SENIOR MANAGEMENT EMPLOYMENT AGREEMENT
______________________________________________________________
SENIOR MANAGEMENT EMPLOYMENT AGREEMENT, dated the 27th
day of February, 1997, between NEOPATH, INC., a Washington
corporation (the "Company"), and _________________
("Executive").
RECITALS
A. Executive is currently employed by the Company or
one of its Subsidiaries.
B. The Board of Directors of the Company (the "Board")
has determined that it is appropriate to reinforce the
continued attention and dedication of certain members of the
Company's management, including Executive, to their assigned
duties without distraction in potentially disturbing
circumstances arising from the possibility of a Change in
Control of the Company, as defined in Schedule A attached
hereto.
AGREEMENTS
NOW, THEREFORE, in consideration of the covenants and
agreements hereinafter set forth, the Company and Executive
agree as follows:
1. Definitions
Terms capitalized in this Agreement which are not
otherwise defined shall have the meanings assigned to such
terms in Schedule A attached hereto.
2. Employment Following a Change in Control.
Once a Change in Control has occurred, no termination of
Executive's employment with the Company, other than on account
of death, shall be effective unless the party causing such
termination of employment provides the other party 30 days'
prior written notice of such termination, which shall indicate
those specific provisions in this Agreement relied upon and
which sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for the termination
of Executive's employment constituting a Termination, if any,
under the provision so indicated.
3. Benefits Upon Change in Control
Executive shall be entitled to the following payments and
benefits following a Change in Control, whether or not a
Termination occurs:
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(a) Salary and Benefits. Executive shall (i) receive an
annual base salary no less than the Executive's annual base
salary in effect immediately prior to the date that the Change
in Control occurs, including any salary which has been earned
but deferred, and an annual bonus equal to at least the
average of the two annual bonuses paid to Executive in the two
years prior to the Change in Control, and (ii) be entitled to
participate in all employee expense reimbursement, incentive,
savings and retirement plans, practices, policies and programs
(including any Company plan qualified under Section 401(a) of
the Code) available to other peer executives of the Company
and its Subsidiaries, but in no event shall the benefits
provided to Executive under this item (ii) be less favorable,
in the aggregate, than the most favorable of those plans,
practices, policies or programs in effect immediately prior to
the date that the Change in Control occurs.
(b) Welfare Benefits. The Company shall at the
Company's expense (except for the amount, if any, of any
required employee contribution which would have been necessary
for Executive to contribute as an active employee under the
plan or program as in effect on the date of the Change in
Control) continue to cover Executive (and his or her
dependents) under, or provide Executive (and his or her
dependents) with insurance coverage no less favorable than,
the Company's life, disability, health, dental and any other
employee welfare benefit plans or programs, as in effect on
the date of the Change in Control (such benefits, the "Welfare
Benefits").
(c) Death of Executive. In the event of
Executive's death prior to Termination, but while employed by
the Company or any Subsidiary, as the case may be, his or her
spouse, if any, or otherwise the personal representative of
his or her estate shall be entitled to receive (i) Executive's
salary at the rate then in effect through the date of death,
as provided under the Company's pay policy, and (ii) any
Accrued Benefits for the periods of service prior to the date
of death.
(d) Disability of Executive. In the event of
Executive's Disability prior to Termination, but while
employed by the Company or any Subsidiary, as the case may be,
Executive shall be entitled to receive (i) his or her salary
at the rate then in effect through the date of the
determination of Disability, as provided under the Company's
pay policy, (ii) any Accrued Benefits for the periods of
service prior to the date of the determination of Disability,
(iii) payments under the Company's short and long term
disability plans following the determination of Disability,
and (iv) Welfare Benefits for a period of one year following
the determination of Disability.
(e) Cause; Upon Expiration of This Agreement; Other
Than for Good Reason. If Executive's employment shall be
terminated by the Company for Cause or upon expiration of this
Agreement or by Executive other than for Good Reason,
Executive shall be entitled to receive only (i) his or her
salary at the rate then in effect through the date of such
termination, as provided under the Company's pay
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policy, and (ii) any Accrued Benefits for the periods of
service prior to the date of such termination.
(f) Withholding. All payments under this Section 3
are subject to applicable federal and state payroll
withholding or other applicable taxes.
