Severance Benefit Plan – BroadVision, Inc.
BROADVISION, INC.
SEVERANCE BENEFIT PLAN
Section 1. Introduction.
The BroadVision, Inc. Severance Benefit Plan (the “Plan”) was established
effective March 26, 2007. The purpose of the Plan is to provide for the payment
of severance benefits to certain eligible employees of BroadVision, Inc. (the
“Company”) whose employment with the Company is involuntarily terminated. This
Plan shall supersede any severance benefit plan, policy or practice previously
maintained by the Company, except for any local plan that is specifically
designated for a certain subsidiary or country. This Plan document also is the
Summary Plan Description for the Plan.
Section 2. Eligibility For Benefits.
(a) General Rules. Subject to the
requirements set forth in this Section, the Company will grant severance
benefits under the Plan to Eligible Employees.
(i) Definition of “Eligible Employee.” For purposes of this
Plan, an “Eligible Employee” is a regular, full-time hire employee of the
Company meeting all of the following requirements:
(1) the employee has been continuously employed by the
Company for a period of one (1) year or more;
(2) the employee’s employment is terminated by the Company
pursuant to (i) an Involuntary Termination Without Cause or (ii) Constructive
Termination within one (1) month prior to or twenty-four (24) months following a
Change of Control; and
(3) the employee is notified by the Company in writing that
he or she is eligible for participation in the Plan (“Notification”).
Notification will include details of the level(s) of participation applicable to
the Eligible Employee.
The determination of whether an employee is an Eligible Employee shall be
made by the Company, in its sole discretion, and such determination shall be
binding and conclusive on all persons.
(ii) Definition of “Involuntary Termination Without
Cause.” For purposes of this Plan, an “Involuntary Termination Without
Cause” means an Eligible Employee’s involuntary termination of employment by the
Company for a reason other than Cause. “Cause” means the occurrence of any one
or more of the following:
(1) the Eligible Employee’s conviction of, or plea of no
contest with respect to, any crime involving fraud, dishonesty or moral
turpitude;
(2) the Eligible Employee’s attempted commission of or
participation in a fraud or act of dishonesty against the Company that results
in (or might have reasonably resulted in) material harm to the business of the
Company;
(3) the Eligible Employee’s intentional, material violation
of any contract or agreement between the Eligible Employee and the Company or
any statutory duty the Eligible Employee owes to the Company;
(4) the Eligible Employee’s conduct that constitutes gross
misconduct, insubordination, incompetence or habitual neglect of duties and that
results in (or might have reasonably resulted in) material harm to the business
of the Company; or
(5) the Eligible Employee’s persistent unsatisfactory
performance of his or her job duties.
The conduct described under clause (3), (4) or (5) above will only constitute
Cause if such conduct is not cured within fifteen (15) days after the Eligible
Employee’s receipt of written notice from the Company or the Board specifying
the particulars of the conduct that may constitute Cause.
(iii) Definition of Change of Control. “Change of Control”
means the occurrence in a single transaction or in a series of related
transactions of any one or more of the following events.
(1) any person (within the meaning of Section 13(d) or 14(d)
of the Exchange Act of 1934, as amended (the “Exchange Act”) becomes the owner,
directly or indirectly, of securities of the Company representing more than
fifty percent (50%) of the combined voting power of the Company’s then
outstanding securities other than by virtue of a merger, consolidation or
similar transaction; provided, however, that there shall be excluded from the
foregoing any person who owns, as of the effective date of the Plan, securities
of the Company representing more than fifteen percent (15%) of the combined
voting power of the Company’s then outstanding securities;
(2) there is consummated a merger, consolidation or similar
transaction involving (directly or indirectly) the Company and, immediately
after the consummation of such merger, consolidation or similar transaction, the
stockholders of the Company immediately prior thereto do not own, directly or
indirectly, outstanding voting securities representing more than fifty percent
(50%) of the combined outstanding voting power of the surviving entity in such
merger, consolidation or similar transaction or more than fifty percent (50%) of
the combined outstanding voting power of the parent of the surviving entity in
such merger, consolidation or similar transaction;
(3) the stockholders of the Company approve or the Board of
Directors approves a plan of complete dissolution or liquidation of the Company,
or a complete dissolution or liquidation of the Company shall otherwise occur;
or
(4) there is consummated a sale, lease, license or other
disposition of all or substantially all of the consolidated assets of the
Company and its subsidiaries, other than a sale, lease, license or other
disposition of all or substantially all of the consolidated assets of the
Company and its subsidiaries to an entity, more than fifty percent (50%) of the
combined voting power of the voting securities of which are owned by
stockholders of the Company in substantially the same proportions as their
ownership of the Company immediately prior to such sale, lease, license or other
disposition.
Once a Change of Control has occurred for purposes of this Plan, no future
events will constitute a Change of Control for purposes of this Plan.
(iv) Definition of Constructive
Termination“Constructive Termination” means a termination of employment
by an Eligible Employee after one of the following occurs without the Eligible
Employee’s express written consent:
(1) Following a Change of Control, a substantial reduction
in the Eligible Employee’s duties or responsibilities (and not simply a change
in title or reporting relationships) in effect immediately prior to the
effective date of the Change of Control; provided, however, that it shall not be
a “Constructive Termination” if the Company is retained as a separate legal
entity or business unit following the effective date of the Change of Control
and the Eligible Employee holds the same position in such legal entity or
business unit as the Eligible Employee held before the effective date of the
Change of Control;
(2) Following a Change of Control, a material reduction by
the Company in the Eligible Employee’s annual base salary, as in effect on the
effective date of the Change of Control or as increased thereafter;
(3) Following a Change of Control, any failure by the
Company to continue in effect any benefit plan or program, including incentive
plans or plans with respect to the receipt of securities of the Company, in
which the Eligible Employee was participating immediately prior to the effective
date of the Change of Control (hereinafter referred to as “Benefit Plans”), or
the taking of any action by the Company that would adversely affect the Eligible
Employee’s participation in or reduce the Eligible Employee’s benefits under the
Benefit Plans or deprive the Eligible Employee of any fringe benefit that he or
she enjoyed immediately prior to the effective date of the Change of Control;
provided, however, that a Constructive Termination shall not be deemed to have
occurred if the Company provides for the Eligible Employee’s participation in
benefit plans and programs that, taken as a whole, are comparable to the Benefit
Plans;
(4) Following a Change of Control, a relocation of the
Eligible Employee’s business office to a location more than fifty (50) miles
from the location at which the Eligible Employee performed his or her duties as
of the effective date of the Change of Control, except for required travel by
the Eligible Employee on the Company’s business to an extent substantially
consistent with his or her business travel obligations prior to the effective
date of the Change of Control; or
(5) a material breach by the Company of any provision of any
material agreement between the Eligible Employee and the Company concerning the
terms and conditions of the Eligible Employee’s employment.
