-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NdtsachANQnuKgqB7XvhBETnskN6OQeC1SNm0/rXiCANJie2KJUkM29PNbx6XybS gpMhpiGudDvTjJx+PWlVDQ== 0000912057-01-516049.txt : 20010516 0000912057-01-516049.hdr.sgml : 20010516 ACCESSION NUMBER: 0000912057-01-516049 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANALYSTS INTERNATIONAL CORP CENTRAL INDEX KEY: 0000006292 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING SERVICES [7371] IRS NUMBER: 410905498 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-04090 FILM NUMBER: 1638679 BUSINESS ADDRESS: STREET 1: 3601 WEST 76TH ST CITY: MINNEAPOLIS STATE: MN ZIP: 55435 BUSINESS PHONE: 6128974506 MAIL ADDRESS: STREET 1: 3601 WEST 76TH ST CITY: MINNEAPOLIS STATE: MN ZIP: 55435 10-Q 1 a2048804z10-q.txt FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 |X| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2001 or |_| Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission file number 0-4090 ANALYSTS INTERNATIONAL CORPORATION Minnesota 41-0905408 3601 West 76th Street Minneapolis, MN 55435 (952) 835-5900 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 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| As of April 27, 2001, 24,195,124 shares of the Registrant's Common Stock were outstanding. ANALYSTS INTERNATIONAL CORPORATION INDEX Page Number ----------- PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Balance Sheets March 31, 2001 (Unaudited) and December 31, 2000 3 Condensed Consolidated Statements of Operations Three Months Ended March 31, 2001 and 2000 (Unaudited) 4 Condensed Consolidated Statements of Cash Flows Three Months Ended March 31, 2001 and 2000 (Unaudited) 5 Notes to Condensed Consolidated Financial Statements (Unaudited) 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-9 Item 3. Quantitative and Qualitative Disclosures About Market Risk 9 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 10 2 Analysts International Corporation Condensed Consolidated Balance Sheets
March 31, 2001 December 31, 2000 -------------- ----------------- (Dollars in thousands) (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 9,884 $ 2,192 Accounts receivable, less allowance for doubtful accounts 97,173 98,495 Prepaid expenses and other current assets 6,756 8,192 -------- -------- Total current assets 113,813 108,879 Property and equipment, net 28,640 28,752 Intangible assets, net of accumulated amortization 48,556 49,335 Other assets 15,034 14,763 -------- -------- $206,043 $201,729 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 36,372 $ 34,250 Dividend payable -- 1,452 Salaries and vacations 13,241 8,515 Self-insured health care reserves and other accruals 5,528 5,766 Long-term debt, current portion 5,250 5,250 Restructuring accruals, current portion 4,761 5,798 -------- -------- Total current liabilities 65,152 61,031 Long-term debt 35,750 35,750 Restructuring accruals, non-current portion 750 750 Deferred compensation accrual 8,581 9,115 Shareholders' equity 95,810 95,083 -------- -------- $206,043 $201,729 ======== ========
Note: The balance sheet at December 31, 2000 has been taken from the audited financial statements at that date, and condensed. See notes to condensed consolidated financial statements. 3 Analysts International Corporation Condensed Consolidated Statements of Operations (Unaudited)
Three Months Ended March 31 ----------------------------- (In thousands except per share amounts) 2001 2000 --------- --------- Professional services revenues: Provided directly $ 110,378 $ 98,903 Provided through sub-suppliers 34,062 33,552 --------- --------- Total revenues 144,440 132,455 Expenses: Salaries, contracted services and direct charges 118,326 108,626 Selling, administrative and other operating costs 23,415 20,944 Amortization of goodwill and other intangible assets 775 162 --------- --------- Operating income 1,924 2,723 Non-operating income 90 438 Interest expense (771) (358) --------- --------- Income before income taxes 1,243 2,803 Income tax expense 472 1,073 --------- --------- Net income $ 771 $ 1,730 ========= ========= Per common share: Net income (basic) $ .03 $ .08 Net income (diluted) $ .03 $ .08 Average common shares outstanding 24,195 22,593 Average common and common equivalent shares outstanding 24,289 22,632
See notes to condensed consolidated financial statements. 4 Analysts International Corporation Condensed Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31 --------------------------- (In thousands) 2001 2000 -------- -------- Net cash provided by operating activities $ 10,349 $ 4,446 Cash flows from investing activities: Property and equipment additions (1,209) (411) Investment in alliance partners -- (3,202) Proceeds from property and equipment sales 4 17 -------- -------- Net cash used in investing activities (1,205) (3,596) Cash flows from financing activities: Cash dividends paid (1,452) (2,260) Proceeds from borrowings 2,220 -- Repayment of borrowings (2,220) -- Proceeds from exercise of stock options -- 99 -------- -------- Net cash used in financing activities (1,452) (2,161) Net increase (decrease) in cash and equivalents 7,692 (1,311) Cash and cash equivalents at beginning of period 2,192 35,081 -------- -------- Cash and cash equivalents at end of period $ 9,884 $ 33,770 ======== ========
See notes to condensed consolidated financial statements. 5 ANALYSTS INTERNATIONAL CORPORATION Notes to Condensed Consolidated Financial Statements (Unaudited) 1. Summary of Significant Accounting Policies Condensed Consolidated Financial Statements - The condensed consolidated balance sheet as of March 31, 2001, and the condensed consolidated statements of operations and cash flows for the three month periods ended March 31, 2001 and 2000 have been prepared by the Company, without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, at March 31, 2001 and the results of operations and the cash flows for the periods ended March 31, 2001 and 2000 have been made. The results of operations for the period ended March 31, 2001 are not necessarily indicative of the results to be expected for the full fiscal year. Comprehensive income (i.e. net income plus available-for-sale securities valuation adjustments) for the three months ended March 31, 2001 and 2000 was $727,000 and $1,730,000 respectively. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 2000 transitional report to shareholders. 2. Long-term Debt In January 2000 the Company secured a $25 million bank line of credit. This line of credit was increased to $30 million in December 2000 and was amended in March, 2001 to modify cash flow leverage, debt service coverage, and debt to capitalization ratio covenants. Under the terms of the line of credit, which expires in January 2003, the Company may choose to take advances or pay down the outstanding balance daily, or request a fixed term advance for one, two, three or six months. The daily advances on the line bear interest at the bank's prime rate (8.0% at March 31, 2001), while the fixed term advances bear interest at the applicable EuroDollar rate plus 2.00%. A commitment fee of .375% is charged on the unused portion of the line. At March 31, 2001 the Company had outstanding three EuroDollar advances. One at $8,000,000 matured on April 20, 2001 and was rolled into another $8,000,000 note maturing on June 20, 2001 accruing interest at 6.460%. The other two advances of $7,000,000 and $6,000,000 mature on May 21, 2001 and are accruing interest at 8.701%. In December 1998 the Company entered into a Note Purchase Agreement whereby it sold $20,000,000 of 7% Senior Notes due December 30, 2006. The Note Purchase Agreement was amended in March, 2001 to modify certain covenants contained in the agreement. Minimum future maturities on these Notes is as follows: 2001, $5,250,000; 2002, $4,000,000; 2003, $3,000,000; 2004, $3,000,000; 2005, $2,500,000; 2006, $2,250,000. Both debt agreements contain, among other things, provisions regarding maintenance of certain operating and working capital ratios and minimum net worth requirements, and restrictions on payments of dividends on common stock. The Company's operating and working capital ratios and net worth are in excess of the minimum net requirements at March 31, 2001. 3. Shareholders' Equity Three Months Ended March 31, 2001 -------------- (In thousands) Balance at beginning of period $ 95,083 Unrealized loss on investments (44) Net income 771 -------- Balance at end of period $ 95,810 ======== 6 4. Net Income Per Common Share Basic and diluted earnings per share are presented in accordance with Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share." The difference between average common shares and average common and common equivalent shares for the period ended March 31, 2001 and 2000 is the result of outstanding stock options. 5. Restructuring In December 2000, the Company recorded a restructuring charge of $7.0 million. Of this charge, $2.6 million related to workforce reductions (primarily non-billable staff), and $4.4 million related to lease termination and abandonment costs (net of sub-lease income) including an amount for assets to be disposed of in conjunction with this consolidation. A summary of first quarter activity with respect to the restructuring charge is as follows: Workforce Office Closure/ Reduction Consolidation Total --------- ------------- ----- Balance at December 31, 2000 $2,204 $4,344 $6,548 Cash expenditures 825 212 1,037 ------ ------ ------ Balance at March 31, 2001 $1,379 $4,132 $5,511 ====== ====== ====== 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Three Months Ended March 31, 2001 and 2000 Changes in Financial Condition Working capital at March 31, 2001 was $48.7 million, up 1.9% from the $47.8 million at December 31, 2000. This includes cash and cash equivalents of $9.9 million compared to $2.2 million at December 31, 2000 and accounts receivable of $97.2 million compared to $98.5 million at December 31, 2000. The ratio of current assets to current liabilities has decreased slightly since December 31, 2000 while the ratio of total assets to total liabilities has improved slightly. In January of 2000, the Company secured a $25 million bank line of credit. This line of credit was increased to $30 million in December 2000. At March 31, 2001 there was $9.0 million available to be drawn on this line of credit. The Company's primary need for working capital is to support accounts receivable and to fund the time lag between payroll disbursement and receipt of fees billed to clients. The Company continues to be able to support the growth in its business with internally generated funds and the use of the line of credit. The Company's sub-supplier contracts are not expected to burden working capital. On December 19, 2000, the Board of Directors declared a quarterly dividend of $.06 per share payable February 15, 2001 to shareholders of record on January 31, 2001. The Board of Directors considers whether to declare dividends each quarter based on the Company's performance, cash position, and anticipated earnings, cash flows, and cash requirements. The Company believes funds generated from its business, current cash balances and existing credit lines are adequate to meet demands placed upon its resources by its operations, and capital investments. There can be no assurance that continuation of the current industry-wide slow-down will not require the Company to seek future amendments to certain debt covenants. Results of Operations Revenues provided directly for the three months ended March 31, 2001 were $110.4 million, an increase of 11.6% from the same period a year ago. This increase is a result of additional revenue provided by the Sequoia acquisition offset by a 6.9% reduction in billable hours, which reduction is the result of an industry-wide slowdown. While the Company has been able to hold rates consistent from the prior year, there can be no assurance the Company will be able to continue this as competitive conditions in the industry make it difficult for the Company to increase or maintain the hourly rates it charges for services. Revenues provided through sub-suppliers for the three-month period were $34.0 million, an increase of 1.5% over the same period a year ago. This increase is the result of the addition of new clients in Managed Services and growth with existing clients. Personnel totaled 4,600 at March 31, 2001, including employees added due to the Sequoia acquisition, compared to 4,150 at March 31, 2000, reflecting a 10.8% increase. The increase consists primarily of billable technical staff offset by reductions in administrative and management personnel in connection with the restructuring. Salaries, contracted services and direct charges, which represent primarily the Company's direct labor cost, were 81.9% of revenues for the three months ended March 31, 2001 compared to 82.0% for the same period a year ago. By comparison, these costs were 83.0% of revenues for the previous quarter. The Company's efforts to control these costs involve controlling labor costs, passing on labor cost increases through increased billing rates where possible, and maintaining productivity levels of its billable technical staff. Labor costs, however, are difficult to control because of the highly skilled technical personnel the Company seeks to hire and retain. It is also difficult to pass on labor costs increases to customers due to intense competition in the industry, and as a result of the industry-wide slowdown. Although the Company continuously attempts to control the factors which affect this category of expense, there can be no assurance the Company will be able to maintain or improve this level. 8 Selling, administrative and other operating costs, which include commissions, employee fringe benefits and location costs, represented 16.2% of revenues for the three months ended March 31, 2001 compared to 15.8% for the same period a year ago. During the current quarter, this category of expense included a consulting fee of $525,000 for assistance in setting the overall strategic direction of the Company. By comparison, these costs were 20.3% of revenues for the previous quarter including certain unusual charges. While the Company is committed to careful management of these costs, there can be no assurance the Company will be able to maintain these costs at their current relationship to revenues. Amortization of goodwill and other intangible assets has increased from $162,000 for the three months ended March 31, 2000 to $775,000 for the three months ended March 31, 2001, primarily as a result of increased intangible balances following the acquisition of Sequoia. Non-operating income, consisting primarily of interest income, has declined from $438,000 for the three months ended March 31, 2000 to $90,000 for the three months ended March 31, 2001. Interest expense has increased from $358,000 to $771,000 during the same periods. These changes are primarily the result of the decrease in cash and cash equivalents and the increase in outstanding debt as a result of the acquisition of Sequoia. Net income for the three months ended March 31, 2001 decreased 55.4% over the same period a year ago. As a percentage of revenue, net income has decreased to .5% for the three months ended March 31, 2001 from 1.3% for the three months ended March 31, 2000. This decrease is primarily a result of the increases, as a percent of revenue, in the expenses discussed above. The Company's net income as a percentage of revenues provided directly for the three months ended March 31, 2001 and 2000 was .7% and 1.7%, respectively. In December 2000, the Company recorded a restructuring charge of $7.0 million. Of this charge, $2.6 million related to workforce reductions (primarily non-billable staff), and $4.4 million related to lease termination and abandonment costs (net of sub-lease income) including an amount for assets to be disposed of in conjunction with this consolidation. A summary of first quarter activity with respect to the restructuring charge is as follows: Workforce Office Closure/ Reduction Consolidation Total --------- ------------- ----- Balance at December 31, 2000 $2,204 $4,344 $6,548 Cash expenditures 825 212 1,037 ------ ------ ------ Balance at March 31, 2001 $1,379 $4,132 $5,511 ====== ====== ====== Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company is exposed to certain market risks on outstanding variable interest rate debt obligations totaling $21.0 million at March 31, 2001. Market risk is the potential loss arising from the adverse changes in market rates and prices, such as interest rates. Market risk is estimated as the potential increase in fair value resulting from a hypothetical one percent increase in interest rates which would result in an annual interest expense increase of approximately $210,000. 9 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) First Amendment to the Note Purchase Agreement Dated as of December 30, 1998. (b) Second Amendment to Credit Agreement Dated as of January 31, 2000. (c) Amended Bylaws of the Corporation. (d) Analysts International Corporation 2000 Non-Qualified Stock Option Plan. (e) Form of Agreements Providing Salary and Incentive Bonus Protection Following a Change of Control 10 Cautionary Statement under the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995 Statements included in this document may be "forward-looking statements" within the meaning of that term in Section 27A of the Securities Act of 1933, as amended, and of Section 21F of the Securities Exchange Act of 1934, as amended. Additional oral or written forward-looking statements may be made by the Company from time to time, and such statements may be included in documents that are filed with the Securites and Exchange Commission. Words such as "believes," "intends," "possible," "expects," "estimates," "anticipates," or "plans" and similar expressions are intended to identify forward-looking statements. Forward-looking statements are based upon expectations and assumptions, and they involve risks and uncertainties which could cause results or outcomes to differ materially from expectations. Among the risks and uncertainties important to the Company's business are (i) the continued need of current and prosepective customers for the Company's services, (ii) the renewal of contracts with customers, especially major customers, (iii) the cancellation of contracts by customers, especially major customers, (iv) competition, (v) the availability of qualified professional staff, (vi) the Company's ability to increase hourly billing rates as labor and operating costs increase, and (vii) the Company's ability to continue to operate its business and support growth with internally generated funds. There may be other factors, such as general economic conditions which affect businesses generally, which may cause results to vary from expectations. 11 SIGNATURES 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 there unto duly authorized. ANALYSTS INTERNATIONAL CORPORATION ---------------------------------- (Registrant) Date May 15, 2001 By /s/ Marti R. Charpentier ------------ ---------------------------------------- Marti R. Charpentier Vice President and Treasurer Date May 15, 2001 By /s/ David J. Steichen ------------ ------------------------------------ David J. Steichen Controller and Assistant Treasurer (Chief Accounting Officer) 12 Exhibit Index Exhibit Number Exhibit - -------------- ------- 6(a) First Amendment to the Note Purchase Agreement Dated as of December 30, 1998 6(b) Second Amendment to Credit Agreement Dated as of January 31, 2000 6(c) Amended Bylaws of the Corporation 6(d) Analysts International Corporation 2000 Non-Qualified Stock Option Plan 6(e) Form of Agreements Providing Salary and Incentive Bonus Proctection Following a Change in Control EX-6.(A) 2 a2048804zex-6_a.txt EXHIBIT 6(A) Exhibit 6(a) - -------------------------------------------------------------------------------- ANALYSTS INTERNATIONAL CORPORATION ------------------------------------ FIRST AMENDMENT Dated as of March 30, 2001 regarding Note Purchase Agreement Dated as of December 30, 1998 ------------------------------------ Re: $20,000,000 7.00% Senior Notes ---------------------------------- Due December 30, 2006 - -------------------------------------------------------------------------------- FIRST AMENDMENT TO NOTE PURCHASE AGREEMENT THIS FIRST AMENDMENT dated as of March 30, 2001 (the "First Amendment") to the Note Purchase Agreement dated as of December 30, 1998 is by and among ANALYSTS INTERNATIONAL CORPORATION, a Minnesota corporation (the "Company"), and each of the institutions which is a signatory to this First Amendment (collectively, the "Noteholders"). RECITALS: A. The Company and each of the Noteholders have heretofore entered into a Note Purchase Agreement dated as of December 30, 1998 (the "Note Purchase Agreement"). The Company has heretofore issued the $20,000,000 7.00% Senior Notes Due December 30, 2006 (the "Notes") dated December 30, 1998 pursuant to the Note Purchase Agreement. B. The Company and the Noteholders now desire to amend the Note Purchase Agreement in the respects, but only in the respects, hereinafter set forth. C. Capitalized terms used herein shall have the respective meanings ascribed thereto in the Note Purchase Agreement unless herein defined or the context shall otherwise require. D. All requirements of law have been fully complied with and all other acts and things necessary to make this First Amendment a valid, legal and binding instrument according to its terms for the purposes herein expressed have been done or performed. NOW, THEREFORE, upon the full and complete satisfaction of the conditions precedent to the effectiveness of this First Amendment set forth in Section 3.1 hereof, and in consideration of good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the Company and the Noteholders do hereby agree as follows: SECTION 1. AMENDMENTS AND AGREEMENTS. 1.1. Section 9.6 of the Note Purchase Agreement shall be and is hereby amended in its entirety to read as follows: 9.6 Fixed Charges Ratio. The Company will maintain, as of the end of each fiscal quarter of the Company, Consolidated Net Income Available for Fixed Charges for the immediately preceding twelve months at least equal to (a) 180% of Consolidated Fixed Charges for any such twelve month period ending on or prior to September 30, 2001, and (b) 200% of Consolidated Fixed Charges for any such twelve month period ending after September 30, 2001. 1.2. The following shall be added as new Section 9.8 of the Note Purchase Agreement: 9.8 Cash Flow Leverage Ratio. The Company will maintain, as of the end of each fiscal quarter of the Company, its Cash Flow Leverage Ratio at not more than (a) 2.25 to 1.00 as of the fiscal quarter ending on March 31, 2001, (b) 2.00 to 1.00 as of the fiscal quarter ending on June 30, 2001, and (c) 1.75 to 1.00 as of the last day of each fiscal quarter of the Company ending after June 30, 2001. 1.3. Section 10.5(c) of the Note Purchase Agreement shall be and is hereby amended in its entirety to read as follows: (c) additional Funded Indebtedness of the Company and its Subsidiaries incurred after the date of the Closing; provided that Consolidated Funded Indebtedness shall at no time exceed (a) 35% of Consolidated Total Capitalization at any time on or prior to June 30, 2001, and (b) 30% of Consolidated Total Capitalization at any time after June 30, 2001. 1.4. The following definition of "Consolidated Net Income Available for Fixed Charges" contained in Schedule B to the Note Purchase Agreement shall be and is hereby amended in its entirety to read as follows: "Consolidated Net Income Available for Fixed Charges" shall mean for any period, the sum of (a) Consolidated Net Income for such period, plus (b) provision for any applicable income taxes deducted in computing Consolidated Net Income for such period, plus (c) Consolidated Fixed Charges for such period, plus (d) for any period which includes the quarter ended December 31, 2000, the amounts set forth in Schedule C. 1.5. The following shall be added as new definitions in Schedule B to the Note Purchase Agreement: "Cash Flow Leverage Ratio" means, as of any date, the ratio of (a) total Consolidated Indebtedness on such date, to (b) EBITDA for the twelve month period ending on such date, all determined with respect to the Company and its Subsidiaries on a consolidated basis in accordance with GAAP. "Consolidated Indebtedness" means the aggregate outstanding principal amount of all Indebtedness of the Company and its Subsidiaries determined on a consolidated basis in accordance with GAAP. "EBITDA" means, for any period, Pre-Tax Earning (excluding non-cash income) plus (a) Interest Expense and Non-Cash Charges, in each case excluding extraordinary items, plus (b) for any period including the quarter ended December 31, 2000, the amounts set forth in Schedule C. "Interest Expense" means, for any period, the total gross interest expense on all Indebtedness during such period, and shall in any event include, without limitation and without duplication, (a) accrued interest (whether or not paid) on all Indebtedness, (b) the amortization of Indebtedness discounts, (c) the amortization of all fees payable in connection with the incurrence of Indebtedness to the extent included in interest expense, and (d) the interest portion of any capitalized lease expenditure, all determined with respect to the Company and its Subsidiaries on a consolidated basis in accordance with GAAP. "Non-Cash Charges" means, for any period, depreciation, amortization, deferred taxes and other non-cash charges which have the effect of reducing Pre-Tax Earnings or Consolidated Net Income, all determined with respect to the Company and its Subsidiaries on a consolidated basis in accordance with GAAP. "Pre-Tax Earnings" means, for any period, Consolidated Net Income plus any provision for income taxes, determined with respect to the Company and its Subsidiaries on a consolidated basis in accordance with GAAP. 1.6. Exhibit I hereto shall be added as new Schedule C to the Note Purchase Agreement. 