EXHIBIT 10.2
QLOGIC CORPORATION
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS CHANGE IN CONTROL SEVERANCE AGREEMENT (this "Agreement") is made and
entered into by and between QLogic Corporation, a Delaware corporation (the
"Company"), and Anthony J. Massetti (the "Executive").
RECITALS
A. The Board of Directors of the Company has approved the Company entering
into a severance agreement with the Executive.
B. The Executive is a key executive of the Company.
C. Should the possibility of a Change in Control of the Company arise, the
Board believes it is imperative that the Company and the Board be able to rely
upon the Executive to continue in his position, and that the Company should be
able to receive and rely upon the Executive's advice, if requested, as to the
best interests of the Company and its stockholders without concern that the
Executive might be distracted by the personal uncertainties and risks created by
the possibility of a Change in Control.
D. Should the possibility of a Change in Control arise, in addition to his
regular duties, the Executive may be called upon to assist in the assessment of
such possible Change in Control, advise management and the Board as to whether
such Change in Control would be in the best interests of the Company and its
stockholders, and to take such other actions as the Board might determine to be
appropriate.
E. This Agreement provides the benefits the Executive will be entitled to
receive upon certain terminations of employment in connection with a Change in
Control from and after the Effective Date and supersedes and negates all
previous agreements with respect to such benefits.
NOW THEREFORE, to help assure the Company that it will have the continued
dedication of the Executive and the availability of his advice and counsel
notwithstanding the possibility, threat, or occurrence of a Change in Control of
the Company, and to induce the Executive to remain in the employ of the Company
in the face of these circumstances and for other good and valuable
consideration, the Company and the Executive agree as follows:
ARTICLE 1. TERM
This Agreement shall be effective as of November 10, 2006 (the "Effective
Date"). This Agreement will continue in effect through the second anniversary of
the Effective Date. However, upon the first anniversary of the Effective Date
and upon each subsequent anniversary of the Effective Date, the term of this
Agreement shall be extended automatically for one (1) additional year (such that
upon the first anniversary of the Effective Date the term of this Agreement
shall be extended through the third anniversary of the Effective Date and so
on), unless the Committee delivers written notice prior to such anniversary of
the Effective Date to the Executive that this Agreement will not be extended or
further extended, as the case may be, and if such notice is given this Agreement
will terminate at the end of the term then in progress.
1
Notwithstanding the foregoing, in the event a Change in Control occurs
during the original or any extended term of this Agreement, this Agreement will
remain in effect for the longer of: (i) twenty-four (24) months beyond the month
in which such Change in Control occurred; or (ii) until all obligations of the
Company hereunder have been fulfilled, and until all benefits required hereunder
have been paid to the Executive. For purposes of clarity, subject to Section
3.1, benefits shall be payable to the Executive under this Agreement only with
respect to a single Change in Control of the Company. Accordingly, no Change in
Control after the first Change in Control shall be considered for purposes of
this Agreement.
ARTICLE 2. DEFINITIONS
Whenever used in this Agreement, the following terms shall have the
meanings set forth below:
(a) "Accrued Obligations" means:
(i) any Base Salary that had accrued but had not been paid
(including accrued and unpaid vacation time) prior to the
Severance Date; and
(ii) any Annual Bonus earned as of the Severance Date with respect
to the fiscal year preceding the year in which the Severance
Date occurs (if the Executive was employed by the Company on
the last day of that fiscal year) that had not previously been
paid.
(b) "Agreement" means this Change in Control Severance Agreement.
(c) "Annual Bonus" means the Executive's annual incentive cash bonus
opportunity.
(d) "Base Salary" means the salary of record paid to the Executive by
the Company as annual salary (whether or not deferred), but excludes
amounts received under incentive or other bonus plans.
(e) "Beneficiary" means the persons or entities designated or deemed
designated by the Executive pursuant to Section 8.2.
(f) "Board" means the Board of Directors of the Company.
(g) "Cause" means the occurrence of any of the following:
(i) the Executive is convicted of, or has pled guilty or nolo
contendere to, a felony (other than traffic related offenses
or as a result of vicarious liability); or
(ii) the Executive has engaged in acts of fraud, material
dishonesty or other acts of willful misconduct in the course
of his duties to the Company; or
2
(iii) the Executive willfully and repeatedly fails to perform or
uphold his duties to the Company; or
(iv) the Executive willfully fails to comply with reasonable
directives of the Board which are communicated to him in
writing;
provided, however, that no act or omission by the Executive shall be
deemed to be "willful" if the Executive reasonably believed in good
faith that such acts or omissions were in the best interests of the
Company.
(h) "Change in Control" means any of the following:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a
"Person")) of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 30% or more of
either (1) the then-outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (2) the
combined voting power of the then-outstanding voting
securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting
Securities"); provided, however, that, for purposes of this
clause (i), the following acquisitions shall not constitute a
Change in Control; (A) any acquisition directly from the
Company, (B) any acquisition by the Company, (C) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any affiliate of the
Company or a successor, (D) any acquisition by any entity
pursuant to a transaction that complies with clauses (iii)(1),
(2) and (3) below, and (E) any acquisition by a Person who
owned more than 30% of either the Outstanding Company Common
Stock or the Outstanding Company Voting Securities as of the
Effective Date or an Affiliate of any such Person;
(ii) A change in the Board or its members such that individuals
who, as of the later of the Effective Date or the date that is
two years prior to such change (the later of such two dates is
referred to as the "Measurement Date"), constitute the Board
(the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the Measurement
Date whose election, or nomination for election by the
Company's stockholders, was approved by a vote of at least
two-thirds of the directors then comprising the Incumbent
Board (including for these purposes, the new members whose
election or nomination was so approved, without counting the
member and his predecessor twice) shall be considered as
though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual
or threatened election contest with respect to the election or
removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board;
3
(iii) Consummation of a reorganization, merger, statutory share
exchange or consolidation or similar corporate transaction
involving the Company or any of its Subsidiaries, a sale or
other disposition of all or substantially all of the assets of
the Company, or the acquisition of assets or stock of another
entity by the Company or any of its Subsidiaries (each, a
"Business Combination"), in each case unless, following such
Business Combination, (1) all or substantially all of the
individuals and entities that were the beneficial owners of
the Outstanding Company Common Stock and the Outstanding
Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more
than 50% of the then-outstanding shares of common stock and
the combined voting power of the then-outstanding voting
securities entitled to vote generally in the election of
directors, as the case may be, of the entity resulting from
such Business Combination (including, without limitation, an
entity that, as a result of such transaction, owns the Company
or all or substantially all of the Company's assets directly
or through one or more subsidiaries (a "Parent")) in
substantially the same proportions as their ownership
immediately prior to such Business Combination of the
Outstanding Company Common Stock and the Outstanding Company
Voting Securities, as the case may be, (2) no Person
(excluding any entity resulting from such Business Combination
or a Parent or any employee benefit plan (or related trust) of
the Company or such entity resulting from such Business
Combination or Parent) beneficially owns, directly or
indirectly, 30% or more of, respectively, the then-outstanding
shares of common stock of the entity resulting from such
Business Combination or the combined voting power of the
then-outstanding voting securities of such entity, except to
the extent that the ownership in excess of 30% existed prior
to the Business Combination, and (3) at least a majority of
the members of the board of directors or trustees of the
entity resulting from such Business Combination or a Parent
were members of the Incumbent Board (determined pursuant to
clause (ii) above using the date that is the later of the
Effective Date or the date that is two years prior to the
Business Combination as the Measurement Date) at the time of
the execution of the initial agreement or of the action of the
Board providing for such Business Combination; or
(iv) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company other than in the
context of a transaction that does not constitute a Change in
Control under clause (iii) above.
