3COM CORPORATION FORM OF FIRST AMENDMENT TO MANAGEMENT RETENTION AGREEMENT
Exhibit 10.13
3COM CORPORATION
FORM OF FIRST AMENDMENT TO MANAGEMENT RETENTION
AGREEMENT
AGREEMENT
This AMENDMENT is made and entered into pursuant to the MANAGEMENT RETENTION AGREEMENT of [ ] (the “Agreement”) by and between 3Com Corporation (the “Company”)
and [ ] (“Executive”).
WHEREAS, the Company desires to amend the Agreement to comply with Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”).
NOW, THEREFORE, it is hereby agreed that the Agreement is amended in the following respects,
effective as of January 1, 2009, or such earlier date as required to comply with Code Section 409A
and guidance issued thereunder.
| 1. | Paragraph (a) of Section 3 is replaced with the following: |
| “3. | Change of Control Severance Benefits. |
(a) Involuntary Termination other than for Cause, death or Disability or
Voluntary Termination for Good Reason Within Three (3) Months Prior to or Within
Twelve (12) Months Following a Change of Control. The Executive shall be
entitled to receive the severance benefits provided below if, within three (3)
months prior to or within twelve (12) months following a Change of Control (as
defined herein), the Executive’s employment is terminated (i) involuntarily by the
Company other than for Cause, death or Disability (as such capitalized terms are
defined herein) or (ii) by the Executive pursuant to a Voluntary Termination for
Good Reason (as defined herein). The Executive’s receipt of the severance benefits
provided below shall be conditioned upon the Executive’s execution of and compliance
with an agreement (the “Release Agreement”) which shall include, without limitation,
(i) a release of claims against the Company, its affiliates and representatives;
(ii) a non-solicitation provision prohibiting the Executive’s solicitation of any
Company employee, business opportunity, client, customer, account, distributor or
vendor for a period of one (1) year following the Executive’s Termination Date; and
(iii) a non-competition provision prohibiting the Executive from directly or
indirectly engaging in, participating in, or having a material ownership interest
in, a business in competition with the Company for a period of one (1) year
following the Executive’s Termination Date; and (iv) a non-disparagement provision.
The form and language of the Release Agreement shall be determined by the Company in
its sole discretion.
If the Release Agreement has not been executed and/or the revocation period
stated in the Release Agreement has not expired by the sixtieth (60th)
day following the Termination Date, severance benefits shall be forfeited. The
Release Agreement shall be furnished to the Executive in sufficient time to enable
the Executive to comply with the preceding sentence, taking into account the period
of time that the Executive must be given to consider the terms of the
Release Agreement under any applicable law. Provided that the Executive has
executed a valid Release Agreement and the applicable revocation period has expired
by the sixtieth (60th) day following the Termination Date, Executive will
be entitled to receive the following:
(i) Severance Payments. One hundred percent (100%) of the
Executive’s Annual Compensation, subject to all applicable taxes and
withholdings, with payment commencing within sixty-five (65) days after the
Executive’s Termination Date in substantially equal installments
corresponding to the Company’s normal payroll practices and continuing for a
period of twelve (12) months, provided that the Executive continues to
comply with all terms and conditions of the Release Agreement during the
twelve (12) month period. Each payment shall be considered a separate
payment and not part of a series of installments for purposes of the
short-term deferral rules under Treasury Regulation Section
1.409A-1(b)(4)(i) and the exemption for involuntary terminations under
separation pay plans under Treasury Regulation Section 1.409A-1(b)(9)(iii).
As a result, the following payments are exempt from the requirements of Code
Section 409A:
(a) payments that are made by the fifteenth (15th)
day of the third month of the calendar year following the year of
the Executive’s Termination Date, and
(b) any additional payments that are made on or before the last
day of the second (2nd) calendar year following the year
of the Executive’s Termination Date and that do not exceed the
lesser of two (2) times: (A) the Executive’s annualized
compensation based upon the annual rate of pay for services provided
to the Company for the Executive’s taxable year that precedes the
taxable year in which the Termination Date occurs (adjusted for any
increase during that year that was expected to continue indefinitely
if the Executive’s employment had not terminated); or (B) the limit
under Code Section 401(a)(17) then in effect.
