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Exhibit 10.8
CHANGE OF CONTROL AGREEMENT
AGREEMENT between PENWEST, LTD., a Washington corporation (the
"Corporation"), and _______________ (the "Executive"), dated as of October 24,
1995.
RECITALS
A. The Executive is an executive officer of the Corporation and
an integral part of its management.
B. The Corporation wishes to assure both itself and the Executive
of continuity of management in the event of any actual or threatened change in
control of the Corporation.
C. This Agreement is not intended to alter the compensation and
benefits that the Executive could reasonably expect in the absence of the
occurrence of a Trigger Date, as defined in this Agreement; consequently, this
Agreement will be operative only upon the Executive's termination during the
term of this Agreement after the occurrence of a Trigger Date.
NOW, THEREFORE, it is hereby agreed as follows;
1. Term of Agreement. The effective date of this Agreement is
October 24, 1995. This Agreement shall remain in effect until terminated by
the Corporation or, if a Trigger Date occurs prior to such termination by the
Corporation, until the obligations of the Corporation pursuant to paragraphs 4
and 6 have been fulfilled. This Agreement shall terminate one year after the
date the Corporation gives the Executive written notice of the termination of
this Agreement; except that if a Trigger Date occurs prior to the termination
date, this Agreement shall remain in effect with respect to all rights accruing
as a result of the occurrence of the Trigger Date.
2. Operation of Agreement - Trigger Date. The provisions of this
Agreement shall become operative the day before each "Trigger Date" which
occurs during the term of this Agreement. Any of the following shall
constitute a Trigger Date: (a) any Person is or becomes the beneficial owner,
directly or indirectly, of securities of the Corporation representing more than
50% of the voting power of the outstanding Voting Stock, (b) the effective date
of a merger, consolidation, reorganization or dissolution in which the
Corporation is not the surviving entity or (c) during any period of two
consecutive years, individuals who constitute the Board of Directors of the
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Corporation at the beginning of any such period cease for any reason to
constitute at least a majority thereof, unless the election, or the nomination
for election by the Corporation's shareholders, of each new director was
approved by a vote of at least two-thirds of the directors then still in office
who were directors of the Corporation at the beginning of such period. means
an individual, firm, corporation or other entity, together with all Affiliates
and Associates of such Person, but shall not include the Corporation, any
subsidiary of the Corporation or any employee benefit plan of the Corporation.
"Affiliate" and "Associate" shall have the respective meanings ascribed to such
terms in Rule 12b-2 of the Securities Exchange Act of 1934, as amended.
"Voting Stock" means the common stock of the Corporation and any other shares
entitled to vote for the election of directors of the Corporation.
3. Termination of Employment. If, during the term of this
Agreement, there is a termination of the Executive's employment after a Trigger
Date, then the Executive shall receive the compensation and benefits described
in paragraphs 4 and 6. The term "termination of the Executive's employment"
for purposes of this Agreement shall mean (1) termination by the Corporation of
the employment of the Executive for any reason other than cause, the
Executive's having reached age 65, death, or disability if the disability is
covered by the Corporation's long term disability plan, or (2) termination by
the Executive of his employment following (i) the assignment to the Executive
of responsibilities or title materially less than his responsibilities and
title immediately prior to the Trigger Date, (ii) the reduction in the
aggregate of the Executive's salary and bonus to which he was entitled
immediately prior to the Trigger Date that is not remedied within 30 days after
receipt by the Corporation of written notice from the Executive of such
reduction, or (iii) without limiting the generality of effect of the foregoing,
any material breach of this Agreement by the Corporation. The term "cause"
shall mean gross misconduct in connection with the Executive's position as an
officer of the Corporation which results in demonstrably material injury to the
Corporation. Bad judgment or negligence shall not constitute gross misconduct
nor shall any act or omission reasonably believed by the Executive to have been
in, or not opposed to, the interests of the Corporation.
