<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarter Ended September 30, 1995 Commission File Number 1-9828
GAINSCO, INC.
(Exact name of registrant as specified in its charter)
Texas 75-1617013
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 Commerce Street Fort Worth, Texas 76102
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (817) 336-2500
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve (12) months, and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
As of September 30, 1995, there were 21,511,922 shares outstanding of the
registrant's Common Stock, $.10 par value.
<PAGE> 2
GAINSCO, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of September 30, 1995
(unaudited) and December 31, 1994 3
Consolidated Statements of Operations for the Three Months
and Nine Months Ended September 30, 1995 and 1994 (unaudited) 5
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1995 and 1994 (unaudited) 6
Notes to Consolidated Financial Statements
September 30, 1995 and 1994 (unaudited) 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 11
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 15
SIGNATURE 16
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
GAINSCO, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30
1995 December 31
Assets (unaudited) 1994
------ ------------- -----------
<S> <C> <C>
Investments
Fixed maturities:
Bonds held to maturity, at amortized cost (fair
value: $113,816,117 - 1995, $121,900,391 - 1994) $ 113,076,489 123,643,375
Bonds available for sale, at fair value
(amortized cost: $56,816,176 - 1995, $25,778,732 -
1994) 57,972,840 25,693,061
Certificates of deposit, at cost (which approximates
fair value) 570,000 570,000
Short-term investments, at cost (which approximates
fair value) 7,944,026 10,394,022
------------- -----------
Total investments 179,563,355 160,300,458
Cash 745,617 520,515
Accrued investment income 3,578,193 4,287,824
Premiums receivable (net of allowance for doubtful
accounts: $96,000 - 1995, $107,000 - 1994) 13,101,420 12,262,357
Reinsurance balances receivable 2,720,146 4,133,557
Ceded unpaid claims and claim adjustment expenses 26,435,939 19,972,288
Ceded unearned premiums 3,791,803 5,976,969
Deferred policy acquisition costs 11,403,347 9,830,543
Property and equipment (net of accumulated depreciation
and amortization: $3,606,111 - 1995, $3,202,644 -
1994) 6,545,485 6,336,010
Deferred Federal income taxes recoverable (note 1) 2,593,576 3,126,787
Management contract 1,850,070 1,887,570
Other assets 2,071,372 1,941,069
------------- -----------
Total assets $ 254,400,323 230,575,947
============= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
GAINSCO, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30
1995 December 31
Liabilities and Shareholders' Equity (unaudited) 1994
------------------------------------ ------------- -----------
<S> <C> <C>
Liabilities:
Unpaid claims and claim adjustment expenses $ 94,449,767 80,728,799
Unearned premiums 48,326,722 44,645,013
Commissions payable 1,553,389 2,191,619
Accounts payable 5,355,411 5,262,071
Reinsurance balances payable 4,719,455 6,003,867
Deferred revenue 606,460 420,408
Drafts payable 2,477,437 4,604,358
Note payable (note 3) 1,750,000 3,500,000
Dividends payable (note 4) 218,218 195,095
Other liabilities 1,216,498 1,428,690
Current Federal income taxes payable (note 1) 141,475 49,460
------------- -----------
Total liabilities 160,814,832 149,029,380
------------- -----------
Shareholders' Equity (note 4):
Preferred stock ($100 par value, 10,000,000 shares
authorized, none issued) - -
Common stock ($.10 par value, 250,000,000 shares
authorized, 21,624,182 issued at September 30, 1995 and
19,611,368 issued at December 31, 1994) 2,162,418 1,961,137
Additional paid-in capital 87,513,144 69,671,214
Net unrealized gain (loss) on fixed maturities (note 1) 751,832 (55,686)
Retained earnings 4,170,689 10,982,494
Treasury stock (112,260 shares at September 30, 1995
and 101,824 shares at December 31, 1994) (1,012,592) (1,012,592)
------------- -----------
Total shareholders' equity 93,585,491 81,546,567
------------- -----------
Total liabilities and shareholders' equity $ 254,400,323 230,575,947
============= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
GAINSCO, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months Nine Months
ended September 30 ended September 30
------------------------------ -----------------------------
1995 1994 1995 1994
------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Premiums earned (note 2) $ 24,959,370 21,542,242 70,675,438 62,235,219
Net investment income 2,161,328 1,806,846 6,084,154 4,980,085
Net realized gains (note 1) 18,239 - 54,648 134,641
Insurance services 596,699 463,242 1,652,058 1,428,401
------------ ---------- ---------- ----------
Total revenues 27,735,636 23,812,330 78,466,298 68,778,346
------------ ---------- ---------- ----------
Expenses:
Claims and claim adjustment expenses
(note 2) 12,873,460 10,705,811 37,176,123 30,634,507
Commissions 5,988,556 4,443,202 15,841,620 13,941,500
Change in deferred policy acquisition costs (525,104) (109,868) (1,572,804) (1,192,674)
Underwriting and operating expenses 3,913,511 3,622,400 11,144,454 10,698,778
------------ ---------- ---------- ----------
Total expenses 22,250,423 18,661,545 62,589,393 54,082,111
------------ ---------- ---------- ----------
Income before Federal income taxes 5,485,213 5,150,785 15,876,905 14,696,235
Federal income taxes:
Current expense 1,497,266 1,476,236 3,923,001 4,106,703
Deferred expense (benefit) (95,295) (229,041) 98,394 (427,295)
------------ ---------- ---------- ----------
Total taxes 1,401,971 1,247,195 4,021,395 3,679,408
------------ ---------- ---------- ----------
Net income $ 4,083,242 3,903,590 11,855,510 11,016,827
============ ========== ========== ==========
Net income per share .19 .18 .54 .51
=== === === ===
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
GAINSCO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months ended September 30
-----------------------------------
1995 1994
------------ ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 11,855,510 11,016,827
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization 2,918,102 3,668,764
Change in deferred Federal income taxes recoverable 98,394 (427,295)
Change in accrued investment income 709,631 694,592
Change in premiums receivable (839,063) (96,428)
Change in reinsurance balances receivable 1,413,411 235,501
Change in ceded unpaid claims and claim adjustment
expenses (6,463,651) (3,065,869)
Change in ceded unearned premiums 2,185,166 (486,768)
Change in deferred policy acquisition costs (1,572,804) (1,192,674)
Change in management contract 37,500 37,500
Change in other assets (130,303) 228,023
Change in unpaid claims and claim adjustment
expenses 13,720,968 7,680,259
Change in unearned premiums 3,681,709 5,373,743
Change in commissions payable (638,230) 391,203
Change in accounts payable 93,340 224,273
Change in reinsurance balances payable (1,284,412) 988,749
Change in deferred revenue 186,052 70,943
Change in drafts payable (2,126,921) (1,783,926)
Change in other liabilities (212,192) (204,065)
Change in current Federal income taxes payable 92,015 210,915
------------ ----------
Net cash provided by operating activities $ 23,724,222 23,564,267
============ ==========
</TABLE>
See accompanying notes to consolidated financial statements.
(continued)
6
<PAGE> 7
GAINSCO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months ended September 30
-----------------------------------
1995 1994
------------ -----------
<S> <C> <C>
Cash flows from investing activities:
Bonds held to maturity:
Matured $ 39,966,950 2,300,000
Purchased (31,708,371) (25,834,929)
Bonds available for sale:
Sold 5,166,863 6,378,737
Matured 3,506,400 13,810,800
Purchased (39,917,034) (10,571,984)
Certificates of deposit matured 395,000 570,000
Certificates of deposit purchased (395,000) (570,000)
Property and equipment purchased (612,942) (457,165)
Net change in short-term investments 2,449,996 (7,865,788)
------------ -----------
Net cash used for investing activities (21,148,138) (22,240,329)
------------ -----------
Cash flows from financing activities:
Payment on note payable (1,750,000) (1,000,000)
Cash dividends paid (604,853) (545,520)
Proceeds from exercise of stock options 7,130 336,205
Payment for fractional shares resulting from
stock dividend (3,259) (2,371)
Treasury stock acquired - (230)
------------ -----------
Net cash used by financing activities (2,350,982) (1,211,916)
------------ -----------
Net increase in cash 225,102 112,022
Cash at beginning of period 520,515 605,450
------------ -----------
Cash at end of period $ 745,617 717,472
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE> 8
GAINSCO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(1) Summary of Accounting Policies
(a) Basis of Consolidation
In the opinion of management, the accompanying consolidated
financial statements contain all adjustments, consisting only
of normal recurring adjustments, necessary to present fairly
the financial position of GAINSCO, INC. and subsidiaries (the
"Company") as of September 30, 1995, the results of operations
and the statements of cash flows for the three months and nine
months ended September 30, 1995 and 1994, on the basis of
generally accepted accounting principles. The December 31,
1994 balance sheet included herein is derived from the
consolidated financial statements included in the Company's
1994 Annual Report to Shareholders.
Reference is made to the Company's annual consolidated
financial statements for the year ended December 31, 1994 for
a description of all other accounting policies.
(b) Investments
Bonds are stated at amortized cost, bonds available for sale
are stated at fair value. Short-term investments are stated
at cost. The "specific identification" method is used to
determine costs of investments sold. Since investments not
available for sale are generally held until maturity or
recovery of fair value, provisions for possible losses are
recorded only when the values have experienced impairment
considered "other than temporary". The bonds available for
sale had an unrealized gain of $751,832 at September 30, 1995,
net of the deferred tax expense of $404,832, and an unrealized
loss at December 31, 1994 of $85,671 net of the deferred tax
benefit of $29,985.
Proceeds from the sale of debt securities totalled $1,063,901
and $5,166,863 for the three months and nine months ended
September 30, 1995, respectively and $6,378,737 for the nine
months ended June 30, 1994. There were no sales of debt
securities for the three months ended September 30, 1994.
Realized gains were $18,239 and $54,648 for the three months
and nine months ended September 30, 1995, respectively and
$134,641 for the nine months ended September 30, 1995. There
were no realized gains for the three months ended September
30, 1994 and no realized losses for any period presented.
(c) Federal Income Taxes
Deferred federal income taxes recoverable consisted of a
"current" recoverable of $306,928 and $1,002,754 at June 30,
1995 and December 31, 1994, respectively and a "noncurrent"
recoverable of $2,286,648 and $2,012,916 at June 30, 1995 and
December
8
<PAGE> 9
GAINSCO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
31, 1994 respectively.
The Company paid income taxes of $3,830,986 and $3,895,787
during the nine months ended September 30, 1995 and 1994,
respectively and $1,230,000 and $1,270,000 during the three
months ended September 30, 1995 and 1994, respectively.
(d) Earnings Per Share
The computation of earnings per share, as adjusted, is based
on the weighted average number of common shares outstanding,
including common stock equivalents. For the three months
ended September 30, 1995 and 1994, the weighted average number
of common shares outstanding was 21,511,922 and 21,484,876
respectively, and common stock equivalents were 297,765 and
307,440, respectively. For the nine months ended September
30, 1995 and 1994, the weighted average number of common
shares outstanding was 21,511,657 and 21,423,493 respectively,
and common stock equivalents were 294,322 and 306,555,
respectively. All computations give retroactive effect for
stock dividends with record dates of September 30, 1995 and
prior.
(2) Reinsurance
The amounts deducted in the Consolidated Statements of Operations for
reinsurance ceded for the three months and nine months ended September
30, 1995 and 1994, respectively, are set forth in the following table.
Premiums and claims ceded to the commercial automobile plans of
Arkansas, California, Louisiana, Mississippi and Pennsylvania are
designated as "plan servicing".
<TABLE>
<CAPTION>
Three months Nine months
ended September 30 ended September 30
----------------------------- ------------------------------
1995 1994 1995 1994
----------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Premiums earned $ 1,007,841 1,701,548 4,203,109 6,035,850
Premiums earned -
plan servicing $ 1,681,748 1,298,054 4,152,016 3,602,600
Claims and claim
adjustment expenses $ 1,545,433 2,039,323 12,540,164 4,470,802
Claims and claim
adjustment expenses -
plan servicing $ 2,023,926 1,410,165 4,717,436 3,786,961
</TABLE>
9
<PAGE> 10
GAINSCO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The amounts included in the Consolidated Balance Sheets for
reinsurance ceded to the commercial automobile plans of Arkansas,
California, Louisiana, Mississippi and Pennsylvania as of September
30, 1995 and December 31, 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
------------ ---------
<S> <C> <C>
Unearned premiums $ 3,019,485 2,597,389
Unpaid claims and claim
adjustment expenses $ 10,204,228 9,071,682
</TABLE>
The Company remains directly liable to its policyholders for all
policy obligations and the reinsuring companies are obligated to the
Company to the extent of the reinsured portion of the risks. The
Company does not have a provision for uncollectible reinsurance and
does not feel one is warranted since all of the reinsurers on its
treaties are rated "A" or better by A.M. Best Company and/or the
Company is adequately collateralized on existing and anticipated claim
recoveries.
The Company has not and does not intend to utilize retrospectively
rated reinsurance contracts with indefinite renewal terms. This form
of reinsurance is commonly known as a "funded cover". Under a funded
cover reinsurance arrangement, an insurance company essentially
deposits money with a reinsurer to help cover future losses and
records the "deposit" as an expense instead of as an asset; or, the
insurance company can borrow from a reinsurer recording the "loan" as
income instead of as a liability with the future "loan" payments
recorded as expense as the payments are made over time.
(3) Note Payable to Bank
The Company made a principal payment of $1,750,000 in June, 1995. The
balance of $1,750,000 is due June 1, 1996.
(4) Shareholders' Equity
As of September 30, 1995 there were 414,576 options, at an average
exercise price of $2.59 per share, that have been granted to officers
and directors of the Company under the 1990 Stock Option Plan.
The Company's policy is to pay a quarterly cash dividend of $.01 per
share every quarter until further action is taken by the Board of
Directors. A cash dividend of $204,879 was paid on October 16, 1995.
The Company also paid a 5% stock dividend on October 16, 1995 to
shareholders of record on September 30, 1995.
10
<PAGE> 11
GAINSCO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Gross premiums written for the third quarter of 1995 were approximately
$27,772,000 versus $24,252,000 for the comparable 1994 period representing a
15% increase. For the first nine months of 1995 gross premiums written have
increased 7% from the comparable 1994 period. The persistency rate increased
from 42% in 1994 to 47% in 1995. The following table presents, for each major
product line, gross premiums written for the periods indicated:
<TABLE>
<CAPTION>
Three months Nine months
ended September 30 ended September 30
----------------------------------------- ------------------------------------------
1995 1994 1995 1994
----------------- ----------------- ----------------- ------------------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial auto $ 15,290 55% $ 13,634 56% $ 44,690 57% $ 43,693 60%
Auto garage 6,964 25% 5,506 23% 18,645 24% 14,854 20%
General liability 5,210 19% 4,763 20% 13,796 18% 13,522 18%
Other lines 308 1% 349 1% 927 1% 1,153 2%
-------- --- -------- --- -------- --- -------- ---
Total $ 27,772 100% $ 24,252 100% $ 78,058 100% $ 73,222 100%
======== === ======== === ======== === ======== ===
</TABLE>
COMMERCIAL AUTO is up 12% for the third quarter of 1995 from the comparable
1994 period and is up 2% for the first nine months of 1995 from the comparable
1994 period. Renewals are up 11% for the first nine months. AUTO GARAGE is up
27% for the third quarter of 1995 from the comparable 1994 period and is up 26%
for the first nine months of 1995 from the comparable 1994 period, as a result
of continued production increases in Connecticut, Florida, Kentucky, and
Pennsylvania. The GENERAL LIABILITY line has recorded a 9% increase for the
third quarter of 1995 versus the comparable 1994 period and a 2% increase for
the first nine months of 1995 versus the comparable 1994 period. Renewals are
up 13% for the first nine months in this product line. For the first nine
months of 1995, gross premium written percentages by state/product line are as
follows: Texas commercial auto (25%), Texas general liability (7%),
Pennsylvania commercial auto (7%), and Kentucky commercial auto (5%) with no
other state/product line comprising 5% or more. Premiums earned increased 16%
and 14% for the third quarter and the first nine months of 1995, respectively,
as a result of increases in premium writings for the current period and the
run-off of the 1994 5% quota share reinsurance treaty.
Net investment income increased 20% in the third quarter of 1995 over the
comparable 1994 period and increased 22% in the first nine months of 1995 over
the comparable 1994 period as a result of growth in the portfolio attributable
to positive cash flows. Because of the Company's profitability in the
underwriting operations, it achieves the highest after tax income by investing
predominantly in tax-exempt securities. At September 30, 1995, 89% of the
Company's investments were in investment grade tax-exempt bonds
11
<PAGE> 12
with an average maturity of 4 years. Since the majority of the Company's
investments are tax-exempt, the yields appear lower than those of the industry;
however, the industry as a whole has a significantly greater percentage of its
investments in taxable securities with substantially longer maturities. On a
taxable equivalent basis the return on average investments is 6.5% for 1995
versus 6.3% for 1994. The increase is attributable to the reinvestment of
maturing securities at higher yields. The Company has the ability to hold its
bond securities until their maturity date. The Company does not actively trade
its bonds, however, it does classify certain bond securities as available for
sale. At September 30, 1995, approximately 7% of the Company's investments
were in U.S. Treasury securities and 4% were in short- term money market funds.
The Company has not invested and does not intend to invest in derivatives or
high-yield ("junk") securities, nor equity securities in issuers of "junk" debt
securities. The Company does not have any non- performing fixed maturity
securities.
Other income increased $133,457 in the third quarter of 1995 from the third
quarter of 1994. For the first nine months of 1995 an increase of $223,657 has
been recorded from the comparable 1994 period. The following table presents
the components:
<TABLE>
<CAPTION>
Three months Nine months
ended September 30 ended September 30
--------------------- ----------------------
1995 1994 1995 1994
--------- ------- --------- ---------
<S> <C> <C> <C> <C>
Computer software $ 89,373 86,317 382,805 371,927
Premium finance 74,573 39,570 198,242 109,468
Plan servicing 421,627 332,043 1,044,931 922,765
Other income 11,126 5,312 26,080 24,241
--------- ------- --------- ---------
Total $ 596,699 463,242 1,652,058 1,428,401
========= ======= ========= =========
</TABLE>
Revenues in the computer software operation are up approximately 3% from the
comparable 1994 periods and are expected to show moderate increases for the
year with profitable results.
Revenues from the premium finance operation are up 88% in the third quarter of
1995 over the third quarter of 1994 and are up 81% for the first nine months of
1995. Through nine months amounts financed are $1,623,000 (82%) above the
comparable 1994 period. Premium finance notes receivable were approximately
$1,571,000 at September 30, 1995 versus $808,000 at September 30, 1994 and the
average annualized return has increased from 16% to 17%.
Plan servicing revenues from commercial automobile plans increased $89,584 in
the third quarter of 1995 when compared to the third quarter of 1994 and are
$122,166 above the comparable nine month period of 1994. Written premiums are
28% ahead of last year on a nine month comparative basis. The California plan
began contributing to revenues in the second quarter of 1995. The Company is
continuing to pursue management contracts with other states to administer their
commercial automobile plans.
Claims and claim adjustment expenses (C & CAE) increased $2,167,649 in the
third quarter of 1995 from the third quarter of 1994. The C & CAE ratio was
51.6% in the third quarter of 1995 versus 49.7% in
12
<PAGE> 13
1994 for the comparable period. C & CAE have increased $6,541,616 for the
first nine months of 1995 over the comparable 1994 period. The C & CAE ratio
was 52.6% for the first nine months of 1995 and 49.2% for the comparable 1994
period. Five separate hailstorms, which occurred during the second quarter of
1995, accounted for approximately $900,000 in claims or 1.3 points of the nine
month C & CAE ratio. The C & CAE ratio for the third quarter and first nine
months of 1995 remains within the Company's expected range of 50-55%.
Commissions increased in the third quarter of 1995 from the 1994 third quarter
as a result of the increase in written premiums between these periods and as a
result of commission income from the 1994 5% quota share treaty only reducing
commission expense approximately $32,000 in 1995, whereas it decreased
commission expense in 1994 by approximately $762,000. Commissions increased in
the first nine months of 1995 period from the comparable 1994 period as a
direct result of increases in gross premiums written and as a result of
commission income from the 1994 5% quota share treaty reducing commission
expense in 1994 more than in 1995. The ratio of commissions to premiums earned
was 24% and 21% for the third quarter of 1995 and 1994, respectively and 22%
for the first nine months of 1995 and 1994. This ratio increased in the
quarterly comparison because of the increase in commissions recorded during the
1995 quarter as a direct result of the increase in gross premiums written.
The change in deferred policy acquisition costs resulted in a net increase to
income of $525,104 for the third quarter of 1995 versus a net increase of
$109,868 in the third quarter of 1994. A net increase of $1,572,804 was
recorded for the first nine months of 1995 versus a net increase of $1,192,674
in the comparable 1994 period. The change in the amount of the increase in DAC
between comparable periods is directly related to the rate at which unearned
premiums are growing as a result of the growth rate of premium writings. Since
DAC (asset) is a function of unearned premiums (liability) the change in DAC
correlates to the change in unearned premiums. The ratio of DAC to net
unearned premiums was 26% and 25% at September 30, 1995 and 1994, respectively.
Underwriting and operating expenses were up 8% in the quarterly comparison and
were up 4% in the nine month comparison to the 1994 periods primarily as a
result of increases in personnel costs and premium taxes.
The effective tax rate for the third quarter of 1995 was 26% versus 24% in the
comparable 1994 quarter primarily because tax-exempt interest income was a
smaller portion of income in 1995 than in 1994. The effective tax rate was 25%
for the first nine months of 1995 and 1994.
For the first nine months of 1995, net income was 8% above the comparable 1994
period. Excluding the unusual hailstorm claims, net income would have been 13%
above the 1994 period. The GAAP combined ratio for the insurance operations
was 84.9% for the first nine months of 1995 versus 83.3% for the first nine
months of 1994, remaining favorably below the expected 85-90% range.
Liquidity and Capital Resources
The primary sources of the Company's liquidity are funds generated from
insurance premiums, net investment income and maturing investments. The
short-term investments and cash are intended to provide adequate funds to pay
claims without selling the fixed maturity investments. At September 30, 1995
the Company held short-term investments and cash of $8,689,643 which is
adequate liquidity for the payment of claims and other short-term commitments.
13
<PAGE> 14
With regard to long term liquidity, the average duration of the investment
portfolio is 3 years. The fair value of the fixed maturity portfolio at
September 30, 1995 was approximately $1.9 million above amortized cost.
The increase in investments and cash is attributable to the positive cash flows
generated from operating activities. Reinsurance balances receivable decreased
as a result of the recovery of a large ceded claim. Ceded unpaid claims and
claim adjustment expenses have increased largely as a result of an increase in
incurred but not reported reserves under the excess casualty treaty. Ceded
unearned premiums decreased primarily because of the nonrenewal of the 5% quota
share treaty in 1995. Deferred policy acquisition costs (DAC) increased
primarily as a result of the increase in premium writings. DAC is 26% of net
unearned premiums at September 30, 1995 and 25% of net unearned premiums at
December 31, 1994.
Unpaid claims and claim adjustment expenses have increased as a result of an
increase in incurred but not reported reserves under the excess casualty treaty
and because of the increase in writings. Unearned premiums increased because
of the increase in writings. Commissions payable have decreased as a result of
the annual contingent commission payments to the general agents in the first
quarter of 1995. Reinsurance balances payable have decreased due to the
run-off of the 5% quota share reinsurance treaty in 1995. Drafts payable
decreased because a large amount of drafts were issued late in the fourth
quarter of 1994 and cleared in the first quarter of 1995. The note payable
decreased as a result of principal repayment during the second quarter (see
note 3 of Notes to Consolidated Financial Statements). The Company's liquidity
position remains strong as a result of cash flows from underwriting and
investment activities.
