1
EXHIBIT 10.8
CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT is entered into as of the 8th day of January, 2001 by
and between PFSWEB, INC., a Delaware corporation (the "Company"), and
_________________________ ("Executive").
WITNESSETH
WHEREAS, the Company considers the establishment and maintenance of a
sound and vital management to be essential to protecting and enhancing the best
interests of the Company and its stockholders; and
WHEREAS, the Company recognizes that, as is the case with many publicly
held corporations, the possibility of a change in control may arise and that
such possibility may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders; and
WHEREAS, the Board (as defined in Section 1) has determined that it is
in the best interests of the Company and its stockholders to secure Executive's
continued services and to ensure Executive's continued and undivided dedication
to his duties in the event of any threat or occurrence of a Change in Control
(as defined in Section 1) of the Company; and
WHEREAS, the Board has authorized the Company to enter into this
Agreement.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements herein contained, the Company and Executive hereby
agree as follows:
1. Definitions. As used in this Agreement, the following terms shall
have the respective meanings set forth below:
"Board" means the Board of Directors of the Company.
"Bonus Amount" means the Per Share Price multiplied by the Bonus Number
set forth below the Executive's name on the signature page hereto.
"Change in Control" means the occurrence of any one of the following
events:
(a) individuals who, on the date of this Agreement, constitute the
Board (the "Incumbent Directors") cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director subsequent
to the date of this Agreement, whose election or nomination for election was
approved by a vote of at least two-thirds of the Incumbent Directors then on the
Board (either by a specific vote or by approval of the proxy statement of the
Company in which such person is named as a nominee for director, without written
objection to such nomination) shall be an Incumbent Director; provided, however,
that
2
no individual initially elected or nominated as a director of the Company as a
result of an actual or threatened election contest with respect to directors or
as a result of any other actual or threatened solicitation of proxies (or
consents) by or on behalf of any person other than the Board shall be deemed to
be an Incumbent Director;
(b) any "Person" (as such term is defined in Section 3(a)(9) of the
Securities Exchange Act of 1934 (the "Exchange Act") and as used in Sections
13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing more than 50% of the combined voting
power of the Company's then outstanding securities eligible to vote for the
election of the Board (the "Company Voting Securities"); provided, however, that
the event described in this paragraph shall not be deemed to be a Change in
Control by virtue of any of the following acquisitions: (i) by the Company or
any Subsidiary, (ii) by any employee benefit plan (or related trust) sponsored
or maintained by the Company or any Subsidiary, (iii) by any underwriter
temporarily holding securities pursuant to an offering of such securities, (iv)
pursuant to a Non-Qualifying Transaction (as defined herein), or (v) pursuant to
any acquisition by Executive or any group of persons including Executive (or any
entity controlled by Executive or any group of persons including Executive);
(c) the consummation of a merger, consolidation, statutory share
exchange or similar form of corporate transaction involving the Company or any
of its Subsidiaries that requires the approval of the Company's stockholders,
whether for such transaction or the issuance of securities in the transaction (a
"Business Combination"), unless immediately following such Business Combination:
(i) more than 50% of the total voting power of (x) the corporation resulting
from such Business Combination (the "Surviving Corporation"), or (y) if
applicable, the ultimate parent corporation that directly or indirectly has
beneficial ownership of 100% of the voting securities eligible to elect
directors of the Surviving Corporation (the "Parent Corporation"), is
represented by Company Voting Securities that were outstanding immediately prior
to such Business Combination (or, if applicable, is represented by shares into
which such Company Voting Securities were converted pursuant to such Business
Combination), and such voting power among the holders thereof is in
substantially the same proportion as the voting power of such Company Voting
Securities among the holders thereof immediately prior to the Business
Combination, (ii) no person (other than any employee benefit plan (or related
trust) sponsored or maintained by the Surviving Corporation or the Parent
Corporation), is or becomes the beneficial owner, directly or indirectly, of
more than 50% of the total voting power of the outstanding voting securities
eligible to elect directors of the Parent Corporation (or, if there is no Parent
Corporation, the Surviving Corporation) and (iii) at least a majority of the
members of the board of directors of the Parent Corporation (or, if there is no
Parent Corporation, the Surviving Corporation) following the consummation of the
Business Combination were Incumbent Directors at the time of the Board's
approval of the execution of the initial agreement providing for such Business
Combination (any Business Combination which satisfies all of the criteria
specified in (i), (ii) and (iii) above shall be deemed to be a "Non-Qualifying
Transaction"); or
2
3
(d) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or a sale of all or substantially all
of the Company's assets.
Notwithstanding the foregoing, a Change in Control of the Company shall
not be deemed to occur (i) solely because any person acquires beneficial
ownership of more than 50% of the Company Voting Securities as a result of the
acquisition of Company Voting Securities by the Company which reduces the number
of Company Voting Securities outstanding; provided, that if after such
acquisition by the Company such person becomes the beneficial owner of
additional Company Voting Securities that increases the percentage of
outstanding Company Voting Securities beneficially owned by such person, a
Change in Control of the Company shall then occur or (ii) if prior to the
occurrence of the Change in Control, and not as the result of any actual,
proposed or threatened Change in Control event initiated by any third party, all
of the Incumbent Directors then serving on the Board, by unanimous action,
authorize the Company to enter into and effect the Change in Control.
