3COM CORPORATION FORM OF FIRST AMENDMENT TO MANAGEMENT RETENTION AGREEMENT
Exhibit 10.12
3COM CORPORATION
FORM OF FIRST AMENDMENT TO MANAGEMENT RETENTION
AGREEMENT
AGREEMENT
This AMENDMENT is made and entered into pursuant to the MANAGEMENT RETENTION AGREEMENT of [ ]
(the “Agreement”) by and between 3Com Corporation (the “Company”) and [ ] (“Employee”).
WHEREAS, the Company desires to amend the Agreement to comply with Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”).
NOW, THEREFORE, it is hereby agreed that the Agreement is amended in the following respects,
effective as of January 1, 2009, or such earlier date as required to comply with Code Section 409A
and guidance issued thereunder.
1. Paragraph (a) of Section 3 is revised in its entirety to read as follows:
“(a) Involuntary Termination other than for Cause, death or Disability or
Voluntary Termination for Good Reason Within Three (3) Months Prior to or Within
Twelve (12) Months Following a Change of Control. If, within three (3) months
prior to or within twelve (12) months following a Change of Control, the Employee’s
employment is terminated (i) involuntarily by the Company other than for Cause,
death or Disability or (ii) by the Employee pursuant to a Voluntary Termination for
Good Reason, then, subject to the Employee’s executing a mutual release, as provided
in the following paragraph, the Company shall provide the Employee with the benefits
described below upon such termination. “Termination Date” shall mean herein the
Employee’s last date of employment with 3Com Corporation or, if later, the date on
which the Employee incurs a separation from service with 3Com Corporation as defined
in Treasury Regulation Section 1.409A-1(h).
The receipt of any severance or other benefits pursuant to this Section 3 will be
subject to the Employee signing and returning to the Company a separation agreement
and release of claims in substantially the form attached hereto as Exhibit A (as
updated at the Company’s discretion or to reflect applicable local, state and
federal law) (“Release Agreement”), by no later than forty-five (45) days after the
date of termination of Employee’s employment. Failure to return the Release
Agreement by the forty-fifth (45th) day, or revoking the release of
claims within the seven (7) day revocation period, will result in a forfeiture of
severance pay. The Release Agreement shall be furnished to the Employee in
sufficient time to enable the Employee to comply with the preceding sentence, taking
into account the period of time that the Employee must be given to consider the
terms of the Release Agreement under any applicable law.
(i) Lump-Sum Payment. A lump-sum cash payment in an amount equal
to one hundred percent (100%) of the Employee’s Annual Compensation, subject
to all applicable taxes and withholdings, to be paid within sixty-
five (65) days of the Termination Date (the payment of which is intended to
be exempt from Section 409A of the Internal Revenue Code of 1986, as amended
(the “Code) pursuant to the short-term deferral rules of Treasury Regulation
1.409A-1(b)(4));
(ii) Continued Employee Benefits. Company-paid health, dental,
vision, long-term disability, and life insurance coverage at the same level
of coverage and coverage tier as was provided to the Employee and/or the
Employee’s dependents immediately prior to the termination of his/her
employment and at the same ratio of Company premium payment to Employee
premium payment as was in effect immediately prior to the Change of Control
(the “Company-Paid Coverage”). Company-Paid Coverage shall continue until
the earlier of (i) two (2) years from the date of termination, or (ii) the
date upon which the Employee and/or his/her dependents become covered under
another employer’s group health, dental, vision, long-term disability, or
life insurance plans that provide the Employee and/or his 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 the Employee and/or his/her dependents shall be the
date upon which the Company-Paid Coverage commences, and each month of
Company-Paid Coverage provided hereunder shall offset a month of
continuation coverage otherwise due under COBRA. To the extent that the
period during which the continued provision of medical and dental benefits
falls within the applicable COBRA continuation period, such continued
provision of medical and dental benefits is exempt from Code Section 409A
under Treasury Regulation Section 1.409A-1(b)(9)(v)(B). To the extent that
the period during which the continued provision of medical and dental
benefits extends beyond the applicable COBRA continuation period, the
following shall apply: (a) the premiums for continued medical and dental
coverage shall be paid on a monthly basis; (b) any amounts paid to or on
behalf of the Employee as reimbursement for medical and/or dental expenses