The increase in common stock is largely the result of the 5% stock dividends
paid on April 14 and October 16, 1995. This also accounts for the increase in
additional paid-in capital and the decrease in retained earnings. Net
unrealized gains on fixed maturities of $751,832 were recorded during the first
nine months of 1995 as a result of an increase in the fair value of the bonds
available for sale.
The Company is not aware of any current recommendations by the regulatory
authorities, which if implemented, would have a material effect on the
Company's liquidity, capital resources or results of operations.
14
<PAGE> 15
PART II. OTHER INFORMATION
GAINSCO, INC. AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
10.31 Change in Control Agreement with Joseph D. Macchia
10.32 Change in Control Agreement with Jack L. Johnson
10.33 Change in Control Agreement with Daniel J. Coots
10.34 Change in Control Agreement with Norman Alberigo
10.35 Change in Control Agreement with Carolyn E. Ray
10.36 Change in Control Agreement with Mark D. Brissman
10.37 Change in Control Agreement with J. Landis Graham
10.38 Amendment to Change in Control Agreement with Joseph
D. Macchia
10.39 Amendment to Change in Control Agreement with Jack L.
Johnson
10.40 Amendment to Change in Control Agreement with Daniel
J. Coots
10.41 Amendment to Change in Control Agreement with Norman
Alberigo
10.42 Amendment to Change in Control Agreement with Carolyn
E. Ray
10.43 Amendment to Change in Control Agreement with Mark D.
Brissman
10.44 Clarification to the GAINSCO, INC. Executive
Incentive Compensation Plan
10.45 GAINSCO, INC. 1995 Stock Option Plan
27.0 Financial Data Schedule
Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter.
15
<PAGE> 16
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized to sign on behalf of the Registrant as
well as in his capacity as Chief Financial Officer.
GAINSCO, INC.
Date: November 13, 1995
By /s/ Daniel J. Coots .
-----------------------------------
Daniel J. Coots
Senior Vice President and
Chief Financial Officer
16
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit No. Description No. Page
----------- ----------- ------------
<S> <C> <C>
10.31 Change in Control Agreement with Joseph D. Macchia ____________
10.32 Change in Control Agreement with Jack L. Johnson ____________
10.33 Change in Control Agreement with Daniel J. Coots ____________
10.34 Change in Control Agreement with Norman Alberigo ____________
10.35 Change in Control Agreement with Carolyn E. Ray ____________
10.36 Change in Control Agreement with Mark D. Brissman ____________
10.37 Change in Control Agreement with J. Landis Graham ____________
10.38 Amendment to Change in Control Agreement with ____________
Joseph D. Macchia
10.39 Amendment to Change in Control Agreement with ____________
Jack L. Johnson
10.40 Amendment to Change in Control Agreement with ____________
Daniel J. Coots
10.41 Amendment to Change in Control Agreement with ____________
Norman Alberigo
10.42 Amendment to Change in Control Agreement with ____________
Carolyn E. Ray
10.43 Amendment to Change in Control Agreement with ____________
Mark D. Brissman
10.44 Clarification to the GAINSCO, INC. Executive ____________
Incentive Compensation Plan
10.45 GAINSCO, INC. 1995 Stock Option Plan ____________
27.0 Financial Data Schedule ____________
</TABLE>
<PAGE> 1
EXHIBIT 10.31
[THE GAINSCO COMPANIES LETTERHEAD]
April 9, 1990
Joseph D. Macchia
Presidence of Chief Executive Officer
GAINSCO, INC.
5701 East Loop 820 South
Fort Worth, Texas 76119
Dear Mr. Macchia:
GAINSCO Service Corp. (the "Company") considers it essential to the
best interests of its stockholders to foster the continuous employment of key
management personnel. In this connection, the Board of Directors of the
Company (the "Board") recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of
the Company's management, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from
the possibility of a change in control of the Company, although no such change
is now contemplated.
In order to induce you to remain in the employ of the Company and in
consideration of your agreement set forth in Subsection 2(ii) hereof, the
Company agrees that you shall receive the severance benefits set forth in this
letter agreement ("Agreement") in the event your employment with the Company is
terminated subsequent to a "change in control of the Company" (as defined in
Section 2 hereof) under the circumstances described below.
1. Term of Agreement. This Agreement shall commence on the date
hereof and shall continue in effect through December 31, 1991; provided,
however, that commencing on January 1, 1991 and each January thereafter, the
term of this Agreement shall automatically be extended for one additional year
unless, not later than the September 30 preceding each such January 1,
<PAGE> 2
Mr. Joseph D. Macchia
April 9, 1990
Page 2
the Company shall have given notice that it does not wish to extend this
Agreement; provided, further, if a change in control of the Company shall have
occurred during the original or extended term of this Agreement, this Agreement
shall continue in effect for the later of (i) the original or extended term or
(ii) a period of twenty-four (24) months beyond the month in which such change
in control occurred. Notwithstanding the foregoing, in no event shall the term
of this Agreement extend beyond the date that you attain sixty-five years of
age.
2. Change in Control. (i) No benefits shall be payable hereunder
unless there shall have been a change in control of the Company, as set forth
below. For purposes of this Agreement, a "change in control of the Company"
shall be deemed to have occurred if (A) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or a corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company,
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the Company's then
outstanding securities; or (B) during any period of two consecutive years (not
including any period prior to the execution of this Agreement), 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 clauses (A), (C) or (D)
of this Subsection) whose election by the Board or nomination for election by
the Company's stockholders was approved by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority thereof;
or (C) the shareholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than 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 entity) at least 75% of
the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation, or
(D) the shareholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company of all
or substantially all the Company's assets.
Notwithstanding the foregoing, a change in control shall not be deemed
to have occurred as a result of the event described in Subsection 2(i)(A),
unless such event would have occurred absent your sale of the Company's
securities.
(ii) For purposes of this Agreement, a "potential change in control
of the Company" shall be deemed to have occurred if (A) the Company enters into
an agreement, the consummation of which would result in the occurrence of a
change in control of the Company,
<PAGE> 3
Mr. Joseph D. Macchia
April 9, 1990
Page 3
(B) any person (including the Company) publicly announces an intention to take
or to consider taking actions which if consummated would constitute a change in
control of the Company; (C) any person, other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or a
corporation owned, directly or indirectly, by the stockholders of the Company
in substantially the same proportions as their ownership of stock of the
Company, who is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing 10% or more of the combined voting power
of the Company's then outstanding securities, increases his beneficial
ownership of such securities by 5% or more of the combined voting power of the
Company's then outstanding securities on the date hereof; or (D) the Board
adopts a resolution to the effect that, for purposes of this Agreement, a
potential change in control of the Company has occurred. You agree that,
subject to the terms and conditions of this Agreement, in the event of a
potential change in control of the Company, you will remain in the employ of
the Company until the earliest of (i) a date which is six (6) months from the
occurrence of such potential change in control of the Company, (ii) the
termination by you of your employment by reason of Disability or Retirement as
defined in Subsection 3(i), or (iii) the occurrence of a change in control of
the Company.
3. Termination Following Change in Control. If any of the events
described in Subsection 2(i) hereof constituting a change in control of the
Company shall have occurred, you shall be entitled to the benefits provided in
Subsection 4(iii) hereof upon the subsequent termination of your employment
during the term of this Agreement unless such termination is (A) because of
your death, Disability or Retirement, (B) by the Company for Cause, or (C) by
you other than for Good Reason.
(i) Disability; Retirement. If, as a result of your
incapacity due to physical or mental illness, you shall have been absent from
the full-time performance of your duties with the Company for a period of six
(6) consecutive months, and within thirty (30) days after written notice of
termination is given you shall not have returned to the full-time performance
of your duties, your employment may be terminated for "Disability".
Termination by the Company or you of your employment based on "Retirement"
shall mean termination with your consent in accordance with the Company's
Pension Plan (as hereafter defined) including early retirement, generally
applicable to its salaried employees, provided, however, that termination based
on "Retirement" shall not include retirement in conjunction with termination by
you for Good Reason.
(ii) Cause. Termination by the Company of your employment
for "Cause" shall mean termination upon (A) the willful and continued failure
by you to substantially perform your duties with the Company (other than any
such failure resulting from your incapacity due to physical or mental illness
or any such actual or anticipated failure after the issuance of a Notice of
Termination, by you for Good Reason as defined in Subsections 3(iv) and 3(iii),
respectively) after a written demand for substantial performance is delivered
to you by the Board, which
<PAGE> 4
Mr. Joseph D. Macchia
April 9, 1990
Page 4
demand specifically identifies the manner in which the Board believes that you
have not substantially performed your duties, or (B) the willful engaging by
you in conduct which is demonstrably and materially injurious to the Company,
monetarily or otherwise. For purposes of this Subsection, no act, or failure
to act, on your part shall be deemed "willful" unless done, or omitted to be
done, by you not in good faith and without reasonable belief that your action
or omission was in the best interest of the Company. Notwithstanding the
foregoing, you shall not be deemed to have been terminated for Cause unless and
until there shall have been delivered to you a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters (3/4) of the
entire membership of the Board at a meeting of the Board called and held for
such purpose (after reasonable notice to you and an opportunity for you,
together with your counsel, to be heard before the Board), finding that in the
good faith opinion of the Board you were guilty of conduct set forth above in
clauses (A) or (B) of the first sentence of this Subsection and specifying the
particulars thereof in detail.
(iii) Good Reason. You shall be entitled to terminate your
employment for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean, without your express written consent, the occurrence after a change
in control of the Company of any of the following circumstances unless, in the
case of paragraphs (A), (E), (F), (G) or (H), such circumstances are fully
corrected prior to the Date of Termination specified in the Notice of
Termination, as defined in Subsections 3(v) and 3(iv), respectively, given in
respect thereof:
(A) the assignment to you of any duties inconsistent with
your present status as Chief Executive Officer of the Company (or such
other title or titles as you may be holding immediately prior to the
change in control of the Company) or a substantial adverse alteration
in the nature or status of your responsibilities from those in effect
immediately prior to the change in control of the Company;
(B) a reduction by the Company in your annual base salary
as in effect on the date of the change in control of the Company;
(C) the relocation of the Company's principal executive
offices to a location outside of Fort Worth, Texas (or, if different,
the metropolitan area in which such offices are located immediately
prior to the change in control of the Company) or the Company's
requiring you to be based anywhere other than the Company's principal
executive offices except for required travel on the Company's business
to an extent substantially consistent with your present business
travel obligations;
(D) the failure by the Company, without your consent, to
pay to you any portion of your current compensation, or to pay to you
any portion of an installment of
<PAGE> 5
Mr. Joseph D. Macchia
April 9, 1990
Page 5
deferred compensation under any deferred compensation program of the
Company, within seven (7) days of the date such compensation is due;
(E) except as provided below, the failure by the Company
to continue in effect any compensation plan in which you participate
immediately prior to the change in control of the Company which is
material to your total compensation, including but not limited to the
Company's 1985 Incentive Stock Option Plan and the Incentive
Compensation Plan or any substitute plans adopted prior to the change
in control, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to such
plan, or the failure by the Company to continue your participation
therein (or in such substitute or alternative plan) on a basis not
materially less favorable, both in terms of the amount of benefits
provided and the level of your participation relative to other
participants, as existed at the time of the change in control;
(F) except as provided below, the failure of GAINSCO,
Inc. to continue to provide you with benefits substantially similar to
those enjoyed by you under the Company's Profit Sharing Plan Trust of
GAINSCO, Inc. (the "Pension Plan" or under any of the Company's other
deferred compensation plans, life insurance, medical, health and
accident, or disability plans in which you were participating at the
time of the change in control of the Company, the taking of any action
by the Company which would directly or indirectly materially reduce
any of such benefits or deprive you of any material fringe benefit
enjoyed by you at the time of the change in control of the Company, or
the failure by the Company to provide you with the number of paid
vacation days to which you are entitled on the basis of years of
service with the Company in accordance with the Company's normal
vacation policy for officers in effect at the time of the change in
control of the Company;
(G) the failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to perform this
Agreement, as contemplated in Section 5 hereof; or
(H) any purported termination of your employment which is
not effected pursuant to a Notice of Termination satisfying the
requirements of Subsection (iv) below (and, if applicable, the
requirements of Subsection (ii) above); for purposes of this
Agreement, no such purported termination shall be effective.
Your right to terminate your employment pursuant to this Subsection shall not
be affected by your incapacity due to physical or mental illness. Your
continued employment shall not constitute consent to, or a waiver of rights
with respect to, any circumstance constituting Good Reason hereunder. You may
not terminate your employment for Good Reason pursuant to paragraphs (E) or (F)
on account of the discontinuance of any plan or benefit (without an
<PAGE> 6
Mr. Joseph D. Macchia
April 9, 1990
Page 6
equitable substitution) which is part of a uniform, non-discriminatory,
Company-wide reduction in benefits.
(iv) Notice of Termination. Any purported termination of
your employment by the Company or by you shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section 6
hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of your employment
under the provision so indicated.
(v) Date of Termination, Etc. "Date of Termination"
shall mean (A) if your employment is terminated for Disability, thirty (30)
days after Notice of Termination is given (provided that you shall not have
returned to the full-time performance of your duties during such thirty (30)
day period), and (B) if your employment is terminated pursuant to Subsection
(ii) or (iii) above or for any other reason (other than Disability), the date
specified in the Notice of Termination (which, in the case of a termination
pursuant to Subsection (ii) above shall not be less than thirty (30) days, and
in the case of a termination pursuant to Subsection (iii) above shall not be
less than fifteen (15) nor more than sixty (60) days, respectively, from the
date such Notice of Termination is given); provided that if within fifteen (15)
days after any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this proviso), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally determined, either by mutual written agreement of
the parties, by a binding arbitration award, or by a final judgment, order or
decree of a court of competent jurisdiction (which is not appealable or with
respect to which the time for appeal therefrom has expired and no appeal has
been perfected); provided further that the Date of Termination shall be
extended by a notice of dispute only if such notice is given in good faith and
the party giving such notice pursues the resolution of such dispute with
reasonable diligence. Notwithstanding the pendency of any such dispute, the
Company will continue to pay you your full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to,
base salary) and continue you as a participant in all compensation, benefit and
insurance plans in which you were participating whether or not specifically
referenced in this Agreement when the notice giving rise to the dispute was
given, until the dispute is finally resolved in accordance with this
Subsection. Amounts paid under this Subsection are in addition to all other
amounts due under this Agreement and shall not be offset against or reduce any
other amounts due under this Agreement, except as provided in Subsection
4(iii)(B) below.
4. Compensation Upon Termination or During Disability. Following
a change in control of the Company, as defined by Subsection 2(i), upon
termination of your employment or during a period of Disability you shall be
entitled to the following benefits:
<PAGE> 7
Mr. Joseph D. Macchia
April 9, 1990
Page 7
(i) During any period that you fail to perform your
full-time duties with the Company as a result of incapacity due to physical or
mental illness, you shall continue to receive your salary at the rate in effect
at the commencement of such period, together with all other compensation and
benefits payable to you during such period, until this Agreement is terminated
pursuant to Section 3(i) hereof. Thereafter, or in the event your employment
shall be terminated by the Company or by you for Retirement, or by reason of
your death, your benefits shall be determined under the Company's retirement,
insurance and other compensation plans and programs then in effect in
accordance with the terms of such programs.
(ii) If your employment shall be terminated by the Company
for Cause or by you other than for Good Reason, Disability, death or
Retirement, the Company shall pay you your full base salary through the Date of
Termination at the rate in effect at the time Notice of Termination is given,
plus all other amounts to which you are entitled under any compensation or
benefit plan of the Company at the time such payments are due, and the Company
shall have no further obligations to you under this Agreement.
(iii) If your employment by the Company shall be terminated
(a) by the Company other than for Cause, Retirement or Disability or (b) by you
for Good Reason, then you shall be entitled to the benefits provided below:
(A) the Company shall pay you your full base salary
through the Date of Termination at the rate in effect at the time
Notice of Termination is given, plus all other amounts to which you
are entitled under any compensation plan of the Company, at the time
such payments are due, except as otherwise provided below; and
(B) in lieu of any further salary payments to you for
periods subsequent to the Date of Termination, the Company shall pay
as severance pay to you a lump sum cash severance payment in an amount
equal to two times your "base amount" (within the meaning of section
280G(b)(3) of the Internal Revenue Code of 1986, as amended (the
"Code")), provided, however, that such severance payment shall be no
less than 1.25 times the amount reported on your Form W-2 statement
issued by the Company with respect to the year preceding that in which
the Date of Termination occurs. Notwithstanding any other provision
of this Agreement, in the event that any payment or benefit received
or to be received by you in connection with a change in control or the
termination of your employment (whether payable pursuant to the terms
of this Agreement or any other plan, arrangement or agreement with the
Company, its successors, any person whose actions result in a change
in control or any person affiliated with (or which, as a result of the
completion of the transactions causing a change in control, will
become affiliated) the Company or such person within the meaning of
section 1504 of the Code) (all such payments and benefits being
hereinafter called the "Severance Payments") would not be deductible
(in whole or in part), by the Company, an affiliate or any person
<PAGE> 8
Mr. Joseph D. Macchia
April 9, 1990
Page 8
making such payment or providing such benefit as a result of Section
280G of the Code, then, to the extent necessary to make such portion
of the Severance Payments deductible (and after taking into account
any reduction in the Severance Payments provided by reason of Section
280G of the Code in such other plan, arrangement or agreement), (A)
the cash Severance Payments shall first be reduced (if necessary, to
zero), and (B) all other non-cash Severance Payments shall next be
reduced. For purposes of this limitation (i) no portion of the
Severance Payments the receipt or enjoyment of which you shall have
effectively waived in writing prior to the Date of Termination shall
be taken into account, (ii) no portion of the Severance Payments shall
be taken into account which in the opinion of tax counsel selected by
the Company's independent auditors and reasonably acceptable to you
does not constitute a "parachute payment" within the meaning of
section 280G(b)(2) of the Code, including by reason of section
280G(b)(4)(A) of the Code, (iii) the Severance Payments shall be
reduced only to the extent necessary so that the Severance Payments
(other than those referred to in clauses (i) or (ii)) in their
entirety constitute reasonable compensation for services actually
rendered within the meaning of section 280G(b)(4)(B) of the Code or
are otherwise not subjet to disallowance as deductions, in the opinion
of tax counsel referred to in clause (ii); and (iv) the value of any
non-cash benefit or any deferred payment or benefit included in the
Severance 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.
(C) the payment provided for in paragraph (B), above,
shall be made not later than the fifth day following the Date of
Termination, provided, however, that if the amount of such payment
cannot be finally determined on or before such day, the Company shall
pay to you on such day an estimate, as determined in good faith by the
Company, of the minimum amount of such payment and shall pay the
remainder of such payment (together with interest at the rate provided
in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof
can be determined but in no event later the thirtieth day after the
Date of Termination. In the event that the amount of the estimated
payment exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to you, payable on
the fifth day after demand by the Company (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code).
(D) the Company also shall pay to you all legal fees and
expenses incurred by you as a result of such termination (including
all such legal fees and legal expenses, if any, incurred in contesting
or disputing any such termination or in seeking to obtain or enforce
any right or benefit 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 payments shall be made at the later of the
times specified in paragraph (C) above, or within five (5) days after
your request
<PAGE> 9
Mr. Joseph D. Macchia
April 9, 1990
Page 9
for payment accompanied with such evidence of fees and expenses
incurred as the Company reasonably may require.
(iv) You shall not be required to mitigate the amount of
any payment provided for in this Section 4 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in this
Section 4 be reduced by any compensation earned by you as the result of
employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by you to the Company, or otherwise.
(v) In addition to all other amounts payable to you under
this Section 4, you shall be entitled to receive all benefits payable to you,
at the respective time or times such payments are due, under the Pension
Plan[s], and any other plan or agreement relating to retirement benefits.
5. Successors; Binding Agreement. (i) The Company will require
any successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/or assets of the
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. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle you to compensation from
the Company in the same amount and on the same terms as you would be entitled
to hereunder if you terminate your employment for Good Reason following a
change in control of the Company, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement
by operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If you
should die while any amount would still be payable to you hereunder if you had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with terms of this Agreement to your devisee, legatee or
other designee or, if there is no such designee, to your estate.
6. Notice. 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 pre-paid, addressed
to the respective addressees set forth on the first page of this Agreement,
provided that all notice to the Company shall be directed to the attention of
the Board with a copy to the Secretary of the Company, or to such other address
as either party may have furnished to
<PAGE> 10
Mr. Joseph D. Macchia
April 9, 1990
Page 10
the other in writing in accordance herewith, except that notice of change of
address shall be effective only upon receipt.
7. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by you and such officer as may be duly
authorized to act on the Company's behalf. No waiver by either party hereto at
any time of any breach by the other party hereto of, or non-compliance with,
any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar of 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 expressly
set forth in this Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Texas. All references to sections of the Exchange Act or the Code shall be
deemed also to refer to any successor provisions to such sections. Any
payments provided for hereunder shall be paid net of any applicable withholding
required under federal, state or local law. The obligations of the Company
under Subsections 4(i), 4(ii), 4(iii)(D) and 4(v) shall survive the expiration
of the term of this Agreement.
8. Validity. The invalidity or unenforceability or any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled, at the Company's expense,
exclusively by arbitration in Tarrant County, Texas in accordance with the
rules of the American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court having jurisdiction; provided,
however, that you shall be entitled to seek specific performance of your right
to be paid until the Date of Termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
<PAGE> 11
Mr. Joseph D. Macchia
April 9, 1990
Page 11
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter which
will then constitute our agreement on this subject.
Sincerely,
GAINSCO Service Corp.
By: /s/ Kenneth J. Peterson
--------------------------------------
Kenneth J. Peterson
Executive Vice President
Agreed to this 9th day
of April, 1990
/s/ J. D. Macchia
- - -----------------------------------
<PAGE> 1
EXHIBIT 10.32
[THE GAINSCO COMPANIES LETTERHEAD]
April 9, 1990
Mr. Jack L. Johnson
Sr. Vice President
GAINSCO, INC.
5701 East Loop 820 South
Fort Worth, Texas 76119
Dear Mr. Johnson:
GAINSCO Service Corp. (the "Company") considers it essential to the
best interests of its stockholders to foster the continuous employment of key
management personnel. In this connection, the Board of Directors of the
Company (the "Board") recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of
the Company's management, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from
the possibility of a change in control of the Company, although no such change
is now contemplated.
In order to induce you to remain in the employ of the Company and in
consideration of your agreement set forth in Subsection 2(ii) hereof, the
Company agrees that you shall receive the severance benefits set forth in this
letter agreement ("Agreement") in the event your employment with the Company is
terminated subsequent to a "change in control of the Company" (as defined in
Section 2 hereof) under the circumstances described below.
1. Term of Agreement. This Agreement shall commence on the date
hereof and shall continue in effect through December 31, 1991; provided,
however, that commencing on January 1, 1991 and each January thereafter, the
term of this Agreement shall automatically be extended for one additional year
unless, not later than the September 30 preceding each such January 1,
<PAGE> 2
Mr. Jack L. Johnson
April 9, 1990
Page 2
the Company shall have given notice that it does not wish to extend this
Agreement; provided, further, if a change in control of the Company shall have
occurred during the original or extended term of this Agreement, this Agreement
shall continue in effect for the later of (i) the original or extended term or
(ii) a period of twenty-four (24) months beyond the month in which such change
in control occurred. Notwithstanding the foregoing, in no event shall the term
of this Agreement extend beyond the date that you attain sixty-five years of
age.
