EXHIBIT 10.27
CHANGE OF CONTROL AGREEMENT DATED JUNE 11, 0000 XXXXXXX XXXXXX XXXXXX AND
THE COMPANY
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement (the "Agreement") is made and entered
into effective as of June 11, 1997, by and between Xxxxxx Bridge (the
"Employee") and CONNECT, Inc., a Delaware corporation (the "Company").
RECITALS
A. It is expected that another company or other entity may from time
to time consider the possibility of acquiring the Company or that a change in
control may otherwise occur, with or without the approval of the Company's Board
of Directors (the "Board"). The Board recognizes that such consideration can be
a distraction to the Employee, an executive corporate officer of the Company,
and can cause the Employee to consider alternative employment opportunities. The
Board has determined that it is in the best interests of the Company and its
shareholders to assure that the Company will have the continued dedication and
objectivity of the Employee, notwithstanding the possibility, threat or
occurrence of a Hostile Takeover or a Change of Control (as defined below) of
the Company.
B. The Board believes that it is in the best interests of the
Company and its shareholders to provide the Employee with an incentive to
continue his or her employment with the Company.
C. The Board believes that it is imperative to provide the Employee
with certain benefits upon a Hostile Takeover and, under certain circumstances,
upon termination of the Employee's employment in connection with a Change of
Control, which benefits are intended to provide the Employee with financial
security and provide sufficient income and encouragement to the Employee to
remain with the Company notwithstanding the possibility of a Hostile Takeover or
a Change of Control.
D. To accomplish the foregoing objectives, the Board of Directors
has directed the Company, upon execution of this Agreement by the Employee, to
agree to the terms provided in this Agreement.
E. The Board, for the reasons set forth above, authorized the Company
to enter into Change of Control Agreements ("Agreements") with each of its
executive corporate officers substantially in the form hereof.
F. Certain capitalized terms used in the Agreement are defined in
Section 4 below.
In consideration of the mutual covenants herein contained, and in
consideration of the continuing employment of Employee by the Company, the
parties agree as follows:
1. At-Will Employment. The Company and the Employee
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acknowledge that the Employee's employment is and shall continue to be at-will,
as defined under applicable law. If the Employee's employment terminates for any
reason, including (without limitation) any termination prior to a Change of
Control, the
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Employee shall not be entitled to any payments or benefits, other than as
provided by this Agreement, or as may otherwise be available in accordance with
the terms of Employee's offer letter from the Company and the Company's
established employee plans and written policies at the time of termination. The
terms of this Agreement shall terminate upon the earlier of (i) the date on
which Employee ceases to be employed as an executive corporate officer of the
Company, (ii) the date that all obligations of the parties hereunder have been
satisfied, or (iii) two (2) years after a Change of Control. A termination of
the terms of this Agreement pursuant to the preceding sentence shall be
effective for all purposes, except that such termination shall not affect the
payment or provision of compensation or benefits on account of a termination of
employment occurring prior to the termination of the terms of this Agreement.
2. Hostile Takeover. Subject to Section 7(l) below, in the
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event of a Hostile Takeover and regardless of whether the Employee's employment
with the Company is terminated in connection with such takeover, each stock
option granted for the Company's securities held by the Employee shall become
immediately exercisable and vested, and shall be considered "Vested Shares"
under each such stock option, on the effective date of the Hostile Takeover as
to 100% of the shares issuable upon exercise of such option and shall be
exercisable in full in accordance with the provisions of the Option Agreement
and Plan pursuant to which such option was granted; and the Company's right of
repurchase with respect to such shares and any shares previously issued upon
exercise of stock options held by the Employee shall immediately lapse on such
date.
3. Change of Control.
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(a) Termination Following A Change of Control. Subject to
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Section 7(l) below, if the Employee's employment with the Company is terminated
at any time within two (2) years after a Change of Control, then the Employee
shall be entitled to receive severance benefits as follows:
(i) Voluntary Resignation. If the Employee
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voluntarily resigns from the Company (other than as an Involuntary Termination
(as defined below), or if the Company terminates the Employee's employment for
Cause (as defined below), then the Employee shall not be entitled to receive
severance payments. The Employee's benefits will be terminated under the
Company's then existing benefit plans and policies in accordance with such plans
and policies in effect on the date of termination or as otherwise determined by
the Board of Directors of the Company.
