Exhibit 10
July 3, 1996
Mr. E. Xxxxxx Xxxxx
21891 Via Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Dear Xxx:
The purpose of this letter agreement is to document (i) the
severance benefits to which you are entitled in connection with your resignation
as the Company's President and Chief Executive Officer and as a member of the
Company's Board of Directors and (ii) the consulting arrangement and restrictive
covenants which will be in effect for you through March 14, 1998.
PART ONE -- SEVERANCE BENEFITS
1. Your resignation as the Company's President and Chief
Executive Officer and as a member of the Company's Board of Directors is
effective as of March 14, 1996. Your employment with the Company also terminated
as of that date.
2. You will receive your normal salary through March 14, 1996,
and all regular and mandatory payroll deductions will be taken from your final
paycheck. Your final paycheck will also include payment for all your accrued but
unused vacation days through March 14, 1996, subject to the collection of
applicable withholding taxes. Your participation in the Company's employee
benefit programs, including (without limitation) the group term life insurance
plan, the disability income plan, the accidental death and dismemberment
insurance program, the flexible dollars benefit program, the Employee Savings
Program (including your ability to make pre-tax and after-tax contributions),
the Employee Stock Purchase Plan and the 1994 Stock Incentive Plan, will cease
as of your March 14, 1996 termination date, except to the limited extent
provided in Paragraphs 6 and 9 of this Part One. You will also cease to
participate in any special executive benefit programs, effective with your March
14, 1996 termination date.
3. Effective with your March 14, 1996 termination
date, you will cease to have any further access to confidential and other
non-public information concerning the Company and its business operations,
except to the limited extent necessary to perform any consulting services
required of you pursuant to Part Two of this letter agreement.
4. You will receive an aggregate of $2,382,000 of salary and
bonus continuation payments over the two-year period beginning March 15, 1996
and ending March 14, 1998. These payments will be made in equal installments at
bi-weekly intervals over the two-year period, with the first payment to be made
as of March 29, 1996. All payments will be subject to the Company's collection
of applicable withholding taxes. In addition to these bi-weekly payments, you
will also receive a total of $120,000 over the two-year consulting period to be
in effect under Part Two of this letter agreement. However, all such
continuation payments and consulting fees will immediately terminate in the
event of a material breach of any of your covenants under Paragraph 15 of this
letter agreement.
Mr. E. Xxxxxx Xxxxx
July 3, 1996
Page 2
5. During your period of employment with the Company, you
received restricted stock awards for a total of 190,400 shares of the Company's
common stock. As of July 3, 1996; 137,400 of those shares were unvested. The
specific break-down of your vested and unvested restricted stock awards as of
July 3, 1996 is attached as Schedule A. All of your remaining unvested shares
will vest on August 30, subject to your compliance with Paragraph 15. Prior to
August 30, you will designate the number of shares of restricted stock to be
issued to you and the number to be issued to your wife. At the time of such
vesting, you will recognize immediate taxable income equal to the fair market
value of those previously unvested shares, less the issue price you paid for
such shares, and you will have to satisfy the applicable withholding taxes on
that income before the certificates for the shares will be released.
6. You currently hold outstanding stock options for 364,000
shares of the Company's common stock. As of July 3, 1996, those options are
exercisable for a total of 232,400 shares. The specific break-down of your
vested and unvested stock options as of July 3, 1996 is also included in
attached Schedule A. Upon execution of this letter agreement, each of your
options will be fully vested and may be exercised for any or all of the
outstanding option shares at any time prior to March 14, 1998, except for the
August 5, 1986 option grant which you have already exercised in full. Prior to
your exercise, you will designate the number of shares to be issued to you and
the number to be issued to your wife. Since all of your outstanding options are
non-qualified options under the federal income tax laws, you will recognize
compensation income in connection with your exercise of those options, and you
must satisfy all applicable withholding taxes associated with each such
exercise.