Notwithstanding the preceding provisions, to the extent that
the payments to be made during the first six (6) month period
following the Executive’s Termination Date exceed the amounts exempt
from Code Section 409A under this paragraph, such payments shall be
paid in a single lump sum on the first (1st) day
following the six (6) month anniversary of the Executive’s
Termination Date; and
(ii) Pro-Rated Bonus Payment. A pro-rated amount of the Executive’s
earned incentive bonus for the bonus period in which the Termination Date occurs, to
be calculated by multiplying the earned bonus amount (based on the Company’s actual
attainment of applicable performance metrics) by a fraction,
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the numerator of which shall be the number of calendar days from the beginning of
the applicable bonus period to the Termination Date and the denominator of which
shall be the number of calendar days within the applicable bonus period; provided,
however, that if a qualifying termination of employment occurs and the Termination
Date is within three (3) months prior to a Change of Control, the numerator shall be
the number of calendar days from the beginning of the applicable bonus period to the
effective date of the Change of Control. The pro-rated bonus referenced herein
shall be paid within sixty-five (65) days of the Termination Date (the payment of
which is intended to be exempt from Section 409A of the Internal Revenue Code of
1986, as amended (the “Code) pursuant to the short-term deferral rules of Treasury
Regulation 1.409A-1(b)(4)).
(iii) Health, Dental & Vision Benefits. Continuation of coverage
under the Company’s health, dental, and vision insurance plans (“Health Care Plans”)
pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) at
the same level of coverage as was provided to and elected by the Executive as of the
Termination Date. If the Executive timely and properly elects to continue coverage
under the Company’s Health Care Plans in accordance with COBRA, the Company shall
continue to pay the Company-paid portion of the premiums for the Executive’s elected
coverage under the Health Care Plans until the earlier of: (i) two (2) years from
the Termination Date, or (ii) the date upon which the Executive becomes eligible for
coverage under another employer’s group health, dental, or vision insurance plan(s).
The Executive will remain obligated to pay the unsubsidized portion of the
applicable premium(s) in order to continue Company-sponsored coverage. The
Company-paid portion of any premium(s) is subject to change at the Company’s
discretion; provided, however, that the Company-paid portion of the Executive’s
premium shall not be changed to be proportionately less than the Company-paid
portion of the then-current employees. To be eligible for continuation of coverage
under the Health Care Plans, an employee must be actively enrolled in the applicable
Health Care Plan(s) as of the Termination Date. For purposes of Title X of COBRA,
the date of the “qualifying event” for the Executive and his/her covered dependents
shall be the Termination Date, and each month of Company-sponsored coverage
continuation provided hereunder shall offset a month of coverage continuation
otherwise due under COBRA. Upon the expiration of the two (2) year period, the
Executive will be required to pay 102% of the premium to continue Company-sponsored
coverage. Any continuation of Company-sponsored coverage shall be governed by COBRA
and the terms and conditions of the applicable plan documents. To the extent that
the period during which the continued provision of medical and dental benefits falls
within the applicable COBRA continuation period, such continued provision of medical
and dental benefits is exempt from Code Section 409A under Treasury Regulation
Section 1.409A-1(b)(9)(v)(B). To the extent that the period during which the
continued provision of medical and dental benefits extends beyond the applicable
COBRA continuation period, the following shall apply: (a) the premiums for continued
medical and dental coverage shall be paid on a monthly basis; (b) any amounts paid
to or on behalf of the Executive as reimbursement for medical and/or dental expenses
shall be paid
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on or before the last day of the year following the year in which such expense was
incurred; (c) any amounts paid to or on behalf of the Executive as reimbursement for
medical and/or dental expenses during one year will not affect the Executive’s
eligibility for amounts paid to or on behalf of the Executive as reimbursement for
medical and/or dental expenses during any other year; and (d) the right to continued
coverage beyond the applicable COBRA continuation period is not subject to
liquidation or exchange for another benefit. This paragraph shall be administered
and interpreted consistent with Treasury Regulation Section 1.409A-3(i)(1)(iv).
