EXHIBIT 10.53
CONFIDENTIAL
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of June 17, 2005 ("Effective Date") by and between
PLATO Learning, Inc., a Delaware corporation headquartered in Minneapolis,
Minnesota (the "Company"), and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("Executive").
WITNESSETH THAT:
WHEREAS, the Company wishes to offer Executive employment and Executive
wishes to accept employment from the Company, pursuant to the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, the Company and Executive hereby agree as follows:
1. Employment. The Company hereby agrees to employ Executive to perform the
duties set forth in Section 3 hereof, and Executive hereby accepts such
employment, on the terms and conditions of this Agreement.
2. Term. The term of this Agreement ("Term") shall commence on the Effective
Date and shall end on June 17, 2007, subject to earlier termination
pursuant to Section 6. On June 17, 2007 and on each June 17 thereafter,
unless earlier terminated pursuant to Section 6, the Term will be
automatically extended for an additional one (1) year, unless either party
gives written notice not to extend the Term hereof at least forty-five
(45) days prior to the date such extension would be effective.
Notwithstanding anything contained herein to the contrary, in the event of
a Change in Control (as such term is defined in Appendix A), the Term
shall be automatically extended until the second anniversary of the Change
in Control.
3. Duties. Executive will serve as the Company's Vice President, Controller
and Chief Accounting Officer, with the responsibilities and duties
customarily associated with that position, and any other consistent
responsibilities and duties assigned or delegated to Executive by the
Board of Directors of the Company (the "Board"), or the Company's Chief
Executive Officer or Chief Financial Officer.
4. Time Commitment. Executive will devote Executive's time, attention and
energies to the performance of his duties and responsibilities under this
Agreement. Except for part-time transitional support to Zomax Incorporated
as Chief Financial Officer until August 12, 2005, Executive may not be
associated with, consult, advise, work for, be employed by, contract with,
or otherwise devote any of Executive's time to the pursuit of any other
work or business activities that may interfere with the performance of
such duties and responsibilities. The foregoing shall not preclude
Executive from devoting reasonable time to the supervision of his personal
investments, civic, charitable, educational, religious and similar types
of activities, speaking engagements and membership on other boards of
directors, provided such activities do not interfere in any way with the
business of the Company; and provided further that, Executive cannot serve
on the board of
directors of more than one publicly-traded company without the written
consent of the Board. The time involved in such activities shall not be
treated as vacation time. Executive shall be entitled to keep any amounts
paid to him in connection with such activities (e.g., director fees and
honoraria).
5. Compensation and Benefits. The Company will pay the following compensation
to Executive in full consideration for performance of his services
hereunder, payable in regular installments in accordance with the
Company's usual payroll policies and procedures.
(a) Salary. Executive will receive an annual salary of One Hundred
Seventy-five Thousand Dollars ($175,000). The Board or the
Compensation Committee of the Board will review Executive's salary
at least annually. Executive's salary will not be reduced, and after
any increase the term "salary" for purposes of this Agreement shall
refer to Executive's annual salary as most recently increased.
(b) Bonus Compensation. Executive will be eligible to participate in the
Company's management incentive plan as established each year by the
Board of Directors or the Compensation Committee of the Board.
Executive's target bonus for fiscal 2005 is set forth in the
Company's Fiscal 2005 Management Incentive Plan.
(c) Stock Options.
(i) The Company shall grant Executive an option under the
Company's 2002 Stock Plan to purchase 40,000 shares of the
Company's common stock at an exercise price per share equal to
the fair market value on the date of grant. Such option will
vest at the rate of one-third of the shares covered by such
option on each of the first three anniversaries of the date of
grant and shall be exercisable for a period of eight years
from the date of grant, provided Executive continues to be
employed by the Company.
(ii) All options to purchase shares of the Company's common stock
shall be evidenced by the Company's standard form of stock
option agreement, and all grants of restricted share of the
Company's common stock shall be evidenced by the Company's
standard form of restricted stock agreement. All options and
grants or restricted shares shall be subject to the terms and
conditions of the Company's 2002 Stock Plan.
