EXHIBIT 10.6
FORM OF CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT (the "Agreement") is
entered into as of the _____ day of _____________, 2004 (the "Effective Date"),
by and between VERILINK CORPORATION (the "Employer"), which is organized under
the laws of the State of Delaware and has its principal office at Madison,
Alabama, and _________________________, an individual resident of the State of
______________ (the "Employee"), (collectively referred to herein as the
"Parties");
BACKGROUND
A. The Employee is employed by, and/or serves as an officer of,
the Employer.
B. The Parties desire to enter into the Agreement to provide
certain benefits to the Employee upon the occurrence of certain events following
a Change in Control (as defined herein) of the Employer.
C. Now, therefore, in light of the foregoing and in consideration
of the mutual promises and covenants contained herein, the Parties hereby enter
into the following Agreement.
AGREEMENT
1. Definitions.
As used in this Agreement, the following terms shall have the
meanings set forth below:
a. "Annual Base Salary" means the annualized rate of
base salary being paid to the Employee as of the date a Change in
Control is effected. Such amount shall not include any bonuses, expense
reimbursements, overtime, or other compensation.
b. "Annual Bonus" means the annual bonus paid or payable
to the Employee for the annual bonus period ending immediately prior to
the effective date of the Change in Control.
c. "Board" means the Board of Directors of the Employer.
d. "Cause" means conduct constituting a felony and
resulting in material financial harm to the Employer.
e. "Change in Control" means any one of the following
events occurring after the Effective Date:
i) the acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
voting securities of the corporation where such acquisition
causes such person to own more than fifty percent (50%) of the
combined voting power of the then outstanding voting
securities of the Employer entitled to vote generally in the
election of directors (the "Outstanding Employer Voting
Securities");
ii) individuals who as of the Effective Date
hereof, constitute the Board (the "Incumbent Board") cease for
any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the Effective Date hereof whose election, or
nomination for election by the Employer's shareholders, was
approved by a vote of at least two-thirds of the directors
then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual
or threatened election contest with respect to the election or
removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board;
iii) the approval by the shareholders of the
Employer of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets
of the Employer ("Business Combination") or, if consummation
of such Business Combination is subject, at the time of such
approval by shareholders, to the consent of any government or
governmental agency, the obtaining of such consent (either
explicitly or implicitly by consummation); excluding, however,
such a Business Combination pursuant to which all or
substantially all of the Persons who were the beneficial
owners of the Outstanding Employer Voting Securities
immediately prior to such Business Combination beneficially
own, directly or indirectly, more than fifty percent (50%) of,
respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation,
a corporation that as a result of such transaction owns the
Employer or all or substantially all of the Employer's assets
either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Employer Voting Securities; or
iv) approval by the shareholders of the Employer
of a complete liquidation or dissolution of the Employer.
f. "Change in Control Benefits" means the benefits
payable to the Employee as described in Section 3.
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g. "Code" means the Internal Revenue Code of 1986, as
amended.
h. "Good Reason" means the occurrence of any of the
following events which is not corrected by the Employer within thirty
(30) days after the Employee's written notice to the Employer of the
same:
i) without the Employee's express written
consent, the assignment to Employee of any duties or
responsibilities or changes in position or status that are not
reasonably consistent with the Employee's duties,
responsibilities, position and status with the Employer
immediately prior to a Change in Control;
ii) a reduction of the Employee's Annual Base
Salary, without the Employee's express written consent; or
iii) a reduction, without the Employee's express
written consent, of any aspect of the Employee's annual bonus
opportunity as in effect immediately prior to a Change in
Control, including, but not limited to, the extent to which
the annual bonus opportunity may then be expressed as one or
more dollar amounts or percentages of Annual Base Salary;
provided, however, that a change in performance goals or
hurdles shall not constitute a reduction within the meaning of
this Section 1(h)(iii).
i. "Protected Period" means the period that begins on
the date of a Change in Control and ends twelve (12) months thereafter.
j. "Term" means the period described in Section 2.
k. "Trigger Event" means either of the events described
in Section 3(a).
2. Term. This Agreement shall remain in effect until:
a. The earlier of:
i) the third (3rd) anniversary of the Effective
Date, if no Change in Control occurs prior to such date; or
ii) the date on which the Employee is no longer
employed by the Employer and any affiliates, if no Change in
Control occurs prior to such date; or
b. If a Change in Control occurs prior to the events
described in Section 2(a) above, twelve (12) months after a Change in
Control if no Trigger Event occurs during the Protection Period; or
c. If a Trigger Event occurs within the Protected Period
following a Change in Control, upon the discharge of the Employer's
obligations to the Employee as set forth in this Agreement.
