Document:

exv10w27

 

EXHIBIT 10.27

SEVERANCE AGREEMENT

THIS AGREEMENT (the “Agreement”) is entered into as of October 3, 2007 between Allegro
MicroSystems, Inc., a Delaware corporation having its principal place of business at 115 Northeast
Cutoff, Worcester, Massachusetts 01615 (“Allegro”), and Mark A. Feragne, a resident of the State of
Rhode Island (“Executive”).

WHEREAS, Executive is the Vice President and Chief Financial Officer of Allegro, and Allegro wishes
to provide certain assurances to Executive concerning the effect of any discontinuance of his
service to Allegro.

NOW, THEREFORE, the parties hereby agree as follows:

1. Severance Benefits.

In the event that Allegro terminates Executive’s employment at any time without “good cause” (as
defined in Section 2.1 of this Agreement), Executive shall be entitled, subject to Section 4 of
this Agreement, to the following:

	1.1	 	A “Severance Benefit” equal to one hundred fifty percent (150%) of (a) Executive’s base
salary on the date that notice of termination is given to Executive (the “Notice Date”); plus
(b) the average annual bonus compensation paid to Executive during the two year period
preceding the Notice Date. The Severance Benefit shall be paid as follows: one year of base
salary shall be paid pursuant to Section 1.2, and the balance of the Severance Benefit shall
be paid in a lump sum within (15) fifteen days following the Notice Date.
	 
	1.2	 	For one year following the Notice Date, Allegro will continue to pay Executive his base
salary in accordance with its customary payroll procedures. During such one year period,
Allegro will continue to pay Executive any automobile allowance in effect on the Notice Date.
	 
	1.3	 	During the one year period referenced in Section 1.2, Executive shall be entitled to (a)
continued participation at no cost in the medical benefits program of Allegro, provided that
such participation shall earlier terminate if Executive becomes eligible for coverage under
the medical benefits program of a new
employer; and (b) participation in any other benefit programs for which 

 

 

	 	 	Executive qualifies
based on the continuation of salary and the providing of services to Allegro hereunder.

	1.4	 	Executive shall be entitled to receive base salary and vacation pay that is accrued but
unpaid as of the Notice Date. Payment shall be made in accordance with Allegro’s customary
payroll procedures.
	 
	1.5	 	All payments made pursuant to Sections 1.1 through 1.4 shall be net of any applicable
withholding taxes.
	 
	1.6	 	All stock options or restricted stock awards or any other benefit or award held by Executive
on the Notice Date pursuant to any stock option or equity compensation plan of Allegro
(including without limitation the 2001 Stock Option Plan and the 2007 Long-Term Incentive
Plan) shall become 100% vested on the Notice Date. Without limitation, all outstanding stock
options or any other benefit or award shall become immediately exercisable and the restriction
period applicable to any restricted stock awards shall lapse.

2. Certain Definitions.

For purposes of this Agreement, certain terms shall have the meaning set forth below:

	2.1	 	The term “good cause” means: (a) continued or repeated failure, refusal or inability (after
prior written notice from Allegro) to substantially perform the duties required by Executive’s
position or to comply with reasonable directives of Allegro’s board of directors; (b)  a
willful or intentional act or omission in breach of Executive’s fiduciary duty to Allegro
which results in a substantial disadvantage to Allegro; (c)  knowingly aiding a competitor of
Allegro to the detriment of Allegro; (d) knowingly making unauthorized disclosures to third
parties of material confidential or proprietary information of Allegro; (e)  inability to
perform Executive’s duties for more than three months in the aggregate during any twelve month
period due to illness, chemical dependency or other incapacity; or (f) conviction (by a court
of competent jurisdiction, not subject to further appeal) of, or pleading guilty to, a felony.

