EXHIBIT 10.55
September 10, 1999
Xxx Xxxxxxx
President and Chief Operating Officer
P-COM, Inc.
0000 Xxxxx Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxx, XX 00000
Dear Xxx:
We are pleased to inform you that the Board of Directors of P-Com,
Inc. (the "Company") has recently authorized and approved a special benefit
program for you and the other key executives. The purpose of this letter
agreement is to set forth the terms and conditions of your benefit package and
to explain the limitations which will govern the overall value of your benefits.
Your benefits will become payable in the event your employment
terminates, either voluntarily or involuntarily for any reason, within twenty-
four (24) months following certain changes in ownership or control of the
Company. To understand the full scope of your benefits, you should familiarize
yourself with the definitional provisions of Section I of this letter agreement.
The benefits comprising your package are detailed in Section II. Section III
addresses the treatment of any excise tax imposed in the event that any of your
benefits constitute excess parachute payments for purposes of the Federal tax
laws and Section IV deals with ancillary matters affecting your arrangement.
SECTION I - DEFINITIONS
For purposes of this letter agreement the following definitions will
be in effect:
1.1 Average Compensation means the average of your W-2 wages from the
Company for the five (5) calendar years completed immediately prior to the
calendar year in which the Change of Control is effected. Any W-2 wages for a
partial year of employment will be annualized, in accordance with the frequency
which such wages are paid during such partial year, before inclusion in your
Average Compensation. If any of your compensation from the Company during such
five (5)-year or shorter period was not included in your W-2 wages for U.S.
income tax purposes, either because you were not a U.S. citizen or resident or
because such compensation was excludible from income as foreign earned income
under Code Section 911 or as pre-tax income under Code Section 125 or 402(g),
then such compensation will nevertheless be included in your Average
Compensation to the same extent as if it were part of your W-2 wages.
1.2 Base Salary means the annual rate of base salary in effect for
you immediately prior to the Change in Control or (if greater) the annual rate
of base salary in effect at the time of your Termination.
1.3 Board means the Company's Board of Directors.
1.4 Change in Control means any of the following transactions
effecting a change in ownership or control of the Company:
(i) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which
is to change the State in which the Company is incorporated,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company in complete liquidation or
dissolution of the Company,
(iii) any reverse merger in which the Company is the surviving
entity but in which securities possessing fifty percent (50%) or more of
the total combined voting power of the Company's outstanding securities are
transferred to person or persons different from the persons holding those
securities immediately prior to such merger,
(iv) a Hostile Take-Over, or
(v) the acquisition, directly or indirectly by any person or
related group of persons (other than the Company or a person that directly
or indirectly controls, is controlled by, or is under common control with,
the Company), of beneficial ownership (within the meaning of Rule 13d-3 of
the 0000 Xxx) of securities possessing more than thirty percent (30%) of
the total combined voting power of the Company's outstanding securities
pursuant to a tender or exchange offer made directly to the Company's
stockholders.
1.5 Code means the Internal Revenue Code of 1986, as amended.
1.6 Common Stock means the Company's common stock.
1.7 Disability shall mean your inability to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more.
1.8 Fair Market Value means, with respect to any shares of Common
Stock subject to any of your Options, the closing selling price per share of
Common Stock on the date in question, as reported on the Nasdaq National Market.
If there is no reported sale of Common Stock on such date, then the closing
selling price on the Nasdaq National Market on the next preceding day for which
there does exist such quotation shall be determinative of Fair Market Value.
1.9 Health Care Coverage means the continued health care coverage to
which you and your eligible dependents may become entitled under Section II of
this letter agreement upon the Termination of your employment.
