EXHIBIT 10.17
EXECUTIVE SEVERANCE BENEFITS AGREEMENT
THIS EXECUTIVE SEVERANCE BENEFITS AGREEMENT (this "Agreement") is entered
into by and between XXXXXX INTERACTIVE SYSTEMS, INC., a Delaware corporation
(the "Company") and XXXX XXXX ("Executive"), effective August 5, 1998. This
Agreement is intended to provide Executive with the compensation and benefits
described herein upon the occurrence of specific events. Certain capitalized
terms used in this Agreement are defined in Article 6.
The Company and Executive hereby agree as follows:
ARTICLE 1
EMPLOYMENT BY THE COMPANY
1.1 The Company currently employs Executive.
1.2 The Company and Executive wish to set forth the compensation and
benefits which Executive shall be entitled to receive in the event Executive's
employment with the Company is terminated under the circumstances described
herein.
1.3 The duties and obligations of the Company to Executive under this
Agreement shall be in consideration for Executive's past services to the
Company, Executive's continued employment with the Company and Executive's
execution of the general waiver and release described in Section 3.2.
1.4 This Agreement shall supersede any other agreement relating to
Executive's severance from employment with the Company.
ARTICLE 2
SEVERANCE BENEFITS
2.1 SEVERANCE BENEFITS. If within TWENTY-FOUR (24) months following a
Change of Control, Executive's employment terminates due to an Involuntary
Termination Without Cause or a Constructive Termination, such termination of
employment will be deemed a Covered Termination. A Covered Termination entitles
Executive to receive the following benefits set forth in Sections 2.2 through
2.5.
2.2 SEVERANCE PAYMENT. Executive shall receive a severance payment equal
to TWELVE (12) months of Base Pay plus Bonus, subject to applicable tax
withholding, payable at such time or times as the Company may elect; provided
that Executive shall not receive such severance payments at a rate slower than
the Company's regularly scheduled payment dates for payroll and bonus. If
Executive is indebted to the Company at his or her date
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of termination, the Company reserves the right to offset any severance payment
under this Agreement by the amount of such indebtedness. In no event shall
payment of any severance payment be made prior to Executive's date of
termination or in the absence of an effective release pursuant to Section 3.2
2.3 ACCELERATION OF STOCK OPTION VESTING. The portion of Executive's stock
options that would have vested on or before the date TWELVE (12) months from the
occurrence of the Covered Termination shall accelerate and immediately become
vested and exercisable. Notwithstanding the foregoing, if the Change of Control
was a transaction that was accounted for as a pooling of interests for financial
reporting purposes, then the unvested portion of such stock options shall not
accelerate unless the Company receives reasonable assurances from the Company's
independent public accountants (and from the acquiring party's independent
public accountants) that in their good faith judgement such acceleration will
not adversely affect the pooling of interests accounting treatment of such
Change of Control transaction.
2.4 COBRA CONTINUATION. Executive and Executive's covered dependents who
are enrolled in a health or dental plan sponsored by the Company may be eligible
to continue coverage under such health or dental plan (or to convert to an
individual policy), at the time of the Executive's termination of employment
under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"). The
Company will notify the individual of any such right to continue health coverage
at the time of termination. The Company will continue to pay its share of
Executive's health insurance premiums until the earlier of: (i) TWELVE (12)
months after the date of termination, or (ii) such time as the Executive becomes
eligible to participate in another employer's health insurance plan (the "COBRA
Period"); provided that Executive elects to continue coverage under COBRA and
timely pays Executive's portion of the premium. No provision of this Agreement
will affect the continuation coverage rules under COBRA, except that the
Company's payment of any applicable insurance premiums during the COBRA Period
will be credited as payment by Executive for purposes of Executive's payment
required under COBRA. Therefore, the period during which Executive must elect to
continue the Company's group medical or dental coverage at his or her own
expense under COBRA, the length of time during which COBRA coverage will be made
available to the Executive, and all other rights and obligations of Executive
under COBRA (except the obligation to pay insurance premiums that the Company
pays during the COBRA Period) will be applied in the same manner that such rules
would apply in the absence of this Agreement.
2.5 ACCRUED VACATION PAY. In addition to any other amount payable under
this Article 2, Executive will be entitled to receive any accrued vacation pay
in accordance with the Company's vacation pay policy then in effect for
employees generally.
2.6 MITIGATION. Except as otherwise specifically provided herein, Executive
shall not be required to mitigate damages or the amount of any payment provided
under this Agreement by seeking other employment or otherwise, nor shall the
amount of any payment provided for under this Agreement be reduced by any
compensation earned by
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Executive as a result of employment by another employer or by any retirement
benefits received by Executive after the date of the Covered Termination, or
otherwise.
ARTICLE 3
LIMITATIONS AND CONDITIONS ON BENEFITS
3.1 TAX CONSEQUENCES. The Company shall withhold appropriate federal,
state, local (and foreign, if applicable) income and employment taxes from any
payments hereunder. Executive acknowledges that he or she has been advised by
the Company to consult with a tax advisor or attorney with respect to the tax
consequences, if any, of these amendments to his or her stock option grants.