4. Compensation. Subject to the provisions of paragraph 8, if
there is a termination of the Executive's employment on or before 24 months
after a Trigger Date, the Executive shall have the right to receive the
compensation described in this paragraph during the compensation period,
subject to reduction as provided in paragraph 5 if the Executive is employed by
one or more employers during such period. The term "compensation period" shall
mean the period between the Executive's termination date and 30 months after
such termination
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date. However, in no event shall the compensation period extend beyond the end
of the month in which the Executive reaches 65 years of age. During the
compensation period the Executive shall continue to receive his annual salary,
payable at the same time and in the same manner as it was paid immediately
prior to his termination. The term "annual salary" shall mean the annual
salary being paid the Executive immediately before his termination, determined
prior to any deductions actually taken from salary (1) for salary reductions or
deferrals under any plan of the Corporation, (2) for payment of employee
benefits under any plan of the Corporation which were charged to the Executive,
and (3) for the purchase of stock under any plan of the Corporation. In
addition, the Executive shall receive his target bonus (determined under the
bonus plan last in effect for the Executive as if the Executive had not been
terminated) for the fiscal year in which the Executive was terminated at the
time that such bonus was paid in the previous year. The same bonus shall be
paid on the same month and day in any succeeding year that occurs within the
compensation period. Notwithstanding any other provision in this paragraph, if
the Executive's annual salary and target bonus are less than the average of the
Executive's gross compensation for the three calendar years prior to the
Executive's termination date, then the Executive shall receive, in monthly
payments, such average annual gross compensation during the compensation period
instead of his salary and target bonus. The term "gross compensation" shall
mean compensation as reported on the Executive's Federal Income Tax Withholding
Statement (Form W-2) plus the following items to the extent they were not
reported on the Executive's Federal Income Tax Withholding Statement: (1) any
salary reductions or deferrals under any plan of the Corporation, (2) any
amounts paid for employee benefits under any plan of the Corporation which are
charged to the Executive, and (3) any amounts charged to the Executive for the
purchase of stock under any plan of the Corporation. Notwithstanding any other
provision of this Agreement, if the aggregate present value of the payments to
or for the benefit of the Executive under this paragraph and paragraph 6 equals
or exceeds three times the "base amount" (as defined in Internal Revenue Code
Section 280G), such that a deduction would not be allowed to the Corporation
under that Section for all or any part of such payments, or if the payments
made hereunder would cause the Executive to be liable for tax under Internal
Revenue Code Section 4999, then the payments under this paragraph and paragraph
6 shall be reduced so that the aggregate "present value" (as defined in
Internal Revenue Code Section 280G(d)(4)) of such payments shall total $100.00
less than three times the base amount. The purpose of such reduction is to
ensure that the payments to the Executive will not constitute a parachute
payment within the meaning of Internal Revenue Code Section 280G(b)(2) and that
the Executive will not be subject to tax under Internal Revenue Code Section
4999. The Executive shall have the right (but shall not be required) to
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receive the benefit of any amendments to Internal Revenue Code Section 280G
that increase the amount that may be received without loss of the deduction to
the Corporation.
5. Reduction by Reason of Other Employment. If the Executive is
employed by one employer or simultaneously by more than one employer during the
compensation period, the amount payable under paragraph 4 shall be reduced by
the total gross compensation received from such employer or employers. Gross
compensation shall have the same meaning as in paragraph 4.
No amount required to be paid to the Executive under paragraph 4 shall
be reduced prior to the time the Executive actually receives compensation from
such new employer or employers, except that if compensation from the new
employer is deferred, either voluntarily or involuntarily, the Corporation may
reduce its payments in an equitable manner.
The Executive shall use best efforts to give the Corporation access to
the Executive's new employer in order to confirm such gross compensation or to
confirm compliance by the Executive with paragraph 8.
6. Benefits. Subject to the provisions of paragraph 8, if there
is a termination of the Executive's employment on or before 24 months after a
Trigger Date, then the Executive shall continue to be treated during the
compensation period as an "employee" under all stock option, purchase or
acquisition plans in effect on his termination date; however, no new stock or
option awards shall be granted after the Executive's termination date. The
Executive, his dependents, beneficiaries and/or estate shall continue during
the compensation period to be entitled to all benefits under medical, dental,
life insurance and similar plans (except for any disability plan) that are in
effect on the Executive's termination date. If by reason of law or government
regulation or third-party contractual restriction the Executive, his
dependents, beneficiaries and/or estate cannot receive or participate in a
benefit, then the Corporation shall, to the extent necessary, pay or provide
for payment of such benefit to the Executive, his dependents, beneficiaries
and/or estate in the same amount and manner as they would have been provided by
the plan. Notwithstanding the foregoing, if the Executive is employed by
another employer, the Corporation shall not provide any medical, dental, life
insurance or similar benefit to the extent it is provided by the other
employer. The participation of the Executive in the PENWEST, LTD. Retirement
Plan, the PENWEST, LTD. 401(k) Plan or any other plan described in Internal
Revenue Code Section 401(a) shall terminate after his termination date in
accordance with the terms of such plans and the Corporation shall not be
obligated to provide equivalent benefits.
