Exhibit 10(r)
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EXECUTIVE SEVERANCE AGREEMENT
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This EXECUTIVE SEVERANCE AGREEMENT (the "Agreement"), is made as of
September 27, 1999 by and between ADVO, Inc. (the "Company") and ▇▇▇▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ (the "Executive").
RECITALS:
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A. The Executive is an executive of the Company and has made and is
expected to continue to make major contributions to the short- and long-term
profitability, growth, and financial strength of the Company;
B. The Company recognizes that the possibility of a Change of Control (as
hereafter defined) exists;
C. The Company desires to assure itself of both present and future
continuity of its management and desires to establish certain severance benefits
for key executive officers of the Company, including the Executive, applicable
in the event of a Change of Control; and
D. The Company wishes to aid in assuring that such executives are not
practically disabled from discharging their duties in respect of a proposed or
actual transaction involving a Change of Control.
NOW, THEREFORE, the Company and the Executive agree as follows:
1. Certain Defined Terms: In addition to terms defined elsewhere herein,
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the following terms have the following meanings when used in this Agreement with
initial capital letters:
(a) "Affiliate" means (i) each entity in which the Company, alone or
together with one or more other Affiliates of the Company, owns not less than
80% of the then outstanding voting securities or, for any entity that is not a
corporation, at least 80% of the then-outstanding capital interests of such
entity and (ii) any additional entity which is deemed by action of the Board to
be an Affiliate for the purposes of this Agreement.
(b) "Base Pay" means the Executive's annual aggregate fixed base salary
from the Company at the time in question.
(c) "Board" means the Board of Directors of the Company.
(d) "Change of Control" means the occurrence during the Term of any of the
following events:
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(i) Any Person (other than the Company, any trustee or other fiduciary holding
securities under any employee benefit plan of the Company, or any company owned,
directly or indirectly, by the stockholders of the Company immediately prior to
the occurrence with respect to which the evaluation is being made in
substantially the same proportions as their ownership of the common stock of the
Company) acquires securities of the Company and immediately thereafter is the
Beneficial Owner (except that a Person shall be deemed to be the Beneficial
Owner of all shares that any such Person has the right to acquire pursuant to
any agreement or arrangement or upon exercise of conversion rights, warrants or
options or otherwise, without regard to the sixty day period referred to in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing 30% or more of the combined voting power of the Company's
then outstanding securities (except that an acquisition of securities directly
from the Company shall not be deemed an acquisition for purposes of this clause
(i));
(ii) During any period of two consecutive years, individuals who at the
beginning of such period constitute the Board, and any new director (other than
a director designated by a person who has entered into an agreement with the
Company to effect a transaction described in clause (i), (iii) or (iv) of this
paragraph) whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of the
two-year period or whose election or nomination for election was previously so
approved by excluding for this purpose any such new director whose initial
assumption of office occurs as a result of either an actual or threatened
election contest (as such terms as used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or threatened solicitation
of proxies or consents by or on behalf of an individual, corporation,
partnership, group, associate or other entity or Person other than the Board,
cease for any reason to constitute at least a majority of the Board;
(iii)The consummation of a merger or consolidation of the Company with any
other entity, other than (i) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving or resulting entity) more than 50% of
the combined voting power of the surviving or resulting entity outstanding
immediately after such merger or consolidation or (ii) a merger or consolidation
in which no premium is intended to be paid to any shareholder participating in
the merger or consolidation;
(iv) The stockholders of the Company approve a plan or agreement for the sale or
disposition of all or substantially all of the consolidated assets of the
Company (other than such a sale or disposition immediately after which such
assets will be owned directly or indirectly by the stockholders of the Company
in substantially the same proportions as their ownership of the common stock of
the Company immediately prior to such sale or disposition) in which case the
Board shall determine the effective date of the Change in Control resulting
therefrom; or
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(v) any other event occurs which the Board determines, in its discretion, would
materially alter the structure or its ownership.
(e) "Cause" means that, prior to any Termination by the Executive for Good
Reason, the Executive shall have:
(i) committed an intentional act of fraud, embezzlement, or theft in
connection with the Executive's duties or in the course of his employment
with the Company;
(ii) committed intentional wrongful damage to property of the Company;
or
(iii) intentionally and wrongfully disclosed confidential information
of the Company; and any such act shall have been materially harmful to the
Company.