2. Change in Control. (i) No benefits shall be payable hereunder
unless there shall have been a change in control of the Company, as set forth
below. For purposes of this Agreement, a "change in control of the Company"
shall be deemed to have occurred if (A) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or a corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company,
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the Company's then
outstanding securities; or (B) during any period of two consecutive years (not
including any period prior to the execution of this Agreement), 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 clauses (A), (C) or (D)
of this Subsection) whose election by the Board or nomination for election by
the Company's stockholders was approved by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority thereof;
or (C) the shareholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than 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 entity) at least 75% of
the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation, or
(D) the shareholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company of all
or substantially all the Company's assets.
(ii) For purposes of this Agreement, a "potential change in control
of the Company" shall be deemed to have occurred if (A) the Company enters into
an agreement, the consummation of which would result in the occurrence of a
change in control of the Company, (B) any person (including the Company)
publicly announces an intention to take or to consider taking actions which if
consummated would constitute a change in control of the Company; (C) any
person, other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or a corporation owned, directly or
indirectly, by the stockholders of the
<PAGE> 3
Mr. Jack L. Johnson
April 9, 1990
Page 3
Company in substantially the same proportions as their ownership of stock of
the Company, who is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing 10% or more of the combined voting power
of the Company's then outstanding securities, increases his beneficial
ownership of such securities by 5% or more of the combined voting power of the
Company's then outstanding securities on the date hereof; or (D) the Board
adopts a resolution to the effect that, for purposes of this Agreement, a
potential change in control of the Company has occurred. You agree that,
subject to the terms and conditions of this Agreement, in the event of a
potential change in control of the Company, you will remain in the employ of
the Company until the earliest of (i) a date which is six (6) months from the
occurrence of such potential change in control of the Company, (ii) the
termination by you of your employment by reason of Disability or Retirement as
defined in Subsection 3(i), or (iii) the occurrence of a change in control of
the Company.
3. Termination Following Change in Control. If any of the events
described in Subsection 2(i) hereof constituting a change in control of the
Company shall have occurred, you shall be entitled to the benefits provided in
Subsection 4(iii) hereof upon the subsequent termination of your employment
during the term of this Agreement unless such termination is (A) because of
your death, Disability or Retirement, (B) by the Company for Cause, or (C) by
you other than for Good Reason.
(i) Disability; Retirement. If, as a result of your
incapacity due to physical or mental illness, you shall have been absent from
the full-time performance of your duties with the Company for a period of six
(6) consecutive months, and within thirty (30) days after written notice of
termination is given you shall not have returned to the full-time performance
of your duties, your employment may be terminated for "Disability".
Termination by the Company or you of your employment based on "Retirement"
shall mean termination with your consent in accordance with the Company's
Pension Plan (as hereafter defined) including early retirement, generally
applicable to its salaried employees, provided, however, that termination based
on "Retirement" shall not include retirement in conjunction with termination by
you for Good Reason.
(ii) Cause. Termination by the Company of your employment
for "Cause" shall mean termination upon (A) the willful and continued failure
by you to substantially perform your duties with the Company (other than any
such failure resulting from your incapacity due to physical or mental illness
or any such actual or anticipated failure after the issuance of a Notice of
Termination, by you for Good Reason as defined in Subsections 3(iv) and 3(iii),
respectively) after a written demand for substantial performance is delivered
to you by the Board, which demand specifically identifies the manner in which
the Board believes that you have not substantially performed your duties, or
(B) the willful engaging by you in conduct which is demonstrably and materially
injurious to the Company, monetarily or otherwise. For purposes of this
Subsection, no act, or failure to act, on your part shall be deemed "willful"
unless done,
<PAGE> 4
Mr. Jack L. Johnson
April 9, 1990
Page 4
or omitted to be done, by you not in good faith and without reasonable belief
that your action or omission was in the best interest of the Company.
Notwithstanding the foregoing, you shall not be deemed to have been terminated
for Cause unless and until there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
(3/4) of the entire membership of the Board at a meeting of the Board called
and held for such purpose (after reasonable notice to you and an opportunity
for you, together with your counsel, to be heard before the Board), finding
that in the good faith opinion of the Board you were guilty of conduct set
forth above in clauses (A) or (B) of the first sentence of this Subsection and
specifying the particulars thereof in detail.
(iii) Good Reason. You shall be entitled to terminate your
employment for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean, without your express written consent, the occurrence after a change
in control of the Company of any of the following circumstances unless, in the
case of paragraphs (A), (E), (F), (G) or (H), such circumstances are fully
corrected prior to the Date of Termination specified in the Notice of
Termination, as defined in Subsections 3(v) and 3(iv), respectively, given in
respect thereof:
(A) the assignment to you of any duties inconsistent with
your present status as Chief Executive Officer of the Company (or such
other title or titles as you may be holding immediately prior to the
change in control of the Company) or a substantial adverse alteration
in the nature or status of your responsibilities from those in effect
immediately prior to the change in control of the Company;
(B) a reduction by the Company in your annual base salary
as in effect on the date of the change in control of the Company;
(C) the relocation of the Company's principal executive
offices to a location outside of Fort Worth, Texas (or, if different,
the metropolitan area in which such offices are located immediately
prior to the change in control of the Company) or the Company's
requiring you to be based anywhere other than the Company's principal
executive offices except for required travel on the Company's business
to an extent substantially consistent with your present business
travel obligations;
(D) the failure by the Company, without your consent, to
pay to you any portion of your current compensation, or to pay to you
any portion of an installment of deferred compensation under any
deferred compensation program of the Company, within seven (7) days of
the date such compensation is due;
<PAGE> 5
Mr. Jack L. Johnson
April 9, 1990
Page 5
(E) except as provided below, the failure by the Company
to continue in effect any compensation plan in which you participate
immediately prior to the change in control of the Company which is
material to your total compensation, including but not limited to the
Company's 1985 Incentive Stock Option Plan and the Incentive
Compensation Plan or any substitute plans adopted prior to the change
in control, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to such
plan, or the failure by the Company to continue your participation
therein (or in such substitute or alternative plan) on a basis not
materially less favorable, both in terms of the amount of benefits
provided and the level of your participation relative to other
participants, as existed at the time of the change in control;
(F) except as provided below, the failure of GAINSCO,
Inc. to continue to provide you with benefits substantially similar to
those enjoyed by you under the Company's Profit Sharing Plan Trust of
GAINSCO, Inc. (the "Pension Plan" or under any of the Company's other
deferred compensation plans, life insurance, medical, health and
accident, or disability plans in which you were participating at the
time of the change in control of the Company, the taking of any action
by the Company which would directly or indirectly materially reduce
any of such benefits or deprive you of any material fringe benefit
enjoyed by you at the time of the change in control of the Company, or
the failure by the Company to provide you with the number of paid
vacation days to which you are entitled on the basis of years of
service with the Company in accordance with the Company's normal
vacation policy for officers in effect at the time of the change in
control of the Company;
(G) the failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to perform this
Agreement, as contemplated in Section 5 hereof; or
(H) any purported termination of your employment which is
not effected pursuant to a Notice of Termination satisfying the
requirements of Subsection (iv) below (and, if applicable, the
requirements of Subsection (ii) above); for purposes of this
Agreement, no such purported termination shall be effective.
Your right to terminate your employment pursuant to this Subsection shall not
be affected by your incapacity due to physical or mental illness. Your
continued employment shall not constitute consent to, or a waiver of rights
with respect to, any circumstance constituting Good Reason hereunder. You may
not terminate your employment for Good Reason pursuant to paragraphs (E) or (F)
on account of the discontinuance of any plan or benefit (without an equitable
substitution) which is part of a uniform, non-discriminatory, Company-wide
reduction in benefits.
<PAGE> 6
Mr. Jack L. Johnson
April 9, 1990
Page 6
(iv) Notice of Termination. Any purported termination of
your employment by the Company or by you shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section 6
hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of your employment
under the provision so indicated.
(v) Date of Termination, Etc. "Date of Termination"
shall mean (A) if your employment is terminated for Disability, thirty (30)
days after Notice of Termination is given (provided that you shall not have
returned to the full-time performance of your duties during such thirty (30)
day period), and (B) if your employment is terminated pursuant to Subsection
(ii) or (iii) above or for any other reason (other than Disability), the date
specified in the Notice of Termination (which, in the case of a termination
pursuant to Subsection (ii) above shall not be less than thirty (30) days, and
in the case of a termination pursuant to Subsection (iii) above shall not be
less than fifteen (15) nor more than sixty (60) days, respectively, from the
date such Notice of Termination is given); provided that if within fifteen (15)
days after any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this proviso), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally determined, either by mutual written agreement of
the parties, by a binding arbitration award, or by a final judgment, order or
decree of a court of competent jurisdiction (which is not appealable or with
respect to which the time for appeal therefrom has expired and no appeal has
been perfected); provided further that the Date of Termination shall be
extended by a notice of dispute only if such notice is given in good faith and
the party giving such notice pursues the resolution of such dispute with
reasonable diligence. Notwithstanding the pendency of any such dispute, the
Company will continue to pay you your full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to,
base salary) and continue you as a participant in all compensation, benefit and
insurance plans in which you were participating whether or not specifically
referenced in this Agreement when the notice giving rise to the dispute was
given, until the dispute is finally resolved in accordance with this
Subsection. Amounts paid under this Subsection are in addition to all other
amounts due under this Agreement and shall not be offset against or reduce any
other amounts due under this Agreement, except as provided in Subsection
4(iii)(B) below.
4. Compensation Upon Termination or During Disability. Following
a change in control of the Company, as defined by Subsection 2(i), upon
termination of your employment or during a period of Disability you shall be
entitled to the following benefits:
<PAGE> 7
Mr. Jack L. Johnson
April 9, 1990
Page 7
(i) During any period that you fail to perform your
full-time duties with the Company as a result of incapacity due to physical or
mental illness, you shall continue to receive your salary at the rate in effect
at the commencement of such period, together with all other compensation and
benefits payable to you during such period, until this Agreement is terminated
pursuant to Section 3(i) hereof. Thereafter, or in the event your employment
shall be terminated by the Company or by you for Retirement, or by reason of
your death, your benefits shall be determined under the Company's retirement,
insurance and other compensation plans and programs then in effect in
accordance with the terms of such programs.
(ii) If your employment shall be terminated by the Company
for Cause or by you other than for Good Reason, Disability, death or
Retirement, the Company shall pay you your full base salary through the Date of
Termination at the rate in effect at the time Notice of Termination is given,
plus all other amounts to which you are entitled under any compensation or
benefit plan of the Company at the time such payments are due, and the Company
shall have no further obligations to you under this Agreement.
(iii) If your employment by the Company shall be terminated
(a) by the Company other than for Cause, Retirement or Disability or (b) by you
for Good Reason, then you shall be entitled to the benefits provided below:
(A) the Company shall pay you your full base salary
through the Date of Termination at the rate in effect at the time
Notice of Termination is given, plus all other amounts to which you
are entitled under any compensation plan of the Company, at the time
such payments are due, except as otherwise provided below; and
(B) in lieu of any further salary payments to you for
periods subsequent to the Date of Termination, the Company shall pay
as severance pay to you a lump sum cash severance payment in an amount
equal to two times your "base amount" (within the meaning of section
280G(b)(3) of the Internal Revenue Code of 1986, as amended (the
"Code")), provided, however, that such severance payment shall be no
less than 1.25 times the amount reported on your Form W-2 statement
issued by the Company with respect to the year preceding that in which
the Date of Termination occurs. Notwithstanding any other provision
of this Agreement, in the event that any payment or benefit received
or to be received by you in connection with a change in control or the
termination of your employment (whether payable pursuant to the terms
of this Agreement or any other plan, arrangement or agreement with the
Company, its successors, any person whose actions result in a change
in control or any person affiliated with (or which, as a result of the
completion of the transactions causing a change in control, will
become affiliated) the Company or such person within the meaning of
section 1504 of the Code) (all such payments and benefits being
hereinafter called the "Severance Payments") would not be deductible
(in whole or in part), by the Company, an affiliate or any person
<PAGE> 8
Mr. Jack L. Johnson
April 9, 1990
Page 8
making such payment or providing such benefit as a result of Section
280G of the Code, then, to the extent necessary to make such portion
of the Severance Payments deductible (and after taking into account
any reduction in the Severance Payments provided by reason of Section
280G of the Code in such other plan, arrangement or agreement), (A)
the cash Severance Payments shall first be reduced (if necessary, to
zero), and (B) all other non-cash Severance Payments shall next be
reduced. For purposes of this limitation (i) no portion of the
Severance Payments the receipt or enjoyment of which you shall have
effectively waived in writing prior to the Date of Termination shall
be taken into account, (ii) no portion of the Severance Payments shall
be taken into account which in the opinion of tax counsel selected by
the Company's independent auditors and reasonably acceptable to you
does not constitute a "parachute payment" within the meaning of
section 280G(b)(2) of the Code, including by reason of section
280G(b)(4)(A) of the Code, (iii) the Severance Payments shall be
reduced only to the extent necessary so that the Severance Payments
(other than those referred to in clauses (i) or (ii)) in their
entirety constitute reasonable compensation for services actually
rendered within the meaning of section 280G(b)(4)(B) of the Code or
are otherwise not subjet to disallowance as deductions, in the opinion
of tax counsel referred to in clause (ii); and (iv) the value of any
non-cash benefit or any deferred payment or benefit included in the
Severance 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.
(C) the payment provided for in paragraph (B), above,
shall be made not later than the fifth day following the Date of
Termination, provided, however, that if the amount of such payment
cannot be finally determined on or before such day, the Company shall
pay to you on such day an estimate, as determined in good faith by the
Company, of the minimum amount of such payment and shall pay the
remainder of such payment (together with interest at the rate provided
in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof
can be determined but in no event later the thirtieth day after the
Date of Termination. In the event that the amount of the estimated
payment exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to you, payable on
the fifth day after demand by the Company (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code).
(D) the Company also shall pay to you all legal fees and
expenses incurred by you as a result of such termination (including
all such legal fees and legal expenses, if any, incurred in contesting
or disputing any such termination or in seeking to obtain or enforce
any right or benefit 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 payments shall be made at the later of the
times specified in paragraph (C) above, or within five (5) days after
your request
<PAGE> 9
Mr. Jack L. Johnson
April 9, 1990
Page 9
for payment accompanied with such evidence of fees and expenses
incurred as the Company reasonably may require.
(iv) You shall not be required to mitigate the amount of
any payment provided for in this Section 4 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in this
Section 4 be reduced by any compensation earned by you as the result of
employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by you to the Company, or otherwise.
(v) In addition to all other amounts payable to you under
this Section 4, you shall be entitled to receive all benefits payable to you,
at the respective time or times such payments are due, under the Pension
Plan[s], and any other plan or agreement relating to retirement benefits.
5. Successors; Binding Agreement. (i) The Company will require
any successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/or assets of the
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. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle you to compensation from
the Company in the same amount and on the same terms as you would be entitled
to hereunder if you terminate your employment for Good Reason following a
change in control of the Company, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement
by operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If you
should die while any amount would still be payable to you hereunder if you had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with terms of this Agreement to your devisee, legatee or
other designee or, if there is no such designee, to your estate.
6. Notice. 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 pre-paid, addressed
to the respective addressees set forth on the first page of this Agreement,
provided that all notice to the Company shall be directed to the attention of
the Board with a copy to the Secretary of the Company, or to such other address
as either party may have furnished to
<PAGE> 10
Mr. Jack L. Johnson
April 9, 1990
Page 10
the other in writing in accordance herewith, except that notice of change of
address shall be effective only upon receipt.
7. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by you and such officer as may be duly
authorized to act on the Company's behalf. No waiver by either party hereto at
any time of any breach by the other party hereto of, or non-compliance with,
any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar of 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 expressly
set forth in this Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Texas. All references to sections of the Exchange Act or the Code shall be
deemed also to refer to any successor provisions to such sections. Any
payments provided for hereunder shall be paid net of any applicable withholding
required under federal, state or local law. The obligations of the Company
under Subsections 4(i), 4(ii), 4(iii)(D) and 4(v) shall survive the expiration
of the term of this Agreement.
8. Validity. The invalidity or unenforceability or any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled, at the Company's expense,
exclusively by arbitration in Tarrant County, Texas in accordance with the
rules of the American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court having jurisdiction; provided,
however, that you shall be entitled to seek specific performance of your right
to be paid until the Date of Termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
<PAGE> 11
Mr. Jack L. Johnson
April 9, 1990
Page 11
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter which
will then constitute our agreement on this subject.
Sincerely,
GAINSCO Service Corp.
By: /s/ Joseph D. Macchia
--------------------------------------
Joseph D. Macchia
President and Chief Executive Officer
Agreed to this 9th day
of April, 1990
/s/ Jack L. Johnson
- - -----------------------------------
<PAGE> 1
EXHIBIT 10.33
[THE GAINSCO COMPANIES LETTERHEAD]
April 9, 1990
Mr. Daniel J. Coots
Vice President
GAINSCO, INC.
5701 East Loop 820 South
Fort Worth, Texas 76119
Dear Mr. Coots:
GAINSCO Service Corp. (the "Company") considers it essential to the
best interests of its stockholders to foster the continuous employment of key
management personnel. In this connection, the Board of Directors of the
Company (the "Board") recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of
the Company's management, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from
the possibility of a change in control of the Company, although no such change
is now contemplated.
In order to induce you to remain in the employ of the Company and in
consideration of your agreement set forth in Subsection 2(ii) hereof, the
Company agrees that you shall receive the severance benefits set forth in this
letter agreement ("Agreement") in the event your employment with the Company is
terminated subsequent to a "change in control of the Company" (as defined in
Section 2 hereof) under the circumstances described below.
1. Term of Agreement. This Agreement shall commence on the date
hereof and shall continue in effect through December 31, 1991; provided,
however, that commencing on January 1, 1991 and each January thereafter, the
term of this Agreement shall automatically be extended for one additional year
unless, not later than the September 30 preceding each such January 1,
<PAGE> 2
Mr. Daniel J. Coots
April 9, 1990
Page 2
the Company shall have given notice that it does not wish to extend this
Agreement; provided, further, if a change in control of the Company shall have
occurred during the original or extended term of this Agreement, this Agreement
shall continue in effect for the later of (i) the original or extended term or
(ii) a period of twenty-four (24) months beyond the month in which such change
in control occurred. Notwithstanding the foregoing, in no event shall the term
of this Agreement extend beyond the date that you attain sixty-five years of
age.
2. Change in Control. (i) No benefits shall be payable hereunder
unless there shall have been a change in control of the Company, as set forth
below. For purposes of this Agreement, a "change in control of the Company"
shall be deemed to have occurred if (A) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or a corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company,
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the Company's then
outstanding securities; or (B) during any period of two consecutive years (not
including any period prior to the execution of this Agreement), 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 clauses (A), (C) or (D)
of this Subsection) whose election by the Board or nomination for election by
the Company's stockholders was approved by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority thereof;
or (C) the shareholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than 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 entity) at least 75% of
the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation, or
(D) the shareholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company of all
or substantially all the Company's assets.
(ii) For purposes of this Agreement, a "potential change in control
of the Company" shall be deemed to have occurred if (A) the Company enters into
an agreement, the consummation of which would result in the occurrence of a
change in control of the Company, (B) any person (including the Company)
publicly announces an intention to take or to consider taking actions which if
consummated would constitute a change in control of the Company; (C) any
person, other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or a corporation owned, directly or
indirectly, by the stockholders of the
<PAGE> 3
Mr. Daniel J. Coots
April 9, 1990
Page 3
Company in substantially the same proportions as their ownership of stock of
the Company, who is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing 10% or more of the combined voting power
of the Company's then outstanding securities, increases his beneficial
ownership of such securities by 5% or more of the combined voting power of the
Company's then outstanding securities on the date hereof; or (D) the Board
adopts a resolution to the effect that, for purposes of this Agreement, a
potential change in control of the Company has occurred. You agree that,
subject to the terms and conditions of this Agreement, in the event of a
potential change in control of the Company, you will remain in the employ of
the Company until the earliest of (i) a date which is six (6) months from the
occurrence of such potential change in control of the Company, (ii) the
termination by you of your employment by reason of Disability or Retirement as
defined in Subsection 3(i), or (iii) the occurrence of a change in control of
the Company.
3. Termination Following Change in Control. If any of the events
described in Subsection 2(i) hereof constituting a change in control of the
Company shall have occurred, you shall be entitled to the benefits provided in
Subsection 4(iii) hereof upon the subsequent termination of your employment
during the term of this Agreement unless such termination is (A) because of
your death, Disability or Retirement, (B) by the Company for Cause, or (C) by
you other than for Good Reason.
(i) Disability; Retirement. If, as a result of your
incapacity due to physical or mental illness, you shall have been absent from
the full-time performance of your duties with the Company for a period of six
(6) consecutive months, and within thirty (30) days after written notice of
termination is given you shall not have returned to the full-time performance
of your duties, your employment may be terminated for "Disability".
Termination by the Company or you of your employment based on "Retirement"
shall mean termination with your consent in accordance with the Company's
Pension Plan (as hereafter defined) including early retirement, generally
applicable to its salaried employees, provided, however, that termination based
on "Retirement" shall not include retirement in conjunction with termination by
you for Good Reason.
(ii) Cause. Termination by the Company of your employment
for "Cause" shall mean termination upon (A) the willful and continued failure
by you to substantially perform your duties with the Company (other than any
such failure resulting from your incapacity due to physical or mental illness
or any such actual or anticipated failure after the issuance of a Notice of
Termination, by you for Good Reason as defined in Subsections 3(iv) and 3(iii),
respectively) after a written demand for substantial performance is delivered
to you by the Board, which demand specifically identifies the manner in which
the Board believes that you have not substantially performed your duties, or
(B) the willful engaging by you in conduct which is demonstrably and materially
injurious to the Company, monetarily or otherwise. For purposes of this
Subsection, no act, or failure to act, on your part shall be deemed "willful"
unless done,
<PAGE> 4
Mr. Daniel J. Coots
April 9, 1990
Page 4
or omitted to be done, by you not in good faith and without reasonable belief
that your action or omission was in the best interest of the Company.
Notwithstanding the foregoing, you shall not be deemed to have been terminated
for Cause unless and until there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
(3/4) of the entire membership of the Board at a meeting of the Board called
and held for such purpose (after reasonable notice to you and an opportunity
for you, together with your counsel, to be heard before the Board), finding
that in the good faith opinion of the Board you were guilty of conduct set
forth above in clauses (A) or (B) of the first sentence of this Subsection and
specifying the particulars thereof in detail.
