RETENTION AND CHANGE OF CONTROL AGREEMENT
Exhibit 10.3
RETENTION AND CHANGE OF CONTROL AGREEMENT
This CHANGE OF CONTROL AGREEMENT (“Agreement”) between and among TechTeam Global,
Inc., a Delaware corporation (the “Company”), TechTeam Government Solutions, Inc., a
Virginia corporation (“TTGSI”) and Xxxxx X. Xxxxxxxx (the “Executive”) is entered
into on October 23, 2009.
The Board of Directors of the Company (the “Board”) has determined that it is in the
best interests of the Company and its shareholders to diminish the inevitable distraction to the
Executive from the personal uncertainties and risks created by a pending or potential Change of
Control, and to encourage the Executive’s full attention and dedication to the Company currently
and in the event of any pending or potential Change of Control, and to provide the Executive with a
severance package if the Executive is terminated as a result of a Change of Control. Therefore, in
order to accomplish these objectives, the Board has caused the Company to enter into this
Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Definitions
(a) “Effective Date” shall mean the date on which a Change of Control occurs.
Notwithstanding anything in this Agreement to the contrary, if a Change of Control occurs and if
the Executive’s employment with the Company is terminated prior to the date on which the Change of
Control occurs, and if it is reasonably demonstrated by the Executive that such termination of
employment (i) was at the request of a third party who has taken steps reasonably calculated to
effect the Change of Control or (ii) otherwise arose in connection with or in anticipation of the
Change of Control, then for all purposes of this Agreement, the “Effective Date” shall mean
the date immediately prior to the date of such termination of employment.
(b) “Change of Control” shall mean the first to occur of the following:
(i) The sale of 51% or more of the then outstanding shares of common stock entitled to
vote generally in the election of the directors (“Voting Securities”) of TTGSI or
the Company; or
(ii) The consummation of the sale or other disposition of all or substantially all of
the assets or operations of TTGSI or the Company (whichever occurs first, the “Acquired
Company”).
(c) “Change Period” shall mean the period commencing upon the Effective Date and
ending on the first anniversary of such date.
(d) “Disability” shall mean the absence of the Executive from the Executive’s duties
with the Acquired Company on a full-time basis for 180 consecutive business days as a result of
incapacity due to mental or physical illness, which is determined to be total and/or permanent by a
physician selected by the Acquired Company or its insurers.
(e) “Cause” shall mean any of the following: (i) Executive’s conviction of or a plea
of no contest to a felony, fraud or a crime involving moral turpitude under any state or federal
statute; (ii) Executive’s continued failure to substantially perform the Executive’s duties
unrelated to a Disability, or any other intentional action or omission by Executive that is
injurious to the Acquired Company; or (iii) any material breach of any employee handbook of the
Acquired Company by the Executive, which breach is not remedied within fourteen (14) days after
written notice thereof.
(f) “Good Reason” shall mean any of the following: (i) the assignment to the Executive
of any duties inconsistent with the Executive’s position, authority, duties or responsibilities
prior to the Effective Date, or any other action by the Company or the Acquired Company (or any of
their successors) which results in a diminution in such position, authority, duties or
responsibilities, and the continuance of such assignment of duties or other such action for a
period of sixty (60) days; (ii) the requirement of the Executive to be based at any office or
location outside of the greater Washington, DC metropolitan area,
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except for short-term assignments (under three (3) months) where the Company pays all travel
or temporary relocation costs incurred by the Executive; (iii) any failure by the Acquired Company
to comply with and satisfy Section 9(c) of this Agreement, or any failure by any successor to
assume and offer to perform this Agreement in accordance with Section 9(c), provided that such
successor has received at least ten days prior written notice from the Acquired Company or the
Executive of the requirements of Section 9(c).
(g) “Notice of Termination” shall mean a written notice which (i) indicates the
specific termination provision in this Agreement relied upon by the terminating party, and (ii) to
the extent practicable, sets forth in reasonable detail the facts and circumstances relied upon to
form such party’s basis for termination of employment under the operative provisions.
(h) “Termination Date” shall mean (i) if the Executive’s employment is terminated by
the Acquired Company for Cause, the date of receipt of the Notice of Termination or any later date
specified therein, as the case may be; (ii) if the Executive’s employment is terminated by the
Executive for Good Reason, the end of the thirty-day cure period described in subsection (d) above
or any later date specified therein (which later date must in all cases be within two years of the
initial existence of the condition constituting Good Reason); (iii) if the Executive’s employment
is terminated by the Acquired Company other than for Cause or Disability, the Termination Date
shall be the date on which the Acquired Company notifies the Executive of such termination; and
(iv) if the Executive’s employment is terminated by reason of death or Disability, the Termination
Date shall be the date of death of the Executive or the date of Disability, as the case may be.
