Exhibit 4.1
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CONFORMED COPY
SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the
"Agreement") is entered into as of the 11 day of July, 2001 (the "Second
Amendment Effective Date") by and among Gemplus Americas Inc., a California
corporation and an indirect wholly owned subsidiary of Gemplus (as defined
below) ("Gemplus US"), Gemplus International S.A., a Luxembourg corporation
("Gemplus"), as party to the Agreement and as guarantor pursuant to Section 16
of the Agreement, and Xxxxxxx X. Xxxxx ("Executive").
WITNESSETH:
WHEREAS, Gemplus, on behalf of its Swiss subsidiary in
formation, and Executive entered into an employment agreement, dated as of July
12, 2000 (the "Original Agreement"), with Gemplus acting in its capacity as
party to the Original Agreement and as guarantor pursuant to Section 16 of the
Original Agreement;
WHEREAS, Gemplus and Executive had determined that it was
desirable for the Original Agreement to be amended and restated to provide,
among other things, for the assignment of the Original Agreement to Gemplus US,
effective as of September 1, 2000 (the "Amendment Effective Date"), in lieu of
to a Swiss subsidiary;
WHEREAS, Gemplus US, Gemplus and Executive entered into an
amended and restated employment agreement, dated as of September 1, 2000 (the
"Amended Agreement"), effective as of September 1, 2000 (the "Amendment
Effective Date") with Gemplus acting in its capacity as party to the Amended
Agreement and as guarantor pursuant to Section 16 of the Amended Agreement;
WHEREAS, the Company (as defined below) and Executive
anticipate that Executive will perform substantial services for the Gemplus
Group during the Employment Period (as defined below) and the Company and
Executive acknowledge and agree that Executive will have a prominent role in the
management of the business, and the development of the goodwill, of the Company
and its Affiliates (as defined below) and will establish and develop relations
and contacts with the principal customers and suppliers of the Company and its
Affiliates in Europe, the United States, the Pacific Rim and the rest of the
world, all of which constitute valuable goodwill of the Company and its
Affiliates; and
WHEREAS, Gemplus shall guarantee the good performance of the
obligations of the Company without limit of time, except for the obligations of
the Company under Section 4(b)(iii) hereof.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and promises contained herein and for other good and valuable
consideration, Gemplus, Gemplus US and Executive hereby agree that, effective as
of the Second Amendment Effective Date, the Amended Agreement is hereby amended
and restated in its entirety as follows:
1. Agreement to Employ. Upon the terms and subject to the
conditions of this Agreement, the Company hereby employs Executive, and
Executive hereby accepts such employment by the Company.
2. Term; Position and Responsibilities.
(a) Term of Employment. Unless Executive's employment shall
sooner terminate pursuant to Section 7 hereof, the Company shall employ
Executive for a term commencing as of June 26, 2000 (the "Commencement Date")
and ending on the fourth anniversary of the Commencement Date (the "Initial
Term"). Effective upon the expiration of the Initial Term and of each Additional
Term (as defined below), Executive's employment hereunder shall be deemed to be
automatically extended, upon the same terms and conditions, in particular
subject to Section 7 hereof, for an additional period of one year (each, an
"Additional Term"), in each such case, commencing upon the expiration of the
Initial Term or the then current Additional Term, as the case may be, unless the
Company or Executive, at least six months prior to the expiration of the Initial
Term or such Additional Term, shall give written notice to the other parties
hereto of its or his intention not to extend the Employment Period (as defined
below) hereunder. The period during which Executive is employed pursuant to this
Agreement, including any extension thereof in accordance with the preceding
sentence, shall be referred to as the "Employment Period".
(b) Position and Responsibilities. During the Employment
Period, Executive shall serve as the managing director (administrateur delegue
or "chief executive officer") of Gemplus and the Chief Executive Officer of
Gemplus US and have such duties and responsibilities as are customarily assigned
to individuals serving in such position and such other duties consistent with
Executive's title and position as the Board of Directors of Gemplus (the
"Board") or the Board of Directors of Gemplus US (the "Gemplus US Board")
specifies from time to time. Executive will select from among the principal
offices of the Gemplus Group (including, without limitation, its offices in
Gemenos, France and Redwood City, California) where his principal place of
employment shall be from time to time. If Executive wishes to select as his
principal place of employment an office or other location that is not one of the
principal offices of the Gemplus Group, such selection shall be reasonably
consistent with the strategy of the Gemplus Group and subject to approval by the
Board. Executive shall determine how much time he shall spend in offices of the
Gemplus Group other than his principal place of employment. Notwithstanding the
foregoing, Executive and the Company acknowledge and agree that Executive's
responsibilities will otherwise require reasonable business travel. Executive
shall devote all of his skill, knowledge and working time to the conscientious
performance of the duties and responsibilities of such position, except for (i)
vacation time as set forth in Section 6(c) and absence for sickness or similar
disability and (ii) to the extent that it does not interfere with the
performance of Executive's duties hereunder, (A) such reasonable time as may be
devoted to service on boards of directors of other corporations and entities,
subject to the provisions of Section 9, and the fulfillment of civic
responsibilities and (B) such reasonable time as may be necessary from time to
time for personal financial matters.
3. Base Salary. As compensation for the services to be
performed by Executive for the Gemplus Group during the Employment Period, the
Company shall pay Executive a base salary at an annualized rate of
U.S.$1,000,000 payable in installments on the Company's regular payroll dates.
Upon consultation of the Board and due consideration of the Board's decision,
the Gemplus US Board shall review Executive's base salary annually during the
period of his employment hereunder and, in its sole discretion, the Gemplus US
Board may increase (but may not decrease) such base salary from time to time
based upon the performance of Executive, the financial condition of the Gemplus
Group, prevailing industry salary levels and such other factors as the Gemplus
US Board shall consider relevant. The annual base salary payable to Executive
under this Section 3, as the same may be increased from time to time, shall
hereinafter be referred to as the "Base Salary".