(iii) Good Reason. You shall be entitled to terminate your
employment for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean, without your express written consent, the occurrence after a change
in control of the Company of any of the following circumstances unless, in the
case of paragraphs (A), (E), (F), (G) or (H), such circumstances are fully
corrected prior to the Date of Termination specified in the Notice of
Termination, as defined in Subsections 3(v) and 3(iv), respectively, given in
respect thereof:
(A) the assignment to you of any duties inconsistent with
your present status as Chief Executive Officer of the Company (or such
other title or titles as you may be holding immediately prior to the
change in control of the Company) or a substantial adverse alteration
in the nature or status of your responsibilities from those in effect
immediately prior to the change in control of the Company;
(B) a reduction by the Company in your annual base salary
as in effect on the date of the change in control of the Company;
(C) the relocation of the Company's principal executive
offices to a location outside of Fort Worth, Texas (or, if different,
the metropolitan area in which such offices are located immediately
prior to the change in control of the Company) or the Company's
requiring you to be based anywhere other than the Company's principal
executive offices except for required travel on the Company's business
to an extent substantially consistent with your present business
travel obligations;
(D) the failure by the Company, without your consent, to
pay to you any portion of your current compensation, or to pay to you
any portion of an installment of deferred compensation under any
deferred compensation program of the Company, within seven (7) days of
the date such compensation is due;
<PAGE> 5
Mr. Daniel J. Coots
April 9, 1990
Page 5
(E) except as provided below, the failure by the Company
to continue in effect any compensation plan in which you participate
immediately prior to the change in control of the Company which is
material to your total compensation, including but not limited to the
Company's 1985 Incentive Stock Option Plan and the Incentive
Compensation Plan or any substitute plans adopted prior to the change
in control, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to such
plan, or the failure by the Company to continue your participation
therein (or in such substitute or alternative plan) on a basis not
materially less favorable, both in terms of the amount of benefits
provided and the level of your participation relative to other
participants, as existed at the time of the change in control;
(F) except as provided below, the failure of GAINSCO,
Inc. to continue to provide you with benefits substantially similar to
those enjoyed by you under the Company's Profit Sharing Plan Trust of
GAINSCO, Inc. (the "Pension Plan" or under any of the Company's other
deferred compensation plans, life insurance, medical, health and
accident, or disability plans in which you were participating at the
time of the change in control of the Company, the taking of any action
by the Company which would directly or indirectly materially reduce
any of such benefits or deprive you of any material fringe benefit
enjoyed by you at the time of the change in control of the Company, or
the failure by the Company to provide you with the number of paid
vacation days to which you are entitled on the basis of years of
service with the Company in accordance with the Company's normal
vacation policy for officers in effect at the time of the change in
control of the Company;
(G) the failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to perform this
Agreement, as contemplated in Section 5 hereof; or
(H) any purported termination of your employment which is
not effected pursuant to a Notice of Termination satisfying the
requirements of Subsection (iv) below (and, if applicable, the
requirements of Subsection (ii) above); for purposes of this
Agreement, no such purported termination shall be effective.
Your right to terminate your employment pursuant to this Subsection shall not
be affected by your incapacity due to physical or mental illness. Your
continued employment shall not constitute consent to, or a waiver of rights
with respect to, any circumstance constituting Good Reason hereunder. You may
not terminate your employment for Good Reason pursuant to paragraphs (E) or (F)
on account of the discontinuance of any plan or benefit (without an equitable
substitution) which is part of a uniform, non-discriminatory, Company-wide
reduction in benefits.
<PAGE> 6
Mr. Daniel J. Coots
April 9, 1990
Page 6
(iv) Notice of Termination. Any purported termination of
your employment by the Company or by you shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section 6
hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of your employment
under the provision so indicated.
(v) Date of Termination, Etc. "Date of Termination"
shall mean (A) if your employment is terminated for Disability, thirty (30)
days after Notice of Termination is given (provided that you shall not have
returned to the full-time performance of your duties during such thirty (30)
day period), and (B) if your employment is terminated pursuant to Subsection
(ii) or (iii) above or for any other reason (other than Disability), the date
specified in the Notice of Termination (which, in the case of a termination
pursuant to Subsection (ii) above shall not be less than thirty (30) days, and
in the case of a termination pursuant to Subsection (iii) above shall not be
less than fifteen (15) nor more than sixty (60) days, respectively, from the
date such Notice of Termination is given); provided that if within fifteen (15)
days after any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this proviso), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally determined, either by mutual written agreement of
the parties, by a binding arbitration award, or by a final judgment, order or
decree of a court of competent jurisdiction (which is not appealable or with
respect to which the time for appeal therefrom has expired and no appeal has
been perfected); provided further that the Date of Termination shall be
extended by a notice of dispute only if such notice is given in good faith and
the party giving such notice pursues the resolution of such dispute with
reasonable diligence. Notwithstanding the pendency of any such dispute, the
Company will continue to pay you your full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to,
base salary) and continue you as a participant in all compensation, benefit and
insurance plans in which you were participating whether or not specifically
referenced in this Agreement when the notice giving rise to the dispute was
given, until the dispute is finally resolved in accordance with this
Subsection. Amounts paid under this Subsection are in addition to all other
amounts due under this Agreement and shall not be offset against or reduce any
other amounts due under this Agreement, except as provided in Subsection
4(iii)(B) below.
4. Compensation Upon Termination or During Disability. Following
a change in control of the Company, as defined by Subsection 2(i), upon
termination of your employment or during a period of Disability you shall be
entitled to the following benefits:
<PAGE> 7
Mr. Daniel J. Coots
April 9, 1990
Page 7
(i) During any period that you fail to perform your
full-time duties with the Company as a result of incapacity due to physical or
mental illness, you shall continue to receive your salary at the rate in effect
at the commencement of such period, together with all other compensation and
benefits payable to you during such period, until this Agreement is terminated
pursuant to Section 3(i) hereof. Thereafter, or in the event your employment
shall be terminated by the Company or by you for Retirement, or by reason of
your death, your benefits shall be determined under the Company's retirement,
insurance and other compensation plans and programs then in effect in
accordance with the terms of such programs.
(ii) If your employment shall be terminated by the Company
for Cause or by you other than for Good Reason, Disability, death or
Retirement, the Company shall pay you your full base salary through the Date of
Termination at the rate in effect at the time Notice of Termination is given,
plus all other amounts to which you are entitled under any compensation or
benefit plan of the Company at the time such payments are due, and the Company
shall have no further obligations to you under this Agreement.
(iii) If your employment by the Company shall be terminated
(a) by the Company other than for Cause, Retirement or Disability or (b) by you
for Good Reason, then you shall be entitled to the benefits provided below:
(A) the Company shall pay you your full base salary
through the Date of Termination at the rate in effect at the time
Notice of Termination is given, plus all other amounts to which you
are entitled under any compensation plan of the Company, at the time
such payments are due, except as otherwise provided below; and
(B) in lieu of any further salary payments to you for
periods subsequent to the Date of Termination, the Company shall pay
as severance pay to you a lump sum cash severance payment in an amount
equal to two times your "base amount" (within the meaning of section
280G(b)(3) of the Internal Revenue Code of 1986, as amended (the
"Code")), provided, however, that such severance payment shall be no
less than 1.25 times the amount reported on your Form W-2 statement
issued by the Company with respect to the year preceding that in which
the Date of Termination occurs. Notwithstanding any other provision
of this Agreement, in the event that any payment or benefit received
or to be received by you in connection with a change in control or the
termination of your employment (whether payable pursuant to the terms
of this Agreement or any other plan, arrangement or agreement with the
Company, its successors, any person whose actions result in a change
in control or any person affiliated with (or which, as a result of the
completion of the transactions causing a change in control, will
become affiliated) the Company or such person within the meaning of
section 1504 of the Code) (all such payments and benefits being
hereinafter called the "Severance Payments") would not be deductible
(in whole or in part), by the Company, an affiliate or any person
<PAGE> 8
Mr. Daniel J. Coots
April 9, 1990
Page 8
making such payment or providing such benefit as a result of Section
280G of the Code, then, to the extent necessary to make such portion
of the Severance Payments deductible (and after taking into account
any reduction in the Severance Payments provided by reason of Section
280G of the Code in such other plan, arrangement or agreement), (A)
the cash Severance Payments shall first be reduced (if necessary, to
zero), and (B) all other non-cash Severance Payments shall next be
reduced. For purposes of this limitation (i) no portion of the
Severance Payments the receipt or enjoyment of which you shall have
effectively waived in writing prior to the Date of Termination shall
be taken into account, (ii) no portion of the Severance Payments shall
be taken into account which in the opinion of tax counsel selected by
the Company's independent auditors and reasonably acceptable to you
does not constitute a "parachute payment" within the meaning of
section 280G(b)(2) of the Code, including by reason of section
280G(b)(4)(A) of the Code, (iii) the Severance Payments shall be
reduced only to the extent necessary so that the Severance Payments
(other than those referred to in clauses (i) or (ii)) in their
entirety constitute reasonable compensation for services actually
rendered within the meaning of section 280G(b)(4)(B) of the Code or
are otherwise not subjet to disallowance as deductions, in the opinion
of tax counsel referred to in clause (ii); and (iv) the value of any
non-cash benefit or any deferred payment or benefit included in the
Severance 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.
(C) the payment provided for in paragraph (B), above,
shall be made not later than the fifth day following the Date of
Termination, provided, however, that if the amount of such payment
cannot be finally determined on or before such day, the Company shall
pay to you on such day an estimate, as determined in good faith by the
Company, of the minimum amount of such payment and shall pay the
remainder of such payment (together with interest at the rate provided
in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof
can be determined but in no event later the thirtieth day after the
Date of Termination. In the event that the amount of the estimated
payment exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to you, payable on
the fifth day after demand by the Company (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code).
(D) the Company also shall pay to you all legal fees and
expenses incurred by you as a result of such termination (including
all such legal fees and legal expenses, if any, incurred in contesting
or disputing any such termination or in seeking to obtain or enforce
any right or benefit 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 payments shall be made at the later of the
times specified in paragraph (C) above, or within five (5) days after
your request
<PAGE> 9
Mr. Daniel J. Coots
April 9, 1990
Page 9
for payment accompanied with such evidence of fees and expenses
incurred as the Company reasonably may require.
(iv) You shall not be required to mitigate the amount of
any payment provided for in this Section 4 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in this
Section 4 be reduced by any compensation earned by you as the result of
employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by you to the Company, or otherwise.
(v) In addition to all other amounts payable to you under
this Section 4, you shall be entitled to receive all benefits payable to you,
at the respective time or times such payments are due, under the Pension
Plan[s], and any other plan or agreement relating to retirement benefits.
5. Successors; Binding Agreement. (i) The Company will require
any successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/or assets of the
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. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle you to compensation from
the Company in the same amount and on the same terms as you would be entitled
to hereunder if you terminate your employment for Good Reason following a
change in control of the Company, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement
by operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If you
should die while any amount would still be payable to you hereunder if you had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with terms of this Agreement to your devisee, legatee or
other designee or, if there is no such designee, to your estate.
6. Notice. 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 pre-paid, addressed
to the respective addressees set forth on the first page of this Agreement,
provided that all notice to the Company shall be directed to the attention of
the Board with a copy to the Secretary of the Company, or to such other address
as either party may have furnished to
<PAGE> 10
Mr. Daniel J. Coots
April 9, 1990
Page 10
the other in writing in accordance herewith, except that notice of change of
address shall be effective only upon receipt.
7. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by you and such officer as may be duly
authorized to act on the Company's behalf. No waiver by either party hereto at
any time of any breach by the other party hereto of, or non-compliance with,
any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar of 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 expressly
set forth in this Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Texas. All references to sections of the Exchange Act or the Code shall be
deemed also to refer to any successor provisions to such sections. Any
payments provided for hereunder shall be paid net of any applicable withholding
required under federal, state or local law. The obligations of the Company
under Subsections 4(i), 4(ii), 4(iii)(D) and 4(v) shall survive the expiration
of the term of this Agreement.
8. Validity. The invalidity or unenforceability or any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled, at the Company's expense,
exclusively by arbitration in Tarrant County, Texas in accordance with the
rules of the American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court having jurisdiction; provided,
however, that you shall be entitled to seek specific performance of your right
to be paid until the Date of Termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
<PAGE> 11
Mr. Daniel J. Coots
April 9, 1990
Page 11
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter which
will then constitute our agreement on this subject.
Sincerely,
GAINSCO Service Corp.
By: /s/ Joseph D. Macchia
---------------------------------------
Joseph D. Macchia
President and Chief Executive Officer
Agreed to this 9th day
of April, 1990
/s/ Daniel J. Coots
- - -----------------------------------
<PAGE> 1
EXHIBIT 10.34
[THE GAINSCO COMPANIES LETTERHEAD]
April 9, 1990
Mr. Norman Alberigo
Vice President
GAINSCO, INC.
5701 East Loop 820 South
Fort Worth, Texas 76119
Dear Mr. Alberigo:
GAINSCO Service Corp. (the "Company") considers it essential to the
best interests of its stockholders to foster the continuous employment of key
management personnel. In this connection, the Board of Directors of the
Company (the "Board") recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of
the Company's management, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from
the possibility of a change in control of the Company, although no such change
is now contemplated.
In order to induce you to remain in the employ of the Company and in
consideration of your agreement set forth in Subsection 2(ii) hereof, the
Company agrees that you shall receive the severance benefits set forth in this
letter agreement ("Agreement") in the event your employment with the Company is
terminated subsequent to a "change in control of the Company" (as defined in
Section 2 hereof) under the circumstances described below.
1. Term of Agreement. This Agreement shall commence on the date
hereof and shall continue in effect through December 31, 1991; provided,
however, that commencing on January 1, 1991 and each January thereafter, the
term of this Agreement shall automatically be extended for one additional year
unless, not later than the September 30 preceding each such January 1,
<PAGE> 2
Mr. Norman Alberigo
April 9, 1990
Page 2
the Company shall have given notice that it does not wish to extend this
Agreement; provided, further, if a change in control of the Company shall have
occurred during the original or extended term of this Agreement, this Agreement
shall continue in effect for the later of (i) the original or extended term or
(ii) a period of twenty-four (24) months beyond the month in which such change
in control occurred. Notwithstanding the foregoing, in no event shall the term
of this Agreement extend beyond the date that you attain sixty-five years of
age.
2. Change in Control. (i) No benefits shall be payable hereunder
unless there shall have been a change in control of the Company, as set forth
below. For purposes of this Agreement, a "change in control of the Company"
shall be deemed to have occurred if (A) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or a corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company,
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the Company's then
outstanding securities; or (B) during any period of two consecutive years (not
including any period prior to the execution of this Agreement), 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 clauses (A), (C) or (D)
of this Subsection) whose election by the Board or nomination for election by
the Company's stockholders was approved by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority thereof;
or (C) the shareholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than 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 entity) at least 75% of
the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation, or
(D) the shareholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company of all
or substantially all the Company's assets.
(ii) For purposes of this Agreement, a "potential change in control
of the Company" shall be deemed to have occurred if (A) the Company enters into
an agreement, the consummation of which would result in the occurrence of a
change in control of the Company, (B) any person (including the Company)
publicly announces an intention to take or to consider taking actions which if
consummated would constitute a change in control of the Company; (C) any
person, other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or a corporation owned, directly or
indirectly, by the stockholders of the
<PAGE> 3
Mr. Norman Alberigo
April 9, 1990
Page 3
Company in substantially the same proportions as their ownership of stock of
the Company, who is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing 10% or more of the combined voting power
of the Company's then outstanding securities, increases his beneficial
ownership of such securities by 5% or more of the combined voting power of the
Company's then outstanding securities on the date hereof; or (D) the Board
adopts a resolution to the effect that, for purposes of this Agreement, a
potential change in control of the Company has occurred. You agree that,
subject to the terms and conditions of this Agreement, in the event of a
potential change in control of the Company, you will remain in the employ of
the Company until the earliest of (i) a date which is six (6) months from the
occurrence of such potential change in control of the Company, (ii) the
termination by you of your employment by reason of Disability or Retirement as
defined in Subsection 3(i), or (iii) the occurrence of a change in control of
the Company.
3. Termination Following Change in Control. If any of the events
described in Subsection 2(i) hereof constituting a change in control of the
Company shall have occurred, you shall be entitled to the benefits provided in
Subsection 4(iii) hereof upon the subsequent termination of your employment
during the term of this Agreement unless such termination is (A) because of
your death, Disability or Retirement, (B) by the Company for Cause, or (C) by
you other than for Good Reason.
(i) Disability; Retirement. If, as a result of your
incapacity due to physical or mental illness, you shall have been absent from
the full-time performance of your duties with the Company for a period of six
(6) consecutive months, and within thirty (30) days after written notice of
termination is given you shall not have returned to the full-time performance
of your duties, your employment may be terminated for "Disability".
Termination by the Company or you of your employment based on "Retirement"
shall mean termination with your consent in accordance with the Company's
Pension Plan (as hereafter defined) including early retirement, generally
applicable to its salaried employees, provided, however, that termination based
on "Retirement" shall not include retirement in conjunction with termination by
you for Good Reason.
(ii) Cause. Termination by the Company of your employment
for "Cause" shall mean termination upon (A) the willful and continued failure
by you to substantially perform your duties with the Company (other than any
such failure resulting from your incapacity due to physical or mental illness
or any such actual or anticipated failure after the issuance of a Notice of
Termination, by you for Good Reason as defined in Subsections 3(iv) and 3(iii),
respectively) after a written demand for substantial performance is delivered
to you by the Board, which demand specifically identifies the manner in which
the Board believes that you have not substantially performed your duties, or
(B) the willful engaging by you in conduct which is demonstrably and materially
injurious to the Company, monetarily or otherwise. For purposes of this
Subsection, no act, or failure to act, on your part shall be deemed "willful"
unless done,
<PAGE> 4
Mr. Norman Alberigo
April 9, 1990
Page 4
or omitted to be done, by you not in good faith and without reasonable belief
that your action or omission was in the best interest of the Company.
Notwithstanding the foregoing, you shall not be deemed to have been terminated
for Cause unless and until there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
(3/4) of the entire membership of the Board at a meeting of the Board called
and held for such purpose (after reasonable notice to you and an opportunity
for you, together with your counsel, to be heard before the Board), finding
that in the good faith opinion of the Board you were guilty of conduct set
forth above in clauses (A) or (B) of the first sentence of this Subsection and
specifying the particulars thereof in detail.
(iii) Good Reason. You shall be entitled to terminate your
employment for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean, without your express written consent, the occurrence after a change
in control of the Company of any of the following circumstances unless, in the
case of paragraphs (A), (E), (F), (G) or (H), such circumstances are fully
corrected prior to the Date of Termination specified in the Notice of
Termination, as defined in Subsections 3(v) and 3(iv), respectively, given in
respect thereof:
(A) the assignment to you of any duties inconsistent with
your present status as Chief Executive Officer of the Company (or such
other title or titles as you may be holding immediately prior to the
change in control of the Company) or a substantial adverse alteration
in the nature or status of your responsibilities from those in effect
immediately prior to the change in control of the Company;
(B) a reduction by the Company in your annual base salary
as in effect on the date of the change in control of the Company;
(C) the relocation of the Company's principal executive
offices to a location outside of Fort Worth, Texas (or, if different,
the metropolitan area in which such offices are located immediately
prior to the change in control of the Company) or the Company's
requiring you to be based anywhere other than the Company's principal
executive offices except for required travel on the Company's business
to an extent substantially consistent with your present business
travel obligations;
(D) the failure by the Company, without your consent, to
pay to you any portion of your current compensation, or to pay to you
any portion of an installment of deferred compensation under any
deferred compensation program of the Company, within seven (7) days of
the date such compensation is due;
<PAGE> 5
Mr. Norman Alberigo
April 9, 1990
Page 5
(E) except as provided below, the failure by the Company
to continue in effect any compensation plan in which you participate
immediately prior to the change in control of the Company which is
material to your total compensation, including but not limited to the
Company's 1985 Incentive Stock Option Plan and the Incentive
Compensation Plan or any substitute plans adopted prior to the change
in control, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to such
plan, or the failure by the Company to continue your participation
therein (or in such substitute or alternative plan) on a basis not
materially less favorable, both in terms of the amount of benefits
provided and the level of your participation relative to other
participants, as existed at the time of the change in control;
(F) except as provided below, the failure of GAINSCO,
Inc. to continue to provide you with benefits substantially similar to
those enjoyed by you under the Company's Profit Sharing Plan Trust of
GAINSCO, Inc. (the "Pension Plan" or under any of the Company's other
deferred compensation plans, life insurance, medical, health and
accident, or disability plans in which you were participating at the
time of the change in control of the Company, the taking of any action
by the Company which would directly or indirectly materially reduce
any of such benefits or deprive you of any material fringe benefit
enjoyed by you at the time of the change in control of the Company, or
the failure by the Company to provide you with the number of paid
vacation days to which you are entitled on the basis of years of
service with the Company in accordance with the Company's normal
vacation policy for officers in effect at the time of the change in
control of the Company;
(G) the failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to perform this
Agreement, as contemplated in Section 5 hereof; or
(H) any purported termination of your employment which is
not effected pursuant to a Notice of Termination satisfying the
requirements of Subsection (iv) below (and, if applicable, the
requirements of Subsection (ii) above); for purposes of this
Agreement, no such purported termination shall be effective.
Your right to terminate your employment pursuant to this Subsection shall not
be affected by your incapacity due to physical or mental illness. Your
continued employment shall not constitute consent to, or a waiver of rights
with respect to, any circumstance constituting Good Reason hereunder. You may
not terminate your employment for Good Reason pursuant to paragraphs (E) or (F)
on account of the discontinuance of any plan or benefit (without an equitable
substitution) which is part of a uniform, non-discriminatory, Company-wide
reduction in benefits.
<PAGE> 6
Mr. Norman Alberigo
April 9, 1990
Page 6
(iv) Notice of Termination. Any purported termination of
your employment by the Company or by you shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section 6
hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of your employment
under the provision so indicated.
(v) Date of Termination, Etc. "Date of Termination"
shall mean (A) if your employment is terminated for Disability, thirty (30)
days after Notice of Termination is given (provided that you shall not have
returned to the full-time performance of your duties during such thirty (30)
day period), and (B) if your employment is terminated pursuant to Subsection
(ii) or (iii) above or for any other reason (other than Disability), the date
specified in the Notice of Termination (which, in the case of a termination
pursuant to Subsection (ii) above shall not be less than thirty (30) days, and
in the case of a termination pursuant to Subsection (iii) above shall not be
less than fifteen (15) nor more than sixty (60) days, respectively, from the
date such Notice of Termination is given); provided that if within fifteen (15)
days after any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this proviso), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally determined, either by mutual written agreement of
the parties, by a binding arbitration award, or by a final judgment, order or
decree of a court of competent jurisdiction (which is not appealable or with
respect to which the time for appeal therefrom has expired and no appeal has
been perfected); provided further that the Date of Termination shall be
extended by a notice of dispute only if such notice is given in good faith and
the party giving such notice pursues the resolution of such dispute with
reasonable diligence. Notwithstanding the pendency of any such dispute, the
Company will continue to pay you your full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to,
base salary) and continue you as a participant in all compensation, benefit and
insurance plans in which you were participating whether or not specifically
referenced in this Agreement when the notice giving rise to the dispute was
given, until the dispute is finally resolved in accordance with this
Subsection. Amounts paid under this Subsection are in addition to all other
amounts due under this Agreement and shall not be offset against or reduce any
other amounts due under this Agreement, except as provided in Subsection
4(iii)(B) below.
4. Compensation Upon Termination or During Disability. Following
a change in control of the Company, as defined by Subsection 2(i), upon
termination of your employment or during a period of Disability you shall be
entitled to the following benefits:
<PAGE> 7
Mr. Norman Alberigo
April 9, 1990
Page 7
(i) During any period that you fail to perform your
full-time duties with the Company as a result of incapacity due to physical or
mental illness, you shall continue to receive your salary at the rate in effect
at the commencement of such period, together with all other compensation and
benefits payable to you during such period, until this Agreement is terminated
pursuant to Section 3(i) hereof. Thereafter, or in the event your employment
shall be terminated by the Company or by you for Retirement, or by reason of
your death, your benefits shall be determined under the Company's retirement,
insurance and other compensation plans and programs then in effect in
accordance with the terms of such programs.
(ii) If your employment shall be terminated by the Company
for Cause or by you other than for Good Reason, Disability, death or
Retirement, the Company shall pay you your full base salary through the Date of
Termination at the rate in effect at the time Notice of Termination is given,
plus all other amounts to which you are entitled under any compensation or
benefit plan of the Company at the time such payments are due, and the Company
shall have no further obligations to you under this Agreement.
