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Exhibit 10.16
KEY EMPLOYEE RETENTION AGREEMENT
This Key Employee Retention Agreement (the "Agreement") is made and
entered into effective as of November 7, 1997, by and between Xxxx Xxxx (the
"Employee") and AccelGraphics, Inc., a Delaware corporation (the "Company").
RECITALS
A. It is expected that another company or other entity may from
time to time consider the possibility of acquiring the Company or that a change
in control may otherwise occur, with or without the approval of the Company's
Board of Directors (the "Board"). The Board recognizes that such consideration
can be a distraction to the Employee, an executive officer of the Company, and
can cause the Employee to consider alternative employment opportunities. The
Board has determined that it is in the best interests of the Company and its
stockholders to assure that the Company will have the continued dedication and
objectivity of the Employee, notwithstanding the possibility, threat or
occurrence of a Change of Control (as defined below) of the Company.
B. The Board recognizes that there is increasing competitive
pressure in the Silicon Valley to hire and retain key personnel in senior
management positions. As a result, the Board believes that it is in the best
interests of the Company and its stockholders to provide the Employee with an
incentive to continue his or her employment with the Company, which for
purposes of this Agreement as it relates to Employee's employment shall include
a majority-owned subsidiary of the Company.
C. The Board believes that it is imperative to provide the
Employee with certain benefits upon a Change of Control and, under certain
circumstances, upon termination of the Employee's employment in connection with
a Change of Control, which benefits are intended to provide the Employee with
financial security and provide sufficient income and encouragement to the
Employee to remain with the Company notwithstanding the possibility of a Change
of Control.
D. To accomplish the foregoing objectives, the Board of Directors
has directed the Company, upon execution of this Agreement by the Employee, to
agree to the terms provided in this Agreement.
E. Certain capitalized terms used in the Agreement are defined in
Section 4 below.
In consideration of the mutual covenants contained in this Agreement,
and in consideration of the continuing employment of Employee by the Company,
the parties agree as follows:
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1. At-Will Employment. The Company and the Employee
acknowledge that the Employee's employment is and shall continue to be at-will,
as defined under applicable law. If the Employee's employment terminates for
any reason, including (without limitation) any termination prior to a Change of
Control, the Employee shall not be entitled to any payments or benefits, other
than as provided by this Agreement, or as may otherwise be available in
accordance with the terms of the Company's established employee plans and
written policies at the time of termination. The terms of this Agreement shall
terminate upon the earlier of (i) the date on which Employee ceases to be
employed as an executive officer of the Company, other than as a result of an
involuntary termination by the Company without Cause (ii) the date that all
obligations of the parties hereunder have been satisfied, or (iii) eighteen
(18) months after a Change of Control. A termination of the terms of this
Agreement pursuant to the preceding sentence shall be effective for all
purposes, except that such termination shall not affect the payment or
provision of compensation or benefits on account of a termination of employment
occurring prior to the termination of the terms of this Agreement.
2. Stock Options and Restricted Stock. Subject to
Sections 5 and 6 below, in the event of a Change of Control and regardless of
whether the Employee's employment with the Company is terminated in connection
with the Change of Control, on the effective date of the transaction, each
stock option granted for the Company's securities held by the Employee (the
"Option") shall become fully vested and immediately exercisable and shall be
exercisable to the extent so vested in accordance with the provisions of the
Option Agreement and Plan pursuant to which such Option was granted and all
repurchase rights of the Company with respect to Restricted Stock purchased by
the Employee pursuant to the terms of a Stock Purchase Agreement ("Repurchase
Rights") shall immediately terminate.
3. Change of Control.
(a) Termination Following A Change of Control.
Subject to Section 4 below, if the Employee's employment with the Company is
terminated at any time within eighteen (18) months after a Change of Control,
then the Employee shall be entitled to receive severance benefits as follows:
(i) Voluntary Resignation. If the Employee
voluntarily resigns from the Company (other than as an Involuntary Termination
(as defined below) or if the Company terminates the Employee's employment for
Cause (as defined below), then the Employee shall not be entitled to receive
severance payments. The Employee's benefits will be terminated under the
Company's then-existing benefit plans and policies in accordance with such plans
and policies in effect on the date of termination or as otherwise determined by
the Board of Directors of the Company.
(ii) Involuntary Termination. If the
Employee's employment is terminated as a result of an Involuntary Termination
other than for Cause, the Employee shall be entitled to receive the following
benefits: (i) severance payments during the period from the date of the
Employee's termination until the date 12 months after the effective date of the
termination (the "Severance Period") equal to the base salary which the Employee
was receiving at the time
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of such termination ("Base Salary"), which payments shall be paid during the
Severance Period in accordance with the Company's standard payroll practices;
(ii) monthly severance payments during the Severance Period equal to 1/12th of
the Employee's "target bonus," which bonus, for purposes of this Agreement,
shall equal thirty percent (30%) of the Base Salary and, which payments shall
be paid during the Severance Period in accordance with the Company's standard
payroll practices; (iii) continuation of all health and life insurance benefits
through the end of the Severance Period substantially identical to those to
which the Employee was entitled immediately prior to the termination, or to
those being offered to executive officers of the Company, or a successor
corporation, if the Company's benefit programs are changed during the Severance
Period; and (iv) outplacement services with a total value not to exceed
$15,000. The Severance Period shall be extended for up to an additional 6
months if the Employee has not, during such 6 month period, obtained Comparable
Employment (as defined below). The extended Severance Period shall thereafter
terminate on the date of commencement of the Comparable Employment.