4. Incentive Compensation Arrangements.
(a) Annual Incentive Compensation. For each fiscal year of the
Company ending during the Employment Period, if the Company attains 100% of the
performance objectives established by the Compensation Committee of the Board
(the "Compensation Committee"), subject to Executive's reasonable approval, for
such fiscal year, Executive shall receive an annual bonus equal to a maximum of
100% of Executive's Base Salary for such fiscal year. Any bonus payable under
this Section 4(a) shall be paid to Executive as soon as reasonably practicable
after delivery to the Board of the audited financial statements of the Gemplus
Group for the relevant fiscal year.
(b) Long Term Incentive Compensation.
(i) Grant of Restricted Stock. Executive, Gemplus and Gemplus
US hereby acknowledge and agree that, in accordance with the terms of the
Original Agreement and a Stock Award Agreement, dated as of July 13, 2000,
entered into by and between Gemplus and Executive, (a) upon execution of the
original Agreement, Gemplus granted to Executive, as a special signing bonus and
as an inducement to Executive to enter into, and as consideration for
Executive's execution of, the Original Agreement, 10,247,893 (the "Shares") of
Gemplus' common stock (the "Common Stock"), (b) Executive is not be permitted to
sell, transfer or encumber the Shares (other than to pledge such shares as
security for a loan under Section 4(b)(iii)) at any time prior to the second
anniversary of the Commencement Date, except (x) in connection with or following
a Change in Control (as defined below) or (y) upon delivery of prior written
notice to Gemplus, for transfers of the Shares to a family trust or family
partnership controlled by Executive (a "Permitted Transferee") for estate
planning purposes, and (c) the Shares are subject to the terms and conditions
set forth in the Stock Award Agreement.
(ii) Grant of Stock Options. Executive, Gemplus and Gemplus US
hereby acknowledge and agree that, in accordance with the terms of the Original
Agreement and a Stock Option Grant Agreement, dated as of July 13, 2000, entered
into by and between Gemplus and Executive, as of the Commencement Date, Gemplus
granted to Executive non-qualified options (the "Options") to purchase up to
20,495,786 shares of Common Stock (the "Option Shares"), at an exercise price
per share of EUR 3.506 (the "Exercise Price"). The Options with respect to
10,247,893 Option Shares shall be referred to herein as the "Service Options"
and the Options with respect to the remaining 10,247,893 Option Shares shall be
referred to herein as the "Performance Options. The Options have a ten year
term, subject to earlier expiration in the event of the termination of
Executive's employment, as described below. Subject to the right of Gemplus to
repurchase Option Shares described below, the Options are 100% vested and
exercisable as of the date of grant.
Any Option Shares purchased by Executive upon the exercise of
any of the Service Options shall be subject to Gemplus' right, exercisable only
upon written notice to Executive within three months following any termination
of Executive's employment for any reason, to repurchase such Option Shares for a
purchase price per share equal to the Exercise Price, provided that Gemplus'
right to repurchase the Option Shares shall lapse, in installments, in each
case, subject to Executive's continued employment with the Company until an
applicable lapse date, as follows: Gemplus' right to repurchase 25% of the
Option Shares shall lapse on the first anniversary of the Commencement Date and
Gemplus' right to repurchase 1/48th of the Option Shares shall lapse on each
monthly anniversary of the Commencement Date thereafter; provided further that
Gemplus' right to repurchase the Option Shares shall lapse if and to the extent
provided in Section 7(f)(i) and 15(a).
Any Option Shares purchased by Executive upon the exercise of
any of the Performance Options shall be subject to Gemplus' right, exercisable
only upon written notice to Executive within three months following any
termination of Executive's employment for any reason, to repurchase such Option
Shares for a purchase price per share equal to the Exercise Price, provided that
Gemplus' right to repurchase the Option Shares shall lapse, in each case,
subject to Executive's continued employment with the Company until an applicable
lapse date, as follows:
(A) Gemplus' right to repurchase 50% of the Option
Shares covered by the Performance Options shall lapse as of the date,
if any, that the Value of Gemplus (as defined below) equals or exceeds
EUR 4 billion;
(B) after achieving the objectives under Clause (A)
above, Gemplus' right to repurchase the remaining 50% of the Option
Shares covered by the Performance Options shall lapse in increments of
that number of Option Shares representing an additional 3% of the
Option Shares covered by the Performance Options as of the date, if
any, that the Value of Gemplus first exceeds by EUR 400 million the
Value of Gemplus as of the then most recent date that Gemplus' right to
repurchase any Option Shares covered by the Performance Options shall
have lapsed; and
(C) to the extent provided in Section 7(f)(i).
The Performance Options are intended to be linked to the
liquidity and value of the Common Stock held by Gemplus' Shareholders.
Accordingly, the term "Value of Gemplus" shall mean the market capitalization of
Gemplus determined on the basis of the lowest closing price for a share of
Common Stock on the principal stock exchange on which the Common Stock is
publicly traded over any consecutive period of 45 business days; provided that
(i) in the event of a Change in Control, the Value of Gemplus shall be
determined as of the date of the closing of the last transaction that results in
the Change in Control, on the basis of the price per share of Common Stock paid
by the acquiror thereof and (ii) in the event of the sale of more than 15% of
the then outstanding shares of Common Stock to a Third Party (as defined below),
the Value of Gemplus shall be determined as of the date of such sale on the
basis of the price per share of Common Stock paid by such Third Party.