(b) Additional Requirements for Benefit
Entitlement. In order to be eligible to receive benefits under the
Plan, an Eligible Employee must (i) remain on the job until his or her date of
termination as scheduled by the Company and (ii) must execute a general waiver
and release in substantially the form attached hereto as Exhibit A, Exhibit B or
Exhibit C, as appropriate, and such release must become effective in accordance
with its terms. The Company, in its discretion, may modify the form of the
required release to comply with applicable law and shall determine the form of
the required release, which may be incorporated into a termination agreement or
other agreement with the Eligible Employee.
(c) Exceptions to Benefit Entitlement. An
employee, including an employee who otherwise is an Eligible Employee, will not
receive benefits under the Plan (or will receive reduced benefits under the
Plan) in the following circumstances, as determined by the Company in its sole
discretion:
(i) The employee has executed an individually negotiated
employment contract or agreement with the Company relating to severance benefits
that is in effect on his or her termination date, in which case such employee’s
severance benefit, if any, shall be governed by the terms of such individually
negotiated employment contract or agreement and shall be governed by this Plan
only to the extent that the reduction pursuant to Section 3(c) below does not
entirely eliminate benefits under this Plan.
(ii) The employee is eligible for benefits pursuant to a
local plan that supersedes the Plan and that is specifically designated for a
certain subsidiary or country.
(iii) The employee is employed in a country whose laws or
statutory labor requirements govern employee termination.
(iv) The employee voluntarily terminates employment with the
Company (other than pursuant to a Constructive Termination). Voluntary
terminations include, but are not limited to, resignation, retirement or failure
to return from a leave of absence on the scheduled date.
(v) The employee voluntarily terminates employment with the
Company in order to accept employment with another entity that is wholly or
partly owned (directly or indirectly) by the Company.
(vi) The employee is offered an identical or substantially
equivalent or comparable position with the Company. For purposes of the
foregoing, a “substantially equivalent or comparable position” is one that
offers the employee substantially the same level of responsibility and
compensation.
(vii) The employee is offered immediate reemployment by a
successor to the Company or by a purchaser of its assets, as the case may be,
following a change in ownership of the Company or a sale of substantially all of
the assets of a division or business unit of the Company. For purposes of the
foregoing, “immediate reemployment” means that the employee’s employment with
the successor to the Company or the purchaser of its assets, as the case may be,
results in uninterrupted employment such that the employee does not incur a
lapse in pay as a result of the change in ownership of the Company or the sale
of its assets.
(viii) The employee is rehired by the Company prior to the
date benefits under the Plan are scheduled to commence.
Section 3. Amount Of Benefit.
(a) Severance Benefits. Severance benefits
under the Plan, if any, shall be provided to Eligible Employees described in
Section 2 in the amount provided in Appendix 1, as such Appendix 1 may be
revised by the Company, in its sole discretion, from time to time.
(b) Additional Benefits. Notwithstanding
the foregoing, the Company may, in its sole discretion, provide benefits in
addition to those pursuant to Section 3(a) to Eligible Employees or employees
who are not Eligible Employees (“Non-Eligible Employees”) chosen by the Company,
in its sole discretion, and the provision of any such benefits to an Eligible
Employee or a Non-Eligible Employee shall in no way obligate the Company to
provide such benefits to any other Eligible Employee or to any other
Non-Eligible Employee, even if similarly situated. If benefits under the Plan
are provided to a Non-Eligible Employee, references in the Plan to “Eligible
Employee” (with the exception of Section 3(a)) shall be deemed to refer to such
Non-Eligible Employee.
(c) Certain Reductions. The Company, in its
sole discretion, shall have the authority to reduce an Eligible Employee’s
severance benefits, in whole or in part, by any other severance benefits, pay in
lieu of notice, or other similar benefits payable to the Eligible Employee by
the Company that become payable in connection with the Eligible Employee’s
termination of employment pursuant to (i) any applicable legal requirement,
including, without limitation, the Worker Adjustment and Retraining Notification
Act (the “WARN Act”), (ii) a written employment or severance agreement with the
Company, or (iii) any Company policy or practice providing for the Eligible
Employee to remain on the payroll for a limited period of time after being given
notice of the termination of the Eligible Employee’s employment. The benefits
provided under this Plan are intended to satisfy, in whole or in part, any and
all statutory obligations that may arise out of an Eligible Employee’s
termination of employment, and the Plan Administrator shall so construe and
implement the terms of the Plan. The Company’s decision to apply such reductions
to the severance benefits of one Eligible Employee and the amount of such
reductions shall in no way obligate the Company to apply the same reductions in
the same amounts to the severance benefits of any other Eligible Employee, even
if similarly situated. In the Company’s sole discretion, such reductions may be
applied on a retroactive basis, with severance benefits previously paid being
recharacterized as payments pursuant to the Company’s statutory obligation.
In addition to the foregoing reductions, if an Eligible Employee becomes
employed by an entity other than the Company during the period of time in
respect of which severance benefits pursuant to Sections 3(a) and 3(b) are paid,
the Eligible Employee must notify the Company in writing immediately. Following
receipt of such notification, the Company will reduce such Eligible Employee’s
unpaid severance benefits by fifty percent (50%).
Section 4. Time Of Payment And Form Of
Benefit.
The Company reserves the right to determine whether severance benefits under
the Plan, if any, shall be paid in a single sum, in installments, or in any
other form and to choose the timing of such payments; provided,
however, that in the event that any of the benefits payable under the Plan
to an Eligible Employee are determined by the Plan Administrator to constitute
deferred compensation subject to Section 409A(a)(2)(B)(i) of the Internal
Revenue Code of 1986 (the “Code”), as amended, then the amount of such benefits
so determined shall be payable to such Eligible Employee in a manner that
complies with the requirements of Section 409A, which may include, without
limitation, deferring the payment of such benefits for six (6) months after such
Eligible Employee’s date of termination, provided, further, however,
that nothing in this paragraph shall require the payment of benefits to such
Eligible Employee earlier than they would otherwise be payable under this Plan.
All such payments under the Plan will be subject to applicable withholding for
federal, state and local taxes. If an Eligible Employee is indebted to the
Company at his or her termination date, the Company reserves the right to offset
any severance payments under the Plan by the amount of such indebtedness. In no
event shall payment of any Plan benefit be made prior to the Eligible Employee’s
termination date or prior to the effective date of the release described in
Section 2(a)(3).
Section 5. Reemployment.
