CATAPULT COMMUNICATIONS
CORPORATION
CHANGE OF CONTROL SEVERANCE
AGREEMENT
This Change of
Control Severance Agreement (the “Agreement”) is made
and entered into by and between Richard A. Karp
(“Executive”) and Catapult Communications Corporation,
a Nevada corporation (the “Company”), effective as of
June 13, 2008.
1. It is
expected that the Company from time to time will consider the
possibility of an acquisition by another company or other change of
control. The Compensation Committee of the Board of Directors of
the Company (the “Committee”) recognizes that such
consideration can be a distraction to Executive and can cause
Executive to consider alternative employment opportunities. The
Committee has determined that it is in the best interests of the
Company and its stockholders to assure that the Company will have
the continued dedication and objectivity of Executive,
notwithstanding the possibility, threat or occurrence of a Change
of Control of the Company.
2. The
Committee believes that it is in the best interests of the Company
and its stockholders to provide Executive with an incentive to
continue his or her employment and to motivate Executive to
maximize the value of the Company upon a Change of Control for the
benefit of its stockholders.
3. The
Committee believes that it is imperative to provide Executive with
certain severance benefits upon Executive’s termination of
employment following a Change of Control. These benefits will
provide Executive with enhanced financial security and incentive
and encouragement to remain with the Company notwithstanding the
possibility of a Change of Control.
4. Certain
capitalized terms used in the Agreement are defined in
Section 6 below.
NOW, THEREFORE, in
consideration of the mutual covenants contained herein, the parties
hereto agree as follows:
1. Term
of Agreement . This Agreement will terminate on
December 31, 2009. Notwithstanding the previous sentence, if
Executive becomes entitled to benefits pursuant to Section 3
and/or Section 4 of this Agreement, the Agreement will not
terminate until, but will terminate when, all of the obligations of
the parties hereto with respect to this Agreement have been
satisfied.
2.
At-Will Employment . The Company and Executive acknowledge
that Executive’s employment is and will continue to be
at-will, as defined under applicable law. If Executive’s
employment terminates for any reason, including (without
limitation) any termination that occurs other than during the
period that is on or within twelve (12) months after a Change
of Control as provided herein, Executive will not be entitled to
any payments, benefits, damages, awards or
compensation
other than as provided by this Agreement and the payment of accrued
but unpaid wages, as required by law, and any unreimbursed
reimbursable expenses.
3. Change
of Control Payment . In the event of a Change of Control, and
subject to Executive’s continued employment with the Company
through the effective date of such Change of Control, Executive
will receive a lump sum payment in an amount equal to twelve
(12) months of Executive’s annual base salary as in
effect immediately prior to the Change of Control (the
“Change of Control Payment”). The Change of Control
Payment will be paid within ten (10) days of the effective
date of such Change of Control. The Change of Control Payment to be
paid pursuant to this Section 3 will be in addition to any
other payments Executive may otherwise be entitled to receive under
Section 4.
(a)
Termination without Cause or Resignation for Good Reason in
Connection with a Change of Control . If the Company terminates
Executive’s employment with the Company without Cause or if
Executive resigns from such employment for Good Reason, and such
termination occurs on or within twelve (12) months after a
Change of Control, and Executive signs and does not revoke a
release of claims with the Company (in a form reasonably acceptable
to the Company) that is effective no later than March 15 of
the year following the year in which the termination occurs, then
Executive will receive the following from the Company:
(i)
Accrued Compensation . The Company will pay Executive all
accrued but unpaid vacation, expense reimbursements, wages, and
other benefits due to Executive under any Company-provided plans,
policies, and arrangements.
(ii)
Severance Payment . Executive will receive a lump sum
payment of severance equal to 100% of Executive’s annual base
salary as in effect immediately prior to Executive’s
termination date or (if greater) at the level in effect immediately
prior to the Change of Control.
(iii)
Equity Awards . All outstanding equity awards will vest in
full as to 100% of the unvested portion of the award. Executive
will have six (6) months following the date of his or her
termination in which to exercise any outstanding stock options or
other similar rights to acquire Company common stock; provided,
however, that such post-termination exercise period will not extend
beyond the original maximum term of the stock option or other
similar right to acquire Company common stock and an equity award
will not extend beyond a Change of Control in the event it is not
assumed or substituted for as contemplated by the stock plan under
which it was granted.
(iv)
Continued Employee Benefits . If Executive elects
continuation coverage pursuant to the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended (“COBRA”) for
Executive and Executive’s eligible dependents, within the
time period prescribed pursuant to COBRA, the Company will
reimburse Executive for the COBRA premiums for such coverage (at
the coverage levels in effect immediately prior to
Executive’s termination) until the earlier of (A) a
period of eighteen (18) months from the last date of
employment of the Executive with the Company, or (B) the date
upon which Executive and/or Executive’s eligible dependents
becomes covered under similar plans. COBRA reimbursements will be
made by the Company to Executive consistent with the
Company’s normal expense reimbursement policy.
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(b)
Timing of Severance Payments . Unless otherwise required by
Section 4(g), the Company will pay any severance payments in a
lump sum as soon as practicable following Executive’s
termination date; provided, however, that no severance or other
benefits will be paid or provided until the release of claims
discussed in Section 4(a) becomes effective, and any severance
amounts or benefits otherwise payable between Executive’s
termination date and the date such release becomes effective will
be paid on the effective date of such release. If Executive should
die before all of the severance amounts have been paid, such unpaid
amounts will be paid in a lump-sum payment promptly following such
event to Executive’s designated beneficiary, if living, or
otherwise to the personal representative of Executive’s
estate.
