SEVERANCE AGREEMENT
THIS AGREEMENT, dated as of April 11, 1997, is made by and
between Dynamics Corporation of America, a New York corporation (the
"Company"), and (the "Executive").
WHEREAS, the Company considers it essential to the best
interests of its stockholders to xxxxxx the continued employment of key
management personnel; and
WHEREAS, the Board recognizes that, as is the case with many
publicly held corporations, the possibility of a Change in Control exists and
that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the Company's management, including the Executive, to
their assigned duties without distraction in the face of potentially
disturbing circumstances arising from the possibility of a Change in Control;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the Company and the Executive hereby agree
as follows:
1. Defined Terms. The definitions of capital-
ized terms used in this Agreement are provided in the
last Section hereof.
2. Term of Agreement. The Term of this Agreement shall
commence on the date hereof and shall continue in effect through December 31,
1999; provided, however, that commencing on January 1, 1999 and each January 1
thereafter, the Term shall automatically be extended for one additional year
unless, not later than September 30 of the preceding year, the Company or the
Executive shall have given notice not to extend the Term; and further
provided, however, that if a Change in Control shall have occurred during the
Term, the Term shall expire no earlier than twenty-four (24) months beyond the
month in which such Change in Control occurred.
3. Company's Covenants Summarized. In order
to induce the Executive to remain in the employ of the
Company and in consideration of the Executive's covenants set forth in Section
4 hereof, the Company agrees, under the conditions described herein, to pay
the Executive the Severance Payments and the other payments and benefits
described herein. Except as provided in Section 9.1 hereof, no Severance
Payments shall be payable under this Agreement unless there shall have been
(or, under the terms of the second sentence of Section 6.1 hereof, there shall
be deemed to have been) a termination of the Executive's employment with the
Company following a Change in Control and during the Term. This Agreement
shall not be construed as creating an express or implied contract of
employment and, except as otherwise agreed in writing between the Executive
and the Company, the Executive shall not have any right to be retained in the
employ of the Company.
4. The Executive's Covenants. The Executive agrees that,
subject to the terms and conditions of this Agreement, in the event of a
Potential Change in Control during the Term, the Executive will remain in the
employ of the Company until the earliest of (i) a date which is six (6) months
from the date of such Potential Change of Control, (ii) the date of a Change
in Control, (iii) the date of termination by the Executive of the Executive's
employment for Good Reason or by reason of death, Disability or Retirement, or
(iv) the termination by the Company of the Executive's employment for any
reason.
5. Compensation Other Than Severance Payments.
5.1 Following a Change in Control and during the Term,
during any period that the Executive fails to perform the Executive's
full-time duties with the Company as a result of incapacity due to physical or
mental illness, the Company shall pay the Executive's full salary to the
Executive at the rate in effect at the commencement of any such period,
together with all compensation and benefits payable to the Executive under the
terms of any compensation or benefit plan, program or arrangement maintained
by the Company during such period, until the Executive's employment is
terminated by the Company for Disability.
5.2 If the Executive's employment shall be terminated for
any reason following a Change in Control and during the Term, the Company
shall pay the Executive's full salary to the Executive through the Date
2
of Termination at the rate in effect immediately prior to the Date of
Termination or, if higher, the rate in effect immediately prior to the first
occurrence of an event or circumstance constituting Good Reason, together with
all compensation and benefits payable to the Executive through the Date of
Termination under the terms of the Company's compensation and benefit plans,
programs or arrangements as in effect immediately prior to the Date of
Termination or, if more favorable to the Executive, as in effect immediately
prior to the first occurrence of an event or circumstance constituting Good
Reason.
5.3 If the Executive's employment shall be terminated for
any reason following a Change in Control and during the Term, the Company
shall pay to the Executive the Executive's normal post-termination
compensation and benefits as such payments become due. Such post-termination
compensation and benefits shall be determined under, and paid in accordance
with, the Company's retirement, insurance and other compensation or benefit
plans, programs and arrangements as in effect immediately prior to the Date of
Termination or, if more favorable to the Executive, as in effect immediately
prior to the occurrence of the first event or circumstance constituting Good
Reason.
