Exhibit 10.24
-------------
SEVERANCE AGREEMENT
-------------------
THIS SEVERANCE AGREEMENT (this "Agreement"), dated as of October 19,
2000, is made and entered by and between Cambridge Technology Partners
(Massachusetts), Inc., a Delaware corporation (the "Company"), and Xxxxxx Xxx
Xxxxxx (the "Executive").
WITNESSETH:
WHEREAS, the Executive is a senior executive of the Company and has
made and is expected to continue to make major contributions to the short- and
long-term profitability, growth and financial strength of the Company;
WHEREAS, the Company recognizes that, as is the case for most publicly
held companies, the possibility of a Change in Control (as defined below) exists
and that such possibility, and the uncertainty it may create among management,
may result in the distraction or departure of management personnel, to the
detriment of the Company and its stockholders;
WHEREAS, the Company desires to assure itself of both present and
future continuity of management and desires to establish certain minimum
severance benefits for certain of its senior executives, including the
Executive, applicable in the event of a Change in Control; and
WHEREAS, the Company wishes to ensure that its senior executives are
not unduly distracted by the circumstances attendant to the possibility of a
Change in Control and to encourage the continued attention and dedication of
such executives, including the Executive, to their assigned duties with the
Company; and
WHEREAS, the Company desires to provide additional inducement for the
Executive to continue to remain in the employ of the Company.
NOW, THEREFORE, the Company and the Executive agree as follows:
1. Certain Defined Terms. In addition to terms defined elsewhere
---------------------
herein, the following terms have the following meanings when used in this
Agreement with initial capital letters:
(a) "Base Pay" means the Executive's annual base salary rate as
in effect from time to time.
(b) "Board" means the Board of Directors of the Company.
(c) "Cash Severance Period" means a number of days equal to 365
multiplied by the severance compensation multiple set forth in Paragraph 1 of
Annex A.
(d) "Cause" means that, prior to any termination pursuant to
Section 3(b), the Executive has:
(i) been convicted of a criminal violation involving fraud,
embezzlement or theft in connection with his duties or in the course of his
employment with the Company or any Subsidiary; or
(ii) committed intentional wrongful disclosure of secret
processes or confidential information of the Company or any Subsidiary;
and any such act has been demonstrably and materially harmful to the
Company. For purposes of this Agreement, no act or failure to act on the
part of the Executive will be deemed "intentional" if it was due primarily
to an error in judgment or negligence, but will be deemed "intentional"
only if done or omitted to be done by the Executive not in good faith and
without reasonable belief that the Executive's action or omission was in
the best interest of the Company. Notwithstanding the foregoing, the
Executive will not be deemed to have been terminated for "Cause" hereunder
unless and until there has been delivered to the Executive a copy of a
resolution duly adopted by the affirmative vote of not less than three-
quarters of the Board then in office at a meeting of the Board called and
held for such purpose, after reasonable notice to the Executive and an
opportunity for the Executive, together with the Executive's counsel (if
the Executive chooses to have counsel present at such meeting), to be heard
before the Board, finding that, in the good faith opinion of the Board, the
Executive had committed an act constituting "Cause" as herein defined and
specifying the particulars thereof in detail. Nothing herein will limit
the right of the Executive or his beneficiaries to contest the validity or
propriety of any such determination.
(e) "Change in Control" means the occurrence during the Term of any
of the following e vents:
(i) except as otherwise provided in this Section 1(e) with
respect to Safeguard Scientifics, Inc., the acquisition by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) (a "Person") of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 20% or more of the
combined voting power of the then outstanding Voting Stock of the Company;
provided, however, that for purposes of this Section 1(e)(i), the following
acquisitions will not constitute a Change in Control: (A) any issuance of
Voting Stock of the Company directly from the Company that is approved by
the Incumbent Board (as defined in Section 1(e)(ii), below), (B) any
acquisition by the Company of Voting Stock of the Company, (C) any
acquisition of Voting Stock of the Company by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any Subsidiary, or
(D) any acquisition of Voting Stock of the Company by any Person pursuant
to a Business Combination that complies with clauses (A), (B) and (C) of
Section 1(e)(iii), below; and provided, further, that a Change in Control
will not occur if any Person becomes the beneficial owner of 20% or more of
the combined voting power of the Voting Stock of the Company solely as a
result of an issuance of Voting Stock described in clause (A) of this
Section 1(e)(i) or an acquisition of Voting Stock described in clause (B)
of this Section 1(e)(i) unless and until such Person thereafter acquires
beneficial ownership of Voting Stock of the Company that causes the
aggregate percent of the combined voting power of the Voting Stock of the
Company then owned
2
beneficially by such Person to exceed the percent of the combined voting
power of Voting Stock of the Company owned beneficially by such Person
immediately after such issuance or acquisition described in clause (A) or
(B) of this Section 1(e)(i); or
(ii) individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board," as modified by this Section 1(e)(ii)), cease
for any reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a Director subsequent to the date
hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least two-thirds of the
Directors then comprising the Incumbent Board (either by a specific vote or
by approval of the proxy statement of the Company in which such person is
named as a nominee for director, without objection to such nomination) will
be deemed to have been a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office occurs
as a result of an actual or threatened election contest (within the meaning
of Rule 14a-11 of the Exchange Act) with respect to the election or removal
of Directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(iii) consummation of a reorganization, merger or consolidation,
a sale or other disposition of all or substantially all of the assets of
the Company, or other transaction (each, a "Business Combination"), unless,
in each case, immediately following such Business Combination, (A) all or
substantially all of the individuals and entities who were the beneficial
owners of Voting Stock of the Company immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 51% of the
combined voting power of the then outstanding shares of Voting Stock of the
entity resulting from such Business Combination (including, without
limitation, an entity which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly
or through one or more subsidiaries), (B) no Person (other than the
Company; such entity resulting from such Business Combination; any employee
benefit plan (or related trust) sponsored or maintained by the Company, any
Subsidiary or such entity resulting from such Business Combination; or any
Person who immediately prior to such Business Combination beneficially
owned directly or indirectly 20% or more of the combined voting power of
the voting stock of the Company and whose ownership of such Voting Stock
did not result in a Change in Control under Section 1(e)(i)) beneficially
owns, directly or indirectly, 20% or more of the combined voting power of
the then outstanding shares of Voting Stock of the entity resulting from
such Business Combination, and (C) at least a majority of the members of
the Board of Directors of the entity resulting from such Business
Combination were members of the Incumbent Board at the time of the
execution of the initial agreement or of the action of the Board providing
for such Business Combination; or
(iv) approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company, except pursuant to a Business
Combination that complies with clauses (A), (B) and (C) of Section
1(e)(iii).
