Exhibit 10.6
FORM OF CHANGE OF CONTROL
AGREEMENT
[Name]
[Title]
Dear [Name]:
Apex Silver Mines Limited (the
“Company”) considers it essential to the best interests
of its stockholders to foster the continuous employment of key
management personnel. In this connection, the Board of
Directors of the Company (the “Board”) recognizes that,
as is the case with many publicly held corporations, the
possibility of a Change of Control (as defined in Section 2 hereof)
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 management personnel to the detriment
of the Company and its stockholders.
The Board has determined that
appropriate steps should be taken to reinforce and encourage the
continued attention and dedication of members of the
Company’s management, including yourself, to their assigned
duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a Change of Control,
although no such change is now contemplated.
In order to induce you to remain in
the employ of the Company, the Company agrees that you shall
receive the severance benefits set forth in this letter agreement
(the “Agreement”) in the event your employment with the
Company is terminated subsequent to a Change of Control under the
circumstances described below.
1. TERM OF AGREEMENT.
This Agreement shall commence on the date hereof and shall continue
from year to year at the discretion of the Board of
Directors. Provided no Change of Control shall have occurred,
the Company may terminate this Agreement at any time upon 12 months
prior written notice to you; provided , however ,
that after a Change of Control during the term of this Agreement,
this Agreement shall remain in effect until all of the obligations
of the parties under the Agreement are satisfied and the two year
period referred to in the definition of “Good Reason”
has expired. Notwithstanding the foregoing, and provided no
Change of Control shall have occurred, this Agreement shall
automatically terminate upon the earlier to occur of (i) your
termination of employment with the Company, or (ii) the
Company’s furnishing you with notice of termination of
employment, irrespective of the effective date of such
termination.
2. CHANGE OF CONTROL. No
benefits shall be payable hereunder unless there shall have been a
Change of Control, as set forth below. For purposes of this
Agreement, a “Change of Control” shall mean the first
to occur of the following events specified in (A), (B), (C), (D) or
(E) (but no event other than the specified events): (A) any
person becomes the beneficial owner, directly or indirectly, of
securities of the Company representing thirty-five percent (35%) or
more of the combined voting power of the Company’s then
outstanding voting securities (other than
(i) the Company, (ii) any subsidiary
of the Company, or (iii) one or more employee benefit plans
maintained by the Company); (B) three or more Directors of the
Company, whose election or nomination for election is not approved
by a majority of the applicable Incumbent Board, are elected within
any single twelve month period to serve on the Board; (C) members
of the applicable Incumbent Board cease to constitute a majority of
the Board; (D) the consummation of a merger or consolidation of the
Company with or into any other corporation or entity or person, or
any other corporate reorganization, in which the stockholders of
the Company immediately prior to such consolidation, merger or
reorganization own less than 50% of the outstanding voting
securities of the surviving entity (or its parent) following the
consolidation, merger or reorganization or (E) the consummation of
a sale, lease or other disposition of all or substantially all of
the assets of the Company. For purposes of Section 2(A)
hereof, the terms “person” and “beneficial
owner” shall have the meanings set forth in Section 13(d) and
Rule 13d-3, respectively, of the Securities Exchange Act of 1934,
as amended, and in the regulations promulgated thereunder.
For purposes of this Section 2, “Incumbent Board” means
(i) members of the Board of Directors of the Company as of the date
hereof, to the extent that they continue to serve as members of the
Board, and (ii) any individual who becomes a member of the Board
after the date hereof, if such individual’s election or
nomination for election as a Director was approved by a vote of at
least seventy-five percent (75%) of the then applicable Incumbent
Board.
3. TERMINATION FOLLOWING
CHANGE OF CONTROL. If the events described in Section 2
hereof constituting a Change of Control shall have occurred during
the term of this Agreement, you shall be entitled to the benefits
provided in Subsection 4(iii) hereof upon the subsequent
termination of your employment within 2 years after the occurrence
of such Change of Control unless such termination is (A) because of
your death or Disability, (B) by the Company for Cause, or (C) by
you other than for Good Reason.
(i)
Disability. If, as a result of
your incapacity due to physical or mental illness, you shall have
been absent from the full-time performance of your duties with the
Company for six consecutive months, and within 30 days after
written notice of termination is given you shall not have returned
to the full-time performance of your duties, your employment may be
terminated for “Disability.”