6. Severance Payments.
6.1 Subject to Section 6.2 hereof, if the Executive's
employment is terminated following a Change in Control and during the Term,
other than (A) by the Company for Cause, (B) by reason of death or Disability,
or (C) by the Executive without Good Reason, then the Company shall pay the
Executive the amounts, and provide the Executive the benefits, described in
this Section 6.1 ("Severance Payments"), in addition to any payments and
benefits to which the Executive is entitled under Section 5 hereof. For
purposes of this Agreement, the Executive's employment shall be deemed to have
been terminated following a Change in Control by the Company without Cause or
by the Executive with Good Reason, if (i) the Executive's employment is
terminated by the Company without Cause prior to a Change in Control (whether
or not a Change in Control ever occurs) and such termination was at the
request or direction of a Person who has entered into an agreement with the
Company the consummation of which would constitute a Change in Control, (ii)
the Executive terminates his employment for
3
Good Reason prior to a Change in Control (whether or not a Change in Control
ever occurs) and the circumstance or event which constitutes Good Reason
occurs at the request or direction of such Person, or (iii) the Executive's
employment is terminated by the Company without Cause or by the Executive for
Good Reason and such termination or the circumstance or event which
constitutes Good Reason is otherwise in connection with or in anticipation of
a Change in Control (whether or not a Change in Control ever occurs). For
purposes of any determination regarding the applicability of the immediately
preceding sentence, any position taken by the Executive shall be presumed to
be correct unless the Company establishes to the Board by clear and convincing
evidence that such position is not correct.
(A) In lieu of any further salary
payments to the Executive for periods subsequent to the Date of
Termination and in lieu of any severance benefit otherwise payable to
the Executive, the Company shall pay to the Executive a lump sum
severance payment, in cash, equal to [three] [one] times the sum of
(i) the Executive's base salary as in effect immediately prior to the
Date of Termination or, if higher, in effect immediately prior to the
first occurrence of an event or circumstance constituting Good
Reason, and (ii) the highest annual bonus earned by the Executive
pursuant to any annual bonus or incentive plan maintained by the
Company in respect of any of the three fiscal years ending
immediately prior to the fiscal year in which occurs the Date of
Termination or, if higher, immediately prior to the fiscal year in
which occurs the first event or circumstance constituting Good
Reason.
(B) For the [thirty-six (36)]
[twelve (12)] month period immediately following the Date of
Termination, the Company shall arrange to provide the Executive and
his dependents life, disability, accident and health insurance
benefits substantially similar to those provided to the Executive and
his dependents immediately prior to the Date of Termination or, if
more favorable to the Executive, those provided to the Executive and
his dependents immediately prior to the first occurrence of an event
or circumstance constituting Good Reason, at no greater cost to the
Executive than the cost to the Executive immediately prior to such
date
4
or occurrence; provided, however, that, unless the Executive consents
to a different method (after taking into account the effect of such
method on the calculation of "parachute payments" pursuant to Section
6.2 hereof), such health insurance benefits shall be provided through
a third-party insurer. Benefits otherwise receivable by the Executive
pursuant to this Section 6.1 (B) shall be reduced to the extent
benefits of the same type are received by or made available to the
Executive during the [thirty-six (36)] [twelve (12)] month period
following the Executive's termination of employment (and any such
benefits received by or made available to the Executive shall be
reported to the Company by the Executive); provided, however, that
the Company shall reimburse the Executive for the excess, if any, of
the cost of such benefits to the Executive over such cost immediately
prior to the Date of Termination or, if more favorable to the
Executive, the first occurrence of an event or circumstance
constituting Good Reason. If the Severance Payments shall be
decreased pursuant to Section 6.2 hereof, and the Section 6.1(B)
benefits which remain payable after the application of Section 6.2
hereof are thereafter reduced pursuant to the immediately preceding
sentence, the Company shall, no later than five (5) business days
following such reduction, pay to the Executive the least of (a) the
amount of the decrease made in the Severance Payments pursuant to
Section 6.2 hereof, (b) the amount of the subsequent reduction in
these Section 6.1(B) benefits, or (c) the maximum amount which can be
paid to the Executive without being, or causing any other payment to
be, nondeductible by reason of section 280G of the Code.
(C) If the Executive would have
become entitled to benefits under the Company's post-retirement
health care or life insurance plans, as in effect immediately prior
to the Date of Termination or, if more favorable to the Executive, as
in effect immediately prior to the first occurrence of an event or
circumstance constituting Good Reason, had the Executive's employment
terminated at any time during the period of [thirty-six (36)] [twelve
(12)] months after the Date of Termination, the Company shall provide
such post-retirement health care or life insurance benefits to the
Executive
5
and the Executive's dependents commencing on the later of (i) the
date on which such coverage would have first become available and
(ii) the date on which benefits described in subsection (B) of this
Section 6.1 terminate.
