Exhibit 10.7
OBJECTIVE SYSTEMS INTEGRATORS, INC.
SEVERANCE AGREEMENT
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THIS AGREEMENT is entered into as of December 15, 1999 ("Effective Date"),
between OBJECTIVE SYSTEMS INTEGRATORS, INC., a Delaware corporation ("OSI"), and
XXXXX X. XXXXX ("Officer").
RECITALS
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Officer serves as OSI's Vice President, Marketing. The parties wish to set
forth the terms of Officer's compensation if his employment ends because of a
Change in Control. If a Change in Control occurs, Officer and other key
employees will be more vulnerable to dismissal without regard to the quality of
their service. Because key employees are in a unique position to affect the
efforts of others, OSI's Board of Directors ("Board") believes it is in the best
interests of OSI and its shareholders to ensure the fair treatment of key
employees and to reduce the adverse effects on their performance inherent in an
acquisition or a change in control.
AGREEMENT
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1. Definitions. For purposes of this Agreement, the following terms have the
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meanings set forth below:
(a) a "Change in Control" will occur if (1) any person, as that term is
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used in Section 13(d) and 14(d)(2) of the Securities and Exchange
Act of 1934 ("Exchange Act"), other than OSI, is or becomes the
beneficial owner, as defined in Rule 13(d)3 under the Exchange Act,
either directly or indirectly (including by holding securities
which are exerciseable for or convertible into shares of OSI
capital stock), of 50% or more of the combined voting power of the
outstanding shares of OSI's capital stock entitled to vote
generally in the election of directors (calculated as provided in
Rule 13(d) under the Exchange Act in the case of rights to acquire
capital stock), whether by means of a tender offer or exchange
offer, a Transaction or otherwise, (2) a Transaction is
consummated, (3) the Continuing Directors do not constitute a
majority of the Board for any reason and at any time during the
term of this Agreement, or (4) a majority of OSI's Outside
Directors decide that a Change of Control has occurred.
(b) "Compensation" includes all wages, salary, bonuses and incentive
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compensation paid by OSI as consideration for the Officer's service
that are included in the Officer's gross income for federal income
tax purposes, but excludes any taxable income recognized on the
exercise of stock options or the disposition of shares acquired on
the exercise of stock options.
(c) a "Continuing Director" is (1) a member of the Board serving on
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December 15, 1999, or (2) a person who is thereafter elected by the
shareholders or appointed by the Board where the election or
appointment was approved by at least a majority of the Continuing
Directors then serving on the Board.
(d) "Disability" means that the Officer, in the reasonable judgment of
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the Board, is not able to perform the duties of his office by
reason of illness or physical or mental disability, where the
condition has continued for a period of more than three consecutive
months.
(e) "Good Reason" includes any of the following:
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(1) assignment to the Officer of significantly reduced duties, or a
substantial reduction in the nature or status of, the Officer's
responsibilities immediately before a Change in Control. In
this regard, a reduction in duties or responsibilities only by
virtue of OSI being acquired and made a part of a larger entity
(as, for example, the Chief Financial Officer of OSI remains as
such following the Change in Control and is not made the Chief
Financial Officer of the acquirer) will constitute "Good
Reason"
(2) reduction in the Officer's salary or a material reduction in
his other benefits taken as a whole, as in effect on the date
of a Change in Control.
(3) relocation of OSI's principal executive offices outside of the
Greater Sacramento area.
(4) relocation of the Officer to any place other than the
principal offices of OSI, except for reasonably required
travel by the Officer on OSI's business.
(5) breach by OSI of this Agreement, if the breach has not been
cured within 30 days after notice setting forth with
specificity the nature of the breach.
(6) failure by OSI to obtain the assumption of this Agreement by
any successor or assign of OSI.
(f) "Outside Director" is a person who is not, and who during the past
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six months was not, an employee or officer of OSI.
