AMENDED AND RESTATED SEVERANCE AGREEMENT
This Agreement, dated May 23, 1996, is made by and between National
Computer Systems, Inc., a Minnesota corporation (the "Company"), and Russell A.
Gullotti (the "Executive") and supersedes that certain Severance Agreement
between the Company and Executive.
In consideration of the premises and the mutual covenants contained in
this Agreement, the Company and the Executive agree as follows:
1. Definitions. The definitions set forth in Exhibit A to this
Agreement are incorporated herein by reference.
2. Term of Agreement. This Agreement shall continue in effect
indefinitely.
3. Severance Payments. If Executive's employment is involuntarily
terminated other than for Cause or if Executive voluntarily terminates his
employment within 60 days after the occurrence of a Severance Event, in lieu of
any cash severance benefit otherwise payable to the Executive, for a period of
two years from the termination of Executive's employment and subject to normal
tax withholding, (a) the Company shall continue Executive's base salary, (b) the
Company shall arrange to provide the Executive with the insurance, fringe
benefits and perquisites that Executive would have received if he had remained
employed upon the same terms and conditions existing before the Severance Event
and (c) the Company shall pay within 90 days of termination of Executive's
employment a pro rata portion of the annual bonus for the then current fiscal
year. Perquisites currently include monthly country club dues, tax preparation
services and an annual physical. Notwithstanding any provision of any incentive
compensation plan requiring continued employment after the completed fiscal year
or other measuring period as a condition to payment, the Company shall pay to
the Executive an amount, in cash, equal to the amount of any incentive
compensation that was allocated or awarded to the Executive for a completed
fiscal year or other measuring period preceding the occurrence of a Severance
Event not yet paid to the Executive.
4. Acceleration of Vesting. Notwithstanding the terms of any option,
restricted stock grant, stock appreciation right, performance share plan or any
other agreement, now existing or hereafter entered into, in which Executive
receives an interest in stock of the Company or a right to obtain an interest in
stock in the Company or whose economic value depends upon the stock performance
of the Company ("Award"), subject to the passage of time, a future event or the
payment of money, such Award shall accelerate and become fully vested upon
termination of Executive's employment following a Change in Control as though
all time had passed, all events had occurred and all performances had been
attained.
5. Limitation on Payments. In the event that any payment or benefit
received or to be received by Executive (whether payable pursuant to the terms
of this Agreement or any other plan, arrangement or agreement with the Company
(collectively the "Total Payments") would not be deductible (in whole or in
part) by the Company as a result of Section 280G of the Code, the Total Payments
shall be reduced until no portion of the Total Payments is not deductible as a
result of Section 280G of the Code. For purposes of this limitation (i) no
portion of the Total Payments the receipt or enjoyment of which Executive shall
have effectively waived in writing prior to the date of payment of the Severance
Payments shall be taken into account, (ii) no portion of the Total Payments
shall be taken into account which in the opinion of tax counsel selected by the
Company's independent auditors and acceptable to Executive does not constitute a
"parachute payment" within the meaning of Section 280G(b) (2) of the Code, (iii)
the Severance Payments shall be reduced only to the extent necessary so that the
Total Payments (other than those referred to in clause (ii)) in their entirety
constitute reasonable compensation for services actually rendered within the
meaning of Section 280G(b)(4) of the Code, in the opinion of the tax counsel
referred to in clause (ii), and (iv) the value of any non-cash benefit or any
deferred cash payment included in the Total Payments shall be determined by the
Company's independent auditors in accordance with the principles of Sections
280G(d)(3) and (4) of the Code.
6. Fees and Expenses. The Company shall pay to the Executive reasonable
legal fees and reasonable expenses incurred in good faith by the Executive in
obtaining the payments and other benefits provided by this Agreement (including,
but not limited to, all such fees and expenses, if any, in seeking in good faith
to obtain or enforce any benefit or right provided by this Agreement or in
connection with any tax audit or proceeding to the extent attributable to the
application of Section 4999 of the Code to any payment or benefit provided
hereunder). Such payment shall be made within five business days after delivery
of the Executive's written request for payment accompanied with such evidence of
fees and expenses incurred as the Company reasonably may require.
