FORM OF MARKETING & SALES/TECHNICAL SEVERANCE AGREEMENT
The XxxXxxx-Xxxxxxxxxx Corporation
000 Xxxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Dear [NAME]:
The XxxXxxx-Xxxxxxxxxx Corporation (the "Company") considers the establishment
and maintenance of sound and vital management to be essential to protecting and
enhancing the best interests of the Company and its stockholders. The Company
also considers it essential to the best interests of the Company and its
stockholders that its key management, technical and marketing personnel be
encouraged to remain with the Company and continue to devote full attention to
the Company's business in the event an effort is made to obtain control of the
Company through a tender offer or otherwise. In this connection, the Company
recognizes that the possibility of a change in control and the uncertainty and
questions which it may raise among management, technical and marketing personnel
may result in the departure or distraction of key management, technical and
marketing personnel to the detriment of the Company and its stockholders.
Although no such change in control is currently anticipated, the board of
directors of the Company has determined that appropriate steps should be taken
to reinforce and encourage the continued attention and dedication of key members
of the Company's management, technical and marketing personnel to their assigned
duties without distraction in the face of the potentially disturbing
circumstances arising from the possibility of a change in control of the
Company.
The board recognizes that your contributions to the past and future growth and
success of the Company have been substantial. Should the Company receive any
proposal from a third person concerning a possible business combination with, or
acquisition of equity securities of, the Company, the board believes it
imperative that the Company and the board be able to rely upon you to continue
in your position, and that the Company be able to receive and rely upon your
advice, if so requested, as to the best interests of the Company and its
stockholders without concern that you might be distracted by the personal
uncertainties and risks created by such a proposal. Should the Company receive
any such proposals, in addition to your regular duties, you may be called upon
to assist in the assessment of such proposals, advise management and the board
as to whether such proposals would be in the best interests of the
Company and its stockholders, and to take such actions as the board might
determine to be appropriate.
Accordingly, to assure the Company that it will have your continued undivided
attention and services and the availability of your advice and counsel
notwithstanding the possibility, threat or occurrence of a bid to take over
control of the Company, and to induce you to remain in the employ of the
Company, and for other good and valuable consideration, this letter agreement
(the "Agreement") sets forth benefits which the Company agrees will be provided
to you in the event of a change in control of the Company (as defined below)
prior to the expiration of this Agreement and while you are still an employee of
the Company.
1. CHANGE IN CONTROL. A "Change in Control" of Company means and shall be
deemed to have occurred if and when: (i) within the meaning of Section 13(d) of
the Securities Exchange Act of 1934, any person or group becomes a beneficial
owner, directly or indirectly, of securities of Company representing 20% or more
of the combined voting power of Company's then outstanding securities; (ii)
individuals who were members of the board of directors of Company immediately
prior to a meeting of the stockholders of Company involving a contest for the
election of directors shall not constitute a majority of the board of directors
following such election; (iii) the stockholders of Company approve the
dissolution or liquidation of Company; (iv) the stockholders of Company approve
an agreement to merge or consolidate, or otherwise reorganize, with or into one
or more entities which are not subsidiaries, as a result of which less than 50%
of the outstanding voting securities of the surviving or resulting entity are,
or are to be, owned by former stockholders of Company (excluding from the term
"former stockholders" a stockholder who is, or as a result of the transaction in
question becomes, an "affiliate," as that term is used in the Securities
Exchange Act of 1934 and the rules promulgated thereunder, of any party to such
merger, consolidation or reorganization); or (v) the stockholders of Company
approve the sale of substantially all of Company's business and/or assets to a
person or entity which is not a subsidiary; PROVIDED, HOWEVER, that no Change in
Control of Company shall be deemed to have occurred if the transaction giving
rise thereto was approved by a majority of the board of directors who were in
office immediately prior to such transaction.
2. TERMINATION OF EMPLOYMENT FOLLOWING A CHANGE IN CONTROL. If, within two
years following a Change in Control of Company, Company terminates Employee's
employment for any reason, or if Employee terminates his employment with Company
for any reason other than death or disability, Company shall pay Employee a lump
sum amount equal to 1.0 times Employee's "base amount" as defined below, if
Employee has reached the fifth but not the tenth anniversary of his date of
employment with Company at the time of his termination, increasing by 0.2 each
such anniversary thereafter until it shall equal 2.0 times Employee's "base
amount" when Employee has reached the tenth anniversary of his date of
employment. Such amount shall be payable within 10 days after such termination
of employment.
3. ESTABLISHMENT OF TRUST; FUNDING OF TRUST UPON CHANGE IN CONTROL.
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(a) Company shall establish, as soon as practicable, a trust for the purpose
of holding assets to make any payments that may be required under the
terms of this Agreement. Such trust, which may be a sub-trust of a
larger trust, shall be revocable prior to a Change in Control but shall
become irrevocable upon a Change in Control. Such trust shall be a
grantor trust under which the income is taxable to the Company and no
contributions or income are taxable to the Employee until funds are
distributed to him.
(b) The trust described herein shall be initially funded with a contribution
of $1.00. Within 10 days following a Change in Control of Company,
Company shall transfer to the trust sufficient funds to cover the maximum
payment which could become payable to Employee under this Agreement in
the event Employee's employment with Company is terminated within two
years following the Change in Control.