Each Option shall expire on the tenth anniversary of the
Commencement Date (the "Normal Expiration Date"), provided that (x) subject to
Section 7(f)(i) and Section 15(a), in the event of the termination of
Executive's employment with the Company as a result of Executive's death,
Executive's Disability (as defined below), a termination of Executive's
employment by Employer Without Cause (as defined below) or a termination of
Executive's employment by Executive for Good Reason (as defined below), each
then outstanding Option covering Option Shares that are subject to Gemplus'
right of repurchase as of the applicable Date of Termination (as defined below)
shall expire immediately upon such Date of Termination and each other Option
shall expire on the earlier of the Normal Expiration Date and the first
anniversary of the applicable Date of Termination, (y) in the event of the
termination of Executive's employment with the Company by the Company for Cause
(as defined below), each then outstanding Option shall expire immediately upon
the applicable Date of Termination and (z) subject to Section 15(a), in the
event of the termination of Executive's employment with the Company by Executive
other than for Good Reason, each then outstanding Option covering Option Shares
that are subject to Gemplus' right of repurchase as of the applicable Date of
Termination shall expire immediately upon such Date of Termination and each
other Option shall expire on the earlier of Normal Expiration Date and the 30th
day following the applicable Date of Termination. The grant and terms of the
Options is evidenced by the separate Stock Option Grant Agreement referred to
above, which agreement contains terms consistent with this Section 4(b)(ii) and
other customary terms.
(iii) Certain Loans. At the request of Executive prior to an
underwritten initial public offering of the Common Stock (an "Initial Public
Offering"), Gemplus US shall make or procure one or more interest bearing loans
to Executive (a) in an amount up to the actual Federal, state and local income
tax incurred by Executive in connection with the grant to Executive of the
Shares, such loan to be made to Executive within a reasonable period of time
prior to the due date for such taxes and to be secured solely by the Shares, and
(b) in an amount equal to the exercise price for any vested Options that
Executive elects to exercise, such loan to be made to Executive at the time of
such exercise, to be a recourse loan with respect to fifty percent (50%) of the
principal amount thereof and to be secured by the shares of Common Stock
purchased by Executive upon such exercise. Each such loan shall bear interest at
the rate provided in Section 1274(b)(2)(B) of the U.S. Internal Revenue Code of
1986, as amended and shall provide for (I) the term of the loan to expire and
the entire principal amount of the loan to be due and payable on the earliest of
(w) the six month anniversary of an Initial Public Offering or, if later, the
expiration of any lock-up period imposed on sales of Common Stock in connection
with such Initial Public Offering, (x) the closing or settlement of any sale or
other disposition by Executive (in one or a series of transactions, whether or
not related) of sufficient shares of Common Stock to realize sufficient funds to
repay substantially all of such outstanding principal amount and accrued
interest, (y) the date of the termination of Executive's employment with the
Company for any reason (other than any such termination by Executive without
Good Reason (as defined below)) and (z) the termination of Executive's
employment with the Company by Executive without Good Reason, provided that in
the case of clauses (w) and (y), if, at such time, Executive could not sell or
otherwise dispose of sufficient shares of Common Stock (disregarding Shares and
Option Shares acquired before the IPO that have not been held by Executive for
at least one year) without registration of such shares (in one or a series of
transactions, whether or not related) to realize sufficient funds to repay all
of such outstanding principal amount and accrued interest, Executive's
obligation to repay the portion of such outstanding principal amount and accrued
interest that exceeds the funds that Executive could so realize at that time
shall be deferred until such time as Executive could realize, by sale or other
disposition (including pursuant to a registered offering effected by the
Company) of shares of Common Stock (disregarding Shares and Option Shares
acquired before the IPO that have not been held by Executive for at least one
year), sufficient funds to repay such deferred amounts, and (II) accrued
interest (a) for calendar year 2000 and the first six months of calendar year
2001 to be due and payable on or before December 31, 2003 and (b) for the
remainder of calendar year 2001 and the calendar years thereafter to be due and
payable annually, as of the last day of each calendar year ending during the
term of the loan; provided, that, in respect of the accrued interest referred to
in clause (II)(b) above, Gemplus US shall cause Executive's obligation to pay
such accrued interest that becomes due and payable on any such loan prior to the
expiration of its term to be forgiven or satisfied as of the due date for such
interest payment and Gemplus US shall make a cash payment to Executive in an
amount equal to the net U.S. and non-U.S. income taxes incurred by Executive as
a result of such cash payment and Gemplus US' forgiving or otherwise causing to
be satisfied such interest payments. With respect to Option Shares that are
subject to Gemplus' right of repurchase pursuant to Section 4(b)(ii) hereof, the
portion of any loan made to purchase such Option Shares shall be satisfied in
full by Executive's transfer of such shares to the lender in lieu of
repurchasing such Option Shares.
(v) Additional Restrictions on Transfer of Common Stock.
Notwithstanding any other provision hereof, Executive shall not be permitted to
sell or otherwise transfer any shares of Common Stock owned or controlled by
Executive during any lock-up period imposed on sales of Common Stock in
connection with any public offering of any shares of Common Stock.
5. Employee Benefits. During the Employment Period, Executive
shall be entitled to life, medical, dental and disability insurance plans, as
the same may be amended and in effect from time to time, applicable to senior
executives of the Company or Gemplus and a Company or Gemplus provided pension
plan consistent with the pension plan made available to other senior executives
of the Company or Gemplus, provided that Executive shall not be entitled to
participate in any severance plan of the Company or Gemplus or otherwise receive
any severance benefits under any other type of plan. The benefits referred to in
this Section 5 shall be provided to Executive on a basis that is commensurate
with Executive's position and duties with the Company and Gemplus.