7. No Mitigation. The Company agrees that Executive is not required to
seek other employment or to attempt in any way to reduce any amounts payable to
the Executive by the Company. The amount of any payment or benefit provided for
in Section 3) shall not be reduced by any compensation earned by the Executive
as the result of employment by another employer, by retirement benefits, by
offset against any amount claimed to be owed by the Executive to the Company or
any Subsidiary, or otherwise.
8. Miscellaneous.
(a) Governing Law. All matters relating to the interpretation,
construction, validity and enforcement of this Agreement shall be governed by
the internal laws of the State of Minnesota without giving effect to any choice
or conflict of law provision or rule (whether of the State of Minnesota or any
other jurisdiction) that would cause the application of laws of any jurisdiction
other than the State of Minnesota.
(b) Entire Agreement. This Agreement contains the entire agreement of
the parties relating to the subject matter hereof and supersedes all prior
agreements and understandings with respect to such subject matter, and the
parties hereto have made no agreements, representations or warranties relating
to the subject matter of this Agreement which are not set forth herein.
(c) Amendments. No amendment or modification of this Agreement shall be
deemed effective unless made in writing and signed by the parties hereto.
(d) No Waiver. No term or condition of this Agreement shall be deemed
to have been waived, nor shall there be any estoppel to enforce any provisions
of this Agreement, except by a statement in writing signed by the party against
whom enforcement of the waiver or estoppel is sought. Any written waiver shall
not be deemed a continuing waiver unless specifically stated, shall operate only
as to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future or as to any act other than that
specifically waived.
(e) Successor to Company. In addition to any obligations imposed by law
upon any successor to the Company, 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 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.
(f) Successor to Executive. This Agreement shall inure to the benefit
of and be enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Executive shall die while any amount would still be payable to
the Executive hereunder (other than amounts which, by their terms, terminate
upon the death of the Executive) if the Executive had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the executors, personal representatives or
administrators of the Executive's estate.
(g) Notices. For the purpose 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, addressed to the
respective addresses set forth below, or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon actual receipt:
To the Company: To the Executive:
National Computer Systems, Inc. Russell A. Gullotti
P.O. Box 9365 7051 Kenmare Drive
Minneapolis, MN 55440 Bloomington, MN 55438
(h) Counterparts. This Agreement may be simultaneously executed in any
number of counterparts, and such counterparts executed and delivered, each as an
original, shall constitute but one and the same instrument.
(i) Severability. To the extent any provision of this Agreement shall
be invalid or unenforceable, it shall be considered deleted herefrom and the
remainder of such provision and of this Agreement shall be unaffected and shall
continue in full force and effect.
(j) Captions and Headings. The captions and paragraph headings used in
this Agreement are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement or any of the provisions
hereof.
IN WITNESS WHEREOF, Executive and the Company have executed this
Agreement as of the date set forth in the first paragraph.
NATIONAL COMPUTER SYSTEMS, INC.
By: /S/ David C. Cox /S/ Russell A. Gullotti
David C. Cox Russell A. Gullotti
Its: Director and Chairman - Compensation
Committee
EXHIBIT A
"Acquiring Person" shall mean any Person who or which, alone or
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding,
but shall not include the Company, any Subsidiary of the Company or any employee
benefit plan of the Company or of any Subsidiary of the Company or any entity
holding shares of Common Stock organized, appointed or established for, or
pursuant to the terms of, any such plan. For purposes of this Agreement, any
calculation of the number of shares of Common Stock outstanding at any
particular time, including for purposes of determining the particular percentage
of such outstanding shares of Common Stock of which any Person is the Beneficial
Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i)
of the General Rules and Regulations under the Exchange Act.
"Affiliate" and "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Exchange Act.
"Beneficial Owner" means beneficial owner (as defined in Rule 13d-3
under the Exchange Act) and "beneficially own" has a meaning correlative
therewith.