(D) The Company shall (i) either
prepay all remaining premiums, or establish an irrevocable grantor
trust holding an amount of assets sufficient to pay all such
remaining premiums (which trust shall be required to pay such
premiums), under any insurance policy insuring the life of the
Executive under any "split-dollar" insurance arrangement in effect
between the Executive and the Company, and (ii) shall transfer to the
Executive any and all rights and incidents of ownership in such
arrangements at no cost to the Executive.
6.2 (A) Notwithstanding any other provisions of this
Agreement, in the event that any payment or benefit received or to be received
by the Executive in connection with a Change in Control or the termination of
the Executive's employment (whether pursuant to the terms of this Agreement or
any other plan, arrangement or agreement with the Company, any Person whose
actions result in a Change in Control or any Person affiliated with the
Company or such Person) (all such payments and benefits, including the
Severance Payments, being hereinafter called "Total Payments") would not be
deductible (in whole or part), by the Company, an affiliate or Person making
such payment or providing such benefit as a result of section 280G of the
Code, then, to the extent necessary to make such portion of the Total Payments
deductible (and after taking into account any reduction in the Total Payments
provided by reason of section 280G of the Code in such other plan, arrangement
or agreement), the cash Severance Payments shall first be reduced (if
necessary, to zero), and all other Severance Payments shall thereafter be
reduced (if necessary, to zero); provided, however, that the Executive may
elect to have the noncash Severance Payments reduced (or eliminated) prior to
any reduction of the cash Severance Payments.
(B) For purposes of this limitation, (i)
no portion of the Total Payments the receipt or enjoyment of which the
Executive shall have waived at such time and in such manner as not to
constitute a "payment" within the meaning of section 280G(b) of the Code shall
be taken
6
into account, (ii) no portion of the Total Payments shall be taken into
account which, in the opinion of tax counsel ("Tax Counsel") reasonably
acceptable to the Executive and selected by the accounting firm which was,
immediately prior to the Change in Control, the Company's independent auditor
(the "Auditor"), does not constitute a "parachute payment" within the meaning
of section 280G(b)(2) of the Code, including by reason of section
280G(b)(4)(A) of the Code, (iii) the Severance Payments shall be reduced only
to the extent necessary so that the Total Payments (other than those referred
to in clauses (i) or (ii)) in their entirety constitute reasonable
compensation for services actually rendered within the meaning of section
280G(b)(4)(B) of the Code or are otherwise not subject to disallowance as
deductions by reason of section 280G of the Code, in the opinion of Tax
Counsel, and (iv) the value of any noncash benefit or any deferred payment or
benefit included in the Total Payments shall be determined by the Auditor in
accordance with the principles of sections 280G(d)(3) and (4) of the Code.
(C) If it is established pursuant to a
final determination of a court or an Internal Revenue Service proceeding that,
notwithstanding the good faith of the Executive and the Company in applying
the terms of this Section 6.2, the Total Payments paid to or for the
Executive's benefit are in an amount that would result in any portion of such
Total Payments being subject to the Excise Tax, then, if such repayment would
result in (i) no portion of the remaining Total Payments being subject to the
Excise Tax and (ii) a dollar-for-dollar reduction in the Executive's taxable
income and wages for purposes of federal, state and local income and
employment taxes, the Executive shall have an obligation to pay the Company
upon demand an amount equal to the sum of (i) the excess of the Total Payments
paid to or for the Executive's benefit over the Total Payments that could have
been paid to or for the Executive's benefit without any portion of such Total
Payments being subject to the Excise Tax; and (ii) interest on the amount set
forth in clause (i) of this sentence at the rate provided in section
1274(b)(2)(B) of the Code from the date of the Executive's receipt of such
excess until the date of such payment.