shall be paid on or before the last day of the year following the year in
which such expense was incurred; (c) any amounts paid to or on behalf of the
Employee as reimbursement for medical and/or dental expenses during one year
will not affect the Employee’s eligibility for amounts paid to or on behalf
of the Employee as reimbursement for medical and/or dental expenses during
any other year; and (d) the right to continued coverage beyond the
applicable COBRA continuation period is not subject to liquidation or
exchange for another benefit. This paragraph shall be administered and
interpreted consistent with Treasury Regulation Section 1.409A-3(i)(1)(iv);
(iii) Pro-Rated Bonus Payment. A lump-sum cash payment equal to
one hundred percent (100%) of the Employee’s Target Bonus as in effect for
the fiscal year in which the Change of Control occurs, pro-rated by
multiplying such Target Bonus amount by a fraction, the numerator of
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which shall be the number of calendar days prior to occurrence of the Change
of Control during such fiscal year, and the denominator of which shall be
three-hundred and sixty-five (365), subject to all applicable taxes and
withholdings, to be paid within sixty-five (65) days of the Termination Date
(the payment of which is intended to be exempt from Section 409A of the Code
pursuant to the short-term deferral rules of Treasury Regulation
1.409A-1(b)(4));
(iv) Equity Compensation Accelerated Vesting. One hundred percent
(100%) of the unvested portion of any stock option, restricted stock or
other Company equity compensation held by the Employee shall automatically
be accelerated in full so as to become completely vested; provided, however,
that if this occurs due to a qualifying termination of employment occurring
within three (3) months prior to a Change of Control, such acceleration
shall become effective upon the date of the Change of Control, with transfer
of shares, payment of cash, or removal of restrictions on shares, whichever
applicable, occurring as soon as practicable, but in no event later than the
sixtieth (60th) day following the Employee’s termination of
employment or Change of Control, whichever is later. Notwithstanding the
foregoing, if the Employee is a “specified employee” (within the meaning of
Treasury Regulation Section 1.409A-1(i) and as applied according to
procedures of the Company) and the award is subject to Code Section 409A,
transfer of shares shall occur on the first market day following the six (6)
month anniversary of the Employee’s termination of employment; and
(v) Extension of Stock Option and Stock Appreciation Right
Post-Termination Exercisability. The post-termination exercise period
of any outstanding Company stock options and stock appreciation rights held
by the Employee shall be extended to the lesser of (A) one (1) year from the
Employee’s termination date, or (B) the original term of the award.”
2. Add a new sentence at the end of Section 4(b) to read as follows:
“In no event shall payment be made later than the end of the year following the year
in which Employee remits the related taxes.”
3. Paragraph (d) of Section 5 is revised in its entirety to read as follows:
“(d) Change of Control. “Change of Control” means the occurrence of any
of the following events:
(i) Any Person becomes the “beneficial owner” (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing more than fifty percent (50%) of the total voting power
represented by the Company’s then outstanding voting securities; or
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(ii) The consummation of the sale or change in ownership of a substantial
portion of the Company’s assets (i.e., the total gross fair market value of
the Company’s assets acquired during the twelve (12) month period ending on
the date of the most recent acquisition equals more than fifty percent (50%)
of the total gross fair market value of all of the Company’s assets (without
regard to associated liabilities) immediately before such acquisition or
acquisitions) other than a transfer of assets to a related person as
described in Treasury Regulation Section 1.409A-3(i)(5)(vii)(B); or
(iii) The consummation of 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) more than 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
(iv) A change in the composition of the Board occurring within a twelve
(12) month 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 as of the date upon
which this Agreement was entered into, or (B) are elected, or nominated for
election, to the Board with the affirmative votes of at least a majority of
those directors whose election or nomination was not in connection with any
transaction described in subsections (i), (ii), or (iii) above, or in
connection with an actual or threatened proxy contest relating to the
election of directors to the Company.”
