CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS AGREEMENT is entered into as of the 9th day of November, 1999 by
and between NFO Worldwide, Inc., a Delaware corporation (the "Company"), and
Xxxxxxx X. Xxxxx ("Executive").
W I T N E S S E T H
WHEREAS, the Company considers the establishment and maintenance of a
sound and vital management to be essential to protecting and enhancing the best
interests of the Company and its stockholders;
WHEREAS, the Company recognizes that, as is the case with many publicly
held corporations, the possibility of a change in control may arise and that
such possibility may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders; and
WHEREAS, the Company and Executive are party to an Employment Agreement
dated December 1, 1997 (the "Employment Agreement");
WHEREAS, the Board (as defined in Section 1) has determined that it is
in the best interests of the Company and its stockholders to provide incentives
to the Executive in addition to those in the Employment Agreement in order to
ensure Executive's continued and undivided dedication to his duties in the event
of any threat or occurrence of a Change in Control (as defined in Section 1) of
the Company; and
WHEREAS, the Board has authorized the Company to enter into this
Agreement which shall amend the Employment Agreement as provided for herein.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements herein contained, the Company and Executive hereby
agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall
have the respective meanings set forth below:
(a) "Annual Bonus" shall have the meaning set forth in the
Employment Agreement.
(b) "Board" means the Board of Directors of the Company.
(c) "Bonus Amount" means the highest Annual Bonus earned by
Executive from the Company (or its affiliates) during the last five (5)
completed fiscal years of the Company immediately preceding Executive's Date of
Termination
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(annualized in the event Executive was not employed by the Company (or its
affiliates) for the whole of any such fiscal year).
(d) "Cause" shall have the meaning set forth in the Employment
Agreement.
(e) "Change in Control" shall have the meaning set forth in
the Employment Agreement.
(f) "Date of Termination" means (1) the effective date on
which Executive's employment by the Company terminates as specified in a prior
written notice by the Company or Executive, as the case may be, to the other,
delivered pursuant to Section 10 or (2) if Executive's employment by the Company
terminates by reason of death, the date of death of Executive.
(g) "Disability" shall have the meaning set forth in the
Employment Agreement.
(h) "Fringe Benefits" shall have the meaning set forth in the
Employment Agreement.
(i) "Good Reason" shall mean the following and shall be deemed
to have occurred if any of the following events shall have occurred: (i) the
Executive is removed from any of the positions he holds as of the date hereof,
or is assigned duties and responsibilities that are inconsistent with the scope
of duties and responsibilities associated with such positions; (ii) the Company
fails to pay the Executive any amounts otherwise due hereunder; (iii) the
Executive's Base Salary is reduced or his Fringe Benefits are reduced; (iv) the
Executive's principal office is relocated outside of Greenwich, Connecticut
without his consent; or (v) the failure of the Company to obtain the assumption
(and, if applicable, guarantee) agreement from any successor (and Parent, if
applicable) as contemplated in Section 9(b).
(j) "Qualifying Termination" means a termination of
Executive's employment (i) by the Company other than for Cause, (ii) by
Executive for Good Reason, or (iii) on account of death or Disability.
(k) "Subsidiary" means any corporation or other entity in
which the Company has a direct or indirect ownership interest of 50% or more of
the total combined voting power of the then outstanding securities or interests
of such corporation or other entity entitled to vote generally in the election
of directors or in which the Company has the right to receive 50% or more of the
distribution of profits or 50% of the assets upon liquidation or dissolution.
(l) "Termination Period" means the period of time beginning
with a Change in Control and ending 30 months following such Change in Control.
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Notwithstanding anything in this Agreement to the contrary, if (i) Executive's
employment is terminated prior to a Change in Control for reasons that would
have constituted a Qualifying Termination if they had occurred following a
Change in Control; (ii) Executive reasonably demonstrates that such termination
(or Good Reason event) was at the request of a third party who had indicated an
intention or taken steps reasonably calculated to effect a Change in Control;
and (iii) a Change in Control involving such third party (or a party competing
with such third party to effectuate a Change in Control) does occur, then for
purposes of this Agreement, the date immediately prior to the date of such
termination of employment or event constituting Good Reason shall be treated as
a Change in Control. For purposes of determining the timing of payments and
benefits to Executive under Section 4, the date of the actual Change in Control
shall of treated as Executive's Date of Termination under Section l(f).