(iii) Involuntary Termination for Cause. If
the Employee's employment is terminated for Cause, then the Employee shall not
be entitled to receive severance payments. The Employee's benefits will be
terminated under the Company's then existing benefit plans and policies in
accordance with such plans and policies in effect on the date of termination or
as otherwise determined by the Board of Directors of the Company.
(b) Termination Apart from A Change of Control.
In the event the Employee's employment terminates for any reason, either prior
to the occurrence of a Change of Control or after the eighteen (18) month
period following the effective date of a Change of Control, then the Employee
shall not be entitled to receive any severance payments under this Agreement.
The Employee's benefits will be terminated under the terms of the Company's
then existing benefit plans and policies in accordance with such plans and
policies in effect on the date of termination or as otherwise determined by the
Board of Directors of the Company.
4. Definition of Terms. The following terms referred to
in this Agreement shall have the following meanings:
(a) Change of Control. "Change of Control" shall
mean the occurrence of any of the following events:
(i) Ownership. Any "Person" (as such term
is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended) is or becomes the "Beneficial Owner" (as defined in Rule 13d-3 under
said Act), directly or indirectly, of securities of the Company representing
twenty percent (20%) or more of the total voting power represented by the
Company's then outstanding voting securities without the approval of the Board
of Directors of the Company;
(ii) Merger/Sale of Assets. A merger or
consolidation of the Company whether or not approved by the Board of Directors
of the Company, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
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converted into voting securities of the surviving entity) at least fifty
percent (50%) of the total voting power represented by the voting securities of
the Company or such surviving entity outstanding immediately after such merger
or consolidation, or the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets; or
(iii) Change in Board Composition. A change
in the composition of the Board of Directors of the Company, as a result of
which fewer than a majority of the directors are Incumbent Directors. "Incumbent
Directors" shall mean directors who either (A) are directors of the Company as
of November 7, 1997 or (B) are elected, or nominated for election, to the Board
of Directors of the Company with the affirmative votes of at least a majority of
the Incumbent Directors at the time of such election or nomination (but shall
not include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to the
Company).
(b) Cause. "Cause" shall mean (i) gross
negligence or willful misconduct in the performance of the Employee's duties to
the Company where such gross negligence or willful misconduct has resulted or
is likely to result in substantial and material damage to the Company or its
subsidiaries, (ii) repeated unexplained or unjustified absence from the
Company, (iii) a material and willful violation of any federal or state law;
(iv) commission of any act of fraud with respect to the Company; or (v)
conviction of a felony or a crime involving moral turpitude causing material
harm to the standing and reputation of the Company, in each case as determined
in good faith by the Board of Directors of the Company.
(c) Comparable Employment. "Comparable
Employment" shall mean employment or consulting that provides compensation,
benefits and duties that are generally comparable to those pertaining to the
Employee's position with the Company at the time of termination of Employee's
employment.
(d) Involuntary Termination. "Involuntary
Termination" shall include any termination by the Company other than for Cause
and the Employee's voluntary termination, upon 30 days prior written notice to
the Company, following (i) a material reduction or change in job duties,
responsibilities and requirements inconsistent with the Employee's position
with the Company and the Employee's prior duties, responsibilities and
requirements, taking into account the differences in job title and duties that
are normally occasioned by reason of an acquisition of one company by another
and that do not actually result in a material change in duties,
responsibilities and requirements inconsistent with an employee's prior
position with the acquired company; (ii) any reduction of the Employee's base
compensation (other than in connection with a general decrease in base salaries
for most similarly situated employees of the successor corporation); or (iii)
the Employee's refusal to relocate to a location more than 50 miles from the
Company's current location.
5. Limitation on Payments.
(a) In the event that the severance and other
benefits provided for in this Agreement to the Employee constitute "parachute
payments" within the meaning of Section
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280G of the Internal Revenue Code of 1986, as amended (the "Code") and, but for
this Section 4, would be subject to the excise tax imposed by Section 4999 of
to the Code, the Company shall reduce the aggregate amount of such payments and
benefits such that the present value thereof (as determined under the Code and
the applicable regulations) is equal to 2.99 times the Employee's "base amount"
as defined in Section 280G(b)(3) of the Code.
(b) The payment of severance and other benefits
provided for in this Agreement shall be subject to all applicable income and
employment tax rules and regulations.