"Per Share Price" means the per share amount (expressed in U.S.
Dollars) paid or payable to holders of the Company Voting Securities in respect
thereof in connection with, or as part of, any Change in Control, including
without limitation, any tender offer price or merger price, provided, that (i)
to the extent such amount is paid or payable in securities or property other
than cash, such securities or property shall be valued at its fair market value
on the date of the consummation of the Change in Control (such fair market value
being deemed the closing price of any securities which are publicly traded) and
(ii) if no amounts are paid or payable to holders of Company Voting Securities
in connection with, or as part of, the Change in Control, the "Per Share Price"
shall be equal to the closing price of the Company Voting Securities on the
effective date of the Change in Control.
"Subsidiary" means any corporation or other entity in which the Company
has a direct or indirect ownership interest of 50% or more of the total combined
voting power of the then outstanding securities or interests of such corporation
or other entity entitled to vote generally in the election of directors or in
which the Company has the right to receive 50% or more of the distribution of
profits or 50% of the assets upon liquidation or dissolution.
2. Obligation of Executive. The Executive agrees to faithfully render
such services to the Company as the Executive and the Company shall mutually
agree from time to time. This Agreement does not constitute an employment
agreement or promise of employment and shall not restrict the ability of the
Company to terminate the employment of the Executive, with or without cause, at
any time (except as may be set forth in any separate written agreement now or
hereafter entered into between the Company and the Executive); provided,
however, that any termination of employment shall not terminate this Agreement
except as set forth in Section 3 below.
3. Term of Agreement. This Agreement shall be effective on the date
hereof and shall continue in effect until June 30, 2002, at which time this
Agreement shall automatically terminate and expire and be of no further force or
effect. Notwithstanding the foregoing, (i) this Agreement may be terminated at
any time by the Company, upon written notice to the
3
4
Executive, provided that such termination shall be expressly authorized by the
unanimous vote of the Incumbent Directors then serving on the Board (excluding
the Executive, if the Executive is then serving as an Incumbent Director) and
(ii) this Agreement shall automatically terminate upon the voluntary termination
of employment by the Executive.
4. Bonus Amount. If a Change in Control shall occur during the term of
this Agreement, the Company shall, within three business days thereafter,
without setoff or counterclaim of any kind, pay to the Executive the Bonus
Amount.
5. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment, award, benefit or distribution
(or any acceleration of any payment, award, benefit or distribution) by the
Company (or any of its affiliated entities) or any entity which effectuates a
Change in Control (or any of its affiliated entities) to or for the benefit of
Executive (whether pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
5) (the "Payments") would be subject to the excise tax imposed by Section 4999
of the Internal Revenue Code of 1986, as amended (the "Code"), or any interest
or penalties are incurred by Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Company shall pay to
Executive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by Executive of all taxes (including any Excise Tax) imposed upon
the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal
to the sum of (x) the Excise Tax imposed upon the Payments and (y) the product
of any deductions disallowed because of the inclusion of the Gross-Up Payment in
Executive's adjusted gross income and the highest applicable marginal rate of
federal income taxation for the calendar year in which the Gross-Up Payment is
to be made. For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to (i) pay federal income taxes at the highest
marginal rates of federal income taxation for the calendar year in which the
Gross-Up Payment is to be made, (ii) pay applicable state and local income taxes
at the highest marginal rate of taxation for the calendar year in which the
Gross-Up Payment is to be made, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and local taxes and
(iii) have otherwise allowable deductions for federal income tax purposes at
least equal to those which could be disallowed because of the inclusion of the
Gross-Up Payment in the Executive's adjusted gross income.
(b) Subject to the provisions of Section 5(a), all
determinations required to be made under this Section 5, including whether and
when a Gross-Up Payment is required, the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determinations, shall be made by
the public accounting firm that is retained by the Company as of the date
immediately prior to the Change in Control (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and Executive
within fifteen (15) business days of the receipt of notice from the Company or
the Executive that there has been a Payment, or such earlier time as is
requested by the Company (collectively, the
4
5
"Determination"). In the event that the Accounting Firm is serving as accountant
or auditor for the individual, entity or group effecting the Change in Control,
Executive may appoint another nationally recognized public accounting firm to
make the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company and the Company shall enter
into any agreement requested by the Accounting Firm in connection with the
performance of the services hereunder. The Gross-Up Payment under this Section 5
with respect to any Payments shall be made no later than thirty (30) days
following such Payment. If the Accounting Firm determines that no Excise Tax is
payable by Executive, it shall furnish Executive with a written opinion to such
effect, and to the effect that failure to report the Excise Tax, if any, on
Executive's applicable federal income tax return will not result in the
imposition of a negligence or similar penalty. The Determination by the
Accounting Firm shall be binding upon the Company and Executive. The parties
acknowledge that as a result of the uncertainty in the application of Section
4999 of the Code at the time of the Determination, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made
("Underpayment") or Gross-Up Payments are made by the Company which should not
have been made ("Overpayment"), consistent with the calculations required to be
made hereunder. In the event that the Executive thereafter is required to make
payment of any Excise Tax or additional Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code) shall be promptly paid by the Company to or for the
benefit of Executive. In the event the amount of the Gross-Up Payment exceeds
the amount necessary to reimburse the Executive for his Excise Tax, the
Accounting Firm shall determine the amount of the Overpayment that has been made
and any such Overpayment (together with interest at the rate provided in Section
1274(b)(2) of the Code) shall be promptly paid by Executive (to the extent he
has received a refund if the applicable Excise Tax has been paid to the Internal
Revenue Service) to or for the benefit of the Company. Executive shall
cooperate, to the extent the Company reimburses his expenses, with any
reasonable requests by the Company in connection with any contests or disputes
with the Internal Revenue Service in connection with the Excise Tax.