	2.2	 	The following events may, at Executive’s option elected by notice within 15 days after the
occurrence thereof, be deemed a termination of employment by Allegro

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	 	 	without good cause within
the meaning of Section 1 of this Agreement: (a) change of position or responsibilities below
the level of Vice President and Chief Financial Officer as the same exist on the date of this
Agreement; (b) reduction in base salary of more than 10%; or (c) relocation to another office
of Allegro that is more than 35 miles distant from Worcester, Massachusetts without
Executive’s consent, unless such relocation is part of a general relocation of Allegro’s
headquarters and the current relocation package is provided.

3. Advisory Services.

For one year following the Notice Date, Executive will make himself available for consultation with
management of Allegro at mutually agreed times. Such consultation will be arranged so as not to
unduly interfere with Executive’s duties to a successor employer. Executive will not be obligated
to render more than ten hours of consulting services in any month.

4. Indemnification.

In the event that the indemnification provisions of Article Six of the Restated Certificate of
Incorporation or Article Seven of the Bylaws are changed after the date of this Agreement,
Executive will have the same rights and protections contained in those provisions as the same
existed on the effective date of this agreement.

5. Exclusive Remedy.

The benefits described in Section 1 constitute Executive’s exclusive remedy with respect to any and
all claims or causes of action arising out of Executive’s employment or termination of employment
by Allegro. Such benefits are in lieu of payments under any severance pay policy or program that
may be maintained by Allegro. Allegro may require, as a pre-condition to payment of the Severance
Benefit described in Sections 1.1 and 1.2 and extension of the rights described in Sections 1.3 and
1.6, that Executive sign a written release of any and all claims against Allegro and its parent
company, Sanken Electric Co., Ltd., and their subsidiaries, affiliates, officers, directors and
agents, arising out of Executive’s employment or the termination thereof. However, no such release
shall deprive Executive of his right to reimbursement for business expenses or his vested rights
under any Allegro benefit plan or compensation program.

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6. Employment Status.

This Agreement is not intended as an employment agreement. Executive’s status as an employee,
officer and director of Allegro will be determined in the ordinary course of business pursuant to
Allegro’s internal operating procedures and the governance of Allegro’s board of directors.

7. Authority for Agreement.

This Agreement has been approved by the board of directors of Allegro upon the recommendation of
its Compensation Committee. The board of directors has authorized the Chairman of the Board of
Allegro to execute this Agreement on behalf of Allegro.

8. Miscellaneous.

	8.1	 	Section 409A Compliance. Any payments or benefits provided under this Agreement
shall commence within fifteen days after Executive’s “separation from service” with Allegro
(as defined under Section 409A of the Internal Revenue Code). In the event that Executive is
deemed to be a “specified employee” under Section 409A of the Internal Revenue Code at the
time of his “separation from service,” the commencement of any payments or benefits that shall
be properly treated as deferred compensation under Section 409A (after taking into account all
applicable exclusions) shall be delayed until the date that is six months after the date
Executive has a “separation from service” (or the date of Executive’s death, if earlier). The
first payment of any installment payments so delayed shall include any installments payments
that otherwise would have been paid during such six-month delay.

	8.2	 	Entire Agreement. This Agreement constitutes the entire agreement and understanding
between Executive and Allegro concerning the subject matter hereof, and supersedes all prior
negotiations or understandings between the parties, whether written or oral, concerning such
matter.

	8.3	 	Waiver; Amendment. No waiver of any breach of this Agreement shall be construed to
be a waiver of any other breach of this Agreement. No waiver or amendment of this Agreement
shall be effective unless set forth in a written document signed by Executive and the Chairman
of the Board of Allegro.

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	8.4	 	Notices. Any notices required or permitted by this Agreement shall be in writing,
and may be transmitted by personal delivery, by courier service or by e-mail if receipt of
such e-mail is acknowledged by the receiving party. Notice to Allegro shall be addressed to
the Chairman of the Board with a copy to the Secretary. Notices shall be addressed to the
recipient’s principal business office.

	8.5	 	Choice of Law. This Agreement shall be construed in accordance with and governed by
the laws of the State of Massachusetts.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first
above written.

