HI/FN, INC. SEVERANCE AND CHANGE OF CONTROL AGREEMENT
EXHIBIT 10.1
HI/FN,
INC.
This
Severance and Change of Control Agreement (the “Agreement”) is made and
entered into by and between [Executive Name] (“Executive”) and hi/fn, Inc. a
Delaware corporation (the “Company”) effective as of May
14, 2008 (the “Effective
Date”).
RECITALS
1. It
is possible that the Company could terminate Executive’s employment with the
Company. The Board of Directors of the Company (the “Board”) recognizes that
such consideration can be a distraction to Executive and can cause Executive 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 Executive,
notwithstanding the possibility, threat or occurrence of such a
termination.
2. The
Board believes that it is in the best interests of the Company and its
stockholders to provide Executive with an incentive to continue his or her
employment and to motivate Executive to maximize the value of the Company for
the benefit of its stockholders.
3. The
Board believes that it is imperative to provide Executive with certain severance
benefits upon certain terminations of Executive’s employment with the
Company. These benefits will provide Executive with enhanced
financial security and incentive and encouragement to remain with the
Company.
4. Certain
capitalized terms used in the Agreement are defined in Section 6
below.
AGREEMENT
NOW,
THEREFORE, in consideration of the mutual covenants contained herein, the
parties hereto agree as follows:
1. Term of
Agreement. This Agreement will have an initial term of three
(3) years commencing on the Effective Date. Notwithstanding the previous
sentence, in the event of a Change of Control within three years of the
Effective Date, the term of the Agreement will extend through the one-year
anniversary of such Change of Control.
2. At-Will
Employment. The Company and Executive acknowledge that
Executive’s employment is and will continue to be at-will, as defined under
applicable law, except as may otherwise be specifically provided under the terms
of any written formal employment agreement or offer letter between the Company
and Executive (an “Employment
Agreement”). If Executive’s employment terminates for any reason,
Executive will not be entitled to any payments, benefits, damages, awards or
compensation other than as provided by this Agreement, including any payments or
benefits Executive would have otherwise been entitled to under his or her
Employment Agreement.
3. Severance
Benefits.
(a) Involuntary Termination
other than for Cause, Death or Disability Prior to a Change of Control or after
Twelve Months Following a Change of Control. If the Company
(or any parent or subsidiary of the Company employing Executive) terminates
Executive’s employment with the Company (or any parent or subsidiary of the
Company) for a reason other than Cause, Executive becoming Disabled or
Executive’s death, any of which occur prior to a Change of Control or after
twelve (12) months following a Change of Control, then, subject to Section 4,
Executive will receive the following severance from the Company:
(i) Accrued
Compensation. Executive will be entitled to receive all
accrued vacation, expense reimbursements and any other benefits due to Executive
through the date of termination of employment in accordance with the Company’s
then existing employee benefit plans, policies and arrangements.
(ii) Severance
Payment. Executive will be paid continuing payments of
severance pay at a rate equal to Executive’s base salary rate, as then in
effect, for six (6) months from the date of such termination, to be paid
periodically in accordance with the Company’s normal payroll
policies.
(iii) Continued Executive
Benefits. Executive will receive Company-paid coverage during
the six (6) month period following such termination for Executive and
Executive’s eligible dependents under the Company’s Benefit Plans.
(iv) Payments or Benefits
Required by Law. Executive will receive such other
compensation or benefits from the Company as may be required by law (for
example, “COBRA” coverage under Section 4980B of the Internal Revenue Code of
1986, as amended (the “Code”)).
(b) Involuntary Termination
other than for Cause, Death or Disability within Twelve Months of a Change of
Control. If within twelve (12) months following a Change of
Control (A) Executive terminates his or her employment with the Company (or any
parent or subsidiary of the Company) for Good Reason or (B) the Company (or any
parent or subsidiary of the Company) terminates Executive’s employment for other
than cause, Executive becoming Disabled or Executive’s death, then, subject to
Section 4, Executive will receive the following severance from the
Company:
(i) Accrued
Compensation. Executive will be entitled to receive all
accrued vacation, expense reimbursements and any other benefits due to Executive
through the date of termination of employment in accordance with the Company’s
then existing employee benefit plans, policies and arrangements.
(ii) Severance
Payment. Executive will be paid continuing payments of
severance pay at a rate equal to Executive’s base salary rate, as then in
effect, for twelve (12) months from the date of such termination, to be paid
periodically in accordance with the Company’s normal payroll
policies.