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7. Effect of Death. In the event of death of the Executive
during the compensation period, the compensation under paragraph 4 for the
month in which death occurs shall be paid to the Executive's estate and the
compensation period shall be deemed to have ended as of the close of business
on the last day of the month in which the death occurred. Coverage of the
Executive and any dependents under any plan described in paragraph 6 shall also
end on such date. Nothing in this paragraph shall affect payments due in
respect of the Executive's death.
8. Non-Competition and Confidentiality. The Executive agrees
that:
(a) the Corporation shall cease providing payments and
benefits under paragraphs 4 and 6 (other than benefits or payments already
earned or accrued) if, during the compensation period, the Executive shall be
employed by or otherwise engaged or be interested in any business that is
competitive with any business of the Corporation or of any of its subsidiaries
in which the Executive was engaged during his employment prior to a termination
and if such employment or activity is likely to cause, or causes, serious
damage to the Corporation or any of its subsidiaries; and
(b) during and after the compensation period, the
Executive will not divulge or appropriate to the Executive's own use or the use
of others any secret or confidential information or knowledge pertaining to the
business of the Corporation, or any of its subsidiaries, obtained during his
employment by the Corporation or any of its subsidiaries.
The Board of Directors has determined, in its best judgment, that the payments
to the Executive under paragraphs 4 and 6 are reasonable consideration for not
competing as provided in (a) and for maintaining the confidentiality of
information as provided in (b).
9. Arbitration of All Disputes. Any controversy or claim arising
out of or relating to this Agreement or the breach hereof shall be settled by
arbitration in the City of Seattle in accordance with the laws of the State of
Washington by three arbitrators, one of whom shall be appointed by the
Corporation, one of whom shall be appointed by the Executive and one of whom
shall be appointed by the first two arbitrators. The arbitration shall be
conducted in accordance with the rules of the American Arbitration Association,
except with respect to the selection of arbitrators which shall be as provided
in this paragraph. Judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof. In the event that it shall
be necessary or desirable for the Executive to retain legal counsel or incur
other costs and expenses in
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connection with the enforcement of the Executive's rights under this Agreement,
the Corporation shall pay the Executive's reasonable attorneys' fees and costs
and expenses in connection with such enforcement (including the enforcement of
any arbitration award in court), regardless of the final outcome, unless the
arbitrators shall determine that under the circumstances recovery by the
Executive of any such fees, costs and expenses would be unjust.
10. Notices. Any notices, requests, demands and other
communications provided for by this Agreement shall be sufficient if in writing
and if sent by registered or certified mail to the Executive at the last
address he has filed in writing with the Corporation and to the Corporation at
its principal executive offices.
11. Non-Alienation. The Executive shall not pledge, hypothecate,
assign or create a lien upon any amounts provided under this Agreement; and no
benefits payable hereunder shall be assignable in anticipation of payment
either by voluntary or involuntary acts, or by operation of law.
12. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Washington.
13. Amendments. This Agreement may not be changed, waived or
discharged orally, but only by an instrument in writing, signed by the party
against which enforcement of such change, waiver or discharge is sought.
14. Successors. This Agreement shall extend to and be binding
upon the Corporation, its successors and assigns. For purposes of this
Agreement, unless the context otherwise requires, references to the Corporation
shall include its subsidiaries.
15. Severability. In the event that any provision of this
Agreement shall be determined to be invalid or unenforceable for any reason,
the remaining provisions of this Agreement shall be unaffected thereby and
shall remain in full force and effect.
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16. Headings. The headings of the paragraphs in this Agreement
are solely for convenience or reference and shall not control the meaning or
interpretation of any provision of this Agreement.
PENWEST, LTD.
By___________________________
_____________________________
[Executive]
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