1.10 Hostile Take-Over means either of the following transactions:
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(i) the successful acquisition by a person or a group of
related persons, other than the Company or a person controlling, controlled
by or under common control with the Company, of beneficial ownership (as
determined pursuant to the provisions of Rule 13d-3 under the 0000 Xxx) of
securities possessing more than twenty-five percent (25%) of the total
combined voting power of the Company's outstanding securities pursuant to a
transaction or series of related transactions which the Board does not at
any time recommend the Company's stockholders to accept or approve, or
(ii) a change in the composition of the Board over a period of
twenty-four (24) consecutive months or less such that a majority of the
Board ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who either (I) have been members
of the Board continuously since the beginning of such period or (II) have
been elected or nominated for election as Board members during such period
by at least a two-thirds majority of the Board members described in clause
(I) who were still in office at the time such election or nomination was
approved by the Board.
1.11 Involuntary Termination means the termination of your employment
with the Company (or successor):
(i) involuntarily upon your discharge or dismissal,
(ii) voluntarily upon your resignation following (I) a change in
your position with the Company (or successor) which reduces your duties or
level of responsibility or otherwise changes the level of management to
which you report, (II) a reduction in your level of compensation (including
base salary, fringe benefits and target bonus under any incentive
performance plan) or (III) a change in your place of employment which is
more than fifty (50) miles from your place of employment prior to the
Change in Control, provided and only if such change or reduction is
effected without your written concurrence, or
(iii) by reason of your death or Disability.
1.12 1934 Act shall mean the Securities Exchange Act of 1934, as
amended.
1.13 Option means any option granted to you under the Plans which is
outstanding at the time of the Change in Control or your subsequent Termination.
Your Options will be divided into two (2) separate categories as follows:
Acquisition-Accelerated Options: any outstanding Option (or
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installment thereof) which automatically accelerates, pursuant to the
acceleration provisions of the agreement evidencing that Option, upon a change
in control or ownership of the Company under certain specified circumstances.
Severance-Accelerated Options: any outstanding Option (or installment
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thereof) which accelerates upon your Termination pursuant to Section II of this
letter agreement.
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1.14 Option Parachute Payment means, with respect to any Acquisition-
Accelerated Option or any Severance-Accelerated Option, the portion of that
Option deemed to be a parachute payment under Code Section 280G and the Treasury
Regulations issued thereunder. The portion of such Option which is categorized
as an Option Parachute Payment will be calculated in accordance with the
valuation provisions established under Code Section 280G and the applicable
Treasury Regulations and will include an appropriate dollar adjustment to
reflect the lapse of your obligation to remain in the Company's employ as a
condition to the vesting of the accelerated installment. In no event, however,
will the Option Parachute Payment attributable to any Acquisition-Accelerated
Option or Severance-Accelerated Option (or accelerated installment) exceed the
spread (the excess of the Fair Market Value of the accelerated option shares
over the option exercise price payable for those shares) existing at the time of
acceleration.
1.15 Other Parachute Payment means any payment in the nature of
compensation (other than the benefits to which you become entitled under Section
II of this letter agreement) which are made to you in connection with the Change
in Control and which accordingly qualify as parachute payments within the
meaning of Code Section 280G(b)(2) and the Treasury Regulations issued
thereunder. Your Other Parachute Payments will include (without limitation) the
Present Value, measured as of the Change in Control, of the aggregate Option
Parachute Payment attributable to your Acquisition-Accelerated Options (if any).
1.16 Plans means (i) the Company's 1992 Stock Option Plan, (ii) the
Company's 1995 Stock Option/Stock Issuance Plan, as amended or restated from
time to time, and (iii) any successor stock incentive plan subsequently
implemented by the Company.
1.17 Present Value means the value, determined as of the date of the
Change in Control, of any payment in the nature of compensation to which you
become entitled in connection with the Change in Control or the subsequent
Termination of your employment, including (without limitation) the Option
Parachute Payment attributable to your Severance-Acceleration Options, your
Severance Payments under Section II of this letter agreement and the Option
Parachute Payment attributable to your Acquisition-Accelerated Options. The
Present Value of each such payment will be determined in accordance with the
provisions of Code Section 280G(d)(4), utilizing a discount rate equal to one
hundred twenty percent (120%) of the applicable Federal rate in effect at the
time of such determination, compounded semi-annually to the effective date of
the Change in Control.