2. OBLIGATION OF EXECUTIVE. In the event of a tender or exchange offer,
proxy contest, or the execution of any agreement which, if consummated, would
constitute a Change in Control, Executive agrees not to voluntarily leave the
employ of the Company, other than as a result of Disability, or an event which
would constitute Good Reason if a Change in Control had occurred, until the
Change in Control occurs or, if earlier, such tender or exchange offer, proxy
contest, or agreement is terminated or abandoned.
3. TERM OF AGREEMENT. This Agreement shall be effective on the date
hereof and shall continue in effect until the Company shall have given three (3)
years' written notice of cancellation; provided, that, notwithstanding the
delivery of any such notice, this Agreement shall continue in effect for a
period of 30 months after a Change in Control, if such Change in Control shall
have occurred during the term of this Agreement. Notwithstanding anything in
this Section to the contrary, this Agreement shall terminate if Executive or the
Company terminates Executive's employment prior to a Change in Control except as
provided in Section l(l).
4. PAYMENTS UPON QUALIFYING TERMINATION. If during the Termination
Period the employment of Executive shall terminate pursuant to a Qualifying
Termination, in lieu of the compensation and benefits provided for pursuant to
Section 5 of the Employment Agreement, the Company shall:
(a) within ten (10) days following the Date of Termination
provide to Executive a lump-sum cash amount equal to the sum of (A) Executive's
Base Salary through the Date of Termination and any bonus amounts which have
become payable, to the extent not theretofore paid or deferred, (B) a pro rata
portion of Executive's Annual Bonus for the fiscal year in which Executive's
Date of Termination occurs in an amount at least equal to (1) Executive's Bonus
Amount, multiplied by (2) a fraction, the numerator of which is the number of
days in the fiscal year in which the Date of Termination occurs through the Date
of Termination
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and the denominator of which is three hundred sixty-five (365), (C) any
compensation previously deferred by Executive other than pursuant to a
tax-qualified plan (together with any interest and earnings thereon) which shall
be fully vested as of the date of the Change of Control and any accrued vacation
pay, in each case to the extent not theretofore paid, and (D) the value of any
pension and profit sharing (401(k)) benefits which Executive would have accrued
in the two years following the Date of Termination under the plans of the
Company or its affiliates in which he participated immediately prior to the Date
of Termination had he remained employed by the Company during such period
calculated, with respect to the NFO Research, Inc. Pension Plan (the "Pension
Plan") and the Executive Deferred Benefit Plan (the "Supplemental Plan"), as the
difference between (1) an amount equal to the value (determined using the
actuarial assumptions then applied by the PBGC for determining immediate annuity
present values) of the Executives accrued benefits under such plans calculated
as though Executive (A) continued to accrue benefits under the plans for 2 years
following the Date of Termination, and (B) received compensation during each
year during such 2 year period equal to the sum of the Executive's Base Salary
and Bonus in the year immediately preceding the Change in Control and (2) the
amount accrued by or otherwise paid to the Executive through the Date of
Termination. With respect to the Company's 401(k) plan, the amount shall be
calculated assuming that both the Executive and the Company contributed the
highest permissible amounts to the plans during such period;
(b) within ten (10) days following the Date of Termination
provide to Executive a lump-sum cash amount equal to (i) two and one-fourth
(2.25) times Executive's highest annual rate of base salary during the 12-month
period immediately prior to Executive's Date of Termination, plus (ii) two and
one-fourth (2.25) times Executive's Bonus Amount;
(c) continue to provide, for a period of two (2) years
following Executive's Date of Termination, Executive (and Executive's
dependents, if applicable) with the same level of Fringe Benefits upon
substantially the same terms and conditions (including contributions required by
Executive for such benefits) as existed immediately prior to Executive's Date of
Termination (or, if more favorable to Executive, as such benefits and terms and
conditions existed immediately prior to the Change in Control); provided, that,
if Executive cannot continue to participate in the Company plans providing such
benefits, the Company shall otherwise provide such benefits on the same
after-tax basis as if continued participation had been permitted.
