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EXHIBIT 4.1
GENERAL MAGIC, INC.
CHANGE OF CONTROL PLAN AND SUMMARY PLAN DESCRIPTION
SECTION 1. INTRODUCTION
The General Magic, Inc. Change of Control Plan ("Plan") was adopted by the
Board of Directors ("Board") of General Magic, Inc., effective April 16, 1998.
The Board 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 its employees, notwithstanding the possibility or occurrence of a
Change of Control (as defined below) of the Company.
SECTION 2. DEFINITION OF TERMS
The following terms referred to in this Plan shall have the following
meanings:
(a) CAUSE.
"Cause" shall mean any of the following:
(1) the Employee's willful dishonesty or fraud with respect to
the business affairs of the Company;
(2) the Employee's intentional falsification of any employment
or Company records;
(3) the Employee's misappropriation of or intentional material
damage to the business or property of the Company, including the improper use or
disclosure of the confidential or proprietary information of the Company; or
(4) the Employee's conviction (including any plea of guilty or
nolo contendere) of a felony or other crime that, in the Company's judgment,
materially impairs the Employee's ability to perform his or her duties for the
Company, or adversely affects the Company's reputation or standing in the
community.
(b) CHANGE OF CONTROL.
"Change of Control" shall mean the occurrence of any of the following
events:
(1) a dissolution or liquidation of the Company;
(2) a sale, lease or other disposition of all or substantially
all of the assets of the Company so long as the Company's stockholders
immediately prior to such transaction will, immediately after such transaction,
fail to possess direct or indirect beneficial ownership of more than fifty
percent (50%) of the voting power of the acquiring entity (for purposes of this
clause 2(b)(2), any person who acquired securities of the Company prior to the
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occurrence of such asset transaction in contemplation of such transaction and
who after such transaction possesses direct or indirect ownership of at least
ten percent (10%) of the securities of the acquiring entity immediately
following such transaction shall not be included in the group of stockholders of
the Company immediately prior to such transaction);
(3) either a merger or consolidation in which the Company is not
the surviving corporation and the stockholders of the Company immediately prior
to the merger or consolidation fail to possess direct or indirect beneficial
ownership of more than fifty percent (50%) of the voting power of the securities
of the surviving corporation (or if the surviving corporation is a controlled
affiliate of another entity, then the required beneficial ownership shall be
determined with respect to the securities of that entity which controls the
surviving corporation and is not itself a controlled affiliate of any other
entity) immediately following such transaction, or a reverse merger in which the
Company is the surviving corporation and the stockholders of the Company
immediately prior to the reverse merger fail to possess direct or indirect
beneficial ownership of more than fifty percent (50%) of the securities of the
Company (or if the Company is a controlled affiliate of another entity, then the
required beneficial ownership shall be determined with respect to the securities
of that entity which controls the Company and is not itself a controlled
affiliate of any other entity) immediately following the reverse merger (for
purposes of this clause 2(b)(3), any person who acquired securities of the
Company prior to the occurrence of a merger, reverse merger, or consolidation in
contemplation of such transaction and who after such transaction possesses
direct or indirect beneficial ownership of at least ten percent (10%) of the
securities of the Company or the surviving corporation (or if the Company or the
surviving corporation is a controlled affiliate, then of the appropriate entity
as determined above) immediately following such transaction shall not be
included in the group of stockholders of the Company immediately prior to such
transaction);
(4) an acquisition by any person, entity or group within the
meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or any comparable successor provisions (excluding
any employee benefit plan, or related trust, sponsored or maintained by the
Company or a subsidiary or other controlled affiliate of the Company) of the
direct or indirect beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act, or comparable successor rule) of securities
of the Company representing at least fifty percent (50%) of the combined voting
power entitled to vote in the election of directors; or
(5) the individuals who, as of the date of this Agreement, are
members of the Board (the "Incumbent Board"), cease for any reason to constitute
at least fifty percent (50%) of the Board. If the election, or nomination for
election by the Company's stockholders, of any new director was approved by a
vote of at least fifty percent (50%) of the Incumbent Board, such new director
shall be considered as a member of the Incumbent Board.
(c) COMPANY.
"Company" means General Magic, Inc. or, following a Change of Control, the
controlling surviving commercial entity resulting from such transaction.
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(d) DISABILITY.
"Disability" shall mean a physical or mental infirmity that renders an
Employee unable to perform the essential duties of his or her job, with or
without reasonable accommodation, for a period of one hundred twenty (120)
consecutive calendar days where the Employee has not returned to regular,
full-time employment prior to termination.
(e) GOOD REASON.
