EXHIBIT 10.12
-------------
SEVERANCE AGREEMENT
-------------------
THIS SEVERANCE AGREEMENT (Agreement) is entered into effective as of
---------
November 20, 1998, by and between VARIAN ASSOCIATES, INC., a Delaware
corporation (the Company), and J. ▇▇▇▇▇ ▇'▇▇▇▇▇▇, an employee of the Company
-------
(Employee).
---------
The Company's Board of Directors (the Board) has determined that it is in
-----
the best interest of the Company and its stockholders for the Company to engage
in a reorganization (the "Triple Spin") pursuant to which the Company will be
-----------
divided into three distinct entities with separate management (the "Post-Spin
---------
Companies"). The Board has further determined that the services of Employee
---------
will no longer be required after the consummation of the Triple Spin and
believes that it is appropriate to reward the Employee for Employees previous
service to the Company and to provide Employee with an incentive to remain in
the employ of the Company pending the successful completion of the Triple Spin.
In view of the foregoing, the Company and Employee agree as follows:
1. RESIGNATION; OTHER TERMINATIONS.
-------------------------------
(a) Upon the consummation of the Triple Spin or upon such earlier
date as mutually agreed by the parties (the "Termination Date"), Employee shall
----------------
resign as a director and/or officer of the Companies with respect to which
Employee held such a position on such date, and will become an inactive employee
of the Company (in which capacity Employee will not be expected to perform any
regular work for the Company), and will remain an inactive employee for the
period set forth in Section 3.(a)(iv) , upon conclusion of which Employee shall,
at Employee's election, either resign or retire from the Company. In
addition, Employee shall resign as of the Termination Date as a member of each
committee of the Companies on which he was then serving and as a director,
officer, trustee or member of any third-party organization in which he was then
serving as a delegate or representative of any of the Companies. For purposes
of this Agreement, the term "Companies" shall include the Company and each of
---------
its direct or indirect majority-owned subsidiaries.
(b) It is anticipated that Employee will remain in the employ of the
Company and continue to perform Employees regular duties until the Termination
Date. If prior to the Termination Date Employee voluntarily terminates
employment for any reason or Employees employment is terminated by the Company
for Cause, or in the event of the death, Disability or Retirement of Employee
prior to the Termination Date, this Agreement shall lapse upon such termination
of employment and be of no further force or effect. If the Company terminates
the employment of Employee prior to the Termination Date without Cause, Employee
shall be
1 of 12
entitled to the payments and benefits provided herein and for purposes of
determining such payments and benefits, the date of such termination shall be
the Termination Date.
(c) If the Company terminates Employees employment for Cause, the
Company shall pay Employees Base Salary through the date of termination at the
rate in effect at the time notice of termination is given, and the Company shall
have no further obligations to Employee under this Agreement.
(d) Any termination of employment by the Company or by Employee prior
to the Termination Date as described in Section 1(b) or (c) (other than death)
shall be communicated by written notice, specify the date of termination, state
the specific basis for termination and set forth in reasonable detail the facts
and circumstances of the termination in order to provide a basis for determining
the entitlement to any payments under this Agreement.
(e) If within thirty (30) days after notice of termination is given,
the party to whom the notice was given notifies the other party that a Dispute
exists, the parties will promptly pursue resolution of such Dispute with
reasonable diligence; provided, however, that pending resolution of any such
-------- -------
Dispute, the Company shall pay 75% of any amounts which would otherwise be due
Employee pursuant to Section 3 if such Dispute did not exist into escrow pending
resolution of such Dispute and pay 25% of such amounts to Employee. Employee
agrees to return to the Company any such amounts to which it is ultimately
determined that he is not entitled.
2. DEFINITIONS.
-----------
For purposes of this Agreement:
"Base Salary" shall mean the annual base salary paid to Employee
-------------
immediately prior to the Termination Date, provided that such amount shall in no
event be less than the annual base salary paid to Employee during the one (1)
year period immediately prior to the Termination Date.