1.18 Severance Payments means the severance payments to which you may
become entitled under Section II in the event of a Termination following a
Change in Control, subject, however, to the dollar limitations of Section III.
1.19 Termination means a Voluntary Resignation or an Involuntary
Termination of your employment.
1.20 Voluntary Resignation means a resignation by you other than one
which constitutes an Involuntary Termination.
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SECTION II - BENEFITS
Upon the Termination of your employment within twenty-four (24) months
following a Change in Control, you will become entitled to receive the special
benefits provided in this Section II.
2.1 Payments
(a) Base Salary
You will be entitled to a Severance Payment in an amount equal to two
(2) times your Base Salary.
(b) Bonus
You will be entitled to an additional Severance Payment in an amount
equal to the greater of the following bonus amounts: (a) two (2) times the full
amount of the target bonus payable to you with respect to the fiscal year in
which the Termination occurs or (b) two (2) times the full amount of the target
bonus payable to you with respect to the fiscal year in which the Change in
Control occurs.
(c) Payment of Severance Payments
In the absence of a Hostile Take-Over, your Severance Payments will be
made at bi-weekly intervals following your Termination. However, these payments
will immediately terminate in the event you fail to abide by the restrictive
covenants set forth in Paragraph 2.4.
Should your Termination occur in connection with a Hostile Take-Over,
the Severance Payments will be made to you in a lump sum payment within thirty
(30) days after your Termination and the provisions of Paragraph 2.4 will not
apply.
All Severance Payments will be subject to the Company's collection of
all applicable federal and state income and employment withholding taxes.
2.2 Option Acceleration
Each of your outstanding Options will (to the extent not then
otherwise fully exercisable) automatically accelerate so that each such Option
will become fully vested and immediately exercisable for the total number of
shares of Common Stock at the time subject to that Option. Each such
accelerated Option, together with all your other vested Options, will remain
exercisable for fully-vested shares until the earlier of (i) the expiration date
of the ten (10)-year option term or (ii) the end of two (2) full years measured
from the date of your Termination or greater if set forth in the Option.
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2.3 Additional Benefits
(a) Health Care Coverage
The Company will, at its expense, provide you and your eligible
dependents with continued health care coverage under the Company's
medical/dental/vision plan until the earlier of (i) twenty-four (24) months
after the date of your Termination or (ii) the first date that you are covered
under another employer's health benefit program which provides substantially the
same level of benefits without exclusion for pre-existing medical conditions.
The coverage so provided you and your eligible dependents will be in full and
complete satisfaction of the continued health care coverage to which you or your
eligible dependents would otherwise, at your own expense, be entitled under Code
Section 4980B by reason of your termination of employment.
(b) Unpaid Benefits
You will receive an immediate lump sum payment of all unpaid vacation
days which you have accrued through the date of your Termination.
2.4 Restrictive Covenants
For the twenty-four (24)-month period following your Termination, you
will not:
(i) directly or indirectly, whether for your own account or as
an employee, director, consultant or advisor, provide services to any
business enterprise which is at the time in competition with any of the
Company's then-existing or formally planned product lines and which is
located geographically in an area where the Company maintains substantial
business activities;
(ii) directly or indirectly encourage or solicit any individual
to leave the Company's employ for any reason or interfere in any other
manner with the employment relationships at the time existing between the
Company and its current or prospective employees; or
(iii) induce or attempt to induce any customer, supplier,
distributor, licensee or other business affiliate of the Company to cease doing
business with the Company or in any way interfere with the existing business
relationship between any such customer, supplier, distributor, licensee or other
business affiliate and the Company.
You acknowledge that monetary damages may not be sufficient to
compensate the Company for any economic loss which may be incurred by reason of
your breach of the foregoing restrictive covenants. Accordingly, in the event
of any such breach, the Company will, in addition to the cessation of the
severance benefits provided under this agreement and any remedies available to
the Company at law, be entitled to obtain equitable relief in the form of an
injunction precluding you from continuing to engage in such breach.