"Good Reason" shall mean the occurrence of any of the following
conditions after a Change of Control, without the Employee's written consent,
which condition(s) remain(s) in effect twenty (20) days after written notice to
the Company from Employee of such condition(s):
(1) a reduction of the Employee's base salary as in effect
immediately prior to the Change of Control, a reduction by more than fifteen
percent (15%) of the Employee's annual target bonus as in effect immediately
prior to the Change of Control, or a failure to provide to the Employee benefit
plans, arrangements, policies and procedures, which, taken as a whole, are not
materially less favorable to the Employee (including on an after-tax basis) than
those, taken as a whole, provided by the Company to the Employee immediately
prior to the Change of Control;
(2) a material, adverse change in the Employee's
responsibilities or duties, as measured against the Employee's responsibilities
or duties immediately prior to the Change of Control; provided, that, in the
case of an Executive Management employee (as defined in the appropriate Benefits
Schedule), a material, adverse change shall be deemed to occur for purposes of
this Plan if the Employee no longer serves as a vice president or executive
officer of a publicly-traded company reporting to the President or Chief
Executive Officer of the Company;
(3) the relocation of the Employee's work place for the Company
to a location more than twenty-five (25) miles from the Employee's then present
work location on other than a temporary basis; or
(4) any material breach of this Plan by the Company.
(f) TERMINATION AFTER CHANGE OF CONTROL.
"Termination After Change of Control" shall mean the occurrence, upon
or within thirteen (13) months following the occurrence of a Change of Control,
of either (i) termination of the Employee's employment by the Company for any
reason other than for Cause, or (ii) the Employee's resignation for Good Reason.
"Termination After Change of Control" shall not include any termination of the
employment of the Employee (A) by the Company for Cause; (B) by the Company as a
result of the Disability of the Employee; (C) as a result of the death of the
Employee; or (D) as a result of the voluntary termination of employment by the
Employee other than for Good Reason.
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SECTION 3. ELIGIBILITY AND PARTICIPATION
All regular, full-time employees of the Company other than the Chief
Executive Officer of the Company (each individually referred to as "Employee")
who are terminated from employment with the Company as a result of a Termination
After Change of Control become eligible to receive benefits under the Plan, and
are considered participants in the Plan, as of the date of such termination. For
purposes of this Plan, a regular, full-time employee is one regularly scheduled
in advance to work at least thirty (30) hours each week.
SECTION 4. ACCELERATION UPON NON-ASSUMPTION OF STOCK AWARDS
In the event of a Change of Control, the surviving, continuing, successor,
or purchasing corporation or parent corporation thereof, as the case may be
("Acquiring Corporation"), shall either assume or continue the Company's rights
and obligations under all then-outstanding stock awards granted to the Employee
or substitute for such stock awards substantially equivalent stock awards for
the Acquiring Corporation's stock. To the extent any of the stock awards held by
the Employee prior to the Change of Control are incentive stock options for
purposes of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), the substituted stock awards also shall be incentive stock options for
the Acquiring Corporation's stock. The Employee's outstanding stock awards shall
be deemed assumed or continued if, following the Change of Control, such stock
awards confer the right to purchase in accordance with their terms and
conditions, for each share of stock subject to such stock awards immediately
prior to the Change of Control, the consideration (whether stock, cash or other
securities or property) to which a holder of a share of the common stock of the
Company on the effective date of the Change of Control was entitled. Subject to
the limitations set forth in Section 5(c), in the event that the Acquiring
Corporation fails to assume or continue the Company's rights and obligations
under the Employee's outstanding stock awards or substitute for such stock
awards in connection with the Change of Control, and provided that the
Employee's employment with the Company has not terminated prior to the effective
date of the Change of Control, any unvested portions of the Employee's
outstanding stock awards shall be immediately exercisable and vested in full as
of the date ten (10) days prior to the date of the Change of Control. The
Company shall notify the Employee as soon as practicable that the Acquiring
Corporation does not intend to assume or continue the Employee's stock awards or
substitute its own stock awards. Stock awards to acquire Company stock that are
not assumed, continued or substituted for by the Acquiring Corporation, or that
are unexercised as of the date of the Change of Control, shall automatically
expire on such date, or upon such later date as may be determined by the Board
prior to the date of the Change of Control, notwithstanding any contrary
provisions contained in any stock award agreement (including a stock option
agreement) with respect to such stock awards. An exercise of the Employee's
outstanding stock awards that was permissible solely by reason of the
acceleration of exercisability provided by this section shall be conditioned
upon the consummation of the Change of Control.
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SECTION 5. SEVERANCE BENEFITS
(a) GENERAL.
(1) TERMINATION AFTER CHANGE OF CONTROL. Subject to the
limitations set forth in Section 5(c), if the Employee's employment is
terminated as a result of a Termination After Change of Control, then the
Employee shall be entitled to receive severance pay and other benefits in
accordance with the applicable Benefit Schedule.