6. Perquisites and Expenses.
(a) General. During the Employment Period, Executive shall be
entitled to participate in all special benefit or perquisite programs generally
available from time to time to senior executives of the Company or Gemplus, on
the terms and conditions in effect from time to time under each such program.
(b) Reimbursement of Business Expenses. The Company shall
reimburse Executive for reasonable travel, lodging, meal and other reasonable
expenses incurred by him in connection with his performance of services
hereunder upon submission of evidence, satisfactory to the Company, of the
incurrence and purpose of each such expense and otherwise in accordance with the
Company's business travel reimbursement policy applicable to its senior
executives as in effect from time to time.
(c) Reimbursement of Certain Additional Expenses. The Company
shall reimburse Executive for the following expenses incurred by Executive as a
result of the permanent residency of Executive and his immediate family in San
Diego, California:
(i) First class airfare and related reasonable travel
expenses for Executive, his immediate family and the family's child
care person incurred by Executive in travelling from San Diego,
California to or between to the Company's business locations or other
official business;
(ii) The cost of suitable rental housing for
Executive, his immediate family and the family's child care person,
near to the Company's headquarters, such housing to be reasonably
comparable to executive's current residence in San Diego, California,
unless such suitable housing is made available to Executive by a member
of the Gemplus Group at no cost to Executive; and
(iii) The reasonable maintenance and security costs
associated with the management of Executive's principal residence in
San Diego, California while he is absent in connection with his
employment by the Company.
In addition, the Company shall make any payments to Executive
that are required to make Executive whole for (x) any income or social taxes
incurred by Executive under the tax laws of any jurisdiction other than the
United States to the extent that the aggregate income and social taxes paid by
Executive with respect to his Company compensation for any calendar year in the
Employment Term exceeds the amount that would have been payable by Executive had
he received 100% of such income in connection with employment in San Diego,
California assuming that Executive's permanent residence for tax purposes is in
San Diego, California and (y) any U.S. or non-U.S. income or social taxes
incurred by Executive as a result of the treatment of any amounts payable to
Executive pursuant to this Section 6(c) or Section 6(f) as taxable compensation
income of Executive.
(d) Reimbursement for Certain Tax and Financial Planning
Services. During the Employment Period, the Company shall reimburse Executive
for the reasonable expenses incurred by him for financial planning services
provided to Executive by his accountants and legal advisors. In addition, the
Company shall reimburse Executive for the reasonable costs of tax planning
services obtained by him in connection with the initial tax structuring of his
compensation hereunder.
(e) Reimbursement for Certain Other Legal and Advisory Costs.
The Company shall reimburse Executive for reasonable and documented fees and
expenses of legal and financial advisors incurred by Executive in evaluating and
negotiating the employment arrangements hereunder.
(f) Reimbursement of Relocation Expenses. If, during the
Employment Period, Executive decides to relocate his (and his immediate
family's) permanent residence to another location near Company offices or
Executive relocates his temporary residence due to a relocation of the Company's
offices (provided Executive relocates such temporary residence to the new
location of the Company's offices), the Company will reimburse Executive for the
reasonable costs of relocating himself, his immediate family and their
respective personal and household effects.
7. Termination of Employment.
(a) Termination Due to Death or Disability. In the event that
Executive's employment hereunder terminates due to death or is terminated by the
Company due to Executive's Disability (as defined below), no termination
benefits shall be payable to or in respect of Executive except as provided in
Section 7(f)(ii). For purposes of this Agreement; "Disability" shall mean a
physical or mental disability that prevents the performance by Executive of his
duties hereunder lasting (or likely to last, based on competent medical evidence
presented to the Gemplus US Board) for a continuous period of six months or
longer. Prior to taking any decision, the Gemplus US Board shall consult the
Board and will provide the Board with the complete medical file of Executive.
Upon due consideration of the decision of the Board, the reasoned and good faith
judgment of the Gemplus US Board as to Executive's Disability shall be final and
shall be based on such competent medical evidence as shall be presented to it by
Executive or by any physician or group of physicians or other competent medical
experts employed by Executive or the Company to advise the Gemplus US Board.
(b) Termination by Employer for Cause. In the event of the
termination of Executive's employment by the Company for Cause (as defined
below), no termination benefits shall be payable to or in respect of Executive
except as provided in Section 7(f)(ii). "Cause" shall mean (i) the willful
failure of Executive substantially to perform his duties hereunder (other than
any such failure due to Executive's physical or mental illness) or other willful
and material breach by Executive of any of his obligations hereunder or under
any other written agreement between Executive and the Company, after a written
demand for substantial performance has been delivered, and a reasonable
opportunity to cure has been given, to Executive by the Gemplus US Board, which
demand identifies in reasonable detail the manner in which the Gemplus US Board
believes that Executive has not substantially performed his duties or has
breached his obligations, (ii) Executive's engaging in fraudulent or willful and
serious misconduct, which in the case of any such misconduct has caused or is
reasonably expected to result in direct or indirect material injury to Employer
or any of its Affiliates, or (iii) Executive's conviction of, or entering a plea
of guilty or nolo contendere to, a crime that constitutes a felony under U.S.
criminal law. Prior to initiating any step of the above procedure, the Gemplus
US Board shall consult with the Board and shall duly consider the Board's
decision.
(c) Termination Without Cause. A termination "Without Cause"
shall mean a termination of Executive's employment by the Company other than due
to Disability as described in Section 7(a) or for Cause described in Section
7(b). In the event that Executive's employment is terminated by the Company
Without Cause, Executive shall be entitled to the termination benefits described
in Section 7(f)(i).