6. Certain Business Combinations. In the event it is
determined by the Board, upon consultation with Company management and the
Company's independent auditors, that the enforcement of any Section of this
Agreement, including, but not limited to, Section 2 hereof, which allows for
the acceleration of vesting of Option shares and termination of Repurchase
Rights upon the effective date of a Change of Control, would preclude
accounting for any proposed business combination of the Company involving a
Change of Control as a pooling of interests, and the Board otherwise desires to
approve such a proposed business transaction which requires as a condition to
the closing of such transaction that it be accounted for as a pooling of
interests, then any such Section of this Agreement shall be null and void. For
purposes of this Section 6, the Board's determination shall require the
unanimous approval of the non-employee Board members.
7. Successors. Any successor to the Company (whether
direct or indirect and whether by purchase, lease, merger, consolidation,
liquidation or otherwise) to all or substantially all of the Company's business
and/or assets shall assume the obligations under this Agreement and agree
expressly to perform the obligations under this Agreement in the same manner
and to the same extent as the Company would be required to perform such
obligations in the absence of a succession. The terms of this Agreement and
all of the Employee's rights hereunder shall inure to the benefit of, and be
enforceable by, the Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
8. Notice. Notices and all other communications
contemplated by this Agreement shall be in writing and shall be deemed to have
been duly given when personally delivered or when mailed by U.S. registered or
certified mail, return receipt requested and postage prepaid. Mailed notices
to the Employee shall be addressed to the Employee at the home address which
the Employee most recently communicated to the Company in writing. In the case
of the Company, mailed notices shall be addressed to its corporate
headquarters, and all notices shall be directed to the attention of its
Secretary.
9. Miscellaneous Provisions.
(a) No Duty to Mitigate. The Employee shall not
be required to mitigate the amount of any payment contemplated by this
Agreement (whether by seeking new employment or in any other manner), nor,
except as otherwise provided in this Agreement, shall any such payment be
reduced by any earnings that the Employee may receive from any other source.
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(b) Waiver. No provision of this Agreement shall
be modified, waived or discharged unless the modification, waiver or discharge
is agreed to in writing and signed by the Employee and by an authorized officer
of the Company (other than the Employee). No waiver by either party of any
breach of, or of compliance with, any condition or provision of this Agreement
by the other party shall be considered a waiver of any other condition or
provision or of the same condition or provision at another time.
(c) Whole Agreement. No agreements,
representations or understandings (whether oral or written and whether express
or implied) which are not expressly set forth in this Agreement have been made
or entered into by either party with respect to the subject matter hereof.
This Agreement supersedes any agreement of the same title and concerning
similar subject matter dated prior to the date of this Agreement, and by
execution of this Agreement both parties agree that any such predecessor
agreement shall be deemed null and void.
(d) Choice of Law. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of California without reference to conflict of laws provisions.
(e) Severability. If any term or provision of
this Agreement or the application thereof to any circumstance shall, in any
jurisdiction and to any extent, be invalid or unenforceable, such term or
provision shall be ineffective as to such jurisdiction to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining terms and provisions of this Agreement or the application of such
terms and provisions to circumstances other than those as to which it is held
invalid or unenforceable, and a suitable and equitable term or provision shall
be substituted therefor to carry out, insofar as may be valid and enforceable,
the intent and purpose of the invalid or unenforceable term or provision.
(f) Arbitration. Any dispute or controversy
arising under or in connection with this Agreement may be settled at the option
of either party by binding arbitration in the County of Santa Clara,
California, in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award
in any court having jurisdiction. Punitive damages shall not be awarded.
(g) Legal Fees and Expenses. The parties shall
each bear their own expenses, legal fees and other fees incurred in connection
with this Agreement.
(h) No Assignment of Benefits. The rights of any
person to payments or benefits under this Agreement shall not be made subject
to option or assignment, either by voluntary or involuntary assignment or by
operation of law, including (without limitation) bankruptcy, garnishment,
attachment or other creditor's process, and any action in violation of this
subsection (h) shall be void.
(i) Employment Taxes. All payments made pursuant
to this Agreement will be subject to withholding of applicable income and
employment taxes.
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(j) Assignment by the Company. The Company may
assign its rights under this Agreement to an affiliate, and an affiliate may
assign its rights under this Agreement to another affiliate of the Company or
to the Company; provided, however, that no assignment shall be made if the net
worth of the assignee is less than the net worth of the Company at the time of
assignment. In the case of any such assignment, the term "Company" when used
in a section of this Agreement shall mean the corporation that actually employs
the Employee.
(k) Counterparts. This Agreement may be executed
in counterparts, each of which shall be deemed an original, but all of which
together will constitute one and the same instrument.
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IN WITNESS WHEREOF, each of the parties has executed this Agreement,
in the case of the Company by its duly authorized officer, as of the day and
year first above written.
ACCELGRAPHICS, INC. XXXX XXXX
By:____________________________ ____________________________
Title:_________________________