	 	 	 	 	 
	 

	 	ALLEGRO MICROSYSTEMS, INC.
	 	 
	 
	 	 	 	 
	/s/ Mark A. Feragne

	 	/s/ Sadatoshi Iijima	 	 
	 

Mark A. Feragne

	 	 

Sadatoshi Iijima
	 	 
	 

	 	Chairman of the Board of Directors	 	 

6December 31, 2007

Globecomm Systems Inc.

45 Oser Avenue

Hauppauge, NY 11788

	
                        Re:
 	
                        $50,000,000 line of credit
 

$10,000,000 foreign exchange line

Gentlemen :

Citibank, N.A. (“Citibank”) is pleased to advise you it holds available for Globecomm Systems Inc. (the “Borrower”), a corporation organized and in good standing under the laws of the State of Delaware, (i) a line of credit in the amount of $50,000,000 (the “Line”) and (ii) a foreign exchange line in the amount of $10,000,000 (the “F/X Line” together with the Line being collectively, the “Credit Facilities”), subject to the following terms and conditions:

	
                         
 	
                        1.
 	
                        Description of the Line:
 

There shall be available under the Line the following sublimits:

(a) Direct Loans in the amount of $7,500,000: Loans provided under the Line shall be evidenced by Citibank’s Master Note (the “Note”) in the principal amount of $7,500,000. Each advance thereunder shall bear interest at a rate to be elected by the Borrower at the time of each request for an advance equal to either:

(i) Prime Rate Option: A rate of interest equal to the prime rate of interest as published in the Money Rates column of the Wall Street Journal from time to time (the “Prime Rate”). Any change in the Prime Rate shall take effect on the date of the change in the Prime Rate, or

(ii) LIBOR Rate Option: A rate of interest equal to the LIBOR Rate, as such term is defined in the Note, plus a margin of 175 basis points for interest periods of 30, 60 or 90 days.

Interest on the unpaid principal balance of the Note from time to time outstanding shall be payable monthly in arrears commencing on the first day of the month following the date of the first advance under the Note. Any advance under the Line made at the discretion of Citibank  shall be in an amount not less than $100,000 for Prime Rate advances and $500,000 for LIBOR Rate advances.

In the case of a Prime Rate advance, such advance may be prepaid, in whole or in part, in increments of not less than $100,000, without premium or penalty.

 

 

The Borrower agrees to indemnify Citibank and hold Citibank harmless from any loss or expense that Citibank may sustain or incur, as more particularly described in the Note should the Borrower make any prepayment of the principal of an advance hereunder bearing interest at the LIBOR Rate or in the event of a default by the Borrower in the payment or performance of any terms of the Note or this line letter.

(b) Commercial letters of credit (each, an “L/C” and collectively, the “L/Cs”) in the aggregate amount of $20,000,000. The maximum tenor for each L/C shall be one year. Each L/C issued under the Line shall be governed by the terms and conditions set forth in Citibank’s Master Letter of Credit Agreement. There shall be payable in respect of each L/C, a fee equal to 1/4% upon the opening and 1/4% upon the presentation of documents thereunder together with Citibank’s fees and charges therewith.

(c) Standby letters of credit (each, an “SBLC and collectively, the “SBLCs”) in the aggregate amount of $30,000,000. SBLCs shall be evidenced by Citibank’s Letter of Credit Agreement for Standby Letters of Credit. There shall be payable in respect of each SBLC, a fee equal to: (i) 1% per annum for SBLCs secured by collateral other than cash or cash equivalents and (ii) 1⁄2 of 1% per annum for SBLCs secured by cash or cash equivalent collateral together with Citibank’s fees and charges therewith. Each SBLC shall expire not more than three (3) years after its issuance but shall automatically renew for successive one-year periods, unless notice of intended termination is delivered by either the Borrower or Citibank.  

The expiry of any SBLC or L/C issued under the Line may, consistent with the terms hereof, exceed the Expiration Date, as defined below.