Notwithstanding the foregoing, in no event shall a transaction or
other event that occurred prior to the Effective Date constitute a
Change in Control.
(i) "Code" means the United States Internal Revenue Code of 1986, as
amended.
4
(j) "Committee" means the Compensation Committee of the Board.
(k) "Company" means QLogic Corporation, a Delaware corporation, or any
successor thereto as provided in Article 7.
(l) "Disability" means disability as defined in the Company's long-term
disability plan in which the Executive participates at the relevant
time or, if the Executive does not participate in a Company
long-term disability plan at the relevant time, such term shall mean
a "permanent and total disability" within the meaning of Section
22(e)(3) of the Code.
(m) "Effective Date" has the meaning given to such term in Article 1
hereof.
(n) "Exchange Act" means the United States Securities Exchange Act of
1934, as amended.
(o) "Executive" means the individual identified in the first sentence,
and on the signature page, of this Agreement.
(p) "Good Reason" means, without the Executive's express written
consent, the occurrence of any one or more of the following:
(i) A material reduction in the nature or status of the
Executive's authorities, duties, and/or responsibilities,
(when such authorities, duties, and/or responsibilities are
viewed in the aggregate) from their level in effect on the day
immediately prior to the start of the Protected Period, other
than an insubstantial and inadvertent act that is remedied by
the Company promptly after receipt of notice thereof given by
the Executive. The change in status of the Company from a
publicly-traded company to a company the securities of which
are not publicly-traded (including any related termination of
the Company's reporting obligations under the Exchange Act)
shall not, in and of itself, constitute Good Reason or a
material reduction in the nature or status of the Executive's
authorities, duties, and/or responsibilities.
(ii) A reduction by the Company in either the Executive's Base
Salary or the Executive's Annual Bonus opportunity as in
effect immediately prior to the start of the Protected Period
or as the same shall be increased from time to time.
(iii) A material reduction in the Executive's relative level of
coverage and accruals under the Company's employee benefit
and/or retirement plans, policies, practices, or arrangements
in which the Executive participates immediately prior to the
start of the Protected Period, both in terms of the amount of
benefits provided, and amounts accrued. For this purpose, the
Company may eliminate and/or modify existing programs and
coverage levels; provided, however, that the Executive's level
of coverage under all such programs must be at least as great
as is provided to other senior executives of the Company.
5
(iv) The failure of the Company to obtain a satisfactory agreement
from any successor to the Company to assume and agree to
perform this Agreement, as contemplated in Article 7.
(v) The Executive is informed by the Company that his principal
place of employment for the Company will be relocated to a
location that is more than fifty (50) miles from his principal
place of employment for the Company at the start of the
corresponding Protected Period.
The Executive's right to terminate employment for Good Reason shall
not be affected by the Executive's incapacity due to physical or
mental illness. The Executive's continued employment shall not
constitute a consent to, or a waiver of rights with respect to, any
circumstances constituting Good Reason herein; provided, however,
that if the Executive does not terminate employment and claim Good
Reason for such termination within ninety (90) days after the
Executive has knowledge of an event or circumstance that would
constitute Good Reason, then the Executive shall be deemed to have
waived his right to claim Good Reason as to that specific fact or
circumstance (except that the event or circumstance may be
considered for purposes of determining whether any subsequent,
separate, event or circumstance constitutes Good Reason; for
example, and without limitation, a reduction in the Executive's
authorities that is deemed waived by operation of this clause may be
considered for purposes of determining whether any subsequent
reduction in the Executive's authorities (when taken into
consideration with the first reduction) constitutes a "material
reduction" in the nature or status of the Executive's authorities
from their level in effect on the day immediately prior to the start
of the Protected Period).
(q) "Protected Period" with respect to a Change in Control of the
Company shall mean the period commencing on the date that is six (6)
months prior to the date of such Change in Control and ending on the
date of such Change in Control.
(r) "Qualifying Termination" has the meaning given to such term in
Section 3.2(a).
(s) "Severance Benefits" means the payments and/or benefits provided in
Section 3.3.
(t) "Severance Date" means the date on which the Executive's employment
with the Company and its subsidiaries terminates for any reason
(whether or not as a result of a Qualifying Termination).
(u) "Subsidiary" means any corporation or other entity a majority of
whose outstanding voting stock or voting power is beneficially owned
directly or indirectly by the Company.
6
ARTICLE 3. SEVERANCE BENEFITS
3.1. RIGHT TO SEVERANCE BENEFITS. The Executive shall be entitled to
receive from the Company the Severance Benefits described in Section 3.3 if the
Executive has incurred a Qualifying Termination and satisfies the release
requirements set forth in Section 3.7.
The Executive shall not be entitled to receive Severance Benefits if his
employment terminates (regardless of the reason) before the Protected Period
corresponding to a Change in Control of the Company or more than twenty-four
(24) months after the date of a Change in Control of the Company.
3.2. QUALIFYING TERMINATION.
(a) Subject to Sections 3.2(c), 3.4, and 3.5, the occurrence of any one
or more of the following events within the Protected Period
corresponding to a Change in Control of the Company, or within
twenty-four (24) calendar months following the date of a Change in
Control of the Company shall constitute a "Qualifying Termination":
(i) An involuntary termination of the Executive's employment by
the Company for reasons other than Cause;
(ii) A voluntary termination of employment by the Executive for
Good Reason;
(iii) A failure or refusal by a successor company to assume by
written instrument the Company's obligations under this
Agreement, as required by Article 7; or
(iv) A repudiation or breach by the Company or any successor
company of any of the provisions of this Agreement.