For the purposes of this Agreement, no act on the part of the Executive shall
be deemed "intentional" if it was due primarily to an error in judgment or
negligence, but shall be deemed "intentional" only if done by the Executive not
in good faith and without reasonable belief that the Executive's action or
omission was in the best interests of the Company.
(f) "Date of Termination" means the date of receipt of the Notice of
Termination or any later date specified therein, as the case may be; provided,
however, that if the Executive is Terminated by the Company other than for Cause
or for disability pursuant to Section 2(a) (ii), the Date of Termination will be
the date on which the Executive receives the Notice of Termination from the
Company; and provided further, if the Executive is Terminated by reason of death
or disability pursuant to Section 2(a)(i) or 2(a)(ii), the Date of Termination
will be the last day of the month in which occurs the date of death or the
disability effective date, as the case may be.
(g) "Employee Benefits" means the perquisites, benefits and service credit
for benefits as provided under the plans and programs maintained by the Company,
including, but not limited to, plans and programs which are "employee benefit
plans" under Section 3 (3) of the Employee Retirement Income Security Act of
1974, as amended, and any amendment or successor, to such plans or programs
(whether insured, funded or unfunded).
(h) "Good Reason" means the occurrence of any of the events listed in
Sections 2(b)(i) through 2(b)(vii), inclusive.
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(i) "Incentive Pay" means an annual amount equal to the aggregate annual
bonus, in addition to Base Pay, made or to be made in regard to services
rendered in any calendar year or performance period pursuant to any bonus plan
of the Company.
(j) "Notice of Termination" means a written notice which (i) indicates the
specific provision in this Agreement relied upon, (ii) sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for the
Termination under the provision so indicated, and (iii) if the effective date of
the Termination is other than the date of receipt of such notice, specifies the
effective date of Termination (which date will not be more than sixty (60) days
after the giving of such notice). The failure by the Executive to set forth in
the Notice of Termination any fact or circumstance which contributes to a
showing that the Executive is entitled to the benefits intended to be provided
by this Agreement will not constitute a waiver of any right of the Executive
hereunder or otherwise preclude the Executive from later asserting such fact or
circumstance in enforcing the Executive's rights hereunder.
(k) "Severance Period" means the period of time commencing on the date of
an occurrence of a Change of Control and continuing until the earlier of (i) the
date which is one year following the occurrence of the Change of Control, and
(ii) the Executive's death.
(l) "Subsidiary" means an entity, at least a majority of the total voting
power of the then-outstanding voting securities of which is held, directly or
indirectly, by the Company and/or one or more other Subsidiaries or, for any
entity that is not a corporation, at least a majority of the then-outstanding
capital interests of which is so held.
(m) "Term" means (A) the period commencing on the date hereof and ending
on the second anniversary of the date hereof; provided, however, that commencing
on the date one year after the date hereof, and on each annual anniversary of
such date (such date and each annual anniversary thereof shall be hereinafter
referred to as the "Renewal Date"), unless previously terminated, the Term shall
be automatically extended so as to terminate two years from such Renewal Date,
unless at least sixty (60) days prior to the Renewal Date the Company shall give
notice to the Executive that the Term shall not be so extended, (B) if, prior to
a Change of Control, for any reason the Executive is Terminated or Terminates,
thereupon without further action the Term shall be deemed to have expired and
this Agreement will immediately terminate and be of no further effect, and (C)
in the event of a Change of Control, the Term will, without further action, be
considered to terminate at the expiration of the Severance Period.
(n) "Terminate" and correlative terms mean the termination of the
Executive's employment with the Company and any Affiliate or Subsidiary.
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2. Termination Following a Change of Control: (a) If, during the Severance
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Period, the Executive is Terminated, the Executive will be entitled to the
benefits provided by Sections 3 and 4 unless such termination is by reason of
one or more of the following events:
(i) The Executive's death;
(ii) The permanent and total disability of the Executive as defined in
any long term disability plan of the Company, applicable to the Executive,
as in effect immediately prior to the Change of Control;
(iii) Cause; or
(iv) The Executive's voluntary Termination in circumstances in which
Good Reason does not exist.