Notwithstanding the foregoing, in the event Executive becomes reemployed with
another employer and becomes eligible to receive welfare benefits from such
employer, the welfare benefits described herein shall be secondary to such
benefits during the period of Executive's eligibility, but only to the extent
that the Company reimburses Executive for any increased cost and provides any
additional benefits necessary to give Executive the benefits provided hereunder;
and
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(d) accelerate the vesting and exercisability of all options
held by Executive and granted under the NFO Research, Inc. Stock Option Plan
(the "Option Plan") or any other stock option plan or agreement of the Company
or its affiliates. In addition, all options shall remain exercisable for two
years following such termination, except to the extent the Committee (as defined
in the Option Plan) permits exercise after such date.
5. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment, award,
benefit or distribution (or any acceleration of any payment, award, benefit or
distribution) by the Company (or any of its affiliated entities) or any entity
which effectuates a Change in Control (or any of its affiliated entities) to or
for the benefit of Executive (whether pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 5) (the "Payments") would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), or any interest or penalties are incurred by Executive with respect to
such excise tax (such excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the "Excise Tax"), then the Company
shall pay to Executive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by Executive of all taxes (including any Excise Tax)
imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up
Payment equal to the sum of (x) the Excise Tax imposed upon the Payments and (y)
the product of any deductions disallowed because of the inclusion of the
Gross-Up Payment in Executive's adjusted gross income and the highest applicable
marginal rate of federal income taxation for the calendar year in which the
Gross-Up Payment is to be made. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to (i) pay federal income taxes
at the highest marginal rates of federal income taxation for the calendar year
in which the Gross-Up Payment is to be made, (ii) pay applicable state and local
income taxes at the highest marginal rate of taxation for the calendar year in
which the Gross-Up Payment is to be made, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state and
local taxes (and (iii) have otherwise allowable deductions for federal income
tax purposes at least equal to those which could be disallowed because of the
inclusion of the Gross-Up Payment in the Executive's adjusted gross income.
(b) Subject to the provisions of Section 5(a), all
determinations required to be made under this Section 5, including whether and
when a Gross-Up Payment is required, the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determinations, shall be made by
the public accounting firm that is retained by the Company as of the date
immediately prior to the Change in Control (the "Accounting Firm") which shall
provide detailed
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supporting calculations both to the Company and Executive within fifteen (15)
business days of the receipt of notice from the Company or the Executive that
there has been a Payment, or such earlier time as is requested by the Company
(collectively, the "Determination"). In the event that the Accounting Firm is
serving as accountant or auditor for the individual, entity or group effecting
the Change in Control, Executive may appoint another nationally recognized
public accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely by the Company
and the Company shall enter into any agreement reasonably requested by the
Accounting Firm in connection with the performance of the services hereunder.
The Gross-Up Payment under this Section 5 with respect to any Payments shall be
made no later than thirty (30) days following such Payment. If the Accounting
Firm determines that no Excise Tax is payable by Executive, it shall furnish
Executive with a written opinion to such effect, and to the effect that failure
to report the Excise Tax, if any, on Executive's applicable federal income tax
return will not result in the imposition of a negligence or similar penalty. The
Determination by the Accounting Firm shall be binding upon the Company and
Executive. As a result of the uncertainty in the application of Section 4999 of
the Code at the time of the Determination, it is possible that Gross-Up Payments
which will not have been made by the Company should have been made
("Underpayment") or Gross-Up Payments are made by the Company which should not
have been made ("Overpayment"), consistent with the calculations required to be
made hereunder. In the event that the Executive thereafter is required to make
payment of any Excise Tax or additional Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code) shall be promptly paid by the Company to or for the
benefit of Executive. In the event the amount of the Gross-Up Payment exceeds
the amount necessary to reimburse the Executive for his Excise Tax, the
Accounting Firm shall determine the amount of the Overpayment that has been made
and any such Overpayment (together with interest at the rate provided in Section
1274(b)(2) of the Code) shall be promptly paid by Executive (to the extent he
has received a refund if the applicable Excise Tax has been paid to the Internal
Revenue Service) to or for the benefit of the Company. Executive shall
cooperate, to the extent his expenses are reimbursed by the Company, with any
reasonable requests by the Company in connection with any contests or disputes
with the Internal Revenue Service in connection with the Excise Tax.
