Exhibit 10.17
STREAM INTERNATIONAL HOLDINGS INC.
Form of Management Retention Agreement
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[ADDRESS OF MANAGEMENT PERSON APPEARS HERE]
Dear _____:
Stream International Holdings Inc. (the "Company") recognizes that, as is
the case with many corporations, the possibility of a change in control may
exist and that such possibility, and the uncertainty and questions which it may
raise among key personnel, may result in the departure or distraction of key
personnel to the detriment of the Company, its stockholders and its customers.
The Board of Directors of the Company (the "Board") has determined that
appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of the Company's key personnel, including yourself, to
their assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a change in control of the
Company.
In order to induce you to remain in its employ, the Company agrees that you
shall receive the severance benefits set forth in this letter agreement (the
"Agreement") in the event your employment with the Company is terminated under
the circumstances described below subsequent to a "Change in Control" of the
Company (as defined below).
1. Certain Definitions.
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As used herein, the following terms shall have the following respective
meanings:
(a) A "Change in Control" shall occur or be deemed to have occurred only if
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any of the following events occur:
(i) any "person," as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other
than the Company, any trustee or other fiduciary holding securities under an
employee benefit plan of the Company, any corporation owned directly or
indirectly by the stockholders of the Company in substantially the same
proportion as their ownership of stock of the Company or an Exempt Person) is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing 30% or
more of the combined voting power of the Company's then outstanding securities;
(ii) the stockholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than (A) 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) more than 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation or (B) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in which no
person (as hereinabove defined), other than a person holding more than 50% of
the combined voting power of the Company's then outstanding securities
immediately prior to such recapitalization, acquires more than 50% of the
combined voting power of the Company's then outstanding securities;
(iii) the stockholders 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 of the Company's assets, excluding any
disposition to a corporation of which 50% or more of the voting securities are
held by the Company or the stockholders of the Company immediately prior to the
disposition.
(iv) RRD, together with its affiliates, ceases to be beneficial owner
of at least 30% of the combined voting power of the Company's then outstanding
securities provided that such event is not the result of an initial public
offering of the Company's stock.
(v) the closing of any of the events referred to in clauses (i), (ii)
or (iii) below regardless of what sequence:
(i) sale or other disposition of outsourced technical support
business;
(ii) sale or other disposition of the outsourced manufacturing
business, including a joint venture in which the Company or the stockholders of
the Company hold less than 60% of the voting interest immediately prior to the
disposition; and
(iii) sale or other disposition of Corporate Technologies
business.
(vi) RRD, together with affiliates, becomes the beneficial owner of at
least 90% of the combined voting power of the Company's then outstanding
securities provided that such event is not the result of an initial public
offering of the Company's stock.
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(b) "Cause" shall mean (i) an intentional act of fraud, embezzlement or
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theft in connection with your duties to the Company or in the course of your
employment with the Company, or (ii) your willful engaging in gross misconduct
which is demonstrably and materially injurious to the Company. For purposes of
this Subsection, no act or failure to act on your part shall be deemed "willful"
unless done or omitted to be done by you not in good faith and without
reasonable belief that your action or omission was in the best interest of the
Company.
(c) "Date of Termination" shall have the meanings set forth in Section
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3(c).
(d) "Disability" shall be deemed to have occurred if, as a result of
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incapacity due to physical or mental illness, you shall have been absent from
the full-time performance of your duties with the Company for six (6)
consecutive months and, within thirty (30) days after written Notice of
Termination by reason of disability is given to you, you shall not have returned
to the full-time performance of your duties.
(e) "Exempt Person" means RRD or any affiliate thereof, provided that RRD
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shall cease to be an Exempt Person if and when, following a Change in Control
(as defined in Section 1(a) but substituting RRD for the "Company" as used
therein) of RRD directly or indirectly, acquires beneficial ownership of any
additional shares of the Company's capital stock.
