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Exhibit
99.2
FORM OF CHANGE IN CONTROL
SEVERANCE AGREEMENT
FOR EXECUTIVE
OFFICERS
THIS AGREEMENT, dated
[ ],
is made by and between EMC Corporation (the “Company”),
and
[ ]
(the “Executive”) residing at [Address].
WHEREAS, the Company
considers the establishment and maintenance of a sound and vital
management to be essential to protecting and enhancing the best
interests of the Company and its stockholders; and
WHEREAS, the Executive has
made and is expected to make, due to the Executive’s intimate
knowledge of the business and affairs of the Company, its policies,
methods, personnel, and problems, a significant contribution to the
profitability, growth, and financial strength of the Company;
and
WHEREAS, the Company, as a
publicly held corporation, recognizes that the possibility of a
Change in Control may exist, and that such possibility and the
uncertainty and questions which it may raise among management may
result in the departure or distraction of the Executive in the
performance of the Executive’s duties, to the detriment of
the Company and its stockholders; and
WHEREAS, it is in the best
interests of the Company and its stockholders to reinforce and
encourage the continued attention and dedication of management
personnel, including the Executive, to their assigned duties
without distraction and to ensure the continued availability to the
Company of the Executive in the event of a Change in
Control;
THEREFORE, in consideration
of the foregoing and other respective covenants and agreements of
the parties herein contained, the parties hereto agree as
follows:
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Defined Terms . The definitions of capitalized terms
used in this Agreement are provided in Section 16. |
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2.
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Term of Agreement .
The term of this Agreement (the “Term”) shall commence
on December 31, 2007 and shall continue in effect through
January 1, 2009; provided , however , that
commencing on January 1, 2009 and each January 1st
thereafter, the Term shall automatically be extended for one
additional year unless, not later than April 1 of the
preceding year, the Company or the Executive shall have given
notice not to extend the Term; and further provided ,
however , that if a Change in Control shall have occurred
during the Term, the Term shall expire on the last day of the
twenty-fourth (24 th ) month following the month in which such Change in
Control occurred.
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| 3. |
Company’s Covenants Summarized . In order to
induce the Executive to remain in the employ of the Company and in
consideration of the Executive’s covenants in Section 4,
the Company, under the conditions described herein, shall pay the
Executive the Severance Payments and the other payments and
benefits described herein. Except as
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provided in
Section 5.4 or 9.1, no Severance Payments shall be payable
under this Agreement unless there shall have been (or, pursuant to
the second sentence of Section 6.1, there shall be deemed to
have been) a termination of the Executive’s employment with
the Company following a Change in Control and during the Term. This
Agreement shall not be construed as creating an express or implied
contract of employment and, except as otherwise agreed in writing
between the Executive and the Company, the Executive shall not have
any right to be retained in the employ of the Company.
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| 4. |
The Executive’s Covenants . Subject to the terms
and conditions of this Agreement, in the event of a Potential
Change in Control, the Executive shall remain in the employ of the
Company until the earliest of (i) a date which is six
(6) months from the date of the first occurrence of a
Potential Change in Control, (ii) the date of a Change in
Control, (iii) the date of termination by the Executive of the
Executive’s employment for Good Reason or by reason of death,
Disability or Retirement, or (iv) the termination by the
Company of the Executive’s employment for any
reason. |
| 5. |
Compensation Other Than Severance Payments; Equity
Awards . |
5.1 If the Executive fails to
perform the Executive’s full-time duties with the Company
following a Change in Control as a result of incapacity due to
physical or mental illness, during any period when the Executive so
fails to perform the Company shall pay the Base Salary to the
Executive, together with all compensation and benefits payable to
the Executive under the terms of any compensation or benefit plan,
program or arrangement (other than the Company’s short- or
long-term disability plan, as applicable, but including any bonus
or incentive plan) maintained by the Company during such period,
until the Executive resumes the full time performance of such
duties or the Executive’s employment is terminated by the
Company for Disability.
5.2 If the Executive’s
employment shall be terminated for any reason following a Change in
Control, the Company shall pay the Base Salary to the Executive
through the Date of Termination, together with all compensation and
benefits payable to the Executive through the Date of Termination
under the terms of the Company’s compensation and benefit
plans, programs or arrangements as in effect immediately prior to
the Date of Termination or, if more favorable to the Executive, as
in effect immediately prior to the first occurrence of an event or
circumstance constituting Good Reason.