6. WITHHOLDING TAXES. The Company may withhold from all payments due to
Executive (or his beneficiary or estate) hereunder all taxes which, by
applicable federal, state, local or other law, the Company is required to
withhold therefrom.
7. REIMBURSEMENT OF EXPENSES. If any contest or dispute shall arise
under this Agreement involving termination of Executive's employment with the
Company or involving the failure or refusal of the Company to
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perform fully in accordance with the terms hereof, the Company shall reimburse
Executive, on a current basis, for all reasonable legal fees and expenses, if
any, incurred by Executive in connection with such contest or dispute
(regardless of the result thereof), together with interest in an amount equal to
the prime rate from time to time in effect, but in no event higher than the
maximum legal rate permissible under applicable law, such interest to accrue
from the date the Company receives Executive's statement for such fees and
expenses through the date of payment thereof, regardless of whether or not
Executive's claim is upheld by an arbitration panel; provided, however,
Executive shall be required to repay any such amounts to the Company to the
extent that an arbitration panel issues a final and non-appealable order setting
forth the determination that the position taken by Executive was frivolous or
advanced by Executive in bad faith.
8. SCOPE OF AGREEMENT. Nothing in this Agreement shall be deemed to
entitle Executive to continued employment with the Company or its Subsidiaries,
and if Executive's employment with the Company shall terminate prior to a Change
in Control, Executive shall have no further rights under this Agreement (except
as otherwise provided hereunder); provided, however, that any termination of
Executive's employment during the Termination Period shall be subject to all of
the provisions of this Agreement.
9. SUCCESSORS; BINDING AGREEMENT.
(a) This Agreement shall not be terminated by any Business
Combination. In the event of any Business Combination, the provisions of this
Agreement shall be binding upon the Surviving Corporation, and such Surviving
Corporation shall be treated as the Company hereunder.
(b) The Company agrees that in connection with any Business
Combination, it will cause any successor entity to the Company unconditionally
to assume (and for any Parent Corporation in such Business Combination to
guarantee), by written instrument delivered to Executive (or his beneficiary or
estate), all of the obligations of the Company hereunder. Failure of the Company
to obtain such assumption and guarantee prior to the effectiveness of any such
Business Combination that constitutes a Change in Control, shall be a breach of
this Agreement and shall constitute Good Reason hereunder and shall entitle
Executive to compensation and other benefits from the Company in the same amount
and on the same terms as Executive would be entitled hereunder if Executive's
employment were terminated following a Change in Control other than by reason of
a Qualifying Termination. For purposes of implementing the foregoing, the date
on which any such Business Combination becomes effective shall be deemed the
date Good Reason occurs, and shall be the Date of Termination if requested by
Executive.
(c) This Agreement shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives, executors,
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administrators, successors, heirs, distributees, devisees and legatees. If
Executive shall die while any amounts would be payable to Executive hereunder
had Executive continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to such
person or persons appointed in writing by Executive to receive such amounts or,
if no person is so appointed, to Executive's estate.
10. Notice. (a) For purposes of this Agreement, all notices and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered or five (5) days after deposit in
the United States mail, certified and return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
Xxxxxxx X. Xxxxx
00 Xxxxxxxxx Xxxx
Xxx Xxxxxx, XX 00000
If to the Company:
NFO Worldwide, Inc.