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d. Notwithstanding the foregoing, the Term, as described
in Section 2(a)(i) above, will be extended for an additional
twelve-month period on each anniversary of the Effective Date beginning
with the third (3rd) such anniversary unless the Employer provides
written notice of non-renewal of the Agreement to the Employee at least
ninety (90) days prior to the anniversary date for which non-renewal is
intended.
3. Benefits on Change in Control
a. Trigger Events for Change in Control Benefits. The
Employee shall be eligible for Change in Control Benefits if:
i) the Employee voluntarily terminates
employment during the Protected Period for an event or events
occurring during the Protected Period that constitute Good
Reason; or
ii) the Employer terminates the Employee's
employment for any reason other than for Cause during the
Protected Period without the Employee's written consent.
b. Amount of Change in Control Benefit. Upon the
occurrence of a Trigger Event, the Employer shall provide the Employee
with the following:
i) a severance payment equal to a multiple of
one (1) times the sum of the Employee's Annual Base Salary and
Annual Bonus;
ii) payment for the Employee's cost of health
continuation coverages under the Employer's group health
plan(s) for twelve (12) months, beginning with the calendar
month following the Trigger Event; and
iii) a supplemental cash payment of $3,500.
c. Form of Payment of Change in Control Benefits. The
Change in Control Benefits in Section 3(b)(i) and (iii) shall be paid
in one lump sum within thirty (30) days of the Trigger Event. The
Change in Control Benefit in Section 3(b)(ii) shall be paid in monthly
installments within ten (10) days of the first day of each calendar
month for which the benefit is payable. The Employer shall have the
right to deduct from all such payments amounts necessary to satisfy
applicable tax withholding obligations.
d. Modification of Change in Control Benefits for Excess
Parachute Payments.
i) The Change in Control Benefits shall be
reduced if the Employer reasonably determines that the Change
in Control Benefits are "parachute payments" under Code
Section 280G(b)(2) and that the Change in Control Benefits,
when added to any other amounts paid by, and any other amounts
of value transferred from, the Employer and its affiliates to
the Employee in relation to the Change in Control, would
result in the imposition of a tax under Code Section 4999
and/or a loss of tax deduction for such payment under Code
Section 280G.
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ii) The amount of the reduction shall be equal
to such amount as reasonably determined by the Employer as is
necessary so that no tax is imposed under Code Section 4999
and no loss of tax deduction occurs under Code Section 280G.
The Employee shall have the right to designate which
"parachute payments" shall be so reduced.
e. Release. Prior to making any payment pursuant to this
Section 3, the Employer shall have the right to require the Employee to
sign, and the Employee hereby agrees to sign, a release, as described
herein, and the Employer may withhold payment of such amount until the
period during which the Employee may revoke such waiver (normally seven
days) has elapsed. The release shall provide for the terms of the
involuntary termination of employment of the Employee and for the
release and discharge of the Employer and related persons and entities
from any and all actions, suits, proceedings, claims, demands or causes
of action, in any way directly or indirectly related to or connected
with the Employee's employment with the Employer and its affiliates or
the termination of employment with the Employer and its affiliates,
including but not limited to, claims relating to discrimination in
employment.
4. Stock Options. With respect to any stock options granted to
the Employee and outstanding immediately prior to a Change in Control, the
Employer shall take all necessary actions necessary: (a) upon a Change in
Control, to fully vest all such stock options not otherwise fully vested and to
eliminate, waive, or relinquish the Employer's repurchase rights for those stock
options subject to a repurchase right, (b) to permit the Employee to exercise
any vested stock options following the Employee's termination of service as an
employee or consultant of the Employer for up to three (3) months (or such
longer period as may currently apply), and (c) to permit Employee to exercise
the stock options for at least the twelve (12) months following a Trigger Event;
unless, in the case of clauses (b) or (c) above, such stock options are not
assumed by an acquiror or are otherwise terminated in accordance with the plan
in connection with the Change in Control.
5. No Guarantee of Employment. Notwithstanding any other
provision of this Agreement to the contrary, nothing in this Agreement shall
entitle the Employee to be employed for any certain period of time by the
Employer or any affiliate and either or both of the Parties shall have the right
to terminate the employment relationship at any time.
6. No Mitigation or Offset. The Employee is not required to
mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise, and no such payment shall be offset or reduced by
the amount of any claim the Employer may have against the Employee.
