EXHIBIT 10.20
CHANGE IN CONTROL SEVERANCE PROTECTION AGREEMENT
XXXX XXXXXXX CORPORATION
This CHANGE IN CONTROL SEVERANCE PROTECTION AGREEMENT (the "Agreement") is
entered into as of ______________, 2004, between Xxxx Xxxxxxx Corporation
("Parent"), a Delaware corporation and ________________ (the "Employee").
RECITALS
WHEREAS, the Employee is a key employee of Parent and serves as Parent's
______________________________, and Parent and the Employee desire to set forth
herein the terms and conditions of the Employee's compensation in the event of a
termination of the Employee's employment in connection with a Change in Control
(as defined below).
WHEREAS, in the event of a Change in Control, the Employee may be
vulnerable to dismissal without regard to quality of the Employee's service, and
Parent believes that it is in the best interests of Parent to enter into this
Agreement in order to ensure fair treatment of the Employee and to reduce the
distractions and other adverse effects upon such the Employee's performance
which are inherent in such a Change in Control.
WHEREAS, this Agreement is not intended to be and shall not constitute an
employment contract between Parent and the Employee or to impose any obligation
upon Parent to retain the Employee. The Employee acknowledges that the Employee
is an "at-will" employee of Parent and that Parent may terminate Employee's
employment at any time with or without cause and with or without notice.
NOW, THEREFORE, for and in consideration of the foregoing, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
AGREEMENT
1. Definitions. For purposes hereof, the following terms shall have the
following meanings:
a. "Affiliate" shall mean, with respect to any Person (as defined
herein), any other Person directly or indirectly controlling, controlled by or
under direct or indirect common control with such Person. A Person shall be
deemed to control another Person for purposes of this definition if such Person
possesses, directly or indirectly, the power (i) to vote the securities or other
ownership interests having ordinary voting power to elect a majority of the
Board of Directors of a corporation or other Persons performing similar
functions for any other type of Person, or (ii) to direct or cause the direction
of the management and policies of such Person, whether through the ownership of
voting securities, by contract, as general partner, as trustee or otherwise.
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b. "Cause" shall mean (i) if a Employee is party to an employment
agreement or similar agreement with the Company and such agreement includes a
definition of Cause, the definition contained therein or (ii) if no such
employment or similar agreement exists, it shall mean (A) the Employee's failure
to perform the duties reasonably assigned to him or her by the Company, (B) a
good faith finding by the Company of the Employee's dishonesty, gross negligence
or misconduct, (C) a material breach by the Employee of any written Company
employment policies or rules or (D) the Employee's conviction for, or his or her
plea of guilty or nolo contendere to, a felony or for any other crime which
involves fraud, dishonesty or moral turpitude.
c. "Change in Control" of the Company means the occurrence of one
of the following events:
(i) An acquisition (other than directly from the Company) of
any voting securities of the Company (the "Voting Securities") by any "Person"
(as the term person is used for purposes of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) immediately
after which such Person has "Beneficial Ownership" (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 30% or more of the combined voting
power of the Company's then outstanding Voting Securities; provided, however,
that in determining whether a Change in Control has occurred, Voting Securities
which are acquired in a "Non-Control Acquisition" (as hereinafter defined) shall
not constitute an acquisition which would cause a Change in Control. A
"Non-Control Acquisition" shall mean an acquisition by (1) an employee benefit
plan (or a trust forming a part thereof) maintained by (x) the Company or (y)
any corporation or other Person of which a majority of its voting power or its
equity securities or equity interest is owned directly or indirectly by the
Company (a "Subsidiary"), (2) the Company or any Subsidiary, or (3) any Person
in connection with a "Non-Control Transaction" as defined in paragraph (c)
below;
(ii) The individuals who are members of the Board (the
"Incumbent Board") cease for any reason to constitute at least two-thirds of the
Board; provided, however, that if the election, or nomination for election by
the Company's stockholders, of any new director was approved by a vote of at
least two-thirds of the then Incumbent Board, such new director shall, for
purposes of this Plan, be considered as a member of the Incumbent Board;
provided, further, however, that no individual shall be considered a member of
the Incumbent Board if such individual initially assumed office as a result of
either an actual or threatened "Election Contest" (defined as any solicitation
subject to Rules 14a-1 to 14a-10 promulgated under the Exchange Act by any
person or group of persons for the purpose of opposing a solicitation subject to
Rules 14a-1 to 14a-10 by any other person or group of persons with respect to
the election or removal of directors at any annual or special meeting of
