Exhibit 10b
-----------
EXECUTIVE AGREEMENT
THIS AGREEMENT dated as of _______________ __, 1997 by and between
TranSwitch Corporation, a Delaware corporation (the "Corporation") and
__________ (the "Executive").
WITNESSETH:
A. The Corporation considers it essential to the best interests of the
Corporation and its stockholders that its management be encouraged to remain
with the Corporation and to continue to devote full attention to the
Corporation's business in the event that there is a likelihood of a change of
control of the Corporation. In this connection, the Corporation recognizes that
the possibility of a change in control 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 Corporation and its stockholders.
Accordingly, the Corporation's Board of Directors (the "Board") has determined
that appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of members of the Corporation's management to their
assigned duties without distraction in the face of the potentially disturbing
circumstances arising from the possibility of a change in control of the
Corporation.
B. The Executive is a key executive of the Corporation, and the
Corporation believes that the Executive has made valuable contributions to the
productivity and profitability of the Corporation.
C. In the event that the Corporation enters into a written letter of
intent or other written agreement (each, a "Business Combination Agreement")
with a third party (including such party's affiliates, an "Acquiring Party")
concerning a possible business combination by such Acquiring Party with, or
acquisition by such Acquiring Party of equity securities of, the Corporation,
the Board believes it imperative that the Corporation and the Board be able to
rely upon the Executive to continue in his position and that the Corporation be
able to receive and rely upon his advice, if so requested, as to the best
interests of the Corporation and its stockholders without concern that he might
be distracted by the personal uncertainties and risks created by the Corporation
entering into a Business Combination Agreement.
D. Should the Corporation enter into a Business Combination Agreement, in
addition to the Executive's regular duties, he may be called upon to assist in
the assessment of such Business Combination Agreement, advise management and the
Board as to whether such Business Combination Agreement is in the best interests
of the Corporation and its stockholders, and to take such other actions as the
Board might determine to be appropriate.
NOW, THEREFORE, to assure the Corporation that it will have the continued
undivided attention and services of the Executive and the availability of his
advice and counsel notwithstanding the possibility or threat of a change of
control of the Corporation, and to induce
-2-
the Executive to remain in the employ of the Corporation, and for other good and
valuable consideration, the Corporation and the Executive agree as follows:
1. Operation of Agreement. This Agreement shall commence on the date
----------------------
hereof (the "Effective Date") and shall continue in effect through for twelve
(12) months from the Effective Date; provided, however, that (i) commencing on
-------- -------
the date that is twelve (12) months and one day from the Effective Date and on
each twelve-month anniversary of such date thereafter (each an "Extension
Date"), the term of this Agreement shall automatically be extended for one
additional year, without further action on the part of the parties hereto,
unless either party gives written notice of termination to the other party not
later than three months prior to an Extension Date, and (ii) if a "Change in
Control" (as defined in Section 4) of the Corporation occurs during the original
or extended term of this Agreement, this Agreement shall continue in effect for
a period of twelve (12) months beyond the month in which such Change in Control
occurs, provided, however, that so long as the Executive continues to be
-------- -------
employed by the Corporation, this Agreement shall be automatically extended from
year to year, without further action on the part of the parties hereto.
2. Employment. Subject to Section 3 hereof, the Corporation and the
----------
Executive agree that so long as the Executive is employed by the Corporation,
the Executive shall perform such executive duties and responsibilities as were
being performed by the Executive immediately prior to the Effective Date or
appropriate comparable duties and responsibilities, as may be determined by the
Board in response to changing business requirements. The Executive agrees that
so long as he is employed by the Corporation he shall devote substantially all
of his business time and efforts to his executive duties and responsibilities.
In the event that the Corporation enters into a Business Combination Agreement
which, if effected, will result in a Change of Control (as defined in Section
4), the Executive agrees that he will not voluntarily leave the employ of the
Corporation, and will render the services contemplated in the recitals to this
Agreement, and the Corporation agrees that it will not terminate the employment
of the Executive for any reason other than for Cause (as such term is defined in
Section 6) until the earlier of (i) in the opinion of the Board (which shall be
binding and conclusive on the Executive), the Business Combination Agreement has
been abandoned or terminated, or (ii) until after such a Change of Control has
been effected, or (iii) 120 calendar days from the date of the execution of a
Business Combination Agreement.