None of the foregoing restrictive covenants will be applicable in the
event your Termination occurs in connection with a Hostile Take-Over.
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SECTION III - PARACHUTE PAYMENTS
3.1 Parachute Tax Gross-Up
Should the aggregate Present Value (measured as of the Change in
Control) of (i) the benefits to which you become entitled under Section II at
the time of your Termination (namely the Severance Payments, the Option
Parachute Payment attributable to your Severance-Accelerated Options and your
Health Care Continuation) and (ii) all Other Parachute Payments to which you are
entitled, exceed 2.99 times your Actual Average Compensation (the "Parachute
Limit") and thereby result in an excise tax liability under Section 4999 of the
Code, then the Company will provide you with a full tax gross-up with respect to
such excise tax liability. The amount of such tax gross-up will be determined
pursuant to the following formula:
X = Y 1 - (A + B + C), where
X is the total dollar payment (the "Tax Gross-Up") required to be
paid under this letter agreement,
Y is the total excise tax (the "Parachute Tax") imposed on you
pursuant to Section 4999 of the Code (or any successor provision)
with respect to the Severance Payments, the Option Parachute
Payment attributable to your Severance-Accelerated Options, your
Health Care Continuation and all Other Parachute Payments,
A is the excise tax rate in effect under Section 4999 of the Code
for excess parachute payments,
B is the highest combined marginal federal income and applicable
state income tax rate in effect for you, after taking into
account the deductibility of state income taxes against federal
income taxes to the extent allowable, for the calendar year in
which the Tax Gross-Up is paid, and
C is the applicable Hospital Insurance (Medicare) Tax Rate in
effect for you for the calendar year in which the Tax Gross-Up is
paid.
3.2 Initial Payment
Within ninety (90) days after each determination is made by the
Internal Revenue Service or your tax advisor that you have received a parachute
payment for which you are liable for a Parachute Tax, you will identify the
nature of such parachute payment to the Company and submit to the Company the
calculation of the Parachute Tax attributable to that payment and the Tax Gross-
Up to which you are entitled with respect to such tax liability. The Company
will pay such Tax Gross-Up to you (net of all applicable withholding taxes,
including any taxes required to be withheld under Section 4999 of the Code)
within ten (10) business days after your submission of the calculation of such
Parachute Tax and the resulting Tax Gross-Up, provided such calculations
represent a reasonable interpretation of the applicable law and regulations.
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3.3 Final Determination
In the event that your actual Parachute Tax liability is determined by
a Final Determination to be greater than the Parachute Tax liability taken into
account for purposes of the Tax-Gross-Up paid pursuant to this Section, then
within ninety (90) days following the Final Determination, you will submit to
the Company a new Parachute Tax calculation based upon the Final Determination.
Within ten (10) business days after receipt of such calculation, the Company
will pay you the additional Tax Gross-Up attributable to such excess Parachute
Tax liability.
3.4 Refund
In the event that your actual Parachute Tax liability is determined by
a Final Determination to be less than the Parachute Tax liability taken into
account for purposes of the Tax Gross-Up paid to you pursuant to this Section,
then you will refund to the Company, promptly upon receipt, any federal or state
tax refund attributable to the Parachute Tax overpayment.
3.5 Definition
For purposes of this section, a Final Determination means an audit
adjustment by the Internal Revenue Service that is either agreed to by you or
your estate or an adjustment that is sustained by a court of competent
jurisdiction in a decision with which you concur or with respect to which the
period within which an appeal may be filed has lapsed without a notice of appeal
being filed.
SECTION IV - MISCELLANEOUS PROVISIONS
4.1 Death
In the event of your death, the Severance Payments (including the
Parachute Payments) to which you become entitled under this letter agreement
will be made, on the due date hereunder, to the executors or administrators of
your estate. Should you die before you exercise all your outstanding Options,
then such Options may be exercised, within twelve (12) months after your death,
by the executors or administrators of your estate or by persons to whom the
Options are transferred pursuant to your will or in accordance with the laws of
inheritance. In no event, however, may any such Option be exercised after the
specified expiration date of the option term.