(d) Termination by Executive. In the event that Executive
terminates his employment for Good Reason, Executive shall be entitled to the
termination benefits described in Section 7(f)(i) and, if applicable, Section
15(a). In the event that Executive terminates his employment without Good
Reason, no termination benefits shall be payable to or in respect of Executive
except as provided in Section 7(f)(ii) and, if applicable, Section 15(a). A
termination of employment by Executive for "Good Reason" shall mean a
termination by Executive of his employment with Employer following the
occurrence, without Executive's consent, of any of the following events: (i) the
assignment to Executive of (x) a title that is different from, and a diminution
from, the title specified in Section 2 or (y) duties that are significantly
different from, and that result in a substantial diminution of, the duties
normally associated with Executive's title and position with the Company and
Gemplus, (ii) a reduction in the rate of Executive's Base Salary, or (iii) a
willful and material breach by the Company or Gemplus of its obligations
hereunder or under any other written agreement between Executive and the
Company, provided that, (x) within 30 days following the occurrence of any of
the events set forth herein, Executive shall have delivered written notice to
the Company of his intention to terminate his employment for Good Reason, which
notice specifies in reasonable detail the circumstances claimed to give rise to
Executive's right to terminate his employment for Good Reason, and the Company
shall not have cured such circumstances to the reasonable satisfaction of
Executive and (y) Executive delivers a Notice of Termination to the Company in
accordance with Section 7(e) within 10 days following the Company's failure to
cure such circumstances.
(e) Notice of Termination. Any termination of Executive's
employment hereunder by the Company pursuant to Section 7(a), 7(b) or 7(c), or
by Executive pursuant to Section 7(d), shall be communicated by a written Notice
of Termination addressed to the other. A "Notice of Termination" shall mean a
written notice stating that Executive's employment with the Company has been or
will be terminated and setting forth the provisions hereof pursuant to which
such employment has or will be terminated.
(f) Payments Upon Certain Terminations.
(i) In the event of a termination of Executive's employment by
the Company Without Cause or a termination by Executive of his employment for
Good Reason during the Employment Period, the Company shall pay to Executive his
full Base Salary through the Date of Termination, an amount equal to the pro
rata amount of annual incentive compensation for the portion of the fiscal year
preceding the Date of Termination that would have been payable to Executive
pursuant to Section 4(a) if he had remained employed for the entire fiscal year,
determined on the basis of the actual performance achieved by the Company during
such fiscal year and the performance objectives established for such fiscal year
and any earned but not paid annual bonus for the fiscal year of the Company
ending immediately prior to the Date of Termination. In addition, in the event
of any such termination, the Company shall pay or, in the case of the Continued
Benefits (as defined below), provide to Executive (or, following his death, to
Executive's designated beneficiary or beneficiaries), as liquidated damages and
in lieu of any other severance compensation or severance benefits to which
Executive may be entitled under applicable law, and, in the case of the
installment payments described in subparagraph (A) below, in consideration of
Executive's covenants and obligations under Sections 8 through 13 hereof,
inclusive, the following payments and benefits:
(A) payment of an aggregate amount equal to the annual rate of
Executive's Base Salary in effect immediately prior to the
Date of Termination, such payment to be made in twelve equal
monthly installments on the last day of each calendar month
ending immediately after the Date of Termination;
(B) a lump sum payment of an amount equal to the actual amount
of annual incentive compensation that was awarded to Executive
for the Company's fiscal year ending immediately prior to the
Date of Termination (or, if such termination occurs before the
last day of the fiscal year of the Company that includes the
Commencement Date, Executive's target bonus for such fiscal
year); and
(C) continued coverage for Executive and his eligible
dependents under the Company's employee benefit and perquisite
plans and programs referred to in Sections 5 and 6(a) (the
"Continued Benefits") during the period commencing on the Date
of Termination and ending on the first anniversary of the Date
of Termination, subject to timely payment by Executive of all
premiums, contributions and other co-payments required to be
paid by senior executives of the Company under the terms of
such plans and programs as in effect from time to time,
provided that if such plans do not permit such coverage,
Executive shall receive a lump sum cash payment equal to the
value of such coverage.
Executive shall not have a duty to mitigate the costs to the
Company under this Section 7(f)(i), except that all or any of the Continued
Benefits shall be reduced or canceled if comparable benefit coverage (determined
on a benefit by benefit basis) is provided or offered to Executive by any
subsequent employer or other Person for which Executive performs services,
including but not limited to consulting services, at any time after the Date of
Termination.
In addition, in the event of a termination of Executive's
employment by the Company Without Cause or a termination by Executive of his
employment for Good Reason during the Employment Period, Gemplus' right to
repurchase those Option Shares covered by Service Options with respect to which
Gemplus' repurchase right would have lapsed on or prior to the expiration of the
two year period immediately following the Date of Termination had Executive
remained in the continuous employment of the Company during such period shall
lapse immediately as of the Date of Termination. In the case of a termination of
Executive's employment by the Company Without Cause or a termination by
Executive of his employment for Good Reason within the two year period following
a Change in Control, Gemplus' right to repurchase any Option Shares covered by
Service Options shall lapse immediately.
(ii) If Executive's employment shall terminate upon his death
or Disability or if Employer shall terminate Executive's employment for Cause or
Executive shall terminate his employment without Good Reason during the
Employment Period, Employer shall pay Executive his full Base Salary through the
Date of Termination and, in the case of any such termination upon Executive's
death or Disability, Executive shall be entitled to receive such death or
Disability benefits, as applicable, as are provided under the terms of any
employee and executive death benefit and disability plans and programs referred
to in Section 5 or 6(a).