4. Payments and Benefits Upon Termination
Executive shall be entitled to the following payments and
benefits following Termination:
(a) Termination Payment. Subject to Section 4(b),
in recognition of past services to the Company by Executive,
the Company shall make a lump sum payment in cash to Executive
as severance pay within ten (10) business days following the
date of Termination equal to two times the sum of:
(i) Executive's annual base salary in effect immediately prior
to the date that either a Change in Control shall occur or
such date of Termination, whichever salary is higher; plus
(ii) Executive's target bonus for the current fiscal year as
determined by the Compensation Committee; provided, however,
that if Termination occurs prior to the determination of such
target bonus for a fiscal year, such bonus shall be the target
bonus for the prior fiscal year.
(b) Termination Benefits; Certain Additional
Payments by the Company.
(i) Then the payments to Executive under
Section 4(a) shall be increased (such increase, a "Gross-Up
Payment"), but only to the extent necessary to ensure that,
after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes and Excise Tax
imposed upon the Gross-Up Payment, the Executive retains an
amount of the Gross-Up Payment equal to such Excise Tax. The
foregoing calculations shall be made by the Company and
Executive. If no agreement on the calculations is reached
within ten (10) business days after the date of Termination,
then the accounting firm which regularly audits the financial
statements of the Company (the "Auditors") shall review the
calculations, and report their determination of the amount due
to both Executive and the Company within thirty (30) days of
the Termination. The determination of such firm shall be
conclusive and binding on all parties and the expense for such
accountants shall be paid by the Company. Pending such
determination, the Company shall continue to make all other
required payments to Executive at the time and in the manner
provided herein.
(ii) As a result of the uncertainty in the
application of Section 280G and Section 4999 of the Code, it
is possible that the Company will make a
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Payment (including a Gross-Up Payment) under this Agreement
that should not have been made (an "Overpayment") or that the
Company will fail to make a payment (including a Gross-Up
Payment) under this Agreement that should have been made (an
"Underpayment"). If the Company and Executive, or, if no
agreement is reached by the Company and Executive, the
Auditors, determine that Overpayment has been made, such
Overpayment shall be treated for all purposes as a loan to the
Executive which he shall repay to the Company, together with
interest at the applicable federal rate provided for in
section 7872(f)(2)(A) of the Code. If the Company and
Executive, or, if no agreement is reached by the Company and
Executive, the Auditors, determine that an Underpayment has
occurred, such Underpayment shall promptly be paid by the
Company to Executive, together with interest at the applicable
federal rate provided for in section 7872(f)(2)(A) of the
Code. The Company and Executive agree to give each other
prompt written notice of any information or taxing authority
inquiry that could reasonably result in the determination that
an Overpayment or Underpayment has been made.
(c) Accrued Benefits. Within ten (10) business
days following the date of Termination, the Company shall make
a lump sum payment in cash to Executive in the amount of any
Accrued Benefits for the periods of service prior to the date
of Termination.
(d) Welfare Benefits. The Company shall, at its
sole option and expense (except for the amount, if any, of any
required employee contribution that would have been necessary
for Executive to contribute as an active employee under the
plan or program as in effect on the date of Termination)
either (i) continue to cover Executive (and his or her
dependents) under, or provide Executive (and his or her
dependents) with Welfare Benefits (as in effect on the date of
the Change in Control or, at the option of Executive, on the
date of Termination) for a period of two years following the
date of Termination, or (ii) pay Executive a lump sum cash
payment within ten (10) business days following the date of
Termination equal to the then-present value of the cost to the
Company of such Welfare Benefits; provided, however, that if
Executive is provided by another employer during such two-year
period with benefits substantially comparable to the Welfare
Benefits, the benefits provided by the Company shall, unless a
lump sum payment has been made by the Company (in which case
Executive shall not, for any reason, be required to return any
part of such payment), be reduced by the benefits provided by
such other employer, but only to the extent of, and with
respect to, the Welfare Benefits otherwise payable by the
Company to Executive.
(e) Death of Executive. In the event of
Executive's death subsequent to Termination and prior to
receiving all benefits and payments provided for by this
Section 4, such benefits and payments shall be paid to his or
her spouse, if
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any, or otherwise to the personal representative of his or her
estate, unless Executive has otherwise directed the Company in
writing prior to his or her death.
