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”), on _____________, ____ (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 shareholders
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
shareholders 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 shareholders.
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 5
below.
The
parties hereto agree as follows:
1. Term of
Agreement. The term of this Agreement shall initially be three
years following the Effective Date (“Initial Term”), and shall automatically be
extended for successive one year periods (“Extended Term”) unless the agreement
is terminated, amended or modified by the Company prior to the end of the
Initial Term or any Extended Term. Upon the Employee’s resignation or
the termination of Employee’s employment, for any reason, this Agreement is
automatically terminated except as provided in Section 3.
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 in accordance with the Company’s written employee plans
or pursuant to other written agreements with the Company; provided, however,
that if severance benefits are triggered under Section 3(a) hereof, then
Employee shall not be eligible for additional severance benefits under any other
plan or agreement with the Company, except as required by statute (such as COBRA
or similar state laws).
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 the 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. For a period of twelve (12) months following
employee’s termination, the Company will pay one hundred percent (100%) of the
Employee’s premiums for coverage under Title X of the Consolidated Budget
Reconciliation Act of 1985 (“COBRA”), for health, dental, and vision insurance
when due (subject to Employee timely electing COBRA coverage). If
Employee’s coverage immediately prior to the Change of Control included
Employee’s dependents, such dependents shall also be covered under the premium
payments by the Company. Company-paid premiums 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 vision insurance plans that provide Employee
and his dependents with comparable benefits and levels of coverage.
(3) Accelerated
Vesting. One hundred percent (100%) of the unvested portion of
any stock option, restricted stock and restricted stock units held by the
Employee shall automatically be accelerated in full so as to become completely
vested.
(b) Timing of Severance
Payments. Subject to any delay required to avoid the
imposition of additional taxes under Internal Revenue Code Section 409A, any
severance payment to which Employee is entitled under Section 3(a)(i) shall be
paid by the Company to the Employee (or to the Employee’s successors in
interest, pursuant to Section 6(b)) in cash and in full, not later than thirty
(30) calendar days following the Termination Date. In no event shall
payment be made later than two and one-half (2½) months following the calendar
year in which the Termination Date occurs.
(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 will be made in writing by a
national “Big Four” accounting firm selected by the Company or such other person
or entity to which the parties mutually agree (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. Any
reduction in payments and/or benefits required by this Section 4 shall
occur in the following order: (1) reduction of cash payments; (2) reduction of
full-value equity award vesting acceleration, (3) reduction of stock option
vesting acceleration, and (4) reduction of other benefits paid to
Employee. In the event that acceleration of vesting of equity awards
is to be reduced, such acceleration of vesting shall be cancelled in the reverse
order of the date of grant for Employee equity awards.
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.
(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).
(iii) The
shareholders 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 shareholders 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.
(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.
(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. Code Section
409A.
(a) Separation From
Service. Notwithstanding anything to the contrary in this
Agreement, no severance payments or benefits payable to Employee, if any,
pursuant to this Agreement that, when considered together with any other
severance payments or separation benefits, is considered deferred compensation
under Section 409A (together, the “Deferred Payments”) will be payable until
Employee has a “separation from service” within the meaning of
Section 409A. Similarly, no severance payable to Employee, if
any, pursuant to this Agreement that otherwise would be exempt from Section 409A
pursuant to Treasury Regulation Section 1.409A-1(b)(9) will be payable
until Employee has a “separation from service” within the meaning of Section
409A.
(b) Specified
Employees. Further, if Employee is a “specified employee”
within the meaning of Section 409A at the time of separation from service
(other than due to death), any Deferred Payments that otherwise are payable
within the first six (6) months following Employee’s separation from service
will become payable on the first payroll date that occurs on or after the date
six (6) months and one (1) day following the date of Employee’s separation from
service. All subsequent Deferred Payments, if any, will be payable in
accordance with the payment schedule applicable to each payment or
benefit. Notwithstanding anything herein to the contrary, in the
event of Employee’s death following Employee’s separation from service but prior
to the six (6) month anniversary of Employee’s separation from service (or any
later delay date), then any payments delayed in accordance with this paragraph
will be payable in a lump sum as soon as administratively practicable after the
date of Employee’s death and all other Deferred Payments will be payable in
accordance with the payment schedule applicable to each payment or
benefit. Each payment and benefit payable under the Agreement is
intended to constitute a separate payment for purposes of Section 1.409A-2(b)(2)
of the Treasury Regulations.
(c) Certain
Payments. Any severance payment that satisfies the
requirements of the “short-term deferral” rule set forth in Section
1.409A-1(b)(4) of the Treasury Regulations will not constitute Deferred Payments
for purposes of the Agreement. Any severance payment that qualifies
as a payment made as a result of an involuntary separation from service pursuant
to Section 1.409A-1(b)(9)(iii) of the Treasury Regulations that does not exceed
the Section 409A Limit will not constitute Deferred Payments for purposes of the
Agreement. For purposes of this paragraph, “Section 409A Limit” will
mean the lesser of two (2) times: (i) Employee’s annualized compensation
based upon the annual rate of pay paid to Employee during the Company’s
taxable year preceding the Company’s taxable year of Employee’s separation
from service as determined under Treasury Regulation Section
1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance issued with
respect thereto; or (ii) the maximum amount that may be taken into account under
a qualified plan pursuant to Section 401(a)(17) of the Code for the year in
which Employee’s employment is terminated.
(d) 409A
Compliance. The foregoing provisions are intended to comply
with the requirements of Section 409A so that none of the severance
payments and benefits to be provided under the Agreement will be subject to the
additional tax imposed under Section 409A, and any ambiguities herein will
be interpreted to so comply. Employee and the Company agree to work
together in good faith to consider amendments to the Agreement and to take such
reasonable actions which are necessary, appropriate or desirable to avoid
imposition of any additional tax or income recognition prior to actual payment
to Employee under Section 409A.
9. 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.
(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.
(h) Amendment. Notwithstanding
anything in this Agreement to the contrary, the Company specifically reserves
the right to amend this Agreement during the Initial Term or any Extended Term
without Employee’s consent to the extent necessary or desirable to comply with
the requirements of Code Section 409A, and the regulations, notices and other
guidance of general application issued thereunder, and with any other applicable
federal or state law.
This
Agreement may also be amended during the Initial Term or any Extended Term by
mutual written agreement of the parties.
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blank]
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.
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COMPANY
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XXXX
MICROPRODUCTS INC.
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By:
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Date:
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EMPLOYEE
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Date:
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