SYNC RESEARCH, INC.
AMENDED AND RESTATED
CHANGE OF CONTROL SEVERANCE AGREEMENT
This Amended and Restated Change of Control Severance Agreement (the
"AGREEMENT") is made and entered into by and between [EmployeeName] (the
"EMPLOYEE") and Sync Research, Inc., a Delaware corporation (the "COMPANY"),
effective as of May __, 1997.
RECITALS
A. It is expected that th 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 the Employee and can cause the Employee 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 the Employee,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company.
B. The Board believes that it is in the best interests of the Company and
its stockholders to provide the Employee with an incentive to continue his or
her employment and to motivate the Employee to maximize the value of the Company
upon a Change of Control for the benefit of its stockholders.
C. The Board believes that it is imperative to provide the Employee with
certain severance benefits upon Employee's termination of employment following a
Change of Control that provide the Employee with enhanced financial security and
incentive and encouragement to the Employee to remain with the Company
notwithstanding the possibility of a Change of Control.
D. For the reasons set forth in these recitals, the Company and Employee
entered into a Change of Control Severance Agreement dated September 30, 1996
(the "1996 SEVERANCE AGREEMENT"). The Company and Employee desire to amend and
restate the 1996 Severance Agreement in its entirety hereby.
E. Certain capitalized terms used in the Agreement are defined in
Section 6 below.
The parties hereto agree to amend and restate the 1996 Severance Agreement
in its entirety as follows:
1. TERM OF AGREEMENT. This Agreement shall terminate upon the date that
all obligations of the parties hereto with respect to this Agreement have been
satisfied.
2. AT-WILL EMPLOYMENT. The Company and the Employee acknowledge that the
Employee's employment is and shall continue to be at-will, as defined under
applicable law. If the Employee's employment terminates for any reason,
including (without limitation)
any termination prior to a Change of Control, the Employee shall not be
entitled to any payments, benefits, damages, awards or compensation other
than as provided by this Agreement or as may otherwise be available in
accordance with the Company's established employee plans and practices or
pursuant to other agreements with the Company.
3. STOCK VESTING ON CHANGE OF CONTROL.
(a) ACCELERATION UPON CHANGE OF CONTROL. Upon a Change of Control,
fifty percent (50%) of the Employee's options to purchase Common Stock of the
Company and/or shares of restricted stock of the Company that are unvested as of
the date of the Change of Control (the "UNVESTED SHARES") shall immediately
become vested.
(b) VESTING OF REMAINING UNVESTED SHARES. Upon a Change of Control,
the remainder of the Unvested Shares for which vesting was not accelerated
pursuant to Section 3(a) shall continue to vest at the same monthly rate as
prior to the Change of Control (i.e., if 200 shares vested per month prior to
the Change of Control, the remaining Unvested Shares will continue to vest at
the rate of 200 shares per month after the Change of Control) and in accordance
with the applicable stock option or restricted stock purchase agreement.
4. CONSULTING ARRANGEMENT.
(a) TERMINATION FOLLOWING A CHANGE OF CONTROL. If the Employee's
employment terminates as a result of Involuntary Termination other than for
Cause at any time within twelve (12) months following a Change of Control, then,
subject to Section 6, the Employee and the Company shall enter into a consulting
arrangement on the following terms:
(1) CONSULTING ENGAGEMENT. Effective as of the Termination
Date, and subject to the terms of this Agreement, the Company agrees to
retain the Employee as a consultant to perform such services (the "CONSULTING
SERVICES") for the Company as may be reasonably requested from time to time
by an officer of the Company (the "CONSULTING ARRANGEMENT"). The term of
this Consulting Arrangement shall commence on the Termination Date and expire
on the earlier of (i) the date the employee is working as a salaried employee
of or consultant to another person, company or entity which is actually or
potentially in competition with any business conducted by the Company, as
determined by the Company in its sole discretion, (ii) at the Employee's
option, the date the Employee is working as a salaried employee of or
consultant to another person, company or entity, or (iii) 12 months
following the Termination Date. As consideration for the Employee's services
under the Consulting Arrangement, the Company shall pay in cash to Employee
an amount equal to 1/12th of the Employee's Annual Compensation on the last
day of each full month following the Termination Date during which the
Consulting Arrangement is in effect. The Employee's stock options and/or
restricted stock shall continue to vest during the term of the Consulting
Arrangement pursuant to Section 3(b). Notwithstanding the foregoing, the
Consulting Arrangement may be terminated earlier by either party upon five
days written notice of termination if the other party fails to cure any
material breach of its obligations hereunder within 10 days after receipt of
notice specifying such breach.