For purposes of determining any benefits payable hereunder, the date
on which the succession referred to in clause (iii) becomes
effective and the date on which the repudiation or breach referred
to in clause (iv) occurs, as applicable, shall be deemed to be the
Executive's Severance Date.
(b) If more than one of the events set forth in Section 3.2(a) occurs,
such events shall constitute but a single Qualifying Termination and
the Executive shall be entitled to but a single payment of the
Severance Benefits.
(c) Notwithstanding anything else contained herein to the contrary, the
Executive's termination of employment on account of reaching
mandatory retirement age, as such age may be defined from time to
time in policies adopted by the Company prior to the commencement of
the Protected Period, and consistent with applicable law, shall not
be a Qualifying Termination.
7
(d) Notwithstanding anything else contained herein to the contrary, the
Executive's Severance Benefits under this Agreement shall be reduced
by the severance benefits (including, without limitation, any other
change-in-control severance benefits and any other severance
benefits generally) that the Executive may be entitled to under any
other plan, program, agreement or other arrangement with the Company
(including, without limitation, any such benefits provided for by an
employment agreement). For purposes of the foregoing, any cash
severance benefits payable to the Executive under any other plan,
program, agreement or other arrangement with the Company shall
offset the cash severance benefits otherwise payable to the
Executive under this Agreement on a dollar-for-dollar basis. For
purposes of the foregoing, non-cash severance benefits to be
provided to the Executive under any other plan, program, agreement
or other arrangement with the Company shall offset any corresponding
benefits otherwise to be provided to the Executive under this
Agreement or, if there are no corresponding benefits otherwise to be
provided to the Executive under this Agreement, the value of such
benefits shall offset the cash severance benefits otherwise payable
to the Executive under this Agreement on a dollar-for-dollar basis.
If the amount of other benefits to be offset against the cash
severance benefits otherwise payable to the Executive under this
Agreement in accordance with the preceding two sentences exceeds the
amount of cash severance benefits otherwise payable to the Executive
under this Agreement, then the excess may be used to offset other
non-cash severance benefits otherwise to be provided to the
Executive under this Agreement on a dollar-for-dollar basis. For
purposes of this paragraph, the Committee shall reasonably determine
the value of any non-cash benefits.
3.3. DESCRIPTION OF SEVERANCE BENEFITS. In the event that the Executive
becomes entitled to receive Severance Benefits, as provided in Sections 3.1, 3.2
and 3.8, the Company shall pay and provide to the Executive (in addition to the
Accrued Obligations) the following:
(a) The Company will pay to the Executive an amount equal to one and
one-half (1.5) times the sum of (i) the Executive's Base Salary, and
(ii) the Executive's Annual Bonus. For purposes of this Section
3.3(a), the Executive's "Base Salary" shall be deemed to be the
Executive's highest annualized rate of Base Salary in effect at any
time after the commencement of the Protected Period and on or before
the Executive's Severance Date, and the Executive's "Annual Bonus"
shall be the greater of (x) the Executive's maximum Annual Bonus
opportunity for the fiscal year in which the Executive's Severance
Date occurs, and (y) the highest aggregate bonus(es) paid by the
Company to the Executive for any one of the three (3) full fiscal
years of the Company immediately preceding the Executive's Severance
Date. Notwithstanding the foregoing provisions, if the Executive
would be entitled to a greater cash severance payment in the
circumstances under the terms of any employment agreement then in
effect than the amount determined under the first sentence of this
Section 3.3(a), the Executive shall be entitled to such greater cash
severance payment only and no additional payment shall be made under
this Section 3.3(a).
8
(b) The Company will pay or reimburse the Executive for his premiums
charged to continue medical coverage pursuant to the Consolidated
Omnibus Budget Reconciliation Act ("COBRA"), at the same or
reasonably equivalent medical coverage for the Executive (and, if
applicable, the Executive's eligible dependents) as in effect
immediately prior to the Severance Date, to the extent that the
Executive elects such continued coverage; provided that the
Company's obligation to make any payment or reimbursement pursuant
to this clause (ii) shall cease upon the first to occur of (a) the
second anniversary of the Severance Date; (b) the Executive's death;
(c) the date the Executive becomes eligible for coverage under the
health plan of a future employer; or (d) the date the Company or its
affiliates ceases to offer any group medical coverage to its active
executive employees or the Company is otherwise under no obligation
to offer COBRA continuation coverage to the Executive.
(c) Notwithstanding any other provision herein or in any other document,
any stock option or other equity-based award granted by the Company
to the Executive, to the extent such award is outstanding and has
not vested as of the Executive's Severance Date, shall automatically
become fully vested as of the Severance Date. In the event that the
Executive has a Qualifying Termination during the Protected Period
related to a Change in Control, any stock option or other
equity-based award granted by the Company to the Executive, to the
extent such award had not vested and was cancelled or otherwise
terminated upon or prior to the date of the related Change in
Control solely as a result of such Qualifying Termination, shall be
reinstated and shall automatically become fully vested, and, in the
case of stock options or similar awards, the Executive shall be
given a reasonable opportunity to exercise such accelerated portion
of the option or other award before it terminates.
3.4. TERMINATION DUE TO DISABILITY, DEATH OR RETIREMENT. Termination of
the Executive's employment due to the Executive's death or Disability is not a
Qualifying Termination, and upon any such termination, the Executive shall be
entitled to payment only of the Accrued Obligations. However, if immediately
prior to the condition or event leading to, or the commencement of, the
Disability of the Executive (but not the death of the Executive), the Executive
would have experienced a Qualifying Termination if he had terminated at that
time, then upon termination of his employment for Disability he shall be
entitled to the benefits provided by this Agreement for a Qualifying
Termination. A voluntary termination of employment by the Executive due to the
Executive's retirement is not a Qualifying Termination, and upon any such
termination, the Executive shall be entitled to payment only of the Accrued
Obligations. However, if immediately prior to the Executive's retirement (but
not death), the Executive would have experienced a Qualifying Termination if he
had terminated at that time, then upon his retirement he shall (subject to
Section 3.2(c)) be entitled to the benefits provided by this Agreement for a
Qualifying Termination.