3.2 EMPLOYEE AGREEMENT AND RELEASE PRIOR TO RECEIPT OF BENEFITS. Upon the
occurrence of a Covered Termination, and prior to the receipt of any benefits
under this Agreement on account of such Covered Termination, Executive shall
execute the Employee Agreement and Release (the "Release") in the form attached
hereto as Exhibit A. Such Release shall specifically relate to all of
Executive's rights and claims in existence at the time of such execution and
shall confirm Executive's obligations under the Company's standard form of
proprietary information and inventions agreement. It is understood that
Executive has twenty-one (21) calendar days to consider whether to execute such
Release, and Executive may revoke such Release within seven (7) calendar days
after execution. In the event Executive does not execute such Release within the
twenty-one (21)-day period, or if Executive revokes such Release within the
subsequent seven (7)-day period, no benefits shall be payable under this
Agreement, and this Agreement shall be null and void.
ARTICLE 4
OTHER RIGHTS AND BENEFITS
4.1 NONEXCLUSIVITY. Nothing in this Agreement shall prevent or limit
Executive's continuing or future participation in any benefit, bonus, incentive
or other plans, programs, policies or practices provided by the Company and for
which Executive may otherwise qualify, nor shall anything herein limit or
otherwise affect such rights as Executive may have under other agreements with
the Company. Except as otherwise expressly provided herein, amounts which are
vested benefits or which Executive is otherwise entitled to receive under any
plan, policy, practice or program of the Company at or subsequent to the date of
a Covered Termination shall be payable in accordance with such plan, policy,
practice or program.
4.2 CERTAIN REDUCTIONS IN PAYMENTS.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event that any payment, distribution or other benefit provided by the
Company to or for the benefit of Executive (whether paid or payable or provided
or to be provided pursuant to the terms of this Agreement or otherwise) (a
"Payment") would (i) constitute a "parachute payment" within the meaning of
Section 280G of the Internal Revenue Code of 1986 ("the Code") and (ii) but for
this
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Section 4.2, be subject to the excise tax imposed by Section 4999 of the Code
(the "Excise Tax"), then, in accordance with this Section 4.2, such Payments
shall be reduced to the maximum amount that would result in no portion of the
Payments being subject to the Excise Tax, but only if and to the extent that
such a reduction would result in Executive's receipt of Payments that are
greater than the net amount Executive would receive (after application of the
Excise Tax) if no reduction is made. The amount of required reduction, if any,
shall be the smallest amount so that the Executive's net proceeds with respect
to the Payments (after taking into account payment of any Excise Tax and all
federal, state and local income, employment or other taxes) shall be maximized.
If, notwithstanding any reduction described in this Section 4.2 (or in the
absence of any such reduction), the Internal Revenue Service (the "IRS")
determines that a Payment is subject to the Excise Tax (or subject to a
different amount of the Excise Tax than determined by the Company or the
Executive), then Section 4.2(c) shall apply. If the Excise Tax is not eliminated
pursuant to this Section 4.2, Executive shall pay the Excise Tax.
(b) All determinations required to be made under this Section 4.2
shall be made by the Company's independent auditors. Such auditors shall
provide detailed supporting calculations both to the Company and Executive. Any
such reasonable determination by the Company's independent auditors shall be
binding upon the Company and Executive. The Executive shall determine which and
how much of the Payments, including without limitation any option acceleration
benefits provide under this Agreement or any option ("Option Benefits"), as the
case may be, shall be eliminated or reduced consistent with the requirements of
this Section 4.2, provided that, if Executive does not make such determination
within ten (10) business days of the receipt of the calculations made by the
Company's independent auditors, the Company shall elect which and how much of
the Option Benefits or other Payments, as the case may be, shall be eliminated
or reduced consistent with the requirements of this Section 4.2, and then the
Company shall notify Executive promptly of such election. Within five (5)
business days thereafter, the Company shall pay to or distribute to or for the
benefit of Executive such amounts as are then due to Executive under this
Agreement.
(c) As a result of the uncertainty in the application of Section
280G of the Code at the time of the initial determination by the Company's
independent auditors hereunder, it is possible that Option Benefits or other
Payments, as the case may be, will have been made by the Company which should
not have been made ("Overpayment") or that additional Option Benefits or other
Payments, as the case may be, which will not have been made by the Company could
have been made ("Underpayment"), in each case, consistent with the calculations
required to be made hereunder. In the event that the Company's independent
auditors, based upon the assertion of a deficiency by the IRS against Executive
or the Company which the Company's independent auditors believe has a high
probability of success, determine that an Overpayment has been made, any such
Overpayment paid or distributed by the Company to or for the benefit of
Executive shall be treated for all purposes as a loan ab initio to Executive
which Executive shall repay to the Company together with interest at the
applicable federal rate provided for in Section 7872(f)(2) of the Code;
provided, however, that no such loan shall be deemed to have been made and no
amount shall be payable by Executive to the Company if and to the extent such
deemed loan and payment would not either reduce the amount on which Executive is
subject to tax under Section 1 and Section 4999 of the Code or generate a refund
of such taxes. In the event that the Company's independent auditors, based upon
controlling precedent or other
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substantial authority, determine that an Underpayment has occurred, any such
Underpayment shall be promptly paid by the Company to or for the benefit of
Executive together with interest at the applicable federal rate provided for in
Section 7872(f)(2) of the Code.