(f) Exclusive Source of Severance Pay. Benefits
provided hereunder shall replace the amount of any severance
payments to which Executive would otherwise be entitled under
any severance plan or policy generally available to employees
of the Company.
(g) Nonsegregation. No assets of the Company need
be segregated or earmarked to represent the liability for
benefits payable hereunder. The rights of any person to
receive benefits hereunder shall be only those of a general
unsecured creditor.
(h) Withholding. All payments under this Section 4
are subject to applicable federal and state payroll
withholding or other applicable taxes.
5. Noncompetition
(a) Noncompetition. In the event that, after a
change in Control, Executive's employment is terminated by the
Company or by Executive for any reason, and provided that any
payments due Executive upon such termination are paid when
due, then for a period of one year after such termination,
Executive shall not engage in any activities (including,
without limitation, activities for any subsequent employer of
Executive) directly competitive with the business of the
Company.
(b) Company Remedy. In the event of any breach by
Executive of the obligations set forth in Section 5(a), the
Company shall be entitled to recover an amount equal to the
total of all amounts paid to Executive pursuant to Sections
4(a) and 4(b) of this Agreement in addition to any other
remedies available to the Company at law or in equity.
6. Arbitration
Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by
arbitration in Seattle, Washington, in accordance with the
Rules of the American Arbitration Association then in effect.
Judgment may be entered on the arbitrator's award in any
jurisdiction.
7. Conflict in Benefits
This Agreement is not intended to and shall not adversely
affect, limit or terminate any other agreement or arrangement
between Executive and the Company presently in effect or
hereafter entered into, including any employee benefit plan
under which Executive is entitled to benefits.
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8. Term, Termination and Amendment
(a) The initial term of this Agreement shall be from the
date hereof until the anniversary date of this Agreement. On
each such annual anniversary date, this Agreement shall
automatically be renewed for a period of one year, unless 60
days prior to such anniversary date the Company shall give
notice to Executive that the Agreement is terminated or
amended, provided that no Change in Control has occurred prior
to such anniversary. Notwithstanding such termination, the
Company shall remain liable for any rights or payments arising
prior to such termination to which Executive is entitled under
this Agreement. During each such one year term, this
Agreement may not be amended or terminated except by written
agreement between Executive and the Company.
(b) In the event of a Change in Control, unless earlier
terminated as provided herein, this Agreement shall continue
in effect for a period of two years from the date of the
Change in Control at which time this Agreement shall expire.
For a two-year period following a Change in Control, (i) this
Agreement may not be terminated, and (ii) no amendment or
other action of the Board which adversely affects the rights
of Executive hereunder is valid and enforceable without the
prior written consent of Executive. After the two-year period
from the date of the Change in Control, the Board may
terminate or amend this Agreement without the prior written
consent of Executive.
9. Miscellaneous
(a) Amendment. This Agreement may not be amended
except by written agreement between Executive and the Company.
(b) No Mitigation. All payments and benefits to
which Executive is entitled under this Agreement shall be made
and provided without offset, deduction or mitigation on
account of income Executive could or may receive from other
employment or otherwise, except as provided in Section 4(d)
and Section 5(b) hereof.
(c) Employment Not Guaranteed. Nothing contained
in this Agreement, and no decision as to the eligibility for
benefits or the determination of the amount of any benefits
hereunder, shall give Executive any right to be retained in
the employ of the Company or rehired, and the right and power
of the Company to dismiss or discharge any employee for any
reason is specifically reserved. Except as expressly provided
herein, no employee or any person claiming under or through
him or her shall have any right or interest herein, or in any
benefit hereunder.
(d) Legal Expenses. In connection with any
litigation, arbitration or similar proceeding, whether or not
instituted by the Company or Executive, with
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respect to the interpretation or enforcement of any provision
of this Agreement, the prevailing party shall be entitled to
recover from the other party all costs and expenses, including
reasonable attorneys' fees and disbursements, in connection
with such litigation, arbitration or similar proceeding. The
Company shall pay prejudgment interest on any money judgment
obtained by Executive as a result of such proceedings,
calculated at the published commercial interest rate of
Seattle-First National Bank for its best customers, as in
effect from time to time from the date that payment should
have been made to Executive under this Agreement.