3.5. TERMINATION FOR CAUSE OR BY THE EXECUTIVE OTHER THAN FOR GOOD REASON
Termination of the Executive's employment by the Company for Cause or by the
Executive other than for Good Reason does not constitute a Qualifying
Termination. Upon any such termination, the Executive shall be entitled to
payment only of the Accrued Obligations.
9
3.6. NOTICE OF TERMINATION. Any termination of the Executive's employment
by the Company for Cause or by the Executive for Good Reason shall be
communicated by a Notice of Termination. For purposes of this Agreement, a
"Notice of Termination" shall mean a written notice which shall indicate the
specific termination provision in this Agreement relied upon, and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated.
3.7. RELEASE. This Section 3.7 shall apply notwithstanding anything else
contained in this Agreement to the contrary. As a condition precedent to any
Company obligation to the Executive pursuant to Section 3.3, the Executive (or,
in the event of the Executive's death following a Qualifying Termination, the
Executive's estate) shall, upon or promptly following the Executive's Severance
Date (or, if later, the date of the relevant Change in Control of the Company),
provide the Company with a valid, executed, written release of claims (in the
form attached hereto as Exhibit A or such similar form as the Company may
reasonably require in the circumstances) (the "Release"), and such Release shall
have not been revoked by the Executive (or the Executive's estate, as
applicable) pursuant to any revocation rights afforded by applicable law. The
Company shall have no obligation to make any payment or provide any benefit to
the Executive pursuant to Section 3.3 unless and until the Release contemplated
by this Section 3.7 becomes irrevocable by the Executive (or the Executive's
estate, as applicable) in accordance with all applicable laws, rules and
regulations.
3.8. EXCLUSIVE REMEDY. The Executive agrees that the payments and benefits
contemplated by Section 3.3 shall, if the Release contemplated by Section 3.7 is
signed and the amounts paid, constitute the exclusive and sole remedy for any
termination of his employment and in such case the Executive covenants not to
assert or pursue any other remedies, at law or in equity, with respect to any
termination of employment. The Company and the Executive acknowledge and agree
that there is no duty of the Executive to mitigate damages under this Agreement,
and there shall be no offset against any amounts due to the Executive under this
Agreement on account of any remuneration attributable to any subsequent
employment that the Executive may obtain.
ARTICLE 4. FORM AND TIMING OF SEVERANCE BENEFITS; TAX WITHHOLDING;
4.1. FORM AND TIMING OF SEVERANCE BENEFITS. The Severance Benefits
described in Section 3.3(a) shall be paid in cash to the Executive in a single
lump sum as soon as practicable following the Severance Date, but in no event
beyond the later of (a) thirty (30) days from the date of the Executive's
Severance Date, or (b) thirty (30) days after the date that the Release
delivered by the Executive to the Company pursuant to Section 3.7 becomes
irrevocable by the Executive in accordance with applicable law; provided,
however, that payment of any and all Severance Benefits are subject to the
provisions of Section 8.14.
4.2. WITHHOLDING OF TAXES. Notwithstanding anything else herein to the
contrary, the Company may withhold (or cause there to be withheld, as the case
may be) from any amounts otherwise due or payable under or pursuant to this
Agreement such federal, state and local income, employment, or other taxes as
may be required to be withheld pursuant to any applicable law or regulation.
10
ARTICLE 5. SECTION 280G. Notwithstanding any other provision herein, the
Executive shall be covered by the provisions set forth in Exhibit B hereto,
incorporated herein by this reference.
ARTICLE 6. THE COMPANY'S PAYMENT OBLIGATION
6.1. PAYMENT OF OBLIGATIONS ABSOLUTE. Except as provided in Sections 3.7,
4.2 and in Article 5, the Company's obligation to make the payments and the
arrangements provided for herein shall be absolute and unconditional, and shall
not be affected by any circumstances, including, without limitation, any offset,
counterclaim, recoupment, defense, or other right which the Company may have
against the Executive or anyone else. All amounts payable by the Company
hereunder shall be paid without notice or demand. Each and every payment made
hereunder by the Company shall be final, and the Company shall not seek to
recover all or any part of such payment from the Executive or from whoever may
be entitled thereto, for any reasons whatsoever, except as otherwise provided in
Article 5; provided that the Executive does not revoke the Release or otherwise
take action to render the Release unenforceable.
6.2. CONTRACTUAL RIGHT TO BENEFITS. This Agreement establishes and vests
in the Executive a contractual right to the benefits to which he is entitled
hereunder. The Company expressly waives any ability, if possible, to deny
liability for any breach of its contractual commitment hereunder upon the
grounds of lack of consideration, accord and satisfaction or any other defense.
In any dispute arising after a Change in Control as to whether the Executive is
entitled to benefits under this Agreement, there shall be a presumption that the
Executive is entitled to such benefits and the burden of proving otherwise shall
be on the Company. However, nothing herein contained shall require or be deemed
to require, or prohibit or be deemed to prohibit, the Company to segregate,
earmark, or otherwise set aside any funds or other assets, in trust or
otherwise, to provide for any payments to be made or required hereunder.
6.3. PENSION PLANS; DUPLICATE BENEFITS. All payments, benefits and amounts
provided under this Agreement shall be in addition to and not in substitution
for any pension rights under the Company's tax-qualified pension plans,
supplemental retirement plans, nonqualified deferred compensation plans, bonus
plans, and any disability, workers' compensation or other Company benefit plan
distribution that the Executive is entitled to as of his Severance Date.
Notwithstanding the foregoing, this Agreement shall not create an inference that
any duplicate payments shall be required. No payments made pursuant to this
Agreement shall be considered compensation for purposes of any such benefit
plan.
ARTICLE 7. SUCCESSORS AND ASSIGNMENT
7.1. SUCCESSORS TO THE COMPANY. The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation, or otherwise)
of all or substantially all of the business and/or assets of the Company or of
any division or subsidiary thereof (the business and/or assets of which
constitute at least fifty percent (50%) of the total business and/or assets of
the Company) to expressly assume and agree to perform the Company's obligations
under this Agreement in the same manner and to the same extent that the Company
would be required to perform them if such succession had not taken place.
11
7.2. ASSIGNMENT BY THE EXECUTIVE. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees, and legatees.
ARTICLE 8. MISCELLANEOUS
8.1. EMPLOYMENT STATUS. Except as may be provided under any other written
agreement between the Executive and the Company, the employment of the Executive
by the Company is "at will," and, prior to the effective date of a Change in
Control, may be terminated by either the Executive or the Company at any time,
subject to applicable law.