3. Termination of Employment. Except with respect to the specific
-------------------------
undertakings herein upon a Qualified Termination, the Executive shall be an at-
will employee of the Corporation. Subject to the last sentence of Section 2,
either party shall have the right to terminate Executive's employment upon
notice to the other party, and, in the case of termination by the Corporation,
such termination shall be in accordance with the Corporation's normal and
customary termination practices for executive employees. If the Executive shall
terminate his employment under circumstances constituting a Qualifying
Termination (as defined in Section 6) the obligations and rights of the
Corporation as set forth in Sections 6, 7 and the following Sections shall
apply. In the event of any termination, the Corporation's benefit obligations
under Section 5 hereof, and applicable laws, shall apply.
-3-
4. Change of Control. For purposes of this Agreement, a "Change in
-----------------
Control" means the occurrence of any of the following events:
(a) The Corporation is merged or consolidated or reorganized into or
with another corporation or other legal person, and as a result of such
merger, consolidation or reorganization less than a majority of the
combined voting power of the then-outstanding securities of such surviving,
resulting or reorganized corporation or person immediately after such
transaction is held in the aggregate by the holders of the then-outstanding
securities entitled to vote generally in the election of directors of the
Corporation ("Voting Stock") immediately prior to such transaction;
(b) The Corporation sells or otherwise transfers all or substantially
all of its assets to any other corporation or other legal person, and as a
result of such sale or transfer less than a majority of the combined voting
power of the then-outstanding securities of such corporation or person
immediately after such sale or transfer is held in the aggregate by the
holders of Voting Stock of the Corporation immediately prior to such sale
or transfer;
(c) There is a report filed on Schedule 13D or Schedule 14D-1 (or any
successor schedule, form or report), each as promulgated pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
disclosing that any "person" (as such term is used in Section 13(d)(3) or
Section 14(d)(2) of the Exchange Act) has become the "beneficial owner" (as
such term is used in Rule 13d-3 under the Exchange Act) of securities
representing 35% or more of the Voting Stock of the Corporation;
(d) The Corporation files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Exchange Act disclosing
in response to Form 8-K or Schedule 14A (or any successor schedule, form or
report or item therein) that a change in control of the Corporation has
occurred; or
(e) If during any period of two consecutive years, individuals who at
the beginning of any such period constitute the Board cease for any reason
to constitute at least a majority thereof, unless the election, or the
nomination for election by the Corporation's stockholders, of each director
of the Corporation first elected during such period was approved by a vote
of at least a majority of the directors then still in office who were
directors of the Corporation at the beginning of any such period;
provided, however, that a "Change in Control" shall not be deemed to have
-------- -------
occurred for purposes of this Agreement solely because (i) the Corporation, (ii)
an entity in which the Corporation directly or indirectly beneficially owns 50%
or more of the voting securities, or (iii) any Corporation-sponsored employee
stock ownership plan or any other employee benefit plan of the Corporation,
either files or becomes obligated to file a report or a proxy statement under or
in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any
successor schedule, form or report) under the Exchange Act, disclosing
beneficial ownership by it of shares of Voting Stock or because the Corporation
reports that a change in control of the Corporation has occurred by reason of
such beneficial ownership.
-4-
5. Compensation, Compensation Plans, Perquisites. So long as the
---------------------------------------------
Executive is employed by the Corporation, the Executive shall be compensated as
follows:
(a) He shall receive an annual base salary at a rate which is not less
than his rate of annual base salary immediately prior to the Effective
Date, with the opportunity for increases from time to time thereafter which
are in accordance with the Corporation's regular practices.
(b) He shall be eligible to participate on a reasonable basis in any
incentive compensation plans, the nature and terms of such plan(s) shall be
determined in the sole discretion of the Board and the Compensation
Committee.
(c) He shall be entitled to receive employee benefits and perquisites
provided by the Corporation equivalent to the benefits and perquisites to
which he was entitled immediately prior to the Effective Date. Such
benefits and perquisites shall include, but not be limited to, the benefits
and perquisites provided under the Corporation's Section 401(k) profit
sharing plan; its life, accident, health and dental insurance and medical
reimbursement plans; and various fringe benefits.