(iii) Options and Restricted
Stock. 50% of the unvested shares subject to all of
Executive’s outstanding rights to purchase or receive shares of the Company’s
common stock (including, without limitation, through awards of stock options,
stock appreciation rights, restricted stock units or similar awards) whether
acquired by Executive on, before or after the date of this Agreement and 50% of
any of Executive’s shares of Company common stock subject to a Company right of
repurchase or forfeiture upon Executive’s termination of employment for any
reason whether acquired by Executive on, before or after the date of this
Agreement, will immediately vest upon such termination. In all other
respects, such awards will continue to be subject to the terms and conditions of
the plans, if any, under which they were granted and any applicable agreements
between the Company and Executive.
(iv) Continued Executive
Benefits. Executive will receive Company-paid coverage during
the twelve (12) month period following such termination for Executive and
Executive’s eligible dependents under the Company’s Benefit Plans.
(v) Payments or Benefits
Required by Law. Executive will receive such other
compensation or benefits from the Company as may be required by law (for
example, “COBRA” coverage under Section 4980B of the Code).
(c) Termination due to Death or
Disability. If Executive’s employment with the Company (or any
parent or subsidiary of the Company) is terminated due to Executive’s death or
Executive’s becoming Disabled, then Executive or Executive’s estate (as the case
may be) will (i) receive the earned but unpaid base salary through the date of
termination of employment, (ii) receive all accrued vacation, expense
reimbursements and any other benefits due to Executive through the date of
termination of employment in accordance with Company-provided or paid plans,
policies and arrangements, and (iii) not be entitled to any other compensation
or benefits from the Company except to the extent required by law (for example,
“COBRA” coverage under Section 4980B of the Code).
(d) Other
Terminations. If Executive voluntarily terminates Executive’s
employment with the Company or any parent or subsidiary of the Company (other
than for Good Reason within twelve (12) months of a Change of Control) or if the
Company (or any parent or subsidiary of the Company employing Executive)
terminates Executive employment with the Company (or any parent or subsidiary of
the Company) for Cause, the Executive will (i) receive his or her earned by
unpaid base salary through the date of termination of employment, (ii) receive
all accrued vacation, expense reimbursement and any other benefits due to
Executive through the date of termination of employment in accordance with
established Company plans, policies and arrangements, and (iii) not be entitled
to any other compensation or benefits (including without limitation, accelerated
vesting of any equity awards) from the Company except to the extent provided
under agreements(s) relating to any equity awards or as may be required by law
(for example, “COBRA” coverage under Section 4980B of the Code).
(e) Exclusive
Remedy. In the event of a termination of Executive’s
termination of employment with the Company (or any parent or subsidiary of the
Company), the provisions of this Section 3 are intended to be and are exclusive
and in lieu of any other rights or remedies to which Executive or the Company
may otherwise be entitled (including any contrary provisions in the Employment
Agreement), whether at law, tort or contract, in equity, or under this
Agreement.
Executive
will be entitled to no benefits, compensation or other payments or rights upon
termination of employment other than those benefits expressly set forth in this
Section 3.
4. Conditions to Receipt of
Severance.
(a) Separation Agreement and
Release of Claims. The receipt of any severance pursuant to
Section 3 will be subject to Executive signing and not revoking a separation
agreement and release of claims in a form reasonably acceptable to the
Company. No severance pursuant to Section 3 will be paid or provided
until the separation agreement and release agreement becomes
effective.
(b) Nonsolicitation. The
receipt of any severance benefits pursuant to Section 3 will be subject to
Executive not violating the provisions of Section 7. In the event
Executive breaches the provisions of Section 7, all continuing payments and
benefits to which Executive may otherwise be entitled pursuant to Section 3 will
immediately cease.
(c) Section
409A. Any cash severance to be paid pursuant to Sections
3(a)(ii) and 3(b)(ii) will not be paid during the six-month period following
Executive’s termination of employment, unless the Company reasonably determines
that paying such amounts immediately following Executive’s termination of
employment would not result the imposition of additional tax under Section 409A
of the Code (“Section 409A”), in which case such amounts shall be paid in
accordance with normal payroll practices. If no cash severance is
paid to Executive as a result of the previous sentence, on the first day
following such six-month period, the Company will pay Executive a lump-sum
amount equal to the cumulative amounts that would have otherwise been paid to
Executive pursuant to Sections 3(a)(ii) and 3(b)(ii). Thereafter,
Executive will receive his cash severance payments pursuant to Sections 3(a)(ii)
and 3(b)(ii) in accordance with the Company’s normal payroll
practices.
