EXHIBIT 10.1
SOLECTRON CORPORATION
CHANGE OF CONTROL SEVERANCE AGREEMENT
This Change of Control Severance Agreement (the "AGREEMENT") is made and
entered into by and between [_________________] (the "EXECUTIVE") and Solectron
Corporation, a Delaware Corporation (the "COMPANY"), effective as of
[_____________], 2002 (the "EFFECTIVE DATE").
RECITALS
1. It is expected that the Company from time to time will consider the
possibility of an acquisition by another company or other change of control. The
Board of Directors of the Company (the "BOARD") recognizes that such
consideration can be a distraction to Executive and can cause Executive to
consider alternative employment opportunities. The Board has determined that it
is in the best interests of the Company and its stockholders to assure that the
Company will have the continued dedication and objectivity of Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control of
the Company.
2. The Board believes that it is in the best interests of the Company
and its stockholders to provide Executive with an incentive to continue his or
her employment and to motivate Executive to maximize the value of the Company
upon a Change of Control for the benefit of its stockholders.
3. The Board believes that it is imperative to provide Executive with
certain severance benefits upon Executive's termination of employment following
a Change of Control. These benefits will provide Executive with enhanced
financial security and incentive and encouragement to remain with the Company
notwithstanding the possibility of a Change of Control.
4. Certain capitalized terms used in the Agreement are defined in
Section 6 below.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto agree as follows:
1. Term of Agreement. This Agreement shall terminate upon the date that
all of the obligations of the parties hereto with respect to this Agreement have
been satisfied.
2. At-Will Employment. The Company and Executive acknowledge that
Executive's employment is and shall continue to be at-will, as defined under
applicable law, except as may otherwise be specifically provided under the terms
of any written formal employment agreement or offer letter between the Company
and Executive (an "EMPLOYMENT AGREEMENT"). If Executive's employment terminates
for any reason, including (without limitation) any termination prior to a Change
of Control, Executive shall not be entitled to any payments, benefits, damages,
awards or compensation other than as provided by this Agreement or under his or
her Employment Agreement.
3. Severance Benefits.
(a) Involuntary Termination Following a Change of Control. If
within twelve (12) months following a Change of Control (i) Executive terminates
his or her employment with the Company (or any parent or subsidiary of the
Company) for Good Reason or (ii) the Company (or any parent or subsidiary of the
Company) terminates Executive's employment for other than Cause, and Executive
signs and does not revoke a standard release of claims with the Company in a
form acceptable to the Company, then Executive shall receive the following
severance from the Company:
(i) Severance Payment. For a period of twenty-four (24)
months following Executive's termination of employment, Executive shall be paid
Executive's average annual base salary and target bonus for the two years prior
to such termination payable in accordance with the Company's normal payroll
practices; provided, however, that if Executive has been employed for less than
two years prior to such termination, for a period of twenty-four (24) months
following such termination, Executive will be paid Executive's average annual
base salary and target bonus for the period Executive was actually employed with
the Company; provided, further, that in the event Executive engages in
Competition during the twenty-four month period following such termination, all
payments pursuant to this subsection shall immediately cease.
(ii) Options. Executive shall be entitled to continue vesting
for twelve (12) months following the date of such termination with respect to
any Company stock options (whether granted to Executive on, before or after the
date of this Agreement); provided, however, that all Company stock options will
immediately cease vesting if Executive engages in Competition during such
12-month period. Additionally, Executive shall have a period of one year and
ninety (90) days following such termination of employment (the "POST-TERMINATION
EXERCISE PERIOD") to exercise Executive's vested Company stock options (whether
granted on, before or after the date of this Agreement), but in no event beyond
the original maximum term of the option; provided, however, that all Company
stock options shall immediately terminate and Executive shall have no further
rights with respect to such options in the event Executive engages in
Competition during such Post-Termination Exercise Period.
(iii) Continued Employee Benefits. Executive shall receive
Company-paid coverage for a period of thirty-six (36) months for Executive and
Executive's eligible dependents under the Company's Benefit Plans; provided,
however, that in the event Executive engages in Competition during the
thirty-six month period following such termination, all Company-paid coverage
pursuant to this subsection shall immediately cease.
(iv) Payments or Benefits Required by Law. Executive shall
receive such other compensation or benefits from the Company as may be required
by law (for example, under Section 4980B of the Code).