(b) In the event of the occurrence of a Change of Control, the Executive
may Terminate during the Severance Period with the right to severance
compensation as provided in Sections 3 and 4 upon the occurrence of one or more
of the following events (regardless of whether any other reason, other than
Cause as hereinabove provided, for Termination exists or has occurred, including
without limitation other employment):
(i) An adverse change in the nature or scope of the authorities,
powers, functions, responsibilities, or duties attached to the position
with the Company; which the Executive held immediately prior to the Change
of Control;
(ii) A reduction in the Executive's Base Pay as in effect immediately
prior to any Change of Control, or as it may have been increased from time
to time thereafter;
(iii) Any failure by the Company to continue in effect any plan or
arrangement providing Incentive Pay in which the Executive is participating
at the time of a Change of Control (or any other plans or arrangements
providing substantially similar benefits) or the taking of any action by
the Company, any Affiliate or Subsidiary which would adversely affect the
Executive's participation in any such plan or arrangement or reduce the
Executive's benefits under any such plan or arrangement in a manner
inconsistent with the practices of the Company prior to the Change of
Control;
(iv) Any failure by the Company to continue in effect any Employee
Benefits in which the Executive is participating at the time of a Change of
Control (or any other plans or arrangements providing the Executive with
substantially similar benefits) or the taking of any action by the Company,
an Affiliate or Subsidiary which would adversely affect the Executive's
participation in or materially reduce the
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Executive's benefits under any Employee Benefits or deprive the Executive
of any material fringe benefit enjoyed by the Executive at the time of a
Change of Control;
(v) The liquidation, dissolution, merger, consolidation, or
reorganization of the Company or transfer of all or substantially all of
its business and/or assets, unless the successor or successors (by
liquidation, merger, consolidation, reorganization, transfer, or otherwise)
to which all or a significant portion of its business and/or assets have
been transferred (directly or by operation of law) assumed all duties and
obligations of the Company under this Agreement pursuant to Section 9;
(vi) Without limiting the generality or effect of the foregoing, any
material breach of this Agreement by the Company or any successor thereto;
or
(c) Any Termination will be communicated by Notice of Termination hereto
given in accordance with Section 10 of this Agreement.
3. Severance Compensation: (a) If, following the occurrence of a Change of
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Control, the Executive is Terminated by the Company during the Severance Period
other than in the circumstances set forth in Section 2 (a) (i), 2 (a) (ii), or 2
(a) (iii), or if the Executive Terminates for Good Reason:
(i) The Company will pay to the Executive in a lump sum in cash within
five (5) business days after the later of the date on which the Company
receives the determination of the Accounting Firm required in Section 4
hereof or the Date of Termination the aggregate of the amount (the
"Severance Payment") equal to one times the sum of (A) the Executive's Base
Pay at the highest rate in effect at any time within the 90-day period
preceding the date the Notice of Termination was given or, if higher, at
the highest rate in effect at any time within the 90-day period preceding
the date of the first occurrence of a Change of Control, and (B) an amount
equal to the greatest amount of Incentive Pay received by the Executive
during any calendar year or portion thereof from and including the third
calendar year prior to the first occurrence of a Change of Control; and
(ii) For the period of one year from the Date of Termination, the
Executive shall be eligible for participation in and shall receive all
benefits under such benefit plans, practices, policies and programs of the
Company that provide medical, prescription dental, or life insurance
coverage, with the costs of such participation to be paid by the Company to
the same extent as prior to the Executive's Termination. In the event that
such continued participation is not allowed under the terms and provisions
of such plans or programs, then in lieu thereof, the Company shall acquire
individual
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insurance policies providing comparable coverage for the Executive;
provided that if any such individual coverage is unavailable, the Company
shall pay to the Executive an amount equal to the contributions that would
have been made by the Company for such coverage on the Executive's behalf
if the Executive had remained in the employ of the Company for the period
referred to in the preceding sentence.
(b) There will be no right of set-off or counter-claim in respect of any
claim, debt, or obligation against any payment to or benefit for the Executive
provided for in this Agreement.
(c) Without limiting the rights of the Executive at law or in equity, if
the Company fails to make any payment or provide any benefit required to be made
or provided under this Agreement (including under this Section 3 or Section 6)
on a timely basis, the Company will pay interest on the amount or value thereof
at an annualized rate of interest equal to the so-called composite "prime rate"
as quoted from time to time during the relevant period in the Northeast Edition
of The Wall Street Journal. Such interest will be payable as it accrues on
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demand. Any change in such prime rate will be effective on and as of the date of
such change.