In the event of an Eligible Employee’s reemployment by the Company as an
employee or return to service with the Company as an independent contractor
during the period of time in respect of which severance benefits pursuant to
Sections 3(a) and 3(b) have been paid, the Company, in its sole and absolute
discretion, may require such Eligible Employee to repay to the Company all or a
portion of such severance benefits as a condition of reemployment or resumption
of service.
Section 6. Right To Interpret Plan; Amendment and
Termination, Limitations of Benefits.
(a) Exclusive Discretion. The Plan
Administrator shall have the exclusive discretion and authority to establish
rules, forms, and procedures for the administration of the Plan and to construe
and interpret the Plan and to decide any and all questions of fact,
interpretation, definition, computation or administration arising in connection
with the operation of the Plan, including, but not limited to, the eligibility
to participate in the Plan and amount of benefits paid under the Plan. The
rules, interpretations, computations and other actions of the Plan Administrator
shall be binding and conclusive on all persons.
(b) Amendment or Termination. The Company
reserves the right to amend or terminate this Plan (including Appendix 1) or the
benefits provided hereunder at any time; provided, however, that no
such amendment or termination shall affect the right to any unpaid benefit of
any Eligible Employee whose termination date has occurred prior to amendment or
termination of the Plan. Any action amending or terminating the Plan shall be in
writing and executed by the Chief Executive Officer or other Executive Vice
President of the Company as authorized in writing by the Chief Executive
Officer.
(c) Section 280G Parachute Payments. If any payment or
benefit an Eligible Employee would receive pursuant to a Change of Control from
the Company or otherwise (“Payment”) would (i) constitute a “parachute payment”
within the meaning of Section 280G of the Code, and (ii) but for this sentence,
be subject to the excise tax imposed by Section 4999 of the Code (the “Excise
Tax”), then such Payment shall be equal to the Reduced Amount. The “Reduced
Amount” shall be either (x) the largest portion of the Payment that would result
in no portion of the Payment being subject to the Excise Tax or (y) the largest
portion, up to and including the total, of the Payment, whichever amount, after
taking into account all applicable federal, state and local employment taxes,
income taxes, and the Excise Tax (all computed at the highest applicable
marginal rate), results in the Eligible Employee’s receipt, on an after-tax
basis, of the greater amount of the Payment notwithstanding that all or some
portion of the Payment may be subject to the Excise Tax. If a reduction in
payments or benefits constituting “parachute payments” is necessary so that the
Payment equals the Reduced Amount, reduction shall occur in the following order
unless the Eligible Employee elects in writing a different order (provided,
however, that such election shall be subject to Company approval if made on
or after the date on which the event that triggers the Payment occurs):
reduction of cash payments; cancellation of accelerated vesting of stock awards;
reduction of employee benefits. In the event that acceleration of vesting of
stock award compensation is to be reduced, such acceleration of vesting shall be
cancelled in the reverse order of the date of grant of the Eligible Employee’s
stock awards unless the Eligible Employee elects in writing a different order
for cancellation.
The accounting firm engaged by the Company for general audit purposes as of
the day prior to the effective date of the Change of Control shall perform the
foregoing calculations. If the accounting firm so engaged by the Company is
serving as accountant or auditor for the individual, entity or group effecting
the Change of Control, the Company shall appoint a nationally recognized
accounting firm to make the determinations required hereunder. The Company shall
bear all expenses with respect to the determinations by such accounting firm
required to be made hereunder.
The accounting firm engaged to make the determinations hereunder shall
provide its calculations, together with detailed supporting documentation, to
the Company and the Eligible Employee within fifteen (15) calendar days after
the date on which the Eligible Employee’s right to a Payment is triggered (if
requested at that time by the Company or the Eligible Employee) or such other
time as requested by the Company or the Eligible Employee. If the accounting
firm determines that no Excise Tax is payable with respect to a Payment, either
before or after the application of the Reduced Amount, it shall furnish the
Company and the Eligible Employee with an opinion reasonably acceptable to the
Eligible Employee that no Excise Tax will be imposed with respect to such
Payment. Any good faith determinations of the accounting firm made hereunder
shall be final, binding and conclusive upon the Company and the Eligible
Employee.
Section 7. No Implied Employment Contract.
The Plan shall not be deemed (i) to give any employee or other person any
right to be retained in the employ of the Company or (ii) to interfere with the
right of the Company to discharge any employee or other person at any time, with
or without cause, which right is hereby reserved.
Section 8. Legal Construction.
This Plan is intended to be governed by and shall be construed in accordance
with the Employee Retirement Income Security Act of 1974 (“ERISA”) and, to the
extent not preempted by ERISA, the laws of the State of California.
Section 9. Claims, Inquiries And Appeals,
Limitations of Benefits
(a) Applications for Benefits and
Inquiries. Any application for benefits, inquiries about the Plan or
inquiries about present or future rights under the Plan must be submitted to the
Plan Administrator in writing by an applicant (or his or her authorized
representative). The Plan Administrator is:
BroadVision, Inc.
1600 Seaport Blvd.,
5th Floor, North Bldg.
Redwood City, CA 94063
(b) Denial of Claims. In the event that any
application for benefits is denied in whole or in part, the Plan Administrator
must provide the applicant with written or electronic notice of the denial of
the application, and of the applicant’s right to review the denial. Any
electronic notice will comply with the regulations of the U.S. Department of
Labor. The notice of denial will be set forth in a manner designed to be
understood by the applicant and will include the following:
(i) the specific reason or reasons for the denial;
(ii) references to the specific Plan provisions upon which
the denial is based;
(iii) a description of any additional information or
material that the Plan Administrator needs to complete the review and an
explanation of why such information or material is necessary; and
(iv) an explanation of the Plan’s review procedures and the
time limits applicable to such procedures, including a statement of the
applicant’s right to bring a civil action under section 502(a) of ERISA
following a denial on review of the claim, as described in Section 9(d) below.
This notice of denial will be given to the applicant within ninety (90) days
after the Plan Administrator receives the application, unless special
circumstances require an extension of time, in which case, the Plan
Administrator has up to an additional ninety (90) days for processing the
application. If an extension of time for processing is required, written notice
of the extension will be furnished to the applicant before the end of the
initial ninety (90) day period.
This notice of extension will describe the special circumstances
necessitating the additional time and the date by which the Plan Administrator
is to render its decision on the application.
(c) Request for a Review. Any person (or
that person’s authorized representative) for whom an application for benefits is
denied, in whole or in part, may appeal the denial by submitting a request for a
review to the Plan Administrator within sixty (60) days after the application is
denied. A request for a review shall be in writing and shall be addressed to:
BroadVision, Inc.
1600 Seaport Blvd.,
5th Floor, North Bldg.
