Franklin (and its affiliates)) are the parties that
trigger the definition of a Change of Control (either as a "person" acquiring
shares, through a merger or consolidation or by effecting a change in the
composition of the Board of Directors), then the transaction would not be
considered to be a "Change of Control" under this Agreement, unless within the
six months immediately following the action that would otherwise be a "Change of
Control" the grandfathered person transfers a controlling interest in the
Company to another party that is not an affiliate of the grandfathered person.
(d) Disability. "Disability" shall mean that Executive has been unable to
perform the essential functions of his or her job as the result of his
or her incapacity due to physical or mental illness, impairment or
medical condition, and such inability, at least twenty-six (26) weeks
after its commencement, is determined to be total and permanent by a
physician selected by Company or its insurers and acceptable to
Executive or Executive's legal representative (such Agreement as to
acceptability not to be unreasonably withheld). Termination resulting
from Disability may only be effected after at least thirty days'
written notice by the Company of its intention to terminate
Executive's employment. In the event that Executive resumes the
performance of substantially all of his or her duties hereunder before
the termination of his or her employment becomes effective, the notice
of intent to terminate shall automatically be deemed to have been
revoked.
(e) Good Reason. "Good Reason" means without Executive's express written
consent: (i) a material reduction of Executive's duties, title,
authority or responsibilities, relative to Executive's duties, title,
authority or responsibilities as in effect immediately prior to such
reduction, or the assignment to Executive of such reduced duties,
title, authority or responsibilities, provided, however, that a
reduction in duties, title, authority or responsibilities solely by
virtue of Company being acquired and made part of a larger entity (as,
for example, when the Senior Vice-President of a business unit of
Company remains as such following a Change of Control) shall not by
itself constitute grounds for a "Voluntary Termination for Good
Reason"; (ii) a substantial reduction of the facilities and
perquisites (including office space and location) available to
Executive immediately prior to such reduction; or (iii) a reduction by
Company in the base salary of Executive as in effect immediately prior
to such reduction; or (iv) a material reduction by Company in the kind
or level of benefits to which Executive was entitled immediately prior
to such reduction with the result that such Executive's overall
benefits package is significantly reduced. Notwithstanding the above,
Executive will not be deemed to have resigned for Good Reason unless
Executive has given the Company written notice of the offending
conduct and a thirty day opportunity to cure and Company has failed to
cure such conduct within the thirty-day period.
7. Successors.
(a) Company's Successors. Any successor to Company (whether direct or
indirect and whether by purchase, merger, consolidation, liquidation
or otherwise) to all or substantially all of Company's business and/or
assets shall assume the obligations under this Agreement and agree
expressly to perform the obligations under this Agreement in the same
manner and to the same extent as Company would be required to perform
such obligations in the absence of a succession. For all purposes
under this Agreement, the term "Company" shall include any successor
to Company's business and/or assets which executes and delivers the
assumption agreement described in this Section 7(a) or which becomes
bound by the terms of this Agreement by operation of law.
(b) Executive's Successors. The terms of this Agreement and all rights of
Executive hereunder shall inure to the benefit of, and be enforceable
by, Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees.
8. Notice.
(a) General. All notices and other communications required or permitted
hereunder shall be in writing, shall be effective when given, and
shall in any event be deemed to be given upon receipt or, if earlier,
(a) five days after deposit with the U.S. Postal Service or other
applicable postal service, if delivered by first class mail, postage
prepaid, (b) upon delivery, if delivered by hand, (c) one business day
after the business day of deposit with Federal Express or similar
overnight courier, freight prepaid or (d) one business day after the
business day of facsimile transmission, if delivered by facsimile
transmission with copy by first class mail, postage prepaid, and shall
be addressed (i) if to Executive, at his or her last known residential
address and (ii) if to Company, at the address of its principal
corporate offices (attention: Secretary), or in any such case at such
other address as a party may designate by ten days' advance written
notice to the other party pursuant to the provisions above.
(b) Notice of Termination. Any termination by Company for Cause or by
Executive for Good Reason or as a result of a voluntary resignation
shall be communicated by a notice of termination to the other party
hereto given in accordance with Section 8(b) of this Agreement. Such
notice shall indicate the specific termination provision in this
Agreement relied upon, shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination under the
provision so indicated and shall specify the termination date (which
shall be not more than thirty days after the giving of such notice).
The failure by either party to include in the notice any fact or
circumstance which contributes to a showing of Good Reason or Cause
shall not waive any right of that party hereunder or preclude that
party from asserting such fact or circumstance in enforcing that
party's rights hereunder.
9. Miscellaneous Provisions.
(a) No Duty to Mitigate. Executive shall not be required to mitigate the
amount of any payment contemplated by this Agreement, nor shall any
such payment be reduced by any earnings that Executive may receive
from any other source.
(b) Waiver. No provision of this Agreement shall be modified, waived or
discharged unless the modification, waiver or discharge is agreed to
in writing and signed by Executive and by an authorized officer of
Company (other than Executive). No waiver by either party of any
breach of, or of compliance with, any condition or provision of this
Agreement by the other party shall be considered a waiver of any other
condition or provision or of the same condition or provision at
another time.
(c) Headings. All captions and section headings used in this Agreement are
for convenient reference only and do not form a part of this
Agreement.
(d) Entire Agreement. This Agreement constitutes the entire agreement of
the parties hereto and supersedes in their entirety all prior
representations, understandings, undertakings or agreements (whether
oral or written and whether expressed or implied) of the parties with
respect to the subject matter hereof.
(e) Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the
State of California. The Superior Court of San Diego County and/or the
United States District Court for the Southern District of California
shall have exclusive jurisdiction and venue over all controversies in
connection herewith.
(f) Severability. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in
full force and effect.
(g) Withholding. All payments made pursuant to this Agreement will be
subject to withholding of applicable income and employment taxes.
(h) Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together will
constitute one and the same instrument.
(i) Attorneys Fees. In the event of litigation between the parties over
the terms of this Agreement and the performance of their respective
obligations hereunder, the prevailing party shall be entitled to
receive its reasonable attorney's fees and expenses from the other
party.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company by its duly authorized officer, as of the day and year set
forth below.
ANACOMP, INC.
By: /s/Xxxxxx X. Xxxxx
_____________________
Xxxxxx X. Xxxxx
Title: Chairman
EXECUTIVE
/s/Xxxxxxx X. Xxxxxx
______________________________
Xxxxxxx X. Xxxxxx