A Change in Control will not occur for purposes of this Agreement solely by
reason of any acquisition after the date of this Agreement of beneficial
ownership of Voting Stock of the
3
Company by Safeguard Scientifics, Inc. unless and until Safeguard Scientifics,
Inc. acquires beneficial ownership of a percentage of the combined voting power
of the then outstanding Voting Stock of the Company that is 20% or more than the
percentage of the combined voting power of the outstanding Voting Stock of the
Company it beneficially owned on September 30, 2000.
(f) "Employee Benefits" means the perquisites, benefits and service
credit for benefits as provided under any and all employee retirement income and
welfare benefit policies, plans, programs or arrangements in which the Executive
is entitled to participate, including without limitation any stock option,
performance share, performance unit, stock purchase, stock appreciation,
savings, pension, supplemental executive retirement, or other retirement income
or welfare benefit, deferred compensation, incentive compensation, group or
other life, health, medical/hospital or other insurance (whether funded by
actual insurance or self-insured by the Company or a Subsidiary), disability,
salary continuation, expense reimbursement and other employee benefit policies,
plans, programs or arrangements that may now exist or any equivalent successor
policies, plans, programs or arrangements that may be adopted hereafter by the
Company or a Subsidiary, providing perquisites, benefits and service credit for
benefits at least as great in the aggregate as are payable thereunder prior to a
Change in Control.
(g) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(h) "Good Reason" means the occurrence of one or more of the
following events (regardless of whether any other reason, other than Cause, for
termination of employment exists or has occurred, including without limitation
other employment):
(i) the failure to elect or reelect or otherwise to maintain
the Executive in the office or the position, or an equivalent office or
position, of or with the Company and/or a Subsidiary (or any successor
thereto by operation of law of or otherwise), as the case may be, which the
Executive held immediately prior to a Change in Control, or the removal of
the Executive as a Director of the Company and/or a Subsidiary (or any
successor thereto) if the Executive has been a Director of the Company
and/or a Subsidiary immediately prior to the Change in Control;
(ii) the failure of the Company to remedy any of the following
within 10 calendar days after receipt by the Company of written notice
thereof from the Executive: (A) an adverse change in the nature or scope of
the authorities, powers, functions, responsibilities or duties attached to
the position with the Company and any Subsidiary which the Executive held
immediately prior to the Change in Control, (B) a reduction in the
aggregate of the Executive's Base Pay and Incentive Pay received from the
Company and any Subsidiary, or (C) the termination or denial of the
Executive's rights to Employee Benefits or a reduction in the scope or
value thereof;
(iii) a determination by the Executive (which determination will
be conclusive and binding upon the parties hereto provided it has been made
in good faith and in all events will be presumed to have been made in good
faith unless otherwise shown by the Company by clear and convincing
evidence) that a change in circumstances has occurred following a Change in
Control, including, without limitation, a change in
4
the scope of the business or other activities for which the Executive was
responsible immediately prior to the Change in Control, which has rendered
the Executive unable to carry out, has hindered the Executive's performance
of, or has caused the Executive to suffer a reduction in, any of the
authorities, powers, functions, responsibilities or duties attached to the
position held by the Executive immediately prior to the Change in Control,
which situation is not remedied within 10 calendar days after written
notice to the Company from the Executive of such determination;
(iv) the liquidation, dissolution, merger, consolidation or
reorganization of the Company or transfer of all or substantially all of
its business and/or assets, unless the successor or successors (by
liquidation, merger, consolidation, reorganization, transfer or otherwise)
to which all or substantially all of its business and/or assets have been
transferred (by operation of law or otherwise) assumed all duties and
obligations of the Company under this Agreement pursuant to Section 11(a);
(v) a requirement by the Company that the Executive have his
principal location of work changed to any location that is in excess of 35
miles from the location thereof immediately prior to the Change in Control,
or that the Executive travel away from his office in the course of
discharging his responsibilities or duties hereunder at least 20% more (in
terms of aggregate days in any calendar year or in any calendar quarter
when annualized for purposes of comparison to any prior year) than was
required of the Executive in any of the three full years immediately prior
to the Change in Control without, in either case, his prior written
consent; or
(vi) without limiting the generality or effect of the foregoing,
any material breach of this Agreement by the Company or any successor
thereto which is not remedied by the Company within 10 calendar days after
receipt by the Company of written notice from the Executive of such breach.
