CHANGE OF CONTROL AGREEMENT
Exhibit 10.2
This Change of Control Agreement (this “Agreement”) is made and effective as of the last date
signified on the signature page hereto by and between Affiliated Computer Services, Inc. (the
“Company”) and Xxxx Xxxxxxx, Executive Vice President — Corporate Development, of the Company (the
“Executive”). This Agreement replaces and supersedes that certain severance agreement between the
Company and the Executive, dated February 2, 2005, as the same may have been amended from time to
time.
The Company has determined that both the Executive’s performance and the Company’s ability to
retain the Executive as an employee will be significantly enhanced if the Executive is provided
with fair and reasonable protection from a Change of Control of the Company. Accordingly, the
Company and the Executive agree as follows:
1. Defined Terms. Unless otherwise indicated, capitalized terms used in this
Agreement shall have the meanings set forth herein or in Schedule A.
2. Effective Date; Term. This Agreement shall be effective on the effective date
hereof and shall remain in effect until (a) the Company terminates this Agreement by giving the
Executive at least one (1) year advance written notice of termination or (b) the effective date of
any termination of the Executive’s employment with the Company, whether voluntary, involuntary, or
for Cause, and regardless of the reason for such termination. Notwithstanding the foregoing, this
Agreement shall, if in effect on the date of a Change of Control, remain in effect for such time
following a Change of Control as may be necessary to give effect to the terms of the Agreement.
3. Change of Control Benefits. Upon a Change of Control, the Executive shall be
entitled to the benefits provided herein.
(a) Change of Control Payments. Within two (2) business days after a Change of
Control occurring in the periods indicated below, the Company shall pay the Executive a lump
sum amount, in cash, equal to:
| (i) | for a Change of Control occurring during the fiscal year ending June 30, 2007: |
| (A) | three (3) times the sum of: |
| (1) | the Executive’s per annum base salary in effect on the date of the Change of Control (“Base Salary”), and | ||
| (2) | the Executive’s Average Commission Payment; and |
| (B) | $750,000 multiplied by a fraction, the numerator of which shall be the number of days the Executive was employed |
| between the period from December 1, 2006 and June 30, 2007 and the denominator of which shall be 212. |
| (ii) | for a Change of Control occurring during the fiscal year ending June 30, 2008: |
| (A) | three (3) times the sum of: |
| (1) | the Executive’s per annum base salary in effect on the date of the Change of Control (“Base Salary”), and | ||
| (2) | the sum of (y) the amount paid to the Executive under his commission arrangement with the Company during the period from December 1, 2006 thru June 30, 2007, plus (z) the bonus that the Executive earned under the Company’s Special Executive FY07 Bonus Plan; provided that such sum shall not exceed $750,000; and |
| (B) | the Executive’s target bonus for the current fiscal year multiplied by a fraction, the numerator of which shall be the number of days the Executive was employed by the Company in the fiscal year in which the Change of Control occurs and the denominator of which shall be 365. |
| (iii) | for a Change of Control occurring after the fiscal year ending June 30, 2008: |
| (A) | three (3) times the sum of: |
| (1) | the Executive’s per annum base salary in effect on the date of the Change of Control (“Base Salary”), and | ||
| (2) | the Executive’s bonus for the immediately preceding fiscal year; and |
| (B) | the Executive’s target bonus for the current fiscal year multiplied by a fraction, the numerator of which shall be the number of days the Executive was employed by the Company in the fiscal year in which the Change of Control occurs and the denominator of which shall be 365. |
(b) Continued Benefits. Until the earlier of the third anniversary of the
termination of the Executive’s employment with the Company after a Change of Control or the
date on which the Executive becomes employed by a new employer, the Company shall, at its
expense, provide the Executive with medical, dental, life insurance, disability
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and accidental death and dismemberment benefits (“Insurance Benefits”) at the highest
level provided to the Executive immediately prior to the Change of Control,
provided, however, that if the Executive becomes employed by a new employer
which maintains Insurance Benefits that either (i) do not cover the Executive with respect
to a pre-existing condition which was covered under the Company’s Insurance Benefits, or
(ii) do not cover the Executive for a designated waiting period, the Executive’s coverage
under the Company’s Insurance Benefits shall continue, without limitation, until the earlier
of the end of the applicable period of noncoverage under the new employer’s Insurance
Benefits or the third anniversary of the Change of Control.