ARTICLE 5
TRANSFERABILITY OF BENEFITS
5.1 No benefit hereunder shall be subject to sale, transfer, assignment,
pledge, encumbrance or charge, and any attempt to do so shall be void.
ARTICLE 6
DEFINITIONS
For purposes of this Agreement, the following terms are defined as follows:
6.1 "BASE PAY" means Executive's base pay (excluding overtime, bonuses,
draws, commission, and other forms of additional compensation and benefits), at
the rate in effect during the last regularly scheduled payroll period
immediately preceding any termination of Executive's employment.
6.2 "BOARD" means the Board of Directors of the Company.
6.3 "BONUS" means the average of the amount of Executive's bonus for the
previous two (2) fiscal years of the Company.
6.4 "CAUSE" means termination of Executive's employment with the Company
for any of the following reasons as determined in good faith by the Board:
(a) an intentional act which materially injures the Company;
(b) an intentional refusal or failure to follow lawful and
reasonable directions of the Board or an individual to whom Executive reports
(as appropriate);
(c) a willful and habitual neglect of duties; or
(d) a conviction of a felony involving moral turpitude which is
reasonably likely to inflict or has inflicted material injury on the Company.
6.5 "CHANGE OF CONTROL" means that the Company (a) merges or combines with
any other company or entity and the Company is not the surviving corporation, or
the stockholders of the Company immediately prior to the merger or consolidation
do not hold a majority of the shares of the resulting corporation; (b) sells all
or substantially all its assets to any other company or entity; or (c) has forty
percent (40%) or more of its stock acquired by a person and/or affiliates of
such person.
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6.6 "CONSTRUCTIVE TERMINATION" means that Executive voluntarily terminates
employment after any of the following are undertaken without Executive's express
written consent:
(a) the assignment to Executive of any duties or responsibilities
which result in a diminution or adverse change of Executive's position, status
or circumstances of employment; provided, however, that a mere change in
Executive's title or reporting relationship shall not constitute a Constructive
Termination;
(b) a reduction by the Company in Executive's Base Pay;
(c) a relocation of Executive's business office to a location more
than thirty (30) miles from the location at which Executive performs duties as
of the date of this Agreement, except for required travel by Executive on the
Company's business to an extent substantially consistent with Executive's
business travel obligations;
(d) any breach by the Company of any provision of this Agreement or
any other material agreement between Executive and the Company concerning
Executive's employment; or
(e) any failure by the Company to obtain the assumption of this
Agreement by any successor or assign of the Company.
6.7 "COVERED TERMINATION" means an Involuntary Termination Without Cause or
a Constructive Termination.
6.8 "INVOLUNTARY TERMINATION WITHOUT CAUSE" means Executive's dismissal or
discharge other than for Cause. The termination of Executive's employment as a
result of Executive's death or disability will not be deemed to be an
Involuntary Termination Without Cause.
ARTICLE 7
GENERAL PROVISIONS
7.1 EMPLOYMENT STATUS. This Agreement does not constitute a contract of
employment or impose upon Executive any obligation to remain as an employee, or
impose on the Company any obligation (i) to retain Executive as an employee,
(ii) to change the status of Executive as an at-will employee, or (iii) to
change the Company's policies regarding termination of employment.
7.2 NOTICES. Any notices provided hereunder must be in writing, and such
notices or any other written communication shall be deemed effective upon the
earlier of personal delivery (including personal delivery by facsimile) or the
third day after mailing by first class mail, to the Company at its primary
office location and to Executive at Executive's address as listed in the
Company's payroll records. Any payments made by the Company to Executive
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under the terms of this Agreement shall be delivered to Executive either in
person or at the address as listed in the Company's payroll records.
7.3 SEVERABILITY. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provisions had never been contained herein.
7.4 WAIVER. If either party should waive any breach of any provisions of
this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
7.5 COMPLETE AGREEMENT. This Agreement, including Exhibit A, constitutes
the entire agreement between Executive and the Company and is the complete,
final, and exclusive embodiment of their agreement with regard to this subject
matter, wholly superseding all written and oral agreements with respect to
payments and benefits to Executive in the event of employment termination. It is
entered into without reliance on any promise or representation other than those
expressly contained herein.
7.6 DURATION OF AGREEMENT. This Agreement shall terminate upon the date of
Executive's termination of employment with the Company. If not sooner
terminated, this Agreement shall terminate on June 30, 2000 and beginning on
July 1, 2000 and on each subsequent anniversary of such date, one (1) year shall
be added to the term of this Agreement, unless at least twelve (12) months prior
to such date or anniversary, the Company shall have notified Executive in
writing that such extension will not become effective. Notwithstanding the
foregoing, this Agreement shall not terminate or expire with respect to
Executive if Executive becomes entitled to receive the payments and benefits set
forth in Sections 2.2 through 2.5 until Executive shall have received such
payments and benefits in full.
7.7 AMENDMENT OR TERMINATION OF AGREEMENT. Notwithstanding anything in
Section 7.6 to the contrary, this Agreement may be changed or terminated upon
the mutual written consent of the Company and Executive. The written consent of
the Company to a change or termination of this Agreement must be signed by an
executive officer of the Company after such change or the Board has approved
termination.