4. Paragraph (g) of Section 5 is revised in its entirety to read as follows:
(g) Voluntary Termination for Good Reason. “Voluntary Termination for Good
Reason” shall mean the Employee’s voluntary resignation following the initial
existence of one or more of the following conditions arising without the consent of
the Employee:
1. a material diminution in the Employee’s base compensation;
2. a material diminution in the Employee’s authority, duties, or
responsibilities;
3. a material change in the geographic location at which the Employee must
perform services; or
4. any other action or inaction that constitutes a material breach by the
Company of the agreement, if any, under which the Employee provides
services.
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Notwithstanding the forgoing, no such condition described herein shall constitute a
Voluntary Termination for Good Reason unless (i) the Employee has given written
notice to the Company specifying the condition relied upon for such termination
within ninety (90) days of the initial existence of the condition and the Company
has been given thirty (30) days to remedy the condition and has not done so within
such thirty (30) days and (ii) the Employee’s Termination Date occurs within six (6)
months of the initial existence of one or more of the conditions specified.”
5. Paragraph (b) of Section 8 is revised in its entirety to read as follows:
(b) Notice of Termination. Not less than thirty days prior to a termination
for Cause, the Company must provide to the Employee notice of termination,
indicating the specific termination provision in this Agreement relied upon. Said
notice 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 final date of employment.
6. A new Section 9 is added and the remaining sections are renumbered accordingly:
(a) Payment of Severance Benefits. Notwithstanding anything to the
contrary in this Agreement, if Employee is a “specified employee” within the meaning
of Section 409A and as applied according to procedures of the Company at the time of
Employee’s termination of employment (other than due to death), then the severance
benefits payable to Employee under this Agreement, if any, and any other severance
payments or separation benefits payments that may be considered deferred
compensation under Section 409A (together, the “Deferred Compensation Separation
Benefits”) otherwise due to Employee on or within the six (6) month period following
Employee’s termination of employment will accrue during such six (6) month period
and will become payable in a lump sum payment (less applicable withholding taxes) on
the date six (6) months and one (1) day following the date of Employee’s termination
of employment. All subsequent payments, if any, will be payable in accordance with
the payment schedule applicable to each payment or benefit. Notwithstanding
anything herein to the contrary, if Employee dies following his or her termination
of employment but prior to the six (6) month anniversary of his or her date of
termination, then any payments delayed in accordance with this paragraph will be
payable in a lump sum (less applicable withholding taxes) to Employee’s estate as
soon as administratively practicable after the date of Employee’s death and all
other Deferred Compensation Separation Benefits will be payable in accordance with
the payment schedule applicable to each payment or benefit. Each payment of
severance benefits to Employee under this Agreement that is made by March 15 of the
calendar year following Employee’s termination of employment and is intended to not
constitute a “deferral of compensation” by virtue of the “short term deferral” rule
of Treasury Regulations Section 1.409A-1(b)(4) shall constitute a “separate payment”
for purposes of application of that rule.
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(b) Amendments to this Agreement with Respect to Section 409A. The
severance payments and other benefits provided under this Agreement are intended to
not constitute a “deferral of compensation” under Section 409A, to the extent
possible, or, to the extent not so possible, to comply with the requirements of
Sections 409A(a)(2), (3) and (4) of the Code so that none of the severance payments
and benefits to be provided hereunder will be subject to the income inclusion,
additional tax or interest provisions of Section 409A(a)(1), and any ambiguities
herein will be interpreted in accordance with that intent. The Company and Employee
agree to work together in good faith to consider amendments to this Agreement and to
take such reasonable actions which are necessary, appropriate or desirable to avoid
imposition of any additional tax or interest or income recognition prior to actual
payment to Employee under Section 409A(a)(1).”
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(signature page follows)
(signature page follows)
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IN WITNESS WHEREOF, each of the parties has executed this First Amendment to the Agreement, in
the case of the Company by a duly authorized Employee’s, as of the day and year written below.
| COMPANY: | ||||||||||
| 3COM CORPORATION | ||||||||||
| Date: | ||||||||||
By:
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| EMPLOYEE: | ||||||||||
| Date: | ||||||||||
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