5.3 Except as expressly
provided herein, if the Executive’s employment shall be
terminated for any reason following a Change in Control, the
Company shall pay to the Executive the Executive’s normal
post-termination compensation and benefits as such payments become
due. Such post-termination compensation and benefits shall be
determined under, and paid in accordance with, the Company’s
retirement, insurance and other compensation or benefit plans,
programs and arrangements as in effect immediately prior to the
Date of Termination or, if more favorable to the Executive, as in
effect immediately prior to the occurrence of the first event or
circumstance constituting Good Reason.
5.4 Notwithstanding anything
to the contrary contained in any equity plan or arrangement of the
Company or any agreement between the Company and the Executive,
upon
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the occurrence of a Change in Control,
any outstanding stock option, restricted stock or other equity or
equity-based award granted to the Executive shall become
immediately vested and exercisable if the Executive becomes
entitled to the Severance Payments described in Section 6.1.
From and after the occurrence of a Change in Control, the
“detrimental activity” provisions in the
Company’s equity plans shall no longer apply to any award
issued to the Executive under such plans.
6.1 If the Executive’s
employment is terminated within twenty-four (24) months
following a Change in Control, other than (a) by the Company
for Cause, (b) by reason of death or Disability, or
(c) by the Executive without Good Reason, then the Company
shall, subject to Section 15 hereof, pay the Executive the
amounts, and provide the Executive the benefits, described in this
Section 6.1 (“Severance Payments”) and
Section 6.2, in addition to any payments and benefits to which
the Executive is entitled under Section 5. For purposes of
this Agreement, the Executive’s employment shall be deemed to
have been terminated within twenty-four (24) months following
a Change in Control and during the Term by the Company without
Cause or by the Executive with Good Reason, if (i) the
Executive’s employment is terminated by the Company without
Cause during a Potential Change in Control Period, or (ii) the
Executive terminates Executive’s employment for Good Reason
during a Potential Change in Control Period. In the event that the
Executive’s employment is terminated in the manner described
in the preceding sentence, a Change in Control shall be deemed to
have occurred immediately preceding such termination for purposes
of Section 5.4 hereof. Except as described above or in
Section 9.1, the Executive shall not be entitled to benefits
pursuant to this Section 6.1 unless a Change in Control shall
have occurred during the Term.
(A) The Company shall pay to
the Executive a lump sum severance payment, in cash, equal to 2.99
times the sum of (a) the Base Salary, and (b) the sum of
the target annual bonus available to the Executive pursuant to each
of the Company’s annual bonus plans or any successor plans
(but excluding any special performance or incentive plan) in which
the Executive participates in respect of the fiscal year in which
the Date of Termination occurs (without giving effect to any event
or circumstance constituting Good Reason), assuming for this
purpose attainment of 100% of any applicable target; provided,
however, that if the applicable target bonus would have been
pro-rated for a partial fiscal year, such target bonus shall be
recalculated for purposes of this Section 6.1(A) to equal the
amount that for which the Executive would have been eligible for
the entire fiscal year.
(B) For the thirty-six
(36) month period immediately following the Date of
Termination, the Company shall arrange to provide the Executive and
Executive’s dependents life, disability, accident and health
insurance benefits substantially similar to those provided to the
Executive and Executive’s dependents immediately prior to the
Date of Termination or, if more favorable to the Executive, those
provided to the Executive and Executive’s dependents
immediately prior to the first occurrence of an event or
circumstance constituting Good Reason, at no greater after-tax cost
to the Executive than the cost to the Executive immediately prior
to such date or
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occurrence. If, at the end of
the thirty-six (36) month period following the Date of
Termination, the Executive has not previously become eligible to
receive comparable benefits from a new employer or pursuant to a
government-sponsored health insurance or health care program, then
the Company shall arrange, at its sole cost and expense, to enable
the Executive to convert coverage for the Executive and the
Executive’s dependents being provided hereunder to individual
policies or program, if applicable, upon the same terms as other
former employees of the Company may apply for such conversion. The
cost of providing the benefits set forth in this
Section 6.1(B) shall be in addition to (and shall not reduce)
the Severance Payments. Benefits otherwise receivable by the
Executive pursuant to this Section 6.1(B) shall be reduced to
the extent the Executive becomes eligible to receive comparable
benefits from a new employer or pursuant to a government-sponsored
health insurance or health care program. Unless the Executive
agrees to another method, the coverage described in this
Section 6.1(B) will be provided through a third party
insurer.