7.8 COUNTERPARTS. This Agreement may be executed in separate counterparts,
any one of which need not contain signatures of more than one party, but all of
which taken together will constitute one and the same Agreement.
7.9 HEADINGS. The headings of the Articles and Sections hereof are inserted
for convenience only and shall not be deemed to constitute a part hereof or to
affect the meaning thereof.
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7.10 SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure
to the benefit of and be enforceable by Executive and the Company, and their
respective successors, assigns, heirs, executors and administrators, except that
Executive may not assign any duties hereunder and may not assign any rights
hereunder without the written consent of the Company, which consent shall not be
withheld unreasonably.
7.11 CHOICE OF LAW. All questions concerning the construction, validity and
interpretation of this Agreement will be governed by the law of the State of
California, without regard to such state's conflict of laws rules.
7.12 NON-PUBLICATION. The parties mutually agree not to disclose publicly
the terms of this Agreement except to the extent that disclosure is mandated by
applicable law or to respective advisors (e.g., attorneys, accountants).
7.13 CONSTRUCTION OF AGREEMENT. In the event of a conflict between the
text of the Agreement and any summary, description or other information
regarding the Agreement, the text of the Agreement shall control.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year written above.
XXXXXX INTERACTIVE SYSTEMS, INC. [EXECUTIVE]
/s/ Xxxxxxx X. Xxx /s/ Xxxx Xxxx
By: ________________________________ _____________________________
Xxxxxxx X. Xxx
Name:_______________________________
Chairman of the Board &
Chief Executive Officer
Title:______________________________
Exhibit A: Employee Agreement and Release
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EXHIBIT A
EMPLOYEE AGREEMENT AND RELEASE
I understand and agree completely to the terms set forth in the foregoing
agreement.
I hereby confirm my obligations under the Xxxxxx Interactive Systems,
Inc.'s (the "Company") proprietary information and inventions agreement.
In granting the release herein, I acknowledge that I understand that I am
waiving the benefit of any provision of law in any jurisdiction to the following
effect: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HER SETTLEMENT WITH THE
DEBTOR." (California Civil Code section 1542). I hereby expressly waive and
relinquish all rights and benefits under that section and any law or legal
principle of similar effect in any jurisdiction with respect to the release of
unknown and unsuspected claims granted in this Agreement.
Except as otherwise set forth in this Agreement, I hereby release, acquit
and forever discharge the Company, its parents and subsidiaries, and its and
their respective officers, directors, agents, servants, employees, shareholders,
successors, assigns and affiliates, of and from any and all claims, liabilities,
demands, causes of action, costs, expenses, attorneys fees, damages, indemnities
and obligations of every kind and nature, in law, equity, or otherwise, known
and unknown, suspected and unsuspected, disclosed and undisclosed (other than
any claim for indemnification I may have as a result of any third party action
against me based on my employment with the Company), arising out of or in any
way related to agreements, events, acts or conduct at any time prior to the date
I execute this Agreement, including but not limited to: all such claims and
demands directly or indirectly arising out of or in any way connected with my
employment with the Company or the termination of that employment, including but
not limited to, claims of intentional and negligent infliction of emotional
distress, any and all tort claims for personal injury, claims or demands related
to salary, bonuses, commissions, stock, stock options, or any other ownership
interests in the Company, vacation pay, fringe benefits, expense reimbursements,
severance pay, or any other form of compensation; claims pursuant to any
federal, state or local law or cause of action including, but not limited to,
the federal Civil Rights Act of 1964, as amended; the federal Age Discrimination
in Employment Act of 1967, as amended ("ADEA"); the federal Employee Retirement
Income Security Act of 1974, as amended; the federal Americans with Disabilities
Act of 1990; the California Fair Employment and Housing Act, as amended; tort
law; contract law; wrongful discharge; harassment; discrimination; fraud;
defamation; emotional distress; and breach of the implied covenant of good faith
and fair dealing; provided, however, that nothing in this paragraph shall be
construed in any way to release the Company from its obligation to indemnify me
pursuant to the Company's indemnification agreement.
I acknowledge that I am knowingly and voluntarily waiving and releasing any
rights I may have under ADEA. I also acknowledge that the consideration given
for the waiver and release in the preceding paragraph hereof is in addition to
anything of value to which I was already entitled. I further acknowledge that I
have been advised by this writing, as required by the ADEA, that: (A) my waiver
and release do not apply to any rights or claims that may arise on or after the
date I execute this Agreement; (B) I have the right to consult with an attorney
prior to executing this Agreement; (C) I have twenty-one (21) days to consider
this Agreement (although I may choose to voluntarily execute this Agreement
earlier); (D) I have seven (7) days following the execution of this Agreement by
the parties to revoke the Agreement; and (E) this Agreement shall not be
effective until the date upon which the revocation period has expired, which
shall be the eighth day after this Agreement is executed by me, provided that
the Company has also executed this Agreement by that date (the "Effective
Date").