(iii) Except as specifically set forth in this Section 7(f),
Executive shall be entitled to receive all amounts payable and benefits accrued
under any otherwise applicable plan, policy, program or practice of the Company
in which Executive was a participant during his employment with Employer in
accordance with the terms thereof, provided that Executive shall not be entitled
to receive any payments or benefits under any such plan, policy, program or
practice providing any severance compensation or benefits (and the provisions of
this Section 7(f) shall supersede the provisions of any such plan, policy,
program or practice).
(g) Date of Termination. As used in this Agreement, the term
"Date of Termination" shall mean (i) if Executive's employment is terminated by
his death, the date of his death, (ii) if Executive's employment is terminated
by the Company for Cause, the date on which Notice of Termination is given as
contemplated by Section 7(e) or, if later, the date of termination specified in
such notice and (iii) if Executive's employment is terminated by the Company
Without Cause, due to Executive's Disability or by Executive for any reason, (x)
the date that is 30 days after the date on which Notice of Termination is given
as contemplated by Section 7(e) or (y) in the case of any termination by
Executive, if no such notice is given, 30 days after the date Executive provides
verbal notice of his termination of employment.
8. Unauthorized Disclosure. During the period of Executive's
employment with the Company and the ten year period following any termination of
such employment, without the prior written consent of the Gemplus US Board or
its authorized representative, except to the extent required by an order of a
court having jurisdiction or under subpoena from an appropriate government
agency, in which event, Executive shall use his best efforts to consult with the
Company prior to responding to any such order or subpoena, and except as
required in the performance of his duties hereunder, Executive shall not
disclose any confidential or proprietary trade secrets, customer lists,
drawings, designs, information regarding product development, marketing plans,
sales plans, manufacturing plans, management organization information (including
but not limited to data and other information relating to members of the Board,
the Gemplus US Board or the Board of Directors of any of the Company's
Affiliates or to management of the Company or any of its Affiliates), operating
policies or manuals, business plans, financial records, packaging design or
other financial, commercial, business or technical information (a) relating to
the Company or any of its Affiliates or (b) that the Company or any of its
Affiliates may receive belonging to suppliers, customers or others who do
business with the Company or any of its Affiliates (collectively, "Confidential
Information") to any third person unless such Confidential Information has been
previously disclosed to the public or is in the public domain (other than by
reason of Executive's breach of this Section 8).
9. Non-Competition. During the period of Executive's
employment with any member of the Gemplus Group and, following any termination
thereof, the period ending on the first anniversary of the Date of Termination
(such periods, collectively, the "Restriction Period"), Executive shall not,
directly or indirectly, become employed in any capacity by, engage in business
with, serve as an agent or consultant to, or become a partner, member, principal
or stockholder (other than a holder of less than 1% of the outstanding voting
shares of any publicly held company) of, any Person that competes with any part
of the business of the Gemplus Group anywhere in the world in which the Gemplus
Group has business operations.
10. Non-Solicitation of Employees. During the Restriction
Period, Executive shall not, directly or indirectly, for his own account or for
the account of any other Person anywhere in the world, (i) solicit for
employment, employ or otherwise interfere with the relationship of the Gemplus
Group with any natural person throughout the world who is or was employed by or
otherwise engaged to perform services for the Gemplus Group at any time during
which Executive was employed by the Company (in the case of any such activity
during the term of Executive's employment) or during the six-month period
preceding such solicitation, employment or interference (in the case of any such
activity after the Date of Termination), other than any such solicitation or
employment on behalf of the Gemplus Group during Executive's employment with the
Company or any other member of the Gemplus Group, or (ii) induce any employee of
any member of the Gemplus Group who is a member of management to engage in any
activity which Executive is prohibited from engaging in under any of Sections 8,
9, 10 or 11 or to terminate his employment with the Company.
11. Non-Solicitation of Customers. During the Restriction
Period, Executive shall not, directly or indirectly, for his own account or for
the account of any other Person anywhere in the world, solicit or otherwise
attempt to establish any business relationship of a nature that is competitive
with the business or relationship of the Gemplus Group with any Person
throughout the world which is or was a customer, client or distributor of the
Gemplus Group at any time during which Executive was employed by the Company (in
the case of any such activity during the term of Executive's employment) or
during the twelve-month period preceding the Date of Termination (in the case of
any such activity after the Date of Termination), other than any such
solicitation (i) on behalf of the Gemplus Group during Executive's employment
with the Company or (ii) for a business relationship that does not involve an
activity competitive with that carried on by the Gemplus Group.
12. Return of Documents. In the event of the termination of
Executive's employment for any reason, Executive shall deliver to the Company
all of (a) the property of the Gemplus Group and (b) the non-personal documents
and data of any nature and in whatever medium of the Gemplus Group, and he shall
not take with him any such property, documents or data or any reproduction
thereof, or any documents containing or pertaining to any Confidential
Information.
13. Injunctive Relief with Respect to Covenants; Forum, Venue
and Jurisdiction. Executive acknowledges that, in the course of his employment
with the Company, Executive will obtain confidential and proprietary information
and trade secrets concerning the business and operations of the Company and its
Affiliates in Europe, the United States, the Pacific Rim and the rest of the
world that could be used to compete unfairly with the Company and its
Affiliates; the covenants and restrictions contained in Sections 8 through 13,
inclusive, are intended to protect the legitimate interests of the Company and
its Affiliates in their respective goodwill, trade secrets and other
confidential and proprietary information; and Executive desires to be bound by
such covenants and restrictions. Executive acknowledges and agrees that the
covenants, obligations and agreements of Executive contained in Sections 8, 9,
10, 11, 12 and 13 relate to special, unique and extraordinary matters and that a
violation of any of the terms of such covenants, obligations or agreements will
cause the Company irreparable injury for which adequate remedies are not
available at law. Therefore, Executive agrees that the Company shall be entitled
to an injunction, restraining order or such other equitable relief (without the
requirement to post bond) as a court of competent jurisdiction may deem
necessary or appropriate to restrain Executive from committing any violation of
such covenants, obligations or agreements. These injunctive remedies are
cumulative and in addition to any other rights and remedies Employer may have.
