EXHIBIT 10.10
SEVERANCE PAY AGREEMENT
This Agreement is made as of the 16th day of April, 1996, between
Fourth Shift Corporation, 0000 Xxxxxxxxxxxxx Xxxxx, Xxxxxxxxxxxxx Xxxxx, Xxxxx
000, Xxxxxxxxxxx, XX 00000 (hereinafter called the "Company") and Xxxxx X.
Xxxxxxxx (hereinafter called "Executive"), residing at 000 Xxx Xxxxx Xxxx Xxxx,
Xxxxxxxxx, 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 or with a subsidiary of the Company
or one of its subsidiaries 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 and its subsidiaries' ability to recruit highly qualified people.
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 or the subsidiary of the Company with which Executive
is employed (the "Subsidiary"), and for other good and valuable consideration,
the Company and Executive agree as follows:
1. TERM OF AGREEMENT.
This Agreement shall be for a two-year term commencing on the date
hereof and shall be automatically renewed for an additional two-year term
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 or the Subsidiary, as the case may be, shall
have exercised its right to terminate the Executive without cause; or
(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 and
the Subsidiary 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 or the Subsidiary, as the case may be, except
-28-
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 five (5) 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:
(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;
(b) a reduction by the Company or by the Subsidiary, as the case
may be, in Executive's compensation (including targeted bonus
compensation) as in effect immediately prior to a Change in Control;
(c) the Company's or the Subsidiary'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 or the Subsidiary 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 or the Subsidiary 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 or the Subsidiary 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 or such Subsidiary's vacation policy as then in effect; or
-29-
(e) the failure by the Company to obtain, as specified in
Section 6(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 or the
Subsidiary, as the case may be, 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 or any of its
subsidiaries, 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 reasonable
belief that his action or omission was in the best interests of the Company and
its subsidiaries.
(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 or the Subsidiary.
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.
(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 (iii) 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 pay as severance pay to Executive a lump-
sum cash amount equal to one (1) times Executive's average annualized cash
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); subject, however, to the restriction that the Executive shall not be
entitled to receive any amount pursuant to this Agreement which constitutes an
"excess parachute payment" within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended, or any successor provision or regulations
promulgated thereunder. In case of uncertainty as to whether some portion of a
payment might constitute an excess parachute payment, the Company shall
initially make the payment to the Executive and Executive agrees to refund to
the Company any amounts ultimately determined to be excess parachute payments;
and
(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.
Executive shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or otherwise. 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.
5. SUCCESSORS; BINDING AGREEMENT; ASSIGNMENT.
-30-
(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.
8. 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
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:
Xxxxx X. Xxxxxxxx
000 Xxx Xxxxx Xxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Either party hereto may change its address for purposes of this Section 8 by
giving fifteen (15) days' prior notice to the other party hereto.
9. 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.
10. 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.
-31-
11. 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.
12. 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. Section 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.
13. ENTIRE AGREEMENT. This Agreement supersedes any and all other
oral or written agreements or policies made relating to the subject matter
hereof; 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/ XXXXXX X. XXXXXXXX
---------------------------
Its PRESIDENT
------------------
/s/ XXXXX X. XXXXXXXX
---------------------------
Xxxxx X. Xxxxxxxx
-32-
