XXXX MICROPRODUCTS, INC.
MANAGEMENT RETENTION AGREEMENT
This Management Retention Agreement (the "Agreement") is made and
entered into by and between __________ (the "Employee") and Xxxx Microproducts,
Inc. (the "Company"), effective as of the latest date set forth by the
signatures of the parties hereto below (the "Effective Date").
R E C I T A L S
A. It is expected that the Company from time to time will consider the
possibility of an acquisition by another company or other change of control. The
Board of Directors of the Company (the "Board") recognizes that such
consideration can be a distraction to the Employee and can cause the Employee to
consider alternative employment opportunities. The Board has determined that it
is in the best interests of the Company and its stockholders to assure that the
Company will have the continued dedication and objectivity of the Employee,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company.
B. The Board believes that it is in the best interests of the Company
and its stockholders to provide the Employee with an incentive to continue his
employment and to motivate the Employee to maximize the value of the Company
upon a Change of Control for the benefit of its stockholders.
C. The Board believes that it is imperative to provide the Employee
with certain severance benefits upon Employee's termination of employment
following a Change of Control which provides the Employee with enhanced
financial security and provides incentive and encouragement to the Employee to
remain with the Company notwithstanding the possibility of a Change of Control.
D. Certain capitalized terms used in the Agreement are defined in
Section 4 below.
The parties hereto agree as follows:
1. Term of Agreement. This Agreement shall terminate three years
following the Effective Date, unless a Change of Control has occurred as of such
time, in which case this Agreement shall terminate upon the date that all
obligations of the parties hereto with respect to this Agreement have been
satisfied. This Agreement may be extended unilaterally by the Company by written
resolutions adopted by the Board prior to the termination of this Agreement.
2. At-Will Employment. The Company and the Employee acknowledge that
the Employee's employment is and shall continue to be at-will, as defined under
applicable law. If the Employee's employment terminates for any reason,
including (without limitation) any termination prior to a Change of Control, the
Employee shall not be entitled to any payments, benefits, damages, awards or
compensation other than as provided by this Agreement, or as may otherwise be
available
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in accordance with the Company's written employee plans or pursuant to other
written agreements with the Company.
3. Severance Benefits.
(a) Termination Following A Change of Control. If the
Employee's employment terminates at any time within twelve (12) months following
a Change of Control, then, subject to Section 4, the Employee shall be entitled
to receive the following severance benefits:
(i) Involuntary Termination. If the Employee's
employment is terminated as a result of Involuntary Termination other than for
Cause, then the Employee shall receive the following severance benefits from the
Company:
(1) Severance Payment. A cash payment in an
amount equal to one hundred percent (100%) of the Employee's Base Salary.
(2) Continued Employee Benefits. One hundred
percent (100%) Company-paid health, dental and life insurance coverage at the
same level of coverage as was provided to such employee immediately prior to the
Change of Control (the "Company-Paid Coverage") under the Company's plans. Such
coverage shall be provided under either (at the Company's discretion) (i) the
Company's plans, or (ii) no less favorable plans or arrangements secured by the
Company. If such coverage included the Employee's dependents immediately prior
to the Change of Control, such dependents shall also be covered at Company
expense. Company-Paid Coverage shall continue until the earlier of (i) one year
from the date of the Change of Control, or (ii) the date that the 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.
(3) Stock Option Accelerated Vesting. One
hundred percent (100%) of the unvested portion of any stock option held by the
Employee shall automatically be accelerated in full so as to become completely
vested; provided, however, that if such potential vesting acceleration would
cause a contemplated Change of Control transaction that was intended to be
accounted for as a "pooling-of-interests" transaction to become ineligible for
such accounting treatment under generally accepted accounting principles, as
determined by the Company's independent public accountants (the "Accountants")
prior to the Change of Control, Employee's stock options and restricted stock
shall not have their vesting so accelerated.
(b) Timing of Severance Payments. Any severance payment to
which Employee is entitled under Section 4(a)(i) shall be paid by the Company to
the Employee (or to the Employee's successors in interest, pursuant to Section
7(b)) in cash and in full, not later than thirty (30) calendar days following
the Termination Date.
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(c) Voluntary Resignation; Termination For Cause. If the
Employee's employment terminates by reason of the Employee's voluntary
resignation (and is not an Involuntary Termination), or if the Employee is
terminated for Cause, then the Employee shall not be entitled to receive
severance or other benefits except for those (if any) as may then be established
under the Company's then existing written employee plans or pursuant to other
written agreements with the Company.