(f) "Good Reason" shall mean, without your express written consent, the
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occurrence after a Change in Control of the Company of any of the following
circumstances unless, in the case of paragraphs (A), (C), (D), (F) or (G), such
circumstances are fully corrected prior to the Date of Termination specified in
the Notice of Termination given in respect thereof:
(A) any significant diminution in your position, duties,
responsibilities, power, title or office as in effect immediately prior to a
Change in Control;
(B) any reduction in your annual base salary as in effect on the date
hereof or as the same may be increased from time to time;
(C) the failure by the Company to (i) continue in effect any material
compensation or benefit plan in which you participate immediately 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, (ii)
continue your participation therein (or in such substitute or alternative plan)
on a basis not materially less favorable, both in terms of the amount of
benefits provided and the level of your participation relative to other
participants, as existed at the time of the Change in Control or (iii) award
cash bonuses to you in amounts and in a manner
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substantially consistent with past practice in light of the Company's financial
performance;
(D) the failure by the Company to continue to provide you with
benefits substantially similar to those enjoyed by you under any of the
Company's life insurance, medical, health and accident, or disability plans in
which you were participating at the time of the Change in Control, the taking of
any action by the Company which would directly or indirectly materially reduce
any of such benefits, or the failure by the Company to provide you with the
number of paid vacation days to which you are 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;
(E) any requirement by the Company or of any person in control of the
Company that (i) the location at which you perform your principal duties for the
Company be changed to a new location that is outside a radius of 35 miles from
your principal residence at the time of the Change in Control or (ii) you travel
on an overnight basis more than 90 days in any consecutive 12-month period;
(F) the failure of the Company to obtain a reasonably satisfactory
agreement from any successor to assume and agree to perform this Agreement, as
contemplated in Section 5;
(G) any purported termination of your employment which is not effected
pursuant to a Notice of Termination satisfying the requirements of Section 3(b),
which purported termination shall not be effective for purposes of this
Agreement.
(g) "Notice of Termination" shall have the meaning set forth in Section
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3(b).
(h) "Severance Payments" shall have the meaning set forth in Section
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4(c)(ii).
(i) "Term" shall have the meaning set forth in Section 2.
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2. Term of the Agreement.
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The term of this Agreement (the "Term") shall commence as of the date
hereof and shall continue in effect through December 31, 1998; provided,
however, that commencing on January 1, 1999 and each January 1 thereafter, the
Term shall be automatically extended for one additional year unless, not later
than November 30 of the preceding calendar year, the Company shall have given
you written notice that the Term will not be extended; and provided further
that, if a Change in Control of the Company shall have occurred during the
original or extended Term, this Agreement shall continue in effect for a period
of not less than twenty-four (24)
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months beyond the month in which such Change in Control occurred.
3. Employment Status; Termination Following Change in Control.
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(a) No benefits shall be payable under this Agreement unless there has been
a Change in Control of the Company during the Term. You acknowledge that this
Agreement does not constitute a contract of employment or impose on the Company
any obligation to retain you as an employee. You may terminate your employment
at any time, with or without Good Reason. If your employment with the Company
terminates for any reason and subsequently a Change in Control shall have
occurred, you shall not be entitled to any benefits hereunder.
(b) Any termination of your employment by the Company or by you following a
Change in Control of the Company during the Term shall be communicated by
written notice of termination that indicates that specific provision in this
Agreement relied upon and sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of your employment
under the provision so indicated ("Notice of Termination"). A Notice of
Termination shall be delivered to the other party hereto in accordance with
Section 6.
(c) The "Date of Termination" shall mean (i) if your employment is
terminated for Disability, thirty (30) days after Notice of Termination is given
(provided that you shall not have returned to the full-time performance of your
duties during such thirty (30) day period), and (ii) if your employment is
terminated by the Company for Cause, by you for Good Reason or for any other
reason (other than Disability), the date specified in the Notice of Termination
(which, in the case of a termination for Cause, shall not be less than thirty
(30) days from the date such Notice of Termination is given and in the case of a
termination for Good Reason shall not be less than fifteen (15) nor more than
sixty (60) days from the date such Notice of Termination is given); provided,
however, that 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 proviso), the party receiving such Notice of Termination notifies
the other party that a dispute exists concerning the termination, then the Date
of Termination shall be the date on which the dispute is finally determined,
either by mutual written agreement of the parties, by a binding arbitration
award, or by a final judgment, order or decree of 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); and provided,
further, that the Date of Termination shall be extended by a notice of dispute
only if such notice is given in good faith and the party giving such notice
pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, the Company will continue to
pay you for your full compensation in effect when the notice giving rise to the
dispute was given (including, but not limited to, base salary) and continue you
as a participant in all compensation, benefit and
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insurance plans in which you were participating when the notice giving rise to
the dispute was given, until the dispute is finally resolved in accordance with
this Subsection.
(d) You shall be entitled to the benefits provided in Section 4 if a Change
in Control shall have occurred during the Term and your employment with the
Company is subsequently terminated or terminates within twenty-four (24) months
after such Change in Control, unless such termination is (A) because of your
death, (B) by the Company for Disability or Cause, or (C) by you other than for
Good Reason.
(e) Your right to terminate your employment for Good Reason shall not be
affected by your incapacity due to physical or mental illness. Your continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason under this Agreement.
