Exhibit 10.40
FORM OF
CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT, dated ___________ __, 200X is made by and between
Manufacturers' Services Limited, a Delaware 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;
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 capitalized terms used in this
Agreement are provided in Section 15.
2. TERM OF AGREEMENT. The Term of this Agreement shall commence on the
date hereof and shall continue in effect through December 31, 2002; PROVIDED,
HOWEVER, that commencing on January 1, 2003 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 the thirty-sixth (36th) month 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 in Section 4, the Company, under the conditions described herein,
shall pay the Executive the
Severance Payments and the other payments and benefits described herein. Except
as provided in Section 9.1, no Severance Payments shall be payable under this
Agreement unless there shall have been (or, pursuant to the second sentence of
Section 6.1, 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. Subject to the terms and conditions of
this Agreement, in the event of a Potential Change in Control during the Term,
the Executive shall 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 in
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; EQUITY.
5.1. If the Executive fails to perform the Executive's full-time duties
with the Company following a Change in Control as a result of incapacity due to
physical or mental illness, during any period when the Executive so fails to
perform the Company shall pay the Executive's Base Salary, together with all
compensation and benefits payable to the Executive under the terms of any
compensation or benefit plan, program or arrangement (other than the Company's
short- or long-term disability plan, as applicable, but including any bonus or
incentive plan) 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, the Company shall pay the Base Salary to the
Executive through the Date of Termination, 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, 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
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or, if more favorable to the Executive, as in effect immediately prior to the
occurrence of the first event or circumstance constituting Good Reason.
5.4. Notwithstanding anything to the contrary contained in any equity
plan or arrangement of the Company or any agreement between the Company and the
Executive, upon the occurrence of a Change in Control, any outstanding stock
option, restricted stock or other equity or equity-based award granted to the
Executive shall become immediately vested and exercisable and shall (to the
extent applicable) remain outstanding for its full term, notwithstanding any
termination of the Executive's employment with the Company.
6. SEVERANCE PAYMENTS.
6.1. If the Executive's employment is terminated following a Change in
Control, 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") and Section 6.2, in addition to any
payments and benefits to which the Executive is entitled under Section 5. For
purposes of this Agreement, the Executive's employment shall be deemed to have
been terminated following a Change in Control and during the Term 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 during a Potential Change
in Control Period, or (ii) the Executive terminates his employment for Good
Reason during a Potential Change in Control Period and, in either case, a Change
in Control occurs before such Potential Change in Control Period lapses. Except
as described in Section 9.1, the Executive shall not be entitled to benefits
pursuant to this Section 6.1 unless a Change in Control shall have occurred.
(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
(i) a lump sum severance payment, in cash, equal to 2.5 times the sum of (a)
the Executive's Base Salary, and (b) the target annual bonus available to
the Executive pursuant to any annual bonus or incentive plan maintained by
the Company in respect of the fiscal year in which occurs the Date of
Termination (without giving effect to any event or circumstance constituting
Good Reason) and (ii) a prorated portion of the Executive's bonus
compensation for the fiscal year in which the Date of Termination occurs
(assuming that any applicable performance objectives were achieved at the
maximum level of performance and without giving effect to any event or
circumstance constituting Good Reason) calculated by multiplying (A) the
maximum achievable amount of such bonus compensation by (B) a fraction, the
numerator of which is the number of days in the applicable fiscal year
through the date of termination and the denominator of which is 365.
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(B) For the eighteen (18) 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 or occurrence.
(C) Notwithstanding any provision of any annual or long-term incentive
plan to the contrary, the Company shall pay to the Executive a lump sum
amount, in cash, equal to the sum of (i) any unpaid incentive compensation
which has been allocated or awarded to the Executive for a completed fiscal
year or other measuring period preceding the Date of Termination under any
such plan and which, as of the Date of Termination, is contingent only upon
the continued employment of the Executive to a subsequent date, and (ii) a
pro rata portion to the Date of Termination of the aggregate value of all
contingent incentive compensation awards to the Executive for all then
uncompleted periods under any such plan, calculated as to each such award by
multiplying the award that the Executive would have earned on the last day
of the performance award period, assuming the achievement, at the target
level, of the individual and corporate performance goals established with
respect to such award, by the fraction obtained by dividing the number of
full months and any fractional portion of a month during such performance
award period through the Date of Termination by the total number of months
contained in such performance award period.