stockholders of the Company) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board (a "Proxy
Contest") including by reason of any agreement intended to avoid or settle any
Election Contest or Proxy Contest; or
(iii) Consummation of:
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(1) A merger, consolidation or reorganization
involving the Company, unless
(a) the stockholders of the Company, immediately
before such merger, consolidation or reorganization, own, directly or
indirectly, immediately following such merger, consolidation or reorganization,
a majority of the combined voting power of the outstanding Voting Securities of
the corporation resulting from such merger or consolidation or reorganization
(the "Surviving Corporation") or a corporation beneficially owning, directly or
indirectly, a majority of the Voting Securities of the Surviving Corporation (a
"Parent Corporation") in substantially the same proportion as their ownership of
the Voting Securities immediately before such merger, consolidation or
reorganization, and
(b) the individuals who were members of the
Incumbent Board immediately prior to the execution of the agreement providing
for such merger, consolidation or reorganization constitute a majority of the
members of the board of directors of either the Surviving Corporation or a
Parent Corporation, and
(c) no Person (other than the Company, any
Subsidiary, any employee benefit plan (or any trust forming a part thereof)
maintained by the Company, the Surviving Corporation or any Subsidiary, or any
Person who, immediately prior to such merger, consolidation or reorganization
had Beneficial Ownership of 30% or more of the then outstanding Voting
Securities) owns, directly or indirectly, 30% or more of the combined voting
power of the Surviving Corporation's then outstanding voting securities (unless
there is a Parent Corporation, in which event of the Parent Corporation's then
outstanding voting securities), and
(d) a transaction described in the immediately
preceding clauses (i) through (iii) shall herein be referred to as a
"Non-Control Transaction";
(2) A complete liquidation or dissolution of the
Company; or
(3) The sale or other disposition of all or
substantially all of the assets of the Company to any Person (other than a
transfer to a Subsidiary).
(iv) Notwithstanding subclauses (i), (ii) or (iii) above, a
Change in Control shall not be deemed to occur solely because any Person (the
"Subject Person") acquired Beneficial Ownership of more than the permitted
amount of the outstanding Voting Securities as a result of the acquisition of
Voting Securities by the Company which, by reducing the number of Voting
Securities outstanding, increases the proportionate number of shares
Beneficially Owned by the Subject Person, provided that if a Change in Control
would occur (but for the operation of this sentence) as a result of the
acquisition of Voting Securities by the Company, and after such share
acquisition by the Company, the Subject Person becomes the Beneficial Owner of
any additional Voting Securities which
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increases the percentage of the then outstanding Voting Securities Beneficially
Owned by the Subject Person, then a Change in Control shall occur.
In all cases, if the Employee's employment is terminated within 30 days
prior to a Change in Control and the Employee reasonably demonstrates that such
termination (1) was at the request of a third party who has indicated an
intention or taken steps reasonably calculated to effect a Change in Control and
who effectuates a Change in Control (a "Third Party"), or (2) otherwise occurred
in connection with, or in anticipation of, a Change in Control which actually
occurs, then the date of a Change in Control with respect to such Employee shall
mean the date immediately prior to the date of such termination of such
Employee's employment.
d. "Disability" shall mean a physical or mental infirmity which
impairs the Employee's ability to perform substantially his or her duties for a
period of one hundred eighty (180) consecutive days.
e. "Good Reason" shall include any of the following:
(i) Parent's assignment to the Employee of duties
inconsistent with, or a substantial alteration in the nature of, the Employee's
responsibilities in effect immediately prior to the Change in Control;
(ii) (A) a reduction in either the Employee's salary or
target bonus (if a target bonus has been established for the Employee) as each
is in effect on the date of a Change in Control, or (B) the discontinuance or
material adverse alteration of any material pension, welfare or fringe benefit
enjoyed by Employee on the date of a Change in Control;
(iii) Parent's relocation of the Employee to any place in
excess of 50 miles from the Employee's place of employment immediately prior to
the Change in Control without the Employee's written consent, except for
reasonably required travel by the Employee on Parent's business;
(iv) any material breach by Parent of any provision of this
Agreement, if such material breach has not been cured within 30 days following
written notice by the Employee to Parent of such breach setting forth with
specificity the nature of the breach; or
(v) any failure by Parent to obtain the assumption of this
Agreement by any successor (by merger, consolidation or otherwise) or assign of
Parent.