(d) Notwithstanding any other provision hereof, the parties, respective
rights and obligations under this Section 3 and under Sections 4 and 6 will
survive any termination or expiration of this Agreement following a Change of
Control or any Termination following a Change of Control for any reason
whatsoever.
4. Excise and Other Taxes. The Executive shall bear all expense of, and be
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solely responsible for, all federal, state, local or foreign taxes due with
respect to any payment received hereunder, including, without limitation, any
excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended (the Code); provided, however, that all payments under this Agreement
shall be reduced to the extent necessary so that no portion thereof shall be
subject to the excise tax imposed by Section 4999 of the Code but only if, by
reason of such reduction, the net after-tax benefit received by the Executive
shall exceed the net after-tax benefit received by the Executive if no such
reduction was made. For purposes of this Section 4, "net after-tax benefit"
shall mean (i) the total of all payments and the value of all benefits which the
Executive receives or is then entitled to receive from the Company that would
constitute "parachute payments" within the meaning of Section 280G of the Code,
less (ii) the amount of all federal, state and local income taxes payable with
respect to the foregoing calculated at the maximum marginal income tax rate for
each year in which the foregoing shall be paid to the Executive (based on the
rate in effect for such year as set forth in the Code as in effect at the time
of the first payment of the foregoing), less (iii) the amount of excise taxes
imposed with respect to the payments and benefits described in (i) above by
Section 4999 of the Code. The foregoing determination will be made by a
nationally recognized accounting firm (the "Accounting Firm") selected by the
Executive and reasonably acceptable to the Company (which may be, but will not
be required to be, the Company's independent auditors). The Executive will
direct the Accounting Firm to submit its
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determination and detailed supporting calculations to both the Company and the
Executive within fifteen (15) days after the Date of Termination. If the
Accounting Firm determines that such reduction is required by this Section 4,
the Company shall pay such reduced amount to the Executive in accordance with
Section 3 (a). If the Accounting Firm determines that no reduction is necessary
under this Section 4, it will, at the same time as it makes such determination,
furnish the Company and the Executive an opinion that the Executive will not be
liable for any excise tax under Section 4999 of the Code. The Company and the
Executive will each provide the Accounting Firm access to and copies of any
books, records, and documents in the possession of the Company or the Executive,
as the case may be, reasonably requested by the Accounting Firm, and otherwise
cooperate with the Accounting Firm in connection with the preparation and
issuance of the determinations and calculations contemplated by this Section 4.
The fees and expenses of the Accounting Firm for its services in connection with
the determinations and calculations contemplated by this Section 4 will be borne
by the Company.
5. No Mitigation Obligation: The Company hereby acknowledges that it will
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be difficult, and may be impossible, for the Executive to find reasonably
comparable employment following the Date of Termination. The payment of the
severance compensation by the Company to the Executive in accordance with the
terms of this Agreement will be liquidated damages, and the Executive will not
be required to mitigate the amount of any payment provided for in this Agreement
by seeking other employment or otherwise, nor will any profits, income,
earnings, or other benefits from any source whatsoever create any mitigation,
offset, reduction, or any other obligation on the part of the Executive
hereunder or otherwise.
6. Legal Fees and Expenses: If the Company has failed to comply with any of
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its obligations under this Agreement or in the event that the Company or any
other person takes or threatens to take any action to declare this Agreement
void or unenforceable, or institutes any litigation or other action or
proceeding designed to deny, or to recover from, the Executive the benefits
provided or intended to be provided to the Executive hereunder, the Company
irrevocably authorizes the Executive from time to time to retain counsel of the
Executive's choice, at the expense of the Company, to advise and represent the
Executive in connection with any such interpretation, enforcement, or defense,
including without limitation the initiation or defense of any litigation or
other legal action, whether by or against the Company or any member of the
Board, officer, stockholder, or other person or entity affiliated with the
Company, in any jurisdiction. The Company will pay and be solely financially
responsible for any and all attorneys' and related fees and expenses incurred by
the Executive in connection with such litigation.
7. Employment Rights: Nothing expressed or implied in this Agreement will
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create any right or duty on the part of the Company or the Executive to have the
Executive remain in the employment of the Company, or any Affiliate or
Subsidiary prior to or following any Change of Control.
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8. Withholding of Taxes: The Company may withhold from any amounts payable
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under this Agreement all federal, state, city, or other taxes as the Company is
required to withhold pursuant to any law or government regulation or ruling.