1.7. Notwithstanding the provisions of Section 10.11, or any other section, of the Note Purchase Agreement, the Company will not and will not permit any Subsidiary to sell, or enter into any agreement providing for the sale and lease back of, real property consisting of the Company's principal executive office and Minneapolis branch office located at 3601 West 76th Street, Minneapolis, Minnesota 55435, unless the sale proceeds are at least equal to the fair market value of such sold or transferred property and are applied to the prepayment of the Notes, pursuant to Section 8.2 of the Note Purchase Agreement, and other Funded Indebtedness of the Company then outstanding, pro rata, based upon the outstanding principal amount thereof. 1.8. Notwithstanding the provisions of Section 10.7(h), or any other section, of the Note Purchase Agreement, the Company will not and will not permit any Subsidiary to create or incur, or suffer to be incurred or to exist, any Lien on its or their accounts receivable or inventory to secure any Indebtedness, or to transfer any accounts receivable or inventory for the purpose of subjecting the same to the payments of obligations in priority to the payment of its or their general creditors, unless the Notes are equally and ratably secured with all such Indebtedness or other payment obligations pursuant to an intercreditor agreement among the Noteholders and the holders of such Indebtedness or other payment obligations containing terms satisfactory to the Noteholders. SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. 2.1. To induce the Noteholders to execute and deliver this First Amendment (which representations shall survive the execution and delivery of this First Amendment), the Company represents and warrants to the Noteholders that: (a) this First Amendment has been duly authorized, executed and delivered by it and this First Amendment constitutes the legal, valid and binding obligation, contract and agreement of the Company enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors' rights generally; (b) the Note Purchase Agreement, as amended by this First Amendment, constitutes the legal, valid and binding obligations, contracts and agreements of the Company enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors' rights generally; (c) the execution, delivery and performance by the Company of this First Amendment (i) has been duly authorized by all requisite corporate action and, if required, shareholder action, (ii) does not require the consent or approval of any governmental or regulatory body or agency, and (iii) will not (A) violate (1) any provision of law, statute, rule or regulation or its articles of incorporation or bylaws, (2) any order of any court or any rule, regulation or order of any other agency or government binding upon it, or (3) any provision of any material indenture, agreement or other instrument to which it is a party or by which its properties or assets are or may be bound, or (B) result in a breach or constitute (alone or with due notice or lapse of time or both) a default under any indenture, agreement or other instrument referred to in clause (iii)(A)(3) of this Section 2.1(c); (d) as of the date hereof and after giving effect to this First Amendment, no Default or Event of Default has occurred which is continuing; and (e) all the representations and warranties contained in Section 5 of the Note Purchase Agreement are true and correct in all material respects with the same force and effect as if made by the Company on and as of the date hereof. SECTION 3. CONDITIONS TO EFFECTIVENESS OF THIS FIRST AMENDMENT. 3.1. This First Amendment shall not become effective until each and every one of the following conditions shall have been satisfied: (a) executed counterparts of this First Amendment, duly executed by the Company and the holders of at least 50% of the outstanding principal of the Notes, shall have been delivered to the Noteholders; and (b) the representations and warranties of the Company set forth in Section 2 hereof are true and correct on and with respect to the date hereof. Subject to satisfaction of the foregoing conditions, this First Amendment shall become effective as of December 31, 2000. SECTION 4. PAYMENT OF NOTEHOLDERS' COUNSEL FEES AND EXPENSES. 4.1. The Company agrees to pay upon demand, the reasonable fees and expenses of Faegre & Benson LLP, counsel to the Noteholders, in connection with the negotiation, preparation, approval, execution and delivery of this First Amendment. SECTION 5. MISCELLANEOUS. 5.1. This First Amendment shall be construed in connection with and as part of the Note Purchase Agreement, and except as modified and expressly amended by this First Amendment, all terms, conditions and covenants contained in the Note Purchase Agreement and the Notes are hereby ratified and shall be and remain in full force and effect. 5.2. Any and all notices, requests, certificates and other instruments executed and delivered after the execution and delivery of this First Amendment may refer to the Note Purchase Agreement without making specific reference to this First Amendment but nevertheless all such references shall include this First Amendment unless the context otherwise requires. 5.3. The descriptive headings of the various Sections or parts of this First Amendment are for convenience only and shall not affect the meaning or construction of any of the provisions hereof. 5.4. This First Amendment shall be governed by and construed in accordance with Minnesota law. 5.5. The execution hereof by you shall constitute a contract between us for the uses and purposes hereinabove set forth, and this First Amendment may be executed in any number of counterparts, each executed counterpart constituting an original, but all together only one agreement. ANALYSTS INTERNATIONAL CORPORATION By______________________________ Its_________________________ [NPA Amendment No. 1] Accepted and Agreed to: GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY By______________________________________________ Its___________________________________________ and By______________________________________________ Its___________________________________________ NORTHERN LIFE INSURANCE COMPANY By ING Investment Management LLC Its Agent By______________________________________________ Its___________________________________________ RELIASTAR LIFE INSURANCE COMPANY By ING Investment Management LLC Its Agent By______________________________________________ Its___________________________________________ SECURITY CONNECTICUT LIFE INSURANCE COMPANY By ING Investment Management LLC Its Agent By______________________________________________ Its___________________________________________ [NPA Amendment No. 1] EX-6.(B) 3 a2048804zex-6_b.txt EXHIBIT 6(B) Exhibit 6(b) SECOND AMENDMENT TO CREDIT AGREEMENT This Amendment, dated as of April 2, 2001, but effective as of March 30, 2001, is made by and between Analysts International Corporation, a Minnesota corporation (the "Borrower"), and Wells Fargo Bank, National Association, assignee of Wells Fargo Bank Minnesota, National Association, f/k/a Norwest Bank Minnesota, National Association (the "Bank"). Recitals The Borrower and the Bank have entered into a Credit Agreement dated as of January 31, 2000 as amended by a First Amendment to Credit Agreement dated as of December 12, 2000 (as so amended, the "Credit Agreement"). Capitalized terms used in these recitals have the meanings given to them in the Credit Agreement unless otherwise specified. The Borrower has requested a waiver of defaults and that certain amendments be made to the Credit Agreement, which the Bank is willing to make pursuant to the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements herein contained, it is agreed as follows: 1. Defined Terms. Capitalized terms used in this Amendment which are defined in the Credit Agreement shall have the same meanings as defined therein, unless otherwise defined herein. In addition, Section 1.1 of the Credit Agreement is amended by adding or amending, as the case may be, the following definitions: "'Cash Flow Leverage' means as of each Covenant Computation Date, the ratio of (A) total Funded Debt as of that Covenant Computation Date to (B) EBITDA during the Covenant Computation Period then ending, plus Restructuring Charges, if any, during the Covenant Computation Period then ending, plus Investment Banking Charges, if any, during the Covenant Computation Period then ending; in each case determined with respect to the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP." "'Consolidated Net Income' means for any period the net income (or loss) of the Borrower and its Subsidiaries for such period, as determined on a consolidated basis in accordance with GAAP after excluding (i) any equity interest of the Borrower on the unremitted earnings of any corporation not a Subsidiary; (ii) net income or loss of any Subsidiary for any period prior to the date it became a Subsidiary; (iii) net income or loss of any corporation (other than a Subsidiary) merged into or consolidated with the Borrower or a Subsidiary for any period prior to the date of such merger or consolidation; (iv) any net gain or loss (net of applicable tax effect) realized in the disposition of capital assets other than in the ordinary course of business; (v) extraordinary gains or losses; (vi) any net income resulting from any reappraisal, revaluation or write-up of assets; (vii) proceeds of any property insurance policy; and (viii) reversal of any contingency reserves not created during the period." "'Consolidated Net Worth' means, at any time (A) the total assets of the Borrower and its Subsidiaries which would be shown as assets on a consolidated balance sheet of the Borrower and its Subsidiaries as of such time prepared in accordance with GAAP, after eliminating all amounts properly attributable to minority interests, if any, in the stock and surplus of the Subsidiaries, minus (B) the total liabilities of the Borrower and its Subsidiaries which would be shown as liabilities on a consolidated balance sheet of the Borrower and its Subsidiaries as of such time prepared in accordance with GAAP." "'Covenant Computation Date' means the last day of each month of any fiscal year of the Borrower." "'Current Ratio' means at any time the ratio of (A) the consolidated current assets of the Borrower and its Subsidiaries determined in accordance with GAAP to (B) the consolidated current liabilities of the Borrower and its Subsidiaries (including the current portion of Funded Debt) determined in accordance with GAAP." "'Debt Service Coverage Ratio' means (i) as of the Covenant Computation Dates for March 2001 through December 2001, the ratio of (A) without duplication, EBITDA during the year-to-date period ending on such Covenant Computation Date, plus Rental Expense during the year-to-date period ending on such Covenant Computation Date, plus Investment Banking Charges, if any, during the year-to-date period ending on such Covenant Computation Date, less Capital Expenditures, taxes and Restricted Payments during the year-to-date period ending on such Covenant Computation Date to (B) without duplication, the applicable Debt Service Requirements plus Rental Expense during the year-to-date period ending on such Covenant Computation Date; and (ii) as of all Covenant Computation Dates thereafter, the ratio of (A) without duplication, EBITDA during the Covenant Computation Period then ending, plus Rental Expense during the Covenant Computation Period then ending, plus Investment Banking Charges, if any, during the Covenant Computation Period then ending, less Capital Expenditures, taxes and Restricted Payments during the Covenant Computation Period then ending to (B) without duplication, the applicable Debt Service Requirements plus Rental Expense during that Covenant Computation Period then ending; in each case determined with respect to the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP." "'Debt Service Requirements' means (i) as of the Covenant Computation Dates for March 2001 through December 2001, the sum of (A) the sum of all payments of principal required to be paid by the Borrower or any Subsidiary with respect to any indebtedness owing by the Borrower or any Subsidiary to the Note Purchasers due on or before December 31, 2001, which, for purposes of this definition of `Debt Service Requirements' will be amortized in equal monthly installments from January 1, 2001 through December 31, 2001 with respect to the year-to-date period ending on such Covenant Computation Date, plus (B) the sum of all payments of principal and interest paid by the Borrower or any Subsidiary during the year-to-date period ending on such Covenant Computation Date on any Funded Debt (to the extent not covered by (A) above) in accordance with the terms of the instruments evidencing such Funded Debt; and (ii) as of all Covenant Computation Dates thereafter, the sum of (A) all payments of principal which are required to be paid by the Borrower or any Subsidiary during the immediately succeeding Covenant Computation Period on any Funded Debt in accordance with the terms of the instruments evidencing such Funded Debt, plus (B) all payments of interest which are required to be paid by the Borrower or any Subsidiary during the immediately preceding Covenant Computation Period on any Funded Debt in accordance with the terms of the instruments evidencing such Funded Debt." "'Facility Amount' means $30,000,000 which shall be reduced to $25,000,000 upon the completed sale and leaseback of the Borrower's headquarters property, unless said amount is reduced pursuant to Section 2.8, in which event it means the amount to which said amount is reduced." "'Intercreditor Agreement' means that certain intercreditor agreement entered into by and among the Note Purchasers, the Bank and the Borrower." "'Investment Banking Charges' shall mean not more than $525,000 of one-time investment banking fees paid to U.S. Bancorp Piper Jaffray, Inc. and recognized by the Borrower and its Subsidiaries on a consolidated basis during the period from January 1, 2001 through April 30, 2001." "'Level Status' means Level I, Level II, Level III or Level IV, each as defined in Exhibit A and determined pursuant to Section 2.3(e) and Exhibit A." "'Note Purchasers' mean those certain note purchasers listed and more particularly described in Schedule A to the Note Purchase Agreement." "'Rental Expense' means, with respect to any period, actual rent payments under operating and capital leases for such periods (including capitalized interest and the interest component of capitalized leases)." "'Restructuring Charges' shall mean not more than $13,000,000 in one-time restructuring and related charges that were recognized by the Borrower and its Subsidiaries on a consolidated basis for the fiscal year ended December 31, 2000." 2. Margins. Section 2.3(e) of the Credit Agreement is hereby amended by replacing the term "Level III" with the term "Level IV." 3. Financial Statements. Section 5.1(b) of the Credit Agreement is hereby deleted in its entirety and replaced with the following: "(b) As soon as available and in any event within 45 days after the end of each month of any fiscal year of the Borrower, consolidated balance sheets of the Borrower and its Subsidiaries as at the end of such month and related consolidated statements of earnings and cash flows of the Borrower and its Subsidiaries for such month and for the year-to-date, in reasonable detail and stating in comparative form the figures for the corresponding date and period in previous years, all prepared in accordance with GAAP, and certified by the chief financial officer of the Borrower, subject to year-end audits." 4. Cash Flow Leverage Ratio. Section 5.8 of the Credit Agreement is hereby deleted in its entirety and replaced with the following: "Section 5.8 Cash Flow Leverage Ratio. The Borrower will maintain at all times its Cash Flow Leverage Ratio, determined as of each Covenant Computation Date set forth below, at a ratio less than the ratio set forth opposite such Covenant Computation Date: Covenant Computation Date Cash Flow Leverage Ratio -------------------------------- ------------------------ March 31, 2001 2.25 to 1.00 April 30, 2001 2.25 to 1.00 May 31, 2001 2.25 to 1.00 June 30, 2001 2.00 to 1.00 July 31, 2001 2.00 to 1.00 August 31, 2001 2.00 to 1.00 Each Covenant Computation 1.00" Date Thereafter 5. Debt Service Coverage Ratio. Section 5.9 of the Credit Agreement is hereby deleted in its entirety and replaced with the following: "Section 5.9 Debt Service Coverage Ratio. The Borrower will at all times maintain its Debt Service Coverage Ratio, determined as of each Covenant Computation Date set forth below, at a ratio greater than the ratio set forth opposite such Covenant Computation Date: Covenant Computation Date Debt Service Coverage Ratio ------------------------- --------------------------- March 31, 2001 1.10 to 1.00 April 30, 2001 1.10 to 1.00 May 31, 2001 1.10 to 1.00 June 30, 2001 1.30 to 1.00 July 31, 2001 1.30 to 1.00 August 31, 2001 1.30 to 1.00 Each Covenant Computation 1.50 to 1.00" Date Thereafter 6. Capitalization Ratio. Section 5.10 of the Credit Agreement is hereby deleted in its entirety and replaced with the following: "Section 5.10 Capitalization. The Borrower will at all times maintain its Capitalization Ratio, determined as of each Covenant Computation Date set forth below, at a ratio less than the ratio set forth opposite such Covenant Computation Date: Covenant Computation Date Capitalization Ratio ----------------------------------------- -------------------- March 31, 2001 0.325 to 1.00 April 30, 2001 0.325 to 1.00 May 31, 2001 0.325 to 1.00 Each Covenant Computation Date Thereafter 0.30 to 1.00" 7. Current Ratio; Consolidated Net Worth. The following new Sections 5.11 and 5.12 are hereby added to the Credit Agreement immediately following Section 5.10 of the Credit Agreement: "Section 5.11 Current Ratio. The Borrower will at all times maintain its Current Ratio, determined as of each Covenant Computation Date set forth below, at a ratio greater than the ratio set forth opposite such Covenant Computation Date: Covenant Computation Date Current Ratio ------------------------- ------------- March 31, 2001 1.50 to 1.00 April 30, 2001 1.50 to 1.00 May 31, 2001 1.50 to 1.00 June 30, 2001 1.50 to 1.00 July 31, 2001 1.50 to 1.00 August 31, 2001 1.50 to 1.00 September 30, 2001 1.50 to 1.00 October 31, 2001 1.50 to 1.00 November 30, 2001 1.50 to 1.00 Each Covenant Computation 1.75 to 1.00" Date Thereafter "Section 5.12 Consolidated Net Worth. The Borrower will at all times maintain its Consolidated Net Worth, determined as of each Covenant Computation Date, of at least the sum of (a) $74,261,000 plus (b) 50% of the Borrower's cumulative Consolidated Net Income, but, in each case, only if Consolidated Net Income is a positive number, for each completed fiscal quarter beginning the fiscal quarter ended December 31, 1998." 8. Restricted Payments. Section 6.5 of the Credit Agreement is hereby deleted in its entirety and replaced with the following: "Section 6.5 Restricted Payments. The Borrower shall not make any Restricted Payments, except that the foregoing shall not prohibit (a) the payment of any dividend on the Borrower's common stock not to exceed $6,000,000 in any twelve month period or (b) the Borrower from repurchasing, on a dollar-for-dollar basis, its common stock for the purpose of offsetting any 401(k) and/or stock option issuances of its common stock." 9. Consent to Sale and Leaseback and Waiver of Compliance. The Borrower has requested that the Bank consent to the sale and leaseback of its headquarters property located in Edina, Minnesota. The Bank hereby grants such consent and waives the restrictions of Section 6.9 of the Credit Agreement upon the following conditions: (A) the sale must be completed by no later than June 15, 2001; (B) the sale must generate a minimum of $18 million in net proceeds; and (C) all of these net proceeds must be applied to the acquisition of assets or the prepayment of the Senior Notes and other Funded Indebtedness (as such terms are defined in the Note Purchase Agreement) of the Borrower then outstanding, pro rata, based upon the outstanding principal amount thereof, with the remainder of such net proceeds applied to reduce the outstanding principal balance of the Note. This consent and waiver shall be effective only in this specific instance and it shall not entitle the Borrower to any other or further consent or waiver in any similar or other circumstances. 10. Collateral Audit. The Borrower understands that the Bank will conduct a collateral audit of the Borrower's accounts receivables on or before April 30, 2001. The Borrower acknowledges that it is required to permit the Bank to conduct such collateral audit in accordance with Section 5.2 of the Credit Agreement. The Borrower agrees to pay to the Bank all reasonable fees charged by the Bank in connection with this collateral audit in accordance with Section 2.6(c) of the Credit Agreement. 11. Grant of Security Interest; Intercreditor Agreement. On or before April 30, 2001, the Borrower shall (A) deliver a security agreement and the necessary financing statements to the Bank granting the Bank a first priority perfected security interest in the Borrower's accounts receivables, and (B) enter into the Intercreditor Agreement by and among the Bank, the Borrower and the Note Purchasers, in each case on such terms and conditions as the Bank may require. The Borrower's failure to fulfill either or both of these obligations shall constitute a Default under the Credit Agreement. 12. New Pricing Grid. Exhibit A to the Credit Agreement is hereby amended in its entirety and replaced with Exhibit A to this Amendment. 13. New Compliance Certificate. Exhibit C to the Credit Agreement is hereby amended in its entirety and replaced with Exhibit B to this Amendment. 14. No Other Changes. Except as explicitly amended by this Amendment, all of the terms and conditions of the Credit Agreement shall remain in full force and effect and shall apply to any advance or letter of credit thereunder. 15. Waiver of Defaults. The Borrower is in default of the following provisions of the Credit Agreement (collectively, the "Defaults"):
- ------------------------------------------------------------------------------------------------------- Section/Covenant Period/Date Required Actual - ------------------------------------------------------------------------------------------------------- 5.8 Cash Flow Leverage Ratio 12/31/00 Not more than 2.00 to 1.00 7.93 to 1.00 - ------------------------------------------------------------------------------------------------------- 5.9 Debt Service Coverage Ratio 12/31/00 Not less than 1.50 to 1.00 -0.65 to 1.00 - ------------------------------------------------------------------------------------------------------- 5.11 Capitalization Ratio 12/31/00 Not more than 0.30 to 1.00 In excess of 0.30 to 1.00 - -------------------------------------------------------------------------------------------------------