-2-
(2) CONTINUED INSURANCE COVERAGE. Subject to the provisions of
this Section 4(a)(2), the Employee shall be entitled to one hundred percent
(100%) Company-paid health, dental and life insurance coverage at the same level
of coverage as was provided to such Employee immediately prior to the Change of
Control (the "COMPANY-PAID COVERAGE"). If such coverage includes the Employee's
dependents immediately prior to the Change of Control, such dependents shall
also be covered at Company expense. Company-Paid Coverage shall continue until
the earlier of (i) termination of the Consulting Arrangement or (ii) the date
that the Employee and his or her dependents become covered under another
employer's group health, dental or life insurance plans that provide Employee
and his or her dependents with comparable benefits and levels of coverage. For
purposes of Title X of the Consolidated Budget Reconciliation Act of 1985
("COBRA"), the date of the "qualifying event" for Employee and his or her
dependents shall be the date upon which the Company-Paid Coverage terminates.
(b) VOLUNTARY RESIGNATION; TERMINATION FOR CAUSE. If the Employee's
employment terminates by reason of the Employee's voluntary resignation (and is
not an Involuntary Termination), or if the Employee is terminated for Cause,
then the Employee shall not be entitled to receive payments for consulting
services or other benefits under Section 4(a) except for those (if any) as may
then be established under the Company's then existing severance and benefits
plans and practices or pursuant to other agreements with the Company.
(c) DISABILITY; DEATH. If the Company terminates the Employee's
employment as a result of the Employee's Disability, or such Employee's
employment is terminated due to the death of the Employee, then the Employee
shall not be entitled to receive payments for consulting services or other
benefits under Section 4(a) except for those (if any) as may then be established
under the Company's then existing severance and benefits plans and practices or
pursuant to other agreements with the Company.
(d) TERMINATION APART FROM CHANGE OF CONTROL. In the event the
Employee's employment is terminated for any reason, either prior to the
occurrence of a Change of Control or after the twelve-month period following a
Change of Control, then the Employee shall not be entitled to receive payments
for consulting services or other benefits under Section 4(a) except for those
(if any) as may then be established under the Company's existing severance and
benefits plans and practices or pursuant to other agreements with the Company.
5. ATTORNEY FEES, COSTS AND EXPENSES. The Company shall promptly
reimburse Employee, on a monthly basis, for the reasonable attorney fees, costs
and expenses incurred by the Employee in connection with any action brought by
Employee to enforce his or her rights hereunder. In the event Employee is not
the prevailing party, determined without regard to whether or not the action
results in a final judgment, Employee shall repay such reimbursements.