(d) Benefits. Executive shall be entitled to three (3) weeks of vacation
each year, which shall be accrued on a prorated basis of each
payroll period. Executive shall be eligible to participate in such
group life insurance, major medical, and other employee benefit
plans and programs (collectively "Benefit Plans") as established by
the Company, in accordance with the applicable terms and conditions
of such Benefit Plans (including the requirements of the Benefit
Plans for participation).
-2-
(e) Expenses. The Company will reimburse Executive for all reasonable
and necessary expenses incurred by Executive in connection with the
performance of his services hereunder upon submission by Executive
of appropriate documentation in accordance with the Company's
expense reimbursement policy.
6. Termination.
(a) Death or Disability. This Agreement and Executive's employment shall
be terminated immediately upon Executive's death. In the event of
Executive's Disability, this Agreement and Executive's employment
shall be terminated thirty (30) days after the Company gives written
notice to Executive, unless Executive has returned to the
substantial performance of his duties on a full-time basis. For
purposes of this Agreement, "Disability" means that as a result of
physical or mental incapacity Executive is unable for a period of
120 consecutive days during any consecutive 180-day period to
perform his duties hereunder on a full-time basis.
Upon termination by reason of Death or Disability, Executive shall
be entitled only to accrued but unpaid salary through the date of
termination, together with any other benefit or payment provided
under the Company's plans, policies or programs in accordance with
their terms (collectively, "Accrued Obligations").
(b) Cause or Without Good Reason. The Company may terminate this
Agreement and Executive's employment for Cause (as defined in
paragraph (d) of this Section) upon ten (10) day's prior written
notice to Executive. Executive may terminate the Agreement and his
employment without Good Reason (as defined in paragraph (d) of this
Section) upon thirty (30) days' prior written notice to the Company.
Upon termination for Cause or without Good Reason, Executive shall
be entitled only to the Accrued Obligations.
(c) Good Reason; Without Cause. Executive may terminate this Agreement
and his employment for Good Reason upon thirty (30) days' prior
written notice to the Company. The Company may terminate this
Agreement and Executive's employment without Cause upon thirty (30)
days' prior written notice to Executive.
Upon termination for Good Reason or without Cause, Executive shall
be entitled to:
(i) the Accrued Obligations;
(ii) a lump sum severance payment equal to the higher of (x) one
(1) times Executive's annual salary in effect on the
termination date (without regard to any reduction in salary
referred to in clause (ii) of the definition of Good Reason)
or (y) Executive's salary for the duration of the remaining
term
-3-
pursuant to this Agreement, which shall be paid to Executive
within ten (10) business days following such termination; and
(iii) continuation of health and other welfare benefits (including
life, accident and disability benefits) to Executive and his
spouse and dependents under the Benefit Plans in which they
participated on the date of Executive's termination, for
twelve (12) months following the date of Executive's
termination on substantially the same terms and conditions
(including contributions by Executive) as in effect
immediately prior to Executive's termination; provided, that
the Company's obligation to provide such health or other
welfare benefit shall cease with respect to such benefit at
the time Executive becomes eligible to participate in a group
plan of another employer providing comparable benefits in the
aggregate.
To the extent that the health and other welfare benefits referred to
in clause (iii) above cannot be provided after termination of
employment under applicable law or the terms of the Benefit Plans
then in effect (and cannot be provided through the Company's paying
the applicable premium for Executive under COBRA), the Company shall
pay to Executive such amount as is necessary to provide Executive,
on an after-tax basis, with an amount equal to the cost of
acquiring, for Executive and his spouse and dependents, (on a
non-group basis) those health and other welfare benefits that would
otherwise be lost to Executive and his spouse and dependents as a
result of Executive's termination.