7. You are currently vested in your entire account balance
under the Long-Term Executive Incentive Performance Plan, and you will
immediately vest in all your outstanding accounts under the Short-Term Executive
Incentive Performance Plan upon your execution of this letter agreement. On
August 30, 1996, you will receive a lump sum payment of your outstanding
account balances under both the Short-Term and Long-Term Executive Incentive
Performance Plans, subject to the Company's collection of applicable withholding
taxes. Prior to August 30, you will designate the amount to be paid to you and
the amount to be paid to your wife. As of July 3, 1996, the aggregate balance of
your outstanding accounts under the Short-Term Plan was $185,353.59 (inclusive
of interest through December 31, 1995) and your outstanding account balance
under the Long-Term Plan was $1,879,390 (inclusive of interest through December
31, 1995).
Your lump sum payment will also include interest on your Short-Term and
Long-Term Plan accounts at the rate of 6.5 percent per annum for the period
January 1, 1996 through the payment date.
8. At the time you receive your lump sum payment under
Paragraph 7, you will repay to the Company your outstanding loans under the
Company's Officer Loan Program. On July 3, 1996, the outstanding balance of
those loans will be $444,844.06. A specific break-down of your outstanding loans
as of July 3, 1996 is set forth in attached Schedule B. This schedule will be
updated to state the amount owed as of November 1, 1996, the lump sum date
referred to in Paragraph 7.
Mr. E. Xxxxxx Xxxxx
July 3, 1996
Page 3
9. The Company will, at its expense, provide you and your
spouse with continued health care coverage under the Company's executive officer
medical/dental plan. Your individual coverage will continue until the earlier of
(i) your attainment of age 65 or (ii) the first date that you are covered under
another employer's health benefit program which provides substantially the same
level of benefits without exclusion for pre-existing medical conditions. The
coverage for your spouse will continue until the earlier of (i) March 31, 1998
or (ii) the first date that she is covered under another employer's health
benefit program which provides substantially the same level of benefits without
exclusion for pre-existing medical conditions. The Company believes that such
continued health care coverage will not constitute taxable income to you under
current federal tax laws, regulations and rulings. The coverage provided you and
your spouse under this Paragraph 9 will be in lieu of any other continued health
care coverage to which you or your spouse would otherwise be entitled pursuant
to the requirements of Code Section 4980B by reason of your termination of
employment or your subsequent divorce, and neither you nor your spouse will
accordingly be entitled to any further health care coverage under Code Section
4980B following the coverage period in effect under this Paragraph 9.
10. You also acknowledge that you will remain subject to the
reporting requirements in effect under Section 16(a) of the Securities Exchange
Act of 1934, as amended, until September 14, 1996, and you will work with Xx.
Xxxxxxxx Xxxxxxx of the Company in filing all required Section 16 (a) reports
for your transactions in the Company's common stock through that date.
11. You have previously been provided with certain computer
and telephone equipment for home use. That equipment may be retained by you. All
copies of proprietary information and other confidential information of the
Company currently in your possession, whether in hard copy, diskette or other
computer-readable format, must either be destroyed or returned to Xx. Xxxxxxx X.
Xxxxx at the time you execute this letter agreement, and you may not retain any
files, documents or other tangible manifestations of such proprietary or
confidential information.
12. You will be entitled to indemnification, in accordance
with the applicable provisions of Article Eleventh of the Company's Articles of
Incorporation and Article IX of the Company's Bylaws (copies of which are
attached as Schedule C), against all expense, liability and loss (including
attorney fees and settlement payments) which you may incur by reason of
any action, suit or proceeding arising from or relating to the performance of
your duties as an officer or director of the Company prior to your March 14,
1996 termination date.