Upon the terms and subject to the conditions set forth in this Amendment, the Bank hereby waives the Defaults. This waiver shall be effective only in this specific instance and for the specific purpose for which it is given, and this waiver shall not entitle the Borrower to any other or further waiver in any similar or other circumstances. 16. Waiver and Amendment Fee. In consideration of the Bank's entering into this Amendment and waiving the Defaults as contained herein, the Borrower shall pay to the Bank, on or before March 30, 2001, a waiver and amendment fee in the amount of $30,000. Such fee shall be deemed fully earned by the Bank's execution and delivery of this Amendment. 17. Conditions Precedent. This Amendment, and the waiver set forth in Paragraph 15 hereof, shall be effective when the Bank shall have received an executed original hereof, together with each of the following, each in substance and form acceptable to the Bank in its sole discretion: (a) Payment of the fee described in Paragraph 16. (b) Such other matters as the Bank may require. 18. Representations and Warranties. The Borrower hereby represents and warrants to the Bank as follows: (a) The Borrower has all requisite power and authority to execute this Amendment and to perform all of its obligations hereunder, and this Amendment has been duly executed and delivered by the Borrower and constitutes the legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms. (b) The execution, delivery and performance by the Borrower of this Amendment have been duly authorized by all necessary corporate action and do not (i) require any authorization, consent or approval by any governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, (ii) violate any provision of any law, rule or regulation or of any order, writ, injunction or decree presently in effect, having applicability to the Borrower, or the articles of incorporation or by-laws of the Borrower, or (iii) result in a breach of or constitute a default under any indenture or loan or credit agreement or any other agreement, lease or instrument to which the Borrower is a party or by which it or its properties may be bound or affected. (c) All of the representations and warranties contained in Article IV of the Credit Agreement are correct on and as of the date hereof as though made on and as of such date, except to the extent that such representations and warranties relate solely to an earlier date. 19. References. All references in the Credit Agreement to "this Agreement" shall be deemed to refer to the Credit Agreement as amended hereby; and any and all references in the Loan Documents to the Credit Agreement shall be deemed to refer to the Credit Agreement as amended hereby. 20. No Other Waiver. Except as set forth in Paragraph 15 hereof, the execution of this Amendment and acceptance of any documents related hereto shall not be deemed to be a waiver of any Default or Event of Default under the Credit Agreement or breach, default or event of default under the Loan Documents or other document held by the Bank, whether or not known to the Bank and whether or not existing on the date of this Amendment. 21. Release. The Borrower hereby absolutely and unconditionally releases and forever discharges the Bank, and any and all participants, parent corporations, subsidiary corporations, affiliated corporations, insurers, indemnitors, successors and assigns thereof, together with all of the present and former directors, officers, agents and employees of any of the foregoing, from any and all claims, demands or causes of action of any kind, nature or description, whether arising in law or equity or upon contract or tort or under any state or federal law or otherwise, which the Borrower has had, now has or has made claim to have against any such person for or by reason of any act, omission, matter, cause or thing whatsoever arising from the beginning of time to and including the date of this Amendment, whether such claims, demands and causes of action are matured or unmatured or known or unknown. 22. Costs and Expenses. The Borrower hereby reaffirms its agreement under the Credit Agreement to pay or reimburse the Bank on demand for all costs and expenses incurred by the Bank in connection with the Loan Documents and all other documents contemplated thereby, including without limitation all reasonable fees and disbursements of legal counsel. Without limiting the generality of the foregoing, the Borrower specifically agrees to pay all fees and disbursements of counsel to the Bank for the services performed by such counsel in connection with the preparation of this Amendment and the documents and instruments incidental hereto. The Borrower hereby agrees that the Bank may, at any time or from time to time in its sole discretion and without further authorization by the Borrower, make a loan to the Borrower under the Credit Agreement, or apply the proceeds of any loan, for the purpose of paying any such fees, disbursements, costs and expenses and the fee required under paragraph 16 hereof. 23. Miscellaneous. This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original and all of which counterparts, taken together, shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first written above. WELLS FARGO BANK, NATIONAL ASSOCIATION ANALYSTS INTERNATIONAL CORPORATION By _________________________________ By _________________________________ _________________________________ _________________________________ Its_______________________________ Its_______________________________ Exhibit A to Second Amendment to Credit Agreement Pricing Grid
- ---------------------------------------------------------------------------------------------------------------- Summary Criteria (Cash Level Flow Leverage Ratio) LIBOR Margin Base Rate Margin Unused Fee - ---------------------------------------------------------------------------------------------------------------- I less than 1.00 to 1.00 1.25% 0.00% 0.250% - ---------------------------------------------------------------------------------------------------------------- II greater than or equal to 1.50% 0.00% 0.300% 1.00 to 1.00 but less than 1.50 to 1.00 - ---------------------------------------------------------------------------------------------------------------- III greater than or equal to 1.75% 0.00% 0.350% 1.50 to 1.00 but less than 2.00 to 1.00 - ---------------------------------------------------------------------------------------------------------------- IV greater than or equal to 2.00% 0.25% 0.375% 2.00 to 1.00 - ----------------------------------------------------------------------------------------------------------------
"Level I Status" exists if, as of the date of determination, the Cash Flow Leverage Ratio of the Borrower is less than 1.00 to 1.00. "Level II Status" exists if, as of the date of determination, the Cash Flow Leverage Ratio of the Borrower is 1.00 to 1.00 or greater, but less than 1.50 to 1.00. "Level III Status" exists if, as of the date of determination, the Cash Flow Leverage Ratio of the Borrower is 1.50 to 1.00 or greater, but less than 2.00 to 1.00. "Level IV Status" exists if, as of the date of determination, the Cash Flow Leverage Ratio of the Borrower is 2.00 to 1.00 or greater. Exhibit B to Second Amendment to Credit Agreement COMPLIANCE CERTIFICATE __________________, 2001 Wells Fargo Bank National Association 7900 Xerxes Avenue South, Suite 160 Bloomington, Minnesota 55431-2206 Attention: Richard G. Trembley Compliance Certificate Ladies and Gentlemen: Reference is made to the Credit Agreement dated as of January 31, 2000, as amended by a First Amendment to Credit Agreement dated as of December 12, 2000, and a Second Amendment to Credit Agreement dated as of March 30, 2001, but effective as of April 2, 2001 (as so amended, the "Credit Agreement"), entered into between Wells Fargo Bank, National Association, a national banking association and Analysts International Corporation, a Minnesota corporation (the "Borrower"). All terms defined in the Credit Agreement and not otherwise defined herein shall have the meanings given them in the Credit Agreement. This is a Compliance Certificate submitted in connection with the Borrower's financial statements (the "Statements") as of and for ______________, 200_ (the "Reporting Date"). I hereby certify to you as follows: 1. I am the chief financial officer of the Borrower, and I am familiar with the financial statements and financial affairs of the Borrower. 2. The Statements, and the computations below, have been prepared in accordance with GAAP. 3. If the Reporting Date is a Covenant Computation Date, the following computations set forth the Borrower's compliance or non-compliance with the requirements set forth in the Financial Covenants as of the Reporting Date: Section 5.8 Cash Flow Leverage Ratio Total Funded Debt (a) $___________ EBITDA (b) $___________ Restructuring Charges (c) $___________ Investment Banking Charges (d) $___________ Cash Flow Leverage Ratio = a/(b+c+d) for March 31, 2001 through November 30, 2001 Cash Flow Leverage Ratio = a/b thereafter A. Pursuant to Section 5.8 of the Credit Agreement, as of the Reporting Date, the Borrower's Cash Flow Leverage Ratio was _____ to 1.00 which |_| satisfies |_| does not satisfy the requirement that such ratio be less than ______ to 1.00 on the Reporting Date as set forth in the table below: Covenant Computation Date Cash Flow Leverage Ratio ----------------------------------------- ------------------------ March 31, 2001 2.25 to 1.00 April 30, 2001 2.25 to 1.00 May 31, 2001 2.25 to 1.00 June 30, 2001 2.00 to 1.00 July 31, 2001 2.00 to 1.00 August 31, 2001 2.00 to 1.00 Each Covenant Computation Date Thereafter 1.75 to 1.00 Section 5.9 Debt Service Coverage Ratio EBITDA $___________ + Rental Expense $___________ + Investment Banking Charges $___________ - - Capital Expenditures $___________ - - Taxes $___________ - - Restricted Payments $___________ = Debt Service Cash Flow (a) $___________ Debt Service Requirement Principal Payments $___________ + Interest Payments $___________ + Rental Expense $___________ =Total Debt Service Requirements (b) $___________ Debt Service Coverage Ratio = a/b B. Pursuant to Section 5.9 of the Credit Agreement, as of the Reporting Date, the Borrower's Debt Service Coverage Ratio was _____ to 1.00 which |_| satisfies |_| does not satisfy the requirement that such ratio be greater than ______ to 1.00 on the Reporting Date as set forth in the table below: Covenant Computation Date Debt Service Coverage Ratio ----------------------------------------- --------------------------- March 31, 2001 1.10 to 1.00 April 30, 2001 1.10 to 1.00 May 31, 2001 1.10 to 1.00 June 30, 2001 1.30 to 1.00 July 31, 2001 1.30 to 1.00 August 31, 2001 1.30 to 1.00 Each Covenant Computation Date Thereafter 1.50 to 1.00 Section 5.10 Capitalization Ratio Total Funded Debt (a) $___________ Total Funded Debt (b) $___________ Net Worth (c) $___________ Capitalization Ratio = a/(b+c) C. Pursuant to Section 5.10 of the Credit Agreement, as of the Reporting Date, the Borrower's Capitalization Ratio was _____ to 1.00 which |_| satisfies |_| does not satisfy the requirement that such ratio be less than ______ to 1.00 on the Reporting Date as set forth in the table below: Covenant Computation Date Capitalization Ratio ----------------------------------------- -------------------- March 31, 2001 0.325 to 1.00 April 30, 2001 0.325 to 1.00 May 31, 2001 0.325 to 1.00 Each Covenant Computation Date Thereafter 0.30 to 1.00 Section 5.11 Current Ratio Current Assets (a) $___________ Current Liabilities (b) $___________ Current Ratio = a/b D. Pursuant to Section 5.11 of the Credit Agreement, as of the Reporting Date, the Borrower's Current Ratio was _____ to 1.00 which |_| satisfies |_| does not satisfy the requirement that such ratio be greater than ______ to 1.00 on the Reporting Date as set forth in the table below: Covenant Computation Date Current Ratio ----------------------------------------- ------------- March 31, 2001 1.50 to 1.00 April 30, 2001 1.50 to 1.00 May 31, 2001 1.50 to 1.00 June 30, 2001 1.50 to 1.00 July 31, 2001 1.50 to 1.00 August 31, 2001 1.50 to 1.00 September 30, 2001 1.50 to 1.00 October 31, 2001 1.50 to 1.00 November 30, 2001 1.50 to 1.00 Each Covenant Computation Date Thereafter 1.75 to 1.00 Section 5.12 Consolidated Net Worth Total Assets (a) $___________ Total Liabilities (b) $___________ Consolidated Net Worth: a-b E. Pursuant to Section 5.12 of the Credit Agreement, as of the Reporting Date, the Borrower's Consolidated Net Worth was $__________________, which |_| satisfies |_| does not satisfy the requirement that such net worth be at least $74,261,000 plus 50% of its cumulative Net Income. Section 6.12 Capital Expenditures E. Pursuant to Section 6.12 of the Credit Agreement, for the twelve month period ending on the Reporting Date, the Borrower and any Subsidiary has expended or contracted to expend for Capital Expenditures, $___________________ in the aggregate which |_| satisfies |_| does not satisfy the requirement that such expenditures be less than $5,000,000 for any consecutive twelve month period. Attached hereto are all relevant facts in reasonable detail to evidence, and the computations of, the financial covenants referred to above. 4. I have no knowledge of the occurrence of any Default or Event of Default under the Credit Agreement, except as set forth in the attachments, if any, hereto. Very truly yours, ANALYSTS INTERNATIONAL CORPORATION By ______________________________________ Its __________________________________ EX-6.(C) 4 a2048804zex-6_c.txt EXHIBIT 6(C) Exhibit 6(c) BY-LAWS OF ANALYSTS INTERNATIONAL CORPORATION Amended and Restated as of April 19, 2001 ARTICLE I. CORPORATE SEAL The corporate seal shall be circular in form and have inscribed thereon in a circle the name "Analysts International Corporation" and the words "Corporate Seal" within the circle. ARTICLE II. MEETINGS OF SHAREHOLDERS Section 1. Each regular meeting of the shareholders of the corporation entitled to vote for the election of directors shall be held at such place within or without the State of Minnesota as shall be determined from time to time by the Board of Directors. Such regular meeting shall be held on such day in the month of April or May in each year, beginning in calendar year 2002 or at such other time as the Board of Directors shall determine, at which time the shareholders, voting as provided in the Articles of Incorporation, shall elect a Board of Directors to serve until the next regular meeting and until their successors are duly elected and qualify, and shall transact such other business as shall properly come before the meeting. The holders of a majority of shares outstanding entitled to vote for the election of directors at said meeting, represented either in person or by proxy, shall constitute a quorum for the transaction of business. In case a quorum be not present at the regular meeting, the holders of a majority of the shares present at the meeting may adjourn to such a day as a majority of them shall agree upon. A notice of such adjournment shall be mailed to each shareholder entitled to vote, at least five (5) days before such adjourned meeting, but if a quorum be present, holders of a majority of the shares present at the meeting may adjourn from day to day as they see fit and no notice need be given. No regular meeting shall be held in calendar 2001. Section 2. Except as may otherwise be provided by the Board of Directors from time to time, only shareholders of record at the close of business on the record date established by the Board of Directors shall be entitled to vote at such meeting. Section 3. Special meetings of the shareholders may be called by the Secretary at any time upon request of the Chief Executive Officer or a majority of the members of the Board of Directors, or upon request by shareholders as provided by law. Section 4. For regular shareholders' meetings there shall be mailed to each person shown by the books of the corporation (or of the corporation's transfer agent) to be, on the record date for determining shareholders entitled to vote, a holder of record of voting shares, at his or her address as shown by such books, a notice setting out the time and place of the annual meeting, which notice shall be mailed at least ten (10) days prior thereto. For special shareholders' meetings there shall be mailed to each person shown by the books of the corporation to be a shareholder of record at the time of mailing such notice and entitled to receive such notice, at his or her address as shown by the books of the corporation, a notice setting out the time, place and object of each special meeting, which notice shall be mailed at least two (2) days prior thereto. ARTICLE III. DIRECTORS Section 1. The business and property of the corporation shall be managed by a Board of Directors, consisting of seven directors. The term of each director shall continue until the next regular meeting of the corporation or until a successor is elected and qualified. Section 2. A majority of the Board of Directors shall constitute a quorum for the transaction of business, provided, however, that if any vacancies exist by reason of death, resignation or otherwise, a majority of the remaining directors shall constitute a quorum for the filling of such vacancies. Section 3. Regular meetings of the Board of Directors shall be held from time to time at such place and time as may from time to time be fixed by resolutions adopted by the Board of Directors. No notice need be given of any regular meeting. Special meetings of the Board of Directors may be held at such time and place as may from time to time be designated in the notice or waiver of notice of the meeting. Special meetings of the Board of Directors may be called by the Chief Executive Officer or by any two (2) directors. Notice of such special meetings shall be given by the Secretary who shall give at least twenty-four (24) hours' notice thereof to each director by mail, telegraph, telephone or in person, provided that no notice of any meeting need be given to any director while he is in the armed forces of the United States. Section 4. Directors need not be shareholders of the corporation. ARTICLE IV. OFFICERS Section 1. The officers of the corporation shall consist of a Chief Executive Officer, a President, a Secretary and a Treasurer, and such other officers and agents as may from time to time be elected by the Board of Directors. Any two (2) offices may be held by one (1) person. Section 2. At the meeting of the Board of Directors next following a regular meeting of shareholders at which directors are elected, the Board shall elect from their number a Chief Executive Officer and shall, from within or without their number, elect a President, a Secretary and a Treasurer and such other officers as may be deemed advisable by them. Such officers shall hold office until the next regular meeting of shareholders at which directors are elected or until their successors are elected and qualify, provided, however, that any officer may be removed with or without cause by the affirmative vote of a majority of the whole Board of Directors. Section 3. The Chief Executive Officer of the corporation shall preside at all meetings of the shareholders and directors, and shall have such other duties as may be prescribed from time to time by the Board of Directors. Section 4. The President shall attend meetings of the directors unless requested otherwise by a majority of them and shall have such duties as may be prescribed from time to time by the Board of Directors. Section 5. The Secretary shall (i) attend all meetings of the shareholders and Board of Directors, (ii) act as clerk thereof, (iii) record all the proceedings of such meetings in the minute book of the corporation, (iv) give proper notice of meetings of shareholders and directors, (v) keep the seal of the corporation and shall affix the same to any instrument requiring it and shall attest the seal, (vi) with another officer sign all certificates for shares of the corporation and affix the corporate seal thereto, and (vii) shall perform such other duties as may be prescribed from time to time by the Board of Directors. Section 6. The Treasurer shall (i) keep accurate accounts of all monies of the corporation received or disbursed, (ii) deposit all monies, drafts, and checks in the name and to the credit of the corporation in such banks and depositories as a majority of the whole Board of Directors shall designate from time to time, (iii) endorse for deposit all notes, checks and drafts received by the corporation, (iv) disburse the funds of the corporation as ordered by the Board of Directors, taking proper vouchers therefor, (v) render to the Chief Executive Officer and directors, whenever required, an account of all transactions as Treasurer and of the financial condition of the corporation, and (vi) perform such duties as may be prescribed by the Board of Directors from time to time. Section 7. If there be a vacancy in the officers of the corporation by reason of death, resignation or otherwise, such vacancy shall be filled, for the unexpired term, by the Board of Directors. ARTICLE V. INDEMNIFICATION OF DIRECTORS AND OFFICERS The corporation shall indemnify each director, officer, employee, or agent of the corporation, and any person serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, judgments, fines, and amounts paid in settlement actually and reasonably incurred by him to the fullest extent to which officers and directors may be indemnified under the terms and conditions of the Minnesota Business Corporation Act as now in force or hereafter amended. The corporation may purchase and maintain insurance on behalf of any person who may be indemnified to the extent of his right to indemnity under this Article. ARTICLE VI. AMENDMENTS OF BY-LAWS These By-Laws may be amended or altered by the vote of a majority of the whole Board of Directors. Such authority in the Board of Directors is subject to the power of shareholders to change or repeal such By-Laws by a majority vote of the shareholders present and represented at any regular meeting or at any special meeting called for such purpose, and the Board of Directors shall not make or alter any By-Law fixing their qualifications, classifications, term of office, or number, except the Board may make or alter any By-Law to increase their number. CERTIFICATION I certify that the foregoing constitutes the By-Laws of Analysts International Corporation, as amended. Date: _________________________ _______________________________ Colleen M. Davenport Secretary (SEAL) EX-6.