7
6.3 The payments provided in subsections (A) and (D) of
Section 6.1 hereof shall be made not later than the fifth day following the
Date of Termination; provided, however, that if the amounts of such payments,
and the limitation on such payments set forth in Section 6.2 hereof, cannot be
finally determined on or before such day, the Company shall pay to the
Executive on such day an estimate, as determined in good faith by the Company
of the minimum amount of such payments to which the Executive is clearly
entitled and shall pay the remainder of such payments (together with interest
on the unpaid remainder (or on all such payments to the extent the Company
fails to make such payments when due) at 120% of the rate provided in section
1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but
in no event later than the thirtieth (30th) day after the Date of Termination.
In the event that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall constitute a loan
by the Company to the Executive, payable on the fifth (5th) business day after
demand by the Company (together with interest at 120% of the rate provided in
section 1274(b)(2)(B) of the Code). At the time that payments are made under
this Agreement, the Company shall provide the Executive with a written
statement setting forth the manner in which such payments were calculated and
the basis for such calculations including, without limitation, any opinions or
other advice the Company has received from Tax Counsel, the Auditor or other
advisors or consultants (and any such opinions or advice which are in writing
shall be attached to the statement).
6.4 The Company also shall pay to the Executive all legal
fees and expenses incurred by the Executive in disputing in good faith any
issue hereunder relating to the termination of the Executive's employment, in
seeking in good faith to obtain or enforce any benefit or right provided by
this Agreement or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any payment or
benefit provided hereunder. Such payments shall be made within five (5)
business days after delivery of the Executive's written requests for payment
accompanied with such evidence of fees and expenses incurred as the Company
reasonably may require.
8
7. Termination Procedures and Compensation
During Dispute.
7.1 Notice of Termination. After a Change in Control and
during the Term, any purported termination of the Executive's employment
(other than by reason of death) shall be communicated by written Notice of
Termination from one party hereto to the other party hereto in accordance with
Section 10 hereof. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated. Further, a Notice of
Termination for Cause is required to include a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters (3/4) of the
entire membership of the Board at a meeting of the Board which was called and
held for the purpose of considering such termination (after reasonable notice
to the Executive and an opportunity for the Executive, together with the
Executive's counsel, to be heard before the Board) finding that, in the good
faith opinion of the Board, the Executive was guilty of conduct set forth in
clause (i) or (ii) of the definition of Cause herein, and specifying the
particulars thereof in detail.
7.2 Date of Termination. "Date of Termination," with respect
to any purported termination of the Executive's employment after a Change in
Control and during the Term, shall mean (i) if the Executive's employment is
terminated for Disability, thirty (30) days after Notice of Termination is
given (provided that the Executive shall not have returned to the full-time
performance of the Executive's duties during such thirty (30) day period), and
(ii) if the Executive's employment is terminated for any other reason, the
date specified in the Notice of Termination (which, in the case of a
termination by the Company, shall not be less than thirty (30) days (except in
the case of a termination for Cause) and, in the case of a termination by the
Executive, shall not be less than fifteen (15) days nor more than sixty (60)
days, respectively, from the date such Notice of Termination is given).
7.3 Dispute Concerning Termination. If within
fifteen (15) days after any Notice of Termination is
9
given, or, if later, prior to the Date of Termination (as determined without
regard to this Section 7.3), the party receiving such Notice of Termination
notifies the other party that a dispute exists concerning the termination, the
Date of Termination shall be extended until the earlier of (i) the date on
which the Term ends or (ii) the date on which the dispute is finally resolved,
either by mutual written agreement of the parties or by a final judgment,
order or decree of an arbitrator or a court of competent jurisdiction (which
is not appealable or with respect to which the time for appeal therefrom has
expired and no appeal has been perfected); provided, however, that the Date of
Termination shall be extended by a notice of dispute given by the Executive
only if such notice is given in good faith and the Executive pursues the
resolution of such dispute with reasonable diligence.
7.4 Compensation During Dispute. If a purported termination
occurs following a Change in Control and during the Term and the Date of
Termination is extended in accordance with Section 7.3 hereof, the Company
shall continue to pay the Executive the full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to,
salary) and continue the Executive as a participant in all compensation,
benefit and insurance plans in which the Executive was participating when the
notice giving rise to the dispute was given, until the Date of Termination, as
determined in accordance with Section 7.3 hereof. Amounts paid under this
Section 7.4 are in addition to all other amounts due under this Agreement
(other than those due under Section 5.2 hereof) and shall not be offset
against or reduce any other amounts due under this Agreement.