Redwood City, CA 94063
A request for review must set forth all of the grounds on which it is based,
all facts in support of the request and any other matters that the applicant
feels are pertinent. The applicant (or his or her representative) shall have the
opportunity to submit (or the Plan Administrator may require the applicant to
submit) written comments, documents, records, and other information relating to
his or her claim. The applicant (or his or her representative) shall be
provided, upon request and free of charge, reasonable access to, and copies of,
all documents, records and other information relevant to his or her claim. The
review shall take into account all comments, documents, records and other
information submitted by the applicant (or his or her representative) relating
to the claim, without regard to whether such information was submitted or
considered in the initial benefit determination.
(d) Decision on Review. The Plan
Administrator will act on each request for review within sixty (60) days after
receipt of the request, unless special circumstances require an extension of
time (not to exceed an additional sixty (60) days), for processing the request
for a review. If an extension for review is required, written notice of the
extension will be furnished to the applicant within the initial sixty (60) day
period. This notice of extension will describe the special circumstances
necessitating the additional time and the date by which the Plan Administrator
is to render its decision on the review. The Plan Administrator will give
prompt, written or electronic notice of its decision to the applicant. Any
electronic notice will comply with the regulations of the U.S. Department of
Labor. In the event that the Plan Administrator confirms the denial of the
application for benefits in whole or in part, the notice will set forth, in a
manner calculated to be understood by the applicant, the following:
(i) the specific reason or reasons for the denial;
(ii) references to the specific Plan provisions upon which
the denial is based;
(iii) a statement that the applicant is entitled to receive,
upon request and free of charge, reasonable access to, and copies of, all
documents, records and other information relevant to his or her claim; and
(iv) a statement of the applicant’s right to bring a civil
action under section 502(a) of ERISA.
(e) Rules and Procedures. The Plan
Administrator will establish rules and procedures, consistent with the Plan and
with ERISA, as necessary and appropriate in carrying out its responsibilities in
reviewing benefit claims. The Plan Administrator may require an applicant who
wishes to submit additional information in connection with an appeal from the
denial of benefits to do so at the applicant’s own expense.
(f) Exhaustion of Remedies. No legal action
for benefits under the Plan may be brought until the claimant (i) has submitted
a written application for benefits in accordance with the procedures described
by Section 9(a) above, (ii) has been notified by the Plan Administrator that the
application is denied, (iii) has filed a written request for a review of the
application in accordance with the appeal procedure described in Section 9(c)
above, and (iv) has been notified that the Plan Administrator has denied the
appeal. Notwithstanding the foregoing, if the Plan Administrator does not
respond to a Participant’s claim or appeal within the relevant time limits
specified in this Section 9, the Participant may bring legal action for benefits
under the Plan pursuant to Section 502(a) of ERISA.
Section 10. Basis Of Payments To And From
Plan.
All benefits under the Plan shall be paid by the Company. The Plan shall be
unfunded, and benefits hereunder shall be paid only from the general assets of
the Company.
Section 11. Other Plan Information.
(a) Employer and Plan Identification
Numbers. The Employer Identification Number assigned to the Company
(which is the “Plan Sponsor” as that term is used in ERISA) by the Internal
Revenue Service is 94-3184304. The Plan Number assigned to the Plan by the Plan
Sponsor pursuant to the instructions of the Internal Revenue Service is
511.
(b) Ending Date for Plan’s Fiscal Year.
The date of the end of the fiscal year for the purpose of maintaining the Plan’s
records is December 31.
(c) Agent for the Service of Legal Process.
The agent for the service of legal process with respect to the Plan is:
BroadVision, Inc.
1600 Seaport Blvd.,
5th Floor, North Bldg.
Redwood City, CA 94063
(d) Plan Sponsor and Administrator. The
“Plan Sponsor” and the “Plan Administrator” of the Plan is:
BroadVision, Inc.
1600 Seaport Blvd.,
5th Floor, North Bldg.
Redwood City, CA 94063
The Plan Sponsor’s and Plan Administrator’s telephone number is (650)
331-1000. The Plan Administrator is the named fiduciary charged with the
responsibility for administering the Plan.
Section 12. Statement Of ERISA Rights.
Participants in this Plan (which is a welfare benefit plan sponsored by
BroadVision, Inc.) are entitled to certain rights and
protections under ERISA. If you are an Eligible Employee, you are considered a
participant in the Plan and, under ERISA, you are entitled to:
Receive Information About Your Plan and
Benefits
(a) Examine, without charge, at the Plan Administrator’s
office and at other specified locations, such as worksites, all documents
governing the Plan and a copy of the latest annual report (Form 5500 Series)
filed by the Plan (note: the Plan currently is not subject to the requirement of
filing such an annual report) with the U.S. Department of Labor and available at
the Public Disclosure Room of the Employee Benefit Security Administration;
(b) Obtain, upon written request to the Plan Administrator,
copies of documents governing the operation of the Plan and copies of the latest
annual report (Form 5500 Series) (note: the Plan currently is not subject to the
requirement of filing such an annual report) and an updated (as necessary)
Summary Plan Description. The Administrator may make a reasonable charge for the
copies; and
(c) Receive a summary of the Plan’s annual financial report
(note: the Plan currently is not subject to the requirement of providing a
summary annual report). The Plan Administrator is required by law to furnish
each participant with a copy of this summary annual report.
Prudent Actions by Plan Fiduciaries
In addition to creating rights for Plan participants, ERISA imposes duties
upon the people who are responsible for the operation of the employee benefit
plan. The people who operate the Plan, called “fiduciaries” of the Plan, have a
duty to do so prudently and in the interest of you and other Plan participants
and beneficiaries. No one, including your employer, your union or any other
person, may fire you or otherwise discriminate against you in any way to prevent
you from obtaining a Plan benefit or exercising your rights under ERISA.
Enforce Your Rights
If your claim for a Plan benefit is denied or ignored, in whole or in part,
you have a right to know why this was done, to obtain copies of documents
relating to the decision without charge, and to appeal any denial, all within
certain time schedules.
Under ERISA, there are steps you can take to enforce the above rights. For
instance, if you request a copy of Plan documents or the latest annual report
from the Plan (note: the Plan currently is not subject to the requirement of
filing such an annual report) and do not receive them within 30 days, you may
file suit in a Federal court. In such a case, the court may require the Plan
Administrator to provide the materials and pay you up to $110 a day until you
receive the materials, unless the materials were not sent because of reasons
beyond the control of the Administrator.
If you have a claim for benefits which is denied or ignored, in whole or in
part, you may file suit in a state or Federal court. In addition, if you
disagree with the Plan’s decision or lack thereof concerning the qualified
status of a domestic relations order or a medical child support order, you may
file suit in Federal court.