(D) 5 a2048804zex-6_d.txt EXHIBIT 6(D) Exhibit 6(d) ANALYSTS INTERNATIONAL CORPORATION 2000 NONQUALIFIED STOCK OPTION PLAN SECTION 1. DEFINITIONS As used herein, the following terms shall have the meanings indicated below: (a) "Affiliates" shall mean a Parent or Subsidiary of the Company. (b) "Committee" shall mean a Committee of two or more directors who shall be appointed by and serve at the pleasure of the Board. In the event the Company's securities are registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, each of the members of the Committee shall be a "non-employee director" within the meaning of Rule 16b-3, or any successor provision, as then in effect, of the General Rules and Regulations under the Securities Exchange Act of 1934 as amended. (c) The "Company" shall mean Analysts International Corporation, a Minnesota corporation. (d) "Fair Market Value" as of any date shall mean (i) if such stock is listed on the Nasdaq National Market, Nasdaq SmallCap Market, or an established stock exchange, the price of such stock at the close of the regular trading session of such market or exchange on such date, as reported by The Wall Street Journal or a comparable reporting service, or, if no sale of such stock shall have occurred on such date, on the next preceding day on which there was a sale of stock; (ii) if such stock is not so listed on the Nasdaq National Market, Nasdaq SmallCap Market, or an established stock exchange, the average of the closing "bid" and "asked" prices quoted by the OTC Bulletin Board, the National Quotation Bureau, or any comparable reporting service on such date or, if there are no quoted "bid" and "asked" prices on such date, on the next preceding date for which there are such quotes; or (iii) if such stock is not publicly traded as of such date, the per share value as determined by the Board, or the Committee, in its sole discretion by applying principles of valuation with respect to the Company's Common Stock. (e) The "Internal Revenue Code" is the Internal Revenue Code of 1986, as amended from time to time. (f) "Option Stock" shall mean Common Stock of the Company (subject to adjustment as described in Section 11) reserved for options pursuant to this Plan. (g) The "Optionee" means an employee or officer of, the Company or any Affiliate to whom a nonqualified stock option has been granted pursuant to Section 9. (h) "Parent" shall mean any corporation which owns, directly or indirectly in an unbroken chain, fifty percent (50%) or more of the total voting power of the Company's outstanding stock. (i) The "Plan" means the Analysts International Corporation 2000 Nonqualified Stock Option Plan, as amended hereafter from time to time, including the form of Option Agreement as it may be modified by the Board from time to time. (j) A "Subsidiary" shall mean any corporation of which fifty percent (50%) or more of the total voting power of outstanding stock is owned, directly or indirectly in an unbroken chain, by the Company. SECTION 2. PURPOSE The purpose of the Plan is to promote the success of the Company and its Affiliates by facilitating the employment and retention of competent personnel and by furnishing incentive to officers and employees upon whose efforts the success of the Company and its Affiliates will depend to a large degree. It is the intention of the Company to carry out the Plan through the granting of "nonqualified stock options" pursuant to Section 9 of this Plan. SECTION 3. EFFECTIVE DATE OF PLAN The Plan shall be effective as of the date of adoption by the Board of Directors. SECTION 4. ADMINISTRATION The Plan shall be administered by the Board of Directors of the Company (hereinafter referred to as the "Board") or by a Committee which may be appointed by the Board from time to time to administer the Plan (hereinafter collectively referred to as the "Administrator"). The Administrator shall have all of the powers vested in it under the provisions of the Plan, including but not limited to exclusive authority (where applicable and within the limitations described herein) to determine, in its sole discretion, whether a nonqualified stock option shall be granted, the individuals to whom, and the time or times at which, options shall be granted, the number of shares subject to each option and the option price and terms and conditions of each option. The Administrator shall have full power and authority to administer and interpret the Plan, to make and amend rules, regulations and guidelines for administering the Plan, to prescribe the form and conditions of the respective stock option agreements (which may vary from Optionee to Optionee) evidencing each option and to make all other determinations necessary or advisable for the administration of the Plan. The Administrator's interpretation of the Plan, and all actions taken and determinations made by the Administrator pursuant to the power vested in it hereunder, shall be conclusive and binding on all parties concerned. No member of the Board or the Committee shall be liable for any action taken or determination made in good faith in connection with the administration of the Plan. In the event the Board appoints a Committee as provided hereunder, any action of the Committee with respect to the administration of the Plan shall be taken pursuant to a majority vote of the Committee members or pursuant to the written resolution of all Committee members. SECTION 5. PARTICIPANTS The Administrator shall from time to time, at its discretion and without approval of the shareholders, designate those employees and officers of the Company or of any Affiliate to whom nonqualified stock options shall be granted under this Plan. The Administrator may grant additional nonqualified stock options under this Plan to some or all participants then holding options or may grant options solely or partially to new participants. In designating participants, the Administrator shall also determine the number of shares to be optioned to each such participant. The Administrator may from time to time designate individuals as being ineligible to participate in the Plan. SECTION 6. STOCK The Stock to be optioned under this Plan shall consist of authorized but unissued shares of Option Stock. Two Hundred Twenty-Five Thousand (225,000) shares of Option Stock shall be reserved and available for options under the Plan; provided, however, that the total number of shares of Option Stock reserved for options under this Plan shall be subject to adjustment as provided in Section 11 of the Plan. In the event that any outstanding option under the Plan for any reason expires or is terminated prior to the exercise thereof, the shares of Option Stock allocable to the unexercised portion of such option shall continue to be reserved for options under the Plan and may be optioned hereunder. SECTION 7. DURATION OF PLAN Nonqualified stock options may be granted pursuant to the Plan from time to time after the effective date of the Plan and until the Plan is discontinued or terminated by the Board. Any nonqualified stock option granted prior to the termination of the Plan by the Board shall remain in full force and effect until the expiration of the option as specified in the written stock option agreement and shall remain subject to the terms and conditions of this Plan. SECTION 8. PAYMENT Optionees may pay for shares upon exercise of options granted pursuant to this Plan with cash, personal check, certified check or, if approved by the Administrator in its sole discretion, previously-owned shares of the Company's Common Stock valued at such stock's then Fair Market Value, or such other form of payment as may be authorized by the Administrator; provided, however, that in no event may the Administrator permit an Optionee to pay for shares with a promissory note made payable to the Company or in installments. The Administrator may, in its sole discretion, further limit the forms of payment available to the Optionee and may exercise such discretion any time prior to the termination of the Option granted to the Optionee or upon any exercise of the Option by the Optionee. "Previously-owned shares" means shares of the Company's Common Stock which the Optionee has owned for at least six (6) months prior to the exercise of the stock option, or for such other period of time as may be required by generally accepted accounting principles. With respect to payment in the form of Common Stock of the Company, the Administrator may require advance approval or adopt such rules as it deems necessary to assure compliance with Rule 16b-3, or any successor provision, as then in effect, of the General Rules and Regulations under the Securities Exchange Act of 1934, if applicable. SECTION 9. TERMS AND CONDITIONS OF NONQUALIFIED STOCK OPTIONS Each nonqualified stock option granted pursuant to this Section 9 shall be evidenced by a written Option Agreement. The Option Agreement shall be in such form as may be approved from time to time by the Administrator and may vary from Optionee to Optionee; provided, however, that each Optionee and each Option Agreement shall comply with and be subject to the following terms and conditions: (a) Number of Shares and Option Price. The Option Agreement shall state the total number of shares covered by the nonqualified stock option. Unless otherwise determined by the Administrator, the option price per share shall be one hundred percent (100%) of the Fair Market Value of the Common Stock per share on the date the Administrator grants the option; provided, however, that the option price may not be less than eighty-five percent (85%) of the Fair Market Value of the Common Stock per share on the date of grant. (b) Term and Exercisability of Nonqualified Stock Option. The term during which any nonqualified stock option granted under the Plan may be exercised shall be established in each case by the Administrator. The Option Agreement shall state when the nonqualified stock option becomes exercisable and shall also state the maximum term during which the option may be exercised. In the event a nonqualified stock option is exercisable immediately, the manner of exercise of the option in the event it is not exercised in full immediately shall be specified in the stock option agreement. The Administrator may accelerate the exercise date of any nonqualified stock option granted hereunder which is not immediately exercisable as of the date of grant. (c) Withholding. The Company or its Affiliate shall be entitled to withhold and deduct from future wages of the Optionee all legally required amounts necessary to satisfy any and all withholding and employment-related taxes attributable to the Optionee's exercise of a nonqualified stock option. In the event the Optionee is required under the Option Agreement to pay the Company, or make arrangements satisfactory to the Company respecting payment of, such withholding and employment-related taxes, the Administrator may, in its discretion and pursuant to such rules as it may adopt, permit the Optionee to satisfy such obligation, in whole or in part, by electing to have the Company withhold shares of Common Stock otherwise issuable to the Optionee as a result of the option's exercise having a Fair Market Value equal to the minimum required tax withholding, based on the minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to the supplemental income resulting from the option. In no event may the Company or any Affiliate withhold shares having a Fair Market Value in excess of such statutory minimum required tax withholding. The Optionee's election to have shares withheld for this purpose shall be made on or before the date the option is exercised or, if later, the date that the amount of tax to be withheld is determined under applicable tax law. Such election shall be approved by the Administrator and otherwise comply with such rules as the Administrator may adopt to assure compliance with Rule 16b-3, or any successor provision, as then in effect, of the General Rules and Regulations under the Securities Exchange Act of 1934, if applicable. (d) Other Provisions. The Option Agreement authorized under this Section 9 shall contain such other provisions as the Administrator shall deem advisable. SECTION 10. TRANSFER OF OPTION The Administrator may, in its sole discretion, permit the Optionee to transfer any or all nonqualified stock options to any member of the Optionee's "immediate family" as such term is defined in Rule 16a-1(e) promulgated under the Securities Exchange Act of 1934, or any successor provision, or to one or more trusts whose beneficiaries are members of such Optionee's "immediate family" or partnerships in which such family members are the only partners; provided, however, that the Optionee receives no consideration for the transfer and such transferred nonqualified stock option shall continue to be subject to the same terms and conditions as were applicable to such nonqualified stock option immediately prior to its transfer. SECTION 11. RECAPITALIZATION, SALE, MERGER, EXCHANGE OR LIQUIDATION If, following adoption of this Plan, the Company effects an increase or decrease in the number of shares of Common Stock in the form of a subdivision or consolidation of shares, or the payment of a stock dividend, or effects any other increase or decrease in the number of shares of Common Stock without receipt of consideration by the Company, the number of shares of Option Stock reserved under Section 6 hereof and the number of shares of Option Stock covered by each outstanding option and the price per share thereof shall be appropriately adjusted by the Board to reflect such change. Additional shares which may be credited pursuant to such adjustment shall be subject to the same restrictions as are applicable to the shares with respect to which the adjustment relates. Unless otherwise provided in the Option Agreement, in the event of an acquisition of the Company through the sale of substantially all of the Company's assets and the consequent discontinuance of its business or through a merger, consolidation, exchange, reorganization, reclassification, extraordinary dividend, divestiture or liquidation of the Company (collectively referred to as a "transaction"), all outstanding stock options shall become immediately exercisable, whether or not such options had become exercisable prior to the transaction; provided, however, that if the acquiring party seeks to have the transaction accounted for on a "pooling of interests" basis and, in the opinion of the Company's independent certified public accountants, accelerating the exercisability of such options would preclude a pooling of interests under generally accepted accounting principles, the exercisability of such options shall not accelerate. In addition to the foregoing, or in the event a pooling of interests transaction precludes the acceleration of the exercisability of outstanding options, the Board may provide for one or more of the following: (a) the complete termination of this Plan and the cancellation of outstanding options not exercised prior to a date specified by the Board (which date shall give Optionees a reasonable period of time in which to exercise the options prior to the effectiveness of such transaction); (b) that Optionees holding outstanding stock options shall receive, with respect to each share of Stock subject to such options, as of the effective date of any such transaction, cash in an amount equal to the excess of the Fair Market Value of such Stock on the date immediately preceding the effective date of such transaction over the option price per share of such options; provided that the Board may, in lieu of such cash payment, distribute to such Optionees shares of stock of the Company or shares of stock of any corporation succeeding the Company by reason of such transaction, such shares having a value equal to the cash payment herein; (c) the continuance of the Plan with respect to the exercise of options which were outstanding as of the date of adoption by the Board of such plan for such transaction and provide to Optionees holding such options the right to exercise their respective options as to an equivalent number of shares of stock of the corporation succeeding the Company by reason of such transaction. The Board may restrict the rights of or the applicability of this Section 11 to the extent necessary to comply with Section 16(b) of the Securities Exchange Act of 1934, the Internal Revenue Code or any other applicable law or regulation. The grant of an option pursuant to the Plan shall not limit in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge, exchange or consolidate or to dissolve, liquidate, sell or transfer all or any part of its business or assets. SECTION 12. INVESTMENT PURPOSE No shares of Common Stock shall be issued pursuant to the Plan unless and until there has been compliance, in the opinion of Company's counsel, with all applicable legal requirements, including without limitation, those relating to securities laws and stock exchange listing requirements. As a condition to the issuance of Option Stock to Optionee, the Administrator may require Optionee to (a) represent that the shares of Option Stock are being acquired for investment and not resale and to make such other representations as the Administrator shall deem necessary or appropriate to qualify the issuance of the shares as exempt from the Securities Act of 1933 and any other applicable securities laws, and (b) represent that Optionee shall not dispose of the shares of Option Stock in violation of the Securities Act of 1933 or any other applicable securities laws. As a further condition to the grant of any stock option or the issuance of Stock to Optionee, Optionee agrees to the following: (a) In the event the Company advises Optionee that it plans an underwritten public offering of its Common Stock in compliance with the Securities Act of 1933, as amended, and the underwriter(s) seek to impose restrictions under which certain shareholders may not sell or contract to sell or grant any option to buy or otherwise dispose of part or all of their stock purchase rights of the underlying Common Stock, Optionee will not, for a period not to exceed 180 days from the prospectus, sell or contract to sell or grant an option to buy or otherwise dispose of any stock option granted to Optionee pursuant to the Plan or any of the underlying shares of Common Stock without the prior written consent of the underwriter(s) or its representative(s). (b) In the event the Company makes any public offering of its securities and determines in its sole discretion that it is necessary to reduce the number of issued but unexercised stock purchase rights so as to comply with any states securities or Blue Sky law limitations with respect thereto, the Board shall have the right (i) to accelerate the exercisability of any stock option and the date on which such option must be exercised, provided that the Company gives Optionee prior written notice of such acceleration, and (ii) to cancel any options or portions thereof which Optionee does not exercise prior to or contemporaneously with such public offering. (c) In the event of a transaction (as defined in Section 11 of the Plan) which is treated as a "pooling of interests" under generally accepted accounting principles, Optionee will comply with Rule 145 of the Securities Act of 1933 and any other restrictions imposed under other applicable legal or accounting principles if Optionee is an "affiliate" (as defined in such applicable legal and accounting principles) at the time of the transaction, and Optionee will execute any documents necessary to ensure compliance with such rules. The Company reserves the right to place a legend on any stock certificate issued upon exercise of an option granted pursuant to the Plan to assure compliance with this Section 12. SECTION 13. RIGHTS AS A SHAREHOLDER An Optionee (or the Optionee's successor or successors) shall have no rights as a shareholder with respect to any shares covered by an option until the date of the issuance of a stock certificate evidencing such shares. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property), distributions or other rights for which the record date is prior to the date such stock certificate is actually issued (except as otherwise provided in Section 11 of the Plan). SECTION 14. AMENDMENT OF THE PLAN The Board may from time to time, insofar as permitted by law, suspend or discontinue the Plan or revise or amend it in any respect; provided, however, that no such revision or amendment, except as is authorized in Section 11, shall impair the terms and conditions of any option which is outstanding on the date of such revision or amendment to the material detriment of the Optionee without the consent of the Optionee. Notwithstanding the foregoing, no such revision or amendment shall (i) materially increase the number of shares subject to the Plan except as provided in Section 11 hereof, (ii) change the designation of the class of employees eligible to receive options, (iii) decrease the price at which options may be granted, or (iv) materially increase the benefits accruing to Optionees under the Plan without the approval of the shareholders of the Company if such approval is required for compliance with the requirements of any applicable law or regulation. SECTION 15. NO OBLIGATION TO EXERCISE OPTION The granting of an option shall impose no obligation upon the Optionee to exercise such option. Further, the granting of an option hereunder shall not impose upon the Company or any Affiliate any obligation to retain the Optionee in its employ for any period. EX-6.(E) 6 a2048804zex-6_e.txt EXHIBIT 6(E) Exhibit 6(e) AGREEMENT This Agreement (this "Agreement"), effective as of December 18, 2000, is between Analysts International Corporation, a Minnesota corporation located at 3601 West 76th Street, Minneapolis, Minnesota 55439-0898 (the "Company") and ___________________ (the "Executive"). A. The Executive is currently employed as the Company's . B. The Board considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its shareholders, and in this connection recognizes that the possibility of a Change in Control may raise uncertainty and questions among management which may result in the departure or distraction of management personnel to the detriment of the Company and its shareholders. C. Company currently has in place various arrangements with certain categories of executives that provide certain economic benefits to those executives in the event of a Change in Control. D. The Board has put these arrangements in place to minimize the risk that Company executive management will depart prior to a Change in Control, thereby leaving the Company without adequate executive management personnel during such a critical period, and to reinforce and encourage the continued attention and dedication of members of the Company's executive management to their assigned duties without distraction in circumstances arising from the possibility of a Change in Control. E. The Board has recognized that continuance of an executive's position with the Company involves a substantial commitment to the Company in terms of the executive's personal life and professional career and the possibility of foregoing present and future career opportunities, for which the Company receives substantial benefits. F. The Board believes that it is necessary and appropriate to harmonize the various currently outstanding arrangements that provide economic benefits to executives in the event of a Change in Control, update and revise these arrangements to include additional provisions consistent with arrangements of this type and to enter into such arrangements with executives who currently are not party to such arrangements but who are at a level of responsibility or position similar to the Company executives who are party to such arrangements. G. To induce the Executive to remain in the employ of the Company, this Agreement, which has been approved by the Board, sets forth the benefits that the Company agrees will be provided to the Executive in the event the Executive's employment with the Company is terminated in connection with a Change in Control under the circumstances described below. H. Certain capitalized terms that are used in this Agreement are defined in Exhibit A, which is an integral part of this Agreement. Accordingly, the Company and Employee each intending to be legally bound, agree as follows: 1. Term of Agreement. This Agreement is effective immediately and will have an initial term ending on December 31, 2003. After this initial term, this Agreement will automatically continue for consecutive one-year terms ("Renewal Periods") unless and until the Company or the Executive has given notice to the other at least 90 calendar days prior to the commencement of the next Renewal Period that this Agreement will not be extended past such next Renewal Period. For example, if the Company notifies the Executive on September 1, 2003 of its intent not to renew this Agreement, the term of this Agreement will end at the end of the next Renewal Period, which will be on December 31, 2004. Notwithstanding anything in the foregoing to the contrary, if a Change in Control has occurred during the term of this Agreement, this Agreement will continue in effect beyond the termination date then in effect for a period of 36 months following the month during which the Change in Control occurs or, if later, until the date on which the Company's obligations to the Executive arising under or in connection with this Agreement have been satisfied in full. 2. Benefits upon a Change in Control Termination. The Executive will become entitled to the benefits described in this Section 2 if and only if (i) the Executive terminates the Executive's employment with the Company for any reason within the period beginning on the first day of the 11th month that begins after the month during which the Change in Control occurs and ending on the last day of such month or (ii) (x) the Company terminates the Executive's employment for any reason other than the Executive's death or Cause, or the Executive terminates the Executive's employment with the Company for Good Reason, and (y) the termination occurs either within the period beginning on the date of a Change in Control and ending on the last day of the 36th month that begins after the month during which the Change in Control occurs or prior to a Change in Control if the Executive's termination was either a condition of the Change in Control or was at the request or insistence of a Person related to the Change in Control. (a) Cash Payment. Not more than 10 days following the Date of Termination, or, if later, not more than 10 days following the date of the Change in Control, the Company will make a lump-sum cash payment to the Executive in an amount equal to (i) 2.99 times the Executive's Eligible Earnings, less (ii) any incentive compensation payments made to the Executive for the year ending after the Executive's Date of Termination. (b) Special Executive Retirement Plan. The termination of the Executive's employment will be deemed a "separation from service" pursuant to Section 5 of the Company's Restated Special Executive Retirement Plan and the Company will pay the applicable monthly benefit to the Executive pursuant to Section 4 of the Company's Restated Special