7. Arbitration of Disputes. In the event of any dispute or claim
relating to or arising out of this Agreement, such dispute shall be fully,
finally and exclusively resolved under the employment dispute resolution rules
of the American Arbitration Association and judgment upon the award rendered by
the arbitrator may be entered in any court having jurisdiction thereof. Unless
the Parties mutually agree to an alternative location, the arbitration will be
held within twenty-five (25) miles of the principal offices of the Employer,
determined as of the earlier of the day immediately prior to the effective date
of the Change in Control or the date any dispute
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first arises. If the Parties cannot agree upon the arbitrators within twenty
(20) days after submission of a Party's request for arbitration in writing, the
arbitrators will be selected in accordance with the procedures of the American
Arbitration Association. If the Employee prevails in the dispute, the Employer
will pay all reasonable attorneys' fees and expenses of the Employee and
reasonable expenses of the arbitrator and any similar expenses incurred to
enforce the arbitrator's decision. The Parties agree that the existence, content
and result of any arbitration proceeding shall be confidential, except to the
extent that either Party determines it is required to disclose such matters in
accordance with applicable laws. EMPLOYEE IS REQUIRED TO INITIAL HERE:
_________.
8. Miscellaneous.
a. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware
without regard to conflicts of law principles thereof.
b. Entire Agreement. This Agreement constitutes the
entire Agreement between Employee and Employer with respect to the
subject matter hereof and supersedes any other negotiations,
understandings or representations, written or oral agreements and past
practices, whether written or oral, including, but not limited to, any
existing agreement involving benefits payable in connection with a
change in control of the Employer, its affiliates or any predecessors
in interest. In addition, payment of the obligations under this
Agreement shall be in lieu of any other severance pay, notice pay or
other similar benefits which might otherwise be payable to the Employee
under any plan or program then maintained by the Employer and it
affiliates.
c. Counterparts. This Agreement may be executed in one
or more counterparts, all of which, taken together, shall constitute
one and the same instrument.
d. Enforcement. The provisions of this Agreement shall
be deemed severable, and the invalidity or unenforceability of any
provision shall not affect the validity or enforceability of the other
provisions hereof. It is understood and agreed that no failure or delay
by Employer or Employee in exercising any right, power or privilege
under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder.
e. Assignment.
i) By the Employee. Neither this Agreement nor
any of the rights or obligations hereunder may be assigned or
delegated by the Employee. However, this Agreement and all
rights and benefits of the Employee hereunder shall inure to
the benefit of and be enforceable by the Employee's personal
or legal representatives, estate, executors, administrator,
heirs, and beneficiaries. In the event of the Employee's
death, all amounts payable to the Employee under this
Agreement if the Employee had lived shall be paid to such
beneficiary(ies) as the Employee specifies in writing from
time to time, or if none, to the Employee's
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successor trustee under the Employee's revocable living trust
agreement, or if no such trust is then existing, then to the
personal representative of the Employee's estate.
ii) By the Employer. If the Employer sells,
assigns, or transfers a majority of its business and assets to
any person or entity, or if the Employer merges into or
consolidates or otherwise combines with any person which is a
continuing or successor entity (such acquiring or successor
entity to be referred to herein as the "Acquiring Entity"),
then the Employer shall assign all of its right, title, and
interest in this Agreement as of the date of such event to the
Acquiring Entity, and such entity shall assume and perform all
of the terms, conditions, and provisions imposed by this
Agreement upon the Employer. In the event of such assignment
by the Employer and of the assumption and agreement by the
Acquiring Entity, all further rights and obligations of the
Employer under this Agreement thenceforth shall cease and
terminate and thereafter the expression, "Employer" wherever
used herein shall be deemed to mean the Acquiring Entity. The
Employer will take whatever actions are necessary to ensure
that the Acquiring Entity expressly assumes the obligations of
the Employer to the Employee under this Agreement and will
cause the Acquiring Entity to evidence the assumption of such
obligations in an agreement satisfactory to the Employee.
f. Amendments. No amendments, additions, or deletions to
this Agreement shall be binding unless made in writing and signed by
all of the Parties, except as herein otherwise specifically provided.
g. Severability. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
h. Binding Agreement. This Agreement shall be binding on
any successors or assigns of either Party hereto.
i. Notices. Any notice or other communication required
or permitted under this Agreement shall be effective only if it is in
writing and delivered in person or by nationally recognized overnight
courier service or deposited in the mails, postage prepaid, return
receipt requested, addressed as follows:
To Employer:
Verilink Corporation
000 Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention:
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To Employee:
________________________
________________________
________________________
Notices given in person or by overnight courier service shall be deemed
given when delivered in person or when delivered to the courier
addressed to the address required by this Section 8(i), and notices
given by mail shall be deemed given three days after deposit in the
mails. Any Party hereto may designate by written notice to the other
Party in accordance herewith any other address to which notices
addressed to the Party shall be sent.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the day and year first above written.
"EMPLOYER"
By:
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Name:
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Title:
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"EMPLOYEE"
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