f. "Person" shall mean any individual, partnership, joint
venture, firm, company, corporation, association, trust or other enterprise or
any government or political subdivision or any agent, department or
instrumentality thereof.
g. "Highest Annual Compensation Amount" shall mean the highest
compensation during any twelve (12) month period during the three (3) calendar
years
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immediately preceding the termination of the Employee paid to or earned by the
Employee, including all amounts of the Employee's base salary that are deferred
under the qualified and non-qualified employee benefit plans of the Parent or
any other agreement or arrangement and all bonuses earned by the Employee during
such period, or if the Employee has been employed by the Company for less than
three (3) calendar years prior to termination, for such lesser period of time.
The Compensation Committee of the Board of Directors shall determine, taking
into consideration Company performance, target bonus amounts and other factors,
the Bonus Amount of the Employee if the Employee has not been employed by the
Company for a period of time during which bonuses have been paid.
h. "Qualifying Termination" shall mean (i) a termination by the
Employee of the Employee's employment with Parent for Good Reason within one
year after the occurrence of a Change in Control or (ii) a termination of
Employee's employment without Cause by Parent within one year after the
occurrence of a Change in Control, or (iii) a termination of Employee's
employment without Cause by Parent within six (6) months prior to the date of a
Change in Control if the Employee reasonably demonstrates that such termination
(A) was at the request of a third party who has indicated an intention or taken
steps reasonably calculated to effect a Change in Control or (B) otherwise arose
in connection with, or in anticipation of, a Change in Control which has been
threatened or proposed provided that, in either case, a Change in Control shall
actually have occurred. Neither a termination of Employee's employment due to
Disability nor a termination of Employee's employment due to death shall
constitute a Qualifying Termination.
2. Term. If a Change in Control has not occurred within ten (10) years
of the date of this Agreement (the "Term"), this Agreement shall automatically
expire. Following the Term, this Agreement may be renewed only by written
agreement of the parties for successive one-year periods. If a Qualifying
Termination occurs during the Term, this Agreement shall continue in full force
and effect and shall not terminate until the Employee shall have received the
severance compensation provided hereunder.
3. Payment of Accrued Compensation upon a Qualifying Termination. If a
Qualifying Termination occurs, the Employee shall immediately be paid all earned
and accrued salary due and owing to the Employee, any bonus compensation to the
extent earned, vested deferred compensation (other than pension plan or profit
sharing plan benefits, which will be paid in accordance with the applicable
plan), any benefits then due under any plans of Parent in which the Employee is
a participant, any accrued and unpaid vacation pay and any appropriate business
expenses incurred by the Employee in connection with his or her duties, all to
the date of termination (collectively, "Accrued Compensation"). The Employee
shall also be entitled to the severance compensation described in Section 4.
4. Severance Compensation. The Employee shall be entitled to the
following upon a Qualifying Termination under the conditions set forth below:
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(a) Condition to Payment of Severance Compensation. Upon the
Employee's execution of a "Release and Confidentiality Agreement" substantially
in the form attached hereto as Exhibit A, Parent shall pay to the Employee
severance compensation in an aggregate amount equal to [TWO] [1.5] [1.0] times
the Employee's Highest Annual Compensation Amount (the "Severance Amount").
(b) Computation and Payment of Severance Amount. The Severance
Amount shall be paid without prejudice to the Employee's right to receive all
Accrued Compensation. The Severance Amount shall be paid to the Employee in a
lump sum within thirty (30) days of the execution of the Release and
Confidentiality Agreement. The Severance Amount shall be paid irrespective of
the Employee's employment status with any other organization or self-employment;
provided, however, that if the Employee should violate the terms of the Release
and Confidentiality Agreement, Parent shall be under no further obligation to
continue the payments or benefits hereunder.