(d) Definitions. For the purposes of this Agreement, "Cause" shall mean
Executive's:
(i) indictment or plea of guilty or nolo contendere involving any
felony or gross misdemeanor involving dishonesty, fraud, or
breach of trust under any law of the United States or any
State thereof;
(ii) willful engagement in any conduct or gross negligence that in
either case materially injures the Company or any of its
subsidiaries; or
(iii) willful and substantial nonperformance of assigned duties,
provided that such nonperformance has continued more than ten
days after the Company has given written notice of such
nonperformance and of its intention to terminate Executive's
employment because of such nonperformance.
For purpose of this Agreement "Good Reason" shall exist if the
Company, without Executive's written consent:
(i) materially reduces the nature, scope, level or extent of
Executive's responsibilities;
(ii) reduces Executive's salary;
-4-
(iii) gives written notice to the Executive pursuant to Section 2
not to extend the Term of this Agreement; or
(iv) relocates Executive's principal business office to a location
which is more than fifty (50) miles from both (A) Executive's
principal business office immediately prior to such relocation
and (B) Executive's principal place of residence at the time
of such relocation.
(e) Conditions. Executive's eligibility to receive the payment and
benefits under this Section is conditioned on (i) his compliance
with the provisions of Section 8 of this Agreement and (ii) his
execution of a general release and waiver of all claims against the
Company and its directors, officers and subsidiaries, in a
reasonable and customary form prepared by the Company.
(f) Right of Recapture. In the event that (x) within one (1) year after
termination of this Agreement and Executive's employment for any
reason the Company determines that prior to such termination he
engaged in any activity which would have constituted a basis for
termination by the Company for Cause while employed by the Company
or (y) Executive breaches the restrictive covenants of Section 8,
then:
(i) the Company shall have no further obligations to pay the lump
sum severance payment or to continue providing Executive and
his spouse and dependents with health and other welfare
benefits, as provided in paragraph (c) above, if such
termination was by the Company without Cause or by Executive
for Good Reason;
(ii) upon written notice to Executive from the Company, Executive
shall pay to the Company within ten (10) business days any
lump severance payment received by Executive pursuant to
paragraph (c) above, and
(iii) if Executive has exercised any stock options granted to him by
the Company, Executive shall pay to the Company within ten
(10) business days after written notice from the Company the
difference between (A) the aggregate fair market value on the
date (or dates) of exercise of the shares subject to stock
options which were exercised by Executive on or after the date
which is one (1) year prior to Executive's termination of
employment and (B) the aggregate exercise price of such stock
options.
If Executive disputes the exercise by the Company of any rights
under this Section 6(f), Executive shall have the right to submit
such dispute to arbitration in accordance with Section 13(e).
Notwithstanding anything contained herein, this paragraph shall not
apply to any breach of the provisions of Section 8(a) unless there
has been substantial damage to the Company. For purposes of this
paragraph, "fair market value" on any date means the per share
closing price of the Company's common stock on the Nasdaq Stock
Market on that date (or, if
-5-
there was no reported closing price on that date, on the last
preceding date on which the closing price was reported) or, if the
Company is not then listed on the Nasdaq Stock Market, as determined
by the Board in good faith.
7. Change in Control.
(a) Retention Bonus. In the event that Executive's employment continues
for two (2) years after a Change in Control (as such term is defined
in Appendix A), Executive shall be entitled to a lump sum cash
retention bonus equal to one (1) times Executive's annual salary
then in effect. Such retention bonus shall be paid to Executive
within ten (10) business days following the second anniversary of
the Change in Control.
(b) Severance Payment and Benefits. In the event that Executive's
employment is terminated less than two (2) years after a Change in
Control by the Company without Cause or by Executive for Good
Reason, Executive shall be entitled to the same rights, payments and
benefits as provided in paragraph (c) of Section 6.
For purposes of this Section, Good Reason shall also include the
Company's failure without Executive's written consent to continue in
effect any incentive or bonus plan, or Benefit Plan, unless
Executive is permitted to participate in other plans providing
Executive with substantially equivalent compensation and benefits in
the aggregate (and, with respect to life insurance, major medical
and other employee welfare benefit plans, at a substantially
equivalent cost).