PART TWO -- CONSULTING ARRANGEMENT AND RESTRICTIVE COVENANTS
13. You will make yourself available to perform consulting
services reasonably requested of you during the two (2) year period beginning
March 15, 1996 and ending March 14, 1998 (the "Consultancy Period"). You will be
paid a monthly retainer fee of $5,000 at the start of each month during the
period April 1, 1996 through February 28, 1998. In addition, you will receive a
pro-rated retainer fee of $2,500 for the period March 15, 1996 to March 31, 1996
(to be paid upon your execution of this letter agreement) and a pro-rated
retainer fee of $2,500 for the period March 1, 1998 to March 14, 1998 (to be
paid on March 1, 1998). In consideration of the monthly retainer fee, you will
make yourself available to render up to 10 hours of consulting
Mr. E. Xxxxxx Xxxxx
July 3, 1996
Page 4
services per month (5 hours per month for a pro-rated retainer) during the
Consultancy Period. All assignments will come from the Chairman of the Company's
Board of Directors, and you will report directly to such person with respect to
each assignment. Should you be requested to render more than the required 5 or
10 hours of consulting services per month, then you will be compensated for
those additional hours at an hourly rate to be agreed upon by you and the
Chairman of the Company's Board of Directors at the time such consulting
services are to be rendered. You will be reimbursed for all reasonable
out-of-pocket expenses incurred in rendering such consulting services upon your
submission of appropriate documentation for those expenses.
14. During the Consultancy Period, you will not make any
representations to any third party that you are an officer, director or employee
of the Company. Any proprietary information or other confidential information of
the Company to which you may have access in the performance of your consulting
services will be held in confidence and will not be disclosed to any third party
or otherwise directly or indirectly used by you, except to the extent necessary
to perform your consulting services.
15. As a condition to, and in consideration for, the severance
benefits you are to receive under Part One and the additional retainer fees you
are to receive under this Part Two, you will not at any time during the two (2)
year period beginning March 15, 1996 and ending March 14, 1998:
(i) directly or indirectly, whether for your own
account or as an employee, director, consultant or advisor, provide services to
any business enterprise which is at the time in competition with any of the
Company's then existing or formally planned product lines and which is located
geographically in an area where the Company maintains substantial business
activities, unless you obtain the prior written consent of the Company's Board
of Directors, or
(ii) directly or indirectly encourage or solicit
any individual to leave the Company's employ for any reason or interfere in any
other manner with the employment relationships at the time existing between the
Company and its current or prospective employees, or
(iii) induce or attempt to induce any customer,
supplier, distributor, licensor, licensee or other business relation
of the Company to cease doing business with the Company or in any way interfere
with the existing business
relationship between any such customer, supplier, distributor, licensor,
licensee or other business relation and the Company.
You acknowledge that monetary damages may not be sufficient to compensate
the Company for any economic loss which may be incurred by reason of your breach
of the foregoing restrictive covenants. Accordingly, in the event of any such
breach, the Company will, in addition to the cessation of the severance benefits
and consulting fees provided you under this agreement and any remedies available
to the Company at law, be entitled to obtain equitable relief in the form of an
injunction precluding you from continuing to engage in such breach.
PART THREE -- MUTUAL RELEASES
16. In consideration of the various payments and benefits to
be provided you pursuant to this letter agreement, you do hereby for yourself,
your heirs, executors, administrators and assigns agree as follows:
Mr. E. Xxxxxx Xxxxx
July 3, 1996
Page 5
a. You fully and forever release and discharge
the Company, Fujitsu Limited, their respective affiliates and their respective
officers, directors, employees, agents and assigns (jointly and severally the
"Releasees"), or any of them, from any claims, demands, damages and causes of
action you have or may have against the Releasees and covenant not to xxx or
otherwise institute or cause to be instituted or in any way participate in
(except at the request of the Company or as otherwise required by law) legal or
administrative proceedings against the Releasees with respect to any matter
arising out of or connected with your employment with the Company, your service
on the Company's Board of Directors or the termination of that employment or
service, including any and all liabilities, claims, demands, contracts, debts,
obligations and causes of action of every nature, kind and description, in law,
equity or otherwise, whether or not now known or ascertained, which heretofore
do or may exist. However, the foregoing release shall not apply with respect to
any claims arising under this letter agreement or your existing indemnification
rights under the Company's Articles of Incorporation and Bylaws.
b. You hereby waive and release any and all
rights you may have had or now have to pursue any and all remedies available to
you under any employment-related cause of action against the Releasees,
including (without limitation) claims of wrongful discharge, emotional distress,
defamation, breach of contract, breach of the covenant of good faith and fair
dealing, violation of the provisions of the California Labor Code, the Employee
Retirement Income Security Act, and any other laws and regulations relating to
employment.
c. You hereby waive and release any and all
rights you may have had or now have to pursue any claim of discrimination,
including (without limitation) any claim of discrimination based on sex, age,
race, national origin or other basis, under Title VII of the Civil Rights Act of
1964, as amended, the California Fair Employment and Housing Act, the California
Constitution, the Equal Pay Act of 1963, the Age Discrimination in Employment
Act of 1967, the Civil Rights Act of 1866, and all other laws and regulations
relating to employment.