8.2. BENEFICIARIES. The Executive may designate one or more persons or
entities as the primary and/or contingent Beneficiaries of any Severance
Benefits owing to the Executive under this Agreement. If the Executive dies
while any amount would still be payable to him hereunder had he continued to
live, all such amounts, unless otherwise provided herein, shall be paid to the
Executive's Beneficiary in accordance with the terms of this Agreement. If the
Executive has not named a Beneficiary, then such amounts shall be paid to the
Executive's devisee, legatee, or other designee, or if there is no such
designee, to the Executive's estate. The Executive may make or change such
designation at any time, provided that any designation or change thereto must be
in the form of a signed writing acceptable to and received by the Committee.
8.3. GENDER AND NUMBER. Where the context requires herein, the singular
shall include the plural, the plural shall include the singular, and any gender
shall include all other genders.
8.4. SECTION HEADINGS. The section headings of, and titles of paragraphs
and subparagraphs contained in, this Agreement are for the purpose of
convenience only, and they neither form a part of this Agreement nor are they to
be used in the construction or interpretation thereof.
8.5. SEVERABILITY. If any provision of this Agreement or the application
thereof is held invalid, the invalidity shall not affect other provisions or
applications of this Agreement which can be given effect without the invalid
provisions or applications and to this end the provisions of this Agreement are
declared to be severable.
8.6. ENTIRE AGREEMENT. This Agreement, together with any employment
agreement and any written agreement evidencing any stock option or other
equity-based incentive award previously granted by the Company, embodies the
entire agreement of the parties hereto respecting the matters within its scope.
As of the Effective Date, this Agreement shall supersede all other agreements of
the parties hereto that are prior to or contemporaneous with the Effective Date
and that directly or indirectly bear upon the subject matter hereof, other than
any prior agreement relating to any right to indemnification the Executive may
have from the Company or the Executive's right to be covered under any
applicable insurance policy, with respect to any liability the Executive
incurred or may incur as an employee, officer or director of the Company or its
affiliates. Any negotiations, correspondence, agreements, proposals or
understandings prior to the Effective Date relating to the subject matter hereof
shall be deemed to have been merged into this Agreement, and to the extent
inconsistent herewith, such negotiations, correspondence, agreements, proposals,
or understandings shall be deemed to be of no force or effect. There are no
representations, warranties, or agreements, whether express or implied, or oral
or written, with respect to the subject matter hereof, except as expressly set
forth herein. This Agreement is an integrated agreement.
12
8.7. MODIFICATION. This Agreement may not be amended, modified or changed
(in whole or in part), except by a formal, definitive written agreement
expressly referring to this Agreement, which agreement is executed by both of
the parties hereto.
8.8. WAIVER. Neither the failure nor any delay on the part of a party to
exercise any right, remedy, power or privilege under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, remedy, power or privilege preclude any other or further exercise of the
same or of any right, remedy, power or privilege, nor shall any waiver of any
right, remedy, power or privilege with respect to any occurrence be construed as
a waiver of such right, remedy, power or privilege with respect to any other
occurrence. No waiver shall be effective unless it is in writing and is signed
by the party asserted to have granted such waiver.
8.9. ARBITRATION. Any controversy arising out of or relating to this
Agreement, its enforcement or interpretation, or because of an alleged breach,
default, or misrepresentation in connection with any of its provisions, or any
other controversy arising out of the Executive's employment, including, but not
limited to, any state or federal statutory claims, shall be submitted to
arbitration in Orange County, California, before a sole arbitrator selected from
Judicial Arbitration and Mediation Services, Inc., Orange, California, or its
successor ("JAMS"), or if JAMS is no longer able to supply the arbitrator, such
arbitrator shall be selected from the American Arbitration Association, and
shall be conducted in accordance with the provisions of California Code of Civil
Procedure Sections 1280 et seq. as the exclusive forum for the resolution of
such dispute; provided, however, that provisional injunctive relief may, but
need not, be sought by either party to this Agreement in a court of law while
arbitration proceedings are pending, and any provisional injunctive relief
granted by such court shall remain effective until the matter is finally
determined by the Arbitrator. Final resolution of any dispute through
arbitration may include any remedy or relief which the Arbitrator deems just and
equitable, including any and all remedies provided by applicable state or
federal statutes. At the conclusion of the arbitration, the Arbitrator shall
issue a written decision that sets forth the essential findings and conclusions
upon which the Arbitrator's award or decision is based. Any award or relief
granted by the Arbitrator hereunder shall be final and binding on the parties
hereto and may be enforced by any court of competent jurisdiction. The parties
hereto acknowledge and agree that they are hereby waiving any rights to trial by
jury in any action, proceeding or counterclaim brought by either of the parties
hereto against the other in connection with any matter whatsoever arising out of
or in any way connected with this Agreement or the Executive's employment. The
parties agree hereto that the Company shall be responsible for payment of the
forum costs of any arbitration hereunder, including the Arbitrator's fee. The
Executive and the Company further agree that in any proceeding to enforce the
terms of this Agreement, the prevailing party shall be entitled to its or his
reasonable attorneys' fees and costs (other than forum costs associated with the
arbitration) incurred by it or him in connection with resolution of the dispute
in addition to any other relief granted. Notwithstanding this provision, the
parties hereto may mutually agree to mediate any dispute prior to or following
submission to arbitration.
13
8.10. NOTICES.
(a) All notices, requests, demands and other communications required or
permitted under this Agreement shall be in writing and shall be
deemed to have been duly given and made if (i) delivered by hand,
(ii) otherwise delivered against receipt therefor, or (iii) sent by
registered or certified mail, postage prepaid, return receipt
requested. Any notice shall be duly addressed to the parties hereto
as follows:
(i) if to the Company:
QLogic Corporation
26650 Aliso Viejo Parkway
Aliso Viejo, California 92656
Attn: General Counsel
with a copy to:
O'Melveny & Myers LLP
610 Newport Center Drive, Suite 1700
Newport Beach, California 92660
Attn: Gary Singer, Esq.
(ii) if to the Executive, at the last address of the Executive
on the books of the Company.
(b) Any party may alter the address to which communications or copies are
to be sent by giving notice of such change of address in conformity with
the provisions of this Section 8.10 for the giving of notice. Any
communication shall be effective when delivered by hand, when otherwise
delivered against receipt therefor, or five (5) business days after being
mailed in accordance with the foregoing.