(ii)
Cause. Termination by the
Company of your employment for “Cause” shall mean
termination for (A) the commission of a felony or a crime involving
moral turpitude or the commission of any other act involving
dishonesty, disloyalty, or fraud with respect to the Company, (B)
conduct tending to bring the Company into substantial public
disgrace or disrepute, (C) substantial and repeated failure to
perform duties as reasonably directed by the Board, (D) gross
negligence or willful misconduct with respect to the Company or any
of its affiliated entities, or (E) any other material breach of any
other agreement between you and the Company or its affiliated
entities which is not cured within 15 days after written notice
thereof to you.
(iii)
Good Reason. You shall be
entitled to terminate your employment for Good Reason. For
purposes of this Agreement, “Good Reason” shall mean,
without your express written consent, the occurrence within 2 years
after a Change of Control of any of the following circumstances
unless, in the case of paragraphs (A), (B), (E), (F), (G) or (H),
such circumstances are fully corrected prior to the Date of
Termination specified in the Notice of Termination, as such terms
are defined in Subsections 3(v) and 3(iv) hereof, respectively,
given in respect thereof:
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(A)
the assignment to you of any duties
inconsistent with your current status as an executive of the
Company or a substantial adverse alteration in the nature or status
of your responsibilities from those in effect immediately prior to
the Change of Control;
(B)
a reduction by the Company in your
annual base salary as in effect on the date hereof or as the same
may be increased from time to time, except for across-the-board
salary reductions similarly affecting all senior executives of the
Company and all senior executives of any person in control of the
Company;
(C)
your relocation to a location not
within 25 miles of your present office or job location, except for
required travel on the Company’s business to an extent
substantially consistent with your present business travel
obligations;
(D)
the failure by the Company to pay to
you any portion of your current compensation, or to pay to you any
portion of an installment of deferred compensation under any
deferred compensation program of the Company, within seven days of
the date such compensation is due;
(E)
the failure by the Company to
continue in effect any bonus to which you were entitled, or any
compensation plan in which you participated immediately prior to
the Change of Control which is material to your total compensation,
including but not limited to the Company’s Incentive Bonus
Plan, Stock Option Plan, 401(k) Profit Sharing Plan, or any
substitute plan or plans adopted prior to the Change of Control,
unless an equitable arrangement (embodied in an ongoing substitute
or alternative plan) has been made with respect to such plan and
such equitable arrangement provides substantially equivalent
benefits not materially less favorable to you (both in terms of the
amount of benefits provided and the level of your participation
relative to other participants), or the failure by the Company to
continue your participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable (both in
terms of the amount of benefits provided and the level of your
participation relative to other participants) as existed at the
time of the Change of Control of the Company.
(F)
the failure by the Company to
continue to provide you with benefits substantially similar or
superior to those enjoyed by you under any of the Company’s
life insurance, medical, dental, and accident, or disability plans
in which you were participating at the time of the Change of
Control, the taking of any action by the Company which would
directly or indirectly materially reduce any of such benefits or
deprive you of any material fringe benefit enjoyed by you at the
time of the Change of Control, or the failure by the Company to
provide you with the number of paid vacation days to which you are
entitled in accordance with the Company’s normal vacation
policy in effect at the time of the Change of Control;
(G)
the failure of the Company to obtain
a satisfactory agreement from any successor to assume and agree to
perform this Agreement, as contemplated in Section 5 hereof;
or
(H)
any purported termination of your
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Subsection 3(iv) hereof
(and,
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if applicable, the requirements of
Subsection 3(ii) hereof); for purposes of this Agreement, no such
purported termination shall be effective.
Your rights to terminate your
employment pursuant to this Subsection 3(iii) shall not be affected
by your incapacity due to physical or mental illness. Your
continued employment shall not constitute consent to, or a waiver
of rights with respect to, any circumstance constituting Good
Reason hereunder.
(iv)
NOTICE OF TERMINATION. Any
purported termination of your employment by the Company or by you
shall be communicated by written Notice of Termination to the other
party hereto in accordance with Section 6 hereof. For
purposes of this agreement, a “Notice of Termination”
shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a
basis for termination of your employment under the provision so
indicated.
(v)
DATE OF TERMINATION, ETC.
“Date of Termination” shall mean (A) if your employment
is terminated for Disability, 30 days after Notice of Termination
is given (provided that you shall not have returned to the
full-time performance of your duties during such 30-day period),
(B) if your employment is terminated pursuant to Subsection 3(ii)
hereof or for any other reason (other than Disability), the date
specified in the Notice of Termination (which shall not be less
than 30 nor more than 60 days from the date such Notice of
Termination is given) or (C) if your employment is terminated
pursuant to Subsection 3(iii) hereof, the date specified in the
Notice of Termination (which shall not be less than 15 nor more
than 60 days from the date such Notice of Termination is
given).
