[ARTICLE] 5
EMPLOYEE SEVERANCE AGREEMENT
This Employee Severance Agreement (the "Agreement") is made and
entered into effective as of May 6, 1998, by and between
_____________("Employee") and Hello Direct, Inc. (the "Company").
WHEREAS, the Board of Directors of the Company has determined it
to be in the best interests of the Company and its stockholders to
provide Company executives with certain protection from events that
could occur in connection with certain changes of control of the
Company, and
WHEREAS, to accomplish this objective and encourage such
executives to continue employment with the Company, the Company
desires to enter into this Agreement,
NOW THEREFORE, for good and valuable consideration, the Company
and Employee hereby agree as follows:
Unless otherwise defined herein, the terms defined in the
applicable Company stock option plan and stock option and restricted
stock purchase agreements shall have the same defined meanings
therein.
1. Employee Rights in Connection with Change of
Control.
(a) Vesting Acceleration. In the event of a
"Change of Control," (i) all of Employee's rights to purchase stock
under all stock option agreements with the Company shall be
automatically vested in their entirety on an accelerated basis and be
fully exercisable and (ii) all of the Company's rights to repurchase
unvested stock under all restricted stock purchase agreements with
Employee shall lapse in their entirety on an accelerated basis as of
the date immediately preceding the first to occur of the following:
(i) such "Change of Control," in the event
any such stock option agreement or restricted stock purchase agreement
is or will be terminated or canceled (except by mutual consent) or any
successor to the Company fails to assume and agree to perform all such
stock option agreements and restricted stock purchase agreements as
provided in Section 3(a) hereof at or prior to such time as any such
person becomes a successor to the Company; or
(ii) such "Change of Control," in the event
Employee does not or will not receive upon exercise of Employee's
stock purchase rights under any such stock option agreement or in
exchange for Employee's restricted stock acquired pursuant to any such
restricted stock purchase agreement the same identical securities
and/or other consideration as is received by all other stockholders in
any merger, consolidation, sale, exchange or similar transaction
occurring upon or after such "Change of Control"; or
(iii) any "Involuntary Termination" of
Employee occurring after any such "Change of Control," or
(iv) one year after such "Change of Control."
(b) Additional Benefits. If Employee's employment
is terminated at any time following a Change of Control by the Company
or by the Employee as a result of an Involuntary Termination, then
Employee shall also receive the following severance benefits from the
Company:
(i) Continued Salary. Employee shall
receive_____ months of Employee's Annual Compensation to be paid out in
a lump sum payment within thirty (30) days of such termination and
subject to applicable tax withholding.
(ii) Continued Employee Benefits. Employee
shall be entitled to one hundred percent (100%) of Company-paid
health, dental and life insurance coverage at the same level of
coverage as was provided to such employee immediately prior to the
Change of Control (the "Company-Paid Coverage"). If such coverage
included Employee's dependents immediately prior to the Change of
Control, such dependents shall also be covered at Company expense.
Company-Paid Coverage shall continue until the earlier of
(i) ___ months from the date of termination or (ii) the date that
Employee and his dependents become covered under another employer's
group health, dental or life insurance plans that provide Employee and
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 Employee and
his dependents shall be the date upon which the Company-Paid Coverage
terminates.
(iii) Extension of Post-Termination Exercise
Period of Nonstatutory Stock Options. The nonstatutory stock options
held by Employee shall remain exercisable for a period of three months
following Employee's termination of employment or consulting
relationship with the Company.
(iv) Accrued Management Bonus. Any accrued
Management Bonus earned by Employee shall become fully payable,
subject to applicable withholding, and shall be paid in a lump sum
payment within thirty (30) days of such termination.
(v) Executive Disability Plan. Employee
shall have the option of continuing to be covered by the Company's
Executive Disability Plan for a period of up to one year following
Employee's termination of employment or consulting relationship with
the Company; and the Company shall pay all premiums and other expenses
associated with such continued coverage.
(vi) Limitation on Payments. To the extent
that any of the payments and benefits provided for in this Agreement
or otherwise payable to Employee constitute "parachute payments"
within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), and, but for this Section 1(b)(vi)(,
would be subject to the excise tax imposed by Section 4999 of the
Code, then Employee's benefits under this Section 1 shall be payable
either
(A) in full, or
(B) as to such lesser amount as would
result in no portion of such severance benefits being subject to
excise tax under Section 4999 of the Code,
whichever of the foregoing amounts, taking into account the applicable
federal, state and local income taxes and the excise tax imposed by
Section 4999, results in the receipt by Employee on an after-tax basis
of the greatest amount of severance benefits under this Section 1,
notwithstanding that all or some portion of such severance benefits
may be taxable under Section 4999 of the Code. Unless the Company and
Employee otherwise agree in writing, any determination required under
this Section 1(b)(v;)shall be made in writing by an independent public
accounting firm reasonably acceptable to the Company other than that
used by the Company (the "Accountants"), whose determination shall be
conclusive and binding upon Employee and the Company for all purposes.
For purposes of making the calculations required by this Section
1(b)(vi), the Accountants may make reasonable assumptions and
approximations concerning applicable taxes and may rely on reasonable,
good faith interpretations concerning the application of Sections 280G
and 4999 of the Code. The Company and Employee shall furnish to the
Accountants such information and documents as the Accountants may
reasonably request in order to make a determination under this
Section. The Company shall bear all costs the Accountants may
reasonably incur in connection with any calculations contemplated by
this Section 1(b)(vi).
2. Definitions.
(a) Annual Compensation. "Annual Compensation"
shall mean an amount equal to the salary received by Employee from the
Company during the twelve months preceding the date of termination,
excluding bonuses.