(c) Reduction of Payment. If, as provided in Appendix B, Executive would
otherwise be subject to the excise tax imposed by Section 4999 of
the Internal Revenue Code, the amounts payable under this Agreement
shall be reduced as provided in Appendix B.
(d) Legal Fees. If any contest or dispute shall arise under this
Agreement involving termination of Executive's employment with the
Company after a Change in Control or involving the failure or
refusal of the Company to perform fully in accordance with the terms
of this Section, the Company shall reimburse Executive for all
reasonable legal fees and related expenses, if any, incurred by
Executive in connection with such contest or dispute if a court of
competent jurisdiction or an arbitration panel substantially upholds
Executive's position.
8. Restrictive Covenants.
(a) Confidentiality. Executive agrees not to directly or indirectly,
without the Company's prior written consent:
(i) use or disclose, for the benefit of any person, firm or entity
other than the Company and its subsidiaries, the Confidential
Business Information of the Company or any of its
subsidiaries;
-6-
(ii) distribute or disseminate in any way to any person, firm or
entity anyone other than the Company and its subsidiaries, any
Confidential Business Information in any form whatsoever;
(iii) copy any Confidential Business Information other than for use
by the Company or any of its subsidiaries;
(iv) remove any Confidential Business Information from the premises
of the Company;
(v) fail to safeguard all confidential documents; and
(vi) copy any confidential documents belonging to any of the
Company's customers.
For purposes of this Agreement, "Confidential Business Information"
means information or material that is not generally available to or
used by others or the utility or value of which is not generally
known or recognized as a standard practice, whether or not the
underlying details are in the public domain, including but not
limited to its computerized and manual systems, procedures, reports,
client lists, review criteria and methods, financial methods and
practices, plans, pricing and marketing techniques, business methods
and procedures and other valuable and proprietary information
relating to the pricing, marketing, design, manufacture and
formulation of educational software, as well as information
regarding the past, present and prospective clients of the Company
or any of its subsidiaries, and their particular needs and
requirements, and their own confidential information.
Upon termination of employment under this Agreement for any reason,
Executive agrees to return to the Company all policy and procedure
manuals, records, notes, data, memoranda, and reports of any nature
(including computerized and electronically stored information) which
are in Executive's possession and/or control which relate to (i) the
Confidential Business Information of the Company or any of its
subsidiaries, (ii) the business activities or facilities of the
Company or its past, present, or prospective clients.
(b) Non-Compete. During the period of Executive's employment and for a
period of one (1) year following termination of this Agreement and
Executive's employment for any reason (the "Restricted Period"),
Executive will not directly or indirectly, on his behalf, or as a
partner, officer, director, trustee, member, employee, or otherwise,
within the United States or in any foreign market in which Executive
was engaged in activities on behalf of the Company or any of its
subsidiaries, own, engage in or participate in, in any way, any
business that is similar to or competitive with any actual or
planned business activity engaged in or planned by the Company or
any of its subsidiaries at the time the employment under this
Agreement was terminated. However, this Agreement shall not
-7-
prohibit ownership by Executive of up to 2% of the shares of stock
of any corporation the stock of which is listed on a national
securities exchange or is traded in the over-the-counter market.
(c) Non-Solicitation. During the Restricted Period, Executive will not
directly or indirectly, for the purpose of selling services and/or
products provided or planned by the Company or any of its
subsidiaries at the time the employment under this Agreement was
terminated, call upon, solicit or divert any actual customer or
prospective customer of the Company or any of its subsidiaries,
unless employed by the Company to do so. An actual customer, for
purposes of this Section, is any customer to whom the Company or any
of its subsidiaries has provided services and/or products within one
year prior to Executive's termination of employment under this
Agreement. A prospective customer, for purposes of this Section, is
any prospective customer to whom the Company or any of its
subsidiaries sought to provide services and/or products within one
year prior to the date of Executive's termination of employment
under this Agreement when Executive had knowledge of or was involved
in such solicitation.