(g) "Termination for Cause" is termination of the Officer's employment
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as a result of (1) an act of intentional personal dishonesty by the
Officer in connection with his responsibilities as an employee and
intended to result in his substantial personal enrichment, (2) his
conviction of a felony, (3) a willful act by the Officer which
constitutes gross misconduct and which is more than of de minimus
injury to OSI, or (4) continued substantial violations of his
employment duties (that have been previously communicated to him in
writing, are consistent with his position as an Officer of OSI and
that are neither illegal, immoral nor wrongful), that are
demonstrably willful and deliberate on his part and that have
continued for 30 days after OSI has delivered to him a written
demand for performance, specifically setting forth the factual basis
for OSI's belief that he has not performed his duties.
(h) "Termination on a Change in Control" is (1) termination by the
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Officer of his employment for Good Reason within two years after
the occurrence of a Change in Control, or (2) termination by OSI of
the Officer's employment within two years after the occurrence of a
Change in Control other than a Termination for Cause or a
termination resulting from his death or Disability.
(i) a "Transaction" is (1) a consolidation or merger involving OSI,
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other than a merger solely to effect a reincorporation or a merger
as to which stockholder approval is not required under Sections
251(f) or 253 of the Delaware General Corporation Law, (2) a sale,
lease, exchange or other transfer (in one transaction or a series
of related transactions) of 50% or more of OSI's assets, or (3) the
adoption of any plan or proposal for the liquidation or dissolution
of OSI.
2. Term. If no Change in Control has occurred, this Agreement will expire
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three years from its Effective Date. This Agreement will be automatically
renewed for successive one-year periods unless either party has given the
other six months prior notice of its election not to renew. If a Change
in Control occurs, this Agreement will continue in effect, and will not
terminate, until the Officer has received the severance compensation
provided for below.
3. Termination on a Change in Control. If a Termination for a Change in
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Control occurs, the Officer will immediately be paid all accrued salary,
bonus compensation to the extent earned, vested deferred compensation
(other than pension plan or profit sharing plan benefits, which will be
paid in accordance with the applicable plan), any benefits then due under
any OSI plans in which the Officer participates, accrued vacation pay and
any appropriate business expenses incurred by the Officer in connection
with his duties, all to the date of termination ("Accrued Compensation").
The Officer will also be entitled to the severance compensation described
in Section 4.
4. Severance Compensation. If a Termination on a Change in Control occurs,
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OSI will pay severance compensation to the Officer in an aggregate amount
equal to the Officer's Compensation for 12 months. Severance compensation
will be computed with reference to the Compensation paid to the Officer
for the last full calendar month immediately preceding the month in which
the Change in Control occurs or the month in which the Officer's
employment terminates, whichever is higher. Compensation as to any month
will include one-twelfth of the amount of any bonus or other lump sum
compensation received by the Officer
during the preceding 12 months and all amounts accrued with respect to
that month under any deferred compensation plan. Severance compensation
will be without prejudice to the Officer's right to receive accrued
Compensation earned and unpaid at the time of termination. Severance
compensation payments to the Officer will be paid in a lump sum within 30
days after Termination on a Change in Control.
5. Other Provisions. In addition to the severance payments described above,
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the Officer will receive 100% OSI-paid benefits in the same or comparable
plans as provided to him immediately before the Termination on a Change
in Control. If the Officer's health insurance coverage included his
dependents, those dependents will also be covered at OSI's expense.
Coverage under this Section will continue for 12 months after
termination; provided, however, that coverage will end on the date the
Officer and any covered dependents become covered under any similar plan
not maintained by OSI.
6. Acceleration of Options. If a Termination on a Change in Control occurs,
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all stock option agreements will be amended to provide that the stock
options held by the Officer immediately before the termination will
become fully vested and exerciseable, even if the vesting conditions set
forth in the underlying stock option agreements have not been satisfied
in full, and will remain exerciseable for a period of 12 months after the
Termination on a Change in Control and for a period of 24 months if the
termination results from the Officer's Disability, but in no event longer
than the original term of the option.