4. Compensation Upon Termination. Following a Change in Control of the
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Company, you shall be entitled to the following benefits during a period of
disability, or upon termination of your employment, as the case may be, provided
that such period or termination occurs during the Term and provided that this
compensation is in lieu of and not in addition to any compensation otherwise
available to you under a Company Severance Policy or an Employment Agreement, as
the case may be:
(a) Disability. During any period that you fail to perform your full-time
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duties with the Company as a result of incapacity due to physical or mental
illness, you shall continue to receive base salary and all other earned
compensation at the rate in effect at the commencement of any such period
(offset by all compensation payable to you under the Company's disability plan
or program or other similar plan during such period) until your employment is
terminated by reason of Disability. Thereafter, or in the event your employment
is terminated by reason of death, your benefits shall be determined under the
Company's long-term disability, retirement, insurance and other compensation
programs then in effect in accordance with the terms of such programs.
(b) Cause and Voluntary Termination other than for Good Reason. If your
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employment shall be terminated by the Company for Cause or by you other than for
Good Reason following a Change in Control, the Company shall pay you your full
base salary and all other compensation through the Date of Termination at the
rate in effect at the time the Notice of Termination is given, plus all other
amounts to which you are entitled under any compensation plan of the Company at
the time such payments are due, and the Company shall have no further
obligations to you under this Agreement.
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(c) Termination Without Cause; Voluntary Termination for Good Reason. If
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your employment with the Company is terminated by the Company (other than for
Cause, Disability or your death) or by you for Good Reason within twenty-four
(24) months after a Change in Control, then you shall be entitled to the
benefits below:
(i) the Company shall pay to you (A) your full base salary and all
other compensation through the Date of Termination at the rate in effect at the
time the Notice of Termination is given, no later than the full fifth day
following the Date of Termination, plus all other amounts to which you are
entitled under any compensation plan of the Company at the time such payments
are due and (B) if you so elect, in lieu of your right to continue to receive
deferred compensation under any deferred compensation plan of the Company then
in effect, no later than the fifth full day following the Date of Termination, a
lump-sum amount, in cash, equal to the deferred amounts together with any
earnings credited on such amounts under such plan;
(ii) the Company will pay as severance pay to you, at the time
specified in Subsection (e) below, a lump sum severance payment (together with
the payments provided in paragraph (iii) below, the "Severance Payments") in an
amount equal to the sum of (A) two (2) times the higher of (x) your annual base
salary in effect on the Date of Termination or (y) your annual base salary in
effect immediately prior to the Change in Control, plus (B) the higher of (x)
your incentive bonus at target payout for the year in which the Date of
Termination occurs, or (y) your incentive bonus at target payout for the year in
which the Change in Control occurred;
(iii) the Company shall pay to you all legal fees and expenses
incurred by you in seeking to obtain or enforce any right or benefit provided by
this Agreement; and
(iv) for a twenty-four (24) month period after such termination, the
Company shall arrange to provide you with life, dental, accident and group
health insurance benefits substantially similar to those which you were
receiving immediately prior to the Notice of Termination. Notwithstanding the
foregoing, the Company shall not provide any benefit otherwise receivable by you
pursuant to this paragraph (iv) if an equivalent benefit is actually received by
you from another employer during the 24-month period following your termination,
and any such benefit actually received by you shall be reported to the Company;
and
(v) all options and shares of restricted stock granted or issued to
you under the Company's 1995 Stock Option Plan, 1995 California Stock Option
Plan and 1995 Replacement Stock Option Plan or any other stock option incentive
plan of the Company shall become exercisable or vested in full on the Date of
Termination provided that if such Date of Termination occurs prior to the
closing of any of the
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events referred to in Section 1(a)(v), then there shall be no such acceleration
of exercisability or vesting.
(d) In the event that you become entitled to the Severance Payments, if any
of the Severance Payments will be subject to the tax imposed by Section 4999 of
the Code, (or any similar tax that may hereafter be imposed)(the "Excise Tax")
the Company shall pay to you at the time specified in Subsection (e), below, an
additional amount (the "Gross-Up Payment") such that the net amount retained by
you, after deduction of any Excise Tax on the Total Payments (as hereinafter
defined) and any federal, state and local income tax and Excise Tax upon the
payment provided for by this Subsection, shall be equal to the Total Payments.