(ii) Involuntary Termination. If the Employee's
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employment is terminated as a result of an Involuntary Termination other than
for Cause, the Employee shall be entitled to receive the following benefits: (i)
monthly severance payments during the period from the date of the Employee's
termination until the date 12 months after the effective date of the
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termination (the "Severance Period") equal to the monthly salary which the
Employee was receiving immediately prior to the Change of Control; (ii) monthly
severance payments during the Severance Period equal to 1/12th of the Employee's
"target bonus" (as defined below) for the fiscal year in which the termination
occurs (iii) continuation of health and life insurance benefits through the end
of the Severance Period substantially identical to those to which the Employee
was entitled immediately prior to the Change of Control; (iv) each stock option
held by the Employee shall become immediately exercisable and vested, and shall
be considered "Vested Shares" under each such stock option, on the date of
termination as to 100% of the shares issuable upon exercise of such option and
shall be exercisable in full in accordance with the provisions of the Option
Agreement and Plan pursuant to which such option was granted; and the Company's
right of repurchase with respect to such shares and any shares previously issued
upon exercise of stock options held by the Employee shall immediately lapse on
such date; and (v) outplacement services with a total value not to exceed
$15,000. The severance payments described in subsections (i) and (ii) above
shall be paid during the Severance Period in accordance with the Company's
standard payroll practices. For purposes of this Agreement, the term "target
bonus" shall mean that percentage of the Employee's base salary that is
prescribed by the Company under its Management Bonus Program as the percentage
of such base salary payable to the Company as a bonus if the Company pays
bonuses at one-hundred percent (100%) of its operating plan.
(iii) Involuntary Termination for Cause. If the
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Employee's employment is terminated for Cause, then the Employee shall not be
entitled to receive severance payments. The Employee's benefits will be
terminated under the Company's then existing benefit plans and policies in
accordance with such plans and policies in effect on the date of termination.
(b) Termination Apart from A Change of Control. In the
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event the Employee's employment terminates for any reason, either prior to the
occurrence of a Change of Control or after the two year period following the
effective date of a Change of Control, then the Employee shall not be entitled
to receive any severance payments under this Agreement. The Employee's benefits
will be terminated under the terms of the Company's then existing benefit plans
and policies in accordance with such plans and policies in effect on the date of
termination or as otherwise determined by the Board of Directors of the Company.
4. Definition of Terms. The following terms referred to in
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this Agreement shall have the following meanings:
(a) Change of Control. "Change of Control" shall mean the
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occurrence of any of the following events:
(i) Ownership. Any "Person" (as such term is used
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in Sections 13(d) and 14(d) of the
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Securities Exchange Act of 1934, as amended) is or becomes the "Beneficial
Owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of
securities of the Company representing fifty percent (50%) or more of the total
voting power represented by the Company's then outstanding voting securities
without the approval of the Board of Directors of the Company; or
(ii) Merger/Sale of Assets. A merger or
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consolidation of the Company, whether or not approved by the Board of Directors
of the Company, other than a merger or consolidation which would result in
holders of more than fifty percent (50%) of the voting power represented by the
voting securities of the Company outstanding immediately prior thereto
continuing to hold (either by the voting securities remaining outstanding or by
being converted into voting securities of the surviving entity) more than fifty
percent (50%) of the total voting power represented by the voting securities of
the Company, or such surviving entity outstanding immediately after such merger
or consolidation, or the Company sells all substantially all of the Company's
assets.
(iii) Change in Board Composition. A change in the
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composition of the Board of Directors of the Company, as a result of which fewer
than a majority of the directors are Incumbent Directors. "Incumbent Directors"
shall mean directors who either (A) are directors of the Company as of the date
of this Agreement or (B) are elected, or nominated for election, to the Board of
Directors of the Company with the affirmative votes of at least a majority of
the Incumbent Directors at the time of such election or nomination (but shall
not include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to the
Company).
(b) Cause. "Cause" shall mean (i) gross negligence or
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willful misconduct in the performance of the Employee's duties to the Company
where such gross negligence or willful misconduct has resulted or is likely to
result in substantial and material damage to the Company or its subsidiaries
(ii) repeated unexplained or unjustified absence from the Company, (iii) a
material and willful violation of any federal or state law; (iv) commission of
any act of fraud with respect to the Company; or (v) conviction of a felony or a
crime involving moral turpitude causing material harm to the standing and
reputation of the Company, in each case as determined in good faith by the Board
of Directors of the Company.
(c) Hostile Takeover. "Hostile Takeover" shall mean a
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transaction or series of transactions that results in any person becoming the
Beneficial Owner, directly or indirectly, of securities of the Company
representing more than fifty percent
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(50%) of the total voting power represented by the Company's then outstanding
voting securities without the approval of the Board of Directors of the Company.
(d) Involuntary Termination. "Involuntary Termination"
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shall include any termination by the Company other than for Cause and the
Employee's voluntary termination, following (i) a material reduction or change
in job duties, responsibilities and requirements inconsistent with the
Employee's position with the Company and the Employee's prior duties,
responsibilities and requirements; (ii) any reduction of the Employee's base
compensation (other than in connection with a general decrease in base salaries
for most officers of the Company and any successor corporation); or (iii) the
Employee's refusal to relocate to a facility or location more than 50 miles from
the Company's current location.
5. Successors. Any successor to the Company (whether direct or
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indirect and whether by purchase, lease, merger, consolidation, liquidation or
otherwise) to all or substantially all of the Company's business and/or assets
shall assume the obligations under this Agreement and agree expressly to perform
the obligations under this Agreement 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. The terms of this Agreement and all of the Employee's rights
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.