8.11. LEGAL COUNSEL; MUTUAL DRAFTING. Each party recognizes that this is a
legally binding contract and acknowledges and agrees that they have had the
opportunity to consult with legal counsel of their choice. Each party has
cooperated in the drafting, negotiation and preparation of this Agreement.
Hence, in any construction to be made of this Agreement, the same shall not be
construed against either party on the basis of that party being the drafter of
such language. The Executive agrees and acknowledges that he has read and
understands this Agreement completely, is entering into it freely and
voluntarily, and has been advised to seek counsel prior to entering into this
Agreement and has had ample opportunity to do so.
8.12. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original as against any party
whose signature appears thereon, and all of which together shall constitute one
and the same instrument. This Agreement shall become binding when one or more
counterparts hereof, individually or taken together, shall bear the signatures
of all of the parties hereto reflected hereon as the signatories. Photographic
copies of such signed counterparts may be used in lieu of the originals for any
purpose.
14
8.13. GOVERNING LAW. This Agreement, and all questions relating to its
validity, interpretation, performance and enforcement, as well as the legal
relations hereby created between the parties hereto, shall be governed by and
construed under, and interpreted and enforced in accordance with, the laws of
the State of California, notwithstanding any California or other conflict of law
provision to the contrary.
8.14. SECTION 409A.
(a) Notwithstanding any provision of this Agreement to the contrary, if
the Executive is a "specified employee" as defined in Section 409A
of the Code ("Section 409A"), the Executive shall not be entitled to
any payments upon a termination of his employment until the earlier
of (i) the date which is six (6) months after his termination of
employment for any reason other than death, or (ii) the date of the
Executive's death. Furthermore, with regard to any benefit to be
provided upon a termination of employment, to the extent required by
Section 409A, the Executive shall pay the premium for such benefit
during the aforesaid period and be reimbursed by the Company
therefor promptly after the end of such period. The provisions of
this Section 8.14 shall only apply if, and to the extent, required
to comply with Section 409A.
(b) To the extent that this Agreement or any plan, program or award of
the Company in which the Executive participates or which has been or
is granted by the Company to the Executive, as applicable, is
subject to Section 409A, the Company and the Executive agree that
the terms and conditions of this Agreement and such other plan,
program or award shall be construed and interpreted to the maximum
extent reasonably possible, without altering the fundamental intent
of the agreement, to comply with Section 409A.
[Remainder of page intentionally left blank]
15
IN WITNESS WHEREOF, the Company and the Executive have executed this
Agreement as of the Effective Date.
"COMPANY"
QLogic Corporation,
a Delaware corporation
By: /s/ Michael L. Hawkins
_______________________________________
Print Name: Michael L. Hawkins
Title: Vice President and General Counsel
"EXECUTIVE"
/s/ Anthony J. Massetti
______________________________________________
Anthony J. Massetti
16
EXHIBIT A
GENERAL RELEASE AGREEMENT
1. Release. Anthony J. Massetti ("Executive"), on his own behalf and on
behalf of his descendants, dependents, heirs, executors, administrators, assigns
and successors, and each of them, hereby acknowledges full and complete
satisfaction of and releases and discharges and covenants not to sue QLogic
Corporation (the "Company"), its divisions, subsidiaries, parents, or affiliated
corporations, past and present, and each of them, as well as its and their
assignees, successors, directors, officers, shareholders, partners,
representatives, attorneys, agents or employees, past or present, or any of them
(individually and collectively, "Releasees"), from and with respect to any and
all claims, agreements, obligations, demands and causes of action, known or
unknown, suspected or unsuspected, arising out of or in any way connected with
Executive's employment or any other relationship with or interest in the Company
or the termination thereof, including without limiting the generality of the
foregoing, any claim for severance pay, profit sharing, bonus or similar
benefit, equity-based awards and/or dividend equivalents thereon, pension,
retirement, life insurance, health or medical insurance or any other fringe
benefit, or disability, or any other claims, agreements, obligations, demands
and causes of action, known or unknown, suspected or unsuspected resulting from
any act or omission by or on the part of Releasees committed or omitted prior to
the date of this Agreement, including, without limiting the generality of the
foregoing, any claim under Title VII of the Civil Rights Act of 1964, the
Americans with Disabilities Act, the California Fair Employment and Housing Act,
or the California Family Rights Act, or any other federal, state or local law,
regulation or ordinance (collectively, the "Claims"); provided, however, that
the foregoing release does not apply to any obligation of the Company to
Executive pursuant to any of the following: (1) Section 3 of the Change in
Control Severance Agreement dated as of [_________, 2006] by and between the
Company and Executive (the "Change in Control Agreement"), or (2) any
equity-based awards previously granted by the Company to Executive (as amended
by the Change in Control Agreement). In addition, this release does not cover
any Claim that cannot be so released as a matter of applicable law. Executive
acknowledges and agrees that he has received any and all leave and other
benefits that he has been and is entitled to pursuant to the Family and Medical
Leave Act of 1993.
2. Acknowledgement of Payment of Wages. Executive acknowledges that he has
received all amounts owed for his regular and usual salary (including, but not
limited to, any bonus or other wages), and usual benefits through the date of
this Agreement.
3. Waiver of Civil Code Section 1542. This Agreement is intended to be
effective as a general release of and bar to each and every Claim hereinabove
specified. Accordingly, Executive hereby expressly waives any rights and
benefits conferred by Section 1542 of the California Civil Code as to the
Claims. Section 1542 of the California Civil Code provides:
"A GENERAL RELEASE DOES NOT EXTEND TO A CLAIM WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR
HER SETTLEMENT WITH THE DEBTOR."
A-1
Executive acknowledges that he later may discover claims, demands, causes of
action or facts in addition to or different from those which Executive now knows
or believes to exist with respect to the subject matter of this Agreement and
which, if known or suspected at the time of executing this Agreement, may have
materially affected its terms. Nevertheless, Executive hereby waives, as to the
Claims, any claims, demands, and causes of action that might arise as a result
of such different or additional claims, demands, causes of action or facts.