6.2. GROSS UP.
(A) Whether or not the Executive becomes entitled to the Severance
Payments, if any of the payments or benefits received or to be received by
the Executive in connection with a Change in Control or the Executive's
termination of 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, excluding the
Gross-Up Payment, being hereinafter referred to as the "Total Payments")
will be subject to the Excise Tax, the Company shall pay to the Executive an
additional amount (the "Gross-Up Payment") such that the net amount retained
by the Executive, after deduction of any Excise Tax on the Total Payments
and any federal, state and local income and employment taxes and Excise Tax
upon the Gross-Up Payment, shall be equal to the Total Payments.
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(B) For purposes of determining whether any of the Total Payments will
be subject to the Excise Tax and the amount of such Excise Tax, (i) all of
the Total Payments shall be treated as "parachute payments" (within the
meaning of section 280G(b)(2) of the Code) unless, 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"), such payments or
benefits (in whole or in part) do not constitute parachute payments,
including by reason of section 280G(b)(4)(A) of the Code, (ii) all "excess
parachute payments" within the meaning of section 280G(b)(l) of the Code
shall be treated as subject to the Excise Tax unless, in the opinion of Tax
Counsel, such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered (within the meaning
of section 280G(b)(4)(B) of the Code) in excess of the Base Amount allocable
to such reasonable compensation, or are otherwise not subject to the Excise
Tax, and (iii) the value of any noncash benefits or any deferred payment or
benefit shall be determined by the Auditor in accordance with the principles
of sections 280G(d)(3) and (4) of the Code. For purposes of determining the
amount of the Gross-Up Payment, the Executive shall be deemed to pay federal
income tax at the highest marginal rate of federal income taxation in the
calendar year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rate of taxation in the state and
locality of the Executive's residence on the Date of Termination (or if
there is no Date of Termination, then the date on which the Gross-Up Payment
is calculated for purposes of this Section 6.2), net of the maximum
reduction in federal income taxes which could be obtained from deduction of
such state and local taxes.
(C) In the event that the Excise Tax is finally determined to be less
than the amount taken into account hereunder in calculating the Gross-Up
Payment, the Executive shall repay to the Company, within five (5) business
days following the time that the amount of such reduction in the Excise Tax
is finally determined, the portion of the Gross-Up Payment attributable to
such reduction (plus that portion of the Gross-Up Payment attributable to
the Excise Tax and federal, state and local income and employment taxes
imposed on the Gross-Up Payment being repaid by the Executive, to the extent
that such repayment results in a reduction in the Excise Tax and a
dollar-for-dollar reduction in the Executive's taxable income and wages for
purposes of federal, state and local income and employment taxes, plus
interest on the amount of such repayment at 120% of the rate provided in
section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder in calculating
the Gross-Up Payment (including by reason of any payment the existence or
amount of which cannot be determined at the time of the Gross-Up Payment),
the Company shall make an additional Gross-Up Payment in respect of such
excess (plus any interest, penalties or additions payable
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by the Executive with respect to such excess) within five (5) business days
following the time that the amount of such excess is finally determined. The
Executive and the Company shall each reasonably cooperate with the other in
connection with any administrative or judicial proceedings concerning the
existence or amount of liability for Excise Tax with respect to the Total
Payments.
6.3. The payments provided in subsection (A), of Section 6.1 and in
Section 6.2 shall be made not later than the fifth day following the Date of
Termination (or if there is no Date of Termination, then the date on which the
Gross-up Payment is calculated for purposes of Section 6.2), PROVIDED, HOWEVER,
that in the case of any payment made pursuant to the second sentence of Section
6.1, such payment shall be made not later than the fifth day following the
Change in Control; PROVIDED FURTHER, HOWEVER, that if the amounts of such
payments 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 or, in the case of payments under Section 6.2, in accordance with
Section 6.2, 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 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.
