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Exhibit 10.27
SEVERANCE AGREEMENT
Parties: Control Data Systems, Inc.
4201 Lexington Avenue North
Arden Hills, Minnesota 55126
("Company")
Joseph F. Killoran ("Executive")
Date: January 4, 1995
RECITALS:
1. Executive has been employed by the Company since August 1, 1992,
and currently serves as the Vice President and Chief Financial Officer of
the Company, and Executive has extensive knowledge and experience relating
to the Company's business.
2. The parties recognize that a "Change of Control" may materially
change or diminish Executive's responsibilities and substantially frustrate
Executive's commitment to the Company.
3. The parties further recognize that it is in the best interests of
the Company and its stockholders to provide certain benefits payable upon a
"Change of Control Termination" to encourage Executive to continue in his
position in the event of a Change of Control, although no such Change of
Control is now contemplated or foreseen.
AGREEMENTS:
1. Term of Agreement. This Agreement shall commence on the date
executed by the parties and shall continue in effect until the third
anniversary of the date set forth above; provided, however, that if a
Change of Control of the Company shall occur during the term of this
Agreement, this Agreement shall continue in effect for a period of twelve
(12) months beyond the date of such Change of Control. Any rights and
obligations accruing before the termination or expiration of this Agreement
shall survive to the extent necessary to enforce such rights and
obligations.
2. "Change of Control." No benefits shall be payable under this
Agreement unless there has been a "Change of Control" of the Company. For
purposes of this Agreement, "Change of Control" shall mean any of the
following events:
(a) A merger or consolidation to which the Company is a party if
the individuals and entities who were shareholders of the
Company immediately prior to the effective date of such
merger or consolidation have, immediately following the
effective date of such merger or consolidation, beneficial
ownership (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of less than fifty percent (50%) of
the total combined voting power of all classes of securities
issued by the surviving corporation for the election of
directors of the surviving corporation;
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(b) The direct or indirect beneficial ownership (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934) of
securities of the Company representing, in the aggregate,
twenty percent (20%) or more of the total combined voting
power of all classes of the Company's then issued and
outstanding securities by any person or entity or by a group
of associated persons or entities acting in concert;
(c) The sale of the properties and assets of the Company
substantially as an entirety, to any person or entity which
is not a wholly-owned subsidiary of the Company;
(d) The stockholders of the Company approve any plan or proposal
for the liquidation of the Company; or
(e) A change in the composition of the Board at any time during
any consecutive twenty-four (24) month period such that the
"Continuity Directors" cease for any reason to constitute at
least a seventy percent (70%) majority of the Board. For
purposes of this event, "Continuity Directors" means those
members of the Board who either:
(1) were directors at the beginning of such consecutive
twenty-four (24) month period; or
(2) were elected by, or on the nomination or recommendation
of, at least a two-thirds (2/3) majority of the then-
existing Board of Directors.
3. Change of Control Termination. For purposes of this Agreement, a
"Change of Control Termination" shall mean any of the following events
occurring within twelve (12) months after a Change of Control:
(a) The termination of Executive's employment by the Company or
its subsidiary for any reason, with or without cause, except
for conduct by Executive constituting (i) a felony involving
moral turpitude under either federal law or the law of the
state of the Company's incorporation, or (ii) Executive's
willful failure to fulfill his employment duties with the
Company or its subsidiary; provided, however, that for
purposes of this clause (ii), an act or failure to act by
Executive shall not be "willful" unless it is done, or
omitted to be done, in bad faith and without any reasonable
belief that Executive's action or omission was in the best
interests of the Company or its subsidiary; or
(b) The termination of employment with the Company or its
subsidiary by Executive for Good Reason. Such termination
shall be accomplished by, and effective upon, Executive
giving written notice to the Company of his decision to
terminate. "Good Reason" shall mean a good faith
determination by Executive, in Executive's sole and absolute
judgment, that any one or more of the following events has
occurred without the Executive's express written consent
after a Change of Control:
(1) A change in Executive's reporting responsibilities,
titles or offices as in effect immediately prior to the
Change of Control, or any removal of Executive from or
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any failure to re-elect Executive to any of such
positions, which has the effect of diminishing
Executive's responsibility or authority;
(2) A reduction by the Company or its subsidiary in
Executive's base salary as in effect immediately prior
to the Change of Control or as the same may be
increased from time to time thereafter;
(3) A requirement imposed by the Company or its subsidiary
on Executive that results in Executive being based at a
location that is outside of a twenty-five (25) radius
mile of Executive's job location at the time of the
Change of Control;
(4) Without the adoption of a replacement plan, program or
arrangement that provides benefits to Executive that
are equal to or greater than those benefits that are
discontinued or adversely affected:
(A) The failure by the Company or subsidiary to
continue in effect, within its maximum stated
term, any pension, bonus, incentive, stock
ownership, purchase, option, life insurance,
health, accident, disability, or any other
employee compensation or benefit plan, program or
arrangement, in which Executive is participating
immediately prior to a Change of Control; or
(B) The taking of any action by the Company or its
subsidiary that would adversely affect Executive's
participation or materially reduce Executive's
benefits under any of such plans, programs or
arrangements; or
(5) Any action by the Company or its subsidiary that would
materially adversely affect the physical conditions
existing at the time of the Change of Control in or
under which Executive performs his or her employment
duties; or
(6) If Executive's primary employment duties are with a
subsidiary of the Company, the sale, merger,
contribution, transfer or any other transaction
relating to the Company's ownership interest in such
subsidiary and which decreases such ownership interest
below the level specified in Section 424(f) of the
Internal Revenue Code of 1986 (the "Code"), or any
successor provision; or
(7) Any material breach by the Company or its subsidiary of
any employment agreement between Executive and the
Company or its subsidiary.