5. Limitation of
Payments. In the event that the severance and other benefits
provided for in this agreement or otherwise payable to Executive (i) constitute
“parachute payments” within the meaning of Section 280G of the Code and (ii) but
for this Section 5, would be subject to the excise tax imposed by Section 4999
of the Code, then Executive’s severance benefits under Section 3 will be
either:
(a) delivered
in full, or
(b) delivered
as to such lesser extent which 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 Executive on an after-tax basis, of the greatest amount of severance
benefits, notwithstanding that all or some portion of such severance benefits
may be taxable under Section 4999 of the Code. Unless the Company and Executive
otherwise agree in writing, any determination required under this Section 5 will
be made in writing by the Company’s independent public accountants immediately
prior to Change of Control (the “Accountants”), whose
determination will be conclusive and binding upon Executive and the Company for
all purposes. For purposes of making the calculations required by
this Section 5, 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 Executive
will 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 will bear all costs the Accountants may
reasonably incur in connection with any calculations contemplated by this
Section 5.
6. Definition of
Terms. The following terms referred to in this Agreement will
have the following meanings:
(a) Benefit
Plans. “Benefit Plans” means plans,
policies or arrangements that the Company sponsors (or participates in) and that
immediately prior to Executive’s termination of employment provide Executive
and/or Executive’s eligible dependents with medical, dental, and/or vision
benefits. Benefit Plans do not include any other type of benefit
(including, but not by way of limitation, disability, life insurance or
retirement benefits). A requirement that the Company provide
Executive and Executive’s eligible dependents with coverage under the Benefit
Plans will not be satisfied unless the coverage is no less favorable than that
provided to Executive and Executive’s eligible dependents immediately prior to
Executive’s termination of employment. Notwithstanding any contrary
provision of this Section 6(a), but subject to the immediately preceding
sentence, the Company may, at its option, satisfy any requirement that the
Company provide coverage under any Benefit Plan by (i) reimbursing Executive’s
premiums under COBRA after Executive has properly elected continuation coverage
under COBRA (in which case Executive will be solely responsible for electing
such coverage for Executive and Executive’s eligible dependents), or (ii)
instead providing coverage under a separate plan or plans providing coverage
that is no less favorable or by paying Executive a lump sum payment sufficient
to provide Executive and Executive’s eligible dependents with equivalent
coverage under a third party plan that is reasonably available to Executive and
Executive’s eligible dependents.
(b) Cause. “Cause” means (i) a failure by
Executive to substantially perform Executive’s duties as an employee, other than
a failure resulting from the Executive’s complete or partial incapacity due to
physical or mental illness or impairment, (ii) a willful act by Executive that
constitutes misconduct, (iii) circumstances where Executive intentionally or
negligently imparts material confidential information relating to the Company or
its business to competitors or to other third parties other than in the course
of carrying out Executive’s duties, (iv) a material violation by Executive of a
federal or state law or regulation applicable to the business of the Company,
(v) a willful violation of a material Company employment policy or the Company’s
xxxxxxx xxxxxxx policy, (vi) any act or omission by Executive constituting
dishonesty (other than a good faith expense account dispute) or fraud, with
respect to the Company or any of its affiliates, or any other misconduct which
is injurious to the financial condition of the Company or any of its affiliates
or is injurious to the business reputation of the Company or any of its
affiliates, (vii) Executive’s failure to cooperate with the Company in
connection with any actions, suits, claims, disputes or grievances against the
Company or any of its officers, directors, employees, shareholders, affiliates,
divisions, subsidiaries, predecessor and successor corporations, and assigns,
whether or not such cooperation would be adverse to Executive’s own interest, or
(viii) Executive’s conviction or plea of guilty or no contest to a
felony.
(c) Change of
Control. “Change of Control” means the
occurrence of any of the following:
(i) the
sale, lease, conveyance or other disposition of all or substantially all of the
Company’s assets to any “person” (as such term is used in Section 13(d) of the
Securities Exchange Act of 1934, as amended), entity or group of persons acting
in concert;
(ii)
any person or group of persons becoming 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;
(iii) a
merger or consolidation of the Company with any other corporation, other than a
merger or consolidation that 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 its controlling entity) at least 50% of the total voting
power represented by the voting securities of the Company or such surviving
entity (or its controlling entity) outstanding immediately after such merger or
consolidation; or
(iv) a
contest for the election or removal of members of the Board that results in the
removal from the Board of at least 50% of the incumbent members of the
Board.
(d) Disability. “Disability” will mean that
Executive has been unable to perform the principal functions of Executive’s
duties due to a physical or mental impairment, but only if such inability has
lasted or is reasonably expected to last for at least six (6)
months. Whether Executive has a Disability will be determined by the
Board based on evidence provided by one or more physicians selected by the
Board.