(i) "Incentive Pay" means an annual bonus, incentive or other payment
of compensation, in addition to Base Pay, made or to be made in regard to
services rendered in any year or other period pursuant to any bonus, incentive,
profit-sharing, performance, discretionary pay or similar agreement, policy,
plan, program or arrangement (whether or not funded) of the Company or a
Subsidiary, or any successor thereto. "Incentive Pay" does not include any
stock option, stock appreciation, stock purchase, restricted stock or similar
plan, program, arrangement or grant, whether or not provided under an
arrangement described in the preceding sentence.
(j) "Severance Period" means the period of time commencing on the
date of the first occurrence of a Change in Control and continuing until the
earlier of (i) the second anniversary of the occurrence of the Change in
Control, or (ii) the Executive's death; provided, however, that commencing on
each anniversary of the Change in Control, the Severance Period will
automatically be extended for an additional year unless, not later than 90
calendar days prior to such anniversary date, either the Company or the
Executive has given written notice to the other that the Severance Period is not
to be so extended.
(k) "Subsidiary" means an entity in which the Company directly or
indirectly beneficially owns 50% or more of the outstanding Voting Stock.
5
(l) "Term" means the period commencing as of the date hereof and
expiring as of the later of (i) the close of business on December 31, 2003, or
(ii) the expiration of the Severance Period; provided, however, that (A)
commencing on January 1, 2004 and each January 1 thereafter, the term of this
Agreement will automatically be extended for an additional year unless, not
later than September 30 of the immediately preceding year, the Company or the
Executive has given notice that it or the Executive, as the case may be, does
not wish to have the Term extended and (B) subject to Section 3(c), if, prior to
a Change in Control, the Executive ceases for any reason to be an employee of
the Company, thereupon without further action the Term will be deemed to have
expired and this Agreement will immediately terminate and be of no further
effect.
(m) "Termination Date" means the date on which the Executive's
employment is terminated (the effective date of which will be the date of
termination, or such other date that may be specified by the Executive if the
termination is pursuant to Section 3(b)).
(n) "Voting Stock" means securities entitled to vote generally in the
election of directors.
2. Operation of Agreement. This Agreement will be effective and binding
----------------------
immediately upon its execution, but, anything in this Agreement to the contrary
notwithstanding, this Agreement will not be operative unless and until a Change
in Control occurs. Upon the occurrence of a Change in Control at any time
during the Term, or during the 180-day period following the expiration of the
Term if Section 3(c) applies, without further action, this Agreement will become
immediately operative.
3. Termination Following a Change in Control.
-----------------------------------------
(a) In the event of the occurrence of a Change in Control, the
Executive's employment may be terminated by the Company or a Subsidiary during
the Severance Period and the Executive will be entitled to the benefits provided
by Section 4 unless such termination is the result of the occurrence of one or
more of the following events:
(i) the Executive's death;
(ii) if the Executive becomes permanently disabled within the
meaning of, and begins actually to receive disability benefits pursuant to,
the long-term disability plan in effect for, or applicable to, the
Executive immediately prior to the Change in Control; or
(iii) Cause.
If, during the Severance Period, the Executive's employment is terminated by the
Company or any Subsidiary other than pursuant to Section 3(a)(i), 3(a)(ii) or
3(a)(iii), the Executive will be entitled to the benefits provided by Section 4.
(b) In the event of the occurrence of a Change in Control, the
Executive may terminate employment with the Company and any Subsidiary during
the Severance Period (i) for Good Reason or (ii) for any reason or without
reason during the 30-day period immediately
6
following the first anniversary of the first occurrence of a Change in Control,
in either case with the right to severance compensation as provided in Section
4.
(c) Any termination of employment of the Executive or the removal of
the Executive from the office or position in the Company or any Subsidiary that
occurs (i) not more than 180 days prior to the date on which a Change in Control
occurs and (ii) following the commencement of any discussion with a third person
that ultimately results in a Change in Control will be deemed to be a
termination or removal of the Executive after a Change in Control for purposes
of this Agreement.
(d) A termination by the Company pursuant to Section 3(a) or Section
3(c) or by the Executive pursuant to Section 3(b) will not affect any rights
that the Executive may have pursuant to any agreement, policy, plan, program or
arrangement of the Company or Subsidiary providing Employee Benefits, which
rights will be governed by the terms thereof, except for any rights to severance
compensation to which the Executive may be entitled upon termination of
employment under any severance policy, plan, program or arrangement of the
Company or Subsidiary, which rights will, during the Severance Period, be
superseded by this Agreement.
4. Severance Compensation.
----------------------
(a) If, following the occurrence of a Change in Control, the Company
or Subsidiary terminates the Executive's employment during the Severance Period
other than pursuant to Section 3(a)(i), 3(a)(ii) or 3(a)(iii), or if the
Executive terminates his employment pursuant to Section 3(b), the Company will
pay to the Executive the amounts described in Annex A within ten business days
after the Termination Date and will continue to provide to the Executive the
benefits described on Annex A for the periods described therein, provided the
Executive executes a release in the form attached hereto as Annex C.
(b) Without limiting the rights of the Executive at law or in equity,
if the Company fails to make any payment or provide any benefit required to be
made or provided hereunder on a timely basis, the Company will pay interest on
the amount or value thereof at an annualized rate of interest equal to the so-
called composite "prime rate" as quoted from time to time during the relevant
period in the Eastern Edition of The Wall Street Journal. Such interest will be
payable as it accrues on demand. Any change in such prime rate will be
effective on and as of the date of such change.