XXXXXX INTERACTIVE SYSTEMS, INC. [EXECUTIVE]
By:________________________________ _________________________________
Title:_____________________________ Date:____________________________
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EXHIBIT 10.17
EXECUTIVE SEVERANCE BENEFITS AGREEMENT
THIS EXECUTIVE SEVERANCE BENEFITS AGREEMENT (this "Agreement") is entered
into by and between XXXXXX INTERACTIVE SYSTEMS, INC., a Delaware corporation
(the "Company") and SZE-LO (XXXXX) XXXX ("Executive"), effective August 5, 1998.
This Agreement is intended to provide Executive with the compensation and
benefits described herein upon the occurrence of specific events. Certain
capitalized terms used in this Agreement are defined in Article 6.
The Company and Executive hereby agree as follows:
ARTICLE 1
EMPLOYMENT BY THE COMPANY
1.1 The Company currently employs Executive.
1.2 The Company and Executive wish to set forth the compensation and
benefits which Executive shall be entitled to receive in the event Executive's
employment with the Company is terminated under the circumstances described
herein.
1.3 The duties and obligations of the Company to Executive under this
Agreement shall be in consideration for Executive's past services to the
Company, Executive's continued employment with the Company and Executive's
execution of the general waiver and release described in Section 3.2.
1.4 This Agreement shall supersede any other agreement relating to
Executive's severance from employment with the Company.
ARTICLE 2
SEVERANCE BENEFITS
2.1 SEVERANCE BENEFITS. If within TWENTY-FOUR (24) months following a
Change of Control, Executive's employment terminates due to an Involuntary
Termination Without Cause or a Constructive Termination, such termination of
employment will be deemed a Covered Termination. A Covered Termination entitles
Executive to receive the following benefits set forth in Sections 2.2 through
2.5.
2.2 SEVERANCE PAYMENT. Executive shall receive a severance payment equal to
TWELVE (12) months of Base Pay plus Bonus, subject to applicable tax
withholding, payable at such time or times as the Company may elect; provided
that Executive shall not receive such severance payments at a rate slower than
the Company's regularly scheduled payment dates for payroll and bonus. If
Executive is indebted to the Company at his or her date
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of termination, the Company reserves the right to offset any severance payment
under this Agreement by the amount of such indebtedness. In no event shall
payment of any severance payment be made prior to Executive's date of
termination or in the absence of an effective release pursuant to Section 3.2
2.3 ACCELERATION OF STOCK OPTION VESTING. The portion of Executive's stock
options that would have vested on or before the date TWELVE (12) months from the
occurrence of the Covered Termination shall accelerate and immediately become
vested and exercisable. Notwithstanding the foregoing, if the Change of Control
was a transaction that was accounted for as a pooling of interests for financial
reporting purposes, then the unvested portion of such stock options shall not
accelerate unless the Company receives reasonable assurances from the Company's
independent public accountants (and from the acquiring party's independent
public accountants) that in their good faith judgement such acceleration will
not adversely affect the pooling of interests accounting treatment of such
Change of Control transaction.
2.4 COBRA CONTINUATION. Executive and Executive's covered dependents who
are enrolled in a health or dental plan sponsored by the Company may be eligible
to continue coverage under such health or dental plan (or to convert to an
individual policy), at the time of the Executive's termination of employment
under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"). The
Company will notify the individual of any such right to continue health coverage
at the time of termination. The Company will continue to pay its share of
Executive's health insurance premiums until the earlier of: (i) TWELVE (12)
months after the date of termination, or (ii) such time as the Executive becomes
eligible to participate in another employer's health insurance plan (the "COBRA
Period"); provided that Executive elects to continue coverage under COBRA and
timely pays Executive's portion of the premium. No provision of this Agreement
will affect the continuation coverage rules under COBRA, except that the
Company's payment of any applicable insurance premiums during the COBRA Period
will be credited as payment by Executive for purposes of Executive's payment
required under COBRA. Therefore, the period during which Executive must elect to
continue the Company's group medical or dental coverage at his or her own
expense under COBRA, the length of time during which COBRA coverage will be made
available to the Executive, and all other rights and obligations of Executive
under COBRA (except the obligation to pay insurance premiums that the Company
pays during the COBRA Period) will be applied in the same manner that such rules
would apply in the absence of this Agreement.
2.5 ACCRUED VACATION PAY. In addition to any other amount payable under
this Article 2, Executive will be entitled to receive any accrued vacation pay
in accordance with the Company's vacation pay policy then in effect for
employees generally.
2.6 MITIGATION. Except as otherwise specifically provided herein, Executive
shall not be required to mitigate damages or the amount of any payment provided
under this Agreement by seeking other employment or otherwise, nor shall the
amount of any payment provided for under this Agreement be reduced by any
compensation earned by
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Executive as a result of employment by another employer or by any retirement
benefits received by Executive after the date of the Covered Termination, or
otherwise.
ARTICLE 3
LIMITATIONS AND CONDITIONS ON BENEFITS
3.1 TAX CONSEQUENCES. The Company shall withhold appropriate federal,
state, local (and foreign, if applicable) income and employment taxes from any
payments hereunder. Executive acknowledges that he or she has been advised by
the Company to consult with a tax advisor or attorney with respect to the tax
consequences, if any, of these amendments to his or her stock option grants.