"Cause" means (i) the willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company or a Subsidiary,
as such duties may be defined from time to time, or abide by the written
policies of the Company or of the Executive's primary employer after a written
demand for substantial performance is delivered to the Executive by the Board of
Directors which demand specifically identifies the manner in which the Board of
Directors believes that the Executive has not substantially performed the
Executive's duties or has not abided by written policies, or (ii) the willful
engaging by the Executive in conduct which is demonstrably and materially
injurious to the Company or its Subsidiaries, monetarily or otherwise. For
purposes of clauses (i) and (ii) of this definition, no act, or failure to act,
on the Executive's part shall be deemed "willful" unless done, or omitted to be
done, by the Executive not in good faith and without reasonable belief that the
Executive's act, or failure to act, was in the best interest of the Company and
its Subsidiaries.
"Change in Control" means (i) a public announcement (which, for
purposes of this definition, shall include, without limitation, a report filed
pursuant to Section 13(d) of the Exchange Act) is made by the Company or any
Person that such Person has become an Acquiring Person, unless approved by the
Board of Directors, (ii) a public announcement (which, for purposes of this
definition, shall include, without limitation, a report filed pursuant to
Section 13(d) of the Exchange Act) is made by the Company or any Person that
such Person beneficially owns more than 50% of the Common Stock, regardless of
whether approved by the Board of Directors, (iii) a tender or exchange offer by
any Person (other than the Company, any Subsidiary of the Company or any
employee benefit plan of the Company or of any Subsidiary of the Company or any
entity holding shares of Common Stock organized, appointed or established for,
or pursuant to the terms of, any such plan) is commenced (within the meaning of
Rule 14d-2(a) of the General Rules and Regulations under the Exchange Act), if,
upon the consummation thereof, such Person would be an Acquiring Person, (iv)
the Company enters into a merger, consolidation or statutory share exchange with
any other Person in which the surviving entity would not have as its directors
at least 60% of the Continuing Directors and would not have at least 60% of its
common stock owned by the common shareholders of the Company prior to such
merger, consolidation or statutory share exchange, or (v) a sale or disposition
of all or substantially all of the assets of the Company or the dissolution of
the Company.
"Code" means the Internal Revenue Code of 1986, as the same may be
amended from time to time.
"Common Stock" means the Company's Common Stock, $.03 par value per
share.
"Continuing Director" means any Person who is a member of the Board of
Directors of the Company, is not an Acquiring Person or an Affiliate or
Associate of an Acquiring Person or a representative of an Acquiring Person or
of any such Affiliate or Associate, and was a member of the Board of Directors
immediately prior to a Change in Control. A Continuing Director also means any
Person who subsequently becomes a member of the Board of Directors of the
Company and is not an Acquiring Person or an Affiliate or Associate of an
Acquiring Person or a representative of an Acquiring Person or of any such
Affiliate or Associate, if such Person's initial nomination for election or
initial election to the Board of Directors is recommended or approved by a
majority of the Continuing Directors; provided that any Person who first becomes
a member of the Board of Directors of the Company in connection with a
transaction described by clause (iv) of the definition of "Change in Control"
shall not be a Continuing Director.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Severance Event" means (i) Executive's duties are reassigned
inconsistent with his duties as Chairman and Chief Executive Officer of the
Company, (ii) the Company reduces, in a manner not agreed to by Executive,
Executive's base salary and/or the target percentage of Executive's defined MIP,
(iii) Executive is required to relocate in a manner not agreed to by Executive,
(iv) a substantial reduction in benefits or perquisites or other involuntary
material adverse change in the terms and conditions of Executive's employment or
(v) a Change in Control resulting in an involuntary change in Executive's
responsibilities or an infringement on Executive's ability to perform the role
of Chairman and Chief Executive Officer.
"Person" means any individual, firm, corporation or other entity, and
shall include any successor (by merger or otherwise) of such entity.
"Subsidiary" means a corporation or other entity or enterprise, whether
incorporated or unincorporated, of which at least a majority of the securities
or other interests having by their terms ordinary voting power to elect a
majority of the board of directors or others serving similar functions with
respect to such corporation or other entity or enterprise is owned, directly or
indirectly, by the Company.