(c) Certain Welfare Benefits. For a number of months equal to
[THIRTY-SIX (36)] [TWENTY-FOUR (24)] [EIGHTEEN (18)] (the "Continuation
Period"), Parent shall at Parent's expense continue on behalf of the Employee
and the Employee's dependents and beneficiaries the life insurance, disability,
medical, dental and hospitalization coverages and benefits provided to the
Employee immediately prior to the Change in Control or, if greater, the
coverages and benefits provided at any time thereafter. The coverages and
benefits (including deductibles and costs) provided in this Section 4(c) during
the Continuation Period shall be no less favorable to the Employee and the
Employee's dependents and beneficiaries, than the most favorable of such
coverages and benefits referred to above. Parent's obligation hereunder with
respect to the foregoing coverages and benefits shall be reduced to the extent
that the Employee obtains any such coverages and benefits pursuant to a
subsequent employer's benefit plans, in which case Parent may reduce any of the
coverages or benefits Parent is required to provide the Employee hereunder so
long as the aggregate coverages and benefits of the combined benefit plans is no
less favorable to the Employee than the coverages and benefits required to be
provided hereunder. Neither this Section 4(c) nor any other provision of this
Agreement shall be interpreted so as to reduce any amounts otherwise payable, or
in any way diminish the Employee's rights as an employee of Parent, whether
existing now or hereafter, under any benefit, incentive, retirement, stock
option, stock bonus, stock purchase plan, or any employment agreement or other
plan or arrangement.
5. Equity Grants. Immediately prior to a Change in Control, (i) all
options granted by Parent to the Employee shall be 100% vested and immediately
exercisable, and the exercise term thereof shall end upon the earlier of: the
first anniversary of the date of termination of employment and the end of the
original exercise term, and (ii) all restrictions shall lapse with respect to
all grants of restricted stock or other awards held by Employee.
6. Excise Tax Limitation.
x. Xxxxx-Up Payment. In the event it shall be determined that any
payment or distribution of any type to or for the benefit of the Employee, by
Parent, any
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Affiliate, any person who acquires ownership or effective control of Parent or
ownership of a substantial portion of Parent's assets (within the meaning of
Section 280G of the Code and the regulations thereunder) or any affiliate of
such Person, whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise (the "Total Payments"), is or will be
subject to the excise tax imposed by Section 4999 of the Code then the amounts
payable to the Employee under this Agreement shall be reduced to the maximum
amount that could be paid to the Employee without giving rise to the Excise Tax
(the "Safe Harbor Cap"), if the result of subtracting the Excise Tax from the
Total Payment is less than the Safe Harbor Cap. The reduction of the amounts
payable hereunder, if applicable, shall be made by reducing first the payment
under Section 4(a), unless an alternative method of reduction is elected by the
Employee. For purposes of reducing the Total Payments to the Safe Harbor Cap,
only amounts payable under this Agreement (and no other amounts) shall be
reduced.
b. Determination by Accountant. All mathematical determinations,
and all determinations as to whether any of the Total Payments are "parachute
payments" (within the meaning of Section 280G of the Code), that are required to
be made under this Section, including determinations as to whether the reduction
of the Total Payments to the Safe Harbor Cap and the assumptions to be utilized
in arriving at such determinations, shall be made at Parent's expense by an
independent nationally recognized accounting firm selected by Parent (the
"Accounting Firm"). The Accounting Firm shall provide its determination (the
"Determination"), together with detailed supporting calculations and
documentation to Parent and the Employee by no later than ten (10) days
following the Termination Date, if applicable, or such earlier time as is
requested by Parent or the Employee (if the Employee reasonably believes that
any of the Total Payments may be subject to the Excise Tax). If the Accounting
Firm determines that no Excise Tax is payable by the Employee, it shall furnish
the Employee and Parent with a written statement that such Accounting Firm has
concluded that no Excise Tax is payable (including the reasons therefor) and
that the Employee has substantial authority not to report any Excise Tax on his
or her federal income tax return. Any determination by the Accounting Firm shall
be binding upon Parent and the Employee, absent manifest error. If Total
Payments are reduced to the Safe Harbor Cap as provided above and if it is
established pursuant to a final determination of a court or an Internal Revenue
Service (the "IRS") proceeding which has been finally and conclusively resolved,
that Total Payments have been made to, or provided for the benefit of, Employee
by the Parent which are in excess of the limitations provided in Section 6(a)
(hereinafter referred to as an "Excess Payment"), such Excess Payment shall be
deemed for all purposes to be an overpayment to the Employee made on the date
such Employee received the Excess Payment and the Employee shall repay the
Excess Payment to the Parent on demand. 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 Total Payments which will not have been made by the Parent should
have been made (a "Safe Harbor Underpayment"), consistent with the calculations
required to be made under this Section 6. In the event that it is determined (i)
by the Accounting Firm, the Parent (which shall include the position taken by
the Parent, or together with its consolidated group, on its federal income tax
return) or the IRS or (ii) pursuant to a determination by a court, that a Safe
Harbor Underpayment has occurred, the Parent shall pay an amount equal to such
Safe Harbor Underpayment to the Employee within fifteen (15) days of such
determination
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together.