4.2 General Creditor Status
The payments and benefits to which you become entitled hereunder will
be paid, when due, from the general assets of the Company, and no trust fund,
escrow arrangement or other segregated account will be established as a funding
vehicle for such payment. Accordingly, your right (or the right of the personal
representatives or beneficiaries of your estate) to receive any payments or
benefits hereunder will at all times be that of a general creditor of the
Company and will have no priority over the claims of other general creditors.
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4.3 Indemnification
The indemnification provisions for officers and directors under the
Company certificate of incorporation, indemnification agreement, Bylaws and
insurance policies will (to the maximum extent permitted by law) be extended to
you with respect to any and all matters, events or transactions occurring or
effected during your employment with the Company.
4.4 Miscellaneous
This letter agreement will be binding upon the Company, its successors
and assigns (including, without limitation, the surviving entity in any Change
in Control) and is to be construed and interpreted under the laws of the State
of California. Except as set forth herein, this letter agreement supersedes all
prior agreements between you and the Company relating to the subject of
severance benefits payable upon a change in control or ownership of the Company,
including the Plans and the agreements evidencing the Options, and may only be
amended by written instrument signed by you and an authorized officer of the
Company. If any provision of this letter agreement as applied to any party or
to any circumstance should be adjudged by a court of competent jurisdiction to
be void or unenforceable for any reason, the invalidity of that provision will
in no way affect (to the maximum extent permissible by law) the application of
such provision under circumstances different from those adjudicated by the
court, the application of any other provision of this letter agreement, or the
enforceability or invalidity of this letter agreement as a whole. Should any
provision of this letter agreement become or be deemed invalid, illegal or
unenforceable in any jurisdiction by reason of the scope, extent or duration of
its coverage, then such provision will be deemed amended to the extent necessary
to conform to applicable law so as to be valid and enforceable or, if such
provision cannot be so amended without materially altering the intention of the
parties, then such provision will be stricken and the remainder of this letter
agreement will continue in full force and effect.
4.5 Attorney Fees
In the event legal proceeding should be initiated by you or by the
Company with respect to any controversy, claim or dispute relating to the
interpretation or application of the provisions of this letter agreement or any
benefits payable hereunder, the prevailing party in such proceedings will be
entitled to recover from the losing party reasonable attorney fees and costs
incurred in connection with such proceedings or in the enforcement or collection
of any judgment or award rendered in such proceedings. For purposes of this
provision, the prevailing party means the party determined by the court to have
most nearly prevailed in the proceedings, even if that party does not prevail in
all matters, and does not necessarily mean the party in whose favor the judgment
is actually rendered. If the Company materially breaches any of its obligations
under this letter agreement and fails to cure that breach within thirty (30)
days after written notice from you, you will then be entitled to reimbursement
from the Company for any reasonable expenses and attorney fees you incur in
having the Company subsequently cure that breach, whether or not legal
proceedings are actually commenced in connection with such breach.
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4.6 Independent Legal Counsel
By executing this letter agreement, you acknowledge that (i) this
agreement has been prepared by Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP ("Xxxxxxx")
acting in its capacity as legal counsel to the Company and (ii) you have had an
opportunity to seek advice from your own legal counsel with respect to the
matters contained herein and such individual counsel is not Xxxxxxx.
Please indicate your acceptance of the foregoing provisions of this
letter agreement by signing the enclosed copy of this agreement and returning it
to the Company.
P-COM, INC.
BY: /s/ Xxxxxx X. Xxxxxxx
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TITLE: Chairman of the Board of Directors
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and Chief Executive Officer
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ACCEPTANCE
I hereby agree to all the terms and provisions of the foregoing letter
agreement governing the special benefits to which I may become entitled in
connection with certain changes in control or ownership of P-Com, Inc.
Signature: /s/ Xxxxx Xxxxxxx
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Dated: October 25, 1999
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