(2) OTHER TERMINATIONS. If the Employee's employment terminates
for any reason other than as a result of a Termination After Change of Control,
then the Employee shall not be entitled to receive severance or other benefits
following the date of such termination, and the Company shall have no obligation
to pay any premiums necessary to provide for the continuation of any health and
medical benefit or life insurance coverage existing on the date of such
termination, except as otherwise required by any applicable severance program or
by applicable law.
(b) ACCELERATION OF VESTING OF STOCK AWARDS.
Subject to the limitations set forth in Section 5(c), if the
Employee's employment is terminated as a result of a Termination After Change of
Control, any unvested portion of any then-outstanding stock awards granted to
the Employee by the Company, including stock awards that have been assumed,
continued or substituted by the Acquiring Corporation, shall be automatically
accelerated and become immediately exercisable and vested in full effective as
of the date of the termination of the Employee's employment.
(c) LIMITATION OF PAYMENTS AND BENEFITS.
(1) EXCESS PARACHUTE PAYMENT. If any payment or benefit the
Employee would receive under this Plan (the "Payment") would (i) constitute a
"parachute payment" within the meaning of Section 280G of the Code, or any
comparable successor provision, and (ii) but for this paragraph would be subject
to the excise tax imposed by Section 4999 of the Code, or any comparable
successor provision (the "Excise Tax"), then the Employee's benefits under this
Plan shall be either (A) provided to Employee in full, or (B) reduced only to
the extent necessary to render the Excise Tax inapplicable, whichever of the
foregoing, when taking into account applicable federal, state, local and foreign
income and employment taxes, the Excise Tax, and any other applicable taxes,
results in receipt by the Employee, on an after-tax basis, of the greatest
amount of benefits, notwithstanding that all or some portion of such benefits
may be subject to the Excise Tax. Any determination required under this
paragraph shall be made in good faith and provided to the Company and the
Employee in writing by a qualified third party (the "Professional Service Firm")
selected by the Company prior to the Change of Control (and if none is selected
by the Company prior to the Change of Control, then that Professional Service
Firm selected by the Company at a later time). In the event of a reduction of
benefits hereunder, benefits payable in cash shall be reduced first. For
purposes of making the calculations required by this paragraph, the Professional
Service Firm may make reasonable assumptions and approximations concerning
applicable taxes and may rely
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on reasonable, good faith interpretations concerning the application of the
Code, and other applicable legal authority. The Company and the Employee shall
furnish to the Professional Service Firm such information and documents as the
Professional Service Firm may reasonably request in order to make a
determination under this paragraph. The Company shall bear all costs the
Professional Service Firm may reasonably incur in connection with any
calculations contemplated by this paragraph.
If, notwithstanding any reduction described in the foregoing
paragraph, the Internal Revenue Service (the "IRS") determines that the Employee
is liable for the Excise Tax as a result of receipt of the Payment, then the
Employee shall be obligated to pay back to the Company, within thirty (30) days
after a final IRS determination or, in the event that the Employee challenges
the final IRS determination, a final judicial determination, a portion of the
Payment equal to the "Repayment Amount." The Repayment Amount with respect to
Payment shall be the smallest amount, if any, required to be repaid to the
Company so that the Employee's net after-tax proceeds with respect to the
Payment (after taking into account the payment of the Excise Tax and all other
applicable taxes imposed on such payment) shall be maximized. The Repayment
Amount shall be zero if a Repayment Amount of more than zero would not result in
the maximization of the Employee's net after-tax proceeds with respect to the
Payment. If the Excise Tax is not eliminated pursuant to this paragraph, the
Employee shall pay the Excise Tax.
Notwithstanding any other provision of this Section 5(c)(1),
if (i) there is a reduction in the payment of benefits as described above, (ii)
the IRS later determines that the Employee is nonetheless liable for the Excise
Tax, payment of which would result in the maximization of the Employee's net
after-tax proceeds (calculated as if the Employee's benefits had not been
reduced hereunder), and (iii) the Employee pays the Excise Tax, then the Company
shall pay to the Employee the amount of the reduction contemporaneously or as
soon as administratively possible after the Employee pays the Excise Tax so that
the Employee's net after-tax proceeds with respect to the Payment is maximized.