(c) Payment of Accrued But Unpaid Amounts. Within two (2) business days after
a Change of Control or such other timeframe as required by applicable law, rule or
regulation, the Company shall pay the Executive (i) any unpaid portion of compensation
previously earned by the Executive; and (ii) all compensation previously deferred by the
Executive but not yet paid.
(d) Post-Retirement Welfare Benefits. For purposes of determining the
Executive’s eligibility for post-retirement benefits under any welfare benefit plan (as
defined in Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended)
maintained by the Company immediately prior to the Change of Control and in which the
Executive then participated, the Executive shall be credited with the excess of three (3)
years of participation in the applicable plan and three (3) years of age over the actual
years of participation and age credited to the Executive on the date of the Change of
Control. If, after taking into account the credited participation and age, the Executive
would have been eligible for post-retirement benefits, the Executive shall receive,
commencing on the date of the Change of Control, post-retirement benefits based on the terms
and conditions of the applicable plans in effect immediately prior to the Change of Control.
(e) Effect on Existing Plans. All Change of Control provisions applicable to
the Executive and contained in any plan, program, agreement or arrangement maintained on or
after the date hereof by the Company (including, but not limited to, any stock option,
restricted stock or pension plan) shall remain in effect for such period after the date of a
Change of Control as is necessary to carry out such provisions and provide the benefits
payable thereunder, and may not be altered in a manner which adversely affects the Executive
without the Executive’s prior written approval.
(f) Outplacement Counseling. The Company shall reimburse all reasonable
expenses incurred by the Executive for professional outplacement services by qualified
consultants selected by the Executive for a period of 12 months following a Change of
Control.
4. Mitigation. The Executive shall not be required to seek other employment after a
Change of Control and any compensation earned from other employment shall not reduce the amounts
otherwise payable under this Agreement.
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5. Gross-up.
(a) In the event it shall be determined that any payment, benefit or distribution (or
combination thereof) by the Company, or any trust established by the Company for the benefit
of its employees, to or for the benefit of the Executive (whether payable pursuant to the
terms of this Agreement (a “Payment”)) would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code and any interest or penalties are incurred by the
Executive with respect to such excise tax (the excise tax, together with interest and
penalties thereon, hereinafter collectively referred to as the “Excise Tax”), the Executive
shall be entitled to receive an additional payment (a “Gross-up Payment”) in an amount such
that after payment by the Executive of all taxes, including, without limitation, any income
taxes and the Excise Tax imposed upon the Gross-up Payment, the Executive retains an amount
of the Gross-up Payment equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 5(c), all determinations required to
be made under this Section 5, including whether and when a Gross-up Payment is
required and the amount of such Gross-up Payment and the assumptions to be utilized in
arriving at such determination, shall be made by a nationally recognized certified public
accounting firm as may be designated by the Executive (the “Accounting Firm”). All fees and
expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-up Payment,
as determined pursuant to this Section 5, shall be paid by the Company to the
Executive within five (5) days after the receipt of the Accounting Firm’s determination. If
the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall so
indicate to the Executive in writing. Any determination by the Accounting Firm shall be
binding upon the Company and the Executive.
(c) The Executive shall notify the Company in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by the Company of a Gross-up
Payment. Such notification shall be given no later than ten (10) business days after the
Executive is informed in writing of such claim and shall apprise the Company of the nature
of the claim and the date of requested payment. The Executive shall not pay the claim prior
to the expiration of the thirty (30) day period following the date on which it gives notice
to the Company. If the Company notifies the Executive in writing prior to the expiration of
the period that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the Company
relating to such claim;
(ii) take such action in connection with contesting such claim as the Company
shall reasonably request in writing from time to time, including, without
limitation, accepting legal representation with respect to such claim by an attorney
reasonably selected by the Company;
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(iii) cooperate with the Company in good faith in order to effectively contest
such claim; and
(iv) permit the company to participate in any proceedings relating to such
claim.
Without limitation on the foregoing provisions of this Section 5(c), the
Company shall control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forego any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its sole option,
either direct the Executive to pay the tax claimed and xxx for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as the Company shall determine provided,
however, that the Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with such contest and
shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax
or income tax (including interest and penalties with respect thereto) imposed as a result of
the contest; provided, further, that if the Company directs the Executive to
pay any claim and xxx for a refund, the Company shall advance the amount of the payment to
the Executive, on an interest-free basis, and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to the advance or with respect to any
imputed income with respect to the advance.