(i) “TTGSI Change of Control” shall mean:
(i) The sale of 51% or more of the then outstanding Voting Securities of TTGSI; or
(ii) The consummation of the sale or other disposition of all or substantially all of the
assets or operations of TTGSI.
(j) “Specified Employee” shall have the meaning given in Code Section 409A as
determined in accordance with the methodology established by the Company as in effect on the date
of Executive’s Separation from Service.
(k) “Separation from Service” shall having the meaning given in Code Section 409A,
applying the default rules thereof.
(l) “Code” shall mean the Internal Revenue Code of 1986, as amended. Any reference to
a specific provision of the Code shall include any successor provision and/or regulations
promulgated under that provision of the Code.
2. Terms of Employment.
(a) Position and Duties. During the Change Period, Executive agrees to devote
reasonable attention and time during normal business hours to the business and affairs of the
Acquired Company and, to the extent necessary to discharge the responsibilities assigned to the
Executive hereunder, to use the Executive’s reasonable best efforts to perform faithfully and
efficiently such responsibilities.
(b) Compensation. During the Change Period, the Executive shall:
(i) receive an annual base salary (“Annual Base Salary”) at least equal to
twelve times the highest monthly base salary paid or payable to the Executive by the
Acquired Company in the twelve-month period immediately preceding the month in which the
Effective Date occurs;
(ii) be eligible to participate in any bonus program in force on the Effective Date, or
otherwise adopted by the Acquired Company;
(iii) be entitled to participate in all savings and retirement plans, practices,
policies and programs applicable generally to other peer executives of the Acquired Company;
(iv) be eligible (and the Executive’s family members shall be eligible) for
participation in and to receive all benefits under welfare benefit plans, practices,
policies and
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programs provided by the Acquired Company (including, without limitation, medical,
prescription, dental, disability, salary continuance, employee life, group life, accidental
death and travel accident insurance plans and programs).
(d) Rights of the Company. The Executive hereby acknowledges and agrees to the
following as it relates to the rights of the Company with respect to this Agreement:
(i) that the Company may accept or reject any proposal for, or terminate any
discussions or negotiations regarding, a Change of Control in its sole discretion,
and that the Executive shall have no right under this Agreement or otherwise to
challenge or contest any such decision by the Company; and
(ii) that the Company may alter or amend this Agreement at any time for any
reason or for no reason.
3. Termination of Employment.
(a) Death or Disability. The Executive’s employment shall terminate automatically
upon the Executive’s death or Disability that continues for 30 days after the Acquired Company
provides Executive of notice of its determination of Disability.
(b) Cause. The Acquired Company may terminate the Executive’s employment during the
Change Period for Cause.
(c) The Executive’s employment may be terminated during the Change Period by the Executive for
Good Reason.
(d) In the case of any termination of employment under this Agreement, the provisions of
Section 4 of this Agreement shall apply.
(e) Notice of Termination. Any termination by the Acquired Company for Cause, or by
the Executive for Good Reason, shall be communicated by written Notice of Termination to the other
party in accordance with this Agreement. In addition, if the Executive is resigning for Good
Reason, the Notice of Termination must be provided to the Acquired Company within ninety (90) days
of the existence of the condition that constitutes Good Reason and must provide the Acquired
Company a period of thirty (30) days to remedy the condition that constitutes Good Reason. If the
Acquired Company remedies the condition that constitutes Good Reason within such thirty (30) day
period, then the Executive may withdraw the Notice of Termination; provided that if the
Executive does not withdraw the Notice of Termination, then the Executive will be considered to
have terminated his employment without Good Reason.
