EXHIBIT 10.18
GENUS, INC.
CHANGE OF CONTROL SEVERANCE AGREEMENT
This Change of Control Severance Agreement (the "Agreement") is made and
entered into by and between [name of employee] (the "Employee") and Genus,
Inc., a California corporation (the "Company"), effective as of the latest
date set forth by the signatures of the parties hereto below (the "Effective
Date").
R E C I T A L S
A. It is expected that the Company from time to time will consider the
possibility of an acquisition by another company or other change of control.
The Board of Directors of the Company (the "Board") recognizes that such
consideration can be a distraction to the Employee and can cause the Employee
to consider alternative employment opportunities. The Board has determined
that it is in the best interests of the Company and its shareholders to
assure that the Company will have the continued dedication and objectivity of
the Employee, notwithstanding the possibility, threat or occurrence of a
Change of Control (as defined below) of the Company.
B. The Board believes that it is in the best interests of the Company
and its shareholders to provide the Employee with an incentive to continue
his employment and to motivate the Employee to maximize the value of the
Company upon a Change of Control for the benefit of its shareholders.
C. The Board believes that it is imperative to provide the Employee
with certain severance benefits upon Employee's termination of employment
following a Change of Control which provides the Employee with enhanced
financial security and provides incentive and encouragement to the Employee
to remain with the Company notwithstanding the possibility of a Change of
Control.
D. Certain capitalized terms used in the Agreement are defined in
Section 5 below.
The parties hereto agree as follows:
1. TERM OF AGREEMENT. This Agreement shall terminate two years
following the Effective Date, unless a Change of Control has occurred as of
such time, in which case this Agreement shall terminate upon the date that
all of the obligations of the parties hereto with respect to this Agreement
have been satisfied.
2. AT-WILL EMPLOYMENT. The Company and the Employee acknowledge that
the Employee's employment is and shall continue to be at-will, as defined
under applicable law, except as may otherwise be specifically provided under
the terms of any written formal employment
agreement between the Company and Employee (an "Employment Agreement"). If
the Employee's employment terminates for any reason, including (without
limitation) any termination prior to a Change of Control, the Employee shall
not be entitled to any payments, benefits, damages, awards or compensation
other than as provided by this Agreement or under his or her Employment
Agreement (if any) together with, or as may otherwise be available in
accordance with the Company's established employee plans and practices or
pursuant to other agreements with the Company.
3. SEVERANCE BENEFITS.
(a) TERMINATION FOLLOWING A CHANGE OF CONTROL. If the Employee's
employment terminates at any time within [six (6) or twelve (12)] months
following a Change of Control, then, subject to Section 4, the Employee shall
be entitled to receive the following severance benefits:
(i) INVOLUNTARY TERMINATION; NOT FOR CAUSE TERMINATION. If
the Employee's employment is terminated as a result of Involuntary
Termination (whether such termination is initiated by the Company or by the
Employee), or as a result of termination other than for Cause, then the
Employee shall receive from the Company a severance payment (or payments) in
cash in an amount equal to [six hundred or twelve hundred] percent
[(600%) or (1200%)] of the Employee's Monthly Base Pay. The Employee shall
not be entitled to and the Company shall not obligated to provide any
employee benefits to Employee other than those required by law.
(b) TIMING OF SEVERANCE PAYMENTS. The severance payment or
payments to which Employee is entitled shall be paid by the Company to
Employee either: (a) in cash and in full, not later than ten (10) calendar
days after the date of termination of Employee's employment, or, (b) as
salary continuation on the same basis and timing as in effect immediately
prior to the Change of Control; (a) or (b) will be chosen at the Company's
discretion. The Company will make this choice known to Employee at the time
of termination. However, Employee may, prior to the date a Severance Payment
becomes payable, elect another method of payment if reasonable and
pre-approved by the Company. No alternative method of payment shall defer
payment of the Severance Payment more than [six (6) or twelve (12)] months
and a day after the date of termination of Employee's employment. If
Employee should die before all amounts payable to him or her have been paid,
such unpaid amounts shall be paid to Employee's designated beneficiary, if
living, or otherwise to the personal representative of Employee's estate.
(c) VOLUNTARY RESIGNATION; TERMINATION FOR CAUSE. If the
Employee's employment terminates by reason of the Employee's voluntary
resignation (and is not an Involuntary Termination), or if the Employee is
terminated for Cause, then the Employee shall not be entitled to receive
severance or other benefits except for those (if any) as may then be
established under the Company's then existing severance and benefits plans
and practices or pursuant to other written agreements with the Company.