17. In consideration of the various promises and releases made
by you under this letter agreement, the Company will, upon the expiration of the
seven (7)-day period measured from the date you execute this letter agreement,
become fully bound by the following releases and waivers, provided you do not
exercise your right to revoke your general release under this Part Three during
that period:
The Company hereby fully and forever releases and
discharges you from any and all claims, demands, damages and causes of action
the Company has or may have against you and covenants not to xxx or otherwise
institute or cause to be instituted or in any way participate in legal or
administrative proceedings against you with respect to any matter arising out of
or connected with your employment with the Company, your service on the
Company's Board of Directors or the termination of that employment or service,
including any and all liabilities, claims, demands, contracts, debts,
obligations and causes of action of every nature, kind and description, in law,
equity or otherwise, whether or not now known or ascertained, which heretofore
do or may exist. However, the foregoing release shall not apply with respect to
any claims arising under this letter agreement.
Mr. E. Xxxxxx Xxxxx
July 3, 1996
Page 6
18. The mutual releases effected by you and the Company under
this Part Three extend to all claims of every nature and kind, known or unknown,
suspected or unsuspected, past or present, arising from or attributable to your
employment by the Company, your service as a member of the Company's Board of
Directors, or the termination of that employment or service. Any and all rights
granted to you and the Company under Section 1542 of the California Civil Code
or any analogous state law or federal law or regulation are hereby expressly
waived by you and the Company, respectively. Section 1542 of the Civil Code of
the State of California reads as follows:
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 his
settlement with the debtor.
PART FOUR -- MISCELLANEOUS PROVISIONS
19. It is the belief of both you and the Company that none of
the payments and benefits provided under this letter agreement are in the nature
of parachute payments under Internal Revenue Code Section 280G, and neither you
nor the Company (or its successors) will take any action or reporting position
contrary to such belief. However, should the Company undergo a "change in
ownership or effective control" or a "change in the ownership of a substantial
portion" of its assets (within the meaning of those terms under Internal Revenue
Code Section 280G and the applicable Treasury Regulations) prior to March 15,
1997 and you incur in connection therewith, whether through tax withholdings
made by the Company (or its successor) or upon an audit by the Internal Revenue
Service, an excise tax liability under Internal Revenue Code Section 4999 with
respect to one or more of the payments or benefits provided to you under this
letter agreement, then the Company will provide you with a tax gross-up payment
to cover (i) the initial excise tax liability you so incur plus (ii) the federal
and state income tax liability and the additional Internal Revenue Code Section
4999 excise tax liability you incur by reason of the gross-up. In no event,
however, will the Company be obligated to provide you with a total tax gross-up
payment under this Paragraph 19 in excess of $1,250,000 (before reduction for
all applicable taxes).
20. The benefits to which you may become entitled
under this letter agreement (except those attributable to your
outstanding stock options and restricted stock awards) will be paid, when due,
from the general assets of the Company. Your right (or the right of the
executors or administrators of your estate) to receive any such payments will at
all times be that of a general creditor of the Company and will have no priority
over the claims of other general creditors of the Company.
21. Should you die before receipt of all benefits to which you
become entitled under this letter agreement, then the payment of such benefits
will be made, on the due date or dates hereunder had you survived, to the
executors or administrators of your estate. Should you die before you exercise
your outstanding stock options, then each such option may be exercised, during
the applicable exercise period in effect hereunder for those options, by the
executors or administrators of your estate or by person to whom the option is
transferred pursuant to your will or in accordance with the laws of inheritance.