(iii) If your employment by the Company shall be terminated
(a) by the Company other than for Cause, Retirement or Disability or (b) by you
for Good Reason, then you shall be entitled to the benefits provided below:
(A) the Company shall pay you your full base salary
through the Date of Termination at the rate in effect at the time
Notice of Termination is given, plus all other amounts to which you
are entitled under any compensation plan of the Company, at the time
such payments are due, except as otherwise provided below; and
(B) in lieu of any further salary payments to you for
periods subsequent to the Date of Termination, the Company shall pay
as severance pay to you a lump sum cash severance payment in an amount
equal to two times your "base amount" (within the meaning of section
280G(b)(3) of the Internal Revenue Code of 1986, as amended (the
"Code")), provided, however, that such severance payment shall be no
less than 1.25 times the amount reported on your Form W-2 statement
issued by the Company with respect to the year preceding that in which
the Date of Termination occurs. Notwithstanding any other provision
of this Agreement, in the event that any payment or benefit received
or to be received by you in connection with a change in control or the
termination of your employment (whether payable pursuant to the terms
of this Agreement or any other plan, arrangement or agreement with the
Company, its successors, any person whose actions result in a change
in control or any person affiliated with (or which, as a result of the
completion of the transactions causing a change in control, will
become affiliated) the Company or such person within the meaning of
section 1504 of the Code) (all such payments and benefits being
hereinafter called the "Severance Payments") would not be deductible
(in whole or in part), by the Company, an affiliate or any person
<PAGE> 8
Mr. Norman Alberigo
April 9, 1990
Page 8
making such payment or providing such benefit as a result of Section
280G of the Code, then, to the extent necessary to make such portion
of the Severance Payments deductible (and after taking into account
any reduction in the Severance Payments provided by reason of Section
280G of the Code in such other plan, arrangement or agreement), (A)
the cash Severance Payments shall first be reduced (if necessary, to
zero), and (B) all other non-cash Severance Payments shall next be
reduced. For purposes of this limitation (i) no portion of the
Severance Payments the receipt or enjoyment of which you shall have
effectively waived in writing prior to the Date of Termination shall
be taken into account, (ii) no portion of the Severance Payments shall
be taken into account which in the opinion of tax counsel selected by
the Company's independent auditors and reasonably acceptable to you
does not constitute a "parachute payment" within the meaning of
section 280G(b)(2) of the Code, including by reason of section
280G(b)(4)(A) of the Code, (iii) the Severance Payments shall be
reduced only to the extent necessary so that the Severance Payments
(other than those referred to in clauses (i) or (ii)) in their
entirety constitute reasonable compensation for services actually
rendered within the meaning of section 280G(b)(4)(B) of the Code or
are otherwise not subjet to disallowance as deductions, in the opinion
of tax counsel referred to in clause (ii); and (iv) the value of any
non-cash benefit or any deferred payment or benefit included in the
Severance 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.
(C) the payment provided for in paragraph (B), above,
shall be made not later than the fifth day following the Date of
Termination, provided, however, that if the amount of such payment
cannot be finally determined on or before such day, the Company shall
pay to you on such day an estimate, as determined in good faith by the
Company, of the minimum amount of such payment and shall pay the
remainder of such payment (together with interest at the rate provided
in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof
can be determined but in no event later the thirtieth day after the
Date of Termination. In the event that the amount of the estimated
payment exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to you, payable on
the fifth day after demand by the Company (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code).
(D) the Company also shall pay to you all legal fees and
expenses incurred by you as a result of such termination (including
all such legal fees and legal expenses, if any, incurred in contesting
or disputing any such termination or in seeking to obtain or enforce
any right or benefit 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 payments shall be made at the later of the
times specified in paragraph (C) above, or within five (5) days after
your request
<PAGE> 9
Mr. Norman Alberigo
April 9, 1990
Page 9
for payment accompanied with such evidence of fees and expenses
incurred as the Company reasonably may require.
(iv) You shall not be required to mitigate the amount of
any payment provided for in this Section 4 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in this
Section 4 be reduced by any compensation earned by you as the result of
employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by you to the Company, or otherwise.
(v) In addition to all other amounts payable to you under
this Section 4, you shall be entitled to receive all benefits payable to you,
at the respective time or times such payments are due, under the Pension
Plan[s], and any other plan or agreement relating to retirement benefits.
5. Successors; Binding Agreement. (i) The Company will require
any successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/or assets of the
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. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle you to compensation from
the Company in the same amount and on the same terms as you would be entitled
to hereunder if you terminate your employment for Good Reason following a
change in control of the Company, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement
by operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If you
should die while any amount would still be payable to you hereunder if you had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with terms of this Agreement to your devisee, legatee or
other designee or, if there is no such designee, to your estate.
6. Notice. 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 pre-paid, addressed
to the respective addressees set forth on the first page of this Agreement,
provided that all notice to the Company shall be directed to the attention of
the Board with a copy to the Secretary of the Company, or to such other address
as either party may have furnished to
<PAGE> 10
Mr. Norman Alberigo
April 9, 1990
Page 10
the other in writing in accordance herewith, except that notice of change of
address shall be effective only upon receipt.
7. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by you and such officer as may be duly
authorized to act on the Company's behalf. No waiver by either party hereto at
any time of any breach by the other party hereto of, or non-compliance with,
any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar of 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 expressly
set forth in this Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Texas. All references to sections of the Exchange Act or the Code shall be
deemed also to refer to any successor provisions to such sections. Any
payments provided for hereunder shall be paid net of any applicable withholding
required under federal, state or local law. The obligations of the Company
under Subsections 4(i), 4(ii), 4(iii)(D) and 4(v) shall survive the expiration
of the term of this Agreement.
8. Validity. The invalidity or unenforceability or any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled, at the Company's expense,
exclusively by arbitration in Tarrant County, Texas in accordance with the
rules of the American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court having jurisdiction; provided,
however, that you shall be entitled to seek specific performance of your right
to be paid until the Date of Termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
<PAGE> 11
Mr. Norman Alberigo
April 9, 1990
Page 11
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter which
will then constitute our agreement on this subject.
Sincerely,
GAINSCO Service Corp.
By: /s/ Joseph D. Macchia
---------------------------------------
Joseph D. Macchia
President and Chief Executive Officer
Agreed to this 9th day
of April, 1990
/s/ Norman Alberigo
- - -----------------------------------
<PAGE> 1
EXHIBIT 10.35
[THE GAINSCO COMPANIES LETTERHEAD]
April 9, 1990
Ms. Carolyn E. Ray
Vice President
GAINSCO, INC.
5701 East Loop 820 South
Fort Worth, Texas 76119
Dear Ms. Ray:
GAINSCO Service Corp. (the "Company") considers it essential to the
best interests of its stockholders to foster the continuous employment of key
management personnel. In this connection, the Board of Directors of the
Company (the "Board") recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of
the Company's management, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from
the possibility of a change in control of the Company, although no such change
is now contemplated.
In order to induce you to remain in the employ of the Company and in
consideration of your agreement set forth in Subsection 2(ii) hereof, the
Company agrees that you shall receive the severance benefits set forth in this
letter agreement ("Agreement") in the event your employment with the Company is
terminated subsequent to a "change in control of the Company" (as defined in
Section 2 hereof) under the circumstances described below.
1. Term of Agreement. This Agreement shall commence on the date
hereof and shall continue in effect through December 31, 1991; provided,
however, that commencing on January 1, 1991 and each January thereafter, the
term of this Agreement shall automatically be extended for one additional year
unless, not later than the September 30 preceding each such January 1,
<PAGE> 2
Ms. Carolyn E. Ray
April 9, 1990
Page 2
the Company shall have given notice that it does not wish to extend this
Agreement; provided, further, if a change in control of the Company shall have
occurred during the original or extended term of this Agreement, this Agreement
shall continue in effect for the later of (i) the original or extended term or
(ii) a period of twenty-four (24) months beyond the month in which such change
in control occurred. Notwithstanding the foregoing, in no event shall the term
of this Agreement extend beyond the date that you attain sixty-five years of
age.
2. Change in Control. (i) No benefits shall be payable hereunder
unless there shall have been a change in control of the Company, as set forth
below. For purposes of this Agreement, a "change in control of the Company"
shall be deemed to have occurred if (A) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or a corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company,
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the Company's then
outstanding securities; or (B) during any period of two consecutive years (not
including any period prior to the execution of this Agreement), 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 clauses (A), (C) or (D)
of this Subsection) whose election by the Board or nomination for election by
the Company's stockholders was approved by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority thereof;
or (C) the shareholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than 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 entity) at least 75% of
the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation, or
(D) the shareholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company of all
or substantially all the Company's assets.
(ii) For purposes of this Agreement, a "potential change in control
of the Company" shall be deemed to have occurred if (A) the Company enters into
an agreement, the consummation of which would result in the occurrence of a
change in control of the Company, (B) any person (including the Company)
publicly announces an intention to take or to consider taking actions which if
consummated would constitute a change in control of the Company; (C) any
person, other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or a corporation owned, directly or
indirectly, by the stockholders of the
<PAGE> 3
Ms. Carolyn E. Ray
April 9, 1990
Page 3
Company in substantially the same proportions as their ownership of stock of
the Company, who is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing 10% or more of the combined voting power
of the Company's then outstanding securities, increases his beneficial
ownership of such securities by 5% or more of the combined voting power of the
Company's then outstanding securities on the date hereof; or (D) the Board
adopts a resolution to the effect that, for purposes of this Agreement, a
potential change in control of the Company has occurred. You agree that,
subject to the terms and conditions of this Agreement, in the event of a
potential change in control of the Company, you will remain in the employ of
the Company until the earliest of (i) a date which is six (6) months from the
occurrence of such potential change in control of the Company, (ii) the
termination by you of your employment by reason of Disability or Retirement as
defined in Subsection 3(i), or (iii) the occurrence of a change in control of
the Company.
3. Termination Following Change in Control. If any of the events
described in Subsection 2(i) hereof constituting a change in control of the
Company shall have occurred, you shall be entitled to the benefits provided in
Subsection 4(iii) hereof upon the subsequent termination of your employment
during the term of this Agreement unless such termination is (A) because of
your death, Disability or Retirement, (B) by the Company for Cause, or (C) by
you other than for Good Reason.
(i) Disability; Retirement. If, as a result of your
incapacity due to physical or mental illness, you shall have been absent from
the full-time performance of your duties with the Company for a period of six
(6) consecutive months, and within thirty (30) days after written notice of
termination is given you shall not have returned to the full-time performance
of your duties, your employment may be terminated for "Disability".
Termination by the Company or you of your employment based on "Retirement"
shall mean termination with your consent in accordance with the Company's
Pension Plan (as hereafter defined) including early retirement, generally
applicable to its salaried employees, provided, however, that termination based
on "Retirement" shall not include retirement in conjunction with termination by
you for Good Reason.
(ii) Cause. Termination by the Company of your employment
for "Cause" shall mean termination upon (A) the willful and continued failure
by you to substantially perform your duties with the Company (other than any
such failure resulting from your incapacity due to physical or mental illness
or any such actual or anticipated failure after the issuance of a Notice of
Termination, by you for Good Reason as defined in Subsections 3(iv) and 3(iii),
respectively) after a written demand for substantial performance is delivered
to you by the Board, which demand specifically identifies the manner in which
the Board believes that you have not substantially performed your duties, or
(B) the willful engaging by you in conduct which is demonstrably and materially
injurious to the Company, monetarily or otherwise. For purposes of this
Subsection, no act, or failure to act, on your part shall be deemed "willful"
unless done,
<PAGE> 4
Ms. Carolyn E. Ray
April 9, 1990
Page 4
or omitted to be done, by you not in good faith and without reasonable belief
that your action or omission was in the best interest of the Company.
Notwithstanding the foregoing, you shall not be deemed to have been terminated
for Cause unless and until there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
(3/4) of the entire membership of the Board at a meeting of the Board called
and held for such purpose (after reasonable notice to you and an opportunity
for you, together with your counsel, to be heard before the Board), finding
that in the good faith opinion of the Board you were guilty of conduct set
forth above in clauses (A) or (B) of the first sentence of this Subsection and
specifying the particulars thereof in detail.
(iii) Good Reason. You shall be entitled to terminate your
employment for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean, without your express written consent, the occurrence after a change
in control of the Company of any of the following circumstances unless, in the
case of paragraphs (A), (E), (F), (G) or (H), such circumstances are fully
corrected prior to the Date of Termination specified in the Notice of
Termination, as defined in Subsections 3(v) and 3(iv), respectively, given in
respect thereof:
(A) the assignment to you of any duties inconsistent with
your present status as Chief Executive Officer of the Company (or such
other title or titles as you may be holding immediately prior to the
change in control of the Company) or a substantial adverse alteration
in the nature or status of your responsibilities from those in effect
immediately prior to the change in control of the Company;
(B) a reduction by the Company in your annual base salary
as in effect on the date of the change in control of the Company;
(C) the relocation of the Company's principal executive
offices to a location outside of Fort Worth, Texas (or, if different,
the metropolitan area in which such offices are located immediately
prior to the change in control of the Company) or the Company's
requiring you to be based anywhere other than the Company's principal
executive offices except for required travel on the Company's business
to an extent substantially consistent with your present business
travel obligations;
(D) the failure by the Company, without your consent, to
pay to you any portion of your current compensation, or to pay to you
any portion of an installment of deferred compensation under any
deferred compensation program of the Company, within seven (7) days of
the date such compensation is due;
<PAGE> 5
Ms. Carolyn E. Ray
April 9, 1990
Page 5
(E) except as provided below, the failure by the Company
to continue in effect any compensation plan in which you participate
immediately prior to the change in control of the Company which is
material to your total compensation, including but not limited to the
Company's 1985 Incentive Stock Option Plan and the Incentive
Compensation Plan or any substitute plans adopted prior to the change
in control, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to such
plan, or the failure by the Company to continue your participation
therein (or in such substitute or alternative plan) on a basis not
materially less favorable, both in terms of the amount of benefits
provided and the level of your participation relative to other
participants, as existed at the time of the change in control;
(F) except as provided below, the failure of GAINSCO,
Inc. to continue to provide you with benefits substantially similar to
those enjoyed by you under the Company's Profit Sharing Plan Trust of
GAINSCO, Inc. (the "Pension Plan" or under any of the Company's other
deferred compensation plans, life insurance, medical, health and
accident, or disability plans in which you were participating at the
time of the change in control of the Company, the taking of any action
by the Company which would directly or indirectly materially reduce
any of such benefits or deprive you of any material fringe benefit
enjoyed by you at the time of the change in control of the Company, or
the failure by the Company to provide you with the number of paid
vacation days to which you are entitled on the basis of years of
service with the Company in accordance with the Company's normal
vacation policy for officers in effect at the time of the change in
control of the Company;
(G) the failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to perform this
Agreement, as contemplated in Section 5 hereof; or
(H) any purported termination of your employment which is
not effected pursuant to a Notice of Termination satisfying the
requirements of Subsection (iv) below (and, if applicable, the
requirements of Subsection (ii) above); for purposes of this
Agreement, no such purported termination shall be effective.
Your right to terminate your employment pursuant to this Subsection shall not
be affected by your incapacity due to physical or mental illness. Your
continued employment shall not constitute consent to, or a waiver of rights
with respect to, any circumstance constituting Good Reason hereunder. You may
not terminate your employment for Good Reason pursuant to paragraphs (E) or (F)
on account of the discontinuance of any plan or benefit (without an equitable
substitution) which is part of a uniform, non-discriminatory, Company-wide
reduction in benefits.
<PAGE> 6
Ms. Carolyn E. Ray
April 9, 1990
Page 6
(iv) Notice of Termination. Any purported termination of
your employment by the Company or by you shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section 6
hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of your employment
under the provision so indicated.
(v) Date of Termination, Etc. "Date of Termination"
shall mean (A) if your employment is terminated for Disability, thirty (30)
days after Notice of Termination is given (provided that you shall not have
returned to the full-time performance of your duties during such thirty (30)
day period), and (B) if your employment is terminated pursuant to Subsection
(ii) or (iii) above or for any other reason (other than Disability), the date
specified in the Notice of Termination (which, in the case of a termination
pursuant to Subsection (ii) above shall not be less than thirty (30) days, and
in the case of a termination pursuant to Subsection (iii) above shall not be
less than fifteen (15) nor more than sixty (60) days, respectively, from the
date such Notice of Termination is given); provided that if within fifteen (15)
days after any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this proviso), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally determined, either by mutual written agreement of
the parties, by a binding arbitration award, or by a final judgment, order or
decree of a court of competent jurisdiction (which is not appealable or with
respect to which the time for appeal therefrom has expired and no appeal has
been perfected); provided further that the Date of Termination shall be
extended by a notice of dispute only if such notice is given in good faith and
the party giving such notice pursues the resolution of such dispute with
reasonable diligence. Notwithstanding the pendency of any such dispute, the
Company will continue to pay you your full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to,
base salary) and continue you as a participant in all compensation, benefit and
insurance plans in which you were participating whether or not specifically
referenced in this Agreement when the notice giving rise to the dispute was
given, until the dispute is finally resolved in accordance with this
Subsection. Amounts paid under this Subsection are in addition to all other
amounts due under this Agreement and shall not be offset against or reduce any
other amounts due under this Agreement, except as provided in Subsection
4(iii)(B) below.
4. Compensation Upon Termination or During Disability. Following
a change in control of the Company, as defined by Subsection 2(i), upon
termination of your employment or during a period of Disability you shall be
entitled to the following benefits:
<PAGE> 7
Ms. Carolyn E. Ray
April 9, 1990
Page 7
(i) During any period that you fail to perform your
full-time duties with the Company as a result of incapacity due to physical or
mental illness, you shall continue to receive your salary at the rate in effect
at the commencement of such period, together with all other compensation and
benefits payable to you during such period, until this Agreement is terminated
pursuant to Section 3(i) hereof. Thereafter, or in the event your employment
shall be terminated by the Company or by you for Retirement, or by reason of
your death, your benefits shall be determined under the Company's retirement,
insurance and other compensation plans and programs then in effect in
accordance with the terms of such programs.
(ii) If your employment shall be terminated by the Company
for Cause or by you other than for Good Reason, Disability, death or
Retirement, the Company shall pay you your full base salary through the Date of
Termination at the rate in effect at the time Notice of Termination is given,
plus all other amounts to which you are entitled under any compensation or
benefit plan of the Company at the time such payments are due, and the Company
shall have no further obligations to you under this Agreement.
(iii) If your employment by the Company shall be terminated
(a) by the Company other than for Cause, Retirement or Disability or (b) by you
for Good Reason, then you shall be entitled to the benefits provided below:
(A) the Company shall pay you your full base salary
through the Date of Termination at the rate in effect at the time
Notice of Termination is given, plus all other amounts to which you
are entitled under any compensation plan of the Company, at the time
such payments are due, except as otherwise provided below; and
(B) in lieu of any further salary payments to you for
periods subsequent to the Date of Termination, the Company shall pay
as severance pay to you a lump sum cash severance payment in an amount
equal to two times your "base amount" (within the meaning of section
280G(b)(3) of the Internal Revenue Code of 1986, as amended (the
"Code")), provided, however, that such severance payment shall be no
less than 1.25 times the amount reported on your Form W-2 statement
issued by the Company with respect to the year preceding that in which
the Date of Termination occurs. Notwithstanding any other provision
of this Agreement, in the event that any payment or benefit received
or to be received by you in connection with a change in control or the
termination of your employment (whether payable pursuant to the terms
of this Agreement or any other plan, arrangement or agreement with the
Company, its successors, any person whose actions result in a change
in control or any person affiliated with (or which, as a result of the
completion of the transactions causing a change in control, will
become affiliated) the Company or such person within the meaning of
section 1504 of the Code) (all such payments and benefits being
hereinafter called the "Severance Payments") would not be deductible
(in whole or in part), by the Company, an affiliate or any person
<PAGE> 8
Ms. Carolyn E. Ray
April 9, 1990
Page 8
making such payment or providing such benefit as a result of Section
280G of the Code, then, to the extent necessary to make such portion
of the Severance Payments deductible (and after taking into account
any reduction in the Severance Payments provided by reason of Section
280G of the Code in such other plan, arrangement or agreement), (A)
the cash Severance Payments shall first be reduced (if necessary, to
zero), and (B) all other non-cash Severance Payments shall next be
reduced. For purposes of this limitation (i) no portion of the
Severance Payments the receipt or enjoyment of which you shall have
effectively waived in writing prior to the Date of Termination shall
be taken into account, (ii) no portion of the Severance Payments shall
be taken into account which in the opinion of tax counsel selected by
the Company's independent auditors and reasonably acceptable to you
does not constitute a "parachute payment" within the meaning of
section 280G(b)(2) of the Code, including by reason of section
280G(b)(4)(A) of the Code, (iii) the Severance Payments shall be
reduced only to the extent necessary so that the Severance Payments
(other than those referred to in clauses (i) or (ii)) in their
entirety constitute reasonable compensation for services actually
rendered within the meaning of section 280G(b)(4)(B) of the Code or
are otherwise not subjet to disallowance as deductions, in the opinion
of tax counsel referred to in clause (ii); and (iv) the value of any
non-cash benefit or any deferred payment or benefit included in the
Severance 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.
(C) the payment provided for in paragraph (B), above,
shall be made not later than the fifth day following the Date of
Termination, provided, however, that if the amount of such payment
cannot be finally determined on or before such day, the Company shall
pay to you on such day an estimate, as determined in good faith by the
Company, of the minimum amount of such payment and shall pay the
remainder of such payment (together with interest at the rate provided
in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof
can be determined but in no event later the thirtieth day after the
Date of Termination. In the event that the amount of the estimated
payment exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to you, payable on
the fifth day after demand by the Company (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code).
(D) the Company also shall pay to you all legal fees and
expenses incurred by you as a result of such termination (including
all such legal fees and legal expenses, if any, incurred in contesting
or disputing any such termination or in seeking to obtain or enforce
any right or benefit 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 payments shall be made at the later of the
times specified in paragraph (C) above, or within five (5) days after
your request
<PAGE> 9
Ms. Carolyn E. Ray
April 9, 1990
Page 9
for payment accompanied with such evidence of fees and expenses
incurred as the Company reasonably may require.
(iv) You shall not be required to mitigate the amount of
any payment provided for in this Section 4 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in this
Section 4 be reduced by any compensation earned by you as the result of
employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by you to the Company, or otherwise.
(v) In addition to all other amounts payable to you under
this Section 4, you shall be entitled to receive all benefits payable to you,
at the respective time or times such payments are due, under the Pension
Plan[s], and any other plan or agreement relating to retirement benefits.
5. Successors; Binding Agreement. (i) The Company will require
any successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/or assets of the
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. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle you to compensation from
the Company in the same amount and on the same terms as you would be entitled
to hereunder if you terminate your employment for Good Reason following a
change in control of the Company, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement
by operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If you
should die while any amount would still be payable to you hereunder if you had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with terms of this Agreement to your devisee, legatee or
other designee or, if there is no such designee, to your estate.
6. Notice. 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 pre-paid, addressed
to the respective addressees set forth on the first page of this Agreement,
provided that all notice to the Company shall be directed to the attention of
the Board with a copy to the Secretary of the Company, or to such other address
as either party may have furnished to
<PAGE> 10
Ms. Carolyn E. Ray
April 9, 1990
Page 10
the other in writing in accordance herewith, except that notice of change of
address shall be effective only upon receipt.
7. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by you and such officer as may be duly
authorized to act on the Company's behalf. No waiver by either party hereto at
any time of any breach by the other party hereto of, or non-compliance with,
any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar of 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 expressly
set forth in this Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Texas. All references to sections of the Exchange Act or the Code shall be
deemed also to refer to any successor provisions to such sections. Any
payments provided for hereunder shall be paid net of any applicable withholding
required under federal, state or local law. The obligations of the Company
under Subsections 4(i), 4(ii), 4(iii)(D) and 4(v) shall survive the expiration
of the term of this Agreement.
8. Validity. The invalidity or unenforceability or any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled, at the Company's expense,
exclusively by arbitration in Tarrant County, Texas in accordance with the
rules of the American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court having jurisdiction; provided,
however, that you shall be entitled to seek specific performance of your right
to be paid until the Date of Termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
<PAGE> 11
Ms. Carolyn E. Ray
April 9, 1990
Page 11
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter which
will then constitute our agreement on this subject.
Sincerely,
GAINSCO Service Corp.
By: /s/ Joseph D. Macchia
---------------------------------------
Joseph D. Macchia
President and Chief Executive Officer
Agreed to this 9th day
of April, 1990
/s/ Carolyn E. Ray
- - -----------------------------------
<PAGE> 1
EXHIBIT 10.36
[THE GAINSCO COMPANIES LETTERHEAD]
November 10, 1994
Mr. Mark D. Brissman
Vice President
GAINSCO, INC.
500 Commerce
Fort Worth, Texas 76102
Dear Mr. Brissman:
GAINSCO Service Corp. (the "Company") considers it essential to the
best interests of its stockholders to foster the continuous employment of key
management personnel. In this connection, the Board of Directors of the
Company (the "Board") recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of
the Company's management, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from
the possibility of a change in control of the Company, although no such change
is now contemplated.
In order to induce you to remain in the employ of the Company and in
consideration of your agreement set forth in Subsection 2(ii) hereof, the
Company agrees that you shall receive the severance benefits set forth in this
letter agreement ("Agreement") in the event your employment with the Company is
terminated subsequent to a "change in control of the Company" (as defined in
Section 2 hereof) under the circumstances described below.
1. Term of Agreement. This Agreement shall commence on the date
hereof and shall continue in effect through December 31, 1994; provided,
however, that commencing on January 1, 1995 and each January thereafter, the
term of this Agreement shall automatically be extended for one additional year
unless, not later than the September 30 preceding each such January 1, the
Company shall have given notice that it does not wish to extend this Agreement;
provided, further, if a change in control of the Company shall have occurred
during the original or extended term of this Agreement, this Agreement shall
continue in effect for the later of (i) the original or extended term or (ii) a
period of twenty-four (24) months beyond the month in which such change in
control occurred. Notwithstanding the foregoing, in no event shall the
<PAGE> 2
Mr. Mark D. Brissman
November 10, 1994
Page 2
_____________________________
term of this Agreement extend beyond the date that you attain sixty-five years
of age.
2. Change in Control. (i) No benefits shall be payable hereunder
unless there shall have been a change in control of the Company, as set forth
below. For purposes of this Agreement, a "change in control of the Company"
shall be deemed to have occurred if (A) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or a corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company,
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the Company's then
outstanding securities; or (B) during any period of two consecutive years (not
including any period prior to the execution of this Agreement), 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 clauses (A), (C) or (D)
of this Subsection) whose election by the Board or nomination for election by
the Company's stockholders was approved by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority thereof;
or (C) the shareholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than 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 entity) at least 75% of
the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation, or
(D) the shareholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company of all
or substantially all the Company's assets.
(ii) For purposes of this Agreement, a "potential change
in control of the Company" shall be deemed to have occurred if (A) the Company
enters into an agreement, the consummation of which would result in the
occurrence of a change in control of the Company, (B) any person (including the
Company) publicly announces an intention to take or to consider taking actions
which if consummated would constitute a change in control of the Company; (C)
any person, other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company, who is or becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 10% or more of the combined voting power of the Company's then
outstanding
<PAGE> 3
Mr. Mark D. Brissman
November 10, 1994
Page 3
_____________________________
securities, increases his beneficial ownership of such securities by 5% or more
of the combined voting power of the Company's then outstanding securities on
the date hereof; or (D) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a potential change in control of the Company has
occurred. You agree that, subject to the terms and conditions of this
Agreement, in the event of a potential change in control of the Company, you
will remain in the employ of the Company until the earliest of (i) a date which
is six (6) months from the occurrence of such potential change in control of
the Company, (ii) the termination by you of your employment by reason of
Disability or Retirement as defined in Subsection 3(i), or (iii) the occurrence
of a change in control of the Company.
3. Termination Following Change in Control. If any of the events
described in Subsection 2(i) hereof constituting a change in control of the
Company shall have occurred, you shall be entitled to the benefits provided in
Subsection 4(iii) hereof upon the subsequent termination of your employment
during the term of this Agreement unless such termination is (A) because of
your death, Disability or Retirement, (B) by the Company for Cause, or (C) by
you other than for Good Reason.
(i) Disability; Retirement. If, as a result of your
incapacity due to physical or mental illness, you shall have been absent from
the full-time performance of your duties with the Company for a period of six
(6) consecutive months, and within thirty (30) days after written notice of
termination is given you shall not have returned to the full-time performance
of your duties, your employment may be terminated for "Disability."
Termination by the Company or you of your employment based on "Retirement"
shall mean termination with your consent in accordance with the Company's
Pension Plan (as hereafter defined) including early retirement, generally
applicable to its salaried employees, provided, however, that termination based
on "Retirement" shall not include retirement in conjunction with termination by
you for Good Reason.
(ii) Cause. Termination by the Company of your employment
for "Cause" shall mean termination upon (A) the willful and continued failure
by you to substantially perform your duties with the Company (other than any
such failure resulting from your incapacity due to physical or mental illness
or any such actual or anticipated failure after the issuance of a Notice of
Termination, by you for Good Reason as defined in Subsections 3(iv) and 3(iii),
respectively) after a written demand for substantial performance is delivered
to you by the Board, which demand specifically identifies the manner in which
the Board believes that you have not substantially performed your duties, or
(B) the willful engaging by you in conduct which is demonstrably and materially
injurious to the Company, monetarily or otherwise. For purposes of this
Subsection, no act, or failure to act, on your part shall be deemed "willful"
unless done, or omitted to be done, by you not in good faith and without
reasonable belief that
<PAGE> 4
Mr. Mark D. Brissman
November 10, 1994
Page 4
_____________________________
your action or omission was in the best interest of the Company.
Notwithstanding the foregoing, you shall not be deemed to have been terminated
for Cause unless and until there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
(3/4) of the entire membership of the Board at a meeting of the Board called
and held for such purpose (after reasonable notice to you and an opportunity
for you, together with your counsel, to be heard before the Board), finding
that in the good faith opinion of the Board you were guilty of conduct set
forth above in clauses (A) or (B) of the first sentence of this Subsection and
specifying the particulars thereof in detail.
(iii) Good Reason. You shall be entitled to terminate your
employment for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean, without your express written consent, the occurrence after a change
in control of the Company of any of the following circumstances unless, in the
case of paragraphs (A), (E), (F), (G) or (H), such circumstances are fully
corrected prior to the Date of Termination specified in the Notice of
Termination, as defined in Subsections 3(v) and 3(iv), respectively, given in
respect thereof:
(A) the assignment to you of any duties inconsistent with
your present status as Vice President of the Company (or such other
title or titles as you may be holding immediately prior to the change
in control of the Company) or a substantial adverse alteration in the
nature or status of your responsibilities from those in effect
immediately prior to the change in control of the Company;
(B) a reduction by the Company in your annual base salary
as in effect on the date of the change in control of the Company;
(C) the relocation of the Company's principal executive
offices to a location outside of Fort Worth, Texas (or, if different,
the metropolitan area in which such offices are located immediately
prior to the change in control of the Company) or the Company's
requiring you to be based anywhere other than the Company's principal
executive offices except for required travel on the Company's business
to an extent substantially consistent with your present business
travel obligations;
(D) the failure by the Company, without your consent, to
pay to you any portion of your current compensation, or to pay to you
any portion of an installment of deferred compensation under any
deferred compensation program of the Company, within seven (7) days of
the date such compensation is due;
(E) except as provided below, the failure by the Company
to continue in effect any compensation plan in which you participate
immediately prior to the change in
<PAGE> 5
Mr. Mark D. Brissman
November 10, 1994
Page 5
_____________________________
control of the Company which is material to your total compensation,
including but not limited to the Company's 1990 Incentive Stock Option
Plan and the Incentive Compensation Plan or any substitute plans
adopted prior to the change in control, unless an equitable
arrangement (embodied in an ongoing substitute or alternative plan)
has been made with respect to such plan, or the failure by the Company
to continue your participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable, both in
terms of the amount of benefits provided and the level of your
participation relative to other participants, as existed at the time
of the change in control;
(F) except as provided below, the failure of GAINSCO,
Inc. to continue to provide you with benefits substantially similar to
those enjoyed by you under the Company's Profit Sharing Plan Trust of
GAINSCO, Inc. (the "Pension Plan" or under any of the Company's other
deferred compensation plans, life insurance, medical, health and
accident, or disability plans in which you were participating at the
time of the change in control of the Company, the taking of any action
by the Company which would directly or indirectly materially reduce
any of such benefits or deprive you of any material fringe benefit
enjoyed by you at the time of the change in control of the Company, or
the failure by the Company to provide you with the number of paid
vacation days to which you are entitled on the basis of years of
service with the Company in accordance with the Company's normal
vacation policy for officers in effect at the time of the change in
control of the Company;
(G) the failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to perform this
Agreement, as contemplated in Section 5 hereof; or
(H) any purported termination of your employment which is
not effected pursuant to a Notice of Termination satisfying the
requirements of Subsection (iv) below (and, if applicable, the
requirements of Subsection (ii) above); for purposes of this
Agreement, no such purported termination shall be effective.
Your right to terminate your employment purchase to this Subsection shall not
be affected by your incapacity due to physical or mental illness. Your
continued employment shall not constitute consent to, or a waiver of rights
with respect to, any circumstance constituting Good Reason hereunder. You may
not terminate your employment for Good Reason pursuant to paragraphs (E) or (F)
on account of the discontinuance of any plan or benefit (without an equitable
substitution) which is part of a uniform, non-discriminatory, Company-wide
reduction in benefits.
<PAGE> 6
Mr. Mark D. Brissman
November 10, 1994
Page 6
_____________________________
(iv) Notice of Termination. Any purported termination of
your employment by the Company or by you shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section 6
hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of your employment
under the provision so indicated.
(v) Date of Termination, Etc. "Date of Termination"
shall mean (A) if y our employment is terminated for Disability, thirty )30)
days after Notice of Termination is given (provided that you shall not have
returned to the full-time performance of your duties during such thirty (30)
day period), and (B) if your employment is terminated pursuant to Subsection
(ii) or (iii) above or for any other reason (other than Disability), the date
specified in the Notice of Termination (which, in the case of a termination
pursuant to Subsection (ii) above shall not be less than thirty (30) days, and
in the case of a termination pursuant to Subsection (iii) above shall not be
less than fifteen (15) nor more than sixty (60) days, respectively, from the
date such Notice of Termination is given); provided that if within fifteen (15)
days after any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this proviso), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally determined, either by mutual written agreement of
the parties, by a binding arbitration award, or by a final judgment, order or
decree of a court of competent jurisdiction (which is not appealable or with
respect to which the time for appeal therefrom has expired and no appeal has
been perfected); provided further that the Date of Termination shall be
extended by a notice of dispute only if such notice is given in good faith and
the party giving such notice pursues the resolution of such dispute with
reasonable diligence. Notwithstanding the pendency of any such dispute, the
Company will continue to pay you your full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to,
base salary) and continue you as a participant in all compensation, benefit and
insurance plans in which you were participating whether or not specifically
referenced in this Agreement when the notice giving rise to the dispute was
given, until the dispute is finally resolved in accordance with this
Subsection. Amounts paid under this Subsection are in addition to all other
amounts due under this Agreement and shall not be offset against or reduce any
other amounts due under this Agreement, except as provided in Subsection
4(iii)(B) below.
4. Compensation Upon Termination or During Disability. Following
a change in control of the Company, as defined by Subsection 2(i), upon
termination of your employment or during a period of Disability you shall be
entitled to the following benefits:
<PAGE> 7
Mr. Mark D. Brissman
November 10, 1994
Page 7
_____________________________
(i) During any period that you fail to perform your
full-time duties with the Company as a result of incapacity due to physical or
mental illness, you shall continue to receive your salary at the rate in effect
at the commencement of such period, together with all other compensation and
benefits payable to you during such period, until this Agreement is terminated
pursuant to Section 3(i) hereof. Thereafter, or in the event your employment
shall be terminated by the Company or by you for Retirement, or by reason of
your death, your benefits shall be determined under the Company's retirement,
insurance and other compensation plans and programs then in effect in
accordance with the terms of such programs.
(ii) If your employment shall be terminated by the Company
for Cause or by you other than for Good Reason, Disability, death or
Retirement, the Company shall pay you your full base salary through the Date of
Termination at the rate in effect at the time Notice of Termination is given,
plus all other amounts to which you are entitled under any compensation or
benefit plan of the Company at the time such payments are due, and the Company
shall have no further obligations to you under this Agreement.
(iii) If your employment by the Company shall be terminated
(a) by the Company other than for Cause, Retirement or Disability or (b) by you
for Good Reason, then you shall be entitled to the benefits provided below:
(A) the Company shall pay you your full base salary
through the Date of Termination at the rate in effect at the time
Notice of Termination is given, plus all other amounts to which you
are entitled under any compensation plan of the Company, at the time
such payments are due, except as otherwise provided below; and
(B) in lieu of any further salary payments to you for
periods subsequent to the Date of Termination, the Company shall pay
as severance pay to you a lump sum cash severance payment in an amount
equal to two times your "base amount" (within the meaning of section
280G(b)(3) of the Internal Revenue Code of 1986, as amended (the
"Code")), provided, however, that such severance payment shall be no
less than 1.25 times the amount reported on your Form W-2 statement
issued by the Company with respect to the year preceding that in which
the Date of Termination occurs. Notwithstanding any other provision
of this Agreement, in the event that any payment or benefit received
or to be received by you in connection with a change in control or the
termination of your employment (whether payable pursuant to the terms
of this Agreement or any other plan, arrangement or agreement with the
Company, its successors, any person whose actions result in a change
in control or any person affiliated with (or which, as a result of the
completion of the transactions causing a change in control, will
become affiliated) the Company or such person within the
<PAGE> 8
Mr. Mark D. Brissman
November 10, 1994
Page 8
_____________________________
meaning of section 1504 of the Code) (all such payments and benefits
being hereinafter called the "Severance Payments") would not be
deductible (in whole or in part), by the Company, an affiliate or any
person making such payment or providing such benefit as a result of
section 280G of the Code, then, to the extent necessary to make such
portion of the Severance Payments deductible (and after taking into
account any reduction in the Severance Payments provided by reason of
section 280G of the Code in such other plan, arrangement or
agreement), (A) the cash Severance Payments shall first be reduced (if
necessary, to zero), and (B) all other non-cash Severance Payments
shall next be reduced. For purposes of this limitation (i) no portion
of the Severance Payments the receipt or enjoyment of which you shall
have effectively waived in writing prior to the Date of Termination
shall be taken into account, (ii) no portion of the Severance Payments
shall be taken into account which in the opinion of tax counsel
selected by the Company's independent auditors and reasonably
acceptable to you does not constitute a "parachute payment" within the
meaning of section 280G(b)(2) of the Code, including by reason of
section 280G(b)(4)(A) of the Code, (iii) the Severance Payments shall
be reduced only to the extent necessary so that the Severance Payments
(other than those referred to in clauses (i) or (ii)) in their
entirety constitute reasonable compensation for services actually
rendered within the meaning of section 280G(b)(4)(B) of the Code or
are otherwise not subject to disallowance as deductions, in the
opinion of tax counsel referred to in clause (ii); and (iv) the value
of any non-cash benefit or any deferred payment or benefit included in
the Severance 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.
(C) the payment provided for in paragraph (B) above,
shall be made not later than the fifth day following the Date of
Termination, provided, however, that if the amount of such payment
cannot be finally determined on or before such day, the Company shall
pay to you on such day an estimate, as determined in good faith by the
Company, of the minimum amount of such payment and shall pay the
remainder of such payment (together with interest at the rate provided
in section 1274(b)(2)(B) of the Code) as soon as the amount thereof
can be determined but in no event later the thirtieth day after the
Date of Termination. In the event that the amount of the estimated
payment exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to you, payable on
the fifth day after demand by the Company (together with interest at
the rate provided in section 1274(b)(2)(B) of the Code).
(D) the Company also shall pay to you all legal fees and
expenses incurred by you as a result of such termination (including
all such legal fees and legal expenses, if
<PAGE> 9
Mr. Mark D. Brissman
November 10, 1994
Page 9
_____________________________
any, incurred in contesting or disputing any such termination or in
seeking to obtain or enforce any right or benefit 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 payments shall be
made at the later of the times specified in paragraph (C) above, or
within five (5) days after your request for payment accompanied with
such evidence of fees and expenses incurred as the Company reasonably
may require.
(iv) You shall not be required to mitigate the amount of
any payment provided for in this Section 4 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in this
Section 4 be reduced by any compensation earned by you as the result of
employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by you to the Company, or otherwise.
(v) In addition to all other amounts payable to you under
this Section 4, you shall be entitled to receive all benefits payable to you,
at the respective time or times such payments are due, under the Pension
Plan[s], and any other plan or agreement relating to retirement benefits.
5. Successors; Binding Agreement. (i) The Company will require
any successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/or assets of the
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. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle you to compensation from
the Company in the same amount and on the same terms as you would be entitled
to hereunder if you terminate your employment for Good Reason following a
change in control of the Company, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement
by operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If you
should die while any amount would still be payable to you hereunder if you had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with terms of this Agreement to your devisee, legatee or
other designee
<PAGE> 10
Mr. Mark D. Brissman
November 10, 1994
Page 10
_____________________________
or, if there is no such designee, to your estate.
6. Notice. 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 pre-paid, addressed
to the respective addressees set forth on the first page of this Agreement,
provided that all notice to the Company shall be directed to the attention of
the Board with a copy to the Secretary of the Company, 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.
7. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by you and such officer as may be duly
authorized to act on the Company's behalf. No waiver by either party hereto at
any time of any breach by the other party hereto of, or non-compliance with,
any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar of 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 expressly
set forth in this Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Texas. All references to sections of the Exchange Act or the Code shall be
deemed also to refer to any successor provisions to such sections. Any
payments provided for hereunder shall be paid net of any applicable withholding
required under federal, state or local law. The obligations of the Company
under Subsections 4(i), 4(ii), 4(iii)(D) and 4(v) shall survive the expiration
of the term of this Agreement.
8. Validity. The invalidity or unenforceability or any provision
of this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled, at the Company's expense,
exclusively by arbitration in Tarrant County, Texas in accordance with the
rules of the American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court having jurisdiction; provided,
however, that you shall be entitled to seek specific performance of your right
to be
<PAGE> 11
Mr. Mark D. Brissman
November 10, 1994
Page 11
_____________________________
paid until the Date of Termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
If this letter sets forth our agreement on the subject matter hereof,
kindly signed and return to the Company the enclosed copy of this letter which
will then constitute our agreement on this subject.
Sincerely,
GAINSCO Service Corp.
By: /s/ Joseph D. Macchia
-------------------------------------
Joseph D. Macchia
President and Chief Executive Officer
Agreed to this 10th day of November, 1994
/s/ Mark D. Brissman
- - -----------------------------------
<PAGE> 1
EXHIBIT 10.37
[THE GAINSCO COMPANIES LETTERHEAD]
October 31, 1995
Mr. J. Landis Graham
Vice President
GAINSCO, INC.
305 Southridge Lakes Parkway
Southlake, Texas 76092
Dear Mr. Graham:
GAINSCO Service Corp. (the "Company") considers it essential to the
best interests of its stockholders to foster the continuous employment of key
management personnel. In this connection, the Board of Directors of the
Company (the "Board") recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of
the Company's management, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from
the possibility of a change in control of the Company, although no such change
is now contemplated.
In order to induce you to remain in the employ of the Company and in
consideration of your agreement set forth in Subsection 2(ii) hereof, the
Company agrees that you shall receive the severance benefits set forth in this
letter agreement ("Agreement") in the event your employment with the Company is
terminated subsequent to a "change in control of the Company" (as defined in
Section 2 hereof) under the circumstances described below.
1. Term of Agreement. This Agreement shall commence on the date
hereof and shall continue in effect through December 31, 1996; provided,
however, that commencing on January 1, 1997 and each January thereafter, the
term of this Agreement shall automatically be extended for one additional year
unless, not later than the September 30 preceding each such January 1, the
Company shall have given notice that it does not wish to extend this Agreement;
provided, further, if a change in control of the Company shall have occurred
during the original or extended term of this Agreement, this Agreement shall
continue in effect for the later of (i) the original or extended term or (ii) a
period of twenty-four (24) months beyond the month in which such change in
control occurred. Notwithstanding the foregoing, in no event shall the
<PAGE> 2
Mr. J. Landis Graham
October 31, 1995
Page 2
term of this Agreement extend beyond the date that you attain sixty-five years
of age.
2. Change in Control. (i) No benefits shall be payable hereunder
unless there shall have been a change in control of the Company, as set forth
below. For purposes of this Agreement, a "change in control of the Company"
shall be deemed to have occurred if (A) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or a corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company,
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the Company's then
outstanding securities; or (B) during any period of two consecutive years (not
including any period prior to the execution of this Agreement), 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 clauses (A), (C) or (D)
of this Subsection) whose election by the Board or nomination for election by
the Company's stockholders was approved by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority thereof;
or (C) the shareholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than 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 entity) at least 75% of
the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation, or
(D) the shareholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company of all
or substantially all the Company's assets.
(ii) For purposes of this Agreement, a "potential change
in control of the Company" shall be deemed to have occurred if (A) the Company
enters into an agreement, the consummation of which would result in the
occurrence of a change in control of the Company, (B) any person (including the
Company) publicly announces an intention to take or to consider taking actions
which if consummated would constitute a change in control of the Company; (C)
any person, other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company, who is or becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 10% or more of the combined voting power of the Company's then
outstanding
<PAGE> 3
Mr. J. Landis Graham
October 31, 1995
Page 3
securities, increases his beneficial ownership of such securities by 5% or more
of the combined voting power of the Company's then outstanding securities on
the date hereof; or (D) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a potential change in control of the Company has
occurred. You agree that, subject to the terms and conditions of this
Agreement, in the event of a potential change in control of the Company, you
will remain in the employ of the Company until the earliest of (i) a date which
is six (6) months from the occurrence of such potential change in control of
the Company, (ii) the termination by you of your employment by reason of
Disability or Retirement as defined in Subsection 3(i), or (iii) the occurrence
of a change in control of the Company.
3. Termination Following Change in Control. If any of the events
described in Subsection 2(i) hereof constituting a change in control of the
Company shall have occurred, you shall be entitled to the benefits provided in
Subsection 4(iii) hereof upon the subsequent termination of your employment
during the term of this Agreement unless such termination is (A) because of
your death, Disability or Retirement, (B) by the Company for Cause, or (C) by
you other than for Good Reason.
(i) Disability; Retirement. If, as a result of your
incapacity due to physical or mental illness, you shall have been absent from
the full-time performance of your duties with the Company for a period of six
(6) consecutive months, and within thirty (30) days after written notice of
termination is given you shall not have returned to the full-time performance
of your duties, your employment may be terminated for "Disability."