Executive Retirement Plan. The Company will provide for payment of the benefit pursuant to this Section 2(b) and Section 4 of the Company's Restated Special Executive Retirement Plan through a trust. The trust must (1) be a grantor trust with respect to which the Company is treated as the grantor, (2) not cause benefits under this Section 2(b) to be funded for federal income tax purposes or for purposes of ERISA, and (3) provide that trust assets will, upon the Company's insolvency, be used to satisfy the claims of the Company's general creditors. Neither the Executive nor the Executive's surviving spouse will have any interest in the assets of the trust. (c) Group Health and Dental Plans. During the continuation period (as defined below), the Company will maintain a group health and dental plan(s) which by its terms covers the Executive (and the Executive's family members and dependents who were eligible to be covered at any time during the 90-day period immediately prior to the date of the Change in Control for the period after the Change in Control in which such family members and dependents would otherwise continue to be covered under the terms of the plan in effect immediately prior to the Change in Control) under the same terms and at the same cost to the Executive and the Executive's family members and dependents as similarly situated individuals who continue to be employed by the Company (without regard to any reduction in such benefits that constitutes Good Reason). The "continuation period" is the period beginning on the Executive's Date of Termination and ending on the earlier of (i) the last day of the 18th month that begins after the Executive's Date of Termination or (ii) the date after the Executive's Date of Termination on which the Executive first becomes eligible to participate as an employee in a plan of another employer providing group health and dental benefits to the Executive and the Executive's eligible family members and dependents which plan does not contain any exclusion or limitation with respect to any pre-existing condition of the Executive or any eligible family member or dependent who would otherwise be covered under the Company's plan but for this clause (ii). To the extent the Executive incurs a tax liability (including federal, state and local taxes and any interest and penalties with respect thereto) in connection with a benefit provided pursuant to this Section 2(c) which the Executive would not have incurred had the Executive been an active employee of the Company participating in the Company's group health and dental plan, the Company will make a payment to the Executive in an amount equal to such tax liability plus an additional amount sufficient to permit the Executive to retain a net amount after all taxes (including penalties and interest) equal to the initial tax liability in connection with the benefit. For purposes of applying the foregoing, the Executive's tax rate will be deemed to be the highest statutory marginal state and federal tax rate (on a combined basis) then in effect. The payment pursuant to this Section 2(c) will be made within 10 days after the Executive's remittal of a written request for payment accompanied by a statement indicating the basis for and amount of the liability. (d) Supplemental Medicare Benefits. The termination of the Executive's employment will be deemed a "separation from service" pursuant to Section 4 of the Company's Supplemental Medicare Coverage Plan and the Company will provide the Executive (and the Executive's family members and dependents who were eligible to be covered at any time during the 90-day period immediately prior to the date of a Change in Control for the period after the Change in Control in which such family members and dependents would otherwise continue to be covered under the terms of the Supplemental Medicare Coverage Plan in effect immediately prior to the Change in Control) the applicable benefits pursuant to Section 3 of the Company's Supplemental Medicare Coverage Plan. (e) Supplemental Dental Benefits. In the event the Executive is at least 65 years of age on the Executive's Date of Termination, the termination of the Executive's employment will be deemed a "separation from service" pursuant to Section 4 of the Company's Supplemental Dental Coverage Plan and the Company will provide the Executive (and the Executive's family members and dependents who were eligible to be covered at any time during the 90-day period immediately prior to the date of a Change in Control for the period after the Change in Control in which such family members and dependents would otherwise continue to be covered under the terms of the Supplemental Dental Coverage Plan in effect immediately prior to the Change in Control) the applicable benefits pursuant to Section 3 of the Company's Supplemental Dental Coverage Plan. (f) Other Welfare Benefits. During the period beginning on the Executive's Date of Termination and ending on the earlier of (i) the last day of the eighteenth (18th) month that begins after the Executive's Date of Termination, or (ii) the date after the Executive's Date of Termination on which the Executive first becomes eligible to participate as an employee in a plan of another employer providing substantially similar welfare benefits to the Executive in the aggregate (and the Executive's family members and dependents who were eligible to be covered at any time during the 90-day period immediately prior to the date of a Change in Control for the period after the Change in Control in which such family members and dependents would otherwise continue to be covered under the terms of the applicable Benefit Plan in effect immediately prior to the Change in Control), the Company will provide, or arrange to provide, to the extent such policies or coverages can be obtained on commercial reasonable terms, the same or equivalent accidental death and dismemberment, short and long-term disability, life insurance coverages, and all other insurance policies and health and welfare benefits (other than benefits pursuant to any cafeteria plan maintained by the Company pursuant to Section 125 of the Code) to the Executive (and the Executive's family members and dependents who were eligible to be covered at any time during the 90-day period immediately prior to the date of a Change in Control for the period after the Change in Control in which such family members and dependents would otherwise continue to be covered under the terms of the applicable Benefit Plan in effect immediately prior to the Change in Control) under the same terms and at the same cost to the Executive and the Executive's family members and dependents as similarly situated individuals who continue to be employed by the Company (without regard to any reduction in such benefits that constitutes Good Reason). To the extent the Executive incurs a tax liability (including federal, state and local taxes and any interest and penalties with respect thereto) in connection with a benefit provided pursuant to this Section 2(f) which the Executive would not have incurred had the Executive been an active employee of the Company participating in the Company's welfare benefit plans, the Company will make a payment to the Executive in an amount equal to such tax liability plus an additional amount sufficient to permit the Executive to retain a net amount after all taxes (including penalties and interest) equal to the initial tax liability in connection with the benefit. For purposes of applying the foregoing, the Executive's tax rate will be deemed to be the highest statutory marginal state and federal tax rate (on a combined basis) then in effect. The payment pursuant to this Section 2(f) will be made within 10 days after the Executive's remittal of a written request for payment accompanied by a statement indicating the basis for and amount of the liability. (f) Termination of Non-Competition Agreements. All non-competition agreements (or non-competition provisions within other agreements) restricting the activities of the Executive after the termination of the Executive's employment with the Company will be null and void and of no further force and effect. If, on or after the date of a Change in Control, an Affiliate is sold, merged, transferred or in any other manner or for any other reason ceases to be an Affiliate or all or any portion of the business or assets of an Affiliate are sold, transferred or otherwise disposed of and the acquiror is not the Parent Corporation or an Affiliate (a "Disposition"), and the Executive remains or becomes employed by the acquiror or an "affiliate" of the acquiror (as defined in this Agreement but substituting "acquiror" for "Parent Corporation") in connection with the Disposition, the Executive will be deemed to have terminated employment on the effective date of the Disposition for purposes of the Section 2 and will be entitled to the benefits described in this Section 2 unless (x) the acquiror and its affiliates jointly and severally expressly assume and agree, in a manner that is enforceable by the Executive, to perform the obligations of this Agreement to the same extent that the Company would be required to perform if the Disposition had not occurred and (y) the Successor guarantees, in a manner that is enforceable by the Executive, payment and performance by the acquiror. 3. Gross-Up Payments. (a) Anything in this Agreement to the contrary notwithstanding, in the event it will be determined that any payments or distributions by the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any payments required under this Section 3) (collectively, the "Payments") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive will be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that, after payment by the Executive of all taxes (and any interest or penalties imposed with respect to such taxes), including any income taxes and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of Section 3(d), all determinations required to be made under this Section 3, including whether and when a Gross-Up Payment is required and the amount such Gross-Up Payment and the assumptions to be used in arriving at such determination, must be made by the Company's external auditors (the "Accounting Firm"), which must provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive must appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm will then be referred to as the "Accounting Firm" hereunder). All fees and expenses of the Accounting Firm must be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 3, must be paid by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm will be binding upon the Company and the Executive. (c) As a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which should have been made by the Company will not have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 3(d) and the Executive thereafter is required to make a payment of any additional Excise Tax, the Accounting Firm must determine the amount of the Underpayment that has occurred and any such Underpayment must be promptly paid by the Company to or for the benefit of the Executive. (d) The Executive must notify the Company in writing of any claim by the Internal Revenue Service or any other taxing authority that, if successful, would require the payment by the Company of any Gross-Up Payment. Such notification must be given as soon as practicable but no later than 10 business days after the Executive knows of such claim and must apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive must not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive must: (i) give the Company any information reasonably requested by the Company relating to such claim; (ii) take such action in connection with contesting such claim as the Company will reasonably request in writing from time to time, including accepting legal representation with respect to such claim by an attorney reasonably selected by the Company; (iii) cooperate with the Company in good faith in order to effectively contest such claim; and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company will bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and will indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 3(d), the Company will control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company will determine; provided further, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company will advance the amount of such payment to the Executive on an interest-free basis and will indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided further that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest will be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive will be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (e) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 3(d), the Executive becomes entitled to receive any refund with respect to such claim, the Executive must (subject to the Company's complying with the requirements of Section 3(d)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 3(d), a determination is made that the Executive will not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty days after such determination, then such advance will be forgiven and will not be required to be repaid and the amount of such advance will offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 4. Indemnification. Following a Change in Control, the Company will indemnify and advance expenses to the Executive for damages, costs and expenses (including, without limitation, judgments, fines, penalties, settlements and reasonable fees and expenses of the Executive's counsel) incurred in connection with all matters, events and transactions relating to the Executive's service to or status with the Company or any other corporation, employee benefit plan or other Person for which the Executive served at the request of the Company to the extent that the Company would have been required to do so under applicable law, corporate articles, bylaws or agreements or instruments of any nature with or covering the Executive, as in effect immediately prior to the Change in Control and to any further extent as may be determined or agreed upon following the Change in Control. 5. Miscellaneous. (a) Successors. The Parent Corporation must seek to have any Successor, by agreement in form and substance satisfactory to the Executive, assent to the fulfillment by the Company of the Company's obligations under this Agreement. Failure of the Parent Corporation to obtain such assent at least three business days prior to the time a Person becomes a Successor (or where the Parent Corporation does not have at least three business days' advance notice that a Person may become a Successor, within one business day after having notice that such Person may become or has become a Successor) will constitute Good Reason for termination by the Executive of the Executive's employment. The date on which any such succession becomes effective will be deemed the Date of Termination, and Notice of Termination will be deemed to have been given on that date. A Successor has no rights, authority or power with respect to this Agreement prior to a Change in Control. (b) Binding Agreement. This Agreement inures to the benefit of, and is enforceable by, the Executive, the Executive's personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive dies while any amount would still be payable to the Executive under this Agreement if the Executive had continued to live, all such amounts, unless otherwise provided in this Agreement, will be paid in accordance with the terms of this Agreement to the Executive's devisee, legatee or other designee or, if there be no such designee, to the Executive's estate. (c) No Mitigation. The Executive will not be required to mitigate the amount of any benefits the Company becomes obligated to provide to the Executive in connection with this Agreement by seeking other employment or otherwise. The benefits to be provided to the Executive in connection with this Agreement may not be reduced, offset or subject to recovery by the Company by any benefits the Executive may receive from other employment or otherwise. (d) No Setoff. The Company has no right to setoff benefits owed to the Executive under this Agreement against amounts owed or claimed to be owed by the Executive to the Company under this Agreement or otherwise. (e) Taxes. All benefits to be provided to the Executive in connection with this Agreement will be subject to required withholding of federal, state and local income, excise and employment-related taxes. The Company's good faith determination with respect to its obligation to withhold such taxes relieves it of any obligation that such amounts should have been paid to the Executive. (f) Notices. For the purposes of this Agreement, notices and all other communications provided for in, or required under, this Agreement must be in writing and will be deemed to have been duly given when personally delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid and addressed to each party's respective address set forth on the first page of this Agreement (provided that all notices to the Company must be directed to the attention of the chair of the Board), or to such other address as either party may have furnished to the other in writing in accordance with these provisions, except that notice of change of address will be effective only upon receipt. (g) Disputes. If the Executive so elects, any dispute, controversy or claim arising under or in connection with this Agreement will be settled exclusively by binding arbitration administered by the American Arbitration Association in Minneapolis, Minnesota in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect; provided that the Executive may seek specific performance of the Executive's right to receive benefits until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement. Judgment may be entered on the arbitrator's award in any court having jurisdiction. If any dispute, controversy or claim for damages arising under or in connection with this Agreement is settled by arbitration, the Company will pay, or if elected by the Executive, reimburse, all fees, costs and expenses incurred by the Executive related to such arbitration unless the arbitrators decide that the Executive's claim was frivolous or advanced by the Executive in bad faith. If the Executive does not elect arbitration, the Executive may pursue all available legal remedies. The Company will pay, or if elected by the Executive, reimburse the Executive for, all fees, costs and expenses incurred by the Executive in connection with any actual, threatened or contemplated litigation relating to this Agreement to which the Executive is or reasonably expects to become a party, whether or not initiated by the Executive, if the Executive is successful in recovering any benefit under this Agreement as a result of such action. The parties agree that any litigation arising under or in connection with this Agreement must be brought in a court of competent jurisdiction in the State of Minnesota, and hereby consent to the exclusive jurisdiction of said courts for this purpose and agree not to assert that such courts are an inconvenient forum. The Company will not assert in any dispute or controversy with the Executive arising under or in connection with this Agreement the Executive's failure to exhaust administrative remedies. (h) Effect of Plan Benefits on Other Severance Plans. In the event the Executive receives any payment under the terms of this Agreement, the Executive will not be eligible to receive benefits under any other severance pay plan sponsored or maintained by the Company, including without limitation the Analysts International, Inc. Executive Change in Control Severance Pay Plan and the Analysts International, Inc. Change in Control Severance Pay Plan. (i) Other Arrangements. This Agreement, including Exhibit A attached hereto and incorporated as an integral part of this Agreement, constitutes the entire agreement of the parties with respect to the subject matter hereof, and no agreements or representations, oral or otherwise, express or implied, with respect to the subject matter to this Agreement have been made by any party which are not expressly set forth in this Agreement. To the extent that any provision of any Other Arrangement limits, qualifies or is inconsistent with any provision of this Agreement, then for purposes of this Agreement, while such Other Arrangement remains in force, the provision of this Agreement will control and such provision of such Other Arrangement will be deemed to have been superseded, and to be of no force or effect, as if such Other Arrangement had been formally amended to the extent necessary to accomplish such purpose. Nothing in this Agreement prevents or limits the Executive's continuing or future participation in any Other Arrangement for which the Executive may qualify, and nothing in this Agreement limits or otherwise affects the rights the Executive may have under any Other Arrangement. Amounts that are vested benefits or which the Executive is otherwise entitled to receive under any Other Arrangement at or subsequent to the Date of Termination will be payable in accordance with such Other Arrangement. (j) No Employment or Service Contract. Nothing in this Agreement is intended to provide the Executive with any right to continue in the employ of the Company for any period of specific duration or interfere with or otherwise restrict in any way the Executive's rights or the rights of the Company. (k) Payment; Assignment. Benefits payable under this Agreement will be paid only from the general assets of the Company. No person has any right to or interest in any specific assets of the Company by reason of this Agreement. To the extent benefits under this Agreement are not paid when due to any individual, he or she is a general unsecured creditor of the Company with respect to any amounts due. Benefits payable pursuant to this Agreement and the right to receive future benefits may not be anticipated, alienated, sold, transferred, assigned, pledged, encumbered or subject to any charge. (l) Late Payments. Benefits not paid under this Agreement when due will accrue interest at the rate of 18% per year or the maximum rate permitted under applicable law. (m) Survival. The respective obligations of, and benefits afforded to, the Company and the Executive which by their express terms or clear intent survive termination of the Executive's employment with the Company or termination of this Agreement, as the case may be, will survive termination of the Executive's employment with the Company or termination of this Agreement, as the case may be, and will remain in full force and effect according to their terms. (n) Amendments; Waivers. No provision of this Agreement may be modified, waived or discharged unless such modification, waiver or discharge is agreed to in a writing signed by the Executive and a duly authorized officer of the Parent Corporation. No waiver by any party to this Agreement at any time of any breach by another party to this Agreement of, or of compliance with any condition or provision of this Agreement to be performed by such party will be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. (o) Governing Law. This Agreement and the legal relations among the parties as to all matters, including, without limitation, matters of validity, interpretation, construction, performance and remedies, will be governed by and construed exclusively in accordance with the internal laws of the State of Minnesota (without regard to the conflict of laws principles of any jurisdiction). (p) Further Assurances. The parties to this Agreement agree to perform, or cause to be performed, such further acts and deeds and to execute and deliver or cause to be executed and delivered, such additional or supplemental documents or instruments as may be reasonably required by the other party to carry into effect the intent and purpose of this Agreement. (q) Interpretation. The invalidity or unenforceability of all or any part of any provision of this Agreement will not affect the validity or enforceability of the remainder of such provision or of any other provision of this Agreement, which will remain in full force and effect. (r) Counterparts. This Agreement may be executed in several counterparts, each of which will be deemed to be an original, but all of which together will constitute one and the same instrument. [Remainder of page intentionally left blank] The Company and the Executive have executed this Agreement as of the date first above written. ANALYSTS INTERNATIONAL CORPORATION By:______________________________________________ Agreed to as of this _____ day of January, 2001 _________________________________________________ [Executive] Exhibit A DEFINITIONS For purposes of the Agreement, the following terms will have the meaning set forth below in this Exhibit A unless the context clearly requires otherwise. Terms defined elsewhere in the Agreement will have the same meaning throughout the Agreement. 