(b) Voluntary Resignation; Termination for Cause. If Executive's
employment with the Company terminates (i) voluntarily by Executive (other than
for Good Reason) or (ii) for Cause by the Company, then Executive shall not be
entitled to receive severance or other benefits except for those (if any)
provided for in the Employment Agreement or as may then be established under the
Company's then existing severance and benefits plans and practices or pursuant
to other written agreements with the Company.
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(c) Disability; Death. If the Company terminates Executive's
employment as a result of Executive's Disability, or Executive's employment
terminates due to his or her death, then Executive shall not be entitled to
receive severance or other benefits except for those (if any) provided for in
the Employment Agreement or as may then be established under the Company's then
existing written severance and benefits plans and practices or pursuant to other
written agreements with the Company.
(d) Termination Apart from Change of Control. In the event
Executive's employment is terminated for any reason, either prior to the
occurrence of a Change of Control or after the twelve (12) month period
following a Change of Control, then Executive shall be entitled to receive
severance and any other benefits only as provided for in the Employment
Agreement or as may then be established under the Company's existing written
severance and benefits plans and practices or pursuant to other written
agreements with the Company.
(e) Exclusive Remedy. In the event of a termination of Executive's
employment within twelve (12) months following a Change of Control, the
provisions of this Section 3 are intended to be and are exclusive and in lieu of
any other rights or remedies to which Executive or the Company may otherwise be
entitled (including any contrary provisions in the Employment Agreement),
whether at law, tort or contract, in equity, or under this Agreement. Executive
shall be entitled to no benefits, compensation or other payments or rights upon
termination of employment within twelve (12) months following a Change in
Control other than those benefits expressly set forth in this Section 3.
4. Golden Parachute Excise Tax.
(a) In the event it shall be determined that any payment or
distribution by the Company or other amount with respect to the Company to or
for the benefit of Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
4 (a "PAYMENT"), is (or will be) subject to the excise tax imposed by Section
4999 of the Internal Revenue Code of 1986, as amended (the "CODE") or any
interest or penalties are (or will be) incurred by Executive with respect to the
excise tax imposed by Section 4999 of the Code with respect to the Company (the
excise tax, together with any interest and penalties, are hereinafter
collectively referred to as the "EXCISE TAX"), Executive shall be entitled to
receive an additional cash payment (a "GROSS-UP PAYMENT") from the Company in an
amount equal to the sum of the Excise Tax and an amount sufficient to pay the
cumulative Excise Tax and all cumulative income taxes (including any interest
and penalties imposed with respect to such taxes) relating to the Gross-Up
Payment so that the net amount retained by Executive is equal to all payments to
which Employee is entitled pursuant to the terms of this Agreement (excluding
the Gross-Up Payment) or otherwise less income taxes (but not reduced by the
Excise Tax or by income taxes attributable to the Gross-Up Payment).
(b) Subject to the provisions of Section 4(c), all determinations
required to be made under this Section 4, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at the determination, shall be made by a nationally
recognized certified public accounting firm selected by the Company with the
consent of Executive, which should not unreasonably be withheld (the
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"ACCOUNTING FIRM") which shall provide detailed supporting calculations both to
the Company and Executive within 30 days after the receipt of notice from
Executive that there has been a Payment, or such earlier time as is requested by
the Company. All fees and expenses of the Accounting Firm shall be borne solely
by the Company. The Company, as determined in accordance with this Section 4,
shall pay any Gross-Up Payment to Executive within five days after the receipt
of the Accounting Firm's determination. If the Accounting Firm determines that
no Excise Tax is payable by Executive, it shall so indicate to Executive in
writing. Any determination by the Accounting Firm shall be binding upon the
Company and Executive. 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, it is possible that Gross-Up Payments that the Company should have made
will not have been made (an "UNDERPAYMENT"), consistent with the calculations
required to be made hereunder. In the event the Company exhausts its remedies in
accordance with Section 4(c) and Executive thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine the amount of
Underpayment that has occurred and the Underpayment shall be promptly paid by
the Company to or for the benefit of Executive.
(c) Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require a Gross-Up
Payment (that has not already been paid by the Company). The notification shall
be given as soon as practicable but no later than ten business days after
Executive is informed in writing of the claim and shall apprise the Company of
the nature of the claim and the date on which the claim is requested to be paid.
Executive shall not pay the claim prior to the expiration of the 30-day period
following the date on which Executive gives notice to the Company or any shorter
period ending on the date that any payment of taxes with respect to the claim is
due. If the Company notifies Executive in writing prior to the expiration of the
30-day period that it desires to contest the claim, Executive shall:
(i) give the Company any information reasonably requested by
the Company relating to the claim;
(ii) take any action in connection with contesting the claim
as the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to the claim by
an attorney reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order
effectively to contest the claim; and
(iv) permit the Company to participate in any proceedings
relating to the claim.