Termination by the Company or you of your employment based on "Retirement"
shall mean termination with your consent in accordance with the Company's
Pension Plan (as hereafter defined) including early retirement, generally
applicable to its salaried employees, provided, however, that termination based
on "Retirement" shall not include retirement in conjunction with termination by
you for Good Reason.
(ii) Cause. Termination by the Company of your employment
for "Cause" shall mean termination upon (A) the willful and continued failure
by you to substantially perform your duties with the Company (other than any
such failure resulting from your incapacity due to physical or mental illness
or any such actual or anticipated failure after the issuance of a Notice of
Termination, by you for Good Reason as defined in Subsections 3(iv) and 3(iii),
respectively) after a written demand for substantial performance is delivered
to you by the Board, which demand specifically identifies the manner in which
the Board believes that you have not substantially performed your duties, or
(B) the willful engaging by you in conduct which is demonstrably and materially
injurious to the Company, monetarily or otherwise. For purposes of this
Subsection, no act, or failure to act, on your part shall be deemed "willful"
unless done, or omitted to be done, by you not in good faith and without
reasonable belief that
<PAGE> 4
Mr. J. Landis Graham
October 31, 1995
Page 4
your action or omission was in the best interest of the Company.
Notwithstanding the foregoing, you shall not be deemed to have been terminated
for Cause unless and until there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
(3/4) of the entire membership of the Board at a meeting of the Board called
and held for such purpose (after reasonable notice to you and an opportunity
for you, together with your counsel, to be heard before the Board), finding
that in the good faith opinion of the Board you were guilty of conduct set
forth above in clauses (A) or (B) of the first sentence of this Subsection and
specifying the particulars thereof in detail.
(iii) Good Reason. You shall be entitled to terminate your
employment for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean, without your express written consent, the occurrence after a change
in control of the Company of any of the following circumstances unless, in the
case of paragraphs (A), (E), (F), (G) or (H), such circumstances are fully
corrected prior to the Date of Termination specified in the Notice of
Termination, as defined in Subsections 3(v) and 3(iv), respectively, given in
respect thereof:
(A) the assignment to you of any duties inconsistent with
your present status as Vice President of the Company (or such other
title or titles as you may be holding immediately prior to the change
in control of the Company) or a substantial adverse alteration in the
nature or status of your responsibilities from those in effect
immediately prior to the change in control of the Company;
(B) a reduction by the Company in your annual base salary
as in effect on the date of the change in control of the Company;
(C) the relocation of the Company's principal executive
offices to a location outside of Fort Worth, Texas (or, if different,
the metropolitan area in which such offices are located immediately
prior to the change in control of the Company) or the Company's
requiring you to be based anywhere other than the Company's principal
executive offices except for required travel on the Company's business
to an extent substantially consistent with your present business
travel obligations;
(D) the failure by the Company, without your consent, to
pay to you any portion of your current compensation, or to pay to you
any portion of an installment of deferred compensation under any
deferred compensation program of the Company, within seven (7) days of
the date such compensation is due;
<PAGE> 5
Mr. J. Landis Graham
October 31, 1995
Page 5
(E) except as provided below, the failure by the Company
to continue in effect any compensation plan in which you participate
immediately prior to the change in control of the Company which is
material to your total compensation, including but not limited to the
Company's 1990 Stock Option Plan and the Executive Incentive
Compensation Plan or any substitute or additional plans adopted prior
to the change in control, unless an equitable arrangement (embodied in
an ongoing substitute or alternative plan) has been made with respect
to such plan, or the failure by the Company to continue your
participation therein (or in such substitute or additional plans) on a
basis not materially less favorable, both in terms of the amount of
benefits provided and the level of your participation relative to
other participants, as existed at the time of the change in control;
(F) except as provided below, the failure of GAINSCO,
Inc. to continue to provide you with benefits substantially similar to
those enjoyed by you under the Company's Profit Sharing Plan and Trust
of GAINSCO, Inc. (the "Pension Plan") or under any of the Company's
other deferred compensation plans, life insurance, medical, health and
accident, or disability plans in which you were participating at the
time of the change in control of the Company, the taking of any action
by the Company which would directly or indirectly materially reduce
any of such benefits or deprive you of any material fringe benefit
enjoyed by you at the time of the change in control of the Company, or
the failure by the Company to provide you with the number of paid
vacation days to which you are entitled on the basis of years of
service with the Company in accordance with the Company's normal
vacation policy for officers in effect at the time of the change in
control of the Company;
(G) the failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to perform this
Agreement, as contemplated in Section 5 hereof; or
(H) any purported termination of your employment which is
not effected pursuant to a Notice of Termination satisfying the
requirements of Subsection (iv) below (and, if applicable, the
requirements of Subsection (ii) above); for purposes of this
Agreement, no such purported termination shall be effective.
Your right to terminate your employment purchase to this Subsection shall not
be affected by your incapacity due to physical or mental illness. Your
continued employment shall not constitute consent to, or a waiver of rights
with respect to, any circumstance constituting Good Reason hereunder. You may
not terminate your employment for Good Reason pursuant to paragraphs (E) or (F)
on account of the discontinuance of any plan or benefit (without an
<PAGE> 6
Mr. J. Landis Graham
October 31, 1995
Page 6
equitable substitution) which is part of a uniform, non-discriminatory,
Company-wide reduction in benefits.
(iv) Notice of Termination. Any purported termination of
your employment by the Company or by you shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section 6
hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of your employment
under the provision so indicated.
(v) Date of Termination, Etc. "Date of Termination"
shall mean (A) if y our employment is terminated for Disability, thirty (30)
days after Notice of Termination is given (provided that you shall not have
returned to the full-time performance of your duties during such thirty (30)
day period), and (B) if your employment is terminated pursuant to Subsection
(ii) or (iii) above or for any other reason (other than Disability), the date
specified in the Notice of Termination (which, in the case of a termination
pursuant to Subsection (ii) above shall not be less than thirty (30) days, and
in the case of a termination pursuant to Subsection (iii) above shall not be
less than fifteen (15) nor more than sixty (60) days, respectively, from the
date such Notice of Termination is given); provided that if within fifteen (15)
days after any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this proviso), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally determined, either by mutual written agreement of
the parties, by a binding arbitration award, or by a final judgment, order or
decree of a court of competent jurisdiction (which is not appealable or with
respect to which the time for appeal therefrom has expired and no appeal has
been perfected); provided further that the Date of Termination shall be
extended by a notice of dispute only if such notice is given in good faith and
the party giving such notice pursues the resolution of such dispute with
reasonable diligence. Notwithstanding the pendency of any such dispute, the
Company will continue to pay you your full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to,
base salary) and continue you as a participant in all compensation, benefit and
insurance plans in which you were participating whether or not specifically
referenced in this Agreement when the notice giving rise to the dispute was
given, until the dispute is finally resolved in accordance with this
Subsection. Amounts paid under this Subsection are in addition to all other
amounts due under this Agreement and shall not be offset against or reduce any
other amounts due under this Agreement, except as provided in Subsection
4(iii)(B) below.
<PAGE> 7
Mr. J. Landis Graham
October 31, 1995
Page 7
4. Compensation Upon Termination or During Disability. Following
a change in control of the Company, as defined by Subsection 2(i), upon
termination of your employment or during a period of Disability you shall be
entitled to the following benefits:
(i) During any period that you fail to perform your
full-time duties with the Company as a result of incapacity due to physical or
mental illness, you shall continue to receive your salary at the rate in effect
at the commencement of such period, together with all other compensation and
benefits payable to you during such period, until this Agreement is terminated
pursuant to Section 3(i) hereof. Thereafter, or in the event your employment
shall be terminated by the Company or by you for Retirement, or by reason of
your death, your benefits shall be determined under the Company's retirement,
insurance and other compensation plans and programs then in effect in
accordance with the terms of such programs.
(ii) If your employment shall be terminated by the Company
for Cause or by you other than for Good Reason, Disability, death or
Retirement, the Company shall pay you your full base salary through the Date of
Termination at the rate in effect at the time Notice of Termination is given,
plus all other amounts to which you are entitled under any compensation or
benefit plan of the Company at the time such payments are due, and the Company
shall have no further obligations to you under this Agreement.
(iii) If your employment by the Company shall be terminated
(a) by the Company other than for Cause, Retirement or Disability or (b) by you
for Good Reason, then you shall be entitled to the benefits provided below:
(A) the Company shall pay you your full base salary
through the Date of Termination at the rate in effect at the time
Notice of Termination is given, plus all other amounts to which you
are entitled under any compensation plan of the Company, at the time
such payments are due, except as otherwise provided below; and
(B) in lieu of any further salary payments to you for
periods subsequent to the Date of Termination, the Company shall pay
as severance pay to you a lump sum cash severance payment in an amount
equal to two times your "base amount" (within the meaning of section
280G(b)(3) of the Internal Revenue Code of 1986, as amended (the
"Code")), provided, however, that such severance payment shall be no
less than 1.25 times the amount reported on your Form W-2 statement
issued by the Company with respect to the year preceding that in which
the Date of Termination occurs. Notwithstanding any other provision
of this Agreement, in the event that any payment or benefit received
or to be received by you in connection with a change in control or the
termination of your employment (whether payable pursuant to the terms
of this
<PAGE> 8
Mr. J. Landis Graham
October 31, 1995
Page 8
Agreement or any other plan, arrangement or agreement with the
Company, its successors, any person whose actions result in a change
in control or any person affiliated with (or which, as a result of the
completion of the transactions causing a change in control, will
become affiliated) the Company or such person within the meaning of
section 1504 of the Code) (all such payments and benefits being
hereinafter called the "Severance Payments") would not be deductible
(in whole or in part), by the Company, an affiliate or any person
making such payment or providing such benefit as a result of section
280G of the Code, then, to the extent necessary to make such portion
of the Severance Payments deductible (and after taking into account
any reduction in the Severance Payments provided by reason of section
280G of the Code in such other plan, arrangement or agreement), (A)
the cash Severance Payments shall first be reduced (if necessary, to
zero), and (B) all other non-cash Severance Payments shall next be
reduced. For purposes of this limitation (i) no portion of the
Severance Payments the receipt or enjoyment of which you shall have
effectively waived in writing prior to the Date of Termination shall
be taken into account, (ii) no portion of the Severance Payments shall
be taken into account which in the opinion of tax counsel selected by
the Company's independent auditors and reasonably acceptable to you
does not constitute a "parachute payment" within the meaning of
section 280G(b)(2) of the Code, including by reason of section
280G(b)(4)(A) of the Code, (iii) the Severance Payments shall be
reduced only to the extent necessary so that the Severance Payments
(other than those referred to in clauses (i) or (ii)) in their
entirety constitute reasonable compensation for services actually
rendered within the meaning of section 280G(b)(4)(B) of the Code or
are otherwise not subject to disallowance as deductions, in the
opinion of tax counsel referred to in clause (ii); and (iv) the value
of any non-cash benefit or any deferred payment or benefit included in
the Severance 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.
(C) the payment provided for in paragraph (B) above,
shall be made not later than the fifth day following the Date of
Termination, provided, however, that if the amount of such payment
cannot be finally determined on or before such day, the Company shall
pay to you on such day an estimate, as determined in good faith by the
Company, of the minimum amount of such payment and shall pay the
remainder of such payment (together with interest at the rate provided
in section 1274(b)(2)(B) of the Code) as soon as the amount thereof
can be determined but in no event later the thirtieth day after the
Date of Termination. In the event that the amount of the estimated
payment exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to you, payable on
the fifth day after demand by the Company (together with interest at
the rate provided in section 1274(b)(2)(B) of the
<PAGE> 9
Mr. J. Landis Graham
October 31, 1995
Page 9
Code).
(D) the Company also shall pay to you all legal fees and
expenses incurred by you as a result of such termination (including
all such legal fees and legal expenses, if any, incurred in contesting
or disputing any such termination or in seeking to obtain or enforce
any right or benefit 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 payments shall be made at the later of the
times specified in paragraph (C) above, or within five (5) days after
your request for payment accompanied with such evidence of fees and
expenses incurred as the Company reasonably may require.
(iv) You shall not be required to mitigate the amount of
any payment provided for in this Section 4 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in this
Section 4 be reduced by any compensation earned by you as the result of
employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by you to the Company, or otherwise.
(v) In addition to all other amounts payable to you under
this Section 4, you shall be entitled to receive all benefits payable to you,
at the respective time or times such payments are due, under the Pension
Plan[s], and any other plan or agreement relating to retirement benefits.
5. Successors; Binding Agreement. (i) The Company will require
any successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/or assets of the
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. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle you to compensation from
the Company in the same amount and on the same terms as you would be entitled
to hereunder if you terminate your employment for Good Reason following a
change in control of the Company, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement
by operation of law, or otherwise.
<PAGE> 10
Mr. J. Landis Graham
October 31, 1995
Page 10
(ii) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If you
should die while any amount would still be payable to you hereunder if you had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with terms of this Agreement to your devisee, legatee or
other designee or, if there is no such designee, to your estate.
6. Notice. 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 pre-paid, addressed
as follows:
If to the Company:
GAINSCO Service Corp.
Attn: President
500 Commerce Street
Fort Worth, Texas 76102-5439
If to you:
J. Landis Graham
305 Southridge Lakes Parkway
Southlake, Texas 76092
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.
7. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by you and such officer as may be duly
authorized to act on the Company's behalf. No waiver by either party hereto at
any time of any breach by the other party hereto of, or non-compliance with,
any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar of 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 expressly
set forth in this Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Texas. All references to sections of the Exchange Act or the Code shall be
deemed also to refer to any successor provisions to such
<PAGE> 11
Mr. J. Landis Graham
October 31, 1995
Page 11
sections. Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law. The
obligations of the Company under Subsections 4(i), 4(ii), 4(iii)(D) and 4(v)
shall survive the expiration of the term of this Agreement.
8. Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled, at the Company's expense,
exclusively by arbitration in Tarrant County, Texas in accordance with the
rules of the American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court having jurisdiction; provided,
however, that you shall be entitled to seek specific performance of your right
to be paid until the Date of Termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
If this letter sets forth our agreement on the subject matter hereof,
kindly signed and return to the Company the enclosed copy of this letter which
will then constitute our agreement on this subject.
Sincerely,
GAINSCO Service Corp.
By: /s/ Joseph D. Macchia
---------------------------------------
Joseph D. Macchia
President and Chief Executive Officer
Agreed to effective the 11th
day of November, 1994
/s/ J. Landis Graham
- - -----------------------------------
J. Landis Graham
<PAGE> 12
Mr. J. Landis Graham
October 31, 1995
Page 12
GUARANTEE
GAINSCO, INC., a Texas corporation, unconditionally guarantees payment
and performance in full of all obligations of GAINSCO Service Corp. ("Service
Corp.") under the above and foregoing change in control agreement (the "Change
in Control Agreement") between Service Corp. and J. Landis Graham and any
renewals or extensions thereof whether or not the terms of the Change in
Control Agreement are modified.
This guarantee is a continuing guarantee and may not be revoked by the
guarantor without the written consent of J. Landis Graham and shall expire only
when the Change in Control Agreement and all renewals or extensions of it have
terminated.
GAINSCO, INC.
By: /s/ Joseph D. Macchia
--------------------------------------
Joseph D. Macchia
President
<PAGE> 1
EXHIBIT 10.38
[THE GAINSCO COMPANIES LETTERHEAD]
October 31, 1995
Mr. Joseph D. Macchia
President and Chief Executive Officer
GAINSCO, INC.
1409 Indian Creek
Fort Worth, Texas 76107
Dear Mr. Macchia:
The purpose of this letter is to supplement the change in control
agreement (the "Change in Control Agreement") between you and GAINSCO Service
Corp. dated April 9, 1990 in order to clarify the method by which notice can be
given by one party to the other.
Section 6 of the Change in Control Agreement shall be amended to read
as follows:
"6. Notice. 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 pre-paid,
addressed as follows:
If to the Company:
GAINSCO Service Corp.
Attn: President
500 Commerce Street
Fort Worth, Texas 76102-5439
If to you:
Joseph D. Macchia
1409 Indian Creek
Fort Worth, Texas 76107
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."
<PAGE> 2
If the proposed amendment to Section 6 set forth above is acceptable,
please sign this letter in the place provided below. The second copy of this
letter is for your records.
GAINSCO Service Corp.
By: /s/ Jack L. Johnson
---------------------------------------
Jack L. Johnson
Its Senior Vice President
ACCEPTED:
/s/ Joseph D. Macchia
- - -----------------------------------
Joseph D. Macchia
<PAGE> 1
EXHIBIT 10.39
[THE GAINSCO COMPANIES LETTERHEAD]
October 31, 1995
Mr. Jack L. Johnson
Senior Vice President
GAINSCO, INC.
1510 Crowley
Arlington, TX 76012
Dear Mr. Johnson:
The purpose of this letter is to supplement the change in control
agreement (the "Change in Control Agreement") between you and GAINSCO Service
Corp. dated April 9, 1990 in order to clarify the method by which notice can be
given by one party to the other.
Section 6 of the Change in Control Agreement shall be amended to read
as follows:
"6. Notice. 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 pre-paid,
addressed as follows:
If to the Company:
GAINSCO Service Corp.
Attn: President
500 Commerce Street
Fort Worth, Texas 76102-5439
If to you:
Jack L. Johnson
1510 Crowley
Arlington, TX 76012
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."
<PAGE> 2
If the proposed amendment to Section 6 set forth above is acceptable,
please sign this letter in the place provided below. The second copy of this
letter is for your records.
GAINSCO Service Corp.
By: /s/ Joseph D. Macchia
---------------------------------------
Joseph D. Macchia
Its President
ACCEPTED:
/s/ Jack L. Johnson
- - -----------------------------------
Jack L. Johnson
<PAGE> 1
EXHIBIT 10.40
[THE GAINSCO COMPANIES LETTERHEAD]
October 31, 1995
Mr. Daniel J. Coots
Senior Vice President
GAINSCO, INC.
4930 High Creek
Arlington 76017
Dear Mr. Coots:
The purpose of this letter is to supplement the change in control
agreement (the "Change in Control Agreement") between you and GAINSCO Service
Corp. dated April 9, 1990 in order to clarify the method by which notice can be
given by one party to the other.
Section 6 of the Change in Control Agreement shall be amended to read
as follows:
"6. Notice. 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 pre-paid,
addressed as follows:
If to the Company:
GAINSCO Service Corp.
Attn: President
500 Commerce Street
Fort Worth, Texas 76102-5439
If to you:
Daniel J. Coots
4930 High Creek
Arlington 76017
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."
<PAGE> 2
If the proposed amendment to Section 6 set forth above is acceptable,
please sign this letter in the place provided below. The second copy of this
letter is for your records.
GAINSCO Service Corp.
By: /s/ Joseph D. Macchia
---------------------------------------
Joseph D. Macchia
Its President
ACCEPTED:
/s/ Daniel J. Coots
- - -----------------------------------
Daniel J. Coots
<PAGE> 1
EXHIBIT 10.41
[THE GAINSCO COMPANIES LETTERHEAD]
October 31, 1995
Mr. Norman Alberigo
Vice President
GAINSCO, INC.
815 Riveria Drive
Mansfield TX 76063
Dear Mr. Alberigo:
The purpose of this letter is to supplement the change in control
agreement (the "Change in Control Agreement") between you and GAINSCO Service
Corp. dated April 9, 1990 in order to clarify the method by which notice can be
given by one party to the other.
Section 6 of the Change in Control Agreement shall be amended to read
as follows:
"6. Notice. 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 pre-paid,
addressed as follows:
If to the Company:
GAINSCO Service Corp.
Attn: President
500 Commerce Street
Fort Worth, Texas 76102-5439
If to you:
Norman Alberigo
815 Riveria Drive
Mansfield TX 76063
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."
<PAGE> 2
If the proposed amendment to Section 6 set forth above is acceptable,
please sign this letter in the place provided below. The second copy of this
letter is for your records.
GAINSCO Service Corp.
By: /s/ Joseph D. Macchia
---------------------------------------
Joseph D. Macchia
Its President
ACCEPTED:
/s/ Norman Alberigo
- - -----------------------------------
Norman Alberigo
<PAGE> 1
EXHIBIT 10.42
[THE GAINSCO COMPANIES LETTERHEAD]
October 31, 1995
Ms. Carolyn E. Ray
Vice President
GAINSCO, INC.
2306 Danbury Drive
Colleyville 76034
Dear Ms. Ray:
The purpose of this letter is to supplement the change in control
agreement (the "Change in Control Agreement") between you and GAINSCO Service
Corp. dated April 9, 1990 in order to clarify the method by which notice can be
given by one party to the other.
Section 6 of the Change in Control Agreement shall be amended to read
as follows:
"6. Notice. 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 pre-paid,
addressed as follows:
If to the Company:
GAINSCO Service Corp.
Attn: President
500 Commerce Street
Fort Worth, Texas 76102-5439
If to you:
Carolyn E. Ray
2306 Danbury Drive
Colleyville 76034
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."
<PAGE> 2
If the proposed amendment to Section 6 set forth above is acceptable,
please sign this letter in the place provided below. The second copy of this
letter is for your records.
GAINSCO Service Corp.
By: /s/ Joseph D. Macchia
---------------------------------------
Joseph D. Macchia
Its President
ACCEPTED:
/s/ Carolyn E. Ray
- - -----------------------------------
Carolyn E. Ray
<PAGE> 1
EXHIBIT 10.43
[THE GAINSCO COMPANIES LETTERHEAD]
October 31, 1995
Mr. Mark D. Brissman
Vice President
GAINSCO, INC.
1240 Lakeway Drive
Southlake, Texas 76092
Dear Mr. Brissman:
The purpose of this letter is to supplement the change in control
agreement (the "Change in Control Agreement") between you and GAINSCO Service
Corp. dated November 10, 1994 in order to clarify the method by which notice
can be given by one party to the other.
Section 6 of the Change in Control Agreement shall be amended to read
as follows:
"6. Notice. 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 pre-paid,
addressed as follows:
If to the Company:
GAINSCO Service Corp.
Attn: President
500 Commerce Street
Fort Worth, Texas 76102-5439
If to you:
Mark D. Brissman
1240 Lakeway Drive
Southlake, Texas 76092
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."
<PAGE> 2
Additionally, you will find below the guarantee by GAINSCO, INC. of
the performance of the obligations of GAINSCO Service Corp. under the Change in
Control Agreement.
If the proposed amendment to Section 6 set forth above is acceptable,
please sign this letter in the place provided below. The second copy of this
letter is for your records.
GAINSCO Service Corp.
By: /s/ Joseph D. Macchia
---------------------------------------
Joseph D. Macchia
Its President
ACCEPTED:
/s/ Mark D. Brissman
- - -----------------------------------
Mark D. Brissman
GUARANTEE
GAINSCO, INC., a Texas corporation, unconditionally guarantees payment
and performance in full of all obligations of GAINSCO Service Corp. ("Service
Corp.") under the change in control agreement dated November 10, 1994 (the
"Change in Control Agreement") between GAINSCO Service Corp. and Mark D.
Brissman and any renewals or extensions thereof whether or not the terms of the
Change in Control Agreement are modified.
This guarantee is a continuing guarantee and may not be revoked by the
guarantor without the written consent of Mark D. Brissman and shall expire only
when the Change in Control Agreement and all renewals or extensions of it have
terminated.
GAINSCO, INC.
By: /s/ Joseph D. Macchia
---------------------------------------
Joseph D. Macchia
President
<PAGE> 1
EXHIBIT 10.44
CLARIFICATION TO THE
GAINSCO, INC.