1. "Affiliate" means (i) any corporation at least a majority of whose outstanding securities ordinarily having the right to vote at elections of directors is owned directly or indirectly by the Parent Corporation or (ii) any other form of business entity in which the Parent Corporation, by virtue of a direct or indirect ownership interest, has the right to elect a majority of the members of such entity's governing body. 2. "Base Pay" means the Executive's annual base salary from the Company at the rate in effect immediately prior to a Change in Control or at the time Notice of Termination is given, whichever is greater. Base Pay includes only regular cash salary (plus the amount of any automobile allowance paid to the Executive or any automobile lease payments made by the Company on behalf of the Executive) and is determined before any reduction for deferrals pursuant to any nonqualified deferred compensation plan or arrangement, qualified cash or deferred arrangement or cafeteria plan. 3. "Benefit Plan" means any (a) employee benefit plan as defined in Section 3(3) of ERISA; (b) cafeteria plan described in Code Section 125; (c) plan, policy or practice providing for paid vacation, other paid time off or short-or long-term profit sharing, bonus or incentive payments or perquisites; or (d) stock option, stock purchase, restricted stock, phantom stock, stock appreciation right or other equity-based compensation plan with respect to the securities of any Affiliate that is sponsored, maintained or contributed to by the Company for the benefit of employees (and/or their families and dependents) generally or the Executive in particular (and/or the Executive's family and dependents). 4."Board" means the board of directors of the Parent Corporation duly qualified and acting at the time in question. On and after the date of a Change in Control, any duty of the Board in connection with this Agreement is nondelegable and any attempt by the Board to delegate any such duty is ineffective. 5. "Cause" means: (a) the Executive's gross misconduct that is materially and demonstrably injurious to the Company; (b) the Executive's willful and continued failure to perform substantially the Executive's duties with the Company (other than any such failure (1) resulting from the Executive's incapacity due to bodily injury or physical or mental illness or (2) relating to changes in the Executive's duties after a Change in Control that constitute Good Reason) after a demand for substantial performance is delivered to the Executive by the chair of the Board which specifically identifies the manner in which the Executive have not substantially performed the Executive's duties and provides for a reasonable period of time within which the Executive may take corrective actions; or (c) the Executive's conviction (including a plea of nolo contendere) of willfully engaging in illegal conduct constituting a felony or gross misdemeanor under federal or state law which is materially and demonstrably injurious to the Company or which impairs the Executive's ability to perform substantially the Executive's duties for the Company. An act or failure to act will be considered "gross or willful" for this purpose only if done, or omitted to be done, by the Executive in bad faith and without reasonable belief that it was in, or not opposed to, the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board (or a committee thereof) or based upon the advice of counsel for the Company will be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. It is also expressly understood that the Executive's attention to matters not directly related to the business of the Company will not provide a basis for termination for Cause so long as the Board did not expressly disapprove in writing of the Executive's engagement in such activities either before or within a reasonable period of time after the Board knew or could reasonably have known that the Executive engaged in those activities. Notwithstanding the foregoing, the Executive may not be terminated for Cause unless and until there has been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the Board at a meeting of the Board called and held for the purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board), finding that in the good faith opinion of the Board the Executive were guilty of the conduct set forth above in clauses (a), (b) or (c) of this definition and specifying the particulars thereof in detail. 6. "Change in Control" means the occurrence of any of the following on or after December 18, 2000: (a) the sale, lease, exchange or other transfer, directly or indirectly, of all or substantially all of the assets of the Parent Corporation, in one transaction or in a series of related transactions, to any Person; (b) the approval by the shareholders of the Parent Corporation of any plan or proposal for the liquidation or dissolution of the Parent Corporation; (c) any Person, other than a "bona fide underwriter," becomes, after the date of this Agreement, the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of (i) 20 percent or more, but not more than 50 percent, of the combined voting power of the Parent Corporation's outstanding securities ordinarily having the right to vote at elections of directors, unless the transaction resulting in such ownership has been approved in advance by the "continuity directors" or (ii) more than 50 percent of the combined voting power of the Parent Corporation's outstanding securities ordinarily having the right to vote at elections of directors (regardless of any approval by the continuity directors); (d) a merger or consolidation to which the Parent Corporation is a party if the shareholders of the Parent Corporation immediately prior to the effective date of such merger or consolidation have, solely on account of ownership of securities of the Parent Corporation at such time, "beneficial ownership" (as defined in Rule 13d-3 under the Exchange Act) immediately following the effective date of such merger or consolidation of securities of the surviving corporation representing (i) 50 percent or more, but not more than 80 percent, of the combined voting power of the surviving corporation's then outstanding securities ordinarily having the right to vote at elections of directors, unless such merger or consolidation has been approved in advance by the continuity directors, or (ii) less than 50 percent of the combined voting power of the surviving corporation's then outstanding securities ordinarily having the right to vote at elections of directors (regardless of any approval by the continuity directors); or (f) the continuity directors cease for any reason to constitute at least a majority of the Board. For purposes of the definition of a Change in Control, a "continuity director" means any individual who is a member of the Board on the date of the Agreement, while he or she is a member of the Board, and any individual who subsequently becomes a member of the Board whose election or nomination for election by the Parent Corporation's shareholders was approved by a vote of at least a majority of the directors who are continuity directors (either by a specific vote or by approval of the proxy statement of the Parent Corporation in which such individual is named as a nominee for director without objection to such nomination). For example, if a majority of the seven individuals constituting the Board on December 18, 2000, approved a proxy statement in which two different individuals were nominated to replace two of the individuals who were members of the Board on December 18, 2000, the two newly elected directors would join the five remaining directors who were members of the Board on December 18, 2000 as continuity directors. Similarly, if a majority of those seven directors approved a proxy statement in which three different individuals were nominated to replace three other directors who were members of the Board on December 18, 2000, the three newly elected directors would also become, along with the other four directors, continuity directors. Individuals subsequently joining the Board could become continuity directors under the principles reflected in this example. For purposes of the definition of a Change in Control, a "bona fide underwriter" means a Person engaged in business as an underwriter of securities that acquires securities of the Parent Corporation through such Person's participation in good faith in a firm commitment underwriting until the expiration of 40 days after the date of such acquisition. 7."Code" means the Internal Revenue Code of 1986, as amended. Any reference to a specific provision of the Code includes a reference to such provision as it may be amended from time to time and to any successor provision. 8."Company" means the Parent Corporation, any Successor and any Affiliate. 9. "Date of Termination" following a Change in Control (or prior to a Change in Control if the Executive's termination was either a condition of the Change in Control or was at the request or insistence of any Person related to the Change in Control) means: (a) if the Executive's employment is to be terminated by the Executive, the date specified in the Notice of Termination which in no event may be a date more than 15 days after the date on which Notice of Termination is given unless the Company agrees in writing to a later date; (b) if the Executive's employment is to be terminated by the Company for Cause, the date specified in the Notice of Termination; (c) if the Executive's employment is terminated by reason of the Executive's death, the date of the Executive's death; or (d) if the Executive's employment is to be terminated by the Company for any reason other than Cause or the Executive's death, the date specified in the Notice of Termination, which in no event may be a date earlier than 15 days after the date on which a Notice of Termination is given, unless the Executive expressly agrees in writing to an earlier date. In the case of termination by the Company of the Executive's employment for Cause, if the Executive has not previously expressly agreed in writing to the termination, then within the 30-day period after the Executive's receipt of the Notice of Termination, the Executive may notify the Company that a dispute exists concerning the termination, in which event the Date of Termination will be the date set either by mutual written agreement of the parties or by the judge or arbitrators in a proceeding as provided in Section 5(g) of the Agreement. During the pendency of any such dispute, the Executive will continue to make the Executive available to provide services to the Company and the Company will continue to pay the Executive the Executive's full compensation and benefits in effect immediately prior to the date on which the Notice of Termination is given (without regard to any changes to such compensation or benefits that constitute Good Reason) and until the dispute is resolved in accordance with Section 5(g) of the Agreement. The Executive will be entitled to retain the full amount of any such compensation and benefits without regard to the resolution of the dispute unless the judge or arbitrators decide(s) that the Executive's claim of a dispute was frivolous or advanced by the Executive in bad faith. 10. "Eligible Earnings" means the sum of (i) the average of the Executive's Base Pay for the last five years of the Company ending on or before the Date of Termination, or if the Executive was employed by the Company for fewer than five years, for the number of years for which the Executive was employed plus (ii) the average of any incentive compensation paid by the Company to the Executive for the last five years of the Company ending on or before the Date of Termination, or if the Executive was eligible to receive such incentive compensation for fewer than five years, for the number of years for which the Executive was eligible. If the Executive's Base Pay or incentive compensation for a year relates to a period of less than 12 months, the amount of the Base Pay or incentive compensation will be annualized in determining the Executive's Eligible Earnings. 11."ERISA" means the Employee Retirement Income Security Act of 1974, as amended. Any reference to a specific provision of ERISA includes a reference to such provision as it may be amended from time to time and to any successor provision. 12."Exchange Act" means the Securities Exchange Act of 1934, as amended. Any reference to a specific provision of the Exchange Act or to any rule or regulation thereunder includes a reference to such provision as it may be amended from time to time and to any successor provision. 13. "Good Reason" means: (a) a change in the Executive's title(s), status, position(s), authority, duties or responsibilities as an executive of the Company as in effect immediately prior to the Change in Control which, in the Executive's reasonable judgment, is material and adverse (other than, if applicable, any such change directly attributable to the fact that the Parent Corporation is no longer publicly owned); provided, however, that Good Reason does not include such a change that is remedied by the Company promptly after receipt of notice of such change is given by the Executive; (b) a reduction by the Company in the Executive's Base Pay, or an adverse change in the form or timing of the payment thereof, as in effect immediately prior to the Change in Control or as thereafter increased; (c) the failure by the Company to cover the Executive under Benefit Plans that, in the aggregate, provide substantially similar benefits to the Executive and/or the Executive's family and dependents at a substantially similar total cost to the Executive (e.g., premiums, deductibles, co-pays, out of pocket maximums, required contributions and the like) relative to the benefits and total costs under the Benefit Plans in which the Executive (and/or the Executive's family or dependents) were participating at any time during the 90-day period immediately preceding the Change in Control; (d) the Company's requiring the Executive to be based more than 30 miles from where the Executive's office is located immediately prior to the Change in Control, except for required travel on the Company's business, and then only to the extent substantially consistent with the business travel obligations which the Executive undertook on behalf of the Company during the 90-day period immediately preceding the Change in Control (without regard to travel related to or in anticipation of the Change in Control); (e) the failure by the Company to obtain from any Successor the assent to this Agreement contemplated by Section 4(a) of the Agreement; (f) any purported termination by the Company of the Executive's employment that is not properly effected pursuant to a Notice of Termination and pursuant to any other requirements of this Agreement, and, for purposes of this Agreement, no such purported termination will be effective; or (g) any refusal by the Company to continue to allow the Executive to attend to matters or engage in activities not directly related to the business of the Company which, at any time prior to the Change in Control, the Executive were not expressly prohibited in writing by the Board from attending to or engaging in. The Executive's continued employment does not constitute consent to, or waiver of any rights arising in connection with, any circumstances constituting Good Reason. The Executive's termination of employment for Good Reason as defined above will constitute Good Reason for all purposes of the Agreement notwithstanding that the Executive may also thereby be deemed to have retired under any applicable benefit plan, policy or practice of the Company. 14. "Notice of Termination" means a written notice given on or after the date of a Change in Control (unless the Executive's termination before the date of the Change in Control was either a condition of the Change in Control or was at the request or insistence of any Person related to the Change in Control in which case the written notice may be given before the date of the Change in Control) which indicates the specific termination provision in the Agreement pursuant to which the notice is given. Any purported termination by the Company or by the Executive on or after the date of a Change in Control (or before the date of a Change in Control if the Executive's termination was either a condition of the Change in Control or was at the request or insistence of any Person related to the Change in Control) must be communicated by written Notice of Termination to be effective; provided, that the Executive's failure to provide Notice of Termination will not limit any of the Executive's rights under the Agreement except to the extent the Company demonstrates that it suffered material actual damages by reason of such failure. 15. "Other Arrangement" is any Benefit Plan or other plan, policy or practice of the Company or any other agreement between the Executive and the Company, other than this Agreement. 16."Parent Corporation" means Analysts International Corporation and any Successor. 17."Person" means any individual, corporation partnership, group, association or other person," as such term is used in Section 13(d) or Section 14(d) of the Exchange Act, other than the Parent Corporation, any Affiliate or any benefit plan(s) sponsored by the Parent Corporation or an Affiliate. 18. "Successor" means any Person that succeeds to, or has the practical ability to control (either immediately or solely with the passage of time), the Parent Corporation's business directly, by merger, consolidation or other form of business combination, or indirectly, by purchase of the Parent Corporation's outstanding securities ordinarily having the right to vote at the election of directors or all or substantially all of its assets or otherwise. ANALYSTS INTERNATIONAL CORPORATION EXECUTIVE CHANGE IN CONTROL SEVERANCE PAY PLAN As Adopted Effective December 18, 2000 ANALYSTS INTERNATIONAL CORPORATION EXECUTIVE CHANGE IN CONTROL SEVERANCE PAY PLAN Table of Contents Page ---- ARTICLE 1 INTRODUCTION.........................................................4 1.1. Plan Name........................................................4 1.2. Plan Type........................................................4 1.3. Plan Purpose.....................................................4 ARTICLE 2 DEFINITIONS, CONSTRUCTION AND INTERPRETATIONS........................4 2.1. Affiliate........................................................4 2.2. Base Pay.........................................................4 2.3. Benefit Plan.....................................................4 2.4. Board............................................................5 2.5. Cause............................................................5 2.6. Change in Control................................................6 2.7. Code.............................................................7 2.8. Company..........................................................7 2.9. Date of Termination..............................................7 2.10. Eligible Participant.............................................7 2.11. ERISA............................................................8 2.12. Exchange Act.....................................................8 2.13. Good Reason......................................................8 2.14. Governing Law....................................................9 2.15. Headings.........................................................9 2.16. Notice of Termination............................................9 2.17. Number and Gender................................................9 2.18. Other Arrangement................................................9 2.19. Parent Corporation...............................................9 2.20. Participant......................................................9 2.21. Plan.............................................................9 2.22. Person...........................................................9 2.23. Qualified Employee..............................................10 2.24. Successor.......................................................10 2.25. Trust...........................................................10 2.26. Trustee.........................................................10 ARTICLE 3 PARTICIPATION AND ELIGIBILITY FOR BENEFITS..........................10 3.1. Commencement of Participation...................................10 3.2. Ceasing to be a Qualified Employee..............................11 3.3. Eligibility for Benefits........................................11 ARTICLE 4 BENEFITS............................................................11 4.1. Compensation and Benefits Before Date of Termination............11 4.2. Cash Payment....................................................11 4.3. Group Health and Dental Plans...................................12 4.4. Other Welfare Benefits..........................................12 4.5. Termination of Non-Competition Agreements.......................13 4.6. Excess Parachute Payments.......................................13 4.7. Indemnification.................................................15 ARTICLE 5 Administration and Enforcement of Rights............................15 5.1. Plan Administration.............................................15 5.2. Amendment and Termination.......................................15 5.3. Benefit Claims..................................................16 5.4. Disputes........................................................16 5.5. Funding and Payment.............................................17 ARTICLE 6 Miscellaneous.......................................................16 6.1. Successors......................................................17 6.2. Binding Plan....................................................17 6.3. Validity........................................................17 6.4. No Mitigation...................................................17 6.5. No Set-off......................................................18 6.6. Taxes...........................................................18 6.7. Notices.........................................................18 6.8. Effect of Plan Benefits on Other Severance Plans................18 6.9. Related Plans...................................................18 6.10. No Employment or Service Contract...............................18 6.11. Survival........................................................18 6.12. Effect on Other Plans...........................................19 6.13. Prohibition of Alienation.......................................19 6.14. Notice of Reemployment..........................................19 ANALYSTS INTERNATIONAL CORPORATION EXECUTIVE CHANGE IN CONTROL SEVERANCE PAY PLAN Article 1 INTRODUCTION 1.1. Plan Name. The name of the Plan is the "Analysts International Corporation Executive Change in Control Severance Pay Plan." 1.2. Plan Type. The Plan is an unfunded plan maintained by the Company primarily for the purpose of providing benefits for a select group of management or highly compensated employees and, as such, is intended to be exempt from the provisions of Parts 2, 3 and 4 of Subtitle B of Title I of ERISA, to the extent such provisions would otherwise be applicable, by operation of Sections 201(2), 301(a)(3) and 401(a)(1) thereof, respectively. The Plan is also intended to be unfunded for tax purposes. The Plan will be construed in a manner that gives effect to such intent. 1.3. Plan Purpose. The purpose of the Plan is to provide benefits to Qualified Employees whose employment is terminated in connection with a Change in Control. Article 2 DEFINITIONS, CONSTRUCTION AND INTERPRETATIONS The definitions and rules of construction and interpretation set forth in this Article 2 apply in construing the Plan unless the context otherwise indicates. 