(2) OTHER BENEFITS. All of the benefits described in the
applicable Benefit Schedule shall be reduced by the amount or to the extent of
other severance or retention benefits paid or payable to the Employee by the
Company in connection with layoff or termination of employment, including
without limitation any benefit required to be paid under the Worker Adjustment
and Retraining Notification Act ("WARN Act") or any other federal, state or
local law (including, without limitation, the so-called "plant closing" laws)
requiring the Company to give advance notice or make a payment of any kind to
the Employee because of that Employee's termination of employment due to a
layoff, reduction in force, plant or facility closing, sale of business, change
of control, or any other similar event or reason ("Other Applicable Laws"). In
no event shall an Employee be entitled to a benefit under this Plan greater than
the reduced amount described above, so that the sum of the Plan benefits, any
other severance or retention benefits payable to Employee by the Company, and
the benefits required under the WARN Act or Other Applicable Laws, if any, shall
not exceed the greater of (i) the benefits under this Plan prior to reduction
hereunder or (ii) the benefit amount mandated under the WARN Act or Other
Applicable Laws.
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SECTION 6. EMPLOYEE COVENANTS REGARDING NONSOLICITATION, NONCOMPETITION AND
CONFIDENTIAL INFORMATION.
The terms of any agreement between the Employee and Company concerning
nonsolicitation, noncompetition and the treatment of proprietary and
confidential information shall continue to apply subsequent to the Employee's
termination of employment for any reason. In the event no such agreement exists,
then for a period of one (1) year following termination of employment for any
reason, the Employee shall not recruit, solicit, or invite the solicitation of
any employees, contractors or service providers of the Company to terminate
their relationship with the Company, nor shall Employee use or disclose any
confidential or proprietary information of the Company unless authorized by the
Company.
SECTION 7. SUCCESSORS.
(a) COMPANY'S SUCCESSORS.
The Company shall require any successor to the Company (whether direct
or indirect and whether by purchase, lease, merger, consolidation, liquidation
or otherwise) or to all or substantially all of the Company's business and/or
assets to assume the obligations under this Plan and agree expressly to perform
the obligations under this Plan in the same manner and to the same extent as the
Company would be required to perform such obligations in the absence of a
succession. For all purposes under this Plan, the term "Company" shall include
any successor to the Company's business and/or assets which executes and
delivers the assumption agreement described in this Section 7(a) or which
becomes bound by the terms of this Plan by operation of law. Failure of the
Company to obtain such agreement shall be a material breach of this Plan.
(b) EMPLOYEE'S SUCCESSORS.
All rights of the Employee hereunder shall inure to the benefit of,
and be enforceable by, the Employee's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. The Employee shall have no right to assign any of his or her
obligations or duties under this Plan to any other person or entity.
SECTION 8. NOTICE.
(a) GENERAL.
Notices and all other communications contemplated by this Plan shall
be in writing and shall be deemed to have been duly given when personally
delivered or when mailed by U.S. registered or certified mail, return receipt
requested and postage prepaid. In the case of the Employee, mailed notices shall
be addressed to him or her at the home address which he or she most recently
communicated to the Company in writing. In the case of the Company, mailed
notices shall be addressed to its corporate headquarters, and all notices shall
be directed to the attention of its Secretary.
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(b) NOTICE OF TERMINATION.
Any termination by the Company for Cause or by the Employee as a
result of a voluntary resignation (including resignation for Good Reason) shall
be communicated by a notice of termination to the other party given in
accordance with this Section 8. Such notice shall indicate the specific
termination provision in this Plan relied upon, shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination
under the provision so indicated, and shall specify the termination date (which
shall be not more than fifteen (15) days after the giving of such notice).
SECTION 9. MISCELLANEOUS PROVISIONS.
(a) AT WILL EMPLOYMENT.
This Plan is not an employment agreement. Nothing in this Plan
requires an Employee to stay in the employ of the Company, requires the Company
to retain an employee in his or her present or any other position, or alters the
Employee's status as an at-will employee. The employment relationship may be
terminated either by the Company or the Employee at any time, with or without
cause.
(b) TERM OF AGREEMENT.
The provisions of this Plan shall terminate on such date as may be
determined by the Board, subject to the limitations of Section 14.
Notwithstanding the above, if a Change of Control occurs, the provisions of this
Plan shall terminate upon the later to occur of (i) the date that all
obligations of the parties hereunder have been satisfied, or (ii) thirteen (13)
months after the Change of Control. Any termination of this Plan shall not
affect any required payment or benefit that accrues prior to such termination.
(c) NO DUTY TO MITIGATE.
The Employee shall not be required to mitigate the amount of any
payment contemplated by this Plan (whether by seeking new employment or in any
other manner), nor shall any earnings that the Employee may receive from any
other source reduce any such payment.
(d) WAIVER.
No provision of this Plan shall be modified, waived or discharged
unless the modification, waiver or discharge is agreed to in writing and signed
by the Employee and by an authorized officer of the Company (other than the
Employee). No waiver by either party of any breach of, or of compliance with,
any condition or provision of this Plan by the other party shall be considered a
waiver of any other condition or provision or of the same condition or provision
at another time.