If it should happen that Plan fiduciaries misuse the Plan’s money, or if you
are discriminated against for asserting your rights, you may seek assistance
from the U.S. Department of Labor, or you may file suit in a Federal court. The
court will decide who should pay court costs and legal fees. If you are
successful, the court may order the person you have sued to pay these costs and
fees. If you lose, the court may order you to pay these costs and fees, for
example, if it finds your claim is frivolous.
Assistance with Your Questions
If you have any questions about the Plan, you should contact the Plan
Administrator. If you have any questions about this statement or about your
rights under ERISA, or if you need assistance in obtaining documents from the
Plan Administrator, you should contact the nearest office of the Employee
Benefit Security Administration, U.S. Department of Labor, listed in your
telephone directory or the Division of Technical Assistance and Inquiries,
Employee Benefit Security Administration, U.S. Department of Labor, 200
Constitution Avenue N.W., Washington, D.C. 20210. You may also obtain certain
publications about your rights and responsibilities under ERISA by calling the
publications hotline of the Employee Benefit Security Administration.
Section 13. Execution.
To record the adoption of the Plan as set forth herein, effective as of March
26, 2007, BroadVision, Inc. has caused its duly authorized officer to execute
the same as of March 26, 2007.
BroadVision, Inc.
By: /s/ Pehong Chen
Pehong Chen, Chairman, CEO,
President and Interim CFO
Exhibit A
RELEASE AGREEMENT (“RELEASE”)
I understand and agree completely to the terms set forth in the
BroadVision, Inc. Severance Benefit Plan (the “Plan”).
I understand that this Release, together with the Plan, constitutes the
complete, final and exclusive embodiment of the entire agreement between the
Company and me with regard to the subject matter hereof. I am not relying on any
promise or representation by the Company that is not expressly stated therein.
Certain capitalized terms used in this Release are defined in the Plan.
I hereby confirm my obligations under the Company’s proprietary information
and inventions agreement.
I hereby represent that I have been paid all compensation owed and for all
hours worked, have received all the leave and leave benefits and protections for
which I am eligible, pursuant to the Family and Medical Leave Act or otherwise,
and have not suffered any on-the-job injury for which I have not already filed a
claim.
In exchange for the consideration provided to me by this Release that I am
not otherwise entitled to receive, I hereby generally and completely release the
Company and its current and former directors, officers, employees, shareholders,
partners, agents, attorneys, predecessors, successors, parent and subsidiary
entities, insurers, affiliates, and assigns from any and all claims, liabilities
and obligations, both known and unknown, that arise out of or are in any way
related to events, acts, conduct, or omissions occurring prior to my signing
this Release. This general release includes, but is not limited to: (a) all
claims arising out of or in any way related to my employment with the Company or
the termination of that employment; (b) all claims related to my compensation or
benefits from the Company, including salary, bonuses, commissions, vacation pay,
expense reimbursements, severance pay, fringe benefits, stock, stock options, or
any other ownership interests in the Company; (c) all claims for breach of
contract, wrongful termination, and breach of the implied covenant of good faith
and fair dealing; (d) all tort claims, including claims for fraud, defamation,
emotional distress, and discharge in violation of public policy; and (e) all
federal, state, and local statutory claims, including claims for discrimination,
harassment, retaliation, attorneys’ fees, or other claims arising under the
federal Civil Rights Act of 1964 (as amended), the federal Americans with
Disabilities Act of 1990, the federal Age Discrimination in Employment Act of
1967 (as amended) (“ADEA”), and the California Fair Employment and Housing Act
(as amended). Nothing in this Release shall prevent me from challenging this
Release by filing, cooperating with, or participating in any proceeding before
the Equal Employment Opportunity Commission, the Department of Labor, or the
California Department of Fair Employment and Housing, except that I hereby
acknowledge and agree that I shall not recover any monetary benefits in
connection with any challenge to my Release.
I acknowledge that I am knowingly and voluntarily waiving and releasing any
rights I may have under the ADEA (“ADEA Waiver”). I also acknowledge that the
consideration given for the ADEA Waiver is in addition to anything of value to
which I was already entitled. I further acknowledge that I have been advised by
this writing, as required by the ADEA, that: (a) my ADEA Waiver does not apply
to any rights or claims that arise after the date I sign this Release; (b) I
should consult with an attorney prior to signing this Release; (c) I have
twenty-one (21) days to consider this Release (although I may choose to
voluntarily sign it sooner); (d) I have seven (7) days following the date I sign
this Release to revoke the ADEA Waiver; and (e) the ADEA Waiver will not be
effective until the date upon which the revocation period has expired
unexercised, which will be the eighth day after I sign this Release.
I acknowledge that I have read and understand Section 1542 of the California
Civil Code which reads as follows: “A general release does not extend to
claims 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.” I hereby
expressly waive and relinquish all rights and benefits under that section and
any law of any jurisdiction of similar effect with respect to my release of any
claims hereunder.
I acknowledge that to become effective, I must sign and return this Release
to the Company so that it is received not later than twenty-one (21) days
following the date it is provided to me.
Employee
Name:
Date:
Exhibit B
RELEASE AGREEMENT (“RELEASE”)
I understand and agree completely to the terms set forth in the
BroadVision, Inc. Severance Benefit Plan (the “Plan”).
I understand that this Release, together with the Plan, constitutes the
complete, final and exclusive embodiment of the entire agreement between the
Company and me with regard to the subject matter hereof. I am not relying on any
promise or representation by the Company that is not expressly stated therein.
Certain capitalized terms used in this Release are defined in the Plan.
I hereby confirm my obligations under the Company’s proprietary information
and inventions agreement.
I hereby represent that I have been paid all compensation owed and for all
hours worked, have received all the leave and leave benefits and protections for
which I am eligible, pursuant to the Family and Medical Leave Act or otherwise,
and have not suffered any on-the-job injury for which I have not already filed a
claim.