(d) The Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with the
contest and shall indemnify and hold 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 the representation and payment of costs and
expenses. Without limitation of the forgoing provisions of this Section 4, the
Company shall control all proceedings taken in connection with the contest and,
at its sole option, may pursue or forego any and all administrative appeals,
proceedings, hearings, and conferences with the taxing authority in
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respect of the claim and may, at its sole option, either direct Executive to pay
the tax claimed and xxx for a refund or contest the claim in any permissible
manner, and Executive agrees to prosecute the 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. If the Company directs
Executive to pay the claim and xxx for a refund, the Company shall advance the
amount of the payment to Executive, on an interest-free basis, and shall
indemnify and hold 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 the advance or with respect to any imputed income with respect
to the advance; and any extension of the statute of limitations relating to
payment of taxes for the taxable year of Executive with respect to which the
contested amount is claimed to be due shall be limited solely to the contested
amount. 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 Executive
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.
If, after the receipt by Executive of an amount advanced by the
Company pursuant to Section 4(d), Executive becomes entitled to receive any
refund with respect to the claim, Executive shall, subject to the Company's
compliance with the requirements of Section 4(d), promptly pay to the Company
the amount of the refund (together with any interest paid or credited thereon
after taxes applicable thereto). If, after the receipt by Executive of an amount
advanced by the Company pursuant to this Section 4(d), a determination is made
that Executive shall not be entitled to any refund with respect to the claim and
the Company does not notify Executive in writing of its intent to contest the
denial of refund prior to the expiration of 30 days after the determination,
then the advance shall be forgiven and shall not be required to be repaid and
the amount of the advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.
5. Definition of Terms. The following terms referred to in this
Agreement shall have the following meanings:
(a) Benefit Plans. "BENEFIT PLANS" means plans, policies or
arrangements that the Company sponsors (or participates in) and that immediately
prior to Executive's termination of employment provide Executive and/or
Executive's eligible dependents with medical, dental, vision and/or financial
counseling benefits. Benefit Plans do not include any other type of benefit
(including, but not by way of limitation, disability, life insurance or
retirement benefits). A requirement that the Company provide Executive and
Executive's eligible dependents with coverage under the Benefit Plans will not
be satisfied unless the coverage is no less favorable than that provided to
Executive and Executive's eligible dependents immediately prior to Executive's
termination of employment. Notwithstanding any contrary provision of this
Section 5, but subject to the immediately preceding sentence, the Company may,
at its option, satisfy any requirement that the Company provide coverage under
any Benefit Plan by instead providing coverage under a separate plan or plans
providing coverage that is no less favorable or by paying Executive a lump sum
payment sufficient to provide Executive and Executive's eligible dependents with
equivalent coverage under a third party plan that is reasonably available to
Executive and Executive's eligible dependents.
(b) Cause. "CAUSE" means (i) a willful failure by Executive to
substantially perform Executive's duties as an employee, other than a failure
resulting from the Executive's
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complete or partial incapacity due to physical or mental illness or impairment,
(ii) a willful act by Executive that constitutes gross misconduct and that is
injurious to the Company, (iii) circumstances where Executive willfully imparts
material confidential information relating to the Company or its business to
competitors or to other third parties other than in the course of carrying out
Executive's duties, (iv) a material and willful violation by Executive of a
federal or state law or regulation applicable to the business of the Company or
(v) Executive's conviction or plea of guilty or no contest to a felony. No act
or failure to act by Executive shall be considered "WILLFUL" unless committed
without good faith and without a reasonable belief that the act or omission was
in the Company's best interest.
(c) Change of Control. "CHANGE OF CONTROL" means the occurrence of
any of the following:
(i) the sale, lease, conveyance or other disposition of all
or substantially all of the Company's assets to any "person" (as such term is
used in Section 13(d) of the Securities Exchange Act of 1934, as amended),
entity or group of persons acting in concert;
(ii) any person or group of persons becoming the "beneficial
owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of
securities of the Company representing 30% or more of the total voting power
represented by the Company's then outstanding voting securities;
(iii) a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation that 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 or its controlling entity) at
least 50% of the total voting power represented by the voting securities of the
Company or such surviving entity (or its controlling entity) outstanding
immediately after such merger or consolidation; or
(iv) a contest for the election or removal of members of the
Board that results in the removal from the Board of at least 33% of the
incumbent members of the Board.