(c) Following a termination of the Executive's employment described
in Section 4(a), the Company will pay in cash to the Executive a lump sum amount
equal to the sum of (i) any unpaid incentive compensation that has been
allocated or awarded to the Executive for any performance period ending prior to
the Termination Date, payment of which is contingent on the continuing
performance of services by the Executive plus (ii) the value of any annual bonus
or long-term incentive pay (including, without limitation, incentive-based
annual cash bonuses and performance units, but not including any equity-based
compensation or compensation provided under a qualified plan) earned for the
performance period that includes the Termination Date, disregarding any
applicable vesting requirements; provided that amount described in clause (ii)
of this Section 4(c) will be calculated at the plan target or payout rate, but
prorated to base payment only on the portion of the Executive's service that had
elapsed during
7
the applicable performance period. Such payment will take into account service
rendered through the payment date and will be made at the earlier of (x) the
date prescribed for payment pursuant to the applicable plan, program or
agreement, and (y) within ten business days after the Termination Date.
(d) Notwithstanding any provision to the contrary in any applicable
plan, program or agreement, upon the occurrence of a Change in Control, all
stock options and other equity incentive awards held by the Executive will
become fully vested and/or exercisable, as the case may be, on the date on which
the Change in Control occurs, and all stock options held by the Executive will
remain exercisable for a period beginning on the day immediately following the
Executive's Termination Date equal to the Cash Severance Period plus 90 days or,
if earlier, until the expiration date of the options.
(e) Notwithstanding any other provision of this Agreement to the
contrary, in the event that the consummation of a transaction that would
constitute a Change in Control is contingent upon the transaction's qualifying
for pooling of interests accounting under Accounting Principles Board Opinion
No. 16 or any successor thereto, the Board may take the minimum action necessary
to qualify the transaction for pooling of interests accounting treatment, but
only if the transaction would qualify for such treatment in the absence of this
Agreement.
5. Certain Additional Payments by the Company.
------------------------------------------
(a) Anything in this Agreement to the contrary notwithstanding, but
subject to Paragraph 7 of Annex B, in the event that this Agreement becomes
operative and it is determined (as hereafter provided) that any payment (other
than the Gross-Up payments provided for in this Section 5 and Annex B) or
distribution by the Company or any of its affiliates to or for the benefit of
the Executive, whether paid or payable or distributed or distributable pursuant
to the terms of this Agreement or otherwise pursuant to or by reason of any
other agreement, policy, plan, program or arrangement, including without
limitation any stock option, performance share, performance unit, stock
appreciation right or similar right, or the lapse or termination of any
restriction on or the vesting or exercisability of any of the foregoing (a
"Payment"), would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code") (or any successor
provision thereto) by reason of being considered "contingent on a change in
ownership or control" of the Company, within the meaning of Section 280G of the
Code (or any successor provision thereto) or to any similar tax imposed by state
or local law, or any interest or penalties with respect to such tax (such tax or
taxes, together with any such interest and penalties, being hereafter
collectively referred to as the "Excise Tax"), then the Executive will be
entitled to receive an additional payment or payments (collectively, a "Gross-Up
Payment"); provided, however, that no Gross-up Payment will be made with respect
to the Excise Tax, if any, attributable to (i) any incentive stock option, as
defined by Section 422 of the Code ("ISO") granted prior to the execution of
this Agreement, or (ii) any stock appreciation or similar right, whether or not
limited, granted in tandem with any ISO described in clause (i). The Gross-Up
Payment will be in an amount such that, after payment by the Executive of all
taxes (including any interest or penalties imposed with respect to such taxes),
including any Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payment. For purposes of
8
determining the amount of the Gross-Up Payment, the Executive will be considered
to pay (x) federal income taxes at the highest rate in effect in the year in
which the Gross-Up Payment will be made and (y) state and local income taxes at
the highest rate in effect in the state or locality in which the Gross-Up
Payment would be subject to state or local tax, net of the maximum reduction in
federal income tax that could be obtained from deduction of such state and local
taxes.
(b) The obligations set forth in Section 5(a) will be subject to the
procedural provisions described in Annex B.
6. No Mitigation Obligation. The Company hereby acknowledges that it
------------------------
will be difficult and may be impossible for the Executive to find reasonably
comparable employment following the Termination Date. Accordingly, the payment
of the severance compensation by the Company to the Executive in accordance with
the terms of this Agreement is hereby acknowledged by the Company to be
reasonable, and the Executive will not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise,
nor will any profits, income, earnings or other benefits from any source
whatsoever create any mitigation, offset, reduction or any other obligation on
the part of the Executive hereunder or otherwise, except as expressly provided
in the last sentence of Paragraph 2 of Annex A.
7. Legal Fees and Expenses. It is the intent of the Company that the
-----------------------
Executive not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement or defense of the Executive's
rights under this Agreement by litigation or otherwise because the cost and
expense thereof would detract from the benefits intended to be extended to the
Executive hereunder. Accordingly, if it should appear to the Executive that the
Company has failed to comply with any of its obligations under this Agreement or
in the event that the Company or any other person takes or threatens to take any
action to declare this Agreement void or unenforceable, or institutes any
litigation or other action or proceeding designed to deny, or to recover from,
the Executive the benefits provided or intended to be provided to the Executive
hereunder, the Company irrevocably authorizes the Executive from time to time to
retain counsel of the Executive's choice, at the expense of the Company as
hereafter provided, to advise and represent the Executive in connection with any
such interpretation, enforcement or defense, including without limitation the
initiation or defense of any litigation or other legal action, whether by or
against the Company or any Director, officer, stockholder or other person
affiliated with the Company, in any jurisdiction. Notwithstanding any existing
or prior attorney-client relationship between the Company and such counsel, the
Company irrevocably consents to the Executive's entering into an attorney-client
relationship with such counsel, and in that connection the Company and the
Executive agree that a confidential relationship will exist between the
Executive and such counsel. Without respect to whether the Executive prevails,
in whole or in part, in connection with any of the foregoing, the Company will
pay and be solely financially responsible for any and all attorneys' and related
fees and expenses incurred by the Executive in connection with any of the
foregoing; provided that, in regard to such matters, the Executive has not acted
in bad faith or with no colorable claim of success. Such payments will be made
within ten business days after delivery of the Executive's written requests for
payment, accompanied by such evidence of fees and expenses incurred as the
Company may reasonably require.