(d) In the event that the Company exhausts its remedies pursuant to Section
5(c) and the Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Gross-up Payment required and such payment
shall be promptly paid by the Company to or for the benefit of the Executive.
(e) If, after the receipt by the Executive of an amount advanced by the Company
pursuant to Section 5(c), the Executive becomes entitled to receive any refund with
respect to such claim, the Executive shall promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon after taxes applicable thereto).
If, after the receipt by the Executive of an amount advanced by the Company pursuant to
Section 5(c), a determination is made that the Executive shall not be entitled to
any refund with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration of thirty
(30) days after such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-up Payment required to be paid.
6. Termination for Cause. Nothing in this Agreement shall be construed to prevent the
Company from terminating the Executive’s employment for Cause.
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7. Indemnification; Director’s and Officer’s Liability Insurance. The Executive
shall, after the Change of Control, retain all rights to indemnification under applicable law or
under the Company’s Certificate of Incorporation or Bylaws, as they may be amended or restated from
time to time. In addition, the Company shall maintain Director’s and Officer’s liability insurance
on behalf of the Executive, at the level in effect immediately prior to the Change of Control, for
the five (5) year period following the Change of Control.
8. Executive Covenants. During the twelve (12) month period following the Change of
Control, the Executive shall not disclose to any person, or use to the significant disadvantage of
any of the Company, any non-public information relating to business plans, marketing plans,
customers or employees of the Company other than information the disclosure of which cannot
reasonably be expected to adversely affect the business of the Company (“Confidential
Information”), provided that nothing contained in this Section 8 shall prevent the
Executive from being employed by a competitor of the Company or utilizing the Executive’s general
skills, experience, and knowledge, including those developed while employed by the Company.
9. Disputes. Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in Dallas, Texas, or, at the option of the
Executive, in the county where the Executive then resides, in accordance with the Rules of the
American Arbitration Association then in effect to be completed within 45 days after notice of such
dispute or controversy is given pursuant to Section 13. Judgment may be entered on an
arbitrator’s award relating to this Agreement in any court having jurisdiction.
10. Costs of Proceedings. The Company shall pay all costs and expenses, including
attorneys’ fees and disbursements, at least monthly, of the Executive in connection with any legal
proceeding (including arbitration), whether or not instituted by the Company or the Executive,
relating to the interpretation or enforcement of any provision of this Agreement, except that if
the Executive instituted the proceeding and the judge, arbitrator or other individual presiding
over the proceeding affirmatively finds that the Executive instituted the proceeding in bad faith,
the Executive shall pay all costs and expenses, including attorney’s fees and disbursements, of the
Executive.
11. Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder can be assigned or delegated by the Executive, without the prior written
consent of the Company. Except as otherwise provided herein, this Agreement shall be binding upon,
inure to the benefit of and be enforceable by the Company and the Executive and their respective
heirs, legal representatives, successors and assigns. If the Company shall be merged into or
consolidated with another entity, the provisions of this Agreement shall be binding upon and inure
to the benefit of the entity surviving such merger or resulting from such consolidation. 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, by agreement in
form and substance satisfactory to the 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. The provisions of this Section 11
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shall continue to apply to each successive employer of the Executive hereunder in the event of any
merger, consolidation or transfer of assets of a successor employer.
12. Withholding. Notwithstanding the provisions of Sections 4 and 5
hereof, the Company may, to the extent required by law, withhold applicable federal, state, and
local income and other taxes from any payments due to the Executive hereunder.
13. Notices. All notices and other communications hereunder must be in writing and
will be deemed to have been duly given if delivered personally, mailed by certified mail (return
receipt requested) or sent by overnight delivery service or facsimile transmission to the Executive
at the Executive’s most recent address in the records of the Company and to the Company at:
Affiliated Computer Services, Inc.
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attn: General Counsel
Fax: 000-000-0000
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attn: General Counsel
Fax: 000-000-0000
14. Confidentiality. The parties agree to keep the terms and conditions of this
Agreement in strictest confidence, it being understood that this restriction shall not prohibit
disclosure required by applicable law, rule or regulation.
15. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED THEREIN.