(c)
Voluntary Resignation; Termination for Cause . If
Executive’s employment with the Company terminates
(i) voluntarily by Executive (other than for Good Reason
during the period that is on or within twelve (12) months
after a Change of Control) or (ii) for Cause by the Company,
then Executive will not be entitled to receive severance or other
benefits except for those (if any) as may then be established under
the Company’s then existing severance and benefits plans and
practices or pursuant to other written agreements with the
Company.
(d)
Disability; Death . If the Company terminates
Executive’s employment as a result of Executive’s
Disability, or Executive’s employment terminates due to his
or her death, then Executive will not be entitled to receive
severance or other benefits except for those (if any) as may then
be established under the Company’s then existing written
severance and benefits plans and practices or pursuant to other
written agreements with the Company.
(e)
Termination not in Connection with a Change of Control . In
the event Executive’s employment is terminated for any reason
other than as provided in Section 4(a), then Executive will be
entitled to receive severance and any other benefits only as may
then be established under the Company’s existing written
severance and benefits plans and practices or pursuant to other
written agreements with the Company.
(f)
Exclusive Remedy . In the event of a Change of Control as
set forth in Section 3 of this Agreement, or a termination of
Executive’s employment as set forth in Section 4(a) of this
Agreement, the provisions of Section 3 and Section 4, as
applicable, are intended to be and are exclusive and in lieu of any
other rights or remedies to which Executive or the Company may
otherwise be entitled, whether at law, tort or contract, in equity,
or under this Agreement (other than the payment of accrued but
unpaid wages, as required by law, and any unreimbursed reimbursable
expenses). Executive will be entitled to no benefits, compensation
or other payments or rights upon a Change of Control or a
termination of employment following a Change of Control other than
those benefits expressly set forth in Section 3 or
Section 4 of this Agreement.
(i) Notwithstanding
anything to the contrary in this Agreement, if Executive is a
“specified employee” within the meaning of
Section 409A of the Internal Revenue Code of 1986, as amended
(the “Code”) and the final regulations and any guidance
promulgated thereunder (“Section 409A”) at the
time of Executive’s termination (other than due to death),
then the severance payable to Executive, if any, pursuant to this
Agreement, when considered together with any other severance
payments or separation benefits that are considered deferred
compensation under Section 409A (together, the “Deferred
Compensation Separation Benefits”) that are payable within
the first six (6) months following Executive’s
termination of employment, will become
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payable on the
first payroll date that occurs on or after the date six
(6) months and one (1) day following the date of
Executive’s termination of employment. All subsequent
Deferred Compensation Separation Benefits, if any, will be payable
in accordance with the payment schedule applicable to each payment
or benefit. Notwithstanding anything herein to the contrary, if
Executive dies following his or her termination but prior to the
six (6) month anniversary of his or her termination, then any
payments delayed in accordance with this paragraph will be payable
in a lump sum as soon as administratively practicable after the
date of Executive’s death and all other Deferred Compensation
Separation Benefits will be payable in accordance with the payment
schedule applicable to each payment or benefit. Each payment and
benefit payable under this Agreement is intended to constitute
separate payments for purposes of Section 1.409A-2(b)(2) of
the Treasury Regulations.
(ii) Any
amount paid under this Agreement that satisfies the requirements of
the “short-term deferral” rule set forth in
Section 1.409A-1(b)(4) of the Treasury Regulations shall not
constitute Deferred Compensation Separation Benefits for purposes
of clause (i) above.
(iii) Any
amount paid under this Agreement that qualifies as a payment made
as a result of an involuntary separation from service pursuant to
Section 1.409A-1(b)(9)(iii) of the Treasury Regulations that
do not exceed the Section 409A Limit shall not constitute
Deferred Compensation Separation Benefits for purposes of clause
(i) above.
(iv) The
foregoing provisions are intended to comply with the requirements
of Section 409A so that none of the severance payments and
benefits to be provided hereunder will be subject to the additional
tax imposed under Section 409A, and any ambiguities herein
will be interpreted to so comply. The Company and Executive agree
to work together in good faith to consider amendments to this
Agreement and to take such reasonable actions which are necessary,
appropriate or desirable to avoid imposition of any additional tax
or income recognition prior to actual payment to Executive under
Section 409A.
5.
Limitation on Payments . In the event that the severance and
other benefits provided for in this Agreement or otherwise payable
to Executive (i) constitute “parachute payments”
within the meaning of Section 280G of the Code, and
(ii) but for this Section 5, would be subject to the
excise tax imposed by Section 4999 of the Code, then
Executive’s Change of Control Payment and severance benefits
under Section 3 and Section 4(a)(i) respectively will be
either:
(a) delivered
in full, or
(b) delivered
as to such lesser extent which would result in no portion of such
benefits being subject to excise tax under Section 4999 of the
Code,
whichever of
the foregoing amounts, taking into account the applicable federal,
state and local income taxes and the excise tax imposed by
Section 4999, results in the receipt by Executive on an
after-tax basis, of the greatest amount of benefits,
notwithstanding that all or some portion of such benefits may be
taxable under Section 4999 of the Code. If a reduction in
severance and other benefits constituting “parachute
payments” is necessary so that benefits are delivered to a
lesser extent, reduction will occur in the following order:
reduction of cash payments; cancellation of accelerated vesting of
equity awards; reduction of employee benefits. In the event that
acceleration of vesting of equity award compensation is to be
reduced, such acceleration of vesting will be cancelled in the
reverse order of the date of grant of Executive’s equity
awards.
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Unless the Company
and Executive otherwise agree in writing, any determination
required under this Section 5 will be made in writing by the
Company’s independent public accountan
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