(C) The Company shall pay to
the Executive a prorated portion of the Executive’s bonus
compensation for the fiscal year in which the Date of Termination
occurs (assuming that any applicable performance objectives were
achieved at the target level of performance and without giving
effect to any event or circumstance constituting Good Reason)
calculated by multiplying (A) the target amount of such bonus
compensation by (B) a fraction, the numerator of which is the
number of days in the applicable fiscal year through the date of
termination and the denominator of which is 365. The foregoing
payment shall be reduced by the sum of any quarterly, semi-annual
and other partial year bonus payments previously paid to the
Executive in respect of the fiscal year in which the Date of
Termination occurs.
6.2 Gross Up
.
(A) Subject to
Section 6.2(F), whether or not the Executive becomes entitled
to the Severance Payments, if any of the payments or benefits
received or to be received by the Executive (whether pursuant to
the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any Person whose actions result in a
Change in Control or any Person affiliated with the Company or such
Person) (all such payments and benefits, excluding the Gross-Up
Payment, being hereinafter referred to as the “Total
Payments”) will be subject to the Excise Tax, the Company
shall pay to the Executive an additional amount (the
“Gross-Up Payment”) such that the net amount retained
by the Executive, after deduction of any Excise Tax on the Total
Payments and any federal, state and local income and employment
taxes and Excise Tax upon the Gross-Up Payment, shall be equal to
the Total Payments.
(B) For purposes of
determining whether any of the Total Payments will be subject to
the Excise Tax and the amount of such Excise Tax, (i) all of
the Total Payments shall be treated as “parachute
payments” (within the meaning of section 280G(b)(2) of the
Code) unless, in the opinion of tax counsel (“Tax
Counsel”) reasonably acceptable to the Executive and selected
by the accounting firm which was, immediately prior to the Change
in Control, the Company’s independent auditor (the
“Auditor”), such
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payments or benefits (in
whole or in part) do not constitute parachute payments, including
by reason of section 280G(b)(4)(A) of the Code, (ii) all
“excess parachute payments” within the meaning of
section 280G(b)(l) of the Code shall be treated as subject to the
Excise Tax unless, in the opinion of Tax Counsel, such excess
parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered (within the meaning of
section 280G(b)(4)(B) of the Code) in excess of the Base Amount
allocable to such reasonable compensation, or are otherwise not
subject to the Excise Tax, and (iii) the value of any noncash
benefits or any deferred payment or benefit shall be determined by
the Auditor in accordance with the principles of sections
280G(d)(3) and (4) of the Code. If there has not been a Date
of Termination with respect to the Executive, the Company shall
cause the Gross-Up Payment to be calculated within 30 days
following the date upon which there occurs a change in ownership or
control of the Company for purposes of section 280G of the
Code.
(C) Upon the
Executive’s request, the Company shall promptly provide the
Executive with a written statement setting forth the manner in
which calculations were made pursuant to this Section 6.2
including, without limitation, any opinions or other advice the
Company has received from Tax Counsel or other advisors or
consultants (and any such opinions or advice which are in writing
shall be attached to the statement).
(D) In the event that the
Excise Tax is finally determined to be less than the amount taken
into account hereunder in calculating the Gross-Up Payment, the
Executive shall repay to the Company, within five (5) business
days following the time that the amount of such reduction in the
Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction (plus that portion of the
Gross-Up Payment attributable to the Excise Tax and federal, state
and local income and employment taxes imposed on the Gross-Up
Payment being repaid by the Executive, to the extent that such
repayment results in a reduction in the Excise Tax and a
dollar-for-dollar reduction in the Executive’s taxable income
and wages for purposes of federal, state and local income and
employment taxes), plus interest on the amount of such repayment at
120% of the rate provided in section 1274(b)(2)(B) of the Code. In
the event that the Excise Tax is determined to exceed the amount
taken into account hereunder in calculating the Gross-Up Payment
(including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment),
the Company shall make an additional Gross-Up Payment in respect of
such excess (plus any interest, penalties or additions payable by
the Executive with respect to such excess) within five
(5) business days following the time that the amount of such
excess is finally determined, provided that such additional payment
shall only be made to the extent that the payment (or the right to
the payment) does not result in taxation under section 409A of the
Code, including pursuant to Treasury Regulation
Section 1.409A-3(d) (in which case the payment shall be made
in no event later than the end of the calendar year following the
calendar year in which the calculation of the Executive’s
excise tax liability under section 280G of the Code may be
calculated). The Executive and the Company shall each reasonably
cooperate with the other in connection with any administrative or
judicial proceedings concerning the existence or amount of
liability for
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Excise Tax with respect to
the Total Payments.