6. Termination. The term "Qualifying Termination" shall mean termination
-----------
by the Corporation of the employment of the Executive with the Corporation
within the twelve (12) months immediately following a Change of Control or
deemed to be following a Change of Control as set forth in Section 18 for any
reason other than for Cause, as hereinafter defined.
For purposes of this Agreement, "Cause" means: (a) any intentional act of
theft, fraud or embezzlement by the Executive in connection with his work with
the Corporation; or (b) the Executive's continuing, repeated and willful failure
or refusal to perform his duties and services under this Agreement (other than
due to his incapacity due to illness or injury), provided that such failure or
refusal continues uncorrected for a period of thirty (30) calendar days after
the Executive shall have received written notice from the Board stating with
specificity the nature of such failure or refusal. Notwithstanding the
foregoing, Executive shall not be deemed to have been terminated for Cause
unless and until there shall have been delivered to him a copy of a resolution
duly adopted by the affirmative vote of not less than a majority of the entire
Board at a meeting of the Board called and held for (but not necessarily
exclusively for) that purpose (after reasonable notice to Executive and an
opportunity for Executive, together with counsel of his choice, to be heard by
the Board) finding that Executive has, in the good faith opinion of the Board,
engaged in conduct constituting Cause and specifying the particulars thereof in
reasonable detail.
7. Termination Payment. In the event of a Qualifying Termination, and
-------------------
subject to reduction as provided in Section 8 of this Agreement, the Corporation
shall pay to the Executive (or in the event of the Executive's death after a
Qualifying Termination, to his beneficiaries, heirs or estate) a lump sum amount
equal to the sum of (i) _________ (__) the Executive's annual base salary as in
effect immediately prior to the Change in Control and (ii) __________ (__) the
highest annual bonus paid to the Executive by the Corporation during the five
most recently completed fiscal years of the Corporation ending immediately prior
to the Change in Control
-5-
(collectively, the "Termination Payment"). Such Termination Payment shall be
paid to the Executive within ten (10) calendar days after the date of a
Qualifying Termination.
8. Reduction of Payments by the Corporation. If, in connection with a
----------------------------------------
change (a) in the ownership or effective control of the Corporation, or (b) in
the ownership of a substantial portion of the Corporation's assets (each as
defined in Section 280G(b)(2)(A) of the Internal Revenue Code of 1986, as
amended (the "Code")), the Termination Payment, and/or any payment or benefit
received or to be received by the Executive pursuant to any other plan,
arrangement or agreement (such payments or benefits, together with the
Termination Payment, the "Total Payments") would constitute (in whole or in
part) an "excess parachute payment" within the meaning of Section 280G(b) of the
Code, then the amount of the Total Payments shall be reduced to the minimum
extent necessary to insure that no portion of the Total Payments constitutes an
"excess parachute payment" within the meaning of Section 280G(b) of the Code.
All calculations pursuant to this Section 8 shall be made by tax counsel
selected by the Corporation or by the Corporation's independent auditors.
9. No Mitigation Obligation. The parties hereto expressly agree that the
-------------------------
payment of the Termination Payments by the Corporation to the Executive in
accordance with the terms of this Agreement will be liquidated damages, and that
the Executive shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise, nor
shall any profits, income, earnings or other benefits from any source whatsoever
create any mitigation, offset, reduction or any other obligation on the part of
the Executive.
10. Confidentiality. The Executive agrees that during and after his
---------------
employment with the Corporation, the Executive shall continue to comply with the
provisions of the Agreement for Assignment and Covenant Against Disclosure
between the Executive and the Corporation.
11. Legal Fees and Expenses. It is the intent of the Corporation that the
------------------------
Executive not be required to incur the expenses associated with the enforcement
of his rights under this Agreement by litigation or other legal action because
the cost and expense thereof would substantially detract from the benefits
intended to be extended to the Executive hereunder. Accordingly, if it should
appear to the Executive that the Corporation has failed to comply with any of
its obligations under this Agreement or in the event that the Corporation or any
other person takes any action to declare this Agreement void or unenforceable,
or institutes any litigation designed to deny, or to recover from, the Executive
the benefits intended to be provided to the Executive hereunder, the Corporation
irrevocably authorizes the Executive from time to time to retain counsel of his
choice, at the expense of the Corporation as hereinafter provided, to represent
the Executive in connection with the initiation or defense of any litigation or
other legal action, whether by or against the Corporation or any director,
officer, stockholder or other person affiliated with the Corporation, in any
jurisdiction. The Corporation shall pay or cause to be paid and shall be solely
responsible for any and all attorneys' and related fees and expenses incurred by
the Executive as a result of the Corporation's failure to perform this Agreement
or any provision hereof or as a result of the Corporation or any person
contesting the validity or enforceability of this Agreement or any provision
hereof as aforesaid.