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(e) CHOICE OF LAW.
The laws of the State of California shall govern the validity,
interpretation, construction and performance of this Plan.
(f) SEVERABILITY.
The invalidity or unenforceability of any provision or provisions of
this Plan shall not affect the validity or enforceability of any other provision
hereof, which shall remain in full force and effect.
(g) NO ASSIGNMENT OF BENEFITS.
The rights of any person to payments or benefits under this Plan shall
not be made subject to option or assignment, either by voluntary or involuntary
assignment or by operation of law, including (without limitation) bankruptcy,
garnishment, attachment or other creditor's process, and any action in violation
of this Section 9(g) shall be void.
(h) INCOME AND EMPLOYMENT TAXES.
All payments made pursuant to this Plan will be subject to withholding
of applicable income and employment taxes.
SECTION 10. ADMINISTRATION AND OPERATION OF THE PLAN
The Company is the "Plan Sponsor" and the "Plan Administrator" of the
Plan, as such terms are defined in the Employee Retirement Income Security Act
of 1974 ("ERISA"). The Company, in its capacity as Plan Administrator of the
Plan, is the named fiduciary that has the authority to control and manage the
operation and administration of the Plan. The Company has the sole discretion to
make such rules, regulations, and interpretations of the Plan and to make such
computations and to take such other action to administer the Plan as it may deem
appropriate in its sole discretion. Such rules, regulations, interpretations,
computations, and other actions shall be conclusive and binding upon all
persons. The Company may engage the services of such persons or organizations to
render advice or perform services with respect to its responsibilities under the
Plan as it shall determine to be necessary or appropriate. Such persons or
organizations may include (without limitation) actuaries, attorneys, accountants
and consultants.
Any person or group of persons may serve in more than one fiduciary
capacity with respect to the Plan. The responsibilities of the Company under the
Plan shall be carried out on its behalf by its directors, officers, employees
and agents, acting on behalf or in the name of the Company in their capacity as
directors, officers, employees and agents and not as individual fiduciaries. The
Company may delegate any of its fiduciary responsibilities under the Plan to
another person or persons pursuant to a written instrument that specifies the
fiduciary responsibilities so delegated to each such person.
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SECTION 11. CLAIMS, INQUIRIES, APPEALS AND ARBITRATION
(a) APPLICATIONS FOR BENEFITS AND INQUIRIES.
Applications for benefits should be in writing, signed and submitted
to: Plan Administrator, Change of Control Plan, General Magic, Inc., 420 N. Mary
Avenue, Sunnyvale, California 94085. If the application is not granted in full
within thirty (30) days of submission then the Employee at his or her election
may either (i) pursue arbitration as described in Section 11(g) hereof and give
the Plan Administrator reasonably prompt notice of such intention or (ii) pursue
the claims procedure set forth below.
(b) DENIAL OF CLAIMS.
If any application for benefits is denied in whole or in part, the
Plan Administrator must notify Employee, in writing, of the denial of the
application, and of Employee's right to review the denial. The written notice of
denial will be set forth in a manner designed to be understood, and will include
specific reasons for the denial, specific references to the Plan provision upon
which the denial is based, a description of any information or material that the
Plan Administrator needs to complete the review and an explanation of the Plan's
review procedure.
This written notice will be given to Employee 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 Employee before the end of the initial
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. If written notice of denial of the
application for benefits is not furnished within the specified time, the
application shall be deemed denied. Employee will then be permitted to appeal
the denial in accordance with the review procedure described below.
(c) REQUEST FOR REVIEW.
The Employee (or the Employee's authorized representative) may appeal
a denied benefit claim by submitting a written request for review to: Review
Panel, Change of Control Plan, General Magic, Inc., 420 N. Mary Avenue,
Sunnyvale, California 94085. The Review Panel shall be comprised of two (2) or
more persons to be appointed by the Company. The Employee's appeal must be
submitted within sixty (60) days after the application is denied (or deemed
denied). The Review Panel will give the Employee (or the Employee's
representative) an opportunity to review pertinent documents in preparing a
request for a review.
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
Employee or the Employee's representative feel are pertinent. The Review Panel
may require the Employee or the Employee's
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representative to submit additional facts, documents or other material as it may
find necessary or appropriate in making its review.
(d) DECISION ON REVIEW.
The Review Panel 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 within the initial 60-day period. The Review
Panel will give written notice of its decision to the applicant. In the event
that the Review Panel confirms the denial of the application for benefits in
whole or in part, the notice will outline the specific Plan provisions upon
which the decision is based. If written notice of the Review Panel's decision is
not given within the time prescribed above, the application will be deemed
denied on review. If the claim is denied on review, the applicant may then
either pursue his or her claim in a judicial forum or invoke the arbitration
procedure described in Section 11(g) hereof.