2.1. Affiliate. An "Affiliate" is: any corporation at least a majority of whose outstanding securities ordinarily having the right to vote at elections of directors is owned directly or indirectly by the Parent Corporation; or any other form of business entity in which the Parent Corporation, by virtue of a direct or indirect ownership interest, has the right to elect a majority of the members of such entity's governing body. 2.2. Base Pay. The "Base Pay" of a Participant is his or her annual base salary from the Company at the rate in effect immediately prior to the Change in Control or at the time Notice of Termination is given, whichever is greater. Base Pay includes only regular cash salary and is determined before any reduction for deferrals pursuant to any nonqualified deferred compensation plan or arrangement, qualified cash or deferred arrangement or cafeteria plan or deduction of any kind. 2.3. Benefit Plan. A "Benefit Plan" is any: (a) employee benefit plan as defined in ERISA Section 3(3), (b) cafeteria plan described in Code Section 125, (c) plan, policy or practice providing for paid vacation, other paid time off or short- or long-term profit sharing, (d) bonus or incentive payments or perquisites, or (e) stock option, stock purchase, restricted stock, phantom stock, stock appreciation right or other equity-based (f) compensation plan with respect to the securities of any Affiliate that is sponsored, maintained or contributed to by the Company for the benefit of employees (and/or their families and dependents) generally or a Participant (and/or a Participant's family and dependents) in particular. 2.4 Board. The "Board" is the board of directors of the Parent Corporation duly qualified and acting at the time in question. On and after the date of a Change in Control, any duty of the Board in connection with the Plan is nondelegable and any attempt by the Board to delegate any such duty is ineffective. 2.5 Cause. (a) Subject to Subsection (b), "Cause" with respect to a particular Participant is any of the following: (i)the Participant's gross misconduct that is materially and demonstrably injurious to the Company; (ii)the Participant's willful and continued failure to perform substantially his or her duties with the Company (other than any such failure (a) resulting from the Participant's incapacity due to bodily injury or physical or mental illness or (b) relating to changes in the Participant's duties after a Change in Control that constitute Good Reason) after a demand for substantial performance is delivered to the Participant by the Chair of the Board which specifically identifies the manner in which the Board believes that the Participant has not substantially performed his or her duties and provides for a reasonable period of time within which the Participant may take corrective measures; or (iii) the Participant's conviction (including a plea of nolo contendere) of willfully engaging in illegal conduct constituting a felony or gross misdemeanor under federal or state law which is materially and demonstrably injurious to the Company or which impairs the Participant's ability to perform substantially his or her duties with the Company. An act or failure to act will be considered "gross" or "willful" for this purpose only if done, or omitted to be done, by the Participant in bad faith and without reasonable belief that it was in, or not opposed to, the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board (or a committee thereof) or based upon the advice of counsel for the Company will be conclusively presumed to be taken or not taken by the Participant in good faith and in the best interests of the Company. In addition, the Participant's attention to matters not directly related to the business of the Company will not provide a basis for termination for Cause so long as the Board did not expressly disapprove in writing to the Participant's engagement in such activities either before or within a reasonable time after the Board knew or reasonably should have known that the Participant engaged in the activities. (b) Notwithstanding Subsection (a), a Participant may not be terminated for Cause unless and until there has been delivered to the Participant a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to such Participant and an opportunity for the Participant, together with his or her counsel, to be heard before the Board), finding that in the good faith opinion of the Board the Participant was guilty of the conduct set forth in clause (i), (ii) or (iii) of Subsection (a) and specifying the particulars thereof in detail. 2.6. Change in Control. (a) "Change in Control" is the occurrence of any of the following on or after December 18, 2000: (i)the sale, lease, exchange or other transfer, directly or indirectly, of all or substantially all of the assets of the Parent Corporation, in one transaction or in a series of related transactions, to any Person; (ii) the approval by the shareholders of the Parent Corporation of any plan or proposal for the liquidation or dissolution of the Parent Corporation; (iii) any Person, other than a "bona fide underwriter," becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of (a) 20 percent or more, but not more than 50 percent, of the combined voting power of the Parent Corporation's outstanding securities ordinarily having the right to vote at elections of directors, unless the transaction resulting in such ownership has been approved in advance by the "continuity directors," as defined at Subsection 2.6(b), or (b) more than 50 percent of the combined voting power of the Parent Corporation's outstanding securities ordinarily having the right to vote at elections of directors (regardless of any approval by the continuity directors); (iv) a merger or consolidation to which the Parent Corporation is a party if the shareholders of the Parent Corporation immediately prior to the effective date of such merger or consolidation have, solely on account of ownership of securities of the Parent Corporation at such time, "beneficial ownership" (as defined in Rule 13d-3 under the Exchange Act) immediately following the effective date of such merger or consolidation of securities of the surviving corporation representing (a) 50 percent or more, but not more than 80 percent, of the combined voting power of the surviving corporation's then outstanding securities ordinarily having the right to vote at elections of directors, unless such merger or consolidation has been approved in advance by the continuity directors, or (b) less than 50 percent of the combined voting power of the surviving corporation's then outstanding securities ordinarily having the right to vote at elections of directors (regardless of any approval by the continuity directors); or (v) the continuity directors cease for any reason to constitute at least a majority the Board. (b) For purposes of this section- (i)"Continuity director" means any individual who was a member of the Board on December 18, 2000, while he or she is a member of the Board, and any individual who subsequently becomes a member of the Board whose election, or nomination for election by the Parent Corporation's shareholders, was approved by a vote of at least a majority of the directors who are continuity directors (either by a specific vote or by approval of the proxy statement of the Parent Corporation in which such individual is named as a nominee for director without objection to such nomination). For example, if a majority of the seven individuals constituting the Board on December 18, 2000, approved a proxy statement in which two different individuals were nominated to replace two of the individuals who were members of the Board on December 18, 2000, the two newly elected directors would join the five remaining directors who were members of the Board on December 18, 2000 as continuity directors. Similarly, if a majority of those seven directors approved a proxy statement in which three different individuals were nominated to replace three other directors who were members of the Board on December 18, 2000, the three newly elected directors would also become, along with the other four directors, continuity directors. Individuals subsequently joining the Board could become continuity directors under the principles reflected in this example. (ii)"Bona fide underwriter" means a Person engaged in business as an underwriter of securities that acquires securities of the Parent Corporation from the Parent Corporation through such Person's participation in good faith in a firm commitment underwriting until the expiration of 40 days after the date of such acquisition. 2.7. Code. The "Code" is the Internal Revenue Code of 1986, as amended. Any reference to a specific provision of the Code includes a reference to such provision as it may be amended from time to time and to any successor provision. 2.8. Company. The "Company" is the Parent Corporation, any Successor and any Affiliate. 2.9. Date of Termination. The "Date of Termination" with respect to a Participant following a Change in Control (or prior to a Change in Control if the Participant's termination was either a condition of the Change in Control or was at the request or insistence of any Person related to the Change in Control) means: (a) if the Participant's employment is to be terminated by the Participant for Good Reason, the date specified in the Notice of Termination which in no event may be a date more than 15 days after the date on which Notice of Termination is given unless the Company expressly agrees in writing to a later date; (b) if the Participant's employment is to be terminated by the Company for Cause, the date specified in the Notice of Termination; (c) if the Participant's employment is terminated by reason of his or her death, the date of his or her death; or (d) if the Participant's employment is to be terminated by the Company for any reason other than Cause or his or her death, the date specified in the Notice of Termination, which in no event may be a date earlier than 15 days after the date on which a Notice of Termination is given, unless the Participant expressly agrees in writing to an earlier date. If the Company terminates a Participant's employment for Cause following a Change in Control (or prior to a Change in Control if the Participant's termination was either a condition of the Change in Control or was at the request or insistence of any Person related to the Change in Control) and the Participant has not previously expressly agreed in writing to the termination, then within the 30-day period after the Participant's receipt of the Notice of Termination, the Participant may notify the Company that a dispute exists concerning the termination, in which event the Date of Termination will be the date set either by mutual written agreement of the parties or by the arbitrators or a court in a proceeding as provided in Section 5.4. During the pendency of any such dispute, the Participant will continue to make himself or herself available to provide services to the Company and the Company will continue to pay the Participant his or her full compensation and benefits in effect immediately prior to the date on which the Notice of Termination is given (without regard to any changes to such compensation or benefits which constitute Good Reason) and until the dispute is resolved in accordance with Section 5.4. The Participant will be entitled to retain the full amount of any such compensation and benefits without regard to the resolution of the dispute unless the arbitrators or judge decide(s) that the Participant's claim of a dispute was frivolous or advanced by the Participant in bad faith. 2.10. Eligible Participant. An "Eligible Participant" is a Participant who has become eligible to receive benefits pursuant to Section 3.3. 2.11. ERISA. "ERISA" is the Employee Retirement Income Security Act of 1974, as amended. Any reference to a specific provision of ERISA includes a reference to such provision as it may be amended from time to time and to any successor provision. 2.12. Exchange Act. The "Exchange Act" is the Securities Exchange Act of 1934, as amended. Any reference to a specific provision of the Exchange Act or to any rule or regulation thereunder includes a reference to such provision as it may be amended from time to time and to any successor provision. 2.13. Good Reason. (a) Subject to Subsection (b), "Good Reason" with respect to a Participant is any of the following: (i) a change in the Participant's title(s), status, position(s), authority, duties or responsibilities as an executive of the Company as in effect immediately prior to the Change in Control which, in the Participant's reasonable judgment, is material and adverse (other than, if applicable, any such change directly attributable to the fact that the Parent Corporation is no longer publicly owned); provided, however, that Good Reason does not include a change in a Participant's title(s), status, position(s), authority, duties or responsibilities that is remedied by the Company promptly after receipt of notice of such change is given by the Participant; (ii) a reduction by the Company in the Participant's Base Pay, or an adverse change in the form or timing of the payment thereof, as in effect immediately prior to the Change in Control or as thereafter increased; (iii) the failure by the Company to cover the Participant under Benefit Plans that, in the aggregate, provide substantially similar benefits to the Participant and/or his or her family and dependents at a substantially similar total cost to the Participant (e.g., premiums, deductibles, co-pays, out of pocket maximums, required contributions, taxes and the like) relative to the benefits and total costs under the Benefit Plans in which the Participant (and/or his or her family or dependents) is participating at any time during the 90-day period immediately preceding the Change in Control; (iv) the Company's requiring a Participant to be based more than 30 miles from where his or her office is located immediately prior to the Change in Control, except for required travel on the Company's business, and then only to the extent substantially consistent with the business travel obligations which the Participant undertook on behalf of the Company during the 90-day period ending on the date of the Change in Control (without regard to travel related to or in anticipation of the Change in Control); (v) the failure of the Parent Corporation to obtain from any Successor the assent to this Plan contemplated by Section 6.1; (vi) any purported termination by the Company of a Participant's employment which is not properly effected pursuant to a Notice of Termination and pursuant to any other requirements of this Plan, and for purposes of this Plan, no such purported termination will be effective; or (vii) any refusal by the Company to continue to allow a Participant to attend to matters or engage in activities not directly related to the business of the Company which, at any time prior to the Change in Control, the Participant was not expressly prohibited by the Company from attending to or engaging in. (b) A Participant's continued employment does not constitute consent to, or waiver of any rights arising in connection with, any circumstance constituting Good Reason. Termination by a Participant of his or her employment for Good Reason as defined in this section will constitute Good Reason for all purposes of this Plan, notwithstanding that the Participant may also thereby be deemed to have "retired" under any applicable benefit plan, policy or practice of the Company. 2.14. Governing Law. To the extent that state law is not preempted by provisions of ERISA or any other laws of the United States, all questions pertaining to the construction, validity, effect and enforcement of this Plan will be determined in accordance with the internal, substantive laws of the State of Minnesota, without regard to the conflict of laws principles of the State of Minnesota or of any other jurisdiction. 2.15. Headings. The headings of articles and sections are included solely for convenience. If there is a conflict between the headings and the text of the Plan, the text will control. 2.16. Notice of Termination. A "Notice of Termination" is a written notice given on or after the date of a Change in Control (unless the termination before the date of the Change in Control was either a condition of the Change in Control or was at the request or insistence of any Person related to the Change in Control in which case the written notice may be given before the date of the Change in Control) which indicates the specific termination provision in this Plan pursuant to which the notice is given. Any purported termination by the Company or by a Participant for Good Reason on or after the date of a Change in Control (or before the date of the Change in Control if the termination was either a condition of the Change in Control or was at the request or insistence of any Person related to the Change in Control) must be communicated by written Notice of Termination to be effective; provided, that a Participant's failure to provide Notice of Termination will not limit any of his or her rights under the Plan except to the extent the Company demonstrates that it suffered material actual damages by reason of such failure. 2.17. Number and Gender. Wherever appropriate, the singular number may be read as the plural, the plural number may be read as the singular and a reference to one gender may be read as a reference to the other. 2.18. Other Arrangement. An "Other Arrangement" is any Benefit Plan or other plan, policy or practice of the Company or any other agreement between the Participant and the Company, other than the Plan. 2.19. Parent Corporation. The "Parent Corporation" is Analysts International Corporation and any Successor. 2.20. Participant. A "Participant" is a Qualified Employee who is participating in the Plan pursuant to Article 3. 2.21. Plan. The "Plan" is that set forth in this instrument as it may be amended from time to time. 2.22. Person. A "Person" includes any individual, corporation, partnership, group, association or other "person," as such term is used in Section 13(d) or Section 14(d) of the Exchange Act, other than the Parent Corporation, any Affiliate or any benefit plan sponsored by the Parent Corporation or an Affiliate. 2.23. Qualified Employee. (a) A "Qualified Employee" is an individual who (i) is either (1) employed by the Parent Corporation as an executive officer of the Parent Corporation elected by the Board or (2) employed by the Company as a management or highly compensated employee, as determined by the Chief Executive Officer of the Parent Corporation, and selected as a Qualified Employee by the Chief Executive Officer of the Parent Corporation and (ii) is not a party to a separate written agreement with the Company which by its express terms specifically provides that the individual is not eligible to participate in the Plan. (b) An individual who, during the 90-day period ending on the date of a Change in Control, ceases to be an executive officer of the Parent Corporation elected by the Board, will nevertheless remain a Qualified Employee until his or her Date of Termination. (c) In the case of an individual who is selected as a Qualified Employee pursuant to Subsection (a)(i)(2), the Chief Executive Officer of the Parent Corporation may at any time prior to a Change in Control, but not thereafter, determine that the individual is no longer a Qualified Employee but as to that individual, the Chief Executive Officer's determination will be deemed to be an amendment to the Plan subject to the provisions of Section 5.2(a). 2.24. Successor. A "Successor" is any Person that succeeds to, or has the practical ability to control (either immediately or solely with the passage of time), the Parent Corporation's business directly, by merger, consolidation or other form of business combination, or indirectly, by purchase of the Parent Corporation's outstanding securities ordinarily having the right to vote at the election of directors, all or substantially all of its assets or otherwise. 2.25. Trust. "Trust" means the trust or trusts, if any, established by the Company pursuant to Section 5.5. 2.26. Trustee. "Trustee" means the one or more banks or trust companies which at the relevant time has or have been appointed by the Company to act as Trustee of the Trust. ARTICLE 3 PARTICIPATION AND ELIGIBILITY FOR BENEFITS 3.1. Commencement of Participation. (a) An individual who is employed by the Parent Corporation as an executive officer of the Parent Corporation elected by the Board will commence participation in the Plan on the first day on which he or she performs services for the Parent Corporation as an executive officer of the Parent Corporation elected by the Board. (b) An individual who is selected by the Chief Executive Officer of the Parent Corporation as a Qualified Employee pursuant to Section 2.24(a)(i)(2) will commence participation in the Plan as of the date specified by the Chief Executive Officer of the Parent Corporation in a notice to the individual regarding his or her selection. (c) Notwithstanding any other provision of the Plan to the contrary, no individual will commence participation in the Plan on or after the date of a Change in Control. 3.2. Ceasing to be a Qualified Employee. A Participant who ceases for any reason to be a Qualified Employee will, except with respect to any current or future benefit to which he or she is then entitled, thereupon cease his or her participation in the Plan. Notwithstanding any other provision of the Plan to the contrary, a Participant will cease to be a Qualified Employee if, prior to the date of a Change in Control: (i) an Affiliate is sold, merged, transferred or in any other manner or for any other reason ceases to be an Affiliate or all or any portion of the business or assets of an Affiliate are sold, transferred or otherwise disposed of and no Change in Control occurs in connection therewith; (ii) the Participant's primary employment duties are with the Affiliate at the time of the occurrence of such event; and (iii) such Participant does not, in conjunction therewith, transfer employment directly to the Parent Corporation or another Affiliate as a Qualified Employee. 3.3. Eligibility for Benefits. (a) A Participant will become eligible for the benefits provided in Article 4 if and only if (i) (1) the Company terminates his or her employment for any reason other than his or her death or Cause or (2) the Participant terminates employment with the Company for Good Reason and (ii) the termination occurs within the period beginning on the date of a Change in Control and ending on the last day of the thirty-sixth month that begins after the month in which the Change in Control occurs or prior to a Change in Control if the termination was either a condition of the Change in Control or at the request or insistence of a Person related to the Change in Control. (b) If, on or after the date of a Change in Control, an Affiliate is sold, merged, transferred or in any other manner or for any other reason ceases to be an Affiliate or all or any portion of the business or assets of an Affiliate is or are sold, transferred or otherwise disposed of and the acquiror is not the Parent Corporation or an Affiliate (a "Disposition"), any individual who was a Qualified Employee immediately prior to the Disposition and who remains or becomes employed by the acquiror or any Person that, directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, the acquiror (an "Acquiror Affiliate") in connection with the Disposition will be deemed to have terminated employment on the effective date of the Disposition for purposes of Subsection (a) unless (i) the acquiror and the Acquiror Affiliates jointly and severally expressly assume and agree, in a manner that is enforceable by the individual, to perform the obligations of this Plan to the same extent that the Company would be required to perform if the Disposition had not occurred and (ii) the Successor guarantees, in a manner that is enforceable by the individual, payment and performance by the acquiror. ARTICLE 4 BENEFITS 4.1. Compensation and Benefits Before Date of Termination. During the period beginning on the date a Participant or the Company, as the case may be, receives Notice of Termination and ending on the Date of Termination, the Company will continue to pay the Participant his or her Base Pay and cause his or her continued participation in all Benefit Plans in accordance with the terms of such Benefit Plans. 4.2. Cash Payment. The Company will make a cash payment to an Eligible Participant in an amount equal to (a) 2.99 times the Eligible Participant's Base Pay, plus (b) any incentive compensation payments made to the Executive for the year ending after the Executive's Date of Termination, in a single lump sum within ten days after the Eligible Participant's Date of Termination or, if later, within ten days following the date of the Change in Control. 