4. Obligations of the Acquired Company upon Termination.
(a) Good Reason: Other than for Cause, Death or Disability. If during the Change
Period, either the Acquired Company terminates the Executive’s employment other than for Cause,
Death or Disability, or the Executive terminates employment for Good Reason, the Acquired Company
shall:
(i) pay to the Executive in a lump sum in cash the aggregate of the following amounts:
A. the sum of: (1) the Executive’s Annual Base Salary through the Termination
Date to the extent not theretofore paid; plus (2) any accrued vacation pay to the
extent not already paid; and
B. the Executive’s Annual Bonus as if earned at the target level; and
C. the amount equal to the Executive’s Annual Base Salary;
(ii) provide the Executive with reasonable executive outplacement services for a period
of up to twelve (12) months after the Termination Date through a recognized outplacement
provider that is agreed to by the Acquired Company and the Executive;
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(iii) continue welfare benefits to the Executive and/or the Executive’s family at least
equal to those which would have been provided to them in accordance with the welfare plans,
programs, practices and policies of the Acquired Company as if the Executive’s employment
had not been terminated for a period of twelve (12) months; provided, however, that
if the Executive becomes re-employed with another employer and is eligible to receive
medical or other welfare benefits under another employer provided plan, the medical and
other welfare benefits described herein shall be secondary to those provided under such
other plan during such applicable period of eligibility (such continuation of such benefits
for the applicable period herein set forth shall be hereinafter referred to as “Welfare
Benefit Continuation”). Any benefits received by the Executive pursuant to this Section
shall not reduce the period of time the Executive is entitled to receive COBRA continuation
health coverage as a result of the Executive’s termination of employment;
(iv) immediately upon termination vest any options granted to Executive and any shares
of restricted stock that were granted to Executive more than one year prior to the
Termination Date, and the Executive will have six (6) months to exercise any such options
(which options shall in no event be exercisable after the end of their original terms);
(v) pay to the Executive the proceeds of the Executive Savings Plan, including all
accumulated interest and dividends, as required therein.
The Company shall pay the amounts described in this Section (in the aggregate, the “Severance
Pay”) promptly after the Termination Date, but no more than thirty (30) days thereafter;
provided that if the Executive is a Specified Employee on the Termination Date, then to the extent
the Severance Pay exceeds an amount equal to the lesser of (x) two times the Executive’s Annual
Base Salary for the prior calendar year and (y) two times the dollar limitation in effect under
Code Section 401(a)(17) for the year in which the Termination Date occurs, such excess shall be
paid with interest on such delayed payment at the applicable federal rate provided for in Code
Section 7872(f)(2)(A) on the first business day after the date that is six months after the
Termination Date (the “Delayed Payment Date”). In addition, if the Executive is a
Specified Employee on the Termination Date and if the taxable value of continued life insurance
coverage exceeds the applicable dollar limit under Code Section 402(g)(1)(B) as in effect for the
Termination Date, then the Executive shall pay the Acquired Company the premiums for the coverage
in excess of such limit and, on the Delayed Payment Date, the Acquired Company shall reimburse such
amount to the Executive.
(b) Death, Retirement or Disability. If during the Change Period, the Executive’s
employment is terminated by reason of the Executive’s death, retirement or Disability, the Acquired
Company shall have no further obligations to the Executive’s legal representatives or the
Executive, as the case may be, under this Agreement.
(c) Cause, Other than for Good Reason. If during the Change Period, the Executive’s
employment is terminated for Cause, or if the Executive terminates employment other than for Good
Reason, the Acquired Company shall have no further obligations to the Executive, except the
Acquired Company shall be obligated to pay the Executive’s Annual Base Salary through the
Termination Date plus the amount of any compensation previously deferred by the Executive, in each
case to the extent not already paid.
5. TTGSI Change of Control. Outstanding equity awards granted to the Executive under
the 2006 Incentive Stock and Awards Plan, including restricted shares granted to the Executive in
March 2009 and June 2009 but specifically excluding any performance shares granted to the Executive
(including that certain performance share award with a performance period ending on December 31,
2010), shall vest in full upon a TTGSI Change of Control.
6. Limitation on Payment. If the Executive is a “disqualified individual” within the
meaning of Code Section 280G, the parties expressly agree that the payments described in this
Agreement and all other payments or benefits (including, but not limited to, amounts in respect of
any equity awards or the accelerated vesting or settlement of such awards) which the Executive
receives or may receive under any other agreement, plan or arrangement with any persons that
constitute “parachute payments” within the meaning of Section 280G of the Code (the “Total
Benefits”) shall collectively be subject to an overall maximum limit (the “Code Section
280G Limit”). In such case, the aggregate amount of any Total Benefits shall not exceed the
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Code Section 280G Limit. The Code Section 280G Limit shall be One Dollar ($1.00) less than
the aggregate amount that would otherwise cause any such payments to be considered a “parachute
payment” within the meaning of Section 280G of the Code, as determined by the Acquired Company.
Accordingly, to the extent that the payments would be considered a “parachute payment” with respect
to the Executive, then the portions of such payments shall be reduced or eliminated in the
following order until the remaining payments with respect to the Executive can be fully paid within
the Code Section 280G Limit:
(a) First, any cash payment to the Executive (reduced in reverse chronological order);
(b) Second, any “parachute payments” not described in this Agreement; and
(c) Third, any forgiveness of indebtedness of the Executive to the Acquired Company.