(e) Good
Reason. “Good
Reason” means (without Executive’s consent) (i) a material reduction in
Executive’s title, authority, status, or responsibilities, unless Executive is
provided with a comparable position (i.e., a position of equal or greater
organizational level, duties, authority, compensation and status); (ii) the
reduction of Executive’s aggregate base salary and target bonus opportunity as
in effect immediately prior to such reduction (other than a reduction applicable
to executives generally), or (iii) a relocation of Executive’s principal place
of employment by more than fifty (50) miles.
7. Non-Solicitation. For
a period beginning on the Effective Date and ending twelve (12) months after
Executive ceases to be employed by the Company, Executive, directly or
indirectly, whether as employee, owner, sole proprietor, partner, director,
member, consultant, agent, founder, co-venturer or otherwise, will
not: (i) solicit, induce or influence any person to leave employment
with the Company; or (ii) directly or indirectly solicit business from any of
the Company’s customers and users on behalf of any business that directly
competes with the principal business of the Company.
8. Litigation. Executive
agrees to cooperate with the Company beginning on the Effective Date and
thereafter (including following Executive’s termination of employment for any
reason), by making himself or herself reasonably available to testify on behalf
of the Company or any of its affiliates in any action, suit, or proceeding,
whether civil, criminal, administrative, or investigative, and to assist the
Company, or any affiliate, in any such action, suit, or proceeding, by providing
information and meeting and consulting with the Board or it representatives or
counsel, or
representatives
or counsel to the Company, or any affiliate as reasonably
requested. The Company agrees to reimburse Executive for all expenses
actually incurred in connection with his or her provision of testimony or
assistance.
9. Successors.
(a) The 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
will 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 the Agreement, the term “Company” will include any
successor to the Company’s business and/or assets which executes and delivers
the assumption agreement described in this Section 9(a) or which becomes bound
by the terms of this Agreement by operation of law.
(b) The Executive’s
Successors. The terms of this Agreement and all rights of
Executive hereunder will inure to the benefit of, and be enforceable by,
Executive’s personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
10. Notice.
(a) General. Notices
and all other communications contemplated by this Agreement will be in writing
and will 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 Executive, mailed notices will be
addressed to him or her at the home address which he or she most recently
communicated to the Company in writing. In the case of the Company,
mailed notices will be addressed to its corporate headquarters, and all notices
will be directed to the attention of its President.
(b) Notice of
Termination. Any termination by the Company for Cause or by
Executive for Good Reason or as a result of a voluntary resignation will be
communicated by a notice of termination to the other party hereto given in
accordance with Section 10(a) of this Agreement. Such notice will
indicate the specific termination provision in this Agreement relied upon, will
set forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination under the provision so indicated, and will specify the
termination date (which will not be more than thirty (30) days after the giving
of such notice).
11. Miscellaneous
Provisions.
(a) Not Duty to
Mitigate. Executive will not be required to mitigate the
amount of any payment contemplated by this Agreement, nor will any such payment
be reduced by any earnings that Executive may receive from any other
source.
(b) Waiver. No
provision of this Agreement will be modified, waived or discharged unless the
modification, waiver or discharge is agreed to in writing and signed by
Executive and by an authorized officer of the Company (other than
Executive). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by the
other
party will be considered a waiver of any other condition or provision or of the
same condition or provision at another time.
(c) Headings. All
captions and section headings used in this Agreement are for convenient
reference only and do not form a part of this Agreement.
(d) Entire
Agreement. This Agreement constitutes the entire agreement of
the parties hereto and supersedes in their entirety all prior representations,
understandings, undertakings or agreements (whether oral or written and whether
expressed or implied) of the parties with respect to the subject matter hereof,
including (without limitation) to the Employment Agreement). No future
agreements between the Company and Executive may supersede this Agreement,
unless they are in writing and specifically mention this Section
11(d).
(e) Choice of
Law. The laws of the State of California (without reference to
its choice of laws provisions) will govern the validity, interpretation,
construction and performance of this Agreement.
(f) Severability. The
invalidity or unenforceability of any provision or provisions of this Agreement
will not affect the validity or enforceability of any other provision hereof,
which will remain in full force and effect.
(g) Withholding. All
payments made pursuant to this Agreement will be subject to withholding of
applicable income and employment taxes.
(h) Counterparts. This
Agreement may be executed in counterparts, each of which will be deemed an
original, but all of which together will constitute one and the same
instrument.
(Remainder
of Page Intentionally Left Blank)
IN
WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of
the Company by a duly authorized officer, as of the day and year set forth
below.
| COMPANY: | HI/FN, INC. | ||
| By: | |||
| Title: | |||
| EMPLOYEE | [Executive Name] | ||
| By: | |||
| Title: | |||