(d) Disability; Death. If the Company terminates the
Employee's employment as a result of the Employee's Disability, or such
Employee's employment is terminated due to the death of the Employee, then the
Employee shall not be entitled to receive severance or other benefits except for
those (if any) as may then be established under the Company's then existing
written employee plans or pursuant to other written agreements with the Company.
(e) Termination Apart from Change of Control. In the event the
Employee's employment is terminated for any reason, either prior to the
occurrence of a Change of Control or after the twelve (12)-month period
following a Change of Control, then the Employee shall be entitled to receive
severance and any other benefits only as may then be established under the
Company's existing severance and benefits plans and practices or pursuant to
other agreements with the Company.
4. Limitation on Payments. In the event that the severance and other
benefits provided for in this Agreement or otherwise payable to the Employee (i)
constitute "parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code") and (ii) but for this
Section 4, would be subject to the excise tax imposed by Section 4999 of the
Code, then the Employee's severance benefits under Section 3(a)(i) shall be
reduced as to such lesser extent as would result in no portion of such severance
benefits being subject to excise tax under Section 4999 of the Code. Unless the
Company and the Employee otherwise agree in writing, any determination required
under this Section 4 shall be made in writing by the Company's independent
public accountants immediately prior to Change of Control (the "Accountants"),
whose determination shall be conclusive and binding upon the Employee and the
Company for all purposes. For purposes of making the calculations required by
this Section 4, the Accountants may make reasonable assumptions and
approximations concerning applicable taxes and may rely on reasonable, good
faith interpretations concerning the application of Sections 280G and 4999 of
the Code. The Company and the Employee shall furnish to the Accountants such
information and documents as the Accountants may reasonably request in order to
make a determination under this Section. The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section 4.
5. Definition of Terms. The following terms referred to in this
Agreement shall have the following meanings:
(a) Base Salary. "Base Salary" means an amount equal to
twelve (12) times Employee's monthly Company salary for the last full month
preceding the Change of Control.
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(b) Cause. "Cause" shall mean (i) any act of personal
dishonesty taken by the Employee in connection with his responsibilities as an
employee and intended to result in substantial personal enrichment of the
Employee, (ii) the conviction of a felony, (iii) a willful act by the Employee
which constitutes gross misconduct and which is injurious to the Company, and
(iv) following delivery to the Employee of a written demand for performance from
the Company which describes the basis for the Company's belief that the Employee
has not substantially performed his duties, continued violations by the Employee
of the Employee's obligations to the Company which are demonstrably willful and
deliberate on the Employee's part.
(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
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 with the affirmative
votes of at least a majority of the Incumbent Directors at the time of such
election or nomination (but shall not include an individual whose election or
nomination is in connection with an actual or threatened proxy contest relating
to the election of directors to the Company); or
(iii) The stockholders of the Company approve a
merger or consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the stockholders
of the Company approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
the Company's assets.
(d) Disability. "Disability" shall mean that the Employee has
been unable to perform his Company duties as the result of his incapacity due to
physical or mental illness, and such inability, at least 26 weeks after its
commencement, is determined to be total and permanent by a physician selected by
the Company or its insurers and acceptable to the Employee or the Employee's
legal representative (such Agreement as to acceptability not to be unreasonably
withheld). Termination resulting from Disability may only be effected after at
least 30 days' written notice by the Company of its intention to terminate the
Employee's employment. In the event that the Employee resumes the performance of
substantially all of his duties hereunder before the termination of his
employment becomes effective, the notice of intent to terminate shall
automatically be deemed to have been revoked.
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(e) Involuntary Termination. "Involuntary Termination" shall
mean (i) without the Employee's express written consent, the significant
reduction of the Employee's duties, authority or responsibilities, relative to
the Employee's duties, authority or responsibilities as in effect immediately
prior to such reduction, or the assignment to Employee of such reduced duties,
authority or responsibilities; (ii) without the Employee's express written
consent, a substantial reduction, without good business reasons, of the
facilities and perquisites (including office space and location) available to
the Employee immediately prior to such reduction; (iii) a reduction by the
Company in the base salary of the Employee as in effect immediately prior to
such reduction; (iv) a material reduction by the Company in the kind or level of
employee benefits, including bonuses, to which the Employee was entitled
immediately prior to such reduction with the result that the Employee's overall
benefits package is significantly reduced; (v) the relocation of the Employee to
a facility or a location more than thirty-five (35) miles from the Employee's
then present location, without the Employee's express written consent; (vi) any
purported termination of the Employee by the Company which is not effected for
Disability or for Cause, or any purported termination for which the grounds
relied upon are not valid; (vii) the failure of the Company to obtain the
assumption of this agreement by any successors contemplated in Section 6(a)
below; or (viii) any act or set of facts or circumstances which would, under
California case law or statute constitute a constructive termination of the
Employee.