9. Successors and Binding Agreement: (a) The Company will require any
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successor (whether direct or indirect, by purchase, merger, consolidation,
reorganization, or otherwise) to all or substantially all of the business and/or
assets of the Company, by agreement in form and substance satisfactory to the
Executive, expressly to assume and agree to perform this agreement in the same
manner and to the same extent the Company would be required to perform if no
such succession had taken place. This Agreement will be binding upon and inure
to the benefit of the Company and any successor to the Company, including,
without limitation, any persons acquiring directly or indirectly all or
substantially all of the business and/or assets of the Company, whether by
purchase, merger, consolidation, reorganization, or otherwise (and such
successor will thereafter be deemed the "Company" for the purposes of this
Agreement), but will not otherwise be assignable, transferable, or delegable by
the Company.
(b) This Agreement will inure to the benefit of and be enforceable by
the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, and/or legatees.
(c) This Agreement is personal in nature and neither of the parties
hereto will, without the consent of the other, assign, transfer, or
delegate this Agreement or any rights or obligations hereunder except as
expressly provided in Sections 9 (a) and 9 (b). Without limiting the
generality or effect of the foregoing, the Executive's right to receive
payments hereunder will not be assignable, transferable, or delegable,
whether by pledge, creation of a security interest, or otherwise, other
than by a transfer by will or by the laws of descent and distribution and,
in the event of any attempted assignment or transfer contrary to this
Section 9 (c), the Company will have no liability to pay any amount so
attempted to be assigned, transferred, or delegated.
10. Notices: For all purposes of this Agreement, all communications,
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including, without limitation, notices, consents, requests, or approvals,
required or permitted to be given hereunder will be in writing and will be
deemed to have been duly given when hand delivered or dispatched by electronic
facsimile transmission (with receipt thereof orally confirmed), or two business
days after having been mailed by United States registered or certified mail,
return receipt requested, postage prepaid, or one business day after having been
sent by a nationally recognized overnight courier service addressed to the
Company (to the attention of the General Counsel of the Company) at its
principal Executive office and to the Executive at the Executive's principal
residence, or to such other address as any party may have furnished to the other
in writing and in accordance herewith, except that notices of changes of address
will be effective only upon receipt.
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11. Governing Law: The validity, interpretation, construction, and
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performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the State of Connecticut, without giving effect to
the principles of conflict of laws of such State, to the extent not preempted by
applicable federal law.
12. Validity: If any provision of this Agreement or the application of any
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provision hereof to any person or circumstances is held invalid, unenforceable,
or otherwise illegal, the remainder of this Agreement and the application of
such provision to any other person or circumstances will not be affected, and
the provision so held to be invalid, unenforceable, or otherwise illegal will be
reformed to the extent (and only to the extent) necessary to make it
enforceable, valid, or legal.
13. Non-Exclusivity of Rights: Nothing in this Agreement will prevent or
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limit the Executive's present or future participation in any benefit, bonus,
incentive, or other plan or program provided by the Company or any Affiliate or
Subsidiary for which the Executive may qualify, nor will this Agreement in any
manner limit or otherwise affect such rights as the Executive may have under any
stock option or other agreements with the Company or any Affiliate or
Subsidiary. Amounts or benefits which are vested or which the Executive is
otherwise entitled to receive under any plan or program of the Company at or
subsequent to the Date of Termination will be payable in accordance with such
plan or program, except as otherwise expressly provided in this Agreement;
provided, however, that any amounts received by the Executive pursuant to this
Agreement shall be in lieu of any benefits which the Executive is entitled to
receive or may become entitled to receive under any reduction-in-force or
severance pay plan or practice which the Company now has in effect or may
hereafter put into effect, any other benefits to which the Executive may be
entitled under any individual agreement of employment with the Company which
would provide a benefit to the Executive upon the occurrence of a Change of
Control of the Company, and any severance benefits required under federal or
state law to be paid to the Executive.
14. Miscellaneous: (a) No provision of this Agreement may be modified,
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waived, or discharged unless such waiver, modification, or discharge is agreed
to in writing signed by the Executive and the Company. No waiver by either
party hereto at any time of any breach by the other party hereto or compliance
with any condition or provision of this Agreement to be performed by such other
party will be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. References to Sections are to references to
Sections of this Agreement.
(b) The Executive and the Company acknowledge that this Agreement
supersedes any other agreement between them concerning the subject matter
hereof.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
ADVO, Inc.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
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By: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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