(iv) Life Insurance. Conversion of the Executive’s basic term life
insurance in effect immediately prior to the Termination Date to continue coverage
until the earlier of (i) two (2) years from the Termination Date, or (ii) the date
upon which the Executive becomes eligible for coverage under another employer’s life
insurance plan.
(v) Equity Compensation Accelerated Vesting. One hundred percent
(100%) of the unvested portion of any stock option, restricted stock or other
Company equity compensation issued by the Company to the Executive shall
automatically be accelerated in full so as to become completely vested; provided,
however, that if a qualifying termination occurs and the Termination Date is within
three (3) months prior to a Change of Control, such acceleration shall become
effective upon the effective date of the Change of Control, with transfer of shares,
payment of cash, or removal of restrictions on shares, whichever applicable,
occurring as soon as practicable, but in no event later than the sixtieth
(60th) day following the Executive’s Termination Date or Change of
Control, whichever is later. Notwithstanding the foregoing, if the Executive is a
“specified employee” (within the meaning of Treasury Regulation Section 1.409A-1(i)
and as applied according to procedures of the Company) and the award is subject to
Code Section 409A, transfer of shares shall occur on the first market day following
the six (6) month anniversary of the Executive’s termination of employment; and
(vi) Extension of Stock Option and Stock Appreciation Right
Post-Termination Exercisability. The post-termination exercise period of any
outstanding Company stock options and stock appreciation rights held by the
Executive shall be extended to the lesser of (A) one hundred and sixty-five (165)
calendar days from the Executive’s Termination Date, or (B) the original term of the
award.”
| 2. | Add a new sentence at the end of Section 4(b) to read as follows: | ||
| “In no event shall payment be made later than the end of the year following the year in which Executive remits the related taxes.” |
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| 3. | Section 5 is revised in its entirety to read as follows: |
“5. Internal Revenue Code Section 409A. Notwithstanding anything to
the contrary in this Agreement, if Executive is a “specified employee” within the
meaning of Section 409A and as applied according to procedures of the Company at the
time of Executive’s termination of employment (other than due to death), then the
severance benefits payable to Executive under this Agreement, if any, and any other
severance payments or separation benefits payments that may be considered deferred
compensation under Section 409A (together, the “Deferred Compensation Separation
Benefits”) otherwise due to Executive on or within the six (6) month period
following Executive’s termination of employment will accrue during such six (6)
month period and will become payable in a lump sum payment (less applicable
withholding taxes) on the date six (6) months and one (1) day following the date of
Executive’s termination of employment. All subsequent payments, if any, will be
payable in accordance with the payment schedule applicable to each payment or
benefit. Notwithstanding anything herein to the contrary, if Executive dies
following his or her termination of employment but prior to the six (6) month
anniversary of his or her date of termination, then any payments delayed in
accordance with this paragraph will be payable in a lump sum (less applicable
withholding taxes) to Executive’s estate as soon as administratively practicable
after the date of Executive’s death and all other Deferred Compensation Separation
Benefits will be payable in accordance with the payment schedule applicable to each
payment or benefit. Each payment of severance benefits to Executive under this
Agreement that is made by March 15 of the calendar year following Executive’s
termination of employment and is intended to not constitute a “deferral of
compensation” by virtue of the “short term deferral” rule of Treasury Regulations
Section 1.409A-1(b)(4) shall constitute a “separate payment” for purposes of
application of that rule.