Except as otherwise set forth in this Release, I hereby generally and
completely release the Company and its current and former directors, officers,
employees, shareholders, partners, agents, attorneys, predecessors, successors,
parent and subsidiary entities, insurers, affiliates, and assigns from any and
all claims, liabilities and obligations, both known and unknown, that arise out
of or are in any way related to events, acts, conduct, or omissions occurring
prior to my signing this Release. This general release includes, but is not
limited to: (a) all claims arising out of or in any way related to my employment
with the Company or the termination of that employment; (b) all claims related
to my compensation or benefits from the Company, including salary, bonuses,
commissions, vacation pay, expense reimbursements, severance pay, fringe
benefits, stock, stock options, or any other ownership interests in the Company;
(c) all claims for breach of contract, wrongful termination, and breach of the
implied covenant of good faith and fair dealing; (d) all tort claims, including
claims for fraud, defamation, emotional distress, and discharge in violation of
public policy; and (e) all federal, state, and local statutory claims, including
claims for discrimination, harassment, retaliation, attorneys’ fees, or other
claims arising under the federal Civil Rights Act of 1964 (as amended), the
federal Americans with Disabilities Act of 1990, the federal Age Discrimination
in Employment Act of 1967 (as amended) (“ADEA”), and the California Fair
Employment and Housing Act (as amended). Nothing in this Release shall prevent
me from challenging this Release by filing, cooperating with, or participating
in any proceeding before the Equal Employment Opportunity Commission, the
Department of Labor, or the California Department of Fair Employment and
Housing, except that I hereby acknowledge and agree that I shall not recover any
monetary benefits in connection with any challenge to my Release.
I acknowledge that I am knowingly and voluntarily waiving and releasing any
rights I may have under the ADEA (“ADEA Waiver”). I also acknowledge that the
consideration given for the ADEA Waiver is in addition to anything of value to
which I was already entitled. I further acknowledge that I have been advised by
this writing, as required by the ADEA, that: (a) my ADEA Waiver does not apply
to any rights or claims that arise after the date I sign this Release; (b) I
should consult with an attorney prior to signing this Release; (c) I have
forty-five (45) days to consider this Release (although I may choose to
voluntarily sign it sooner); (d) I have seven (7) days following the date I sign
this Release to revoke the ADEA Waiver; and (e) the ADEA Waiver will not be
effective until the date upon which the revocation period has expired
unexercised, which will be the eighth day after I sign this Release.
I have received with this Release a written disclosure of all of the
information required by the ADEA, including without limitation a detailed list
of the job titles and ages of all employees who were terminated in this group
termination and the ages of all employees of the Company in the same job
classification or organizational unit who were not terminated, along with
information on the eligibility factors used to select employees for the group
termination and any time limits applicable to this group termination program.
I acknowledge that I have read and understand Section 1542 of the California
Civil Code which reads as follows: “A general release does not extend to
claims 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.” I hereby
expressly waive and relinquish all rights and benefits under that section and
any law of any jurisdiction of similar effect with respect to my release of any
claims hereunder.
I acknowledge that to become effective, I must sign and return this Release
to the Company so that it is received not later than forty-five (45) days
following the date this Release and the ADEA disclosure form is provided to me.
Employee
Name:
Date:
Exhibit C
RELEASE AGREEMENT (“RELEASE”)
I understand and agree completely to the terms set forth in the
BroadVision, Inc. Severance Benefit Plan (the “Plan”).
I understand that this Release, together with the Plan, constitutes the
complete, final and exclusive embodiment of the entire agreement between the
Company and me with regard to the subject matter hereof. I am not relying on any
promise or representation by the Company that is not expressly stated therein.
Certain capitalized terms used in this Release are defined in the Plan.
I hereby confirm my obligations under the Company’s proprietary information
and inventions agreement.
I hereby represent that I have been paid all compensation owed and for all
hours worked, have received all the leave and leave benefits and protections for
which I am eligible, pursuant to the Family and Medical Leave Act or otherwise,
and have not suffered any on-the-job injury for which I have not already filed a
claim.
In exchange for the consideration provided to me by this Release that I am
not otherwise entitled to receive, I hereby generally and completely release the
Company and its current and former directors, officers, employees, shareholders,
partners, agents, attorneys, predecessors, successors, parent and subsidiary
entities, insurers, affiliates, and assigns from any and all claims, liabilities
and obligations, both known and unknown, that arise out of or are in any way
related to events, acts, conduct, or omissions occurring prior to my signing
this Release. This general release includes, but is not limited to: (a) all
claims arising out of or in any way related to my employment with the Company or
the termination of that employment; (b) all claims related to my compensation or
benefits from the Company, including salary, bonuses, commissions, vacation pay,
expense reimbursements, severance pay, fringe benefits, stock, stock options, or
any other ownership interests in the Company; (c) all claims for breach of
contract, wrongful termination, and breach of the implied covenant of good faith
and fair dealing; (d) all tort claims, including claims for fraud, defamation,
emotional distress, and discharge in violation of public policy; and (e) all
federal, state, and local statutory claims, including claims for discrimination,
harassment, retaliation, attorneys’ fees, or other claims arising under the
federal Civil Rights Act of 1964 (as amended), the federal Americans with
Disabilities Act of 1990, and the California Fair Employment and Housing Act (as
amended). Nothing in this Release shall prevent me from challenging this Release
by filing, cooperating with, or participating in any proceeding before the Equal
Employment Opportunity Commission, the Department of Labor, or the California
Department of Fair Employment and Housing, except that I hereby acknowledge and
agree that I shall not recover any monetary benefits in connection with any
challenge to my Release.
I acknowledge that I have read and understand Section 1542 of the California
Civil Code which reads as follows: “A general release does not extend to
claims 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.” I hereby
expressly waive and relinquish all rights and benefits under that section and
any law of any jurisdiction of similar effect with respect to my release of any
claims hereunder.
I acknowledge that to become effective, I must sign and return this Release
to the Company so that it is received not later than fourteen (14) days
following the date it is provided to me.
Employee
Name:
Date:
APPENDIX 1
BROADVISION, INC.
SEVERANCE BENEFIT PLAN
Severance benefits provided to Eligible Employees under the BroadVision, Inc.
Severance Benefit Plan (the “Plan”) are as set forth below.
A. Eligible Employees Involuntarily Terminated
Without Cause, No Change of Control. Pursuant to Section 3(a) of the
Plan, each Eligible Employee subject to an Involuntary Termination Without
Cause, except where such termination is a result of a Change of Control, shall
receive the following:
1. Cash Severance Benefits. Designated
Eligible Employees shall receive a cash severance benefit in accordance with the
Company’s then current payroll practices as follows:
|
EMPLOYEE DESIGNATION |
BASE |
ACCRUAL/YR |
MAXIMUM |
|||
|
CEO |
6.00 Mo. |
1.00 Mo/Yr. |
12.00 Mo. |
|||
|
EVP |
3.00 Mo. |
0.50 Mo/Yr. |
6.00 Mo. |
|||
|
SVP |
2.00 Mo. |
0.50 Mo/Yr. |
4.00 Mo. |
|||
|
VP |
1.00 Mo. |
0.50 Mo/Yr. |
2.00 Mo. |
|||
|
All Others |
0.50 Mo. |
0.08 Mo./Yr. |
1.00 Mo. |
For the purposes of the table above:
EMPLOYEE DESIGNATION equals the Eligible Employee’s highest official
title granted by the Company.