Mr. E. Xxxxxx Xxxxx
July 3, 1996
Page 7
22. The provisions of this letter agreement will be construed
and interpreted under the laws of the State of California. This agreement
incorporates the entire agreement between you and the Company relating to the
subject of severance benefits and supersedes all prior agreements and
understandings with respect to such subject matter. This agreement may only be
amended by written instrument signed by you and a duly-authorized officer of the
Company. If any provision of this letter agreement as applied to any party or to
any circumstance should be adjudged by a court of competent jurisdiction to be
void or unenforceable for any reason, the invalidity of that provision will in
no way affect (to the maximum extent permissible by law) the application of such
provision under circumstances different from those adjudicated by the court, the
application of any other provision of this letter agreement, or the
enforceability or invalidity of this letter agreement as a whole. Should any
provision of this letter agreement become or be deemed invalid, illegal or
unenforceable in any jurisdiction by reason of the scope, extent or duration of
its coverage, then such provision shall be deemed amended to the extent
necessary to conform to applicable law so as to be valid and enforceable or, if
such provision cannot be so amended without materially altering the intention of
the parties, then such provision shall be stricken and the remainder of this
letter agreement shall continue in full force and effect.
23. All rights and remedies provided pursuant to this letter
agreement or by law will be cumulative, and no such right or remedy will be
exclusive of any other. A party may pursue any one or more rights or remedies
hereunder or may seek damages or specific performance in the event of another
party's breach hereunder or may pursue any other remedy by law or equity,
whether or not stated in this letter agreement.
24. Any controversy which may arise between you and the
Company with respect to the construction, interpretation or application of any
of the terms, provisions or conditions of this letter agreement or any monetary
claim arising from or relating to this agreement will be submitted to final and
binding arbitration in San Francisco, California in accordance with the rules of
the American Arbitration Association then in effect.
25. The provisions of this letter agreement will be binding
upon and inure to the benefit of (i) you and your heirs, executors,
administrators and assigns and (ii) the Company and its successors and assigns.
PART FIVE -- SPECIAL RIGHTS
26. You have twenty-one (21) days after your July 3, 1996
receipt of this letter agreement within which you may review and consider,
discuss with an attorney of your own choosing, and decide whether or not to
execute this letter agreement.
27. You will have seven (7) days after you execute this letter
agreement within which to revoke such agreement.
28. In order to revoke this letter agreement, you must deliver
to the Chairman of the Company's Board of Directors, on or before the end of the
seven (7)-day period following the date you execute this letter agreement, a
letter stating that you are revoking such agreement.
Mr. E. Xxxxxx Xxxxx
July 3, 1996
Page 8
29. The provisions of this letter agreement will not become
effective or enforceable until after the expiration of the seven (7)-day period
following the date you execute this letter agreement.
If the provisions of this letter agreement are in accordance
with your understanding of the severance benefits, consulting arrangement and
mutual releases we have previously discussed, we ask that you execute the
Acceptance and Agreement section below after you have had the opportunity to
discuss this document with your attorney and return the executed agreement to
me.
Very truly yours,
/s/ Xxxxxxx X. Xxxxx
Xxxxxxx X. Xxxxx
Senior Vice President,
Human Resources and
Corporate Services
AMP/cvv
Attachments
ACCEPTANCE AND AGREEMENT
I have read and understand the provisions of the foregoing
letter agreement and affix my signature hereto voluntarily and without coercion.
Accordingly, I hereby accept and agree to all the terms and provisions of the
foregoing letter agreement, and I shall accordingly be entitled to all the
benefits provided under such letter agreement and be bound by all my covenants,
releases and waivers set forth therein. I acknowledge that I have been given an
opportunity to consult with an attorney of my own choosing concerning the
releases and waivers contained in this letter agreement, and that the releases
and waivers I have made and the terms to which I have agreed in such letter
agreement are knowing, conscious, and with full appreciation that I am forever
foreclosed from pursuing any of the rights so released or waived.
/s/ E. Xxxxxx Xxxxx
----------------------
E. XXXXXX XXXXX
DATED: July 3, 1996
The termination and consulting agreement between Xxxxxx and Mr. E. Xxxxxx
Xxxxx was amended so that the references in Sections 5 and 7 to August 30 or
August 30, 1996 were changed to November 1 or November 1, 1996.