9
8. Confidentiality; Nonsolicitation.
--------------------------------
(a) During the Term, the Company agrees that it will disclose to the
Executive its confidential or proprietary information (as defined in this
Section 8(a)) to the extent necessary for the Executive to carry out his
obligations to the Company. The Executive hereby covenants and agrees that he
will not during the Term or thereafter disclose to any person not employed by
the Company, or use in connection with engaging in competition with the Company,
any confidential or proprietary information of the Company. For purposes of
this Agreement, the term "confidential or proprietary information" will include
all information of any nature and in any form that is owned by the Company and
that is not publicly available (other than by the Executive's breach of this
Section 8(a)) or generally known to persons engaged in businesses similar or
related to those of the Company. Confidential or proprietary information will
include, without limitation, the Company's financial matters, customers,
employees, industry contracts, strategic business plans, product development (or
other proprietary product data), marketing plans, and all other secrets and all
other information of a confidential or proprietary nature which is protected by
the Uniform Trade Secrets Act. For purposes of the preceding two sentences, the
term "Company" will also include any Subsidiary (collectively, the "Restricted
Group"). The foregoing obligations imposed by this Section 8(a) will not apply
(i) during the Term, in the course of the business of and for the benefit of the
Company, (ii) if such confidential or proprietary information has become,
through no fault of the Executive, generally known to the public or (iii) if the
Executive is required by law to make disclosure (after giving the Company notice
and an opportunity to contest such requirement).
(b) The Executive hereby covenants and agrees that during the Term
and for two years thereafter the Executive will not, without the prior written
consent of the Company, on behalf of the Executive or on behalf of any person,
firm or company, directly or indirectly, attempt to influence, persuade or
induce, or assist any other person in so persuading or inducing, any employee of
the Restricted Group to give up, or to not commence, employment or a business
relationship with the Restricted Group.
(c) The Executive and the Company agree that the covenants contained
in this Section 8 are reasonable under the circumstances, and further agree that
if in the opinion of any court of competent jurisdiction any such covenant is
not reasonable in any respect, such court will have the right, power and
authority to excise or modify any provision or provisions of such covenants as
to the court will appear not reasonable and to enforce the remainder of the
covenants as so amended. The Executive acknowledges and agrees that the remedy
at law available to the Company for breach of any of his obligations under this
Section 8 would be inadequate and that damages flowing from such a breach may
not readily be susceptible to being measured in monetary terms. Accordingly,
the Executive acknowledges, consents and agrees that, in addition to any other
rights or remedies that the Company may have at law, in equity or under this
Agreement, upon adequate proof of his violation of any such provision of this
Agreement, the Company will be entitled to immediate injunctive relief and may
obtain a temporary order restraining any threatened or further breach, without
the necessity of proof of actual damage.
10
9. Employment Rights. Nothing expressed or implied in this Agreement
-----------------
will create any right or duty on the part of the Company or the Executive to
have the Executive remain in the employment of the Company or any Subsidiary
prior to or following any Change in Control.
10. Withholding of Taxes. The Company may withhold from any amounts
--------------------
payable under this Agreement all federal, state, city or other taxes as the
Company is required to withhold pursuant to any applicable law, regulation or
ruling.
11. Successors and Binding Agreement.
--------------------------------
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization or otherwise) to
all or substantially all of the business or assets of the Company, by agreement
in form and substance reasonably satisfactory to the Executive, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent the Company would be required to perform if no such succession had taken
place. This Agreement will be binding upon and inure to the benefit of the
Company and any successor to the Company, including without limitation any
persons acquiring directly or indirectly all or substantially all of the
business or assets of the Company whether by purchase, merger, consolidation,
reorganization or otherwise (and such successor will thereafter be deemed the
"Company" for the purposes of this Agreement), but will not otherwise be
assignable, transferable or delegable by the Company.
(b) This Agreement will inure to the benefit of and be enforceable by
the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees and legatees. During the Severance Period and
during any period following the Executive's termination of employment during the
Severance Period other than pursuant to Section 3(a)(i), 3(a)(ii) or 3(a)(iii),
(i) this Agreement will supersede the provisions of any employment or other
agreement between the Executive and the Company that relate to any matter that
is also the subject of this Agreement, and such provisions in such other
agreements will be null and void, and (ii) the Executive will not be bound by
any restrictions contained in any such agreement on the Executive's right to
engage in competition with the Company following the Executive's termination of
employment with the Company.
(c) This Agreement is personal in nature and neither of the parties
hereto will, without the consent of the other, assign, transfer or delegate this
Agreement or any rights or obligations hereunder except as expressly provided in
Sections 11(a) and 11(b). Without limiting the generality or effect of the
foregoing, the Executive's right to receive payments hereunder will not be
assignable, transferable or delegable, whether by pledge, creation of a security
interest, or otherwise, other than by a transfer by the Executive's will or by
the laws of descent and distribution and, in the event of any attempted
assignment or transfer contrary to this Section 11(c), the Company will have no
liability to pay any amount so attempted to be assigned, transferred or
delegated.