4. PARACHUTE PAYMENTS.
(a) Notwithstanding anything in this Agreement to the contrary, any
"parachute payments" to be made to or for the benefit of Employee,
whether pursuant to this Agreement or otherwise, shall be modified to the
extent necessary so that the requirements of either subparagraph (i) or
(ii) below are satisfied:
(i) the aggregate of "present value" of all "parachute payments"
payable to or for the benefit of Employee, whether pursuant to
this Agreement or otherwise, shall be less than three times
Employee's "base amount"; or
(ii) each "parachute payment" payable to or for the benefit of
Employee, whether pursuant to this Agreement or otherwise, shall
be in an amount which does not exceed the "reasonable
compensation" allocable to such "parachute payment."
(b) Notwithstanding anything in any other section of this Agreement to the
contrary, no "illegal parachute payments" shall be made to or for the
benefit of Employee.
(c) For purposes of this section:
(i) The term "base amount" shall have the meaning ascribed to it under
Section 280G(b)(3) of the Internal Revenue Code of 1986, as
amended (the "Code");
(ii) the term "illegal parachute payment" shall mean a payment
described in Section 280G(b)(2)(B) of the Code;
(iii) the term "parachute payment" shall have the meaning ascribed in
Section 280G(b)(2)(A) of the Code, without regard to Section
280G(b)(2)(A)(ii) of the Code but with regard to Section
280G(b)(4)(A);
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(iv) "present value" shall be determined in accordance with Section
280G(d)(4) of the Code;
(v) the term "reasonable compensation" shall have the meaning ascribed
to it under Section 280G(b)(4)(B) of the Code (for personal
services actually rendered before the date of the Change in
Control of Company; and
(vi) the portion of the "base amount" and the amount of "reasonable
compensation" allocable to any "parachute payment" shall be
determined in accordance with Section 280G(b)(3) of the Code and
Section 280G(b)(4)(B) of the Code, respectively.
(d) In the event the amount of any "parachute payments" which would be
payable to or for the benefit of Employee without regard to this section
must be modified to comply with this section, Employee shall direct which
"parachute payments" are to be waived or modified; provided, however,
that no change in timing of the payments shall be made without the
consent of the Company.
(e) Payment of amounts pursuant to this Agreement shall not, unless directed
by Employee, be delayed pending determination of the status of a payment
as a "parachute payment" or "illegal parachute payment" by the Internal
Revenue Service, court or similar body of competent jurisdiction.
(f) This section shall be interpreted so as to avoid the imposition of excise
taxes on Employee under Section 4999 of the Code or the disallowance of a
deduction to Company pursuant to Section 280G(a) of the Code.
5. TERM OF AGREEMENT. This Agreement shall be effective until December
31, 1999. Either party may, in its sole discretion and for any reason,
provide written notice of termination (effective as of the then applicable
expiration date) to the other party no later than 60 days before the
expiration date of this Agreement. If written notice is not so provided,
this Agreement shall be automatically extended for an additional period of 12
months past the expiration date. This Agreement shall continue to be
automatically extended for an additional 12 months at the end of such
12-month period and each succeeding 12-month period unless notices are given
in the manner described in this section. The foregoing notwithstanding, in
the event of a Change of Control the term of this Agreement will
automatically be extended for an additional three years past the expiration
date then in effect.
6. SUCCESSORS. The rights and obligations of Company under this Agreement
shall inure to the benefit of and shall be binding upon the successors and
assigns of Company.
7. GOVERNING LAW. This Agreement is made and entered into in the State of
California, and the laws of California shall govern its validity and
interpretation and the performance by the parties hereto of their respective
duties and obligations hereunder.
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8. AMENDMENT OF AGREEMENT. This Agreement may be amended or modified
only by an instrument in writing executed by all of the parties hereto.
9. ARBITRATION. Any dispute, controversy, or claim arising out of or
relating to this Agreement or breach thereof, shall be submitted to arbitration
in accordance with the Voluntary Labor Arbitration Rules of the American
Arbitration Association. Judgment upon the award rendered by the arbitration
may be entered in any court in the State of California, or in any other court of
competent jurisdiction. In reaching his or her decision, the arbitrator shall
have no authority to ignore, change, modify, add to or delete from any provision
of this Agreement, but instead is limited to interpreting this Agreement. In
the case of any arbitration or subsequent judicial proceeding arising after a
Change in Control, the Employee shall be awarded his or her costs, including
attorneys' fees.
10. NOTICES. Any notice or communications required or permitted to be given
to the parties hereto shall be delivered personally or be sent by United States
registered or certified mail, postage prepaid and return receipt requested, and
addressed or delivered as follows, or at such other address as the party
addressed may have substituted by notice pursuant to this section:
(a) If to Company:
The XxxXxxx-Xxxxxxxxxx Corporation
000 Xxxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: President
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(b) If to Employee:
11. SEVERABILITY. In case any one or more of the provisions contained in
this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if such invalid, illegal or unenforceable provision had never
been contained herein and there shall be deemed substituted such other provision
as will most nearly accomplish the intent of the parties to the extent permitted
by the applicable law. In case this Agreement, or any one or more of the
provisions hereof, shall be held to be invalid, illegal or unenforceable within
any governmental jurisdiction or subdivision thereof, the Agreement or any such
provision thereof shall not as a consequence be deemed to be invalid, illegal or
unenforceable in any other governmental jurisdiction or subdivision thereof.
12. COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
shall together constitute one and the same Agreement.
The parties have executed this Agreement as of the date first written above.
Employee The XxxXxxx-Xxxxxxxxxx Corporation
_________________________ By_________________________________
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