The Executive expressly and irrevocably waives any and all rights to receive any “parachute
payments” that exceed the Code Section 280G Limit.
7. Confidential Information. The Executive shall hold in a fiduciary capacity for the
benefit of the Acquired Company all secret or confidential information, knowledge or data relating
to the Acquired Company and its respective businesses, which has been obtained by the Executive
during the Executive’s employment by the Acquired Company which shall not be or become public
knowledge (other than by acts by the Executive or representatives of the Executive in violation of
this Agreement). After termination of the Executive’s employment with the Company, the Executive
shall not, without the prior written consent of the Acquired Company or as may otherwise be
required by law or legal process, communicate or divulge any such information, knowledge or data to
anyone other than the Acquired Company and those designated by it. In no event shall an asserted
violation of the provisions of this Section constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement.
8. Non-Solicitation Covenant. In consideration for entry into this Agreement,
Executive reaffirms his/her agreement with the Acquired Company not to compete with, or solicit
customers or employees of the Acquired Company as set forth in the Intellectual Property
Assignment, Non-Solicitation, and Confidentiality Agreement.
9. Successors and Assigns.
(a) This Agreement is personal to the Executive and without the prior written consent of the
Acquired Company shall not be assignable by the Executive otherwise than by will or the laws of
descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the
Executive’s legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the Acquired Company and
its successors and assigns.
(c) The Acquired Company shall 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 Acquired Company to assume expressly and agree to perform this Agreement in the same manner and
to the same extent that the Acquired Company would be required to perform it if no such succession
had taken place. As used in this Agreement, “Acquired Company” shall mean the Acquired Company as
hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or otherwise.
10. General Provisions.
(a) This Agreement shall be governed by and construed in accordance with the laws of the State
of Michigan, without reference to principles or conflict of laws. All litigation related to this
Agreement shall be brought in a court located in the State of Michigan, and each party, for the
purposes of such litigation, hereby submits to the exclusive jurisdiction and venue of that court.
The captions of this Agreement are not part of the provisions hereof and shall have no force or
effect.
(b) All notices and other communications hereunder shall be in writing and shall be given by
hand delivery to the other party or by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
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If to the Executive:
Xxxxx X. Xxxxxxxx
0000 Xxxxxxxxx Xxxxxxx Xxxxx
XxXxxx, XX 00000
Xxxxx X. Xxxxxxxx
0000 Xxxxxxxxx Xxxxxxx Xxxxx
XxXxxx, XX 00000
or to the most current address of record designated in the Executive’s personnel file.
If to the Company:
Chief Executive Officer
TechTeam Global, Inc.
00000 Xxxx 00 Xxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Chief Executive Officer
TechTeam Global, Inc.
00000 Xxxx 00 Xxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000-0000
or to such other address as either party shall have furnished to the other in writing under this
Agreement. Notice and communications shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement.
(d) The Acquired Company may withhold from any amounts payable under this Agreement such
federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or
regulation.
(e) The Executive’s or the Acquired Company’s failure to insist upon strict compliance with
any provision hereof or any other provision of this Agreement or the failure to assert any right
the Executive or the Acquired Company may have hereunder, including, without limitation, the right
of the Executive to terminate employment for Good Reason, shall not be deemed to be a waiver of
such provision or right or any other provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may otherwise be provided under
any other written agreement between the Executive and the Company, the employment of the Executive
by the Company is “at will” and, prior to the Effective Date, may be terminated by either the
Executive or the Company at any time. Moreover, if prior to the Effective Date, the Executive’s
employment with the Company terminates, then the Executive shall have no further rights under this
Agreement. The Executive further acknowledges that this Agreement does not give the Executive any
additional right to participate in any plan, program, etc. The Executive and the Company agree
that this Agreement supercedes any separation policy of the Company.
(g) This Agreement constitutes the entire agreement between the parties concerning the subject
matter hereof. Any prior understandings, representations, promises, undertakings, agreements or
inducements, whether written or oral, concerning the subject matter hereof not contained herein
shall have no force and effect.
(h) This Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal representatives. An
agreement to amend this Agreement can be entered into on behalf of the Company only by the
President of the Company after approval of the Company Board.
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement on the date first
written above.
| TECHTEAM GLOBAL, INC. | EXECUTIVE | |||||||
By:
|
/s/ Xxxx X. Xxxxxxxx
|
/s/ Xxxxx X. Xxxxxxxx
|
||||||
| Its: Chief Executive Officer | ||||||||
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