BASE is equal to the number of months of Base Salary the Eligible
Employee shall accrue under the Plan as a cash severance benefit upon completion
of one year of continuous employment with the Company.
ACCRUAL/YR is equal to the number of months of additional Base Salary
that the Eligible Employee will accrue under the Plan for each additional full
year of completed continuous employment with the Company subsequent to the first
year of continuous employment with the Company.
MAXIMUM is equal to the maximum number of months of Base Salary that
the Eligible Employee will be entitled to accrue as a cash severance benefit
under the Plan regardless of the Eligible Employee’s total number of years of
continuous employment with the Company.
Partial months of employment shall not be taken into account in calculating
the amount of any such severance benefit nor shall service provided as an
independent contractor or as an employee of an entity or other business unit
prior to such entity’s or other business unit’s acquisition by the Company or an
affiliate of the Company be taken into account in calculating the amount of any
severance benefit. A break in continuous employment of whatever duration shall
cause the loss of all completed months of continuous employment prior to such
break.
For purposes of calculating Plan benefits under this Section 1, “Base Salary”
shall mean the Eligible Employee’s base pay (excluding incentive pay, premium
pay, commissions, overtime, bonuses, profit sharing and any and all other forms
of variable compensation), at the rate in effect during the last regularly
scheduled payroll period immediately preceding the Eligible Employee’s
termination date. No Eligible Employee shall be entitled to receive more than 12
months of Base Salary under the Plan.
2. Additional Severance Benefits. With
respect to an Eligible Employee who is enrolled in a health, dental, or vision
plan sponsored by the Company and who elects to continue coverage under such
health, dental, or vision plan (or to convert to an individual policy), at the
time of the Eligible Employee’s termination of employment, the Company shall pay
the portion of premiums for the Eligible Employee’s health, dental and/or vision
plan coverage, including coverage for the Eligible Employee’s eligible
dependents, that the Company paid prior to the Eligible Employee’s termination
of employment for the same number of months as such Eligible Employee is
entitled to receive cash severance benefits as set forth in Section 1, above.
3. COBRA Continuation Coverage. Each
Eligible Employee who is enrolled in a health, dental, or vision plan sponsored
by the Company may be eligible to continue coverage under such health, dental,
or vision plan (or to convert to an individual policy) at the time of the
Eligible Employee’s termination of employment under the Consolidated Omnibus
Budget Reconciliation Act of 1985 (“COBRA”). The Company will notify the
Eligible Employee of any such right to continue such coverage at the time of
termination pursuant to COBRA. No provision of this Plan will affect the
continuation coverage rules under COBRA, except that the Company’s payment, if
any, of applicable insurance premiums pursuant to Section 2, above, will be
credited as payment by the Eligible Employee for purposes of the Eligible
Employee’s payment required under COBRA. Therefore, the period during which an
Eligible Employee may elect to continue the Company’s health, dental, or vision
plan coverage at his or her own expense under COBRA, the length of time during
which COBRA coverage will be made available to the Eligible Employee, and all
other rights and obligations of the Eligible Employee under COBRA (except the
obligation to pay insurance premiums pursuant to Section 2, above) will be
applied in the same manner that such rules would apply in the absence of this
Plan. Following the expiration of the period that the Company is obligated to
pay an Eligible Employee’s insurance premiums pursuant to Section 2 following
the Eligible Employee’s termination of employment, the Eligible Employee will be
responsible for the entire payment of premiums required under COBRA for the
duration of the COBRA period. For purposes of this Section 3, (i) references to
COBRA shall be deemed to refer also to analogous provisions of state law and
(ii) any applicable insurance premiums that are paid by the Company shall not
include any amounts payable by an Eligible Employee under an Internal Revenue
Code Section 125 health care reimbursement plan, which amounts, if any, are the
sole responsibility of the Eligible Employee.
4. Other Employee Benefits. All other
benefits (such as life insurance, disability coverage, and pension plan
coverage) terminate as of the Eligible Employee’s termination date (except to
the extent that a conversion privilege may be available thereunder).
5. Reductions Pursuant to Section 3(c) of the Plan.
The severance benefits set forth in this Appendix 1 are subject to
certain reductions under Section 3(c) of the Plan.
B. Eligible Employees Terminated Due to a Change of
Control. There are three (3) categories of Eligible Employees covered
in a Change of Control situation: Level I, Level II and Level III as hereinafter
defined. Level I Eligible Employees are defined as those Company Executive
Officers designated by the Compensation Committee as Level I Eligible Employees.
Level II Eligible Employees are defined as those Non-Executive Company Officers
designated by the CEO as Level II Eligible Employees who report directly to the
CEO. Level III Eligible Employees are defined as those Non-Executive Company
Officers and Department Managers designated by the CEO as Level III Eligible
Employees who report either directly to the CEO or to Level II Eligible
Employees. Designated Level I, II and III employees/positions covered under the
Plan are set forth in the spreadsheet attached hereto as Appendix 3 together
with detailed analysis of current status.
Pursuant to Section 3(a) of the Plan, each Level I, Level II and Level III
Eligible Employee subject to an Involuntary Termination Without Cause or
Constructive Termination within 1 month prior to or 24 months following a Change
of Control shall receive the following:
|
1. |
Cash Severance Payment. Level I, Level II and Level III |
||||
|
EMPLOYEE LEVEL |
BASE (NUMBER OF MO. BASE SALARY AFTER 1 YEAR TENURE) |
ACCELERATOR (NUMBER OF MO. BASE SALARY ACCRUED PER EACH YR. OF ADDITIONAL TENURE |
MAXIMUM YEARS TENURE ACCELERATOR APPLIED |
MAXIMUM MONTHS BASE SALARY ACCRUAL ALLOWED |
|
|
Level I |
9 |
1.25 |
12 |
24 |
|
|
Level II |
6 |
1.00 |
9 |
15 |
|
|
Level III |
3 |
0.75 |
8 |
9 |
|
For the purposes of the table above:
BASE is equal to the number of months of Base Salary the Eligible
Employee shall accrue under the Plan as a cash severance benefit upon completion
of one year of continuous employment with the Company.
ACCELERATOR is equal to the number of months of additional Base
Salary that the Eligible Employee will accrue under the Plan for each additional
full year of completed continuous employment with the Company subsequent to the
first year of continuous employment with the Company.
MAXIMUM YEARS is equal to the maximum number of years that the
ACCELERATOR will be applied under the Plan regardless of the number of years of
actual continuous employment with the Company.
MAXIMUM MONTHS is equal to the maximum number of months of Base
Salary that the Eligible Employee will be entitled to accrue as a cash severance
benefit under the Plan regardless of the Eligible Employee’s
total number of years of continuous employment with the
Company.
