EXHIBIT 10.11
INSO CORPORATION
Management Retention Agreement
INSO Corporation
00 Xx. Xxxxx Xxxxxx
Xxxxxx, XX 00000-0000
Dear [name]:
INSO Corporation (the "Company") recognizes that, as is the case with
many publicly held corporations, the possibility of a change in control may
exist and that such possibility, and the uncertainty and questions which it may
raise among key personnel, may result in the departure or distraction of key
personnel to the detriment of the Company, its stockholders and its customers.
The Board of Directors of the Company (the "Board") has determined that
appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of the Company's key personnel, including yourself, to
their assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a change in control of the
Company.
In order to induce you to remain in its employ, the Company agrees that
you shall receive the severance benefits set forth in this letter agreement (the
"Agreement") in the event your employment with the Company is terminated under
the circumstances described below subsequent to a "Change in Control" of the
Company (as defined below).
1. Certain Definitions.
As used herein, the following terms shall have the following respective
meanings:
(a) A "Change in Control" shall occur or be deemed to have
occurred only if any of the following events occur:
(i) any "person," as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other
than the Company, any trustee or other fiduciary holding securities under an
employee benefit plan of the Company, any corporation owned directly or
indirectly by the stockholders of the Company in substantially the same
proportion as their ownership of stock of the Company or an Exempt Person) is or
becomes the "beneficial owner" (as defined in Rule 13(d)(3) under the Exchange
Act), directly or indirectly, of securities of the Company representing 33 1/3%
or more of the combined voting power of the Company's then
outstanding securities (other than as a result of the acquisition of such
securities directly from the Company);
(ii) during any period of two consecutive years (not including any
period prior to the execution of this Agreement), individuals who at the
beginning of such period constitute the Board, and any new director (other than
a director designated by a person who has entered into an agreement with the
Company to effect a transaction described in paragraph (i), (iii) or (iv) of
this Subsection) whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at the beginning of
the period or whose election or nomination for election was previously so
approved cease for any reason to constitute at least a majority thereof; or
(iii) the stockholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than (A) a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation or (B) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in which no
person (as hereinabove defined), other than a person holding more than 50% of
the combined voting power of the Company's then outstanding securities
immediately prior to such recapitalization, acquires more than 50% of the
combined voting power of the Company's then outstanding securities; or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.
(b) "Cause" shall mean (i) an intentional act of fraud,
embezzlement or theft in connection with your duties to the Company or in the
course of your employment with the Company, (ii) your willful engaging in gross
misconduct which is demonstrably and materially injurious to the Company, (iii)
your willful and continued failure to perform substantially your duties with the
Company or one of its affiliates (other than any such failure resulting from
incapacity due to physical or mental illness), which such failure is not cured
within 30 days after a written demand for substantial performance is delivered
to you by the Board or the Chief Executive Officer of the Company which
specifically identifies the manner in which the Board or Chief Executive Officer
believes that you have not substantially performed your duties. For purposes of
this Subsection, no act or failure to act on your part shall be deemed "willful"
unless done or omitted to be done by you not in good faith and without
reasonable belief that your action or omission was in the best interest of the
Company.
(c) "Date of Termination" shall have the meaning set forth in
Section 3(c).
(d) "Disability" shall be deemed to have occurred if, as a
result of incapacity due to physical or mental illness, you shall have been
absent from the full time performance of your duties with the Company for six
(6) consecutive months and, within thirty (30) days after written Notice of
Termination by reason of disability is given to you, you shall not have returned
to the full time performance of your duties.
(e) "Exempt Person" means Houghton Mifflin Company ("HMC"),
provided that HMC shall cease to be an Exempt Person if and when, following a
Change in Control (as defined in Section 1(a) but substituting "Houghton Mifflin
Company" for the "Company" as used therein) of HMC, HMC, directly or indirectly,
acquires beneficial ownership of any additional shares of the Company's capital
stock.