(e) RULES AND PROCEDURES.
The Plan Administrator and/or the Review Panel may establish rules and
procedures, consistent with the Plan and with ERISA, as necessary and
appropriate in carrying out their responsibilities in reviewing benefit claims.
If the Employee wishes to submit additional information in connection with an
appeal from the denial (or deemed denial) of benefits, the Employee may be
required to do so at the Employee's own expense.
(f) EXHAUSTION OF REMEDIES.
No legal action for benefits under Section 11(d) of the Plan or
otherwise may be brought unless and until (i) a written application for benefits
has been submitted in accordance with the procedures described above; (ii) the
person claiming benefits has been notified by the Plan Administrator that the
application is denied (or the application is deemed denied due to the Plan
Administrator's failure to act on it within the time prescribed), and the
claimant has not invoked the arbitration procedure under Section 11(g) hereof;
(iii) a written request for a review of the application has been submitted in
accordance with the appeal procedure described above; and (iv) the person
appealing the denial has been notified in writing that the Review Panel has
denied the appeal (or the appeal is deemed to be denied due to the Review
Panel's failure to take any action on the claim within the time prescribed) and
the claimant has not invoked the arbitration procedure under Section 11(g)
hereof.
(g) ARBITRATION.
(1) In the event of any dispute between the Company and the
Employee concerning the validity, interpretation, enforcement or breach of this
Plan, provided the Employee has invoked this arbitration procedure either under
Section 11(a) or Section 11(d) hereof, excepting only any rights the parties may
have to seek injunctive relief, the dispute shall be resolved by final and
binding arbitration administered by JAMS/Endispute in Sunnyvale,
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California in accordance with then existing JAMS/Endispute Arbitration Rules and
Procedures for Employment Disputes. Resolution by arbitration, either in lieu of
or after exhausting the procedures set forth at Sections 11(b) through (d) of
this Plan, shall be at the election of the Employee with respect to any claim to
which Section 11(a) shall apply. In the event of such an arbitration proceeding,
the parties shall select a mutually acceptable neutral arbitrator from among the
JAMS/Endispute panel of arbitrators. In the event the parties cannot agree on an
arbitrator, the Administrator of JAMS/Endispute shall appoint an arbitrator.
Neither party nor the arbitrator shall disclose the existence, content, or
results of any arbitration hereunder without the prior written consent of all
parties, except as may be compelled by court order. Except as provided herein,
the Federal Arbitration Act shall govern the interpretation and enforcement of
such arbitration and all proceedings. The arbitrator shall apply the substantive
law (and the law of remedies, if applicable) of the State of California, or
federal law, or both, as applicable and the arbitrator is without jurisdiction
to apply any different substantive law. The arbitrator shall have the authority
to entertain a motion to dismiss and/or a motion for summary judgment by any
party and shall apply the standards governing such motions under the Federal
Rules of Civil Procedure. The arbitrator shall render an award and a written,
reasoned opinion in support thereof. Judgment upon the award may be entered in
any court having jurisdiction thereof. The parties intend this arbitration
provision to be valid, enforceable, irrevocable and construed as broadly as
possible. Pending the resolution of any dispute between the parties, the Company
shall continue prompt payment of all amounts due the claimant under this Plan
and prompt provision of all benefits to which the claimant is otherwise
entitled.
(2) Costs of arbitration, including reasonable attorney fees and
costs and the reasonable fees and costs of any experts incurred by the claimant,
shall be borne and paid by the Company if the claimant prevails on any portion
of his or her claim(s). Such fees and costs shall be paid by the Company in
advance of the final disposition of such claims, as such fees are incurred, upon
receipt of an undertaking by the claimant to repay such amounts if it is
ultimately determined that he or she did not prevail on any portion of his or
her claim(s).
(3) Notwithstanding the foregoing provisions of this Section
11(g), either a claimant or the Company may seek and obtain otherwise available
injunctive relief in Court for any violation of obligations concerning
confidential information or trade secrets that cannot adequately be remedied at
law or in arbitration.
SECTION 12. OTHER PLAN INFORMATION.
(a) EMPLOYER AND PLAN IDENTIFICATION NUMBERS. The Employer Identification
Number assigned to the Company by the Internal Revenue Service is 77-0250147.
The Plan Number assigned to the Plan by the Plan Sponsor pursuant to the
instructions of the Internal Revenue Service is 505.
(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 the General Counsel of the Company,
who may be
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contacted at 420 N. Mary Avenue, Sunnyvale, California 94085. The service of
legal process also may be made on the Plan by serving the Plan Administrator.
SECTION 13. STATEMENT OF ERISA RIGHTS.