3.2 EMPLOYEE AGREEMENT AND RELEASE PRIOR TO RECEIPT OF BENEFITS. Upon the
occurrence of a Covered Termination, and prior to the receipt of any benefits
under this Agreement on account of such Covered Termination, Executive shall
execute the Employee Agreement and Release (the "Release") in the form attached
hereto as Exhibit A. Such Release shall specifically relate to all of
Executive's rights and claims in existence at the time of such execution and
shall confirm Executive's obligations under the Company's standard form of
proprietary information and inventions agreement. It is understood that
Executive has twenty-one (21) calendar days to consider whether to execute such
Release, and Executive may revoke such Release within seven (7) calendar days
after execution. In the event Executive does not execute such Release within the
twenty-one (21)-day period, or if Executive revokes such Release within the
subsequent seven (7)-day period, no benefits shall be payable under this
Agreement, and this Agreement shall be null and void.
ARTICLE 4
OTHER RIGHTS AND BENEFITS
4.1 NONEXCLUSIVITY. Nothing in this Agreement shall prevent or limit
Executive's continuing or future participation in any benefit, bonus, incentive
or other plans, programs, policies or practices provided by the Company and for
which Executive may otherwise qualify, nor shall anything herein limit or
otherwise affect such rights as Executive may have under other agreements with
the Company. Except as otherwise expressly provided herein, amounts which are
vested benefits or which Executive is otherwise entitled to receive under any
plan, policy, practice or program of the Company at or subsequent to the date of
a Covered Termination shall be payable in accordance with such plan, policy,
practice or program.
4.2 CERTAIN REDUCTIONS IN PAYMENTS.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event that any payment, distribution or other benefit provided by the
Company to or for the benefit of Executive (whether paid or payable or provided
or to be provided pursuant to the terms of this Agreement or otherwise) (a
"Payment") would (i) constitute a "parachute payment" within the meaning of
Section 280G of the Internal Revenue Code of 1986 ("the Code") and (ii) but for
this
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Section 4.2, be subject to the excise tax imposed by Section 4999 of the Code
(the "Excise Tax"), then, in accordance with this Section 4.2, such Payments
shall be reduced to the maximum amount that would result in no portion of the
Payments being subject to the Excise Tax, but only if and to the extent that
such a reduction would result in Executive's receipt of Payments that are
greater than the net amount Executive would receive (after application of the
Excise Tax) if no reduction is made. The amount of required reduction, if any,
shall be the smallest amount so that the Executive's net proceeds with respect
to the Payments (after taking into account payment of any Excise Tax and all
federal, state and local income, employment or other taxes) shall be maximized.
If, notwithstanding any reduction described in this Section 4.2 (or in the
absence of any such reduction), the Internal Revenue Service (the "IRS")
determines that a Payment is subject to the Excise Tax (or subject to a
different amount of the Excise Tax than determined by the Company or the
Executive), then Section 4.2(c) shall apply. If the Excise Tax is not eliminated
pursuant to this Section 4.2, Executive shall pay the Excise Tax.
(b) All determinations required to be made under this Section 4.2
shall be made by the Company's independent auditors. Such auditors shall
provide detailed supporting calculations both to the Company and Executive. Any
such reasonable determination by the Company's independent auditors shall be
binding upon the Company and Executive. The Executive shall determine which and
how much of the Payments, including without limitation any option acceleration
benefits provide under this Agreement or any option ("Option Benefits"), as the
case may be, shall be eliminated or reduced consistent with the requirements of
this Section 4.2, provided that, if Executive does not make such determination
within ten (10) business days of the receipt of the calculations made by the
Company's independent auditors, the Company shall elect which and how much of
the Option Benefits or other Payments, as the case may be, shall be eliminated
or reduced consistent with the requirements of this Section 4.2, and then the
Company shall notify Executive promptly of such election. Within five (5)
business days thereafter, the Company shall pay to or distribute to or for the
benefit of Executive such amounts as are then due to Executive under this
Agreement.
(c) As a result of the uncertainty in the application of Section
280G of the Code at the time of the initial determination by the Company's
independent auditors hereunder, it is possible that Option Benefits or other
Payments, as the case may be, will have been made by the Company which should
not have been made ("Overpayment") or that additional Option Benefits or other
Payments, as the case may be, which will not have been made by the Company could
have been made ("Underpayment"), in each case, consistent with the calculations
required to be made hereunder. In the event that the Company's independent
auditors, based upon the assertion of a deficiency by the IRS against Executive
or the Company which the Company's independent auditors believe has a high
probability of success, determine that an Overpayment has been made, any such
Overpayment paid or distributed by the Company to or for the benefit of
Executive shall be treated for all purposes as a loan ab initio to Executive
which Executive shall repay to the Company together with interest at the
applicable federal rate provided for in Section 7872(f)(2) of the Code;
provided, however, that no such loan shall be deemed to have been made and no
amount shall be payable by Executive to the Company if and to the extent such
deemed loan and payment would not either reduce the amount on which Executive is
subject to tax under Section 1 and Section 4999 of the Code or generate a refund
of such taxes. In the event that the Company's independent auditors, based upon
controlling precedent or other
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substantial authority, determine that an Underpayment has occurred, any such
Underpayment shall be promptly paid by the Company to or for the benefit of
Executive together with interest at the applicable federal rate provided for in
Section 7872(f)(2) of the Code.