6. Withholding Taxes. The Company may withhold from all payments due to
Executive (or his beneficiary or estate) hereunder all taxes which, by
applicable federal, state, local or other law, the Company is required to
withhold therefrom.
7. Reimbursement of Expenses. If any contest or dispute shall arise
under this Agreement involving the failure or refusal of the Company to perform
fully in accordance with the terms hereof, the Company shall reimburse
Executive, on a current basis, for all reasonable legal fees and expenses, if
any, incurred by Executive in connection with such contest or dispute
(regardless of the result thereof), together with interest in an amount equal to
the Chase Bank prime rate from time to time in effect, but in no event higher
than the maximum legal rate permissible under applicable law, such interest to
accrue from the date the Company receives Executive's statement for such fees
and expenses through the date of payment thereof, regardless of whether or not
Executive's claim is upheld by a court of competent jurisdiction; provided,
however, Executive shall be required to repay any such
5
6
amounts to the Company to the extent that a court issues a final order from
which no appeal can be taken, or with respect to which the time period to appeal
has expired, setting forth the determination that the position taken by
Executive was frivolous or advanced by Executive in bad faith.
8. Successors; Binding Agreement.
(a) This Agreement shall not be terminated by any Business
Combination. In the event of any Business Combination, the provisions of this
Agreement shall be binding upon the Surviving Corporation, and such Surviving
Corporation shall be treated as the Company hereunder.
(b) The Company agrees that in connection with any Business
Combination, it will cause any successor entity to the Company to
unconditionally assume (and for any Parent Corporation in such Business
Combination to guarantee), by written instrument delivered to Executive (or his
beneficiary or estate), all of the obligations of the Company hereunder. Failure
of the Company to obtain such assumption and guarantee prior to the
effectiveness of any such Business Combination that constitutes a Change in
Control, shall be a breach of this Agreement.
(c) This Agreement shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive shall die while any amounts would be payable to Executive hereunder
had Executive continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to such
person or persons appointed in writing by Executive to receive such amounts or,
if no person is so appointed, to Executive's estate.
9. Notice. For purposes of this Agreement, all notices and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered or five (5) days after deposit in
the United States mail, certified and return receipt requested, postage prepaid,
addressed as follows:
If to the Executive to the most recent address of such
Executive on the books and records of the Company; and if to the Company:
PFSweb, Inc., 000 Xxxxx Xxxxxxx Xxxxxxxxxx, Xxxxx, Xxxxx 00000, Attention: Chief
Executive Officer; or to such other address as either party may have furnished
to the other in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
10. No Setoff. The Company's obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action that the Company may have against Executive or others.
11. Employment with Subsidiaries. Employment with the Company for
purposes of this Agreement shall include employment with any Subsidiary.
6
7
12. Survival. The respective obligations and benefits afforded to the
Company and Executive and arising during the term of this Agreement shall
survive the termination of this Agreement.
13. GOVERNING LAW; VALIDITY. THE INTERPRETATION, CONSTRUCTION AND
PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAWS THEREOF, OF SUCH PRINCIPLES OF ANY OTHER
JURISDICTION WHICH COULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION
OTHER THAN THE STATE OF DELAWARE. 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 OTHER PROVISIONS SHALL REMAIN IN
FULL FORCE AND EFFECT.
14. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
15. Miscellaneous. No provision of this Agreement may be modified or
waived unless such modification or waiver is agreed to in writing and signed by
Executive and by a duly authorized officer of the Company. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
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. Failure by Executive
or the Company to insist upon strict compliance with any provision of this
Agreement or to assert any right Executive or the Company may have hereunder
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement. Except as otherwise specifically provided
herein, the rights of, and benefits payable to, Executive, his estate or his
beneficiaries pursuant to this Agreement are in addition to any rights of, or
benefits payable to, Executive, his estate or his beneficiaries under any other
employee benefit plan or compensation program of the Company.
*********
7
8
CHANGE IN CONTROL SIGNATURE PAGE
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by a duly authorized officer of the Company and Executive has executed
this Agreement as of the day and year first above written.
PFSWEB, INC.
By:
---------------------------------
Title:
------------------------------
------------------------------------
[Print Name of Executive]
------------------------------------
[Bonus Number]
------------------------------------
[Signature of Executive]
8