Executive further agrees that during the Restricted Period Executive
shall not directly or indirectly induce any person to leave the
employ of the Company or any of its subsidiaries, or solicit any
person who is currently or was an employee of the Company or any of
its subsidiaries at any time during the twelve months prior to
Executive's termination of employment under this Agreement.
(d) Judicial Modification. If the final judgment of a court of competent
jurisdiction declares that any term or provision of this Section is
invalid or unenforceable, the parties agree that (i) the court
making the determination of invalidity or unenforceability shall
have the power to reduce the scope, duration, or geographic area of
the term or provision, to delete specific words or phrases, or to
replace any invalid or unenforceable term or provision with a term
or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or
provision, (ii) the parties shall request that the court exercise
that power, and (iii) this Agreement shall be enforceable as so
modified after the expiration of the time within which the judgment
or decision may be appealed.
9. Remedies. In the event Executive breaches or threatens to breach any
provision of Section 8 of this Agreement, the Company shall, in addition
to the provisions of Section 6(f) be entitled to injunctive relief,
enjoining or restraining such breach or threatened breach. Executive
acknowledges that the Company's remedy at law is inadequate and that the
Company and its subsidiaries will suffer irreparable injury if such
conduct is not prohibited.
Executive further agrees that the covenants contained in Section 8 shall
be construed as separate and independent of other provisions of this
Agreement and the existence of any claim by Executive against the Company
or any of its subsidiaries, except for a claim that
-8-
Executive was terminated without Cause or terminated his employment for
Good Reason, shall not constitute a defense to the enforcement by the
Company of either Section 8 or this Section.
10. Property Rights. All discoveries, designs, improvements, ideas,
inventions, intellectual property, creations, and works of art, whether or
not patentable or subject to copyright, relating to the business of the
Company or any of its subsidiaries, or its clients, conceived, developed
or made by Executive during employment under this Agreement, either solely
or jointly with others (hereafter "Developments") shall automatically
become the sole property of the Company. Executive shall immediately
disclose to the Company all such Developments and shall, without
additional compensation, execute all assignments, application or any other
documents deemed necessary by the Company to perfect the Company's rights
therein. These obligations shall continue throughout the Restricted Period
under this Agreement with respect to Developments conceived, developed or
made by Executive during the period of employment under this Agreement.
The Company acknowledges and agrees that the provisions of this section
shall not apply to inventions or for which no equipment, supplies,
facility or trade secret information of the Company or its clients were
used by Executive and which were developed entirely on Executive's own
time unless (a) such inventions relate (i) to the business of the Company
or (ii) to the Company's actual or demonstrably anticipated research or
development or (b) such inventions result from any work performed by
Executive for the Company.
11. Assignments. Neither party shall have the right or power to assign any
rights or duties under this Agreement without the written consent of the
other party, provided, however, that the Company shall have the right to
assign this Agreement without consent pursuant to any corporate
reorganization, merger, or other transaction involving a Change in Control
of the Company or any of its subsidiary companies. Any attempted
assignment in breach of this Section shall be void.
If Executive performs services and duties for any subsidiary or other
affiliated entity of the Company, then the provisions of Sections 8 and 9
shall apply to the confidential information and business activities,
property rights, clients, and employees of that subsidiary or other
entity.
12. Severability. Each section, paragraph, clause, sub-clause and provision
(collectively "Provisions") of this Agreement shall be severable from each
of the others, and if for any reason any section, paragraph, clause,
sub-clause or provision is invalid or unenforceable, such invalidity or
unenforceability shall not prejudice or in any way affect the validity or
enforceability of any other Provision hereof.