(e) Notices. Any notices required under the terms
of this Agreement shall be effective when mailed, postage
prepaid, by certified mail and addressed to, in the case of
the Company:
NeoPath, Inc.
0000 - 000xx Xxxxxx XX
Xxxxxxx, XX 00000
Attention: Chief Executive Officer
and to, in the case of Executive:
____________________________
____________________________
Either party may designate a different address by giving
written notice of change of address in the manner provided
above.
(f) Waiver; Cure. No waiver or modification in
whole or in part of this Agreement, or any term or condition
hereof, shall be effective against any party unless in writing
and duly signed by the party sought to be bound. Any waiver
of any breach of any provision hereof or any right or power by
any party on one occasion shall not be construed as a waiver
of, or a bar to, the exercise of such right or power on any
other occasion or as a waiver of any subsequent breach. Other
than a breach of the provisions of Section 5, any breach of
this Agreement may be cured by the breaching party within ten
days of the date that such breaching party shall have received
written notice of such breach from the party asserting such
breach.
(g) Binding Effect; Successors. Subject to the
provisions hereof, nothing in this Agreement shall prevent the
consolidation of the Company with, or its merger into, any
other corporation, or the sale by the Company of all or
substantially all of its properties and assets, or the
assignment of this Agreement by the Company in connection with
any of the foregoing actions. This Agreement shall be binding
upon, inure to the benefit of and be enforceable by the
Company and Executive and their
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respective heirs, legal representatives, successors and
assigns. If the Company shall be merged into or consolidated
with another entity, the provisions of this Agreement shall be
binding upon and inure to the benefit of the entity surviving
such merger or resulting from such consolidation. The Company
shall require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company,
including the successor to all or substantially all of the
business or assets of any Subsidiary, division or profit
center of the Company, to expressly assume and agree to
perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no
such succession had taken place. The provisions of this
Section 9(g) shall continue to apply to each subsequent
employer of Executive hereunder in the event of any subsequent
merger, consolidation or transfer of assets of such subsequent
employer.
(h) Separability. Any provision of this Agreement
which is held to be unenforceable or invalid in any respect in
any jurisdiction shall be ineffective in such jurisdiction to
the extent that it is unenforceable or invalid without
affecting the remaining provisions hereof, which shall
continue in full force and effect. The enforceability or
invalidity of a provision of this Agreement in one
jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
(i) Controlling Law. This Agreement shall be
governed by and construed in accordance with the laws of the
state of Washington applicable to contracts made and to be
performed therein.
IN WITNESS WHEREOF, the Company and Executive have
executed this Agreement as of the day and year first above
written.
NEOPATH, INC.
By:
______________________________
Xxxx X. Xxxxxx
Title:President & Chief Executive Officer
EXECUTIVE:
______________________________
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Schedule A
CERTAIN DEFINITIONS
As used in this Agreement, and unless the context
requires a different meaning, the following terms have the
meanings indicated:
"Accrued Benefits" means the aggregate of any
compensation previously deferred by Executive (together with
any accrued interest or earnings thereon), any accrued
vacation pay and, if the date of Termination occurs after the
end of a Fiscal Year for which a bonus is payable to
Executive, such bonus, in each case to the extent previously
earned and not paid.
"Base Amount" shall mean the "base amount" of Executive
as defined in Section 280G of the Code.
"Cause" means (a) willful misconduct on the part of
Executive that has a materially adverse effect on the Company
and its Subsidiaries, taken as a whole, (b) Executive's
engaging in conduct which could reasonably result in his or
her conviction of a felony or a crime against the Company or
involving substance abuse, fraud or moral turpitude, or which
would materially compromise the Company's reputation, as
determined in good faith by a written resolution duly adopted
by the affirmative vote of not less than two-thirds of all of
the directors who are not employees or officers of the
Company, or (c) unreasonable refusal by Executive to perform
the duties and responsibilities of his or her position in any
material respect. No action, or failure to act, shall be
considered "willful" if it is done by Executive in good faith
and with reasonable belief that his or her action or omission
was in the best interests of the Company.