4. ADEA Waiver. Executive expressly acknowledges and agrees that by
entering into this Agreement, he is waiving any and all rights or claims that he
may have arising under the Age Discrimination in Employment Act of 1967, as
amended ("ADEA"), which have arisen on or before the date of execution of this
Agreement. Executive further expressly acknowledges and agrees that:
(a) In return for this Agreement, he will receive consideration beyond
that which he was already entitled to receive before entering into this
Agreement;
(b) He is hereby advised in writing by this Agreement to consult with an
attorney before signing this Agreement;
(c) He was given a copy of this Agreement on [____________] and informed
that he had twenty-one (21) days within which to consider the Agreement and that
if he wished to executive this Agreement prior to expiration of such 21-day
period, he should execute the Acknowledgement and Waiver attached hereto as
Exhibit A-1;
(d) Nothing in this Agreement prevents or precludes Executive from
challenging or seeking a determination in good faith of the validity of this
waiver under the ADEA, nor does it impose any condition precedent, penalties or
costs from doing so, unless specifically authorized by federal law; and
(e) He was informed that he has seven (7) days following the date of
execution of this Agreement in which to revoke this Agreement, and this
Agreement will become null and void if Executive elects revocation during that
time. Any revocation must be in writing and must be received by the Company
during the seven-day revocation period. In the event that Executive exercises
his right of revocation, neither the Company nor Executive will have any
obligations under this Agreement.
5. No Transferred Claims. Executive represents and warrants to the Company
that he has not heretofore assigned or transferred to any person not a party to
this Agreement any released matter or any part or portion thereof.
6. Miscellaneous. The following provisions shall apply for purposes of
this Agreement:
(a) Number and Gender. Where the context requires, the singular shall
include the plural, the plural shall include the singular, and any gender shall
include all other genders.
A-2
(b) Section Headings. The section headings of, and titles of paragraphs
and subparagraphs contained in, this Agreement are for the purpose of
convenience only, and they neither form a part of this Agreement nor are they to
be used in the construction or interpretation thereof.
(c) Governing Law. This Agreement, and all questions relating to its
validity, interpretation, performance and enforcement, as well as the legal
relations hereby created between the parties hereto, shall be governed by and
construed under, and interpreted and enforced in accordance with, the laws of
the State of California, notwithstanding any California or other conflict of law
provision to the contrary.
(d) Severability. If any provision of this Agreement or the application
thereof is held invalid, the invalidity shall not affect other provisions or
applications of this Agreement which can be given effect without the invalid
provisions or applications and to this end the provisions of this Agreement are
declared to be severable.
(e) Modifications. This Agreement may not be amended, modified or changed
(in whole or in part), except by a formal, definitive written agreement
expressly referring to this Agreement, which agreement is executed by both of
the parties hereto.
(f) Waiver. Neither the failure nor any delay on the part of a party to
exercise any right, remedy, power or privilege under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, remedy, power or privilege preclude any other or further exercise of the
same or of any right, remedy, power or privilege, nor shall any waiver of any
right, remedy, power or privilege with respect to any occurrence be construed as
a waiver of such right, remedy, power or privilege with respect to any other
occurrence. No waiver shall be effective unless it is in writing and is signed
by the party asserted to have granted such waiver.
(g) Arbitration. Any controversy arising out of or relating to this
Agreement shall be submitted to arbitration in accordance with the arbitration
provisions of the Change in Control Agreement.
(h) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original as against any party
whose signature appears thereon, and all of which together shall constitute one
and the same instrument. This Agreement shall become binding when one or more
counterparts hereof, individually or taken together, shall bear the signatures
of all of the parties reflected hereon as the signatories. Photographic copies
of such signed counterparts may be used in lieu of the originals for any
purpose.
[Remainder of page intentionally left blank]
A-3
The undersigned have read and understand the consequences of this
Agreement and voluntarily sign it. The undersigned declare under penalty of
perjury under the laws of the State of California that the foregoing is true and
correct.
EXECUTED this ________ day of ________ 20__, at ______________________
County, __________.
"EXECUTIVE"
_____________________________________
Anthony J. Massetti
QLOGIC CORPORATION
By:
_______________________________
[NAME]
[TITLE]
A-4
EXHIBIT A-1
ACKNOWLEDGMENT AND WAIVER
I, Anthony J. Massetti, hereby acknowledge that I was given 21 days to
consider the foregoing Agreement and voluntarily chose to sign the Agreement
prior to the expiration of the 21-day period.
I declare under penalty of perjury under the laws of the State of
California that the foregoing is true and correct.
EXECUTED this ___ day of ____________ 20__, at ___________ County,
_________.
_______________________________
Anthony J. Massetti
A-5
EXHIBIT B
SECTION 280G PROVISIONS
1.1 GROSS-UP PAYMENT. In the event it is determined (pursuant to Section 1.2)
or finally determined (as defined in Section 1.3(c)) that any payment,
distribution, transfer, or benefit by the Company, or a direct or indirect
subsidiary or affiliate of the Company, to or for the benefit of the
Executive or the Executive's dependents, heirs or beneficiaries (whether
such payment, distribution, transfer, benefit or other event occurs
pursuant to the terms of this Agreement or otherwise in connection with,
or arising out of, the Executive's employment with the Company or a change
in ownership or effective control of the Company or a substantial portion
of its assets, but determined without regard to any additional payments
required under this Exhibit B) (each a "Payment" and collectively the
"Payments") is subject to the excise tax imposed by Section 4999 of the
Code, and any successor provision or any comparable provision of state or
local income tax law (collectively, "Section 4999"), or any interest,
penalty or addition to tax is incurred by the Executive with respect to
such excise tax (such excise tax, together with any such interest,
penalty, and addition to tax, hereinafter collectively referred to as the
"Excise Tax"), then, within 10 days after such determination or final
determination, as the case may be, the Company shall pay to the Executive
(or to the applicable taxing authority on the Executive's behalf) an
additional cash payment (hereinafter referred to as the "Gross-Up
Payment") equal to an amount such that after payment by the Executive of
all taxes, interest, penalties, additions to tax and costs imposed or
incurred with respect to the Gross-Up Payment (including, without
limitation, any income and excise taxes imposed upon the Gross-Up
Payment), the Executive retains an amount of the Gross-Up Payment equal to
the Excise Tax imposed upon such Payment or Payments. This provision is
intended to put the Executive in the same position as the Executive would
have been had no Excise Tax been imposed upon or incurred as a result of
any Payment.
1.2 DETERMINATION OF GROSS-UP.
(a) Except as provided in Section 1.3, the determination that a Payment
is subject to an Excise Tax shall be made in writing by a nationally
recognized accounting firm or executive compensation consulting firm
selected by the Company (the "Accounting Firm"). Such determination
shall include the amount of the Gross-Up Payment and detailed
computations thereof, including any assumptions used in such
computations. Any determination by the Accounting Firm will be
binding on the Company and the Executive.