In the event that there are any SBLCs or L/Cs outstanding past the Expiration Date and Citibank or the Borrower shall have decided not to renew the Line, all such outstanding L/Cs and SBLCs must be promptly cash secured by the Borrower or Citibank indemnified by a new lender pursuant to an indemnification agreement reasonably satisfactory in all respects to Citibank.

(d) Term Loan Line for term loans (the “Acquisition Line Sublimit”) in the aggregate amount of $25,000,000.

Each term loan under the Acquisition Line Sublimit shall be evidenced by Citibank’s Commercial Note (the “Term Note”) in the amount of each term loan thereunder and shall bear interest at a rate equal to either (i) the Prime Rate; any change in the Prime Rate shall take effect on the date of the change in the Prime Rate or (ii) a rate of interest equal to the LIBOR Rate, as such term is defined in the Note, plus a margin of 200 basis points for interest periods of 30, 60 or 90 days. Each term loan shall mature not more than five (5) years after its funding and shall be repayable in equal consecutive monthly principal installments plus interest. The principal amount of any term loans shall not exceed ninety percent (90%) of the purchase price of such acquisition.

The purpose of the Acquisition Line Sublimit shall be to provide financing for specific acquisition targets (“Targets”).

 

 

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                        2.
 	
                        Description of F/X Line:
 

The F/X Line shall be available for spot and forward contracts of foreign currencies, subject to a maximum daily delivery risk in the amount of $3,000,000. The F/X Line shall be evidenced by such agreements and documents as Citibank or any of its affiliates that shall process foreign exchange transactions on behalf of Citibank shall reasonably require from time to time.

3.          Uncommitted/Expiration: The Borrower acknowledges and agrees that the Credit Facilities are uncommitted and requests for advances or extensions of credit thereunder shall be approved in the discretion of Citibank, which may refuse to make an extension of credit under the Credit Facilities at any time without prior notice to the Borrower, and that the performance or compliance by the Borrower of the agreements contained in this letter, or in any other document or agreement evidencing or securing such advances or extensions of credit, shall not obligate Citibank to make an advance or provide an extension of credit thereunder.

Subject to the terms and conditions hereof, the Credit Facilities shall be available until December 31, 2008 (the “Expiration Date”).

	
                         
 	
                        4.
 	
                        Guarantors:
 

Repayment of all loans, extensions of credit and financial accommodations provided under the Credit Facilities together with interest and costs thereon shall be guaranteed by Globecomm Network Services Corporation (“GNSC”), GSI Properties Corp. (“GSI”), Globecomm Services Maryland LLC (“GSM”), Lyman Maryland Properties, LLC (“LMP”) and Turbo Logic Associates, LLC (“TLA”) (collectively, the “Guarantors”) pursuant to Citibank’s Guarantee of All Liability (the “Guarantee”). In addition, the Line shall be guaranteed by all subsidiaries hereafter formed or acquired by the Borrower and each such new subsidiary shall execute promptly after request therefor a Guarantee.

	
                         
 	
                        5.
 	
                        Purpose of the Line:
 

The purpose of the Line shall be to provide guarantees for bids/performance on contracts to facilitate trade, to finance acquisitions and to support the Borrower’s general working capital needs.

6.          Security for the Credit Facilities:

The Credit Facilities shall be secured by a first priority security interest in all assets and personal property of the Borrower, GNSC, GSM, LMP and TLA pursuant to Citibank’s General Security Agreement and duly filed UCC-1 Financing Statements.

 

 

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                        7.
 	