Termination for "Good Reason" shall not include Executive's
death or a termination for any reason other than the events
specified in clauses (1) through (7) above.
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4. Compensation and Benefits. Subject to the limitations contained
in Section 5 below, upon a Change of Control Termination, Executive shall
be entitled to the following compensation and benefits:
(a) The Company shall, within five days of such Change of
Control Termination, pay to Executive:
(1) All salary and other compensation earned by Executive
through the date of the Change of Control Termination
at the rate in effect immediately prior to such
Termination;
(2) All other amounts to which Executive may be entitled to
receive under any compensation plan maintained by the
Company, subject to any distribution requirements
contained in such compensation plans; and
(3) A severance payment equal to one and one-half (1-1/2)
times Executive's "average annual compensation" paid to
Executive by the Company (or any "predecessor entity"
or "related entity") and includible in Executive's
gross income for federal income tax purposes during the
Executive's five most recent taxable years ending
immediately before the year in which the Change of
Control occurred. For purposes of this clause (3),
"average annual compensation," "predecessor entity" and
"related entity" shall have the same meaning as set
forth in Code Section 280G and the regulations
thereunder.
In the event the Company does not make timely payment
in full of the severance payment provided for in clause
(3) herein, Executive shall be entitled to receive
interest on any unpaid amount at the prime interest
rate announced from time to time by Norwest Bank
Minneapolis, N.A., or the maximum rate permitted under
Code Section 280G(d)(4), or any successor provision,
whichever rate is lower.
(b) The Company shall continue to provide Executive with
coverage under life, health, dental or disability benefit
plans at a level comparable to the benefits which Executive
was receiving or entitled to receive immediately prior to
the Change of Control Termination. Such coverage shall
continue for thirty-six (36) months following such Change of
Control Termination or, if earlier, until Executive is
eligible to be covered for such benefits through his
employment with another employer. The Company may, in its
sole discretion, provide such coverage through the purchase
of individual insurance contracts for Executive.
(c) The Company shall provide Executive with out placement
services for twelve (12) months following the Change of
Control Termination or, if earlier, until Executive has
accepted employment with another employer.
5. Limitation on Change of Control Payments. Executive shall not be
entitled to receive any Change of Control Action, as defined below, which
would constitute a "parachute payment" for purposes of Code Section 280G,
or any successor provision, and the regulations thereunder. In the event
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any Change of Control Action payable to Executive would constitute a
"parachute payment," Executive shall have the right to designate those
Change of Control Actions which would be reduced or eliminated so that
Executive will not receive a "parachute payment." For purposes of this
Section 4, a "Change of Control Action" shall mean any payment, benefit or
transfer of property in the nature of compensation paid to or for the
benefit of Executive under any arrangement which is considered contingent
on a Change of Control for purposes of Code Section 280G, including,
without limitation, any and all of the Company's salary, bonus, incentive,
restricted stock, stock option, compensation or benefit plans, programs or
other arrangements, and shall include benefits payable under this
Agreement.