(d) DISABILITY; DEATH. If the Company terminates the Employ-ee's
employment as a result of the Employee's Disability, or such Employee's
employment is terminated due to the death of the Employee, then the Employee
shall not be entitled to receive severance or other benefits except for
-2-
those (if any) as may then be established under the Company's then existing
severance and benefits plans and practices or pursuant to other written
agreements with the Company.
(e) TERMINATION APART FROM CHANGE OF CONTROL. In the event the
Employee's employment is terminated for any reason, either prior to the
occurrence of a Change of Control or after the [six (6) or twelve (12)] month
period following a Change of Control, then the Employee shall be entitled to
receive severance and any other benefits only as may then be established
under the Company's existing severance and benefits plans and practices or
pursuant to other written agreements with the Company.
4. LIMITATION ON PAYMENTS. In the event that the severance and other
benefits provided for in this Agreement or otherwise payable to the Employee
(i) constitute "parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code") and (ii) but for this
Section 4, would be subject to the excise tax imposed by Section 4999 of the
Code, then the Employee's severance benefits under Section 3(a)(i) shall be
either
(a) delivered in full, or
(b) delivered as to such lesser extent which would result in
no portion of such severance benefits being subject to
excise tax under Section 4999 of the Code,
whichever of the foregoing amounts, taking into account the applicable
federal, state and local income taxes and the excise tax imposed by Section
4999, results in the receipt by the Employee on an after-tax basis, of the
greatest amount of severance benefits, notwithstanding that all or some
portion of such severance benefits may be taxable under Section 4999 of the
Code. Unless the Company and the Employee otherwise agree in writing, any
determination required under this Section 4 shall be made in writing by the
Company's independent public accountants immediately prior to Change of
Control (the "Accountants"), whose determination shall be conclusive and
binding upon the Employee and the Company for all purposes. For purposes of
making the calculations required by this Section 4, the Accountants may make
reasonable assumptions and approximations concerning applicable taxes and may
rely on reasonable, good faith interpretations concerning the application of
Sections 280G and 4999 of the Code. The Company and the Employee shall
furnish to the Accountants such information and documents as the Accountants
may reasonably request in order to make a determination under this Section.
The Company shall bear all costs the Accountants may reasonably incur in
connection with any calculations contemplated by this Section 4.
5. DEFINITION OF TERMS. The following terms referred to in this
Agreement shall have the following meanings:
(a) "MONTHLY BASE PAY" means all base straight-time gross
earnings, exclusive of payments for overtime, shift premiums, incentive
compensation, incentive payments, bonuses, commissions or other compensation,
for the last full calendar month preceding the date of the Change of Control.
-3-
(b) CAUSE. "Cause" shall mean (i) any act of dishonesty taken by
the Employee and intended to result in substantial gain or personal
enrichment of the Employee, (ii) persistent failure or inability to perform
the duties and obligations of Employee's employment which are demonstrably
willful and deliberate on the Employee's part and which are not remedied in a
reasonable period of time after receipt of written notice from Company, (iii)
conviction of Employee of an illegal act with respect to his or her
employment by the Company.
(c) CHANGE OF CONTROL. "Change of Control" means the occurrence
of any of the following events:
(i) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing 50% or more of the
total voting power represented by the Company's then outstanding voting
securities; or
(ii) A change in the composition of the Board occurring
within a two-year 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 hereof,
or (B) are elected, or nominated for election, to the Board with the
affirmative votes of at least a majority of the Incumbent Directors at the
time of such election or nomination (but shall not include an individual
whose election or nomination is in connection with an actual or threatened
proxy contest relating to the election of directors to the Company); or
(iii) The shareholders of the Company approve 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) at least 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 the
shareholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all the Company's assets.
(d) DISABILITY. "Disability" shall mean that the Employee has
been unable to perform his Company duties as the result of his incapacity due
to physical or mental illness, and such inability, at least 26 weeks after
its commencement, is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Employee or the
Employee's legal representative (such Agreement as to acceptability not to be
unreasonably withheld). Termination resulting from Disability may only be
effected after at least 30 days' written notice by the Company of its
intention to terminate the Employee's employment. In the event that the
Employee resumes the performance of substantially all of his duties hereunder
before the termination of his employment becomes effective, the notice of
intent to terminate shall automatically be deemed to have been revoked.