"Change in Control" means, and shall be deemed to occur
upon the happening of, any one of the following:
(a) The occupying of a majority of the seats (other than
vacant seats) on the Board by individuals who were neither
nominated or appointed by a majority of the Incumbent
Directors;
(b) The acquisition, directly or indirectly, by any
Person of beneficial ownership of 15% or more of the combined
voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of
directors, which acquisition is not approved in advance by a
majority of the Incumbent Directors;
(c) The first purchase of the Company's Common Stock
pursuant to a tender or exchange offer (other than a tender or
exchange offer made by the Company);
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(d) The approval by the stockholders of the Company of a
reorganization, merger or consolidation or sale of
substantially all of the assets of the Company (an
"Acquisition Transaction") unless, following such Acquisition
Transaction, all or substantially all of the individuals and
entities who were the beneficial owners of the outstanding
voting securities of the Company immediately prior to such
Acquisition Transaction beneficially own, directly or
indirectly, more than 50% of the then outstanding voting
securities of the corporation resulting from such Acquisition
Transaction (including, without limitation, a corporation
which as a result of such transaction owns the Company or all
or substantially all of the Company's assets either directly
or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such
Acquisition Transaction of the outstanding voting securities
of the Company; or
(e) Approval by the stockholders of the Company of a
liquidation or dissolution of the Company.
(f) For purposes of this definition, (i) the terms
"beneficial owner" and "beneficial ownership" shall have the
meanings set forth in Rules 13d-3 and 13d-5 of the General
Rules and Regulations promulgated under the Exchange Act, and
the term "voting securities" shall mean the voting securities
of a corporation entitled to vote generally in the election of
directors.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Disability" means that (a) a person has been
incapacitated by bodily injury or physical or mental disease
so as to be prevented thereby from performance of his or her
duties with the Company for 120 days in any 12-month period,
and (b) such person is disabled for purposes of any and all
of the plans or programs of the Company or any Subsidiary that
employs Executive under which benefits, compensation or awards
are contingent upon a finding of disability. The
determination with respect to whether Executive is suffering
from such a Disability will be determined by a mutually
acceptable physician or, if there is no physician mutually
acceptable to the Company and Executive, by a physician
selected by the then Xxxx of the University of Washington
Medical School.
"Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Excise Tax" means the excise tax, including any interest
or penalties thereon, imposed on Executive by Section 4999 of
the Code.
"Fiscal Year" means the 12-month period ending on
December 31 in each year (or such other fiscal year period
established by the Board).
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"Good Reason" means, without Executive's express written
consent:
(a) (i) the assignment to Executive of duties, or
limitation of Executive's responsibilities,
inconsistent with Executive's title, position,
duties, responsibilities and status with the Company
Executive as such duties and responsibilities
existed immediately prior to the date of the Change
in Control, or (ii) removal of Executive from, or
failure to re-elect Executive to, Executive's
positions with the Company or any Subsidiary that
employs Executive immediately prior to the Change in
Control, except in connection with the involuntary
termination of Executive's employment by the Company
for Cause or as a result of Executive's death or
Disability;
(b) failure by the Company to pay, or reduction by the
Company of, Executive's annual base salary, as
reflected in the Company's payroll records for
Executive's last pay period immediately prior to the
Change in Control;
(c) failure by the Company to pay, or reduction by the
Company of, Executive's bonus;
(d) the relocation of the principal place of Executive's
employment to a location that is more than 25 miles
further from Executive's principal residence than
such principal place of employment immediately prior
to the Change in Control; or
(e) the breach of any material provision of this
Agreement by the Company, including, without
limitation, failure by the Company to bind any
successor to the Company to the terms and provisions
of this Agreement in accordance with Section 10(g).
"Gross-Up Payment" shall have the meaning set forth in
Section 4(b).
"Incumbent Director" means a member of the Board who has
been either (a) nominated by a majority of the directors of
the Company then in office or (b) appointed by directors so
nominated, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf
of a Person other than the Board.
"Parachute Payment" means any payment deemed to
constitute a "parachute payment" as defined in Section 280G of
the Code.
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"Person" means any individual, entity or group (as such
term is used in Section 13(d)(3) or 14(d)(2) of the Exchange
Act).
"Subsidiary" means an Person controlled by the Company
directly, or indirectly through one or more intermediaries.
"Termination" means, following the occurrence of any
Change in Control by the Company, (a) the involuntary
termination of the employment of Executive for any reason
other than death, Disability or for Cause or (b) the
termination of employment by Executive for Good Reason.
"Welfare Benefits" shall have the meaning set forth in
Section 3(b).
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