12. Notices. For all purposes of this Agreement, all communications,
-------
including without limitation notices, consents, requests or approvals, required
or permitted to be given hereunder will be in writing and will be deemed to have
been duly given when hand delivered or dispatched by electronic facsimile
transmission (with receipt thereof orally confirmed), or five
11
business days after having been mailed by United States registered or certified
mail, return receipt requested, postage prepaid, or three business days after
having been sent by a nationally recognized overnight courier service such as
FedEx, UPS, or Purolator, addressed to the Company (to the attention of the
Secretary of the Company) at its principal executive office and to the Executive
at his principal residence, or to such other address as any party may have
furnished to the other in writing and in accordance herewith, except that
notices of changes of address will be effective only upon receipt.
13. Governing Law. The validity, interpretation, construction and
-------------
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the Commonwealth of Massachusetts, without giving
effect to the principles of conflict of laws of such Commonwealth.
14. Validity. If any provision of this Agreement or the application of
--------
any provision hereof to any person or circumstances is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and the
application of such provision to any other person or circumstances will not be
affected, and the provision so held to be invalid, unenforceable or otherwise
illegal will be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid or legal.
15. Miscellaneous. No provision of this Agreement may be modified, waived
-------------
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto or compliance with
any condition or provision of this Agreement to be performed by such other party
will be deemed a waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. No agreements or representations, oral
or otherwise, expressed or implied with respect to the subject matter hereof
have been made by either party that are not set forth expressly in this
Agreement. References to Sections are to references to Sections of this
Agreement. References to Paragraphs are to Paragraphs of an Annex to this
Agreement. Any reference in this Agreement to a provision of a statute, rule or
regulation will also include any successor provision thereto.
16. Survival. Notwithstanding any provision of this Agreement to the
--------
contrary, the parties' respective rights and obligations under Sections 3(c), 4,
5, 7 and 8 will survive any termination or expiration of this Agreement or the
termination of the Executive's employment following a Change in Control for any
reason whatsoever.
17. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which will be deemed to be an original but all of which
together will constitute one and the same agreement.
12
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
CAMBRIDGE TECHNOLOGY PARTNERS
(MASSACHUSETTS), INC.
By: /s/ Xxxx X. Xxxxxxx
-----------------------------
Name: XXXX X. XXXXXXX
Title: President, CEO
EXECUTIVE
/s/ Xxxxxx Xxx Xxxxxx
--------------------------------
Xxxxxx Xxx Xxxxxx
13
Annex A
-------
SEVERANCE COMPENSATION
----------------------
(1) A lump sum payment in an amount equal to two and a half times the sum
of (A) Base Pay (at the highest rate in effect for any period within three
fiscal years prior to the Termination Date), plus (B) Incentive Pay (in an
amount equal to not less than (i) the highest aggregate Incentive Pay earned in
any of the three fiscal years immediately preceding the year in which the
Termination Date occurs or (ii) the Incentive Pay that would have been earned
for the entire fiscal year in which the Termination Date occurs, disregarding
any applicable vesting requirements, calculated at the plan target or payout
rate.
(2) For a period of 30 months following the Termination Date (the
"Continuation Period"), the Company will arrange to provide the Executive with
Employee Benefits that are welfare benefits (but not stock option, performance
share, performance unit, stock purchase, stock appreciation or similar
compensatory benefits) substantially similar to those that the Executive was
receiving or entitled to receive immediately prior to the Termination Date (or,
if greater, immediately prior to the reduction, termination, or denial described
in Section 1(h)(ii)), except that the level of any such Employee Benefits to be
provided to the Executive may be reduced in the event of a corresponding
reduction generally applicable to all similarly situated recipients of or
participants in such Employee Benefits. If and to the extent that any benefit
described in this Paragraph 2 is not or cannot be paid or provided under any
policy, plan, program or arrangement of the Company or any Subsidiary, as the
case may be, then the Company will itself pay or provide for the payment to the
Executive, his dependents and beneficiaries, of such Employee Benefits along
with, in the case of any benefit described in this Paragraph 2 which is subject
to tax because it is not or cannot be paid or provided under any such policy,
plan, program or arrangement of the Company or any Subsidiary, an additional
amount such that after payment by the Executive, or his dependents or
beneficiaries, as the case may be, of all taxes so imposed, the recipient
retains an amount equal to such taxes. Notwithstanding the foregoing, or any
other provision of the Agreement, for purposes of determining the period of
continuation coverage to which the Executive or any of his dependents is
entitled pursuant to Section 4980B of the Code under the Company's medical,
dental and other group health plans, or successor plans, the Executive's
"qualifying event" will be the termination of the Continuation Period and the
Executive will be considered to have remained actively employed on a full-time
basis through that date. Without otherwise limiting the purposes or effect of
Section 6 or this Paragraph 2, Employee Benefits otherwise receivable by the
Executive pursuant to this Paragraph 2 will be reduced to the extent comparable
welfare benefits are actually received by the Executive from another employer
during the Continuation Period following the Executive's Termination Date, and
any such benefits actually received by the Executive will be reported by the
Executive to the Company.
(3) A lump sum payment in an amount equal to the aggregate Company
matching contribution that would have been allocated to the Executive's account
under the Company's 401(k) plan during the Cash Severance Period determined at
the rate of matching contribution in effect on the Termination Date and based on
the assumption that the Executive continued to be employed during the Cash
Severance Period and contributed to the 401(k) plan at the rate of contribution
(subject to applicable plan limits) the Executive had elected for the plan year
that includes the Termination Date.
A-1
(4) Outplacement services by a firm selected by the Executive, at the
expense of the Company in an amount up to 20% of the Executive's Base Pay.