7. Employment Status. This Agreement does not constitute a contract of
employment or impose on the Employee or Parent any obligation to retain the
Employee, or to change the status of the Employee's employment. The Employee
acknowledges that the Employee is an "at-will" employee of Parent, and that
Parent may terminate the Employee's employment at any time, with or without
cause and with or without notice.
8. Nature of Rights. The Employee shall have the status of a mere
unsecured creditor of Parent with respect to his or her right to receive any
payment under this Agreement. This Agreement shall constitute a mere promise by
the Company to make payments in the future of the benefits provided for herein.
It is the intention of the parties hereto that the arrangements reflected in
this Agreement shall be treated as unfunded for tax purposes and, if it should
be determined that Title I of ERISA is applicable to this Agreement, for
purposes of Title I of ERISA. Nothing in this Agreement shall prevent or limit
the Employee's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by Parent and for which the Employee
may qualify, nor shall anything herein limit or reduce such rights as the
Employee may have under any other agreements with Parent. Amounts which are
vested benefits or which the Employee is otherwise entitled to receive under any
plan or program of Parent shall be payable in accordance with such plan or
program, except as explicitly modified by this Agreement.
9. Full Settlement. The Company's obligation to provide the payments
and benefits provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may have
against the Employee or others. In no event shall the Employee be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to the Employee under any of the provisions of this Agreement
and such amounts shall not be reduced whether or not the Employee obtains other
employment except as set forth in Section 4(c) with respect to certain welfare
benefits. The Company agrees to pay as incurred, to the full extent permitted by
law, all legal fees and expenses (collectively, "Legal Fees") which the Employee
may reasonably incur as a result of any contest (including as a result of any
contest by the Employee about the amount of any payment pursuant to this
Agreement) by the Company, the Employee or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof, plus in each case interest on any delayed
payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of
the Internal Revenue Code of 1986, as amended (the "Code"); provided, however,
that the Company shall not pay the Legal Fees after a final, nonappealable
adjudication of a court of competent jurisdiction: (A) to the extent they were
incurred with respect to a claim brought by the Employee in bad faith and/or (B)
to the extent they were incurred where a determination has been made (either by
a court or as part of a settlement agreement) that the Employee is not entitled
to substantially all the amounts claimed by Employee whether or not such claims
were made in bad faith.
10. Miscellaneous.
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a. Severability. Should a court or other body of competent
jurisdiction determine that any provision of this Agreement is excessive in
scope or otherwise invalid or unenforceable, such provision shall be adjusted
rather than voided, if possible, so that it is enforceable to the maximum extent
possible.
b. Withholding. All compensation and benefits to the Employee
hereunder shall be reduced by all federal, state, local and other withholdings
and similar taxes and payments required by applicable law.
c. Entire Agreement; Modification. This Agreement represents the
entire agreement between the parties and supersedes any prior agreements between
the parties, written or oral, with respect to the subject matter covered hereby.
This Agreement may be amended, modified, superseded or canceled, and any of the
terms hereof may be waived, only by a written instrument executed by each party
hereto or, in the case of a waiver, by the party waiving compliance. The failure
of any party at any time or times to require performance of any provision hereof
shall not affect such party's right at a latter time to enforce the same. No
waiver by any party of the breach of any provision contained in this Agreement,
whether by conduct or otherwise, in any one or more instances, shall be deemed
to be or construed as a further or continuing waiver of any such breach or of
any other term of this Agreement.
d. Applicable Law. This Agreement shall be construed under and
governed by the laws of the State of Delaware.
e. Successors and Assigns. This Agreement shall be binding upon,
and shall issue to the benefit of, Parent's successors and
assigns and the Employee's heirs and assigns.
f. Nontransferability by Employee. Neither this Agreement nor any
right or interest hereunder shall be assignable or transferable by the Employee,
the Employee's beneficiaries or legal representatives, except by will or by the
laws of descent and distribution.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of
_______________________, 2004.
XXXX XXXXXXX CORPORATION
By ___________________________________
EMPLOYEE:
______________________________________
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