6. Payment of Attorneys Fees and Other Costs. If, after a Change in
Control of the Company, a good faith dispute arises with respect to the
enforcement of Executive's rights under this Agreement or if any legal or
arbitration proceeding shall be brought in good faith to enforce or
interpret any provision contained herein or to recover damages for breach
hereof, Executive shall recover from the Company (a) reasonable attorneys'
fees and necessary costs and disbursements incurred by Executive as a
result of such dispute or such legal or arbitration proceeding, and (b)
prejudgment interest on any money judgment or arbitration award obtained by
Executive calculated at the prime rate announced from time to time by
Norwest Bank Minneapolis, N.A., or the maximum rate permitted under Code
Section 280G(d)(4), or any successor provision, whichever rate is lower,
such prejudgment interest to be paid from the date that payments to
Executive should have been made under this Agreement.
7. Withholding Taxes. The Company shall be entitled to deduct from
all payments or benefits provided for under this Agreement any federal,
state or local income and employment-related taxes required by law to be
withheld with respect to such payments or benefits.
8. Successors and Assigns. This Agreement shall inure to the
benefit of and shall be enforceable by Executive, his heirs and the
personal representative of his estate, and shall be binding upon and inure
to the benefit of the Company, its successors and assigns. The Company
will require the transferee of any sale of all or substantially all of the
business and assets of the Company or the survivor of any merger,
consolidation or other transaction expressly to agree to honor this
Agreement in the same manner and to the same extent that the Company would
be required to perform this Agreement if no such event had taken place.
Failure of the Company to obtain such agreement before the effective date
of such event shall be a breach of this Agreement and shall entitle
Executive to the benefits provided in Section 5 as if Executive had
terminated employment for Good Reason following a Change in Control.
9. 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 certified or registered mail, return receipt requested, postage
prepaid, addressed to the respective addresses set forth on the first page
of this Agreement 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 receipt. All
notices to the Company shall be directed to the attention of the Board of
Directors of the Company.
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10. Captions. The headings or captions set forth in this Agreement
are for convenience only and shall not affect the meaning or interpretation
of this Agreement.
11. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Minnesota.
12. Construction. Wherever possible, each term and provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law. If any term or provision of this Agreement is
invalid or unenforceable under applicable law, (a) the remaining terms and
provisions shall be unimpaired, and (b) the invalid or unenforceable term
or provision shall be deemed replaced by a term or provision that is valid
and enforceable and that comes closest to expressing the intention of the
unenforceable term or provision.
13. Amendment; Waivers. This Agreement may not be modified, amended,
waived or discharged in any manner except by an instrument in writing
signed by both parties hereto. The waiver by either party of compliance
with any provision of this Agreement by the other party shall not operate
or be construed as a waiver of any other provision of this Agreement, or of
any subsequent breach by such party of a provision of this Agreement.
14. Entire Agreement. This Agreement supersedes all prior or
contemporaneous negotiations, commitments, agreements (written or oral) and
writings between the Company and Executive with respect to the subject
matter hereof and constitutes the entire agreement and understanding
between the parties hereto. All such other negotiations, commitments,
agreements and writings will have no further force or effect, and the
parties to any such other negotiation, commitment, agreement or writing
will have no further rights or obligations thereunder.
15. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
16. Arbitration. Any dispute arising out of or relating to this
Agreement or the alleged breach of it, or the making of this Agreement,
including claims of fraud in the inducement, shall be discussed between the
disputing parties in a good faith effort to arrive at a mutual settlement
of any such controversy. If, notwithstanding, such dispute cannot be
resolved, such dispute shall be settled by binding arbitration. Judgment
upon the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. The arbitrator shall be a retired state or
federal judge or an attorney who has practiced securities or business
litigation for at least 10 years. If the parties cannot agree on an
arbitrator within 20 days, any party may request that the chief judge of
the District Court for Hennepin County, Minnesota, select an arbitrator.
Arbitration will be conducted pursuant to the provisions of this Agreement,
and the commercial arbitration rules of the American Arbitration
Association, unless such rules are inconsistent with the provisions of this
Agreement. Limited civil discovery shall be permitted for the production
of documents and taking of depositions. Unresolved discovery disputes may
be brought to the attention of the arbitrator who may dispose of such
dispute. The arbitrator shall have the authority to award any remedy or
relief that a court of this state could order or grant; provided, however,
that punitive or exemplary damages shall not be awarded. The arbitrator
may award to the prevailing party, if any, as determined by the arbitrator,
all of its costs and fees, including the arbitrator's fees, administrative
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fees, travel expenses, out-of-pocket expenses and reasonable attorneys'
fees. Unless otherwise agreed by the parties, the place of any arbitration
proceedings shall be Hennepin County, Minnesota.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
CONTROL DATA SYSTEMS, INC.
By: /s/ Ruth A. Rich
Its Vice President of Human Resources
and Admin. and Executive Officer
/s/ Joseph F. Killoran
Joseph F. Killoran, Executive