6. LIMITATION ON PAYMENTS. In the event that the payments and other
benefits provided for in this Agreement or otherwise payable to the Employee
(i) constitute "parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code"), and (ii) but for this
Section 6, would be subject to the excise tax
-3-
imposed by Section 4999 of the Code (or any corresponding provisions of state
income tax law), then the Employee's benefits under Section 4(a) shall be
either
(a) delivered in full, or
(b) delivered as to such lesser extent which would result in no
portion of such benefits being subject to excise tax under Section 4999 of the
Code,
whichever of the foregoing amounts, taking into account the applicable
federal, state and local income taxes and the excise tax imposed by Section
4999, results in the receipt by the Employee on an after-tax-basis, of the
greater amount of benefits, notwithstanding that all or some portion of such
benefits may be taxable under Section 4999 of the Code. Unless the Company
and the Employee otherwise agree in writing, any determination required under
this Section 6 shall be made in writing by the Company's independent public
accountants (the "ACCOUNTANTS"), whose determination shall be conclusive and
binding upon the Employee and the Company for all purposes. For purposes of
making the calculations required by this Section 6, the Accountants may make
reasonable assumptions and approximations concerning applicable taxes and may
rely on reasonable, good faith interpretations concerning the application of
Sections 280G and 4999 of the Code. The Company and the Employee shall
furnish to the Accountants such information and documents as the Accountants
may reasonably request in order to make a determination under this Section.
The Company shall bear all costs the Accountants may reasonably incur in
connection with any calculations contemplated by this Section 6. In the
event that subsection (a) above applies, then Employee shall be responsible
for any excise taxes imposed with respect to such benefits. In the event
that subsection (b) above applies, then each benefit provided hereunder shall
be proportionately reduced to the extent necessary to avoid imposition of
such excise taxes.
7. DEFINITION OF TERMS. The following terms used in this Agreement shall
have the following meanings:
(a) ANNUAL COMPENSATION. "ANNUAL COMPENSATION" means an amount equal
to (i) Employee's Company salary for the twelve months preceding the Change of
Control, and (ii) Employee's maximum target bonus for the year in which the
Change of Control occurs.
(b) CAUSE. "CAUSE" shall mean (i) any act of personal dishonesty
taken by the Employee in connection with his or her responsibilities as an
employee and intended to result in substantial personal enrichment of the
Employee, (ii) Employee's committing and being convicted of a felony, (iii) a
willful act by the Employee which constitutes gross misconduct and which is
injurious to the Company or an act of fraud by Employee against the Company, or
(iv) following delivery to the Employee of a written demand for performance from
the Company which describes the basis for the Company's belief that the Employee
has not substantially performed his or her duties, continued violations by the
Employee of the Employee's obligations to the Company which are demonstrably
willful and deliberate on the Employee's part.
-4-
(c) CHANGE OF CONTROL. "CHANGE OF CONTROL" means the occurrence of
any of the following events:
(i) Any "PERSON" (as such term is used in Section 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the
"BENEFICIAL OWNER" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing 50% or more of the total
voting power represented by the Company's then outstanding voting securities; or
(ii) A change in the composition of the Board occurring within a
two-year period, as a result of which fewer than a majority of the directors are
Incumbent Directors. "INCUMBENT DIRECTORS" shall mean directors who either
(A) are directors of the Company elected at the annual meeting of stockholders
of the Company to be held on June 13, 1997, or (B) are elected, or nominated for
election, to the Board with the affirmative votes of at least a majority of the
Incumbent Directors at the time of such election or nomination (but shall not
include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to the
Company); or
(iii) The stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation or 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
the Company's assets.
(d) DISABILITY. "DISABILITY" shall mean that the Employee has been
unable to perform his or her Company duties as the result of his or her
incapacity due to physical or mental illness, and such inability, at least 26
weeks after its commencement, is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to the Employee
or the Employee's legal representative (such Agreement as to acceptability not
to be unreasonably withheld). Termination resulting from Disability may only be
effected after at least 30 days' written notice by the Company of its intention
to terminate the Employee's employment. In the event that the Employee resumes
the performance of substantially all of his or her duties hereunder before the
termination of his or her employment becomes effective, the notice of intent to
terminate shall automatically be deemed to have been revoked.