(E) Notwithstanding the
foregoing provisions of this Section 6.2, if it shall be
determined that the Executive is entitled to a Gross-Up Payment
with respect to a Change in Control occurring prior to
December 31, 2009, but the Total Payments do not exceed 110%
of the greatest amount that could be paid to the Executive such
that the receipt of Total Payments would not give rise to any
Excise Tax (the “Reduced Amount”), then no Gross-Up
Payment shall be made to the Executive and the Total Payments, in
the aggregate, shall be reduced to the Reduced Amount. If a
reduction is required, the reduction shall be applied to the
payments otherwise payable pursuant to Section 6.1(A)
hereof.
(F) If the Executive is
entitled to a Gross-Up Payment, the amount of the Gross-Up Payment
shall be reduced by the portion of the Gross-Up Payment that is
attributable to equity awards granted to the Executive by the
Company on and after August 10, 2007 (“Post 8/10/2007
Equity Awards”). The portion of the Gross-Up Payment that is
attributable to Post 8/10/2007 Equity Awards shall be determined by
multiplying the Gross-Up Payment by a fraction, the numerator of
which is the aggregate amount of “parachute payments”
within the meaning of section 280G(b)(2) attributable to the
Executive’s Post 8/10/2007 Equity Awards and the denominator
of which is the aggregate of all of the Executive’s
“parachute payments” within the meaning of section
280G(b)(2). Notwithstanding the foregoing, if as a result of the
application of this Section 6.1(E) the Reduced Amount (reduced
by applicable taxes) exceeds the sum of the Total Payments and the
Gross-Up Payment (such sum reduced by applicable taxes), then the
Executive shall not receive a Gross-Up Payment and the Total
Payments shall be reduced to the Reduced Amount. In such case, the
reduction to the Total Payments shall be applied to the payments
otherwise payable pursuant to Section 6.1(A)
hereof.
(G) The Executive will not be
entitled to a Gross-Up Payment under this Agreement with respect to
any change in ownership or control of the Company (for purposes of
section 280G of the Code) occurring on or after December 31,
2009, but shall continue to remain entitled to a Gross-Up Payment
with respect to any change in ownership or control of the Company
(for purposes of section 280G of the Code) occurring prior to
December 31, 2009 in accordance with this Section 6.2. In
the event (1) the Executive’s entitlement to a Gross-Up
Payment is eliminated pursuant to this Section 6.2(G) and
(2) the Reduced Amount (reduced by applicable taxes) exceeds
the net amount of the Total Payments which would be retained by the
Executive after deduction of any Excise Tax (and all other
applicable taxes) on the Total Payments, the Total Payments shall
be reduced to the Reduced Amount. If a reduction is required, the
reduction shall be applied to the payments otherwise payable
pursuant to Section 6.1(A) hereof.
6.3 Subject to
Section 14.3(A), the payments provided in subsection
(A) and (C) of Section 6.1 and in Section 6.2
shall be made not later than the eighth day following the Release
Deadline (or, in the case of Section 6.2, if there is no Date
of Termination, then the fifth day following the date on which the
Gross-Up Payment is calculated for purposes of Section
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6.2), provided , however ,
that if the amounts of such payments cannot be finally determined
on or before such day, the Company shall pay to the Executive on
such day an estimate, as determined in good faith by the Company
or, in the case of payments under Section 6.2, in accordance
with Section 6.2, of the minimum amount of such payments to
which the Executive is clearly entitled and shall pay the remainder
of such payments (together with interest on the unpaid remainder
(or on all such payments to the extent the Company fails to make
such payments when due) at 120% of the rate provided in section
1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined, but in no event later than the thirtieth
(30th) day after the Release Deadline (also subject to
Section 14.3(A)). In the event that the amount of the
estimated payments exceeds the amount subsequently determined to
have been due, such excess shall constitute a loan by the Company
to the Executive, payable on the fifth (5th) business day
after demand by the Company (together with interest at 120% of the
rate provided in section 1274(b)(2)(B) of the Code). At the time
that payments are made under this Agreement, the Company shall
provide the Executive with a written statement
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