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7. TERMINATION PROCEDURES AND COMPENSATION DURING DISPUTE.
7.1. NOTICE OF TERMINATION. After a Change in Control, 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. 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,
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 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.
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7.4. COMPENSATION DURING DISPUTE. If the Date of Termination is
extended in accordance with Section 7.3, 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, the Base 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. 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)
and shall not be offset against or reduce any other amounts due under this
Agreement.
8. NO MITIGATION. If the Executive's employment with the Company
terminates following a Change in Control, 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 or Section 7.4. Further, the
amount of any payment or benefit provided for in this Agreement 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.
9. SUCCESSORS; BINDING AGREEMENT.
9.1. In addition to any obligations imposed by law upon any successor
to the Company, the Company shall 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 and during the Term, 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,
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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:
To the Company:
Manufacturers' Services Limited
000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: General Counsel
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 not supersede any agreement setting
forth the terms and conditions of the Executive's employment with the Company
unless the Executive's employment with the Company is terminated on or following
a Change in Control and during the Term, by the Company other than for Cause or
by the Executive for Good Reason. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the Commonwealth
of Massachusetts. 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
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expiration of the Term (including, without limitation, those under Sections 6
and 7) 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.
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.
14.1. 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 Boston,
Massachusetts 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 Agreement, the following terms
shall have the meanings indicated below:
15.1. "Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under Section 12 of the Exchange Act.
15.2. "Auditor" shall have the meaning set forth in Section 6.2.
15.3. "Base Amount" shall have the meaning set forth in
Section 280G(b)(3) of the Code.
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15.4. "Base Salary" shall mean the annual base salary in effect for the
Executive immediately prior to a Change in Control, as such salary may be
increased from time to time during the Term (in which case such increased amount
shall be the Base Salary for purposes hereof), but without giving effect to any
reduction thereto.
15.5. "Beneficial Owner" shall have the meaning set forth in Rule 13d-3
under the Exchange Act.
15.6. "Board" shall mean the Board of Directors of the Company.
15.7. "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) that
has not been cured within 30 days 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 results in demonstrable and
material monetary harm to the Company or its subsidiaries. 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. 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.
15.8. A "Change in Control" shall be deemed to have occurred if any of
the events set forth in any one of the following paragraphs shall have occurred:
(A) any Person other than CSFB is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company representing 40% or
more of the combined voting power of the Company's then outstanding
securities, excluding any Person who becomes such a Beneficial Owner in
connection with a transaction described in Section 15.8(C)(i) or in a
transaction involving the sale or transfer by CSFB of CSFB Securities
representing 40% or more of the combined voting power of the Company's then
outstanding securities to such Person if, and only for so long as, such
Person is an Exempt Transferee;
(B) the following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals who, on the
date hereof,
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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 in office who either were directors on the date
hereof or whose appointment, election or nomination for election was
previously so approved or recommended;
(C) 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 securities acquired
directly from the Company or its Affiliates) representing 40% or more of the
combined voting power of the Company's then outstanding securities; or
(D) 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.
15.9. "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
15.10. "Company" shall mean Manufacturers' Services Limited and, except
in determining under Section 15.8 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.
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15.11. "Control" shall have the meaning set forth in Rule 12b-2
promulgated under Section 12 of the Exchange Act.
15.12. "Date of Termination" shall have the meaning set forth in
Section 7.2.
15.13. "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.