6. Notice. Notices and all other communications contemplated
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by this Agreement 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. Mailed notices to the
Employee shall be addressed to the Employee at the home address which the
Employee 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.
7. Miscellaneous Provisions.
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(a) No Duty to Mitigate. The Employee shall not be
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required to mitigate the amount of any payment contemplated by this Agreement
(whether by seeking new employment or in any other manner), nor, except as
otherwise provided in this Agreement, shall any such payment be reduced by any
earnings that the Employee may receive from any other source.
(b) Waiver. No provision of this Agreement shall be
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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
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Employee). No waiver by either party of any breach of, or of compliance with,
any condition or provision of this Agreement 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.
(c) Whole Agreement. No agreements, representations or
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understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof. This Agreement
supersedes any agreement of the same title and concerning similar subject matter
dated prior to the date of this Agreement, and by execution of this Agreement
both parties agree that any such predecessor agreement shall be deemed null and
void; provided, however, that this Agreement does not supersede the Letter
Agreement between the Company and Employee dated April 28, 1997 (the "April
Agreement") and the Offer Letter to Employee dated October 19, 1995 (the
"October Offer Letter"), as clarified in the Letter dated June 6, 1996 from the
Company to Employee (the "June Letter"). Notwithstanding the other terms of this
Agreement, the benefits provided by this Agreement are in addition to the
benefits provided to Employee under the April Agreement and October Offer
Letter, as clarified in the June Letter.
(d) Choice of Law. The validity, interpretation,
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construction and performance of this Agreement shall be governed by the laws of
the State of California without reference to conflict of laws provisions.
(e) Severability. If any term or provision of this
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Agreement or the application thereof to any circumstance shall, in any
jurisdiction and to any extent, be invalid or unenforceable, such term or
provision shall be ineffective as to such jurisdiction to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining terms and provisions of this Agreement or the application of such
terms and provisions to circumstances other than those as to which it is held
invalid or unenforceable, and a suitable and equitable term or provision shall
be substituted therefor to carry out, insofar as may be valid and enforceable,
the intent and purpose of the invalid or unenforceable term or provision.
(f) Arbitration. Any dispute or controversy arising under
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or in connection with this Agreement may be settled at the option of either
party by binding arbitration in the County of Santa Clara, California, in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction. Punitive damages shall not be awarded.
(g) Legal Fees and Expenses. The parties shall each bear
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their own expenses, legal fees and other fees incurred in connection with this
Agreement.
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(h) No Assignment of Benefits. The rights of any person to
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payments or benefits under this Agreement 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 subsection (h) shall be
void.
(i) Employment Taxes. All payments made pursuant to this
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Agreement will be subject to withholding of applicable income and employment
taxes.
(j) Assignment by Company. The Company may assign its
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rights under this Agreement to an affiliate, and an affiliate may assign its
rights under this Agreement to another affiliate of the Company or to the
Company; provided, however, that no assignment shall be made if the net worth of
the assignee is less than the net worth of the Company at the time of
assignment. In the case of any such assignment, the term "Company" when used in
a section of this Agreement shall mean the corporation that actually employs the
Employee.
(k) Counterparts. This Agreement may be executed in
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counterparts, each of which shall be deemed an original, but all of which
together will constitute one and the same instrument.
(l) Limitation on Payments. In the event that the
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severance and other benefits provided for in this Agreement to the Employee (i)
constitute "parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code") and (ii) but for this
Section, would be subject to the excise tax imposed by Section 4999 of the Code,
then the Employee's benefits under Sections 2 and 3 shall be payable either:
(a) in full, or
(b) as to such lesser amount which would result in no
portion of such severance benefits being subject to excise tax under Section
4999 of the Code, whichever of the foregoing amounts, taking into account the
applicable federal, state and local income taxes and the excise tax imposed by
Section 4999, results in the receipt by the Employee on an after-tax basis, of
the greatest amount of benefits under Sections 2 and 3, notwithstanding that all
or some portion of such benefits may be taxable under Section 4999 of the Code.
Unless the Company and the Employee otherwise agree in writing, any
determination required under this Section 7(l) shall be made in writing by the
Company's independent public accountants (the "Accountants"), whose
determination shall be conclusive and binding upon the Employee and the Company
for all purposes. For purposes of making
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the calculations required by this Section 7(l), the Accountants may make
reasonable assumptions and approximations concerning applicable taxes and may
rely on reasonable, good faith interpretations concerning the application of
Section 280G and 4999 of the Code. The Company and the Employee shall furnish to
the Accountants such information and documents as the Accountants may reasonably
request in order to make a determination under this Section. The Company shall
bear all costs the Accountants may reasonably incur in connection with any
calculations contemplated by this Section 7(l).
IN WITNESS WHEREOF, each of the parties has executed this Agreement,
in the case of the Company by its duly authorized officer, as of the day and
year first above written.
CONNECT, INC. /s/ Xxxxxx X. Bridge
/s/ Xxxxxx Xxxxxx ------------------------
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Xxxxxx Xxxxxx
Vice President, Finance &
Administration, and
Chief Financial Officers
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