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EXHIBIT 10.5(a)
CHANGE OF CONTROL AGREEMENT
AGREEMENT dated as of the 1st day of June, 1999, between
STYLING TECHNOLOGY CORPORATION, a Delaware corporation (the "Employer"), and XXX
X. XXXXXXX, an individual who resides at the address appearing below (the
"Executive").
W I T N E S S E T H:
WHEREAS, the Executive is employed by the Employer pursuant to
the Employment Agreement dated as of the date hereof between the Employer and
the Executive (the "Employment Agreement");
WHEREAS, it is desirable to provide severance and other
benefits to the Executive in the event that his employment with the Employer is
terminated for any reason following a change of control of the Employer; and
WHEREAS, the Employer and the Executive wish to enter into an
agreement governing the terms and conditions on which he will be entitled to
severance and other benefits following a change of control of the Employer.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants hereinafter set forth, the parties hereby agree as follows:
1. SEVERANCE BENEFITS.
(a) Payment Upon a Change of Control. As a condition
precedent to a Change of Control (as defined below), unless expressly
waived in writing by the Executive, he shall be entitled to receive,
and the Employer shall provide to him, the following benefits:
(1) an amount equal to five (5) times his
then current annual salary, which amount shall be payable in a
single sum immediately prior to the Change of Control;
(2) an amount equal to five (5) times any
incentive compensation paid to him for the fiscal year of the
Employer immediately preceding the fiscal year in which the
Change of Control occurs, which amount shall be payable in a
single sum payment immediately prior to the Change of Control;
(3) continuation coverage, at the Employer's
expense, under any Employer-sponsored group or individual
benefit plans, policies, programs or arrangements covering the
Executive immediately prior to the Change of Control
(including, without limitation, any benefit plans, policies,
programs or arrangements covering the Executive under his
Employment Agreement dated as of the date hereof or any
successor agreement thereto, if then in effect), for the
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five (5) year period immediately following the Change of
Control, unless he becomes eligible for equivalent coverage
under a plan, policy, program or arrangement provided by
another employer; provided, however, that if continuation
coverage is not available for any reason beyond the control of
the Employer for any employee benefit plans for any portion of
such five (5) year period, then the Employer shall pay the
cash equivalent of such coverage to the Executive for the
remaining portion of such period (which cash equivalent shall
be the subject of a good faith determination by the Board of
Directors of the Employer (the "Board"));
(4) outplacement services selected by the
Executive with a value of up to twelve (12) months' salary or,
at the Executive's election, the cash equivalent of such
services; and
(5) such additional benefits as the
Employer, in its discretion, may provide.
(b) Payment After a Change of Control. If the
Executive expressly waives in writing the payment of benefits pursuant
to subparagraph 1(a) as a precondition to a Change of Control, then
upon the termination of the employment of the Executive for any reason
(except upon the involuntary termination by the Employer of the
Executive's employment for Cause (as defined below)) within the
thirty-six (36) month period immediately after the Change of Control
(the "Stay Period"), the Executive shall be entitled to receive, and
the Employer shall provide to the Executive, such benefits; provided
that his employment termination date shall replace the Change of
Control with respect to the determination and timing of the payment or
provision of such benefits. In the event of the involuntary termination
by the Employer of the Executive's employment other than for Cause, or
the Executive's termination of his employment for Good Reason (as
defined in the Employment Agreement), after a Change of Control, the
amount of any severance benefits payable under this subparagraph 1(b)
shall be reduced on a dollar-for-dollar basis to the extent of any
actual post-employment payments by the Employer to the Executive
pursuant to the relevant provisions of the Employment Agreement.
(c) Excess Parachute Payment. If any portion of the
benefits payable to the Executive pursuant to subparagraph 1(a), 1(b)
or 2(b) or any other payments in the nature of compensation (as defined
in Section 280G of the Internal Revenue Code of 1986, as amended (the
"Code")) to him or for his benefit under this Agreement or otherwise,
the receipt of which is contingent on a Change of Control
(collectively, the "Total Payments"), constitutes an Excess Parachute
Payment (as defined below), then the Total Payments to be made to the
Executive shall be increased, such that the value of the Total Payments
that the Executive is entitled to receive shall include such benefits
and other payments as well as the following:
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(1) an amount equal to the aggregate excise
tax liability, if any, attributable to such Total Payments,
including, without limitation, any increase in the Total
Payments pursuant to this subparagraph 1(c) and
(2) in the event of any payment of
additional compensation to the Executive or his Beneficiary
pursuant to paragraph 2(b), an amount determined as follows:
(i) the combined marginal federal and state ordinary income
tax rate of the Executive for the tax year in which he or his
Beneficiary receives such payment multiplied by the amount of
such payment less (ii) the federal and state capital gains
taxes that the Executive otherwise would have paid for the
same year, if such payment were characterized as long-term
capital gains, rather than as ordinary income.
(d) Definitions. For purposes of this Agreement:
(1) "Cause" shall mean the Executive's
material unremedied breach of the Employment Agreement or a
conviction of a felony committed against the Employer;
provided, however, the Executive shall be provided with at
least thirty (30) days' prior notice of, and an opportunity
within the thirty (30) days to cure, any grounds for
terminating his employment for Cause. The existence of Cause
shall be determined in good faith by the Board at a duly held
meeting thereof.