4.3. Group Health and Dental Plans. (a) During the continuation period, the Company will maintain a group health and dental plan(s) which by its terms covers the Eligible Participant (and the Eligible Participant's family members and dependents who were eligible to be covered at any time during the 90-day period immediately prior to the date of the Change in Control for the period after the Change in Control in which such family members and dependents would otherwise continue to be covered under the terms of the plan in effect immediately prior to the Change in Control) under the same terms and at the same cost to the Eligible Participant and the Eligible Participant's family members and dependents as similarly situated individuals who continue to be employed by the Company (without regard to any reduction in such benefits that constitutes Good Reason). The continuation period under applicable federal and state continuation laws will begin to run from the date on which coverage pursuant to this Section 2(c) ends. The "continuation period" is the period beginning on the Eligible Participant's Date of Termination and ending on the earlier of (i) the last day of the 18th month that begins after the Eligible Participant's Date of Termination or (ii) the date after the Eligible Participant's Date of Termination on which the Eligible Participant first becomes eligible to participate as an employee in a plan of another employer providing group health and dental benefits to the Eligible Participant and the Eligible Participant's eligible family members and dependents which plan does not contain any exclusion or limitation with respect to any pre-existing condition of the Eligible Participant or any eligible family member or dependent who would otherwise be covered under the Company's plan but for this clause (ii). (b) To the extent the Eligible Participant incurs a tax liability (including federal, state and local taxes and any interest and penalties with respect thereto) in connection with a benefit provided pursuant to this Section 4.3 which the Eligible Participant would not have incurred had the Eligible Participant been an active employee of the Company participating in the Company's group health and dental plan, the Company will make a payment to the Eligible Participant in an amount equal to such tax liability plus an additional amount sufficient to permit the Eligible Participant to retain a net amount after all taxes (including penalties and interest) equal to the initial tax liability in connection with the benefit. For purposes of applying the foregoing, the Eligible Participant's tax rate will be deemed to be the highest statutory marginal state and federal tax rate (on a combined basis) then in effect. The payment pursuant to this Section 4.3 will be made within 10 days after the Eligible Participant's remittal of a written request for payment accompanied by a statement indicating the basis for and amount of the liability. 4.4. Other Welfare Benefits. (a) During the period beginning on the Eligible Participant's Date of Termination and ending on the earlier of (i) the last day of the eighteenth (18th) month that begins after the Eligible Participant's Date of Termination, or (ii) the date after the Eligible Participant's Date of Termination on which the Eligible Participant first becomes eligible to participate as an employee in a plan of another employer providing substantially similar welfare benefits to the Eligible Participant (and the Eligible Participant's family members and dependents who were eligible to be covered at any time during the 90-day period immediately prior to the date of a Change in Control for the period after the Change in Control in which such family members and dependents would otherwise continue to be covered under the terms of the applicable Benefit Plan in effect immediately prior to the Change in Control), the Company will provide, or arrange to provide, the same or equivalent accidental death and dismemberment, short and long-term disability, life insurance coverages, and all other insurance policies and health and welfare benefits to the Eligible Participant (and the Eligible Participant's family members and dependents who were eligible to be covered at any time during the 90-day period immediately prior to the date of a Change in Control for the period after the Change in Control in which such family members and dependents would otherwise continue to be covered under the terms of the applicable Benefit Plan in effect immediately prior to the Change in Control) under the same terms and at the same cost to the Eligible Participant and the Eligible Participant's family members and dependents as similarly situated individuals who continue to be employed by the Company (without regard to any reduction in such benefits that constitutes Good Reason). (b) To the extent the Eligible Participant incurs a tax liability (including federal, state and local taxes and any interest and penalties with respect thereto) in connection with a benefit provided pursuant to this Section 4.4 which the Eligible Participant would not have incurred had the Eligible Participant been an active employee of the Company participating in the Company's welfare benefit plans, the Company will make a payment to the Eligible Participant in an amount equal to such tax liability plus an additional amount sufficient to permit the Eligible Participant to retain a net amount after all taxes (including penalties and interest) equal to the initial tax liability in connection with the benefit. For purposes of applying the foregoing, the Eligible Participant's tax rate will be deemed to be the highest statutory marginal state and federal tax rate (on a combined basis) then in effect. The payment pursuant to this Section 4.4 will be made within 10 days after the Eligible Participant's remittal of a written request for payment accompanied by a statement indicating the basis for and amount of the liability. 4.5. Termination of Non-Competition Agreements. After the termination of an Eligible Participant's employment with the Company in connection with a Change in Control, all non-competition agreements (or non-competition provisions within other agreements) restricting the activities of the Eligible Participant will be null and void and of no further force and effect. 4.6. Excess Parachute Payments. (a) Notwithstanding anything in this Plan to the contrary, in the event it shall be determined that any payments or distributions by the Company to or for the benefit of an Eligible Participant (whether paid or payable or distributed or distributable pursuant to the terms of this Plan or Other Arrangement, but determined without regard to any payments required under this Section 4.6) (collectively, the "Payments") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Eligible Participant with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Eligible Participant shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that, after payment by the Eligible Participant of all taxes (and any interest or penalties imposed with respect to such taxes), including any income taxes and Excise Tax imposed upon the Gross-Up Payment, the Eligible Participant retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of Section 4.6(d), all determinations required to be made under this Section 4.6, including whether and when a Gross-Up Payment is required and the amount such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the Company's external auditors (the "Accounting Firm"), which shall provide detailed supporting calculations both to the Company and the Eligible Participant within 15 business days of the receipt of notice from the Eligible Participant that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Eligible Participant shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the "Accounting Firm" hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 4.6, shall be paid by the Company to the Eligible Participant within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Eligible Participant. (c) As a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which should have been made by the Company will not have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 4.6(d) and the Eligible Participant thereafter is required to make a payment of any additional Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Eligible Participant. (d) The Eligible Participant shall notify the Company in writing of any claim by the Internal Revenue Service or any other taxing authority that, if successful, would require the payment by the Company of any Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Eligible Participant knows of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Eligible Participant shall not pay such claim prior to the expiration of the thirty-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Eligible Participant in writing prior to the expiration of such period that it desires to contest such claim, the Eligible Participant shall: (i) give the Company any information reasonably requested by the Company relating to such claim; (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including accepting legal representation with respect to such claim by an attorney reasonably selected by the Company; (iii) cooperate with the Company in good faith in order to effectively contest such claim; and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Eligible Participant harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 4.6(d), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Eligible Participant to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Eligible Participant agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided further, however, that if the Company directs the Eligible Participant to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Eligible Participant on an interest-free basis and shall indemnify and hold the Eligible Participant harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided further that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Eligible Participant with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Eligible Participant shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (e) If, after the receipt by the Eligible Participant of an amount advanced by the Company pursuant to Section 4.6(d), the Eligible Participant becomes entitled to receive any refund with respect to such claim, the Eligible Participant shall (subject to the Company's complying with the requirements of Section 4.6(d)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Eligible Participant of an amount advanced by the Company pursuant to Section 4.6(d), a determination is made that the Eligible Participant shall not be entitled to any refund with respect to such claim and the Company does not notify the Eligible Participant in writing of its intent to contest such denial of refund prior to the expiration of thirty days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 4.7. Indemnification. Following a Change in Control, the Company will indemnify and advance expenses to an Eligible Participant to the full extent permitted by law for damages, costs and expenses (including, without limitation, judgments, fines, penalties, settlements and reasonable fees and expenses of the Participant's counsel) incurred in connection with all matters, events and transactions relating to such Eligible Participant's service to or status with the Company or any other corporation, employee benefit plan or other entity with whom the Eligible Participant served at the request of the Company. ARTICLE 5 ADMINISTRATION AND ENFORCEMENT OF RIGHTS 5.1. Plan Administration. The Board has the power and authority to construe, interpret and administer the Plan. Prior to the date of a Change in Control, the Board may delegate such power and authority to any committee or individual but such delegation will automatically cease to be effective on the date of a Change in Control. Prior to (but not after) the date of a Change in Control, the power and authority of the Board and any individual or committee to whom such power and authority is in whole or in part delegated is discretionary as to all matters. 5.2. Amendment and Termination. (a) Prior to the date of a Change in Control, the Board may amend the Plan from time to time in such respects as the Board may deem advisable; provided, that the effective date of any amendment that adversely affects a Qualified Employee may not be less than one year after the date on which the amendment is approved by the Board and, if a Change in Control occurs prior to the date on which the amendment would otherwise be effective, the amendment automatically will be null and void. On and after the date of a Change in Control, the Plan may be amended only if each Participant and Eligible Participant is provided with written notice of the amendment (which must include a complete and accurate description of the amendment and its intended and potential impact on Participants and Eligible Participants and a copy of the proposed amendment) at least 90 days before the adoption of the amendment and the amendment is approved by the affirmative vote of not less than 80 percent of all Participants and Eligible Participants. (b) The Board may terminate the Plan at any time; provided, first, that prior to the date of a Change in Control, the effective date of the termination may not be less than one year after the date on which the termination is approved by the Board; and, second, that the Plan cannot be terminated, and no termination will become effective, within the period beginning on the date of a Change in Control and ending on the last day of the thirty-sixth month that begins after the month in which the Change in Control occurs. Any amendment or termination of the Plan must be set forth in a written instrument approved by the Board and signed by at least two officers of the Parent Corporation. 5.3. Benefit Claims. A person whose employment relationship with the Company has terminated and who has not been awarded benefits under the Plan or who objects to the amount of the benefits so awarded may file a written request for benefits with the Board. The Board will review such request and will notify the claimant of its decision within 60 days after such request is filed. If the Board denies the claim for benefits, the notice of the denial will contain: (a) the specific reason for the denial, (b) a specific reference to the provision of the Plan on which denial is based, (c) a description of any additional information or material necessary for the person to perfect his or her claim (and an explanation of why such information is material or necessary), and (d) an explanation of the Plan's claim review procedure. If the Board determines that a claimant is not eligible for benefits, or if the claimant believes that he or she is entitled to greater or different benefits, the claimant may file a petition for review with the Board within 60 days after the claimant receives the notice issued by the Board. Within 60 days after the Board receives the petition, the Board will give the claimant (and his or her counsel, if any) an opportunity to present his or her position to the Board orally or in writing, and the claimant (or his or her counsel) will have the right to review the pertinent documents. Within 60 days after the hearing (or the date of receipt of the petition if the claimant presents his or her position in writing) the Board will notify the claimant of its decision in writing, stating the decision and the specific provisions of the Plan on which the decision is based. 5.4. Disputes. (a) If a Participant so elects, any dispute, controversy or claim arising under or in connection with this Plan will be settled exclusively by binding arbitration in Minneapolis, Minnesota in accordance with the Employee Benefit Plan Claims Arbitration Rules of the American Arbitration Association, incorporated by referenced herein; provided, that a Participant may seek specific performance of his or her right to receive benefits until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with the Plan. Judgment may be entered on the arbitrator's award in any court having jurisdiction. If any dispute, controversy or claim for damages arising under or in connection with this Plan is settled by arbitration, the Company will pay, or if elected by the Participant, reimburse, all fees, costs and expenses incurred by a Participant related to such arbitration unless the arbitrator decides that the claim was frivolous or advanced by the Participant in bad faith. (b) If a Participant does not elect arbitration, he or she may pursue all available legal remedies. The Company will pay, or if elected by the Participant, reimburse each Participant for, all fees, costs and expenses incurred by such Participant in connection with any actual, threatened or contemplated litigation relating to this Plan to which the Participant is or reasonably expects to become a party, whether or not initiated by the Participant, if the Participant is successful in recovering any benefit under this Plan as a result of such action. (c) In any dispute or controversy with any Participant arising under or in connection with this Plan, the Company will not assert the Participant's failure to exhaust administrative remedies. 5.5. Funding and Payment. (a) The Company may establish a Trust with an independent corporate trustee. The Trust must (i) be a grantor trust with respect to which the Company is treated as grantor for purposes of Code Section 677, (ii) not cause the Plan to be funded for purposes of Title I of ERISA and (iii) provide that Trust assets will, upon the insolvency of the Company, be used to satisfy claims of the Company's general creditors. The Company may from time to time transfer to the Trust cash, marketable securities or other property acceptable to the Trustee. (b) The Trustee will make distributions to Participants and Beneficiaries from the Trust in satisfaction of the Company's obligations under the Plan in accordance with the terms of the Trust. The Company is responsible for paying any benefits that are not paid from the Trust. (c) Nothing contained in the Plan or Trust is to be construed as providing for assets to be held for the benefit of any Participant or any other person or persons to whom benefits are to be paid pursuant to the terms of this Plan, the Participant's or other person's only interest under the Plan being the right to receive the benefits set forth herein. The Trust is established only for the convenience of the Company and no Participant has any interest in the assets of the Trust. To the extent the Participant or any other person acquires a right to receive benefits under this Plan or the Trust, such right is no greater than the right of any unsecured general creditor of the Company. ARTICLE 6 MISCELLANEOUS 6.1. Successors. The Parent Corporation will require any Successor to expressly assume and agree to perform the obligations of this Plan in the same manner and to the same extent that the Parent Corporation would be required to perform if no such succession had taken place. Failure of the Parent Corporation to obtain such assumption and agreement at least three business days prior to the time a Person becomes a Successor (or where the Parent Corporation does not have at least three business days' advance notice that a Person may become a Successor, within one business day after having notice that such Person may become or has become a Successor) will constitute Good Reason for termination of a Participant's employment. The date on which any such succession becomes effective will be deemed the Date of Termination and Notice of Termination will be deemed to have been given on such date. A Successor has no rights, authority or power with respect to the Plan prior to a Change in Control. 6.2. Binding Plan. This Plan is for the benefit of, and is enforceable by, each Participant, each Participant's personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees, but a Participant may not otherwise assign any of his or her rights or delegate any of his or her obligations under this Plan. If a Participant dies after becoming entitled to, but before receiving, any amounts payable under this Plan, all such amounts, unless otherwise provided in this Plan, will be paid in accordance with the terms of this Plan to such Participant's devisee, legatee or other designee or, if there be no such designee, to such Participant's estate. 6.3. Validity. The invalidity or unenforceability of any provision of the Plan does not affect the validity or enforceability of any other provision of the Plan, which will remain in full force and effect. 6.4. No Mitigation. No Eligible Participant will be required to mitigate the amount of any benefits the Company becomes obligated to provide in connection with this Plan by seeking other employment or otherwise and the benefits to be provided in connection with this Plan may not be reduced, offset or subject to recovery by the Company by any benefits an Eligible Participant may receive from other sources. 6.5. No Set-off. The Company has no right to set-off benefits owed under this Plan against amounts owed or claimed to be owed by an Eligible Participant to the Company under this Plan or otherwise. 6.6. Taxes. All benefits to be provided to each Eligible Participant in connection with this Plan will be subject to required withholding of federal, state and local income, excise and employment-related taxes. 6.7. Notices. For the purposes of this Plan, notices and all other communications provided for in, or required under, this Plan must be in writing and will be deemed to have been duly given when personally delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid and addressed to each Participant's or the Company's (as the case may be) respective address (provided that all notices to the Company must be directed to the attention of the chair of the Board). For purposes of any such notice requirement, the Company will use the Participant's most current address on file in the Company's personnel records. Any notice of a Participant's change of address will be effective only upon receipt by the Company. 6.8. Effect of Plan Benefits on Other Severance Plans. A Participant who receives any payment under the terms of this Plan will not be eligible to receive benefits under any other severance pay plan sponsored or maintained by the Company. 6.9. Related Plans. To the extent that any provision of any Other Arrangement limits, qualifies or is inconsistent with any provision of this Plan, then for purposes of this Plan, while such Other Arrangement remains in force, the provision of this Plan will control and such provision of such Other Arrangement will be deemed to have been superseded, and to be of no force or effect, as if such Other Arrangement had been formally amended to the extent necessary to accomplish such purpose. Nothing in this Plan prevents or limits a Participant's continuing or future participation in any Other Arrangement, and nothing in this Plan limits or otherwise affects the rights Participants may have under any Other Arrangement. Amounts that are vested benefits or which Participants are otherwise entitled to receive under any Other Arrangement at or subsequent to the Date of Termination will be payable in accordance with such Other Arrangement. 6.10. No Employment or Service Contract. Nothing in this Plan is intended to provide any Participant with any right to continue in the employ of the Company for any period of specific duration or interfere with or otherwise restrict in any way Participants' rights or the rights of the Company, which rights are hereby expressly reserved, to terminate a Participant's employment at any time for any reason or no reason whatsoever, with or without cause. 6.11. Survival. The respective obligations of, and benefits afforded to, the Company and the Participants which by their express terms or clear intent survive termination of a Participant's employment with the Company or termination of this Plan, as the case may be, will remain in full force and effect according to their terms notwithstanding the termination of a Participant's employment with the Company or termination of this Plan, as the case may be. 6.12. Effect on Other Plans. Unless otherwise expressly provided therein, benefits paid or payable under the Plan will not be deemed to be salary or compensation for purposes of determining the benefits to which a Participant may be entitled under any other Benefit Plan sponsored, maintained or contributed to by the Company. 6.13. Prohibition of Alienation. No Participant will have the right to alienate, assign, encumber, hypothecate or pledge his or her interest in any benefit provided under the Plan, voluntarily or involuntarily, and any attempt to so dispose of any interest will be void. 6.14. Notice of Reemployment. If an Eligible Participant commences full-time employment during his or her Continuation Period, he or she must notify the Company not later than five business days after he or she commences full-time employment. -----END PRIVACY-ENHANCED MESSAGE-----