A-2
Annex B
-------
EXCISE TAX GROSS-UP PROCEDURAL PROVISIONS
-----------------------------------------
(1) Subject to the provisions of Paragraph 5, all determinations required
to be made under Section 5 and Annex B, including whether an Excise Tax is
payable by the Executive and the amount of such Excise Tax and whether a Gross-
Up Payment is required to be paid by the Company to the Executive and the amount
of such Gross-Up Payment, if any, will be made by a nationally recognized
accounting firm (the "National Firm") selected by the Executive in his sole
discretion. The Executive will direct the National Firm to submit its
determination and detailed supporting calculations to both the Company and the
Executive within 30 calendar days after the Termination Date, if applicable, and
any such other time or times as may be requested by the Company or the
Executive. If the National Firm determines that any Excise Tax is payable by
the Executive, the Company will pay the required Gross-Up Payment to the
Executive within ten business days after receipt of such determination and
calculations with respect to any Payment to the Executive. If the National Firm
determines that no Excise Tax is payable by the Executive with respect to any
material benefit or amount (or portion thereof), it will, at the same time as it
makes such determination, furnish the Company and the Executive with an opinion
that the Executive has substantial authority not to report any Excise Tax on his
federal, state or local income or other tax return with respect to such benefit
or amount. As a result of the uncertainty in the application of Section 4999 of
the Code and the possibility of similar uncertainty regarding applicable state
or local tax law at the time of any determination by the National Firm
hereunder, it is possible that Gross-Up Payments that will not have been made by
the Company should have been made (an "Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts or fails to pursue its remedies pursuant to Paragraph 5 and the
Executive thereafter is required to make a payment of any Excise Tax, the
Executive will direct the National Firm to determine the amount of the
Underpayment that has occurred and to submit its determination and detailed
supporting calculations to both the Company and the Executive as promptly as
possible. Any such Underpayment will be promptly paid by the Company to, or for
the benefit of, the Executive within ten business days after receipt of such
determination and calculations.
(2) The Company and the Executive will each provide the National Firm
access to and copies of any books, records and documents in the possession of
the Company or the Executive, as the case may be, reasonably requested by the
National Firm, and otherwise cooperate with the National Firm in connection with
the preparation and issuance of the determinations and calculations contemplated
by Paragraph 1. Any determination by the National Firm as to the amount of the
Gross-Up Payment will be binding upon the Company and the Executive.
(3) The federal, state and local income or other tax returns filed by the
Executive will be prepared and filed on a consistent basis with the
determination of the National Firm with respect to the Excise Tax payable by the
Executive. The Executive will report and make proper payment of the amount of
any Excise Tax, and at the request of the Company, provide to the Company true
and correct copies (with any amendments) of his federal income tax return as
filed with the Internal Revenue Service and corresponding state and local tax
returns, if relevant, as filed with the applicable taxing authority, and such
other documents reasonably requested by the Company, evidencing such payment.
If prior to the filing of the Executive's federal income tax
B-1
return, or corresponding state or local tax return, if relevant, the National
Firm determines that the amount of the Gross-Up Payment should be reduced, the
Executive will within ten business days pay to the Company the amount of such
reduction.
(4) The fees and expenses of the National Firm for its services in
connection with the determinations and calculations contemplated by Paragraph 1
will be borne by the Company. If such fees and expenses are initially paid by
the Executive, the Company will reimburse the Executive the full amount of such
fees and expenses within ten business days after receipt from the Executive of a
statement therefor and reasonable evidence of his payment thereof.
(5) The Executive will notify the Company in writing of any claim by the
Internal Revenue Service or any other taxing authority that, if successful,
would require the payment by the Company of a Gross-Up Payment. Such
notification will be given as promptly as practicable but no later than 10
business days after the Executive actually receives notice of such claim and the
Executive will further apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid (in each case, to the extent
known by the Executive). The Executive will not pay such claim prior to the
expiration of the 30-calendar-day period following the date on which he gives
such notice to the Company or, if earlier, the date that any payment of amount
with respect to such claim is due. If the Company notifies the Executive in
writing prior to the expiration of such period that it desires to contest such
claim, the Executive will:
(A) provide the Company with any written records or documents in his
possession relating to such claim reasonably requested by the Company;
(B) take such action in connection with contesting such claim as the
Company reasonably requests in writing from time to time, including without
limitation accepting legal representation with respect to such claim by an
attorney competent in respect of the subject matter and reasonably selected by
the Company;
(C) cooperate with the Company in good faith in order effectively to
contest such claim; and
(D) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company will bear and pay directly all costs and
-------- -------
expenses (including interest and penalties) incurred in connection with such
contest and will indemnify and hold harmless the Executive, on an after-tax
basis, for and against any Excise Tax or income or other tax, including interest
and penalties with respect thereto, imposed as a result of such representation
and payment of costs and expenses. Without limiting the foregoing provisions of
this Paragraph 5, the Company will control all proceedings taken in connection
with the contest of any claim contemplated by this Paragraph 5 and, at its sole
option, may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim
(provided, however, that the Executive may participate therein at his own cost
and expense) and may, at its option, either direct the Executive to pay the tax
claimed and xxx for a refund or contest the claim in any permissible manner, and
the Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial
B-2
jurisdiction and in one or more appellate courts, as the Company determines;
provided, however, that if the Company directs the Executive to pay the tax
-------- -------
claimed and xxx for a refund, the Company will advance the amount of such
payment to the Executive on an interest-free basis and will indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income or
other tax, including interest or penalties with respect thereto, imposed with
respect to such advance; and provided further, however, that any extension of
-------- ------- -------
the statute of limitations relating to payment of taxes for the taxable year of
the Executive with respect to which the contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
any such contested claim will be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and the Executive will 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.