8. No Mitigation. The Company agrees that, if the
Executive's employment with the Company terminates during the Term, the
Executive is not required to seek other employment or to attempt in any way to
reduce any amounts payable to the Executive by the Company pursuant to Section
6 hereof or Section 7.4 hereof. Further, the amount of any payment or benefit
provided for in this Agreement (other than Section 6.1(B) hereof) shall not be
reduced by any compensation earned by the Executive as the result of
employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by the Executive to the Company, or otherwise.
10
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by law upon any
successor to the Company, the Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach
of this Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive were to terminate the Executive's
employment for Good Reason after a Change in Control, except that, for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination.
9.2 This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive shall die while any amount would still be payable to the Executive
hereunder (other than amounts which, by their terms, terminate upon the death
of the Executive) if the Executive had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms
of this Agreement to the executors, personal representatives or administrators
of the Executive's estate.
10. Notices. For the purpose of this Agreement, notices and
all other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed,
if to the Executive, to the address inserted below the Executive's signature
on the final page hereof and, if to the Company, to the address set forth
below, or to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notice of change of
address shall be effective only upon actual receipt:
11
To the Company:
---------------------------------------
---------------------------------------
---------------------------------------
Attention:
11. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge
is agreed to in writing and signed by the Executive and such officer as may be
specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or of any lack of compliance
with, any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. This Agreement
supersedes any other agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof which have been made by
either party; provided, however, that this Agreement shall supersede any
agreement setting forth the terms and conditions of the Executive's employment
with the Company only in the event that the Executive's employment with the
Company is terminated on or following a Change in Control, by the Company
other than for Cause or by the Executive other than for Good Reason. The
validity, interpretation, construction and performance of this Agreement shall
be governed by the laws of the State of New York. All references to sections
of the Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for hereunder shall be paid
net of any applicable withholding required under federal, state or local law
and any additional withholding to which the Executive has agreed. The
obligations of the Company and the Executive under this Agreement which by
their nature may require either partial or total performance after the
expiration of the Term (including, without limitation, those under Sections 6
and 7 hereof) shall survive such expiration.
12. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
12
13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. Settlement of Disputes; Arbitration. All claims by the
Executive for benefits under this Agreement shall be directed to and
determined by the Board and shall be in writing. Any denial by the Board of a
claim for benefits under this Agreement shall be delivered to the Executive in
writing and shall set forth the specific reasons for the denial and the
specific provisions of this Agreement relied upon. The Board shall afford a
reasonable opportunity to the Executive for a review of the decision denying a
claim and shall further allow the Executive to appeal to the Board a decision
of the Board within sixty (60) days after notification by the Board that the
Executive's claim has been denied.
14.2 Any further dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
New York, New York in accordance with the rules of the American Arbitration
Association then in effect; provided, however, that the evidentiary standards
set forth in this Agreement shall apply. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. Notwithstanding any
provision of this Agreement to the contrary, the Executive shall be entitled
to seek specific performance of the Executive's right to be paid until the
Date of Termination during the pendency of any dispute or controversy arising
under or in connection with this Agreement.
15. Definitions. For purposes of this Agree-
ment, the following terms shall have the meanings indi-
cated below:
(A) "Affiliate" shall have the meaning set forth in Rule
12b-2 promulgated under Section 12 of the Exchange Act.
(B) "Auditor" shall have the meaning set forth in Section
6.2 hereof.
(C) "Base Amount" shall have the meaning set forth in
section 280G(b)(3) of the Code.
13
(D) "Beneficial Owner" shall have the meaning set forth in
Rule 13d-3 under the Exchange Act.
(E) "Board" shall mean the Board of Directors of the
Company.
(F) "Cause" for termination by the Company of the
Executive's employment shall mean (i) the willful and continued failure by the
Executive to substantially perform the Executive's duties with the Company
(other than any such failure resulting from the Executive's incapacity due to
physical or mental illness or any such actual or anticipated failure after the
issuance of a Notice of Termination for Good Reason by the Executive pursuant
to Section 7.1 hereof) after a written demand for substantial performance is
delivered to the Executive by the Board, which demand specifically identifies
the manner in which the Board believes that the Executive has not
substantially performed the Executive's duties, or (ii) the willful engaging
by the Executive in conduct which is demonstrably and materially injurious to
the Company or its subsidiaries, monetarily or otherwise. For purposes of
clauses (i) and (ii) of this definition, (x) no act, or failure to act, on the
Executive's part shall be deemed "willful" unless done, or omitted to be done,
by the Executive not in good faith and without reasonable belief that the
Executive's act, or failure to act, was in the best interest of the Company
and (y) in the event of a dispute concerning the application of this
provision, no claim by the Company that Cause exists shall be given effect
unless the Company establishes to the Board by clear and convincing evidence
that Cause exists.