(f) "Good Reason" shall mean, without your express written
consent, the occurrence after a Change in Control of the Company of any of the
following circumstances unless, in the case of paragraphs (A), (C), (D), (F) or
(G), such circumstances are fully corrected prior to the Date of Termination
specified in the Notice of Termination given in respect thereof:
(A) any significant diminution in your
position, duties, responsibilities, power, title or office as in effect
immediately prior to a Change in Control;
(B) any reduction in your annual base salary as in
effect on the date hereof or as the same may be increased from time to time;
(C) the failure by the Company to (i) continue in
effect any material compensation or benefit plan in which you participate
immediately prior to the Change in Control, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been made with
respect to such plan, (ii) continue your participation therein (or in such
substitute or alternative plan) on a basis not materially less favorable,
both in terms of the amount of benefits provided and the level of your
participation relative to other participants, as existed at the time of the
Change in Control or (iii) award cash bonuses to you in amounts and in a
manner substantially consistent with past practice in light of the Company's
financial performance;
(D) the failure by the Company to continue to
provide you with benefits substantially similar to those enjoyed by you under
any of the Company's life insurance, medical, health and accident, or
disability plans in which you were participating at the time of the Change in
Control, the taking of any action by the Company which would directly or
indirectly materially reduce any of such benefits, or the failure by the
Company to provide you with the number of paid vacation days to which you are
entitled on the basis of years of service with the Company in accordance with
the Company's normal vacation policy in effect at the time of the Change in
Control;
(E) any requirement by the Company or of any
person in control of the Company that (i) the location at which you perform
your principal duties for the Company be changed to a new location that is
both outside a radius of 35 miles from your principal residence at the time
of the Change in Control and more than 20 miles from the location at which
you perform your principal duties for the Company at the time of the Change
in Control or (ii) you travel on an overnight basis more than 90 days in any
consecutive 12-month period;
(F) the failure of the Company to obtain a
reasonably satisfactory agreement from any successor to assume and agree to
perform this Agreement, as contemplated in Section 5; or
(G) any purported termination of your employment
which is not effected pursuant to a Notice of
Termination satisfying the requirements of
Section 3(b), which purported termination shall
not be effective for purposes of this Agreement.
(g) "Notice of Termination" shall have the meaning set
forth in Section 3(b).
(h) "Severance Payments" shall have the meaning set forth
in Section 4(c)(ii).
(i) "Term" shall have the meaning set forth in Section 2.
2. Term of the Agreement.
The term of this Agreement (the "Term") shall commence as of the date
hereof and shall continue in effect through December 31, ______; provided,
however, that commencing on January l, _______ and each January l thereafter,
the Term shall be automatically extended for one additional year unless, not
later than November 30 of the preceding calendar year, the Company shall have
given you written notice that the Term will not be extended; and provided
further that, if a Change in Control of the Company shall have occurred during
the original or extended Term, this Agreement shall continue in effect for a
period of not less than [36 months] beyond the month in which such Change in
Control occurred.
3. Employment Status; Termination Following Change in Control.
(a) No benefits shall be payable under this Agreement unless
there has been a Change in Control of the Company during the Term. You
acknowledge that this Agreement does not constitute a contract of employment or
impose on the Company any obligation to retain you as an employee. You may
terminate your employment at any time, with or without Good Reason. If your
employment with the Company terminates
for any reason and subsequently a Change in Control shall have occurred, you
shall not be entitled to any benefits hereunder.
(b) Any termination of your employment by the Company or by
you following a Change in Control of the Company during the Term shall be
communicated by written notice of termination that indicates the specific
provision in this Agreement relied upon and sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of
your employment under the provision so indicated ("Notice of Termination"). A
Notice of Termination shall be delivered to the other party hereto in
accordance with Section 6.
(c) The "Date of Termination" shall mean (i) if your
employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that you shall not have returned to the
full-time performance of your duties during such thirty (30) day period), and
(ii) if your employment is terminated by the Company for Cause, by you for
Good Reason or for any other reason (other than Disability), the date
specified in the Notice of Termination (which, in the case of a termination
for Cause, shall not be less than thirty (30) days from the date such Notice
of Termination is given and in the case of a termination for Good Reason
shall not be less than fifteen (15) nor more than sixty (60) days from the
date such Notice of Termination is given); provided, however, that if within
fifteen (15) days after any Notice of Termination is given, or, if later,
prior to the Date of Termination (as determined without regard to this
proviso), the party receiving such Notice of Termination notifies the other
party that a dispute exists concerning the termination, then the Date of
Termination shall be the date on which the dispute is finally determined,
either by mutual written agreement of the parties, by a binding arbitration
award, or by a final judgment, order or decree of a court of competent
jurisdiction (which is not appealable or with respect to which the time for
appeal therefrom has expired and no appeal has been perfected); and provided,
further, that the Date of Termination shall be extended by a notice of
dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, the Company will continue
to pay you your full compensation in effect when the notice giving rise to
the dispute was given (including, but not limited to, base salary) and
continue you as a participant in all compensation, benefit and insurance
plans in which you were participating when the notice giving rise to the
dispute was given, until the dispute is finally resolved in accordance with
this Subsection.
(d) You shall be entitled to the benefits provided in
Section 4 if a Change in Control shall have occurred during the Term and your
employment with the Company is subsequently terminated or terminates within
36 months after such Change in Control, unless such termination is (A)
because of your death, (B) by the Company for Disability or Cause , or (C) by
you other than for Good Reason.
(e) Your right to terminate your employment for Good Reason
shall not be affected by your incapacity due to physical or mental illness. Your
continued
employment shall not constitute consent to, or a waiver of rights with
respect to, any circumstance constituting Good Reason under this Agreement.