Partial months of employment shall not be taken into account in calculating
the amount of any such severance benefit nor shall service provided as an
independent contractor or as an employee of an entity or other business unit
prior to such entity’s or other business unit’s acquisition by the Company or an
affiliate of the Company be taken into account in calculating the amount of any
severance benefit. A break in continuous employment of whatever duration shall
cause the loss of all completed months of continuous employment prior to such
break.
For purposes of calculating Plan benefits under this Section 2, “Base Salary”
shall mean the Eligible Employee’s base pay (excluding incentive pay, premium
pay, commissions, overtime, bonuses, profit sharing and any and all other forms
of variable compensation), at the rate in effect during the last regularly
scheduled payroll period immediately preceding the Eligible Employee’s Change of
Control termination. No Eligible Employee shall be entitled to receive more than
24 months of Base Salary under the Plan for a Change of Control termination.
|
2. |
Additional Severance Benefits. With respect to an Eligible |
|
3. |
Stock Option Accelerated Vesting. The vesting and |
|
EMPLOYEE LEVEL |
BASE (PERCENTAGE OF UNVESTED STOCK OPTIONS ACCELERATED AFTER 1 YEAR TENURE) |
ACCELERATOR (PERCENTAGE OF UNVESTED STOCK OPTIONS ACCELERATED PER EACH YR. OF ADDITIONAL TENURE) |
MAXIMUM (TOTAL % OF UNVESTED STOCK OPTIONS ALLOWED TO BE ACCELERATED) |
|
Level I |
30% |
7.8% |
100% |
|
Level II |
25% |
6.1% |
80% |
|
Level III |
20% |
4.4% |
60% |
Partial months of employment shall not be taken into account in calculating
the amount of any such accelerated vesting nor shall service provided as an
independent contractor or as an employee of an entity or other business unit
prior to such entity’s or other business unit’s acquisition by the Company or an
affiliate of the Company be taken into account in calculating the amount of any
accelerated vesting. A break in continuous employment of whatever duration shall
cause the loss of all completed months of continuous employment prior to such
break.
Designated Level I, II and III Eligible Employees current stock option
vesting status is set forth in the spreadsheet attached hereto as Appendix 3.
|
4. |
COBRA Continuation Coverage. Each Eligible Employee who is |
|
5. |
Other Employee Benefits. All other benefits (such as life |
|
6. |
Reductions Pursuant to Section 3(c) of the Plan. The |
The foregoing severance benefits are subject to such change as the Company,
pursuant to Section 3(a) of the Plan, may determine in its sole and absolute
discretion. Any such change in severance benefits shall be set forth in a
revised version of this Appendix 1.
Appendix 1 Adopted: March 26, 2007, as amended October 21, 2009.
|
BroadVision, Inc. |
|
By: /s/ Pehong Chen |
Pehong Chen
|
Title: Chairman, CEO, President and Interim CFO |
APPENDIX 2
EXPLANATION OF BETTER AFTER TAX RESULT
PROVISION
A “better after tax result” provision permits an Eligible Employee to receive
the full amount of his or her benefits following a Change of Control unless a
reduction in such benefits would yield a greater total benefit for the Eligible
Employee, taking into account all applicable taxes including the golden
parachute payment excise tax. Therefore, the following two calculations are
done:
|
1. |
Assuming receipt of the full amount of the benefits the Eligible Employee is |
|
2. |
A calculation is run to determine to what extent the Eligible Employee’s |
The Eligible Employee receives the larger of the two possible after tax
benefit amounts, either the cut back amount (which avoids the imposition of the
excise tax) or the unreduced amount (which is subject to the excise tax).
Example 1: Assume the Eligible Employee’s average annual
compensation paid by the Company over the last five years is $300,000. Assume
further that upon an Involuntary Termination without Cause following a Change of
Control, the Eligible Employee would receive $5,000 in insurance benefits,
$225,000 in severance payments, and $674,000 in stock option acceleration valued
in accordance with IRS proposed regulations. Assume further that the Eligible
Employee has a marginal income tax rate of 50%. In this example, the Eligible
Employee’s benefits payable pursuant to the Change of Control Severance Benefit
Plan have a value, for purposes of the 20% excise tax under Section 4999 of the
Code, of $904,000. Because $904,000 equals or exceeds three times the Eligible
Employee’s average annual compensation ($900,000), the Eligible Employee is
subject to the 20% excise tax under Section 4999 of the Code. In the absence of
the better after tax results provision, upon receipt of the benefits described
above, the Eligible Employee would pay income tax on the severance payment equal
to $112,500 (50% x $225,000) and excise tax of $120,800 (20% x ($904,000 –
$300,000)). (The excise tax is paid on the excess of the value of payments and
benefits triggered by the Change of Control less the Eligible Employee’s average
annual compensation.)
However, if effect were given to a better after tax results provision, the
Eligible Employee’s benefit would be cut back to provide the Eligible Employee
with greater after tax benefits as follows: Instead of receiving $5,000 in
health insurance benefits, the Eligible Employee would receive $999 in health
insurance benefits. As a result of the reduction in health insurance benefits,
the Eligible Employee’s benefits payable pursuant to the Change of Control
Severance Benefit Plan would have a value for excise tax purposes of $899,999,
which would not equal or exceed three times the Eligible Employee’s average
annual compensation and the Eligible Employee would not be subject to the 20%
excise tax. In this example, the $4,001 cut back of health insurance benefits
payable to the Eligible Employee saved $120,800 in excise tax. It also would be
possible to reduce cash severance, instead of health benefits, by the same
amount and achieve the same result.
Example 2: Assume the same facts as in Example 1, but the value of
the severance payments due to the Eligible Employee is $700,000 instead of
$225,000. In this example, the Eligible Employee’s benefits payable pursuant to
the Change of Control Severance Benefit Plan are valued for excise tax purposes
at $1,379,000. Because $1,379,000 equals or exceeds three times the Eligible
Employee’s average annual compensation of $900,000, the Eligible Employee is
subject to the 20% excise tax of $215,800 (20% x ($1,379,000 – $300,000)). If
the Eligible Employee’s benefits were cut back, the Eligible Employee would
avoid the $215,800 excise tax but also would forfeit $5,000 in health insurance
benefits and $474,001 in severance payments. Pursuant to the better after tax
results provision, the Eligible Employee would receive all of the benefits
payable under the Change of Control Severance Benefit Plan and pay the excise
tax because that will put the Eligible Employee in a better after tax position.
APPENDIX 3
CHANGE OF CONTROL DESIGNATED ELIGIBLE
EMPLOYEES
SEVERANCE BENEFITS
[insert spreadsheet]
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