(G) A "Change in Control" shall be deemed to have occurred
if the event set forth in any one of the following paragraphs shall have
occurred:
(I) any Person is or becomes the
Beneficial Owner, directly or indirectly, of
securities of the Company (not including in the
securities beneficially owned by such Person any
securities acquired directly from the Company or
its affiliates) representing 25% or more of the
combined voting power of the Company's then
outstanding securities, excluding any Person who
becomes such a Beneficial Owner
14
in connection with a transaction described
in clause (i) of paragraph (III) below; or
(II) the following individuals
cease for any reason to constitute a majority of
the number of directors then serving: individuals
who, on the date hereof, constitute the Board and
any new director (other than a director whose
initial assumption of office is in connection with
an actual or threatened election contest, including
but not limited to a consent solicitation, relating
to the election of directors of the Company) whose
appointment or election by the Board or nomination
for election by the Company's stockholders was
approved or recommended by a vote of at least
two-thirds (2/3) of the directors then still in
office who either were directors on the date hereof
or whose appointment, election or nomination for
election was previously so approved or recommended;
or
(III) there is consummated a
merger or consolidation of the Company or any
direct or indirect subsidiary of the Company with
any other corporation, other than (i) a merger or
consolidation which would result in the voting
securities of the Company outstanding immediately
prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by
being converted into voting securities of the
surviving entity or any parent thereof) at least
60% of the combined voting power of the securities
of the Company or such surviving entity or any
parent thereof outstanding immediately after such
merger or consolidation, or (ii) a merger or
consolidation effected to implement a
recapitalization of the Company (or similar
transaction) in which no Person is or becomes the
Beneficial Owner, directly or indirectly, of
securities of the Company (not including in the
securities Beneficially Owned by such Person any
15
securities acquired directly from the Company or
its Affiliates) representing 25% or more of the
combined voting power of the Company's then
outstanding securities; or
(IV) the stockholders of the
Company approve a plan of complete liquidation or
dissolution of the Company or there is consummated
an agreement for the sale or disposition by the
Company of all or substantially all of the
Company's assets, other than a sale or disposition
by the Company of all or substantially all of the
Company's assets to an entity, at least 60% of the
combined voting power of the voting securities of
which are owned by stockholders of the Company in
substantially the same proportions as their
ownership of the Company immediately prior to such
sale.
(H) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(I) "Company" shall mean and, except in determining
under Section 15(G) hereof whether or not any Change in Control of the Company
has occurred, shall include any successor to its business and/or assets which
assumes and agrees to perform this Agreement by operation of law, or
otherwise.
(J) "Date of Termination" shall have the meaning set forth
in Section 7.2 hereof.
(K) "Disability" shall be deemed the reason for the
termination by the Company of the Executive's employment, if, as a result of
the Executive's incapacity due to physical or mental illness, the Executive
shall have been absent from the full-time performance of the Executive's
duties with the Company for a period of six (6) consecutive months, the
Company shall have given the Executive a Notice of Termination for Disability,
and, within thirty (30) days after such Notice of Termination is given, the
Executive shall not have returned to the full-time performance of the
Executive's duties.
16
(L) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(M) "Executive" shall mean the individual named in the first
paragraph of this Agreement.