"Cause" shall mean:
-------
(i) The continued willful failure of Employee to perform
Employees duties to the Company (other than any such failure resulting from
Employees incapacity due to physical or mental illness) after written notice
thereof (specifying the particulars thereof in reasonable detail) and a
reasonable opportunity to be heard and cure such failure are given to Employee
by the Board or a committee thereof; or
2 of 12
(ii) The willful commission by Employee of a wrongful act that
caused or was reasonably likely to cause substantial damage to the Company, or
an act of fraud in the performance of Employees duties on behalf of the Company;
or
(iii) The conviction of Employee for commission of a felony in
connection with the performance of Employees duties on behalf of the Company; or
(iv) The order of a federal or state regulatory authority
having jurisdiction over the Company or its operations or by a court of
competent jurisdiction requiring the termination of Employees employment by the
Company.
Disability shall mean Employees incapacity due to physical or
----------
mental illness such that Employee shall have become qualified to receive
benefits under the Company's long-term disability plan as in effect on the
Termination Date.
Dispute shall mean a disagreement between Employee and the
-------
Company regarding the existence of Disability or Cause.
Retirement shall mean Employees actual retirement after reaching
----------
the normal or early retirement date provided for in the Company's Retirement and
Profit-Sharing Program as in effect on the date of Employees termination of
employment.
Severance Period shall mean the whole and partial number of years
----------------
determined by multiplying (i) the Severance Factor by (ii) one (1) year.
3. PAYMENTS AND BENEFITS UPON RESIGNATION.
--------------------------------------
(a) Upon the resignation or Retirement of Employee on the Termination
Date in accordance with Section 1(a) and Employees satisfaction of the Release
Delivery Requirement, Employee shall be entitled to the following payments and
benefits:
(i) The Company shall pay to Employee as compensation for
services rendered, no later than five (5) business days following Employees
satisfaction of the Release Delivery Requirement, a lump sum severance
payment (the "Cash Severance") equal to 2.99 (the "Severance Factor")
--------------- ----------------
multiplied by the sum of (A) Employees Base Salary and (B) the highest
annual bonus paid to Employee in any of the three years ending prior to the
"Termination Date" under the Company's Management Incentive Plan (MIP).
3 of 12
(ii) The Company shall pay to Employee as compensation for
services rendered, no later than five (5) business days following the date
of termination, a lump sum payment equal to a pro rata portion (based on
the number of days elapsed during the year in which the "Termination Date"
occurs) of Employees target bonus under the Company's Management Incentive
Plan (MIP) for the year in which the "Termination Date" occurs.
(iii) All waiting periods for the exercise of any stock options
granted to Employee and all conditions or restrictions of any restricted
stock granted to Employee shall terminate, and all such options shall be
exercisable in full according to their terms, and the restricted stock
shall be transferred to Employee as soon as reasonably practicable
thereafter. In the event that Employees combined age and service with the
Company as of the Termination Date satisfy the definition of "Retirement",
the resignations described in Section 1 hereof shall constitute
"retirement" for purposes of the Company's Omnibus Stock Plan.
(iv) Employees participation as of the Termination Date in the
life, medical/dental/vision and disability insurance plans and
financial/tax counseling plan of the Company shall be continued on the same
terms (including any cost sharing) as if Employee were an employee of the
Company (or equivalent benefits provided) until the earlier of Employees
commencement of substantially equivalent full-time employment with a new
employer or twenty-four (24) months after the Termination Date; provided,
--------
however, that after the Termination Date, Employee shall no longer be
-------
entitled to receive Company-paid executive physicals or, upon expiration of
the applicable memberships, Company-paid airline memberships. In the event
Employee shall die before the expiration of the period during which the
Company is required to continue Employees participation in such insurance
plans, the participation of Employees surviving spouse and family in the
Company's insurance plans shall continue throughout such period.
(v) Employee may elect upon the "Termination Date" to purchase
any automobile then in the possession of Employee and subject to a lease of
which the Company is the lessor by payment to the Company of the residual
value set forth in the lease, without any increase for remaining lease
payments during the term or other lease breakage costs. Employee may elect
to have any such payment deducted from any payments due Employee hereunder.
(vi) Each of Employees outstanding awards under the Long Term
4 of 12
Incentive feature of the Company's Omnibus Stock Plan (the LTIP) shall,
----
within five (5) days of Employee's satisfaction of the Release Delivery
Requirement, be settled as follows:
(A) for the 1997 to 1999 and the 1998 to 2000 LTIP cycles, an
amount equal to each such award's target payout shall be
paid; and
(B) for the 1999 to 2001 LTIP cycle, an amount equal to a pro
rata portion (based on the number of days elapsed during
such award cycle as of the "Termination Date") of such
award's target payout shall be paid.