(e) INVOLUNTARY TERMINATION. "Involuntary Termination" shall mean
(i) a reduction by the Company in the Monthly Base Pay of Employee as in
effect immediately prior to such reduction,
-4-
except when a reduction in Monthly Base Pay is implemented for a majority of
the Company's employees; (ii) without the Employee's express written consent,
the Company requires the Employee to change the location of his or her job or
office, so that he or she will be based at a location more than fifty (50)
miles from the location of his job or office immediately prior to the Change
of Control; (iii) the cost to the Company of Company-provided benefits to
Employee, taken as a whole, under plans, arrangements policies and
procedures, materially decreases below the cost of the Company-provided
benefits to Employee immediately prior to the Change of Control, or the cost
to the Employee of such benefits materially increases above the cost to the
Employee immediately prior to the Change of Control; however, if such
decrease or increase results either from the Company's good faith exercise of
business judgment, a decrease that is implemented affecting the majority of
Company's employees, or in response to changes in federal or state law, such
decrease or increase shall not constitute Involuntary Termination; (iv) the
significant reduction of the Employee's duties and responsibilities, relative
to the Employee's duties and responsibilities as in effect immediately prior
to such reduction; (v) a successor company fails or refuses to assume the
Company's obligations under this Agreement.
6. SUCCESSORS.
(a) COMPANY'S SUCCESSORS. Any successor to the Company (whether
direct or indirect and whether by purchase, merger, consolidation,
liquidation or otherwise) to all or substantially all of the Company's
business and/or assets shall assume the obligations under this Agreement and
agree expressly to perform the obligations under this Agreement in the same
manner and to the same extent as the Company would be required to perform
such obligations in the absence of a succession. For all purposes under this
Agreement, the term "Company" shall include any successor to the Company's
business and/or assets which executes and delivers the assumption agreement
described in this Section 6(a) or which becomes bound by the terms of this
Agreement by operation of law.
(b) EMPLOYEE'S SUCCESSORS. The terms of this Agreement and all
rights of the Employee hereunder shall inure to the benefit of, and be
enforceable by, the Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
7. NOTICE.
(a) GENERAL. Notices and all other communications contemplated
by this Agreement shall be in writing and shall be deemed to have been duly
given when personally delivered or when mailed by U.S. registered or
certified mail, return receipt requested and postage prepaid. In the case of
the Employee, mailed notices shall be addressed to him at the home address
which he most recently communicated to the Company in writing. In the case
of the Company, mailed notices shall be addressed to its corporate
headquarters, and all notices shall be directed to the attention of its
Secretary.
(b) NOTICE OF TERMINATION. Any termination by the Company for
Cause or by the Employee as a result of a voluntary resignation or an
Involuntary Termination shall be communicated by a notice of termination to
the other party hereto given in accordance with Section 8(a) of this
Agreement. Such notice shall indicate the specific termination provision in
this Agreement relied upon, shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for
-5-
termination under the provision so indicated, and shall specify the
termination date (which shall be not more than 30 days after the giving of
such notice). The failure by the Employee to include in the notice any fact
or circumstance which contributes to a showing of Involuntary Termination
shall not waive any right of the Employee hereunder or preclude the Employee
from asserting such fact or circumstance in enforcing his rights hereunder.
8. MISCELLANEOUS PROVISIONS.
(a) NO DUTY TO MITIGATE. The Employee shall not be required to
mitigate the amount of any payment contemplated by this Agreement, nor shall
any such payment be reduced by any earnings that the Employee may receive
from any other source.
(b) WAIVER. No provision of this Agreement shall be modified,
waived or discharged unless the modification, waiver or discharge is agreed
to in writing and signed by the Employee and by an authorized officer of the
Company (other than the Employee). No waiver by either party of any breach
of, or of compliance with, any condition or provision of this Agreement by
the other party shall be considered a waiver of any other condition or
provision or of the same condition or provision at another time.
(c) ENTIRE AGREEMENT. This Agreement, together with the Employment
Agreement (if any), constitutes the entire agreement of the parties hereto
and supersedes in their entirety all prior undertakings and agreements of the
parties with respect to the subject matter hereof.
(d) CHOICE OF LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California.
(e) SEVERABILITY. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full
force and effect.
(f) WITHHOLDING. All payments made pursuant to this Agreement
will be subject to withholding of applicable income and employment taxes.
(g) COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
-6-
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the day and
year set forth below.
COMPANY GENUS, INC.
By:____________________________________
Title:_________________________________
Date:_________________
EMPLOYEE __________________________________
Date:_________________
-7-