ARTICLE 5
TRANSFERABILITY OF BENEFITS
5.1 No benefit hereunder shall be subject to sale, transfer, assignment,
pledge, encumbrance or charge, and any attempt to do so shall be void.
ARTICLE 6
DEFINITIONS
For purposes of this Agreement, the following terms are defined as follows:
6.1 "BASE PAY" means Executive's base pay (excluding overtime, bonuses,
draws, commission, and other forms of additional compensation and benefits), at
the rate in effect during the last regularly scheduled payroll period
immediately preceding any termination of Executive's employment.
6.2 "BOARD" means the Board of Directors of the Company.
6.3 "BONUS" means the average of the amount of Executive's bonus for the
previous two (2) fiscal years of the Company.
6.4 "CAUSE" means termination of Executive's employment with the Company
for any of the following reasons as determined in good faith by the Board:
(a) an intentional act which materially injures the Company;
(b) an intentional refusal or failure to follow lawful and
reasonable directions of the Board or an individual to whom Executive reports
(as appropriate);
(c) a willful and habitual neglect of duties; or
(d) a conviction of a felony involving moral turpitude which is
reasonably likely to inflict or has inflicted material injury on the Company.
6.5 "CHANGE OF CONTROL" means that the Company (a) merges or combines with
any other company or entity and the Company is not the surviving corporation, or
the stockholders of the Company immediately prior to the merger or consolidation
do not hold a majority of the shares of the resulting corporation; (b) sells all
or substantially all its assets to any other company or entity; or (c) has forty
percent (40%) or more of its stock acquired by a person and/or affiliates of
such person.
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6.6 "CONSTRUCTIVE TERMINATION" means that Executive voluntarily terminates
employment after any of the following are undertaken without Executive's express
written consent:
(a) the assignment to Executive of any duties or responsibilities
which result in a diminution or adverse change of Executive's position, status
or circumstances of employment; provided, however, that a mere change in
Executive's title or reporting relationship shall not constitute a Constructive
Termination;
(b) a reduction by the Company in Executive's Base Pay;
(c) a relocation of Executive's business office to a location more
than thirty (30) miles from the location at which Executive performs duties as
of the date of this Agreement, except for required travel by Executive on the
Company's business to an extent substantially consistent with Executive's
business travel obligations;
(d) any breach by the Company of any provision of this Agreement or
any other material agreement between Executive and the Company concerning
Executive's employment; or
(e) any failure by the Company to obtain the assumption of this
Agreement by any successor or assign of the Company.
6.7 "COVERED TERMINATION" means an Involuntary Termination Without Cause
or a Constructive Termination.
6.8 "INVOLUNTARY TERMINATION WITHOUT CAUSE" means Executive's dismissal or
discharge other than for Cause. The termination of Executive's employment as a
result of Executive's death or disability will not be deemed to be an
Involuntary Termination Without Cause.
ARTICLE 7
GENERAL PROVISIONS
7.1 EMPLOYMENT STATUS. This Agreement does not constitute a contract of
employment or impose upon Executive any obligation to remain as an employee, or
impose on the Company any obligation (i) to retain Executive as an employee,
(ii) to change the status of Executive as an at-will employee, or (iii) to
change the Company's policies regarding termination of employment.
7.2 NOTICES. Any notices provided hereunder must be in writing, and such
notices or any other written communication shall be deemed effective upon the
earlier of personal delivery (including personal delivery by facsimile) or the
third day after mailing by first class mail, to the Company at its primary
office location and to Executive at Executive's address as listed in the
Company's payroll records. Any payments made by the Company to Executive
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under the terms of this Agreement shall be delivered to Executive either in
person or at the address as listed in the Company's payroll records.
7.3 SEVERABILITY. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provisions had never been contained herein.
7.4 WAIVER. If either party should waive any breach of any provisions of
this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
7.5 COMPLETE AGREEMENT. This Agreement, including Exhibit A, constitutes
the entire agreement between Executive and the Company and is the complete,
final, and exclusive embodiment of their agreement with regard to this subject
matter, wholly superseding all written and oral agreements with respect to
payments and benefits to Executive in the event of employment termination. It is
entered into without reliance on any promise or representation other than those
expressly contained herein.
7.6 DURATION OF AGREEMENT. This Agreement shall terminate upon the date of
Executive's termination of employment with the Company. If not sooner
terminated, this Agreement shall terminate on June 30, 2000 and beginning on
July 1, 2000 and on each subsequent anniversary of such date, one (1) year shall
be added to the term of this Agreement, unless at least twelve (12) months prior
to such date or anniversary, the Company shall have notified Executive in
writing that such extension will not become effective. Notwithstanding the
foregoing, this Agreement shall not terminate or expire with respect to
Executive if Executive becomes entitled to receive the payments and benefits set
forth in Sections 2.2 through 2.5 until Executive shall have received such
payments and benefits in full.
7.7 AMENDMENT OR TERMINATION OF AGREEMENT. Notwithstanding anything in
Section 7.6 to the contrary, this Agreement may be changed or terminated upon
the mutual written consent of the Company and Executive. The written consent of
the Company to a change or termination of this Agreement must be signed by an
executive officer of the Company after such change or the Board has approved
termination.
