Frederick Kohler Page 2
unvested Option shares will become fully vested and exercisable. Such severance pay will be paid in accordance with the Companys standard payroll schedule on the Companys payroll dates at your regular payroll rate immediately prior to the Qualifying Termination, commencing on the Companys first regular payroll date following the last day of the Deadline, and will be subject to all applicable withholdings. Notwithstanding anything stated herein to the contrary, the severance provided in connection with your Qualifying Termination under this section is intended to be exempt from Internal Revenue Code Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(9)(iii) and to the extent it is exempt pursuant to such section it will in any event be paid no later than the last day of your second taxable year following the taxable year in which your Qualifying Termination has occurred.
To receive any of the severance pay or vesting acceleration described in this Section 6 or Section 7 below, (i) you must execute (and not revoke) a full and complete general release of all claims in a form provided by the Company without alteration and (ii) you must have returned all Company property (collectively, (i) and (ii) are the Conditions), in each case by the forty-fifth (45th) day (the Deadline) after your Qualifying Termination.
For the purposes of this offer letter only, you will be deemed to have incurred a Qualifying Termination if you are subject to an Involuntary Termination (as defined in this Section) that occurs in connection with or within twenty-four (24) months following a Change in Control (as defined in this Section).
For purposes of this Agreement:
(a) a Change in Control means a (i) consolidation, reorganization or merger of the Company with or into any other entity or entities in which the holders of the Companys outstanding shares immediately before such consolidation, reorganization or merger do not, immediately after such consolidation, reorganization or merger, retain stock or other ownership interests representing a majority of the voting power of the surviving entity or entities as a result of their shareholdings in the Company immediately before such consolidation, reorganization or merger; or (ii) a sale or all or substantially all of the Companys assets that is followed by a distribution of the proceeds to the Companys stockholders.
(b) an Involuntary Termination means an involuntary separation from service, as defined in Treasury Regulation 1.409A-1(n), (i) by the Company for any reason other than (A) Cause, as defined below, (B) death or (C) Permanent Disability, as defined below or (ii) by you for Good Reason (as defined below).
(c) Cause means (i) any willful, material violation by you of any law or regulation applicable to the business of the Company, your conviction for, or guilty plea to, a felony or a crime involving moral turpitude, or any willful perpetration by you of a common law fraud, (ii) your commission of an act of personal dishonesty which involves personal profit in connection with the Company or any other entity having a business relationship with the Company, (iii) any material breach by you of any provision of any agreement or understanding between the Company and you regarding the terms of your service as an employee, officer, director or consultant to the Company, including without limitation, your willful and continued failure or refusal to perform the material duties required of you as an employee, officer, director or consultant of the Company, other than as a result of having a disability, or a breach of any applicable invention assignment and confidentiality agreement or any agreement between the Company and you, (iv) your disregard of the policies of the Company so as to cause loss, damage or injury to the property, reputation or employees of the Company, (v) your violation or failure to comply with any of the Companys confidential information, privacy or similar policy or program or (vi) any other misconduct by you which is materially injurious to the financial condition or business reputation of, or is otherwise materially injurious to, the Company.
(d) Good Reason means, without your express written consent, the occurrence of any one or more of the following: (i) a change in your position with the Company that materially reduces your level of authorities, responsibilities or duties (provided that such reduction would not include remaining in the same relative position of responsibility within the Company following a Change in Control even if the Company were a subsidiary of another entity); (ii) a reduction in your base salary by more than ten percent (10%) unless (A) you consent thereto in your discretion, or (B) the annual salaries of all Company employees are similarly