Gemplus US, Gemplus and Executive hereby irrevocably submit to
the exclusive jurisdiction of the courts of France located, in Marseilles,
France, in respect of the interpretation and enforceability of Section 9 and any
request or application for equitable relief in respect of any violation of
Section 9 and the parties hereto irrevocably agree that (a) the covenants and
restrictions contained in Section 9 shall be governed by and construed in
accordance with the laws of France, without reference to principles of conflicts
of laws, (b) sole and exclusive appropriate venue for any such suit, proceeding
request or application shall be in such a court, (c) all claims with respect to
any such suit, proceeding request or application shall be heard and determined
exclusively in such a court, (d) any such court shall have exclusive
jurisdiction over the person of such parties and over the subject matter of any
dispute relating to any such suit, proceeding request or application and (e)
each party hereby waives any and all objections and defenses to bringing any
such suit, proceeding request or application before such a court in accordance
with the provisions of this Section 13.
Notwithstanding any other provision hereof, the Company's
obligation to pay or provide Executive any amount or benefit pursuant to Section
7(f) is subject to Executive's compliance with his obligations under Sections 9,
10 and 11. In addition, as liquidated damages, Executive agrees that, in the
event Executive commits a material breach of any such sections, (i) the right of
Gemplus to repurchase any Options Shares that has lapsed as a result of the
termination of Executive's employment shall be reinstated and Gemplus shall have
three months from the date of such reinstatement to exercise its right to
repurchase such Option Shares and (ii) any amounts paid to Executive pursuant to
Section 7(f) shall be repaid by Executive to the Company promptly upon demand.
14. Entire Agreement. This Agreement (together with the Stock
Award Agreement and the Stock Option Grant Agreement) constitutes the entire
agreement among the parties hereto with respect to the subject matter hereof.
All prior correspondence and proposals (including but not limited to the
Original Agreement, the Amended Agreement and all summaries of proposed terms)
and all prior promises, representations, understandings, arrangements and
agreements relating to such subject matter (including but not limited to those
made to or with Executive by any other Person) are merged herein and superseded
hereby.
15. Special Provisions relating to a Change in Control.
(a) Lapse of Certain Restrictions. If, on the six month
anniversary of the closing of the last transactions that results in a Change in
Control, Executive terminates his employment for any reason, Gemplus' right to
repurchase those Option Shares covered by Service Options shall lapse
immediately.
(b) Certain Excise Taxes.
(i) 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 Gemplus 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
15(b) (the "Payments"), would be subject to the excise tax (the "Excise Tax")
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), then the Company shall pay Executive an additional cash payment (a
"Gross-Up Payment") in an amount such that after payment by Executive of all
taxes (including the net Federal, state, local and foreign income and employment
taxes and any Excise Tax and taking into account the effects of Section 68 of
the Code) imposed upon the Gross-Up Payment, he retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments. The Gross-Up
Payment under this Section 15(b) with respect to any Payment shall be made no
later than the earlier of (A) thirty (30) days following such Payment and (B)
the earliest date upon which the Company or its Successor is required to
withhold any portion of the Excise Tax with respect to such Payment.
(ii) All determinations required to be made under this Section
15(b), including whether and when a Gross-Up Payment is required and the amount
of such Gross-Up Payment, as well as the assumptions to be utilized in arriving
at such determinations, shall be made by a "big four" public accounting firm
that mutually acceptable to the Company and Executive (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 Executive that there has been a Payment, or such earlier time as is
requested by the Company or reasonably requested by Executive (collectively, the
"Determination). 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. If the Accounting Firm determines that no Excise Tax is payable by
Executive, it shall furnish him with a written opinion to such effect, and to
the effect that failure to report the Excise Tax, if any, on his applicable
federal income tax return will not result in the imposition of a negligence or
similar penalty.
In determining the amount of the Gross-Up Payment, Executive
shall be deemed to pay Federal, state, local and foreign income and employment
taxes at the actual marginal rate of Federal, state, local and foreign income
and employment taxation paid by Executive for the calendar year in which the
Payment and the Gross-Up Payment is made with respect to the Payments, taking
into account the effects of Section 68 of the Code.
(iii) 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 Executive is thereafter 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 after-tax reimbursement for any penalties assessed
against Executive and with interest at the rate equal to the discount rate
required to be used in calculating the present value of the Payments under
Section 280G(d)(4) 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 Executive, on an after-tax basis, 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 equal to the discount rate required to be used in calculating the
present value of the Payments under Section 280G(d)(4) of the Code) shall be
promptly paid to the Company by Executive. Executive shall cooperate 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.
16. Guarantee of Gemplus. Gemplus hereby undertakes to
guarantee the good performance of the obligations of Gemplus US to Executive,
except the obligations set forth in Section 4(b)(iii).
17. Miscellaneous
(a) Binding Effect; Assignment. This Agreement shall be
binding on and inure to the benefit of Gemplus and Gemplus US, and their
successors and permitted assigns. This Agreement shall also be binding on and
inure to the benefit of Executive and his heirs, executors, administrators and
legal representatives. This Agreement shall not be assignable by any party
hereto without the prior written consent of the other. Notwithstanding the
foregoing, the Company may effect such an assignment upon a transfer of all or
substantially all of its business and/or assets (by whatever means), provided
that the Successor to the Company shall expressly assume and agree to perform
this Agreement.
(b) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the state of California, without
reference to principles of conflicts of laws, except as otherwise provided in
Section 13 hereof.