All LTIP awards settled on an accelerated basis shall not be discounted to
take into account such early settlement.
(vii) All payments and benefits provided under this Agreement
shall be subject to applicable tax withholding.
(b) Following Employees termination of employment for any reason, the
company shall have the unconditional right to reduce any payments owed to
Employee hereunder by the amount of any due and unpaid principal and interest on
any loans by the Company to Employee and Employee hereby agrees and consents to
such right on the part of the Company.
(c) Any amount of Cash Severance paid to Employee pursuant to Section
3(a)(i) shall be offset proportionately by any amount of Related Income (defined
below) received by Employee during the Severance Period and Employee shall be
obligated to repay any such Related Income to Company on an after-tax basis as
soon as practicable after Employees receipt thereof. Related Income means any
--------------
salary and/or bonus paid to Employee by a Post-Spin Company for services
performed in Employees capacity as an employee, but shall not include (i) any
fees earned by Employee in connection with Employees service as a non-employee
officer or member of the board of directors of or a consultant to a Post-Spin
Company or (ii) any amount of salary and/or bonus in excess of the product of
(A) the Cash Severance and (B) a fraction, the numerator of which is the number
of whole and partial years over which such salary and/or bonus was earned and
the denominator of which is Employees Severance Factor.
For example, assume Employees Severance Factor is 2.50 and Employees
Cash Severance paid under Section 3(a)(i) is $500,000. Assume further that (i)
Employee obtains employment with a Post-Spin Company as of the second
anniversary of his termination of employment hereunder and works for at least
six months thereafter and (ii) the Post-Spin
5 of 12
Company pays Employee $125,000 in salary and bonus for services rendered as an
employee during such six-month period. Employee would be obligated to pay to the
Company $100,000 (on an after-tax basis) and would be permitted to retain the
excess $25,000. The Related Income ($100,000) is calculated by multiplying the
Cash Severance ($500,000) by the fraction described above (.5/2.5). The excess
($25,000) is not included in Related Income and may be retained by Employee.
(d) Following Employees termination of employment for any reason,
Employee shall no longer be entitled to (i) the use of aircraft owned or leased
by the Company or (ii) property tax subsidies from the Company.
4. RELEASE.
-------
In recognition of the consideration recited above, Employee hereby
agrees to execute a release effective as of the Termination Date in favor of the
Company in substantially the form attached hereto as Exhibit A and Employee
acknowledges that no payments are required to be made by the Company hereunder
until Employee satisfies the Release Delivery Requirement. For purposes of this
Agreement, "Release Delivery Requirement" shall mean (i) the delivery of the
----------------------------
release on the Termination Date in substantially the form attached hereto as
Exhibit A and (ii) the expiration of the seven-day period commencing on the date
of such delivery without the Executive having revoked the release.
5. GENERAL.
-------
(a) Employee shall retain in confidence under the conditions of the
Company's confidentiality agreement with Employee any proprietary or other
confidential information known to him concerning the Company and its business so
long as such information is not publicly disclosed and disclosure is not
required by an order of any governmental body or court. If required, Employee
shall return to the Company any memoranda, documents or other materials
proprietary to the Company.
(b) While employed by the Company and following the termination of
such employment (other than a termination of employment by the Company other
than for Cause) for a period of two (2) years, Employee shall not:
(i) whether for Employees own account or for the account of
any other individual, partnership, firm, corporation or other business
organization, intentionally solicit, endeavor to entice away from the
Company, any Post-Spin Company or a subsidiary of any of them (each, a
Protected Party), or otherwise interfere with the
---------------
6 of 12
relationship of a Protected Party with, any person who is employed by a
Protected Party or any person or entity who is, or was within the then most
recent twelve (12) month period, a customer or client of a Protected Party;
or
(ii) without the prior written consent of the Company or the
applicable Post-Spin Company, in any geographic area in which the Company
or a Post-Spin Company is then conducting business, directly or indirectly
own an interest in, manage, operate, join, control, lend money or render
financial or other assistance to or participate in or be connected with, as
an officer, employee, partner, stockholder, consultant or otherwise, any
individual, partnership, firm, corporation or other business organization
or entity that is engaged in any business in which the Company, any Post-
Spin Company or any subsidiary of any of them is actively engaged at the
time; provided, however, that the restrictions in this Section 5(b)(ii)
-------- -------
shall not apply to (A) any non-employee directorships held by Employee as
of the date hereof or (B) ownership by Employee for personal investment
purposes only of not in excess of 1% of the voting stock of any publicly
held corporation.