For purposes of determining whether any of the Severance Payments will be
subject to the Excise Tax and the amount of such Excise Tax, (a) any other
payments or benefits received or to be received by you in connection with a
Change in Control of the Company or your 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 of the Company or any person affiliated with the Company or such
person)(which together with the Severance Payments, constitute the "Total
Payments") shall be treated as "parachute payments" within the meaning of
Section 280G(b)(2) of the Code, and all "excess parachute payments" within the
meaning of Section 280G(b)(1) shall be treated as subject to the Excise Tax,
unless in the opinion of tax counsel selected by the Company's independent
auditors and acceptable to you such other payments or benefits (in whole or in
part) do not constitute parachute payments, or such excess parachute payments
(in whole or in part) represent reasonable compensation for services actually
rendered within the meaning of Section 280G(b)(4) of the Code in excess of the
base amount within the meaning of Section 280G(b)(3) of the Code, or are
otherwise not subject to the Excise Tax, (b) the amount of the Total Payments
which shall be treated as subject to the Excise Tax shall be equal to the lesser
of (1) the total amount of the Total Payments or (2) the amount of excess
parachute payments within the meaning of Section 280G(b)(1) (after applying
paragraph (a), above, and (c) the value of any non-cash benefits or any deferred
payment or benefit shall be determined by the Company's independent auditors 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, you shall be deemed
to pay federal income taxes 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 your residence on the Date of Termination, net of the
maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes. In the event that the Excise Tax is
subsequently determined to be less than the amount taken into account hereunder
at the time of termination of your employment, you shall repay to the Company at
the time that the amount of such reduction in Excise Tax is finally determined
the portion of the Gross-Up Payment attributable to such reduction (plus the
portion of the Gross-Up Payment
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attributable to the Excise Tax and federal, state and local income tax imposed
on the Gross-Up Payment being repaid by you if such repayment results in a
reduction in Excise Tax and/or a federal, state and local income tax deduction)
plus interest on the amount of such repayment at 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 at the time of the termination of
your employment (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 payable with respect to such excess) at the time that the amount of
such excess is finally determined.
(e) The payments provided for in Subsections 4(b), (c) and (d) shall be
made not later than the fifth day following the Date of Termination, unless
otherwise specified; provided, however, that, if the amounts of such payments
cannot be finally determined on or before such day, the Company shall pay to you
on such day an estimate, as determined in good faith by the Company, of the
minimum amount of such payments and shall pay the remainder of such payments
(together with interest at 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 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 you, payable on
the fifth day after demand by the Company (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code).
(f) Except as provided in the second sentence of Subsection 4(c)(v) hereof,
you shall not be required to mitigate the amount of any payment provided for in
this Section 4 by seeking other employment or otherwise, nor shall the amount of
any payment or benefit provided for in this Section 4 be reduced by any
compensation earned by you as a result of employment by another employer, by
retirement benefits or by offset against any amount claimed to be owed by you to
the Company or otherwise.
5. Successors; Binding Agreement.
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(a) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business or assets of the Company expressly to assume and agree to perform this
Agreement 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 an
assumption of this Agreement at or prior to the effectiveness of any succession
shall be a breach of this Agreement and shall constitute Good Reason if you
elect to terminate your employment, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement, the Company shall
mean the Company as
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defined above and any successor to its business or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law, or otherwise.
(b) As used in this Agreement, each of the businesses referred to in
clauses (i), (ii) and (iii) of Section 1(a)(v) is referred to as a "Business."
Notwithstanding anything to the contrary herein, the transfer of your employment
from the Company to any entity that acquires or succeeds to a Business shall not
be considered a termination of your employment with the Company for the purposes
of this Agreement, provided that such acquiring or successor entity agrees to be
bound by this Agreement to the same extent as the Company.
(c) This Agreement shall insure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If you should die while any amount
would still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee or if there
is no such designee, to your estate.
6. Notice. For the purposes of this Agreement, notices and all other
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communications provided for in this Agreement shall be in writing and shall be
duly given when delivered or when mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed to the
Company, at 000 Xxxxxxxx Xxxx, Xxxxxxxx, Xxxxxxxxxxxxx 00000-0000 Attention:
President and General Counsel, and to you at the address shown above or to such
other address as either the Company or you may have furnished to the other in
writing in accordance herewith, except that notice of change of address shall be
effective only upon receipt.
7. Miscellaneous.
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(a) 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.
(b) The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Delaware.
(c) No waiver by you at any time of any breach of, or compliance with, any
provision of this Agreement to be performed by the Company shall be deemed a
waiver of that or any other provision at any subsequent time.
(d) This Agreement may be executed in counterparts, each of which shall be
deemed to be an original but both of which together will constitute one and the
same instrument.
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(e) Any payments provided for hereunder shall be paid net of any applicable
withholding required under federal, state or local law.
(f) This Agreement sets forth the entire agreement of the parties hereto in
respect of the subject matter contained herein and supersedes all prior
agreements, promises, covenants, arrangements, communications, representations
or warranties, whether oral or written, by any officer, employee or
representative of any party hereto; and any prior agreement of the parties
hereto in respect of the subject matter contained herein is hereby terminated
and cancelled.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter, which
will then constitute our agreement on this subject.
Sincerely,
STREAM INTERNATIONAL HOLDINGS INC.
By:
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Agreed to this ____ day __________ of 199_
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Name of Management Person
Print Name:
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Address:
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