7. Aggregate Benefit Cap. If the benefits provided for in this Agreement or
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otherwise payable to the Officer constitute "parachute payments" within
the meaning of Section 280G of the Internal Revenue Code of 1986, as
amended ("Code"), and will be subject to the excise tax imposed by
Section 4999 of the Code, the Officer will receive a payment from OSI
sufficient to pay the initial excise tax ("Gross-Up"), but no further
payments from OSI with respect to the Gross-Up. Unless OSI and the
Officer otherwise agree in writing, determination of the Officer's excise
tax liability and the amount required to be paid under this Section will
be made, in writing, by the same firm of independent public accountants
who were employed by OSI immediately before the Change of Control
("Accountants"). For purposes of making their calculations, 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. OSI and
the Officer will furnish the Accountants with such information and
documents as the Accountants may reasonably request. OSI will bear all
costs the Accountants reasonably incur in connection with these
calculations.
8. Other Benefits. Neither this Agreement nor the severance compensation
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that it provides for will reduce any amounts otherwise payable, or in any
way diminish the Officer's rights as an employee of OSI, whether existing
now or hereafter, under any benefit, incentive, retirement, stock option,
stock bonus or stock purchase plan or under any employment agreement or
other plan or arrangement.
9. Employment Status. This Agreement does not constitute a contract of
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employment. It does not impose on OSI any obligation to retain the
Officer as an employee, to change the status of his employment or to
change OSI's policies regarding termination of employment.
10. Miscellaneous.
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(a) Severability. If a court or other body of competent jurisdiction
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determines that any term of this Agreement is invalid or
unenforceable, that term will be adjusted rather than voided, if
possible, so that it is enforceable to the maximum extent possible,
and all other terms of the Agreement will be deemed valid and
enforceable to the fullest extent possible.
(b) Withholding. Compensation and benefits to the Officer under this
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Agreement will be reduced by all federal, state, local and other
withholdings or similar taxes as required by applicable law.
(c) Entire Agreement. This Agreement is the entire agreement between
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the parties with respect to its subject matter and may be amended,
modified, superseded or canceled, or its terms waived, only by a
written instrument executed by each party or, in the case of a
waiver, by the party waiving compliance. Failure of a party at any
time to require performance of any term of this Agreement will not
affect the right at a latter time to enforce the same. No waiver of
a breach of this Agreement, whether by conduct or otherwise, in any
one or more instances will be construed as a further or continuing
waiver of the breach or of any other term of this Agreement.
(d) Counterparts. This Agreement may be executed in one or more
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counterparts, each of which will constitute an original.
(e) Successors and Assigns. This Agreement will be binding on OSI, its
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successors and assigns, and will inure to the benefit of the
Officer and his estate, heirs, legal representatives and assigns.
(f) Notices. All notices, requests, demands and other communications
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under this Agreement will be in writing, will be effective on
receipt and will be delivered by Federal Express or a similar
courier, personal delivery, certified or registered mail or by
facsimile transmission. Addresses for notice to either party are as
shown on the signature page of this Agreement or as subsequently
modified by written notice.
(g) Jurisdiction. The parties each irrevocably consent to the
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jurisdiction of the courts of the State of California for all
purposes in connection with any action or proceeding arising out of
or relating to this Agreement. Any action instituted under this
Agreement will be brought only in the state courts of the State of
California.
(h) Governing Law. This Agreement will be governed by, and its
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provisions construed in accordance with, the laws of the State of
California as applied to contracts between California residents
entered into and to be performed entirely within California.
IN WITNESS WHEREOF, the parties have executed this Agreement as of December 15,
1999.
OBJECTIVE SYSTEMS INTEGRATORS, INC.,
By: /s/ Xxxxxxx X. Xxxxx
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Title: Co-Chief Executive Officer
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Date: 12/15/99
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Address for Notices: 000 Xxxx Xxx
Xxxxxx, Xxxxxxxxxx 00000
Attention: General Counsel
OFFICER
/s/ Xxxxx X. Xxxxx
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Xxxxx X. Xxxxx
Address for Notices:
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