4. COMPENSATION UPON
TERMINATION OR DURING DISABILITY. Following a Change of
Control, as defined by Section 2 hereof, upon termination of your
employment within 2 years after the occurrence of such Change of
Control or during a period of Disability you shall be entitled to
the following benefits:
(i)
During any period that you fail to
perform your full-time duties with the Company as a result of
incapacity due to physical or mental illness, you shall continue to
receive your base salary at the rate in effect at the commencement
of any such period, together with all amounts payable to you under
any compensation plan of the Company during such period, until this
Agreement is terminated pursuant to Subsection 3(i) hereof.
Thereafter, or in the event your employment shall be terminated by
you other than for Good Reason or by reason of your death, your
benefits shall be determined under the Company’s insurance or
other compensation programs then in effect in accordance with the
terms of such programs.
(ii)
If your employment shall be
terminated by the Company for Cause, Disability or death, or by you
other than for Good Reason, the Company shall, to the extent not
theretofore paid, pay you in a lump sum your full base salary
through the Date of Termination at the rate in effect at the time
Notice of Termination is given within 10 business days of the Date
of Termination, plus all other amounts to which you are entitled
under any insurance and other compensation programs of the Company
at the time such payments are due, and the Company shall have no
further obligations to you under this Agreement.
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(iii)
If your employment by the Company
shall be terminated (a) by the Company other than for Cause,
Disability or death or (b) by you for Good Reason, then you shall
be entitled to the benefits provided below:
(A)
The Company shall, to the extent not
theretofore paid, pay you in a lump sum your full base salary
through the Date of Termination at the rate in effect at the time
Notice of Termination is given within 10 business days of the Date
of Termination, plus all other amounts to which you are entitled
under any compensation plan of the Company, at the time such
payments are due, except as otherwise provided below.
(B)
In lieu of any further salary
payments to you for periods subsequent to the Date of Termination,
the Company shall pay as severance pay to you a lump sum severance
payment (together with the payments provided in paragraph (C) of
this Subsection 4(iii), the “Severance Payments”) equal
to times the sum
of (a) your annual base salary in effect immediately prior to the
occurrence of the circumstance giving rise to the Notice of
Termination given in respect thereof, and (b) 100% of your target
bonus amount established pursuant to the compensation or bonus plan
in effect immediately prior to the occurrence of the circumstance
giving rise to the Notice of Termination. The Severance
Payments shall be made within 10 business days of the Date of
Termination.
(C)
The Company shall pay to you any
deferred compensation, including but not limited to deferred
bonuses, allocated or credited to you as of the Date of
Termination.
(D)
The Company shall also pay to you
all legal fees and expenses incurred by you prior to December 31 of
the second calendar year following the calendar year that includes
the Date of Termination as a result of such termination including
all such fees and expenses, if any, incurred in contesting or
disputing any such termination or in seeking to obtain or enforce
any right or benefit provided by this Agreement .
(E)
Taxes - All payments shall be
subject to the withholding of such amounts as the Company is
required to be withheld pursuant to any applicable federal, state,
or local law or regulation, and you are responsible for any tax
liability on such payments.
(F)
All payments under this Agreement
will be contingent upon the execution of a Release of Claims
by you and the Company, and this Release of Claims shall
govern the timing of all payments made. A copy of the terms
and conditions of such Release of Claims is attached as an
appendix to this Agreement.
(G)
Gross-Up of Benefits. Anything
in this Agreement to the contrary notwithstanding, in the event it
shall be determined that any payment or distribution by the Company
to or for your benefit (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise,
but determined without regard to any additional payments required
under this Section 4.(iii)(G) (a “Payment”) would
be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended, including any
regulations adopted thereunder (the “Code”), or any
interest or penalties are
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incurred by you with respect to such
excise tax that are not due to your actions or inactions (such
excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the “Excise
Tax”), then you shall be entitled to receive an additional
payment (a “Gross-Up Payment”) in an amount such that
after payment by you of all taxes imposed upon the Gross-Up Payment
(including any federal, state, and local income taxes, employment
taxes under Section 3101(b) of the Code, and Excise Taxes,
assuming the highest marginal income tax rates apply to the
Gross-Up Payment), you retain an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments. In the
event you are entitled to a Gross-Up Payment, the following shall
apply:
(1)
All determinations required to be
made, including whether and when a Gross-Up Payment is required and
the amount of such Gross-Up Payment, shall be made by a nationally
recognized certified public accounting firm selected by the Company
(the “Accounting Firm”). The Accounting Firm
shall be requested to provide detailed supporting calculations both
to the Company and you within 15 business days of the receipt
of notice that there has been a Payment. All fees and
expen