13. Miscellaneous.
(a) This Agreement (including the appendices) contains the entire
agreement of the parties with respect to the employment of Executive
and supersedes all prior agreements, provisions, covenants,
arrangements, communications,
-9-
representations or warrantees, whether written or oral, by any
officer, employee or representative of any party with respect to the
subject matter of this Agreement.
(b) Failure on the part of either party to insist upon strict compliance
by the other with respect to any of the terms, covenants and
conditions hereof, shall not be deemed a subsequent waiver of such
term, covenant or condition.
(c) The provisions of any section containing a continuing obligation
after termination shall survive such termination whether with or
without Cause and even if occasioned by the Company's breach or
wrongful termination.
(d) This Agreement may not be modified except in a written amendment
signed by the parties.
(e) Except for action by the Company to enforce the restrictive
covenants of Section 8, any dispute, controversy or difference that
may arise between the parties hereto out of or in relation to or in
connection with this Agreement or for the breach thereof which
cannot be settled amicably by the parties within thirty (30) days
shall be finally and exclusively settled by arbitration in
Minneapolis, Minnesota, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association then in
effect. The arbitrator shall have discretion to award the prevailing
party reasonable attorney's fees, subject to Section 7(d). In the
event of litigation under this Agreement, the court shall have
discretion to award the prevailing party reasonable attorney's fees,
subject to Section 7(d).
(f) The headings in this Agreement are inserted for convenience and
identification only and are not intended to describe, interpret,
define or limit the scope, extent, or intent of this Agreement or
any provision hereof. Each party has cooperated in the preparation
of this Agreement. As a result, this Agreement shall not be
construed against any party on the basis that the party was the
draftsperson.
(g) All forms of compensation referred to in this Agreement are subject
to reduction to reflect withholding for applicable income, payroll
and other taxes.
14. Governing Law. It is the intention of the parties hereto that all
questions with respect to the construction, formation, and performance of
this Agreement and the rights and liabilities of the parties hereto shall
be determined in accordance with the laws of the State of Minnesota. The
parties hereto submit to the jurisdiction and venue of the courts of
Hennepin County, Minnesota in respect to any dispute arising out of this
agreement.
15. Insurance. For the period from the date hereof through at least the fifth
anniversary of Executive's termination of employment from the Company, the
Company agrees to maintain Executive as an insured party on all directors'
and officers' insurance maintained by the Company for the benefit of its
directors and officers on at least the same basis as all other covered
individuals.
-10-
16. Notices. Any notice required pursuant to this Agreement will be in writing
and will be deemed given upon the earlier of (i) delivery thereof, if by
hand, (ii) five (5) business days after mailing if sent by mail
(registered or certified mail, postage prepaid, return receipt requested),
(iii) the next business day after deposit if sent by a recognized
overnight delivery service, or (iv) upon transmission if sent by facsimile
transmission or by electronic mail, with return notification (provided
that any notice sent by facsimile or electronic mail shall also promptly
be sent by one of the means described in clauses (i) through (iii) of this
Section. All notices will be addressed as follows or to such other address
as a party may identify in a written notice to the other party:
to the Company: PLATO Learning, Inc.
Attn: Chief Executive Officer
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
to Executive: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Each party named above may change its address and that of its
representative for notice by the giving of notice thereof in the manner
hereinabove provided.
17. Counterparts. This Agreement may be executed in one or more counterparts,
all of which together shall constitute but one Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement in the State of Minnesota effective as of the day and year first above
written.
PLATO LEARNING, INC.