(d) Competition. "COMPETITION" shall mean Executive's direct or
indirect engagement in (whether as an employee, consultant, agent, proprietor,
principal, partner, stockholder, corporate officer, director or otherwise), or
ownership interest in or participation in the financing, operation, management
or control of, any person, firm, corporation or business that competes with
Company or is a customer of the Company.
(e) Disability. "DISABILITY" shall mean that Executive has been
unable to perform the principal functions of Executive's duties due to a
physical or mental impairment, but only if such inability has lasted or is
reasonably expected to last for at least six months. Whether Executive has a
Disability shall be determined by the Board based on evidence provided by one or
more physicians selected by the Board.
(f) Good Reason. "GOOD REASON" means (without Executive's consent)
(i) a material reduction in Executive's title, authority, status, or
responsibilities, (ii) a material breach by the Company of its obligations as an
employee, or (iii) a relocation of Executive's principal place of employment by
more than twenty five (25) miles. With respect to a termination of employment
that
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occurs during the six (6) month period immediately following a Change of
Control, clause (i) of the preceding sentence shall be applied by replacing the
word "reduction" with the word "change."
6. Successors.
(a) The Company's Successors. Any successor to the Company
(whether direct or indirect and whether by purchase, merger, consolidation,
liquidation or otherwise) to all or substantially all of the Company's business
and/or assets shall assume the obligations under this Agreement and agree
expressly to perform the obligations under this Agreement in the same manner and
to the same extent as the Company would be required to perform such obligations
in the absence of a succession. For all purposes under this Agreement, the term
"COMPANY" shall include any successor to the Company's business and/or assets
which executes and delivers the assumption agreement described in this Section
6(a) or which becomes bound by the terms of this Agreement by operation of law.
(b) The Executive's Successors. The terms of this Agreement and
all rights of Executive hereunder shall inure to the benefit of, and be
enforceable by, Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
7. Notice.
(a) General. Notices and all other communications contemplated by
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by U.S. registered or certified mail,
return receipt requested and postage prepaid. In the case of Executive, mailed
notices shall be addressed to him or her at the home address which he or she
most recently communicated to the Company in writing. In the case of the
Company, mailed notices shall be addressed to its corporate headquarters, and
all notices shall be directed to the attention of its President.
(b) Notice of Termination. Any termination by the Company for
Cause or by Executive for Good Reason or as a result of a voluntary resignation
shall be communicated by a notice of termination to the other party hereto given
in accordance with Section 7(a) of this Agreement. Such notice shall indicate
the specific termination provision in this Agreement relied upon, shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination under the provision so indicated, and shall specify the
termination date (which shall be not more than thirty (30) days after the giving
of such notice). The failure by Executive to include in the notice any fact or
circumstance which contributes to a showing of Good Reason shall not waive any
right of Executive hereunder or preclude Executive from asserting such fact or
circumstance in enforcing his or her rights hereunder.
8. Miscellaneous Provisions.
(a) No Duty to Mitigate. Executive shall not be required to
mitigate the amount of any payment contemplated by this Agreement, nor shall any
such payment be reduced by any earnings that Executive may receive from any
other source.
(b) Waiver. No provision of this Agreement shall be modified,
waived or discharged unless the modification, waiver or discharge is agreed to
in writing and signed by
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Executive and by an authorized officer of the Company (other than Executive). No
waiver by either party of any breach of, or of compliance with, any condition or
provision of this Agreement by the other party shall be considered a waiver of
any other condition or provision or of the same condition or provision at
another time.
(c) Headings. All captions and section headings used in this
Agreement are for convenient reference only and do not form a part of this
Agreement.
(d) Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto and supersedes in their entirety all prior
representations, understandings, undertakings or agreements (whether oral or
written and whether expressed or implied) of the parties with respect to the
subject matter hereof, including (without limitation) the Employment Agreement).
No future agreements between the Company and Executive may supersede this
Agreement, unless they are in writing and specifically mention this Section
8(d).
(e) Choice of Law. The laws of the State of California (without
reference to its choice of laws provisions) shall govern the validity,
interpretation, construction and performance of this Agreement.
(f) Severability. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.
(g) Withholding. All payments made pursuant to this Agreement will
be subject to withholding of applicable income and employment taxes.
(h) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the day and year
set forth below.
COMPANY SOLECTRON CORPORATION
By: _________________________________________
Title: Chief Executive Officer Date: _______
EXECUTIVE By: _________________________________________
Title: _____________________Date: ___________
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