(b) For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay Federal income taxes at the highest
marginal rate of Federal individual income taxation in the calendar
year in which the Gross-Up Payment is to be made. Such highest
marginal rate shall take into account the loss of itemized
deductions by the Executive and shall also include the Executive's
share of the hospital insurance portion of FICA and state and local
income taxes at the highest marginal rate of individual income
taxation in the state and locality of the Executive's residence on
the date that the Payment is made, net of the maximum reduction in
Federal income taxes that could be obtained from the deduction of
such state and local taxes.
B-1
1.3 NOTIFICATION.
(a) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service (or any successor thereof) or any state
or local taxing authority (individually or collectively, the "Taxing
Authority") that, if successful, would require the payment by the
Company of a Gross-Up Payment. Such notification shall be given as
soon as practicable but no later than 30 days after the Executive
receives written notice of such claim and shall apprise the Company
of the nature of such claim and the date on which such claim is
requested to be paid; provided, however, that failure by the
Executive to give such notice within such 30-day period shall not
result in a waiver or forfeiture of any of the Executive's rights
under this Exhibit B except to the extent of actual damages suffered
by the Company as a result of such failure. The Executive shall not
pay such claim prior to the expiration of the 15-day period
following the date on which the Executive gives such notice to the
Company (or such shorter period ending on the date that any payment
of taxes, interest, penalties or additions to tax with respect to
such claim is due). If the Company notifies the Executive in writing
prior to the expiration of such 15-day period (regardless of whether
such claim was earlier paid as contemplated by the preceding
parenthetical) that it desires to contest such claim, the Executive
shall:
(1) give the Company any information reasonably requested by the
Company relating to such claim;
(2) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to
time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
selected by the Company;
(3) cooperate with the Company in good faith in order effectively
to contest such claim; and
(4) permit the Company to participate in any proceedings relating
to such claim;
provided, however, that the Company shall bear and pay directly all
attorneys fees, costs and expenses (including additional interest,
penalties and additions to tax) incurred in connection with such
contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for all taxes (including, without limitation,
income and excise taxes), interest, penalties and additions to tax
imposed in relation to such claim and in relation to the payment of
such costs and expenses or indemnification.
B-2
(b) Without limitation on the foregoing provisions of this Section
1.3, and to the extent its actions do not unreasonably
interfere with or prejudice the Executive's disputes with the
Taxing Authority as to other issues, the Company shall control
all proceedings taken in connection with such contest and, in
its reasonable discretion, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences
with the Taxing Authority in respect of such claim and may, at
its or in their sole option, either direct the Executive to
pay the tax, interest or penalties claimed and sue for a
refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination
before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and sue for a
refund, the Company shall advance an amount equal to such
payment to the Executive, on an interest-free basis, and shall
indemnify and hold the Executive harmless, on an after-tax
basis, from all taxes (including, without limitation, income
and excise taxes), interest, penalties and additions to tax
imposed with respect to such advance or with respect to any
imputed income with respect to such advance, as any such
amounts are incurred; and, further, provided, that any
extension of the statute of limitations relating to payment of
taxes, interest, penalties or additions to tax for the taxable
year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such
contested amount; and, provided, further, that any settlement
of any claim shall be reasonably acceptable to the Executive,
and the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be
payable hereunder, and the Executive shall be entitled to
settle or contest, as the case may be, any other issue.
(c) If, after receipt by the Executive of an amount advanced by
the Company pursuant to Section 1.3(a), the Executive receives
any refund with respect to such claim, the Executive shall
(subject to the Company's compliance with the requirements of
this Exhibit B) promptly pay to the Company an amount equal to
such refund (together with any interest paid or credited
thereof after taxes applicable thereto), net of any taxes
(including, without limitation, any income or excise taxes),
interest, penalties or additions to tax and any other costs
incurred by the Executive in connection with such advance,
after giving effect to such repayment. If, after the receipt
by the Executive of an amount advanced by the Company pursuant
to Section 1.3(a), it is finally determined that the Executive
is not entitled to any refund with respect to such claim, then
such advance shall be forgiven and shall not be required to be
repaid and the amount of such advance shall be treated as a
Gross-Up Payment and shall offset, to the extent thereof, the
amount of any Gross-Up Payment otherwise required to be paid.
B-3
(d) For purposes of this Exhibit B, whether the Excise Tax is
applicable to a Payment shall be deemed to be "finally
determined" upon the earliest of: (1) the expiration of the
15-day period referred to in Section 1.3(a) if the Company or
the Executive's Employer has not notified the Executive that
it intends to contest the underlying claim, (2) the expiration
of any period following which no right of appeal exists, (3)
the date upon which a closing agreement or similar agreement
with respect to the claim is executed by the Executive and the
Taxing Authority (which agreement may be executed only in
compliance with this section), or (4) the receipt by the
Executive of notice from the Company that it no longer seeks
to pursue a contest (which shall be deemed received if the
Company does not, within 15 days following receipt of a
written inquiry from the Executive, affirmatively indicate in
writing to the Executive that the Company intends to continue
to pursue such contest).
1.4 UNDERPAYMENT AND OVERPAYMENT. It is possible that no Gross-Up Payment will
initially be made but that a Gross-Up Payment should have been made, or
that a Gross-Up Payment will initially be made in an amount that is less
than what should have been made (either of such events is referred to as
an "Underpayment"). It is also possible that a Gross-Up Payment will
initially be made in an amount that is greater than what should have been
made (an "Overpayment"). The determination of any Underpayment or
Overpayment shall be made by the Accounting Firm in accordance with
Section 1.2. In the event of an Underpayment, the amount of any such
Underpayment shall be paid to the Executive as an additional Gross-Up
Payment. In the event of an Overpayment, the Executive shall promptly pay
to the Company the amount of such Overpayment together with interest on
such amount at the applicable Federal rate provided for in Section 1274(d)
of the Code for the period commencing on the date of the Overpayment to
the date of such payment by the Executive to the Company. The Executive
shall make such payment to the Company as soon as administratively
practicable after the Company notifies the Executive of (a) the Accounting
Firm's determination that an Overpayment was made and (b) the amount to be
repaid.
1.5 COMPLIANCE WITH LAW. Nothing in this Exhibit B is intended to violate the
Sarbanes-Oxley Act of 2002, and to the extent that any advance or
repayment obligation hereunder would constitute such a violation, such
obligation shall be modified so as to make the advance a nonrefundable
payment to the Executive and the repayment obligation null and void to the
extent required by such Act.
B-4