(c) Taxes. The Company may withhold from any payments made
under this Agreement all applicable taxes and social security contributions,
including but not limited to income, employment and social insurance taxes, as
shall be required by law.
(d) Amendments. No provision of this Agreement may be
modified, waived or discharged unless such modification, waiver or discharge is
approved by the Board or a Person authorized thereby and is agreed to in writing
by Executive. No waiver by any party hereto at any time of any breach by any
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. No waiver of any provision of this Agreement shall be implied
from any course of dealing between or among the parties hereto or from any
failure by any party hereto to assert its rights hereunder on any occasion or
series of occasions.
(e) Severability. In the event that any one or more of the
provisions of this Agreement shall be or become invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
(f) Notices. Any notice or other communication required or
permitted to be delivered under this Agreement shall be (i) in writing, (ii)
delivered personally, by courier service or by certified or registered mail,
first-class postage prepaid and return receipt requested, (iii) deemed to have
been received on the date of delivery or, if so mailed, on the third business
day after the mailing thereof or as provided by the postal services whichever
the latest, and (iv) addressed as follows (or to such other address as the party
entitled to notice shall hereafter designate in accordance with the terms
hereof):
(A) If to Gemplus, to it at:
Gemplus International S.A.
Aerogolf Center
1 Hohenhof
L- 2633 Senningerberg
Luxembourg
Attention: General Counsel
(B) If to the Company, to it at:
GEMPLUS AMERICAS Inc.
0 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxx, Xxxxxxxxxx 00000
Attention: General Counsel
(C) if to Executive, to him at his residential address as
currently on file with the Company.
Copies of any notices or other communications given under this Agreement shall
also be given to:
Xxxxxxx Xxxxxxx & Xxxxxxxx LLP
Spear Xxxxxx Xxxxx
Xxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxx, Esq.
(g) Voluntary Agreement. Executive represents that he is
entering into this Agreement voluntarily and that his employment hereunder and
compliance with the terms and conditions of this Agreement will not conflict
with or result in the breach by him of any agreement to which he is a party or
by which he may be bound.
(h) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
(i) Headings. The section and other headings contained in this
Agreement are for the convenience of the parties only and are not intended to be
a part hereof or to affect the meaning or interpretation hereof.
(k) Certain Definitions.
"Affiliate": with respect to any Person, means any other
Person that, directly or indirectly through one or more intermediaries,
Controls, is Controlled by, or is under common Control with the first Person,
including but not limited to a Subsidiary of the first Person, a Person of which
the first Person is a Subsidiary, or another Subsidiary of a Person of which the
first Person is also a Subsidiary.
"Change in Control": any transaction or series of transactions
as a result of which (i) 51 % or more of the then outstanding shares of Common
Stock or of the then outstanding shares of common stock of Gemplus US are sold
or otherwise disposed of to any Third Party; provided, however, that if such
transaction or series of transactions is approved in advance by the Board, the
threshold percentage shall be 66 2/3rd %, (ii) a majority of the members of the
Board or of the Gemplus US Board consists of persons whose nomination or
election to the Board or the Gemplus US Board, as the case may be, has not been
previously approved by the shareholders of Gemplus or Gemplus US, as the case
may be, as of the date hereof or by the directors then serving on the Board or
the Gemplus US Board, as the case may be, who themselves have been nominated to
serve on the Board or the Gemplus US Board, as the case may be, by such
shareholders or (iii) all or substantially all of the assets of Gemplus or
Gemplus US are sold or otherwise disposed of to a Third Party.
"Company": initially, Gemplus and, from and after the
Amendment Effective Date, Gemplus US.
"Control": with respect to any Person, means the possession,
directly or indirectly, severally or jointly, of the power to direct or cause
the direction of the management policies of such Person, whether through the
ownership of voting securities, by contract or credit arrangement, as trustee or
executor, or otherwise.
"Gemplus Group": collectively, Gemplus and its Subsidiaries.
"Person": any natural person, firm, partnership, limited
liability company, association, corporation, company, trust, business trust,
governmental authority or other entity.
"Principal Shareholder": a shareholder of Gemplus that owns
15% or more of the then outstanding shares of Common Stock.
"Subsidiary": with respect to any Person, each corporation or
other Person in which the first Person owns or Controls, directly or indirectly,
capital stock or other ownership interests representing 50% or more of the
combined voting power of the outstanding voting stock or other ownership
interests of such corporation or other Person.
"Successor": of a Person means a Person that succeeds to the
first Person's assets and liabilities by merger, liquidation, dissolution or
otherwise by operation of law, or a Person to which all or substantially all the
assets and/or business of the first Person are transferred.
"Third Party": any Person or group of related Persons (within
the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended)
who are not Affiliates of Gemplus or of any Principal Shareholder of Gemplus.
IN WITNESS WHEREOF, the Company has duly executed this
Agreement by its authorized representative, and Executive has hereunto set his
hand, in each case effective as of the date first above written.
GEMPLUS INTERNATIONAL S.A.
As a party to this Agreement and as Guarantor
By: /s/ Xxxxxx Xxxxxx
----------------------------------------
Name: Xxxxxx Xxxxxx
Title: Director
By: /s/ Xxxx Xxxxxxx
-----------------------------------------
Name: Xxxx Xxxxxxx
Title: Director
By: /s/ Xxxxxxx Xxxxx
----------------------------------------
Name: Xxxxxxx Xxxxx
Title: Director
GEMPLUS AMERICAS INC.
By: /s/ Xxxxx Xxxxx
----------------------------------------
Name: Xxxxx Xxxxx
Title: Secretary
Executive:
/s/ Xxxxxxx X. Xxxxx
--------------------------------------------
Name: Xxxxxxx X. Xxxxx