_______________________________ By: _____________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: __________________________
Title: __________________________
-11-
APPENDIX A
"Change in Control" means the occurrence of any one of the following
events:
(i) individuals who, on June 17, 2005, constitute the Board (the
"Incumbent Directors") cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director
subsequent to June 17, 2005 whose election or nomination for election was
approved by a vote of at least a majority of the Incumbent Directors then
on the Board (either by a specific vote or by approval of the proxy
statement of the Company in which such person is named as a nominee for
director, without written objection to such nomination) shall be an
Incumbent Director; provided, however, that no individual initially
elected or nominated as a director of the Company as a result of an actual
or threatened election contest with respect to directors or as a result of
any other actual or threatened solicitation of proxies by or on behalf of
any person other than the Board shall be deemed to be an Incumbent
Director;
(ii) any "person" (as such term is defined in the Securities
Exchange Act of 1934 (the "Exchange Act") and as used in Sections 13(d)(3)
and 14(d)(2) of the Exchange Act) is or becomes a "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 50% or more of the combined voting
power of the Company's then outstanding securities eligible to vote for
the election of the Board ("Company Voting Securities"); provided,
however, that the event described in this paragraph (ii) shall not be
deemed to be a Change in Control by virtue of any of the following
acquisitions: (A) by the Company or any subsidiary, (B) by any employee
benefit plan (or related trust) sponsored or maintained by the Company or
any subsidiary, (C) by any underwriter temporarily holding securities
pursuant to an offering of such securities, (D) pursuant to a
Non-Qualifying Transaction, as defined in paragraph (iii), or (E) by any
person of Voting Securities from the Company, if a majority of the
Incumbent Board approves in advance the acquisition of beneficial
ownership of 50% or more of Company Voting Securities by such person;
(iii) the consummation of a merger, consolidation, statutory share
exchange or similar form of corporate transaction involving the Company or
any of its subsidiaries that requires the approval of the Company's
stockholders, whether for such transaction or the issuance of securities
in the transaction (a "Business Combination"), unless immediately
following such Business Combination: (A) more than 60% of the total voting
power of (x) the corporation resulting from such Business Combination (the
"Surviving Corporation"), or (y) if applicable, the ultimate parent
corporation that directly or indirectly has beneficial ownership of 100%
of the voting securities eligible to elect directors of the Surviving
Corporation (the "Parent Corporation"), is represented by Company Voting
Securities that were outstanding immediately prior to such Business
Combination (or, if applicable, is represented by shares into which such
Company Voting Securities were converted pursuant to such Business
Combination), and such voting power among the holders thereof is in
substantially the same proportion as the voting power of such Company
Voting Securities among the holders thereof immediately prior
A-1
to the Business Combination, (B) no person (other than any employee
benefit plan (or related trust) sponsored or maintained by the Surviving
Corporation or the Parent Corporation), is or becomes the beneficial
owner, directly or indirectly, of 50% or more of the total voting power of
the outstanding voting securities eligible to elect directors of the
Parent Corporation (or, if there is no Parent Corporation, the Surviving
Corporation) and (C) at least a majority of the members of the board of
directors of the Parent Corporation (or, if there is no Parent
Corporation, the Surviving Corporation) following the consummation of the
Business Combination were Incumbent Directors at the time of the Board's
approval of the execution of the initial agreement providing for such
Business Combination (any Business Combination which satisfies all of the
criteria specified in (A), (B) and (C) above shall be deemed to be a
"Non-Qualifying Transaction");
(iv) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or the consummation of a sale of
all or substantially all of the Company's assets; or
(v) the occurrence of any other event that the Board determines by a
duly approved resolution constitutes a Change in Control.
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
solely because any person acquires beneficial ownership of more than 50% of
Company Voting Securities as a result of the acquisition of Company Voting
Securities by the Company which reduces the number of Company Voting Securities
outstanding; provided, that if after such acquisition by the Company such person
becomes the beneficial owner of additional Company Voting Securities that
increases the percentage of outstanding Company Voting Securities beneficially
owned by such person, a Change in Control of the Company shall then occur.