7.8 COUNTERPARTS. This Agreement may be executed in separate counterparts,
any one of which need not contain signatures of more than one party, but all of
which taken together will constitute one and the same Agreement.
7.9 HEADINGS. The headings of the Articles and Sections hereof are
inserted for convenience only and shall not be deemed to constitute a part
hereof or to affect the meaning thereof.
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7.10 SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure
to the benefit of and be enforceable by Executive and the Company, and their
respective successors, assigns, heirs, executors and administrators, except that
Executive may not assign any duties hereunder and may not assign any rights
hereunder without the written consent of the Company, which consent shall not be
withheld unreasonably.
7.11 CHOICE OF LAW. All questions concerning the construction, validity and
interpretation of this Agreement will be governed by the law of the State of
California, without regard to such state's conflict of laws rules.
7.12 NON-PUBLICATION. The parties mutually agree not to disclose publicly
the terms of this Agreement except to the extent that disclosure is mandated by
applicable law or to respective advisors (e.g., attorneys, accountants).
7.13 CONSTRUCTION OF AGREEMENT. In the event of a conflict between the text
of the Agreement and any summary, description or other information regarding the
Agreement, the text of the Agreement shall control.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year written above.
XXXXXX INTERACTIVE SYSTEMS, INC. [EXECUTIVE]
/s/ Xxxxxxx X. Xxx /s/ Sze-Lo (Xxxxx) Xxxx
By: ________________________________ _____________________________
Xxxxxxx X. Xxx
Name:_______________________________
Chairman of the Board &
Chief Executive Officer
Title:______________________________
Exhibit A: Employee Agreement and Release
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EXHIBIT A
EMPLOYEE AGREEMENT AND RELEASE
I understand and agree completely to the terms set forth in the foregoing
agreement.
I hereby confirm my obligations under the Xxxxxx Interactive Systems,
Inc.'s (the "Company") proprietary information and inventions agreement.
In granting the release herein, I acknowledge that I understand that I am
waiving the benefit of any provision of law in any jurisdiction to the following
effect: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HER SETTLEMENT WITH THE
DEBTOR." (California Civil Code section 1542). I hereby expressly waive and
relinquish all rights and benefits under that section and any law or legal
principle of similar effect in any jurisdiction with respect to the release of
unknown and unsuspected claims granted in this Agreement.
Except as otherwise set forth in this Agreement, I hereby release, acquit
and forever discharge the Company, its parents and subsidiaries, and its and
their respective officers, directors, agents, servants, employees, shareholders,
successors, assigns and affiliates, of and from any and all claims, liabilities,
demands, causes of action, costs, expenses, attorneys fees, damages, indemnities
and obligations of every kind and nature, in law, equity, or otherwise, known
and unknown, suspected and unsuspected, disclosed and undisclosed (other than
any claim for indemnification I may have as a result of any third party action
against me based on my employment with the Company), arising out of or in any
way related to agreements, events, acts or conduct at any time prior to the date
I execute this Agreement, including but not limited to: all such claims and
demands directly or indirectly arising out of or in any way connected with my
employment with the Company or the termination of that employment, including but
not limited to, claims of intentional and negligent infliction of emotional
distress, any and all tort claims for personal injury, claims or demands related
to salary, bonuses, commissions, stock, stock options, or any other ownership
interests in the Company, vacation pay, fringe benefits, expense reimbursements,
severance pay, or any other form of compensation; claims pursuant to any
federal, state or local law or cause of action including, but not limited to,
the federal Civil Rights Act of 1964, as amended; the federal Age Discrimination
in Employment Act of 1967, as amended ("ADEA"); the federal Employee Retirement
Income Security Act of 1974, as amended; the federal Americans with Disabilities
Act of 1990; the California Fair Employment and Housing Act, as amended; tort
law; contract law; wrongful discharge; harassment; discrimination; fraud;
defamation; emotional distress; and breach of the implied covenant of good faith
and fair dealing; provided, however, that nothing in this paragraph shall be
construed in any way to release the Company from its obligation to indemnify me
pursuant to the Company's indemnification agreement.
I acknowledge that I am knowingly and voluntarily waiving and releasing any
rights I may have under ADEA. I also acknowledge that the consideration given
for the waiver and release in the preceding paragraph hereof is in addition to
anything of value to which I was already entitled. I further acknowledge that I
have been advised by this writing, as required by the ADEA, that: (A) my waiver
and release do not apply to any rights or claims that may arise on or after the
date I execute this Agreement; (B) I have the right to consult with an attorney
prior to executing this Agreement; (C) I have twenty-one (21) days to consider
this Agreement (although I may choose to voluntarily execute this Agreement
earlier); (D) I have seven (7) days following the execution of this Agreement by
the parties to revoke the Agreement; and (E) this Agreement shall not be
effective until the date upon which the revocation period has expired, which
shall be the eighth day after this Agreement is executed by me, provided that
the Company has also executed this Agreement by that date (the "Effective
Date").
XXXXXX INTERACTIVE SYSTEMS, INC. [EXECUTIVE]
By:___________________________________ ______________________________
Title:________________________________ Date:_________________________
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