                        Conditions Precedent:
 

Prior to the Borrower’s initial request for an advance or financial accommodation under the Credit Facilities, it shall have provided to Citibank, if it has not already done so:

(i) A copy of the resolutions passed by the Borrower’s Board of Directors certified by its Secretary as being in full force and effect authorizing the borrowing described herein and the execution of all documents and agreements required by Citibank to evidence and secure the Credit Facilities;

(ii) A copy of the resolutions passed by each Guarantor’s Board of Directors or other governing body, as applicable, certified by the Secretary of such Guarantor as being in full force and effect authorizing the guarantee described herein and the execution of all documents and agreements required by Citibank to evidence and secure the guarantee;

(iii) Copies of the certificates of incorporation or articles of organization of the Borrower and each Guarantor, as the case may be; and

Prior to the Borrower’s request for a term loan under the Acquisition Line Sublimit:

a) the Borrower shall have  provided to Citibank the following:

(i) Current satisfactory projections for each fiscal year through the maturity of the term of each term loan, which projections shall reflect compliance with all covenants of this Line Letter, each Note and all related loan documents. The projections shall include in form and substance reasonably satisfactory to Citibank a “break-out” of the historical business of the Borrower and the Target, including assumptions used and explanations of synergies anticipated.

(ii) A written statement that the acquisition is a “Permitted Acquisition.” Permitted Acquisition shall mean an acquisition by the Borrower or any subsidiary of the Borrower by merger, by consolidation or by purchase of a voting majority of the stock of a Target, the purchase of all or substantially all of the assets of a Target.

In addition, each Permitted Acquisition shall be subject to the following terms and conditions:

a) Total consideration for the Permitted Acquisition(s) does not exceed $25,000,000 for the term of the Line.

b) The Borrower and its subsidiaries shall not have closed more than two (2) acquisitions in any twelve (12) month period (excluding the heretofore completed May 2007 acquisition).

c) Each Permitted Acquisition involves a domestic Target.

 

 

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d) The Target offers products and deliver services substantially similar to those currently provided by the Borrower and its subsidiaries, as reasonably determined by Citibank.

e) Permitted Acquisitions must be considered “non-hostile”.

f) The Target shall not demonstrate a negative earnings before interest, taxes, depreciation and amortization for the most recently concluded four consecutive quarterly periods and the Target combined with the Borrower must demonstrate pro-forma covenant compliance based on projections reasonably satisfactory to Citibank matching the life of the term loan.

	
                         
 	
                        8.
 	
                        Financial Reporting:
 

The Borrower shall provide to Citibank:

(i) As soon as available, but in any event within seventy five (75) days after the last day of each fiscal year, a copy of the signed10-K report filed or to be filed with the Securities and Exchange Commission (“SEC”).

(ii) As soon as available, but in any event within sixty (60) days after the end of each fiscal quarter, a copy of the signed 10-Q report filed or to be filed with the SEC.

(iii) Such other financial or additional information as Citibank may from time to time reasonably request.

	
                         
 	
                        9.
 	
                        Special Requirements:
 

a. The Borrower agrees to maintain at the end of each fiscal quarter:

(i) a minimum capital base (the sum of capital surplus, earned surplus, capital stock and such other items as are allowable under generally accepted accounting principles and subordinated liabilities minus deferred charges, intangibles, investments in non-guaranteeing affiliates, receivables due from stockholders, officers or affiliates, and treasury stock) in an amount not less than the sum of (a) $80,000,000 plus (b) seventy five percent (75%) of the net income of the Borrower for each fiscal quarter.

(ii) a minimum liquidity ratio, that is, the ratio of (a) the sum of (x) consolidated unrestricted cash plus (y) consolidated net accounts receivable to (b) the sum of (x) consolidated current portion of long term debt plus (y) the face amount of all undrawn, L/Cs, other than cash secured L/Cs, issued on behalf of the Borrower and its subsidiaries plus (z) consolidated current liabilities, all as determined for the Borrower and its subsidiaries on a consolidated basis in accordance with generally accepted accounting principles that come due within one (1) year of not less than 0.75 to 1.0.

 

 

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(iii) a maximum leverage ratio of total liabilities less subordinated debt to capital base of not greater than 1.0 to 1.0.