(b) Amendments to this Agreement with Respect to Section 409A. The
severance payments and other benefits provided under this Agreement are intended to
not constitute a “deferral of compensation” under Section 409A, to the extent
possible, or, to the extent not so possible, to comply with the requirements of
Sections 409A(a)(2), (3) and (4) of the Code so that none of the severance payments
and benefits to be provided hereunder will be subject to the income inclusion,
additional tax or interest provisions of Section 409A(a)(1), and any ambiguities
herein will be interpreted in accordance with that intent. The Company and
Executive agree to work together in good faith to consider amendments to this
Agreement and to take such reasonable actions which are necessary, appropriate or
desirable to avoid imposition of any additional tax or interest or income
recognition prior to actual payment to Executive under Section 409A(a)(1).”
| 4. | Paragraph (c) of Section 6 is revised in its entirety to read as follows: |
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“(c) Change of Control. “Change of Control” means the occurrence of any of
the following events:
(i) Any Person becomes the “beneficial owner” (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Company representing
more than fifty percent (50%) of the total voting power represented by the Company’s
then outstanding voting securities; or
(ii) The consummation of the sale or change in ownership of a substantial
portion of the Company’s assets (i.e., the total gross fair market value of the
Company’s assets acquired during the twelve (12) month period ending on the date of
the most recent acquisition equals more than fifty percent (50%) of the total gross
fair market value of all of the Company’s assets (without regard to associated
liabilities) immediately before such acquisition or acquisitions) other than a
transfer of assets to a related person as described in Treasury Regulation Section
1.409A-3(i)(5)(vii)(B); or
(iii) The consummation of a merger or consolidation of the Company with any
other corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than fifty percent (50%) of the total
voting power represented by the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation; or
(iv) A change in the composition of the Board occurring within a twelve (12)
month period, as a result of which fewer than a majority of the directors are
Incumbent Directors. “Incumbent Directors” shall mean directors who either (A) are
directors of the Company as of the date upon which this Agreement was entered into,
or (B) are elected, or nominated for election, to the Board with the affirmative
votes of at least a majority of those directors whose election or nomination was not
in connection with any transaction described in subsections (i), (ii), or (iii)
above, or in connection with an actual or threatened proxy contest relating to the
election of directors to the Company.”
| 5. | Paragraph (g) of Section 6 is revised in its entirety to read as follows: |
“(g) Termination Date. “Termination Date” shall mean the Executive’s last
date of employment with 3Com Corporation or, if later, the date on which the
Executive incurs a separation from service with 3Com Corporation as defined in
Treasury Regulation Section 1.409A-1(h).”
| 6. | Paragraph (h) of Section 6 is revised in its entirety to read as follows: |
“(h) Voluntary Termination for Good Reason. “Voluntary Termination for
Good Reason” shall mean the Executive’s voluntary resignation following the initial
existence of one or more of the following conditions arising without the consent of
the Executive:
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1. a material diminution in the Executive’s base compensation;
2. a material diminution in the Executive’s authority, duties, or
responsibilities;
3. a material change in the geographic location at which the Executive must
perform services; or
4. any other action or inaction that constitutes a material breach by the
Company of the agreement, if any, under which the Executive provides services.
Notwithstanding the forgoing, no such condition described herein shall constitute a
Voluntary Termination for Good Reason unless (i) the Executive has given written
notice to the Company specifying the condition relied upon for such termination
within ninety (90) days of the initial existence of the condition and the Company
has been given thirty (30) days to remedy the condition and has not done so within
such thirty (30) days and (ii) the Executive’s Termination Date occurs within six
(6) months of the initial existence of one or more of the conditions specified.”
| 7. | Paragraph (b) of Section 8 is revised in its entirety to read as follows: |
“(b) Notice of Termination. Not less than thirty days prior to a
termination for Cause, the Company must provide to the Executive notice of
termination, indicating the specific termination provision in this Agreement relied
upon. Said notice shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination under the provision so indicated, and
shall specify the final date of employment.”
* * *
(signature page follows)
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IN WITNESS WHEREOF, each of the parties has executed this First Amendment to the Agreement, in
the case of the Company by a duly authorized Employee, as of the day and year written below.
COMPANY:
3COM CORPORATION
By: |
Date: | |||||||
| EMPLOYEE: | ||||||||
| Date: | ||||||||
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