Employee acknowledges that a breach of any of the covenants contained
in this Section 5(b) may result in material irreparable injury to the Company
for which there may be no adequate remedy at law, that it may not be possible to
measure damages for such injuries precisely and that, in the event of such a
breach, any payments remaining under the terms of this Agreement shall cease and
the Company may be entitled to obtain a temporary restraining order and/or a
preliminary or permanent injunction restraining Employee from engaging in
activities prohibited by this Section 5(b) or such other relief as may be
required to specifically enforce any of the covenants in this Section 5(b).
Employee agrees to and hereby does submit to in personam jurisdiction before
-- --------
each and every such court in the State of California, County of Santa ▇▇▇▇▇, for
that purpose. This Section 5(b) shall survive any termination of this
Agreement.
(c) If litigation is brought by Employee to enforce or interpret any
provision contained in this Agreement, the Company shall indemnify Employee for
Employees reasonable attorneys fees and disbursements incurred in such
litigation and pay prejudgment interest on any money judgment obtained by
Employee calculated at the prime rate of interest in effect from time to time at
the Bank of America, San Francisco, from the date that payment should have been
made under the Agreement, provided that Employee shall not have been found by
the court in which such litigation is pending to have had no cause in bringing
the action, or to have acted in bad faith, which finding must be final with the
time to appeal therefrom having expired and no appeal having been taken.
7 of 12
(d) Except as provided in Section 3, the Company's obligation to pay
to Employee the compensation and to make the arrangements provided in this
Agreement shall be absolute and unconditional and shall not be affected by any
circumstance, including, without limitation, any setoff, counterclaim,
recoupment, defense or other right which the Company may have against Employee
or anyone else. All amounts payable by the Company hereunder shall be paid
without notice or demand. Employee shall not be required to mitigate the amount
of any payment provided for in this Agreement by seeking other employment.
(e) This Agreement shall inure to the benefit of and be enforceable
by (i) Employees heirs, successors and assigns and (ii) the Post-Spin Companies.
If Employee should die while any amounts would still be payable to Employee
hereunder if Employee had continued to live, all such amounts shall be paid in
accordance with the terms of this Agreement to Employees heirs, successors and
assigns.
(f) For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed as
follows:
If to Employee: If to the Company:
J. ▇▇▇▇▇ ▇'▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ Varian Associates, Inc.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: Vice President, Human
Resources
or to such other address as either party furnishes to the other in writing in
accordance herewith, except that notices of change of address shall be effective
only upon receipt.
(g) This Agreement shall constitute the entire agreement between
Employee and the Company concerning the subject matter of this Agreement.
8 of 12
(h) The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of California without
giving effect to the provisions, principles or policies thereof relating to
choice or conflict of laws. The invalidity or unenforceability of any provision
of this Agreement in any circumstance shall not affect the validity or
enforceability of such provision in any other circumstance or the validity or
enforceability of any other provision of this Agreement, and, except to the
extent such provision is invalid or unenforceable, this Agreement shall remain
in full force and effect. Any provision in this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
only to the extent of such prohibition or unenforceability without invalidating
or affecting the remaining provisions hereof in such jurisdiction, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. This Section 5(h)
shall survive any termination of this Agreement.
(i) No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement and this Agreement
shall supersede all prior agreements, negotiations, correspondence, undertakings
and communications of the parties, oral or written, with respect to the subject
matter hereof.
IN WITNESS WHEREOF, the parties acknowledge that they have read and
understand the terms of this Agreement and have executed this Agreement to be
effective as of November 1, 1998.
VARIAN ASSOCIATES, INC. EMPLOYEE
/s/▇▇▇▇▇ ▇▇▇▇▇▇ /s/ J. ▇▇▇▇▇ ▇'▇▇▇▇▇▇
------------------------------------- -----------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇ J. ▇▇▇▇▇ ▇'▇▇▇▇▇▇
Title: Vice-President, Human Resources
9 of 12
EXHIBIT A
---------
RELEASE
-------
RELEASE, dated as of the Termination Date (as defined in the Severance
Agreement), by J. ▇▇▇▇▇ ▇'▇▇▇▇▇▇ (Employee) in favor of Varian Associates, Inc.,
--------
a Delaware corporation (the Company).