(f) Termination Date. "Termination Date" shall mean (i) if
this Agreement is terminated by the Company for Disability, thirty (30) days
after notice of termination is given to the Employee (provided that the Employee
shall not have returned to the performance of the Employee's duties on a
full-time basis during such thirty (30)-day period), (ii) if the Employee's
employment is terminated by the Company for any other reason, the date on which
a notice of termination is given, provided that if within thirty (30) days after
the Company gives the Employee notice of termination, the Employee notifies the
Company that a dispute exists concerning the termination or the benefits due
pursuant to this Agreement, then the Termination Date shall be the date on which
such dispute is finally determined, either by mutual written agreement of the
parties, or a by final judgment, order or decree of a court of competent
jurisdiction (the time for appeal therefrom having expired and no appeal having
been perfected), or (iii) if the Agreement is terminated by the Employee, the
date on which the Employee delivers the notice of termination to the Company.
6. Successors.
(a) Company's Successors. Any successor to the Company
(whether direct or indirect and whether by purchase, merger, consolidation,
liquidation or otherwise) to all or substantially all of the Company's business
and/or assets shall assume the obligations under this Agreement and agree
expressly to perform the obligations under this Agreement in the same manner and
to the same extent as the Company would be required to perform such obligations
in the absence of a succession. For all purposes under this Agreement, the term
"Company" shall include any successor to the Company's business and/or assets
which executes and delivers the assumption agreement described in this Section
6(a) or which becomes bound by the terms of this Agreement by operation of law.
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(b) Employee's Successors. The terms of this Agreement and all
rights of the Employee hereunder shall inure to the benefit of, and be
enforceable by, the Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
7. Notice.
(a) General. Notices and all other communications contemplated
by this Agreement shall be in writing and shall be deemed to have been duly
given when personally delivered or when mailed by U.S. registered or certified
mail, return receipt requested and postage prepaid. In the case of the Employee,
mailed notices shall be addressed to him at the home address which he most
recently communicated to the Company in writing. In the case of the Company,
mailed notices shall be addressed to its corporate headquarters, and all notices
shall be directed to the attention of its Secretary.
(b) Notice of Termination. Any termination by the Company for
Cause or by the Employee as a result of a voluntary resignation or an
Involuntary Termination shall be communicated by a notice of termination to the
other party hereto given in accordance with Section 7(a) of this Agreement. Such
notice shall indicate the specific termination provision in this Agreement
relied upon, shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination under the provision so indicated, and
shall specify the termination date (which shall be not more than 30 days after
the giving of such notice). The failure by the Employee to include in the notice
any fact or circumstance which contributes to a showing of Involuntary
Termination shall not waive any right of the Employee hereunder or preclude the
Employee from asserting such fact or circumstance in enforcing his rights
hereunder.
8. Miscellaneous Provisions.
(a) No Duty to Mitigate. The Employee shall not be required
to mitigate the amount of any payment contemplated by this Agreement, nor shall
any such payment be reduced by any earnings that the Employee may receive from
any other source.
(b) Waiver. No provision of this Agreement shall be
modified, waived or discharged unless the modification, waiver or discharge is
agreed to in writing and signed by the Employee and by an authorized officer of
the Company (other than the Employee). No waiver by either party of any breach
of, or of compliance with, any condition or provision of this Agreement by the
other party shall be considered a waiver of any other condition or provision or
of the same condition or provision at another time.
(c) Whole Agreement. No agreements, representations or
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof. This Agreement
supersedes in their entirety any prior or contemporaneous agreements, whether
written, oral, express or implied, relating to the subject matter hereof.
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(d) Choice of Law. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of California.
(e) Severability. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.
(f) Withholding. All payments made pursuant to this
Agreement will be subject to withholding of applicable income and employment
taxes.
(g) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together will constitute one and the same instrument.
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 below.
COMPANY XXXX MICROPRODUCTS, INC.
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EMPLOYEE
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Date:
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