16. Entire Agreement. This Agreement (along with grants of stock options, if any, to
the Executive, pursuant to the Company’s 1997 Stock Option Plan, as amended and the 2007 Equity
Incentive Plan) constitutes the entire agreement between the parties and, except as expressly
provided herein, supersedes all other prior agreements concerning the effect of a Change of Control
on the relationship between the Company and the Executive. This Agreement may be changed only by a
written agreement executed by the Company and the Executive.
[Signature Page Follows]
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The parties have executed this Agreement to be effective as of the last date signified below.
| AFFILIATED COMPUTER SERVICES, INC. |
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| Date: June 8, 2008 | By: | /s/ Xxxx Xxxxxxxx | ||
| Xxxx Xxxxxxxx, Chief Executive Officer | ||||
| EXECUTIVE |
||||
| Date: June 9, 2008 | /s/ Xxxx Xxxxxxx | |||
| Xxxx Xxxxxxx | ||||
SCHEDULE A
CERTAIN DEFINITIONS
As used in this Agreement, and unless the context requires a different meaning, the following
terms, when capitalized, have the meaning indicated:
“Average Commission Payment” shall mean the average of the commission payments received by
Executive annually for each of the prior three (3) fiscal years.
“Cause” shall mean:
(i) the willful and continued failure of the Executive to perform substantially the
Executive’s duties with the Company (other than any such failure resulting from incapacity
due to physical or mental illness), after a written demand for substantial performance is
delivered to the Executive by the Board which specifically identifies the manner in which
the Board believes that the Executive has not substantially performed the Executive’s
duties, or
(ii) the willful engaging by the Executive in illegal conduct or gross misconduct
which is materially and demonstrably injurious to the Company.
For purpose of this provision, no act or failure to act, on the part of the Executive, shall be
considered willful unless it is done, or omitted to be done, by the Executive in bad faith or
without reasonable belief that the Executive’s action or omission was in the best interests of the
Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or based upon the advice of counsel for the Company shall be conclusively
presumed to be done, or omitted to be done, by the Executive in good faith and in the best
interests of the Company. The termination of employment of the Executive shall not be deemed to be
for cause unless and until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of the entire membership of
the Board at a meeting of the Board called and held for such purpose (after reasonable notice is
provided to the Executive and Executive is given an opportunity, together with counsel, to be heard
before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of
the conduct described in subparagraph (i) or (ii) above and specifying the particulars thereof in
detail.
“Change of Control” shall mean the first to occur of any of the following dates:
(i) the date a Corporate Event is consummated;
(ii) the date any person (as such term is used in Section 13(d) of the Securities
Exchange Act of 1934, hereinafter the “1934 Act”), other than one or more trusts
established by the Company for the benefit of employees of the Company or its subsidiaries,
shall become the beneficial owner (within the
meaning of Rule 13d-3 under the 0000 Xxx) of fifty-one percent (51%) or more of the
Company’s outstanding Common Stock, other than holders of such amounts as of the date
hereof; or
(iii) the date, during any period of twenty-four (24) consecutive months, on which
individuals who at the beginning of such period constitute the entire Board of 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 comprising the majority was approved by a vote of at least a majority of the
Continuing Directors in office on the date of such election or nomination for election of
the new director. For purposes hereof, a “Continuing Director” shall mean:
(A) any member of the Board of Directors at the close of business on June 30,
2007;
(B) any member of the Board who succeeds any Continuing Director described in
subparagraph (A) above if such successor was elected, or nominated for election by
the Company’s stockholders, by a majority of the Continuing Directors then still in
office; or
(C) any director elected, or nominated for election by the Company’s
stockholders to fill any vacancy or newly created directorship on the Board of
Directors of the Company by a majority of the Continuing Directors then still in
office.
“Corporate Event” shall mean any of the following:
(i) any consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of the Company’s Common
Stock would be converted into cash, securities or other property, other than any
consolidation or merger of the Company in which the holders of the Company’s Common Stock
immediately prior to the consolidation or merger have the same proportionate ownership of
common stock of the surviving corporation immediately after the consolidation or merger;
(ii) any sale, lease, or other transfer of all, or substantially all, of the assets of
the Company, other than any sale, lease, or other transfer to any corporation where the
Company owns, directly or indirectly, at least eighty percent (80%) of the outstanding
voting securities of the corporation after the transfer; or
(iii) any plan or proposal for the liquidation or dissolution of the Company.