4. Compensation Upon Termination. Following a Change in Control of
the Company, you shall be entitled to the following benefits during a period
of disability, or upon termination of your employment, as the case may be,
provided that such period or termination occurs during the Term:
(a) Disability. During any period that you fail to perform your full
time duties with the Company as a result of incapacity due to physical or
mental illness, you shall continue to receive base salary and all other
earned compensation at the rate in effect at the commencement of any such
period (offset by all compensation payable to you under the Company's
disability plan or program or other similar plan during such period) until
your employment is terminated by reason of Disability. Thereafter, or in the
event your employment is terminated by reason of death, your benefits shall
be determined under the Company's long term disability, retirement, insurance
and other compensation programs then in effect in accordance with the terms
of such programs.
(b) Cause and Voluntary Termination other than for Good Reason. If
your employment shall be terminated by the Company for Cause or by you other
than for Good Reason following a Change in Control, the Company shall pay you
your full base salary and all other compensation through the Date of
Termination at the rate in effect at the time the Notice of Termination is
given, plus all other amounts to which you are entitled under any
compensation plan of the Company at the time such payments are due, and the
Company shall have no further obligations to you under this Agreement.
(c) Termination Without Cause; Voluntary Termination for Good
Reason. If your employment with the Company is terminated by the Company
(other than for Cause, Disability or your death) or by you for Good Reason
within 36 months after a Change in Control, then you shall be entitled to the
benefits below:
(i) the Company shall pay to you (A) your
full base salary and all other compensation through the Date of Termination
at the rate in effect at the time the Notice of Termination is given, no
later than the full fifth day following the Date of Termination, plus all
other amounts to which you are entitled under any compensation plan of the
Company at the time such payments are due and (B) if you so elect, in lieu of
your right to continue to receive deferred compensation under any deferred
compensation plan of the Company then in effect, no later than the fifth full
day following the Date of Termination, a lump sum amount, in cash, equal to
the deferred amounts together with any earnings credited on such amounts
under such plan;
(ii) the Company will pay as severance pay to you,
at the time specified in Subsection (e) below, a lump sum severance payment
(together with the payments provided in paragraph (iii) below, the "Severance
Payments") in an amount equal to the sum of (A) three (3) times the higher of
(x) your annual base salary in effect
on the Date of Termination or (y) your annual base salary in effect
immediately prior to the Change in Control, plus (B) one and one-half (1-1/2)
times the higher of (x) your target incentive bonus for the year in which the
Date of Termination occurs, or (y) your target incentive bonus for the year
in which the Change in Control occurred;
(iii) the Company shall pay to you all legal fees
and expenses incurred by you in seeking to obtain or enforce any right or
benefit provided by this Agreement; and
(iv) for a [24-]month period after such
termination, the Company shall arrange to provide you with life, [disability,]
dental, accident and group health insurance benefits substantially similar
to those which you were receiving immediately prior to the Notice of
Termination. Notwithstanding the foregoing, the Company shall not provide any
benefit otherwise receivable by you pursuant to this paragraph (iv) if an
equivalent benefit is actually received by you from another employer during
the [24-]month period following your termination, and any such benefit
actually received by you shall be reported to the Company.
(v) all options and shares of restricted stock
granted or issued to you under the Company's 1993 Stock Incentive Plan or any
other stock incentive plan of the Company shall become exercisable or vested
in full on the Date of Termination.