(b) Cause. "Cause" shall mean (i) any willful act
of personal dishonesty, fraud or misrepresentation taken by Employee
in connection with his or her responsibilities as an employee which
was intended to result in substantial gain or personal enrichment of
Employee at the expense of the Company and was materially and
demonstrably injurious to the Company; (ii) Employee's conviction of a
felony on account of any act which was materially and demonstrably
injurious to the Company; or (iii) Employee's willful and continued
failure to substantially perform his or her principal duties and
obligations of employment (other than any such failure resulting from
incapacity due to physical or mental illness), which failure is not
remedied in a reasonable period of time after receipt of written
notice from the Company. For the purposes of this Section 2(b), no
act or failure to act shall be considered "willful" unless done or
omitted to be done in bad faith and without reasonable belief that the
act or omission was in or not opposed to the best interests of the
Company. Any act or failure to act based upon authority given
pursuant to a resolution duly adopted by the Board of Directors of the
Company or based upon the advice of counsel for the Company shall be
conclusively presumed to be done or omitted to be done in good faith
and in the best interests of the Company.
(c) Change of Control. "Change of Control" means
the occurrence of any of the following events:
(i) Any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended) is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under said Act), directly or indirectly, of securities of
the Company representing 50% or more of the total voting power
represented by the Company's then outstanding voting securities; or
(ii) A change in the composition of the Board
of Directors of the Company occurring within a two-year period as a
result of which fewer than a majority of the directors are "Incumbent
Directors." "Incumbent Directors" shall mean directors who either
(A) are directors of the Company as of the date hereof, or (B) are
elected, or nominated for election, to the Board of Directors with the
affirmative votes (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 election as a director without objection to such
nomination) of at least a majority of the Incumbent Directors at the
time of such election or nomination (but shall not include an
individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of
directors of the Company);
(iii) The consummation of (A) a merger or
consolidation of the Company with any other entity, 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,
or the entity that controls such surviving entity) at least fifty
percent (50%) of the total voting power represented by the voting
securities of the Company, such surviving entity or the entity that
controls the Company or such surviving entity outstanding immediately
after such merger or consolidation, or (B) the sale or disposition by
the Company of all or substantially all the Company's assets; or
(iv) the stockholders of the Company approve
a plan of complete liquidation of the Company.
(d) Involuntary Termination. "Involuntary
Termination" shall mean without Employee's written consent (i) a
termination by the Company of Employee's employment with the Company
other than for Cause; (ii) a material reduction of or variation in
Employee's duties, authority or responsibilities, relative to
Employee's duties, authority or responsibilities as in effect
immediately prior to such reduction or variation; (iii) a reduction by
the Company in the base salary of Employee as in effect immediately
prior to such reduction; (iv) a material reduction by the Company in
the kind or level of employee benefits, including bonuses, to which
Employee was entitled immediately prior to such reduction, with the
result that Employee's overall benefits package is materially reduced;
(v) the relocation of Employee to a facility or a location more than
thirty (30) miles from Employee's then present location; (vi) the
failure of the Company to obtain the assumption of this Agreement by
any successor as required in Section 4(a), or (vii) any act or set of
facts that would under applicable law constitute a constructive
termination of Employee.
3. Voluntary Resignation
(a) Voluntary Resignation; Termination For Cause.
If Employee's continuous status as an employee of the Company
terminates (i) for any reason prior to a Change of Control, (ii) after
change of control, by reason of Employee's voluntary resignation (and
not Involuntary Termination) or (iii) for Cause, then Employee shall
not be entitled to receive severance benefits under Section 1 hereof.
4. Successors.
(a) Company's Successors. Any successor to the
Company (whether direct or indirect and whether by purchase, merger or
consolidation) shall assume the obligations under this Agreement and
agree expressly to perform the obligations under this Agreement in the
same manner and to the same extent as the Company would be required to
perform such obligations in the absence of a succession.
(b) Successors. The terms of this Agreement and
all rights of Employee hereunder shall inure to the benefit of, and be
enforceable by, Employee's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees
and legatees.
5. Modification; Waiver. No provision of this
Agreement shall be modified or waived unless the modification or
waiver is agreed to in writing and signed by Employee and by an
authorized officer of the Company (other than Employee).
6. Entire Agreement. This Agreement, together with all
present and future stock option agreements and restricted stock
purchase agreements entered into between the Company and Employee
represent the entire agreement of the parties hereto with respect to
the subject matter thereof. In the event of any conflict between the
terms of this Agreement and the terms of any such present or future
stock option agreements and/or restricted stock purchase agreements,
the terms of this Agreement shall prevail.
7. Choice of Law; Arbitration. The validity,
interpretation, construction and performance of this Agreement shall
be governed by the laws of the State of California. Any dispute or
controversy arising under or in connection with this Agreement shall
be settled exclusively by arbitration in Santa Clara, California by
three arbitrators in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on
the arbitrator's award in any court having jurisdiction. The Company
shall bear all costs and expenses arising out of or in connection with
any arbitration pursuant to this Section 7.
8. No Employment Agreement. This Agreement shall not
constitute an employment agreement. Employee's employment with the
Company shall constitute employment "at will," unless otherwise
provided in some other written agreement between the Company and
Employee.
IN WITNESS WHEREOF, each of the parties has executed this
Agreement, in the case of the Company by its duly authorized officer,
as of the day and year set forth above.
COMPANY HELLO DIRECT, INC.
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Signature of Authorized
Signatory
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Print Name and Title
"EMPLOYEE"
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Signature
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Print Name