15.14. "CSFB" (the successor to DLJ) shall mean, collectively, DLJ
Investment Partners II, L.P., a Delaware limited partnership, DLJ Investment
Funding II, Inc., a Delaware corporation, DLJ ESC II, L.P., a Delaware limited
partnership, DLJ Investment Partners, L.P. a Delaware limited partnership, DLJ
Merchant Banking Partners, L.P. a Delaware limited partnership, DLJ
International Partners, C.V., a Netherlands Antilles limited partnership, DLJ
Offshore Partners, C.V., a Netherlands Antilles limited partnership, DLJ
Merchant Banking Funding, Inc., a Delaware corporation, and DLJ First ESC L.P.,
a Delaware limited partnership.
15.15. "CSFB Securities" shall mean the securities of the Company owned
by DLJ as of August 16th, 2000.
15.16. "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
15.17. "Excise Tax" shall mean any excise tax imposed under
Section 4999 of the Code.
15.18. "Executive" shall mean the individual named in the first
paragraph of this Agreement.
15.19. "Exempt Transferee" shall mean any merchant banking or similar
investment firm which acquires CSFB Securities from CSFB in the ordinary course
of its business and not with the purpose nor with the effect of changing or
influencing the Control or management of the Company, nor in connection with or
as a participant in any transaction having such purpose or effect.
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15.20. "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 the second sentence of Section 6.1
(treating all references in subsections (A) through (G) 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 subsection (A), (E), (F) or (G)
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:
(A) The assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities immediately
prior to the Change in Control; or the diminution or adverse alteration in
any material adverse respect of such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by Executive;
(B) Any reduction in the Executive's rate of Base Salary or failure by
the Company to pay the Executive salary in accordance with any agreement
between the Executive and the Company, or any reduction in the Executive's
total cash and stock compensation opportunities, including Base Salary and
incentives, for any fiscal year to less than 100% of the total cash and
stock compensation opportunities made available to him immediately preceding
the Change in Control or failure by the Company to provide the Executive
with total cash and stock compensation opportunities in accordance with any
agreement between the Executive and the Company (for this purpose, such
opportunities shall be deemed reduced if the objective standards by which
the Executive's incentive compensation measured becomes more stringent, the
target or maximum amounts of such incentive compensation are reduced, or the
amount of such incentive compensation is reduced on a discretionary basis
from the amount that would be payable solely by reference to the
objectives); or
(C) the relocation of the Executive's principal place of employment to
a location more than 40 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;
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(D) 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;
(E) 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 or any
substitute plans adopted prior to the Change in Control, 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;
(F) 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 or 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
(G) any purported termination of the Executive's employment which is
not effected pursuant to a Notice of Termination satisfying the requirements
of Section 7.1; 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.
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15.21. "Gross-Up Payment" shall have the meaning set forth in
Section 6.2.
15.22. "Notice of Termination" shall have the meaning set forth in
Section 7.1.
15.23. "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 and (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.
15.24. "Potential Change in Control" shall be deemed to have occurred
if the event set forth in any one of the following subsections shall have
occurred:
(A) the Company enters into an agreement, the consummation of which
would result in the occurrence of a Change in Control;
(B) 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;
(C) 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), other than in a transaction
involving the sale or transfer by CSFB of CSFB Securities representing 15%
or more of the combined voting power of the Company's then outstanding
securities to such Person if, and only for so long as, such Person is an
Exempt Transferee; or
(D) the Board adopts a resolution to the effect that, for purposes of
this Agreement, a Potential Change in Control has occurred.
15.25. "Potential Change in Control Period" shall commence upon the
occurrence of a Potential Change in Control and shall lapse immediately
following the first to occur of (i) a Change in Control or (ii) the one year
anniversary of the occurrence of a Potential Change in Control.
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15.26. "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.
15.27. "Severance Payments" shall have the meaning set forth in
Section 6.1.
15.28. "Tax Counsel" shall have the meaning set forth in Section 6.2.
15.29. "Term" shall mean the period of time described in Section 2
(including any extension, continuation or termination described therein).
15.30. "Total Payments" shall mean those payments so described in
Section 6.2.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
MANUFACTURERS' SERVICES LIMITED
By:
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Name:
Title:
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EXECUTIVE:
Address:
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(Please print carefully)
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