▇-▇
▇▇▇▇▇▇▇▇ ▇
Cut-back to Safe Harbor Cap on Payments
(a) Notwithstanding anything in this Agreement to the contrary, in
the event it shall be determined that any payment, award, benefit or
distribution (or any acceleration of any payment, award, benefit or
distribution) by the Company (or any of its affiliated entities) or any entity
which effectuates a Change in Control (or any of its affiliated entities) to or
for the benefit of Executive, whether pursuant to the terms of this Agreement or
otherwise (the "Payments"), would be subject to the excise tax (the "Excise
Tax") imposed by Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code"), then the amounts payable to Executive under this Agreement shall
be reduced (reducing first the payments under Section 7(a) and (b), unless an
alternative method of reduction is elected by Executive) to the maximum amounts
will result in no portion of the Payments being subject to such excise tax (the
"Safe Harbor Cap"). For purposes of reducing the Payments to the Safe Harbor
Cap, only amounts payable to Executive under this Agreement (and no other
Payments) shall be reduced, unless consented to by Executive.
(b) All determinations required to be made under this Appendix B
shall be made by the public accounting firm that is retained by the Company as
of the date immediately prior to the Change in Control (the "Accounting Firm")
which shall provide detailed supporting calculations both to the Company and
Executive within ten (10) business days of the receipt of notice from the
Company or Executive that there has been a Payment, or such earlier time as is
requested by the Company. Notwithstanding the foregoing, in the event (i) the
Board shall determine prior to the Change in Control that the Accounting Firm is
precluded from performing such services under applicable auditor independence
rules or (ii) the Audit Committee of the Board determines that it does not want
the Accounting Firm to perform such services because of auditor independence
concerns or (iii) the Accounting Firm is serving as accountant or auditor for
the person(s) effecting the Change in Control, the Board shall appoint another
nationally recognized public accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses (including, but not limited to, the costs
of retaining experts) of the Accounting Firm shall be borne solely by the
Company and the Company shall enter into any agreement requested by the
Accounting Firm in connection with the performance of the services hereunder.
If the Accounting Firm determines that payments shall be reduced to
the Safe Harbor Cap, it shall furnish Executive with a written opinion to that
effect, and to the effect that Executive is not required to report any Excise
Tax on Executive's federal income tax return. If the Accounting Firm determines
that no Excise Tax would otherwise be payable by Executive, it shall furnish
Executive with a written opinion to such effect, and to the effect that
Executive is not required to report any Excise Tax on Executive's federal income
tax return. The determination by the Accounting Firm shall be binding upon the
Company and Executive (except as provided in paragraph (c) below).
B-1
(c) If it is established pursuant to a final determination of a
court or the Internal Revenue Service (the "IRS") proceeding which has been
finally and conclusively resolved, that Payments have been made to, or provided
for the benefit of, Executive by the Company, which are in excess of the
limitations provided in this Appendix B (hereinafter referred to as an "Excess
Payment"), Executive shall repay the Excess Payment to the Company on demand,
together with interest on the Excess Payment at the applicable federal rate (as
defined in Section 1274(d) of the Code) from the date of Executive's receipt of
such Excess Payment until the date of such repayment. 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 Payments which will not have been made by the
Company should have been made (an "Underpayment"), consistent with the
calculations required to be made under this Appendix B. In the event that it is
determined (i) by the Accounting Firm, the Company (which shall include the
position taken by the Company, 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 an Underpayment has occurred, the Company shall pay an amount equal
to such Underpayment to Executive within ten (10) days of such determination
together with interest on such amount at the applicable federal rate from the
date such amount would have been paid to Executive until the date of payment.
Executive shall cooperate, to the extent Executive's expenses are reimbursed by
the Company, with any reasonable requests by the Company in connection with any
contests or disputes with the Internal Revenue Service in connection with the
Excise Tax or the determination of the Excess Payment. Notwithstanding the
foregoing, in the event that amounts payable under this Agreement were reduced
pursuant to paragraph (a) of this Appendix B and the value of its stock options
is subsequently redetermined by the Accounting Firm (as defined below) within
the context of Treasury Regulation Section 1.280G-1 Q/A 33 that reduces the
value of the Payments attributable to such options, the Company shall promptly
pay to Executive any amounts payable under this Agreement that were not
previously paid solely as a result of paragraph (a) up to the Safe Harbor Cap.
B-2