(e) INVOLUNTARY TERMINATION. "INVOLUNTARY TERMINATION" shall mean
(i) without the Employee's express written consent, the significant reduction of
the Employee's duties, authority or responsibilities, relative to the Employee's
duties, authority or responsibilities as in effect immediately prior to such
reduction, or the assignment to Employee of such reduced duties, authority or
responsibilities; (ii) without the Employee's express written consent, a
substantial reduction, without good business reasons, of the facilities and
prerequisites
-5-
(including office space and location) available to the Employee immediately
prior to such reduction; (iii) a reduction by the Company in the base salary
of the Employee as in effect immediately prior to such reduction; (iv) a
material reduction by the Company in the kind or level of employee benefits,
including bonuses, to which the Employee was entitled immediately prior to
such reduction with the result that the Employee's overall benefits package
is significantly reduced; (v) the relocation of the Employee to a facility or
a location more than thirty (30) miles from the Employee's then present
location, without the Employee's express written consent; (vi) any purported
termination of the Employee by the Company which is not effected for
Disability or for Cause, or any purported termination for which the grounds
relied upon are not valid; (vii) the failure of the Company to obtain the
assumption of this Agreement by any successors contemplated in Section 8(a)
below; or (viii) any act or set of facts or circumstances which would, under
California case law or statute, constitute a constructive termination of the
Employee.
(f) TERMINATION DATE. "TERMINATION DATE" shall mean (i) if this
Agreement is terminated by the Company for Disability, thirty (30) days after
notice of termination is given to the Employee (provided that the Employee shall
not have returned to the performance of the Employee's duties on a full-time
basis during such thirty (30)-day period), (ii) if the Employee's employment is
terminated by the Company for any other reason, the date on which a notice of
termination is given, provided that if within thirty (30) days after the Company
gives the Employee notice of termination, the Employee notifies the Company that
a dispute exists concerning the termination or the benefits due pursuant to this
Agreement, then the Termination Date shall be the date on which such dispute is
finally determined, either by mutual written agreement of the parties, or by a
final judgment, order or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been perfected), or
(iii) if the Agreement is terminated by the Employee, the date on which the
Employee delivers the notice of termination to the Company.
8. SUCCESSORS.
(a) 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
8(a) or which becomes bound by the terms of this Agreement by operation of law.
(b) EMPLOYEE'S SUCCESSORS. The terms of this Agreement and all
rights of the Employee hereunder shall inure to the benefit of, and be
enforceable by, the Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
-6-
9. 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 five (5) days after being mailed by U.S. registered
or certified mail, return receipt requested and postage prepaid. In the case of
the Employee, 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
Secretary.
(b) NOTICE OF TERMINATION. Any termination by the Company for Cause
or by the Employee as a result of a voluntary resignation and any Involuntary
Termination shall be communicated by a notice of termination to the other party
hereto given in accordance with Section 9(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 30 days after the
giving of such notice). The failure by the Employee to include in the notice
any fact or circumstance which contributes to a showing of Involuntary
Termination shall not waive any right of the Employee hereunder or preclude the
Employee from asserting such fact or circumstance in enforcing his or her rights
hereunder.
10. MISCELLANEOUS PROVISIONS.
(a) NO DUTY TO MITIGATE. The Employee 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 the Employee may receive from any
other source, subject to the termination provisions of Section 4(a)(1).
(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 the Employee and by an authorized officer of the Company
(other than the Employee). 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) WHOLE AGREEMENT. The 1996 Severance Agreement is hereby
terminated, and this Agreement supersedes the 1996 Severance Agreement in its
entirety. This Agreement represents the entire agreement between the Employee
and the Company with respect to the matters set forth herein. No agreements,
representations or understandings (whether oral or written and whether express
or implied) which are not expressly set forth in this Agreement have been made
or entered into by either party with respect to the subject matter hereof.
(d) CHOICE OF LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California as
-7-
applied to agreements entered into and performed within California solely by
residents of that state.
(e) 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.
(f) WITHHOLDING. All payments made pursuant to this Agreement will
be subject to withholding of applicable income and employment taxes.
(g) 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.
-8-
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 date set forth
above.
COMPANY: SYNC RESEARCH, INC.
By:
----------------------------------
Title:
-------------------------------
EMPLOYEE: -------------------------------------
Signature
-------------------------------------
Please print name
-9-