Participants in this Plan (which is a welfare benefit plan sponsored by
General Magic, Inc.) are entitled to certain rights and protections under ERISA.
If you are considered a participant in the Plan under ERISA, you are entitled
to:
(a) Examine, without charge, at the Plan Administrator's office and at
other specified locations, such as work sites, all Plan documents and copies of
all documents filed by the Plan with the U.S. Department of Labor, such as
detailed annual reports;
(b) Obtain copies of all Plan documents and Plan information upon written
request to the Plan Administrator. The Administrator may make a reasonable
charge for the copies;
(c) Receive a summary of the Plan's annual financial report, in the case
of a plan which is required to file an annual financial report with the
Department of Labor. (Generally, all pension plans and welfare plans with 100 or
more participants must file these annual reports.)
In addition to creating rights for Plan participants, ERISA imposes duties
upon the people 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 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. If your claim for a Plan
benefit is denied in whole or in part, you must receive a written explanation of
the reason for the denial. You have the right to have the Plan review and
reconsider your claim.
Under ERISA, there are steps you can take to enforce the above rights. For
instance, if you request materials from the Plan 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 Plan Administrator. If you have a claim for
benefits that is denied or ignored, in whole or in part, you may file suit in a
state or federal court. If it should happen that the 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.
If you have any questions about this statement or about your rights under
ERISA, you should contact the nearest office of the Pension and Welfare Benefits
Administration, U.S. Department of Labor, listed in your telephone directory, or
the Division of Technical Assistance
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and Inquiries, Pension and Welfare Benefit Administration, U.S. Department of
Labor, 200 Constitution Avenue N.W., Washington, D.C. 20210.
SECTION 14. AMENDMENT OR TERMINATION
Notwithstanding any other provisions above, the Company reserves the right
to amend or terminate this Plan at any time by action of the Board, an
authorized committee of the Board, or the Chief Executive Officer; provided,
however, that, once a Change of Control occurs, the Plan may not be terminated
or amended in any way that impairs the rights or benefits available to an
Employee under the Plan without the Employee's written consent to such
termination or amendment.
SECTION 15. LEGAL CONSTRUCTION
This Plan is intended as an "employee welfare benefit plan" for purposes of
ERISA. The Plan shall be interpreted in accordance with ERISA and, to the extent
not preempted by ERISA, with the laws of the State of California. This Plan
constitutes a plan document and a summary plan description for purposes of
ERISA.
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<PAGE> 15
BENEFIT SCHEDULE
FOR GENERAL MAGIC, INC.
CHANGE OF CONTROL
EXECUTIVE MANAGEMENT
THE COMPANY SHALL DETERMINE IN ITS SOLE AND ABSOLUTE DISCRETION IN WHICH
CATEGORY AN EMPLOYEE SHALL BE PLACED FOR PURPOSES OF RECEIVING SEVERANCE
BENEFITS UNDER THIS PLAN. THE COMPANY'S DETERMINATION SHALL BE FINAL AND SHALL
BE BINDING AND CONCLUSIVE ON ALL PERSONS. THE COMPANY RETAINS THE RIGHT TO
RECLASSIFY AN EMPLOYEE PRIOR TO THE TIME OF THE OCCURRENCE OF A CHANGE OF
CONTROL, AND THEREAFTER TO THE EXTENT PERMITTED BY THE PLAN.
If the Employee is a member of the Company's Executive Management team at
the time of a Termination After Change of Control (i.e., an officer of the
Company (excluding the Company's Chief Executive Officer) or an individual who
has been designated as a member of the Executive Management team by the Board or
the Company's Chief Executive Officer), then the Employee shall be entitled to
receive a lump-sum severance payment in an amount equal to 100% of the greater
of the Employee's annual base salary in effect (i) immediately prior to the
Change of Control and (ii) at the time of such termination, and shall also be
entitled to receive the full amount of the Employee's annual bonus for the
fiscal year in which he or she is terminated at the greater of the "on-target"
level in effect (i) immediately prior to the Change of Control and (ii) at the
time of such termination. This amount shall be paid in lieu of any bonus or
commission that may be owing, or become owing to Employee at any time
thereafter, to the extent permitted by applicable state wage payment laws. Any
severance payments to which the Employee is entitled pursuant to this schedule
shall be paid within thirty (30) days of the Employee's termination. In
addition, for a period of up to twelve (12) months immediately following a
Termination After Change of Control, the Company shall reimburse the Employee
for any COBRA premiums paid by the Employee for continued group health insurance
coverage (the "Employment Benefits"), with the Employee being responsible for
his or her own tax liability, if any, associated with these reimbursements. Such
Employment Benefits shall terminate upon the earlier of (i) twelve (12) months
from the date of the Employee's termination of employment or (ii) termination of
the Employee's entitlement to COBRA coverage under the terms of the statute.