-6-
12. Notices. Any notices, requests, demands and other communications
-------
provided for by this Agreement shall be sufficient if in writing and if sent by
personal delivery or by facsimile, such facsimile to be followed by a copy sent
by regular mail, in the case of Executive to the last address he has filed in
writing with the Corporation or, in the case of the Corporation, to the Board of
Directors with a copy to the Secretary of the Corporation at its principal
executive offices.
13. Non-Alienation. The Executive shall not have any right to pledge,
--------------
hypothecate, anticipate or in any way create a lien or security interest upon
any amounts provided under this Agreement; and no benefits payable hereunder
shall be assignable in anticipation of payment either by voluntary or
involuntary acts, or by operation of law, except by will or the laws of descent
and distribution.
14. No Set-off. In the event of a Qualifying Termination of the
----------
Executive's employment hereunder, the Corporation may not set-off or withhold
against any termination payments due to the Executive the amount of any claims
it may have against the Executive except any amounts for borrowed money or
advances owing to the Corporation by the Executive as of the date of such
Qualifying Termination.
15. Amendment. This Agreement may be amended or canceled by mutual
---------
agreement of the parties in writing without the consent of any other person and,
so long as the Executive lives, no person, other than the parties hereto, shall
have any rights under or interest in this Agreement or the subject matter
hereof.
16. Successor to the Corporation. Except as otherwise provided herein,
----------------------------
this Agreement shall be binding upon and inure to the benefit of the Corporation
and any successor of the Corporation; provided, however, that the Corporation
-------- -------
shall obtain the written agreement of any successor of the Corporation to be
bound by the provisions of this Agreement as if the successor were the
Corporation and for purposes of this Agreement, any successor of the Corporation
shall be deemed to be the "Corporation" for all purposes. In the event of the
death of the Executive after a Qualifying Termination, the beneficiaries, heirs
or estate of the Executive, as appropriate, shall be entitled to enforce the
provisions of Section 7 hereof.
17. Severability. In the event that any provision or portion of this
------------
Agreement shall be determined to be invalid or unenforceable for any reason in
any jurisdiction, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in full force and effect and any such invalid or
unenforceable provision shall not be considered invalid or unenforceable in any
other jurisdiction.
18. Employment Rights. Nothing expressed or implied in this Agreement
-----------------
shall create any right or duty on the part of the Corporation or the Executive
to have the Executive remain in the employment of the Corporation prior to the
Corporation entering into a Business Combination Agreement; provided, however,
-------- -------
that if there is any termination of the Executive's employment which would
constitute a Qualifying Termination if it occurred after a Change of Control and
such termination follows the commencement of a substantive discussion with a
third
-7-
person that ultimately results in a Change in Control, such termination shall be
deemed to be following a Change in Control for purposes of this Agreement.
19. Termination of Agreement. This Agreement shall terminate if the
------------------------
Executive's employment by the Corporation is terminated in any manner other than
a Qualifying Termination.
20. Miscellaneous. As used throughout this Agreement, the masculine
-------------
pronoun has been used for convenience only. It is intended to refer equally to
men and women. Moreover the use of the singular term throughout with respect to
individuals or persons is intended to include the plural form. This Agreement
shall be construed by the laws of the United States of America and the State of
Connecticut.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-8-
IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant
to the authorization from its Board of Directors, the Corporation has caused
these presents to be executed in its name on its behalf, and its corporate seal
to be hereunto affixed and attested by its Secretary, or Assistant Secretary,
all as of the day and year first above written.
(SEAL)
TRANSWITCH CORPORATION
ATTEST:
By:__________________________ By:___________________________
Title: Name:
Title:
WITNESS: EXECUTIVE:
_____________________________ ______________________________