(d) In the event that you become entitled to the Severance
Payments, if any of the Severance Payments will be subject to the tax imposed by
Section 4999 of the Code, (or any similar tax that may hereafter be imposed)(the
"Excise Tax") the Company shall pay to you at the time specified in Subsection
(e), below, an additional amount (the "Gross-Up Payment") such that the net
amount retained by you, after deduction of any Excise Tax on the Total Payments
(as hereinafter defined) and any federal, state and local income tax and Excise
Tax upon the payment provided for by this Subsection, shall be equal to the
Total Payments. For purposes of determining whether any of the Severance
Payments will be subject to the Excise Tax and the amount of such Excise Tax,
(a) any other payments or benefits received or to be received by you in
connection with a Change in Control of the Company or your termination of
employment (whether pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any person whose actions result in a
Change in Control of the Company or any person affiliated with the Company or
such person)(which together with the Severance Payments, constitute the "Total
Payments") shall be treated as "parachute payments" within the meaning of
Section 280G(b)(2) of the Code, and all "excess parachute payments" within the
meaning of Section 280G(b)(1) shall be treated as subject to the Excise Tax,
unless in the opinion of tax counsel selected by the Company's independent
auditors and acceptable to you such other payments or benefits (in whole or in
part) do not constitute parachute payments, or such excess parachute payments
(in whole or in part) represent reasonable compensation for services actually
rendered within the
meaning of Section 280G(b)(4) of the Code in excess of the base amount within
the meaning of Section 280G(b)(3) of the Code, or are otherwise not subject
to the Excise Tax, (b) the amount of the Total Payments which shall be
treated as subject to the Excise Tax shall be equal to the lesser of (1) the
total amount of the Total Payments or (2) the amount of excess parachute
payments within the meaning of Section 280G(b)(1) (after applying paragraph
(a), above), and (c) the value of any non-cash benefits or any deferred
payment or benefit shall be determined by the Company's independent auditors
in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up Payment, you shall be
deemed to pay federal income taxes at the highest marginal rate of federal
income taxation in the calendar year in which the Gross-Up Payment is to be
made and state and local income taxes at the highest marginal rate of
taxation in the state and locality of your residence on the Date of
Termination, net of the maximum reduction in federal income taxes which could
be obtained from deduction of such state and local taxes. In the event that
the Excise Tax is subsequently determined to be less than the amount taken
into account hereunder at the time of termination of your employment, you
shall repay to the Company at the time that the amount of such reduction in
Excise Tax is finally determined the portion of the Gross-Up Payment
attributable to such reduction (plus the portion of the Gross-Up Payment
attributable to the Excise Tax and federal, state and local income tax
imposed on the Gross-Up Payment being repaid by you if such repayment results
in a reduction in Excise Tax and/or a federal, state and local income tax
deduction) plus interest on the amount of such repayment at the rate provided
in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the time of
the termination of your employment (including by reason of any payment the
existence or amount of which cannot be determined at the time of the Gross-Up
Payment), the Company shall make an additional gross-up payment in respect of
such excess (plus any interest payable with respect to such excess) at the
time that the amount of such excess is finally determined.
(e) The payments provided for in Subsections 4(b), (c) and
(d) shall be made not later than the fifth day following the Date of
Termination, unless otherwise specified; provided, however, that, if the
amounts of such payments cannot be finally determined on or before such day,
the Company shall pay to you on such day an estimate, as determined in good
faith by the Company, of the minimum amount of such payments and shall pay
the remainder of such payments (together with interest at the rate provided
in Section l274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined but in no event later than the thirtieth day after the Date of
Termination. In the event that the amount of the estimated payments exceeds
the amount subsequently determined to have been due, such excess shall
constitute a loan by the Company to you, payable on the fifth day after
demand by the Company (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code).
(f) Except as provided in the second sentence of Subsection
4(c)(v) hereof, you shall not be required to mitigate the amount of any
payment provided for in this Section 4 by seeking other employment or
otherwise, nor shall the amount of any
payment or benefit provided for in this Section 4 be reduced by any
compensation earned by you as a result of employment by another employer, by
retirement benefits or by offset against any amount claimed to be owed by you
to the Company or otherwise.
5. Successors; Binding Agreement.
(a) The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company expressly to
assume and agree to perform this Agreement to the same extent that the
Company would be required to perform it if no such succession had taken
place. Failure of the Company to obtain an assumption of this Agreement at or
prior to the effectiveness of any succession shall be a breach of this
Agreement and shall constitute Good Reason if you elect to terminate your
employment, except that for purposes of implementing the foregoing, the date
on which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, Company shall mean the Company as
defined above and any successor to its business or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law, or
otherwise.
(b) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
you should die while any amount would still be payable to you hereunder if
you had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to your
devisee, legatee or other designee or if there is no such designee, to your
estate.
6. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
duly given when delivered or when mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed to the
Company, at 00 Xx. Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000-0000, Attention:
President and General Counsel, and to you at the address shown above or to such
other address as either the Company or you may have furnished to the other in
writing in accordance herewith, except that notice of change of address shall be
effective only upon receipt.
7. Miscellaneous.
(a) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
(b) The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Delaware.
(c) No waiver by you at any time of any breach of, or
compliance with, any provision of this Agreement to be performed by the Company
shall be deemed a waiver of that or any other provision at any subsequent time.
(d) This Agreement may be executed in counterparts, each of
which shall be deemed to be an original but both of which together will
constitute one and the same instrument.
(e) Any payments provided for hereunder shall be paid net
of any applicable withholding required under federal, state or local law.
(f) This Agreement sets forth the entire agreement of the
parties hereto in respect of the subject matter contained herein and supersedes
all prior agreements, promises, covenants, arrangements, communications,
representations or warranties, whether oral or written, by any officer, employee
or representative of any party hereto; and any prior agreement of the parties
hereto in respect of the subject matter contained herein is hereby terminated
and canceled.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter, which
will then constitute our agreement on this subject.
Sincerely,
INSO CORPORATION
By__________________________________
Agreed to this ____ day of , 199_
____________________________________
(Signature)
_____________________________________
Print Name
Address:______________________
______________________