<PAGE> 16
BENEFIT SCHEDULE
FOR GENERAL MAGIC, INC.
CHANGE OF CONTROL PLAN
DIRECTORS AND MANAGERS
THE COMPANY SHALL DETERMINE IN ITS SOLE AND ABSOLUTE DISCRETION IN WHICH
CATEGORY AN EMPLOYEE SHALL BE PLACED FOR PURPOSES OF RECEIVING SEVERANCE
BENEFITS UNDER THIS PLAN. THE COMPANY'S DETERMINATION SHALL BE FINAL AND SHALL
BE BINDING AND CONCLUSIVE ON ALL PERSONS. THE COMPANY RETAINS THE RIGHT TO
RECLASSIFY AN EMPLOYEE PRIOR TO THE TIME OF THE OCCURRENCE OF A CHANGE OF
CONTROL, AND THEREAFTER TO THE EXTENT PERMITTED BY THE PLAN.
If the Employee holds the position of a director or manager at the time of
a Termination After Change of Control, then the Employee shall be entitled to
receive a lump-sum severance payment in an amount equal to 50% of the greater of
the Employee's annual base salary in effect (i) immediately prior to the Change
of Control and (ii) at the time of such termination, and shall also be entitled
to receive the full amount of the Employee's annual bonus for the fiscal year in
which he or she is terminated at the greater of the "on-target" level in effect
(i) immediately prior to the Change of Control and (ii) at the time of such
termination. This amount shall be paid in lieu of any bonus or commission that
may be owing, or become owing to Employee at any time thereafter, to the extent
permitted by applicable state wage payment laws. Any severance payments to which
the Employee is entitled pursuant to this schedule shall be paid within thirty
(30) days of the Employee's termination. In addition, for a period of up to six
(6) months immediately following a Termination After Change of Control, the
Company shall reimburse the Employee for any COBRA premiums paid by the Employee
for continued group health insurance coverage (the "Employment Benefits"), with
the Employee being responsible for his or her own tax liability, if any,
associated with these reimbursements. Such Employment Benefits shall terminate
upon the earlier of (i) six (6) months from the date of the Employee's
termination of employment or (ii) termination of the Employee's entitlement to
COBRA coverage under the terms of the statute.
<PAGE> 17
BENEFIT SCHEDULE
FOR GENERAL MAGIC, INC.
CHANGE OF CONTROL PLAN
EMPLOYEES
THE COMPANY SHALL DETERMINE IN ITS SOLE AND ABSOLUTE DISCRETION IN
WHICH CATEGORY AN EMPLOYEE SHALL BE PLACED FOR PURPOSES OF RECEIVING SEVERANCE
BENEFITS UNDER THIS PLAN. THE COMPANY'S DETERMINATION SHALL BE FINAL AND SHALL
BE BINDING AND CONCLUSIVE ON ALL PERSONS. THE COMPANY RETAINS THE RIGHT TO
RECLASSIFY AN EMPLOYEE PRIOR TO THE TIME OF THE OCCURRENCE OF A CHANGE OF
CONTROL, AND THEREAFTER TO THE EXTENT PERMITTED BY THE PLAN.
Any regular, full-time employee of the Company who is not a member of
Executive Management or a Director or Manager as of the time of a Termination
After Change of Control shall be entitled to receive a lump-sum severance
payment in an amount equal to 25% of the greater of the Employee's annual base
salary in effect (i) immediately prior to the Change of Control and (ii) at the
time of such termination (the "Base Salary Rate"), together with a lump-sum
severance payment in the amount of two additional weeks pay at the Base Salary
Rate for each full year of the Employee's employment with the Company
immediately prior to such termination; provided, however, that in no event shall
the aggregate severance payment exceed an amount equal to six (6) months of the
Employee's annual base salary at the Base Salary Rate. Such Employee shall also
be entitled to receive the full amount of the Employee's annual bonus for the
fiscal year in which he or she is terminated at the greater of the "on-target"
level in effect (i) immediately prior to the Change of Control and (ii) at the
time of such termination. Any severance payments to which the Employee is
entitled pursuant to this schedule shall be paid in a lump sum within thirty
(30) days of the Employee's termination. In addition, for a period of up to
three (3) months after any termination following a Change of Control, the
Company shall reimburse the Employee for any COBRA premiums paid by the Employee
for continued group health insurance coverage (the "Employment Benefits"), with
the Employee being responsible for his or her own tax liability, if any,
associated with these reimbursements. Such Employment Benefits shall terminate
upon the earlier of (i) three (3) months from the date of the Employee's
termination of employment or (ii) termination of the Employee's entitlement to
COBRA coverage under the terms of the statute.