(6) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Paragraph 5, the Executive receives any refund with respect
to such claim, the Executive will (subject to the Company's complying with the
requirements of Paragraph 5) promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon after any taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Paragraph 5, a determination is made that
the Executive is not entitled to any refund with respect to such claim and the
Company does not notify the Executive in writing of its intent to contest such
denial or refund prior to the expiration of 30 calendar days after such
determination, then such advance will be forgiven and will not be required to be
repaid and the amount of any such advance will offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid by the Company to the
Executive pursuant to Section 5 and this Annex B.
(7) Notwithstanding any provision of this Agreement to the contrary, but
giving effect to any redetermination of the amount of Gross-Up payments
otherwise required by this Annex B, if (A) but for this sentence, the Company
would be obligated to make a Gross-Up Payment to the Executive, (B) the
aggregate "present value" of the "parachute payments" to be paid or provided to
the Executive under this Agreement or otherwise does not exceed 1.10 multiplied
by three times the Executive's "base amount," and (C) but for this sentence, the
net after-tax benefit to the Executive of the Gross-Up Payment would not exceed
$50,000 (taking into account income taxes, employment taxes and any Excise Tax),
then the payments and benefits to be paid or provided under this Agreement will
be reduced (or repaid to the Company, if previously paid or provided) to the
minimum extent necessary so that no portion of any payment or benefit to the
Executive, as so reduced or repaid, constitutes an "excess parachute payment."
For purposes of this Paragraph 7, the terms "excess parachute payment," "present
value," "parachute payment," and "base amount" will have the meanings assigned
to them by Section 280G of the Code. The determination of whether any reduction
in or repayment of such payments or benefits to be provided under this Agreement
is required pursuant to this Paragraph 7 will be made at the expense of the
Company, if requested by the Executive or the Company, by the National Firm.
Appropriate adjustments will be made to amounts previously paid to the
Executive, or to amounts not paid pursuant to this Paragraph 7, as the case may
be, to reflect properly a subsequent determination that the Executive owes more
or less Excise Tax than the amount previously determined to be due. In the event
that any payment or benefit intended to be provided under this Agreement or
otherwise is required to be reduced or repaid pursuant to
B-3
this Paragraph 7, the Executive will be entitled to designate the payments
and/or benefits to be so reduced or repaid in order to give effect to this
Paragraph 7. The Company will provide the Executive with all information
reasonably requested by the Executive to permit the Executive to make such
designation. In the event that the Executive fails to make such designation
within 10 business days prior to the Termination Date or other due date, the
Company may effect such reduction or repayment in any manner it deems
appropriate.
B-4
Annex C
-------
GENERAL RELEASE
---------------
This GENERAL RELEASE (the "Release Agreement") is made as of the ___ day of
____________________, by and between Cambridge Technology Partners
(Massachusetts), Inc., a Delaware corporation (the "Company"), and
_____________________________________ (the "Executive").
In consideration of the payments to be made to the Executive under that
certain Severance Agreement dated as of ________________________ (the "Severance
Agreement"), the Executive, for himself, his heirs, executors, administrators,
and assigns, releases the Company, its current, former and successor
subsidiaries, parent corporations, affiliates and partners, and each of their
officers, directors, employees, agents, representatives, insurance carriers,
benefit plans, fiduciaries and attorneys, or any other related parties, from,
and agrees not to xxx any of the foregoing with respect to, any claims that he
has, or that anyone claiming for him might have or claim to have, prior to or as
a result of his resignation as an officer of the Company and his termination of
employment with the Company. These claims include, but are not limited to,
claims arising under any employment agreement, employment law or regulation,
including Title VII of the Civil Rights Act of 1964, as amended; the Age
Discrimination in Employment Act of 1967, as amended; the Employee Retirement
Income Security Act of 1974, as amended; or any other federal, state or local
civil rights, employee benefit, labor contract, tort, or common law. The
Company acknowledges that the Executive is waiving only those claims that he has
or believes he might have as of the date of this Release Agreement and not any
claims that might arise in the future.
Notwithstanding the foregoing, the release contained in this Release
Agreement will not apply to (i) any right the Executive has to indemnification
under the Company's Certificate of Incorporation, By-laws or otherwise with
regard to the Executive's service as an officer or director of the Company, (ii)
any rights the Executive has accrued under any employee benefit plan maintained
by the Company and (iii) any rights of the Executive under the Severance
Agreement.
The Executive acknowledges that he has been advised to consult with an
attorney prior to signing this Release Agreement. The Executive further
acknowledges that he has been given at least [21] days to consider signing this
Release Agreement and that he may voluntarily choose to sign the Release
Agreement before the end of the [21]-day period. The Executive understands that
he will have seven days after he signs this Release Agreement during which he
may revoke this Release Agreement for any reason by delivering a notice of
revocation to the Company, to the attention of the General Counsel, at the
Company's executive offices. The Executive also understands that this Release
Agreement will not become effective or enforceable, and the Executive will not
receive any payments, until after this revocation period has expired.
The Executive understands and agrees that if, after signing this Release
Agreement, he or anyone claiming for him files a claim seeking recovery in
violation of this Release Agreement, unless otherwise prohibited by applicable
law, the Executive or such person making a claim on his behalf, will be required
first to repay to the Company the amounts paid to the Executive by
C-1
the Company under the Severance Agreement, and the Company will not be obligated
to make any further payments to the Executive under the Severance Agreement.
IN WITNESS WHEREOF, the parties have executed this Release Agreement as of
the date first written above.
CAMBRIDGE TECHNOLOGY PARTNERS
(MASSACHUSETTS), INC.
By___________________________
EXECUTIVE
_____________________________
C-2