(iv) a debt service coverage ratio, the ratio of earnings before interest, taxes, depreciation and amortization to the sum of the current portion of all long term indebtedness and interest expense on all indebtedness of not less than 1.50 to 1.0, to be maintained at all times in the event of a term loan is provided and is outstanding under the Acquisition Line Sublimit. 

b. Each of the Borrower, GNSC, GSM, LMP and TLA shall maintain hazard insurance on their inventory with a financially sound and reputable insurance company in such amounts as are necessary to cover not less than the replacement cost of such inventory and covering such risks as are usually carried by companies engaged in the same or similar business which insurance policy shall be endorsed to name Citibank as an additional loss payee. So long as no Event of Default has occurred and is continuing under the loan documents in respect of the Credit Facilities, the Borrower shall be entitled to receive the full amount of all insurance proceeds, provided that said proceeds are used to purchase replacement inventory of a type and quality satisfactory to Citibank.

c. The Borrower agrees to maintain a minimum level of unrestricted cash and cash equivalents equal to not less than the sum of Six Million ($6,000,000) Dollars and the proceeds derived by the Borrower from any sale/leaseback transaction, true lease or conditional sales agreement with CitiCapital.

d. Term loans under the Acquisition Line Sublimit shall be prepaid, in whole or in part, as the case may be, with the net proceeds of any sale or issuance of any shares of any class of the capital stock of the Borrower, any debt exchangeable or convertible into any shares of the Borrower or any subordinated debt incurred or created by the Borrower.

	
                         
 	
                        10.
 	
                        Annual Clean-up:
 

The Borrower covenants and agrees that for a period of not less than thirty (30) consecutive days at any one time prior to the expiration of the Line there shall be no direct loans outstanding thereunder.

	
                         
 	
                        11.
 	
                        Integration:
 

This letter amends, replaces and supersedes that certain letter agreement dated October 25, 2006 (the “Original Letter Agreement”) between the Borrower and Citibank, which shall be of no further force and effect. The terms and conditions of this letter agreement and the rights and remedies of Citibank under this letter agreement shall apply to all of the obligations incurred prior to the date hereof pursuant to the Original Letter Agreement, in addition to any obligations incurred on or after the date hereof. This letter agreement does not constitute and shall not be construed to evidence a novation of or a payment and readvance of any all loans, extensions of credit or financial accommodations, interest or other sums, if any outstanding under the Credit Facilities prior to the date hereof, it being the intention of the Borrower, the Guarantors and Citibank that this
letter agreement, together with the 

 

 

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Credit Facilities, provide for the terms and conditions of, and evidences, the same loans, extensions of credit or financial accommodations as was outstanding prior to the date hereof, in addition to any loans, extensions of credit or financial accommodation incurred on or after the date hereof. The indebtedness and obligations incurred prior to the date hereof, in addition to any incurred on or after the date hereof, shall be and shall continue to be secured as set forth in the Credit Facilities and the liens granted to Citibank pursuant to the Credit Facilities shall continue in full force and effect during the term of the Credit Facilities and any renewals thereof. 

	
                         
 	
                        12.
 	
                        Acceptance:
 

If the foregoing is acceptable, please so indicate by signing and returning this letter before January 31, 2008, the date this letter will otherwise expire, unless extended in writing by Citibank.

 

	
                         
 	
                         
 	
                         
 	
                        Very truly yours,
 
	
                         
 	
                         
 	
                         
 	
                        CITIBANK, N.A.
 
	
                          
 	
                         
 	
                        By:
 	
                        
 /s/ STUART N. BERMAN
 
	
                         
 	
                         
 	
                         
 	
                        Stuart N. Berman
 Vice President
 

 

	
                        Agreed and Accepted this
 day of  January 25, 2008
 	
                         
 	
                         
 	
                         
 
	
                        GLOBECOMM SYSTEMS INC.
 	
                         
 	
                         
 	
                         
 
	
      
 By:
 	
                        /s/ ANDREW C. MELFI
 	
                         
 	
                         
 	
                          
 
	
                        Name:
 	
                        Andrew C. Melfi
 	
                         
 	
                         
 	
                         
 
	
                        Title:
 	
                        Vice President, CFO
 	
                         
 	
                         
 	
                         
 

 

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