EXECUTIVE INCENTIVE COMPENSATION PLAN
WHEREAS, GAINSCO, INC. ("GAINSCO") has adopted and continues to
maintain a plan providing incentive compensation for a select group of its
executives which is entitled the GAINSCO Executive Incentive Compensation Plan
(the "Plan");
AND WHEREAS, the Plan is attached to and its terms are incorporated
into the Employment Agreement (the "Agreement") between GAINSCO and Joseph D.
Macchia (the "Employee"), which was executed on July 5, 1979;
AND WHEREAS, GAINSCO has administered the Plan in a consistent manner
over the years to reflect the true intent of the parties relative to the
entitlement of the Employee to the benefits provided by the Plan and the amount
of those benefits.
AND WHEREAS, certain ambiguous provisions of the Plan could possibly
be misinterpreted to represent some intent or meaning inconsistent with the
original intent and meaning of GAINSCO relative to the entitlement of the
Employee to the benefits provided by the Plan and the amount of those benefits.
NOW THEREFORE, the Plan is hereby corrected as follows to remove any
ambiguity from the terms of the Plan and to make the language of the Plan
accurately reflect the original meaning and intent of GAINSCO relative to the
entitlement of the Employee to the benefits provided by the Plan and the amount
of those benefits as reflected by the manner in which GAINSCO has administered
the Plan over the years.
The recital paragraph of the Plan which precedes Paragraph I is hereby
deleted in its entirety and the following is substituted in its place:
The following plan of executive incentive
compensation shall become effective for the calendar year 1988
and subsequent years unless rescinded or modified by the Board
of Directors. However, to the extent that this plan is or has
been incorporated into the terms of the Employment Agreement
between GAINSCO, INC. and Joseph D. Macchia (the "Employee:"),
and the terms of such Employment Agreement provide that the
Employee's Base Share of the Fund created under this plan
shall not be reduced without the consent of the Employee, then
the Board of Directors does not have the power to rescind,
modify or terminate the plan or take any other action,
relative to the administration of the plan which would have
the effect of reducing the Employee's Base
<PAGE> 2
Share of the Fund created under this plan without the consent
of the Employee.
The Executive Incentive Compensation Committee shall
be made up of three persons, consisting of the President and
two members of the Board of Directors. A simple majority vote
shall be necessary for administering the plan.
EXECUTED on behalf of GAINSCO, INC. as of the 16th day of May, 1995.
By: /s/ Jack L. Johnson
-------------------------------------
Jack L. Johnson
Senior Vice President
<PAGE> 1
EXHIBIT 10.45
GAINSCO, INC.
1995 STOCK OPTION PLAN
<PAGE> 2
GAINSCO, INC. 1995
STOCK OPTION PLAN
1. PURPOSE. The purpose of this Stock Option Plan ("Plan") is to
provide an incentive to employees and members of the Board of Directors who are
not full time employees (sometimes hereinafter referred to as the "Optionees")
to enter into or remain in the employ of or to become or remain a director of
GAINSCO, INC., a Texas corporation or one of its subsidiary companies
(collectively referred to herein as the "Company"), and to devote themselves to
the Company's success by providing an opportunity to acquire or increase their
proprietary interest in GAINSCO, INC. through receipt of rights (the "Options")
to acquire GAINSCO, INC. Common Stock, par value $.10 per share (the "Common
Stock"). It is intended that no options granted under the Plan shall qualify
as incentive stock options as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code") and the regulations promulgated
thereunder, and that all stock options under this Plan shall, therefore, be
nonqualified stock options.
2. ADMINISTRATION. The Plan shall be administered by the Stock
Option Plan Committee of the Board of Directors (the "Committee"). The
Committee shall consist of not less than two directors. No person shall be
eligible to continue to serve as a member of such Committee unless such person
is a "disinterested person" within the meaning of Rule 16b-3 of the General
Rules and Regulations under the Securities Exchange Act of 1934, as amended
(the "Act"), and an "outside director" within the meaning of Section 162(m) of
the Code. The Committee shall have the power to select Optionees for
discretionary grants, to establish the number of shares and other terms
applicable to each such Option, to construe the provisions of the Plan, and to
adopt rules and regulations governing the administration of the Plan, all with
regard to Options granted to full time employees of the Company pursuant to
Section 3(a) below. Members of the Committee may receive Options under the
Plan only pursuant to the formula provisions of Section 3(b). The Committee
shall not administer the Plan insofar as it affects Optionees under Section
3(b), all such power being reserved to the Board of Directors.
No member of the Committee shall be liable for any action
taken or determination made in good faith with respect to the Plan or any
Options granted under it. No member of the Committee shall be liable for any
act or omission of any other member of the Committee or for any act or omission
on his own part, including, but not limited to, the exercise of any power and
discretion given to him under the Plan, except those resulting from his own
gross negligence or willful misconduct.
In addition to such other rights of indemnification as he may
have as a member of the Board of Directors or the Committee, and with respect
to administration of the Plan and
-1-
<PAGE> 3
the granting of Options under it, each member of the Committee shall be
entitled without further act on his part to indemnity from the Company for all
expenses (including the amount of judgment and the amount of approved
settlements made with a view to the curtailment of costs of litigation, other
than amounts paid to the Company itself) reasonably incurred by him in
connection with or arising out of any action, suit or proceeding with respect
to the administration of the Plan or the granting of Options under it in which
he may be involved by reason of his being or having been a member of the
Committee, whether or not he continues to be such member of the Committee at
the time of the incurring of such expenses; provided, however, that such
indemnity shall not include any expenses incurred by such member of the
Committee (i) in respect of matters as to which he shall be finally adjudged in
such action, suit or proceeding to have been guilty of gross negligence or
willful misconduct in the performance of his duties as a member of the
Committee; or (ii) in respect of any matter in which any settlement is effected
for an amount in excess of the amount approved by the Company on the advice of
its legal counsel; and provided further that no right of indemnification under
the provisions set forth herein shall be available to or accessible by any such
member of the Committee unless within five (5) days after institution of any
such action, suit or proceeding he shall have offered the Company in writing
the opportunity to handle and defend such action, suit or proceeding at its own
expense. The foregoing right of indemnification shall inure to the benefit of
the heirs, executors or administrators of each such member of the Committee and
shall be in addition to all other rights to which such member of the Committee
would be entitled to as a matter of law, contract or otherwise.
3. GRANT OF OPTIONS.
(a) Key Employees. The Committee, subject to the
provisions of this Plan may, from time to time, grant such number of Options to
employees of the Company presently or hereafter holding the office of Assistant
Vice President or higher, as it may deem appropriate in order to carry out the
purpose of the Plan and with such terms and conditions, consistent with this
Plan as it may deem appropriate, subject to the availability of Options under
the Plan.
(b) Directors Who Are Not Full Time Employees. Current
directors who are not full time employees of the Company shall be granted,
subject to the provisions of this Plan, Options to purchase 8,000 shares of
common stock for each year of past service as a director (up to a maximum of
ten (10) years). New directors who are not full time employees of the Company
elected to serve on the board in the future shall be granted, subject to the
provisions of this Plan and the availability under the Plan of such Options,
Options to purchase 40,000 shares of Common Stock upon their election as such
(whether by the Board of Directors to fill an unexpired term or by the
shareholders). One-fifth of the Options initially granted under this Section
3(b) to Optionees who are directors on the date of the Plan's adoption by the
Board of Directors shall be exercisable immediately and a like number shall
become exercisable on each of the first four anniversaries of such date, if the
Optionee continues to be a director on that anniversary date. Options granted
to new directors after the date of the initial grants shall, in
-2-
<PAGE> 4
each case, be exercisable twenty (20%) percent immediately and a like number
shall become exercisable on each of the first four anniversaries of the date on
which they are granted if the Optionee continues to be a director on that
anniversary date. If an Optionee is no longer a director on an anniversary of
the grant of Options to that Optionee, all Options granted to that Optionee
which have not become exercisable shall terminate, shall be of no further force
or effect and shall be available for subsequent grant under the Plan.
4. EXERCISE PRICE . All Options granted under this Plan shall be
exercisable at a price (the "Option Price") which shall be the fair market
value of the Common Stock on the date the Option is granted.
5. OPTION SHARES. The number of shares of the Common Stock for
which Options may be issued under the Plan, (the "Option Shares") is 1,020,000
shares of Common Stock. All such Option Shares shall be subject to adjustment
as provided in Section 9. Option Shares shall be issued from authorized and
unissued Common Stock or Common Stock held in or hereafter acquired for the
treasury of the Company. If any outstanding Option granted under the Plan
expires, lapses or is terminated for any reason, the Option Shares allocable to
the unexercised portion of such Option may again be the subject of an Option
granted pursuant to the Plan.
6. TERM OF PLAN. This Plan is effective on the date of its
adoption by the Board of Directors. It shall terminate in accordance with
Section 7(j) below or, if shareholders approval is obtained, on the tenth
anniversary of its effective date or such earlier date as the Board of
Directors may determine. Any Option outstanding under the Plan at the time of
its termination shall remain in effect in accordance with its terms and
conditions and those of the Plan.
7. TERMS AND CONDITIONS OF OPTIONS. Options granted pursuant to
the Plan shall be evidenced by written documents (the "Option Agreements"),
which Option Agreements shall comply with and be subject to the following terms
and conditions and, for Options granted under Section 3(a), such other terms
and conditions which the Committee shall from time to time provide which are
not inconsistent with the terms of this Plan:
(a) NUMBER OF OPTIONS SHARES. Each Option Agreement
shall state the number of Option Shares to which it pertains.
(b) OPTION PRICE. Each Option Agreement shall state the
Option Price which shall be established in accordance with Section 4
above.
-3-
<PAGE> 5
(c) MEDIUM OF PAYMENT. An Optionee shall pay for Option
Shares (i) in cash, (ii) by check payable to the order of the Company,
or (iii) by a combination of the foregoing. Alternatively, payment
may be made all or in part in shares of the Common Stock held by the
Optionee for more than one year. If payment is made in whole or in
part in shares of the Common Stock, then the Optionee shall deliver to
the Company certificates registered in the name of such Optionee
representing shares of Common Stock legally and beneficially owned by
such Optionee, free of all liens, claims and encumbrances of every
kind, accompanied by stock powers duly endorsed in blank by the record
holder of the shares represented by such certificates.
(d) RESTRICTION ON RESALE. Upon each exercise of
Options, two certificates shall be issued to the Optionee representing
the total number of Option Shares underlying the exercised Options,
(i) one such certificate to be for that number of shares which would
yield at the average of the high and low price on the day of exercise
a number of dollars equal to (X) the exercise price per share times
the number of Options exercised plus (Y) the highest federal income
tax rate applicable on the date of exercise to ordinary income,
multiplied by the difference between the market value of the Options
exercised and (X) (the "Clean Certificate") and (ii) a second stock
certificate (the "Legended Certificate") representing the remaining
shares to be issued pursuant to the exercise. The Legended
Certificate shall bear a restrictive legend precluding resale of the
shares represented by it for eighteen months following its date of
issuance.
(e) TERMINATION OF OPTIONS. No Options shall be
exercisable after the first to occur of the following:
(i) Expiration of the Option term specified in
the Option Agreement, which for Options granted under Section
3(a) above shall be for such period not exceeding ten years
from the date of grant as shall be determined by the Committee
and for Options issued under Section 3(b) above shall be ten
years from the date of grant.
(ii) The date, if any, set by the Committee for
Options issued under Section 3(a) above and by the Board of
Directors for Options issued under Section 3(b) above, under
terms specified in an Option Agreement, to be an accelerated
expiration date in the event of dissolution or liquidation of
the Company or consummation of any corporate combination
transaction in which the Company is not the surviving or
acquiring company or in which the Company becomes a
wholly-owned subsidiary of another company, provided an
Optionee who holds an Option is given written notice at least
thirty (30) days before the date so fixed;
-4-
<PAGE> 6
(iii) Expiration of three (3) months from the date
the Optionee's employment by (if the Options are granted under
Section 3(a) of the Plan) or service as a director of (if the
Options are granted under Section 3(b) of the Plan) the
Company terminates for any reason other than the circumstances
described in (iv), (v) or (vi) below;
(iv) Expiration of one (1) year from the date the
Optionee's employment by (if the Options are granted under
Section 3(a) of the Plan) or service as a director of (if the
Options are granted under Section 3(b) of the Plan) the
Company terminates by reason of the Optionee's disability
(within the meaning of section 22(e)(3) of the Code) or death;
(v) Expiration of ten (10) days (which period may
be extended for Options issued under Section 3(a) above on a
case by case basis in the sole discretion of the Committee)
from the date the Optionee voluntarily terminates employment
by (if the Options are granted under Section 3(a) of the Plan)
or service as a director of (if the Options are granted under
Section 3(b) of the Plan) the Company (not including any
termination due to the death or disability of the Optionee);
or
(vi) A finding by the Committee in the case of
Options issued under Section 3(a) above or by the Board of
Directors (without participation by the director in question)
in the case of a director who received Options under Section
3(b) above, after full consideration of the facts presented on
behalf of both the Company and the Optionee, that an employee
Optionee has been discharged from employment by, or a director
has been removed from service as a director of, the Company
for Cause. For purposes of this paragraph "Cause" shall mean:
(A) a pattern of gross negligence or an act of willful
misconduct by Optionee in the performance of his duties to the
Company which has a material adverse effect on the Company's
reputation, business, properties or business relationships, or
(B) Optionee's conviction of a felony or misdemeanor (other
than a traffic violation) or of misappropriation of funds of
the Company, or (C) Optionee's appropriation to himself of a
corporate opportunity of the Company which Optionee fails to
make available to the Company within thirty (30) days after
notice thereof to Optionee from the Company, or (D) the
material breach by Optionee of his obligations under any
provision of any employment agreement he or she might have
with the Company, and the failure by Optionee to remedy such
breach within thirty (30) days after notice thereof to
Optionee. In the event of a finding that Optionee has been
discharged for Cause, in addition to immediate termination of
the Option, the Optionee shall automatically forfeit all
-5-
<PAGE> 7
Option Shares for which the Company has not yet delivered
the share certificates upon refund by the Company of the
Option Price.
Any Options which are not exercisable on the date that an
Officer/Optionee or a Director/Optionee loses his status as such,
shall terminate, be of no further force or effect and shall be
available for subsequent grant under this Plan.
(f) TRANSFERS. No Option granted under the Plan may be
transferred, except by will, by the laws of descent and distribution
or pursuant to a qualified domestic relations order as defined by the
Internal Revenue Code of 1986, as amended. During the lifetime of the
person to whom an Option is granted, such Options may be exercised
only by him or by his guardian or legal representative. No Option
Shares shall be disposed of by an Optionee for at least six (6) months
from the date the Option under which they were acquired, was granted.
(g) OTHER PROVISIONS. The Option Agreements may contain
such other provisions relating to Options issued under Section 3(a)
above, not inconsistent with the provisions of this Plan, as the
Committee shall deem advisable provided, however, Options granted
under Section 3(a) shall be exercisable (subject to any restrictions
contained in this Plan) twenty (20%) percent immediately and a like
number shall become exercisable on each of the first four
anniversaries of the date on which they are granted.
(h) AMENDMENT. The Committee shall have the right,
subject to the consent of the Optionee, to amend Option Agreements
relating to Options issued under Section 3(b) above, any terms so
amended to be consistent with the provisions of this Plan.
(i) MAXIMUM OPTIONS TO ANY EMPLOYEE. No employee may be
granted Options to purchase more than three hundred thousand (300,000)
shares of Common Stock.
(j) SHAREHOLDER APPROVAL. If the shareholders do not
approve the adoption of the plan within twelve months after the
effective date of the Plan, any Options granted under the Plan prior
to such shareholders' meeting shall be null and void. No Options may
be exercised prior to shareholder approval of the adoption of the
Plan.
8. EXERCISE. Exercise of the Options shall be subject to the
following requirements:
(a) No Option shall be deemed to have been exercised
prior to the receipt by the Company of written notice of such exercise
and of payment in full of the Option
-6-
<PAGE> 8
Price for the Option Shares to be purchased. Each such notice shall
specify the number of Option Shares to be purchased and shall (unless
the Option Shares are covered by a then current registration statement
under the Securities Act of 1933 (the "Securities Act")), contain the
Optionee's acknowledgment in form and substance satisfactory to the
Company that (i) such Option Shares are being purchased for investment
and not for distribution or resale (other than a distribution or
resale which, in the opinion of counsel satisfactory to the Company,
may be made without violating the registration provisions of the
Securities Act), (ii) the Optionee has been advised and understands
that (A) the Option Shares have not been registered under the
Securities Act and are "restricted securities" within the meaning of
Rule 144 under the Securities Act and are subject to restrictions on
transfer, and (B) the Company is under no obligation to register the
Option Shares under the Securities Act or to take any action which
would make available to the Optionee any exemption from such
registration, and (iii) such Option Shares may not be transferred
without compliance with all applicable federal and state securities
laws. Notwithstanding the above, should the Company be advised by
counsel that issuance of shares should be delayed pending (i)
registration under federal or state securities laws, or (ii) the
receipt of an opinion that an appropriate exemption therefrom is
available, the Company may defer exercise of any Option granted
hereunder until either such event has occurred. No Optionee shall
have any rights as a shareholder with respect to Option Shares until
the date of issuance of a stock certificate for such shares.
9. ADJUSTMENTS IN COMMON STOCK. Adjustments shall be made with
reference to the number of Option Shares underlying Options and the per share
exercise price therefor as provided in this section:
(a) In the event that the outstanding shares of Stock of
the Company are hereafter increased or decreased or changed into or
exchanged for a different number or kind of shares or other securities
of the Company or of another corporation, by reason of a
recapitalization, reclassification, stock split-up, combination of
shares, dividend or other distribution payable in capital stock,
appropriate adjustment shall be made by the Committee in the number
and kind of shares for the purchase of which Options may be granted
under the Plan. In addition, the Committee shall make appropriate
adjustment in the number and kind of shares as to which outstanding
Options, or portions thereof then unexercised, shall be exercisable,
to the end that the proportionate interest of the holder of the Option
shall, to the extent practicable, be maintained as before the
occurrence of such event; provided, however, that the Committee may
provide for a reapportionment of any shares not yet exercisable if
there is an imbalance in the number of shares exercisable during the
remaining exercise periods, if any, after such increase or decrease in
shares. Such adjustment in outstanding Options shall be made without
change in the total price applicable to the unexercised portion of the
Option but with a corresponding adjustment in the Option price per
share.
-7-
<PAGE> 9
(b) In the event of the dissolution or liquidation of the
Company, any Option granted and outstanding under this Plan shall
terminate as of the effective date of such action.
(c) In the event of a Reorganization (as hereinafter
defined) in which the Company is not the surviving or acquiring
company, or in which the Company is or becomes a wholly-owned
subsidiary of another company after the effective date of the
Reorganization, then
(i) If there is no plan or agreement respecting
the Reorganization ("Reorganization Agreement") or if the
Reorganization Agreement does not specifically provide for the
change, conversion or exchange of the shares under outstanding
and unexercised stock options for securities of another
corporation, any such stock options shall be deemed
exercisable for stock of the surviving corporation or parent
corporation of which the Company becomes a subsidiary at a
rate of exchange to be determined by the Committee, but in no
event shall the fair market value of the stock substituted for
the stock of the Company at the time of the Reorganization be
less than the fair market value of the stock of the Company at
the time of the Reorganization; or
(ii) If there is a Reorganization Agreement and if
the Reorganization Agreement specifically provides for the
change, conversion or exchange of the shares under outstanding
and unexercised stock options for securities of another
corporation, then the Committee shall adjust the shares under
such outstanding and unexercised stock options (and shall
adjust the shares remaining under the Plan which are then
available to be optioned under the Plan, if the Reorganization
Agreement makes specific provision therefor) in a manner not
inconsistent with the provisions of the Reorganization
Agreement for the adjustment, change, conversion or exchange
of such stock and such options.
(d) The term "Reorganization" as used in paragraph (c) of
this Section 9 shall mean any statutory merger, statutory
consolidation, sale of all or substantially all of the assets of the
Company, or sale, pursuant to an agreement with the Company, of
securities of the Company pursuant to which the Company is or becomes
a subsidiary of another company after the effective date of the
Reorganization.
(e) Adjustments and determinations under this Section 9
for Options issued under Section 3(a) above shall be made by the
Committee and for Options issued under Section 3(b) above shall be
made by the Board of Directors, whose decisions as to what adjustments
or determinations shall be made, and the extent thereof, shall be
final, binding and conclusive.
-8-
<PAGE> 10
10. AMENDMENT OF THE PLAN. Except as herein limited, the Board of
Directors of the Company may amend the Plan from time to time in such manner as
it may deem advisable, except that no such amendment shall substantially
adversely affect the rights of Optionees with regard to Options held by them;
provided, however, the Board of Directors of the Company may not, without
obtaining approval of the shareholders of the Company as required by Rule
16b-3(b) under the Securities Exchange Act of 1934 (the "Act"), amend this Plan
in any respect covered by (A), (B) or (C) of Rule 16b- 3(b)(2) of the Act; nor
may any provisions of the Plan described in Rule 16b-3(c)(2)(ii)(A) be amended
more than once every six months, other than to comport with changes in the
Internal Revenue Code, the Employee Retirement Security Act, or the rules
thereunder.
11. SECURITIES LAW RESTRICTIVE LEGEND. Share certificates issued
to Optionees upon exercise of Options under the Plan shall contain such
restrictive legends as the Committee, with reference to Options issued under
Section 3(a) above or the Board of Directors with reference to Options issued
under Section 3(b) above, may deem appropriate regarding compliance with
securities laws.
12. CONTINUED EMPLOYMENT. The grant of an Option pursuant to the
Plan shall not be construed to imply or to constitute evidence of any
agreement, express or implied, on the part of the Company to retain the
Optionee in the employ of the Company or as a member of the Company's Board of
Directors, whichever the case may be. Rights to terminate the employment of
any Optionee or the service of any Optionee as a member of the Company's Board
of Directors shall not be diminished or affected by reason of the fact that an
Option has been granted to him.
13. WITHHOLDING OF TAXES. Whenever the Company proposes or is
required to issue or transfer Option Shares, the Company shall have the right
to (a) require the recipient or transferee to remit to the Company an amount
sufficient to satisfy any federal, state and/or local withholding tax
requirements prior to the delivery or transfer of any certificate or
certificates for such Option Shares, or (b) take whatever action it deems
necessary to protect its interests.
14. CHANGE IN CONTROL. Any other provisions contained herein to
the contrary notwithstanding, all Options granted by the Committee to
Officer/Optionees shall become exercisable immediately in the event of a change
in control of the Company. For purposes of this Plan, a "change in control of
the Company" shall be deemed to have occurred if (A) any "person" (as such term
is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or a corporation
owned, directly or
-9-
<PAGE> 11
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing 25% or more of the
combined voting power of the Company's then outstanding securities; or (B)
during any period of two consecutive years (not including any period prior to
the adoption of this Plan), 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 clauses (A), (C) or (D) of this Subsection) whose
election by the Board or nomination for election by the Company's stockholders
was approved by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute a majority thereof; or (C) the shareholders of the Company
approve a merger or consolidation of the Company with any other corporation,
other than 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 entity) at least 75% of the combined voting power
of the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or (D) the shareholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of all or substantially all the
Company's assets.
15. TERMINOLOGY. The headings in this Plan are solely for the
convenience of reference and shall be given no effect in the construction or
interpretation of this Plan. Wherever required by context, any gender shall
include any other gender, the singular shall include the plural and the plural
shall include the singular.
Adopted by the Board of Directors on the 16th day of May, 1995.
By /s/ J. D. Macchia
----------------------------------
J. D. Macchia, Chairman
-10-
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