0 Xxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
(b) A written notice of Executive's Date of Termination by the
Company or Executive, as the case may be, to the other, shall (i) indicate the
specific termination provision in this Agreement relied upon, (ii) to the extent
applicable, set forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of Executive's employment under the provision
so indicated and (iii) specify the termination date (which date shall be not
less than fifteen (15) (thirty (30), if termination is by the Company for
Disability) nor more than sixty (60) days after the giving of such notice). The
failure by Executive or the Company to set forth in such notice any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of Executive or the Company hereunder or preclude Executive or
the Company from asserting such fact or circumstance in enforcing Executive's or
the Company's rights hereunder.
11. FULL SETTLEMENT; RESOLUTION OF DISPUTES. The Company's obligation
to make any payments provided for in this Agreement and
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otherwise to perform its obligations hereunder in the event of a Qualifying
Termination during the Termination Period shall be in lieu and in full
settlement of all other severance payments to Executive under any other
severance or employment agreement between Executive and the Company, and any
severance plan of the Company, including, but not limited to, the Employment
Agreement; provided, however, that the provisions of the Employment Agreement
shall remain in effect to the extent otherwise applicable pursuant to its terms
for all other purposes, including with respect to any termination that is not a
Qualifying Termination and any termination that would have constituted a
Qualifying Termination but is not covered by this Agreement because it does not
occur during the Termination Period. The Company's obligations hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against Executive or others.
In no event shall Executive be obligated to seek other employment or take other
action by way of mitigation of the amounts payable to Executive under any of the
provisions of this Agreement and, except as provided in Section 4(c), such
amounts shall not be reduced whether or not Executive obtains other employment.
Any dispute or controversy arising under or in connection with this Agreement
shall be settled exclusively by arbitration in Connecticut by three arbitrators
in accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrators' award in any court having
jurisdiction. The Company shall bear all costs and expenses arising in
connection with any arbitration proceeding pursuant to this Section.
12. EMPLOYMENT WITH SUBSIDIARIES. Employment with the Company for
purposes of this Agreement shall include employment with any Subsidiary.
13. SURVIVAL. The respective obligations and benefits afforded to the
Company and Executive as provided in Sections 4 (to the extent that payments or
benefits are owed as a result of a termination of employment that occurs during
the term of this Agreement), 5 (to the extent that Payments are made to
Executive as a result of a Change in Control that occurs during the term of this
Agreement), 6, 7, 9(c) and 11 shall survive the termination of this Agreement.
14. GOVERNING LAW; VALIDITY. THE INTERPRETATION, CONSTRUCTION AND
PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CONNECTICUT WITHOUT REGARD TO
THE PRINCIPLE OF CONFLICTS OF LAWS. THE INVALIDITY OR UNENFORCEABILITY OF ANY
PROVISION OF THIS AGREEMENT SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF
ANY OTHER PROVISION OF THIS AGREEMENT, WHICH OTHER PROVISIONS SHALL REMAIN IN
FULL FORCE AND EFFECT.
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15. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
16. MISCELLANEOUS. No provision of this Agreement may be modified or
waived unless such modification or waiver is agreed to in writing and signed by
Executive and by a duly authorized officer 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 of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. Failure by Executive
or the Company to insist upon strict compliance with any provision of this
Agreement or to assert any right Executive or the Company may have hereunder,
including, without limitation, the right of 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. Except as otherwise
specifically provided herein, the rights of, and benefits payable to, Executive,
his estate or his beneficiaries pursuant to this Agreement are in addition to
any rights of, or benefits payable to, Executive, his estate or his
beneficiaries under any other employee benefit plan or compensation program of
the Company.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by a duly authorized officer of the Company and Executive has executed
this Agreement as of the day and year first above written.
NFO WORLDWIDE, INC.
By: /s/ Xxxxxxx X. Xxxxx
--------------------
Name: Xxxxxxx X. Xxxxx
Title: Chief Financial Officer
/s/ Xxxxxxx X. Xxxxx
--------------------
Xxxxxxx X. Xxxxx