(N) "Good Reason" for termination by the Executive of the
Executive's employment shall mean the occurrence (without the Executive's
express written consent) after any Change in Control, or prior to a Change in
Control under the circumstances described in clauses (ii) and (iii) of the
second sentence of Section 6.1 hereof (treating all references in paragraphs
(I) through (VII) below to a "Change in Control" as references to a "Potential
Change in Control"), of any one of the following acts by the Company, or
failures by the Company to act, unless, in the case of any act or failure to
act described in paragraph (I), (V), (VI) or (VII) below, such act or failure
to act is corrected prior to the Date of Termination specified in the Notice
of Termination given in respect thereof:
(I) the assignment to the Executive of any duties
inconsistent with the Executive's status with the Company or
a substantial adverse alteration in the nature or status of
the Executive's responsibilities from those in effect
immediately prior to the Change in Control;
(II) a reduction by the Company in the Executive's
annual base salary as in effect on the date hereof or as the
same may be increased from time to time;
(III) the relocation of the Executive's principal
place of employment to a location more than 25 miles from
the Executive's principal place of employment immediately
prior to the Change in Control or the Company's requiring
the Executive to be based anywhere other than such principal
place of employment (or permitted relocation thereof) except
for required travel on the Company's business to an extent
substantially consistent with the Executive's present
business travel obligations;
17
(IV) the failure by the Company to pay to the
Executive any portion of the Executive's current
compensation or to pay to the Executive any portion of an
installment of deferred compensation under any deferred
compensation program of the Company, within seven (7) days
of the date such compensation is due;
(V) the failure by the Company to continue in
effect any compensation plan in which the Executive
participates immediately prior to the Change in Control
which is material to the Executive's total compensation,
unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect
to such plan, or the failure by the Company to continue the
Executive's participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable,
both in terms of the amount or timing of payment of benefits
provided and the level of the Executive's participation
relative to other participants, as existed immediately prior
to the Change in Control;
(VI) the failure by the Company to continue to
provide the Executive with benefits substantially similar to
those enjoyed by the Executive under any of the Company's
pension, savings, life insurance, medical, health and
accident, or disability plans in which the Executive was
participating immediately prior to the Change in Control,
the taking of any other action by the Company which would
directly or indirectly materially reduce any of such
benefits or deprive the Executive of any material fringe
benefit enjoyed by the Executive at the time of the Change
in Control, or the failure by the Company to provide the
Executive with the number of paid vacation days to which the
Executive is entitled on the basis of years of service with
the Company in accordance with the Company's normal vacation
policy in effect at the time of the Change in Control; or
(VII) any purported termination of the
Executive's employment which is not effected
pursuant to a Notice of Termination satisfying
18
the requirements of Section 7.1 hereof; for purposes of this
Agreement, no such purported termination shall be effective.
The Executive's right to terminate the Executive's
employment for Good Reason shall not be affected by the Executive's incapacity
due to physical or mental illness. The Executive's continued employment shall
not constitute consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder.
For purposes of any determination regarding the existence of
Good Reason, any claim by the Executive that Good Reason exists shall be
presumed to be correct unless the Company establishes to the Board by clear
and convincing evidence that Good Reason does not exist.
(O) "Notice of Termination" shall have the meaning set forth
in Section 7.1 hereof.
(P) "Person" shall have the meaning given in Section 3(a)(9)
of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof,
except that such term shall not include (i) the Company or any of its
subsidiaries, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its Affiliates, (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company.
(Q) "Potential Change in Control" shall be deemed to have
occurred if the event set forth in any one of the following paragraphs shall
have occurred:
(I) the Company enters into an agreement,
the consummation of which would result in the occurrence of
a Change in Control;
(II) the Company or any Person publicly
announces an intention to take or to consider taking actions
which, if consummated, would constitute a Change in Control;
19
(III) any Person becomes the Beneficial
Owner, directly or indirectly, of securities of the Company
representing 15% or more of either the then outstanding
shares of common stock of the Company or the combined voting
power of the Company's then outstanding securities (not
including in the securities beneficially owned by such
Person any securities acquired directly from the Company or
its affiliates); or
(IV) the Board adopts a resolution to the
effect that, for purposes of this Agreement, a Potential
Change in Control has occurred.
(R) "Retirement" shall be deemed the reason for the
termination by the Executive of the Executive's employment if such employment
is terminated in accordance with the Company's retirement policy, including
early retirement, generally applicable to its salaried employees.
(S) "Severance Payments" shall have the meaning set forth in
Section 6.1 hereof.
(T) "Tax Counsel" shall have the meaning set forth in
Section 6.2 hereof.
(U) "Term" shall mean the period of time described in
Section 2 hereof (including any extension, continuation or termination
described therein).
20
(V) "Total Payments" shall mean those
payments so described in Section 6.2 hereof.
[COMPANY NAME]
By:
-----------------------------------
Name:
Title:
---------------------------------------
EXECUTIVE
Address:
---------------------------------------
---------------------------------------
---------------------------------------
(Please print carefully)
21