-------
WHEREAS, the Company and Employee entered into the Severance Agreement
dated as of November 20, 1998 (the Severance Agreement);
-------------------
WHEREAS, pursuant to the terms of the Severance Agreement, Employees
employment is scheduled to terminate upon the Termination Date, at which time
Employee shall become an inactive employee entitled to the benefits provided
therein, subject to Employees execution and delivery of this Release and the
expiration of the seven-day revocation period provided herein without Employee
having revoked this Release.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and consideration set forth in the Severance
Agreement, Employee agrees as follows:
1. Release of Claims and Consultation with Attorneys. In recognition
-------------------------------------------------
of the consideration recited in the Severance Agreement, Employee hereby
releases and discharges the Company and its present, former and future partners,
affiliates, direct and indirect parents, subsidiaries, successors, directors,
officers, employees, agents, attorneys, heirs and assigns (the "Released
--------
Parties"), from any and all claims, actions and causes of action that Employee
-------
may have or in the future may possess with respect to the Released Parties,
including without limitation, claims, actions and causes of action arising out
of Employees employment relationship with the Company, or the termination of
such employment, and including without limitation any claims arising under Title
VII of the Civil Rights Act of 1964, the Rehabilitation Act of 1973, the
Americans With Disabilities Act of 1990, the Civil Rights Act of 1866, the Civil
Rights Act of 1991, the Employee Retirement Income Security Act of 1974, the
Family and Medical Leave Act of 1993, the California Fair Employment and Housing
Act, the California ▇▇▇▇▇ Civil Rights Act, the California Equal Pay Law, any
contract or agreement, or any federal, state or local law, whether such claim
arises under statute or common law and whether or not Employee is presently
aware of the existence of such claim, damage, action and cause of action, suit
or demand. Employee also forever releases, discharges and waives any right
Employee may have to recover in any proceeding brought by any federal, state or
local agency against the Released Parties to enforce any laws. Employee agrees
that the value received as described in
10 of 12
the Severance Agreement shall be in full satisfaction of any and all claims,
actions or causes of action for payment or other benefits of any kind that
Employee may have against the Released Parties, other than any claims Employee
may have with regard to vested benefits under any of the Company's employee
benefit plans.
2. ADEA Release. In further recognition of the consideration
------------
recited in the Severance Agreement, Employee hereby releases and discharges the
Released Parties from any and all claims, actions and causes of action that
Employee may have against the Released Parties arising under the federal Age
Discrimination in Employment Act of 1967, as amended (ADEA), and the applicable
----
rules and regulations promulgated thereunder. If Employee fails to revoke this
Release during the applicable seven-day revocation period described below, this
Release shall become effective and binding upon the parties hereto.
3. Representations. By executing this Release, Employee represents
---------------
that:
(a) Employee has been given the opportunity to consult with the
attorney(s) of Employees choice;
(b) Employee has been given a period of at least 21 days within which
to consider the terms and provisions of the Severance Agreement and this
Release;
(c) Employee is aware that for a period of seven days following
Employee's execution of this Release, Employee has the option to revoke this
Release by providing notice to the Company in accordance with the terms set
forth below;
(d) Employee has knowingly and voluntarily accepted the terms of the
Severance Agreement and this Release; and
(e) Employee has read and expressly waives any rights Employee may
have under Section 1542 of the California Civil Code, which provides 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.
4. General.
-------
(a) For the purposes of this Release, notices and all other
communications provided for in this Release shall be in writing and shall be
deemed to have been duly given
11 of 12
when delivered or mailed by United States registered mail, return receipt
requested, postage prepaid, addressed as follows:
If to Employee: If to the Company:
J. ▇▇▇▇▇ ▇'▇▇▇▇▇▇ Varian Associates, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: Vice President, Human
Resources
(b) This Release shall inure to the benefit of and be enforceable by
the Post-Spin Companies.
(c) This Release shall be governed by the laws of the State of
California without giving effect to the provisions, principles or policies
thereof relating to choice or conflict of laws.
VARIAN ASSOCIATES, INC. EMPLOYEE
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇ /s/ J. ▇▇▇▇▇ ▇'▇▇▇▇▇▇
--------------------------------------- -----------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇ J. ▇▇▇▇▇ ▇'▇▇▇▇▇▇
Title: Vice-President, Human Resources
12 of 12