(2) A "Change of Control" of the Employer
shall be deemed to have occurred for purposes of this
Agreement, if the event set forth in any one of the following
paragraphs shall have occurred:
(A) any Person (as defined in
Section 3(a)(9) of the Securities Exchange Act of
1934 (the "Exchange Act"), as modified and used in
Sections 13(d) and 14(d) thereof) or Persons become
the Beneficial Owner (as defined in Rule 13d-3 under
the Exchange Act) or Beneficial Owners, directly or
indirectly, of securities of the Employer
representing thirty percent (30%) or more of either
the then outstanding shares of common stock of the
Employer or the combined voting power of the
Employer's then outstanding voting securities; except
that, for purposes of the Agreement, Person shall not
include (i) the Employer or any subsidiary thereof,
(ii) a trustee or other fiduciary holding securities
under an employee benefit plan of the Employer or any
current subsidiary thereof, (iii) an underwriter
temporarily holding securities pursuant to an
offering of such securities, (iv) an entity owned,
directly or indirectly, by any current subsidiary of
the Employer or (v) the Executive or any entity of
which he is the Beneficial Owner, directly or
indirectly, of more than five percent (5%) of its
outstanding equity interests;
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(B) a merger or consolidation of the
Employer with any other corporation or the issuance
of voting securities of the Employer in connection
with a merger or consolidation of the Employer or any
direct or indirect parent or subsidiary of the
Employer other than a merger or consolidation in
which no Person or Persons become the Beneficial
Owner or Beneficial Owners, directly or indirectly,
of securities of the Employer representing fifty
percent (50%) or more of either the then outstanding
shares of common stock of the Employer or the
combined voting power of the Employer's then
outstanding voting securities;
(C) the complete liquidation or
dissolution of the Employer or the sale or
disposition by the Employer of all or substantially
all of the Employer's assets (in one transaction or a
series of related transactions within any period of
twenty-four (24) consecutive months), other than a
sale or disposition by the Employer of all or
substantially all of the Employer's assets to (i) any
current subsidiary of the Employer or (ii) an entity
owned, directly or indirectly, by any current
subsidiary of the Employer;
(D) during any period of twenty-four
(24) consecutive months, individuals who, at the
beginning of such period, constituted the Board
cease, for any reason, to constitute at least a
majority thereof, unless the election or nomination
for election of each new director was approved by the
vote of at least two-thirds (2/3) of the directors
then still in office who were directors at the
beginning of such period; or
(E) a change in control of the
Employer of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act, or
any successor regulation of similar import,
regardless of whether the Employer is subject to such
reporting requirement.
(3) "Excess Parachute Payment" shall have
the same meaning as such term has under Code Section 280G and
any temporary, proposed or final regulations thereunder, and
any Total Payments shall be valued as provided therein.
2. REGISTRATION RIGHTS.
(a) Demand Registration. In the event of a Change of
Control in which the Executive is not able to sell all of his shares of
common stock of the Employer (the "Shares") for the highest
consideration and on the same terms on which any shares of common stock
of the Employer were acquired from any other shareholder of the
Employer in connection with the Change of Control, the Executive (or,
in the event of his death, his Beneficiary (as defined below)) may
demand that the Employer file a registration statement (the "Demand
Registration Statement") under the Securities
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Act of 1933 with the Securities and Exchange Commission (the
"Commission") covering the proposed sale to the public of the specified
number of his Shares. Unless the Executive or the Beneficiary, as
applicable, delivers the demand within sixty (60) days after the Change
of Control, all rights of the Executive and the Beneficiary to make
such a demand shall terminate. Within forty-five (45) days of its
receipt of such a demand, the Employer, at its expense, shall prepare
and file with the Commission (and any appropriate state securities
authorities) a registration statement on Form X-0, X-0 or S-3 (or the
successors to such Forms) covering the proposed offer and sale of all
Shares to be registered pursuant to the Demand Registration Statement.
(1) The Employer, in its discretion, may
effect the public offering of the Shares to be covered by the
Demand Registration Statement through either (i) a shelf
offering on a Form S-2 or S-3 (or any successor or similar
Form) registration statement (provided that the Employer is
then eligible to utilize such Form under the Securities Act),
with sales of the Shares registered thereunder to be effected
though normal brokers' transactions or in transactions on the
NASDAQ National Market or on any national securities exchange
or other market on which the shares of common stock of the
Employer are listed or traded or in a privately negotiated
transaction or (ii) a firmly underwritten offering utilizing
one or more underwriters chosen by the Executive or the
Beneficiary, as applicable, after consulting with the Employer
and considering such factors as the underwriting discount
proposed by, and the reputation and market presence of, such
underwriters.
(2) The Employer shall use its best efforts
to have the Demand Registration Statement declared effective
under the Securities Act by the Commission (and under
applicable state securities laws by all appropriate state
securities authorities) as soon as practicable after the
filing thereof and to maintain the effectiveness thereof for a
period of no longer than ninety (90) days (or until all of the
Shares covered thereby have been sold, if such sales are
completed before the end of such ninety (90) days period).
(b) Additional Compensation. If, for any reason, the
Executive (or, in the event of his death, his Beneficiary) exercises
the demand registration rights pursuant to paragraph 2(a) with respect
to the sale of any number of the Shares, but the net proceeds received
by the Executive or the Beneficiary in connection therewith are less
per Share than the highest per share consideration received by any
other shareholder for his or her shares of common stock of the Employer
in connection with the Change of Control, then the Employer shall pay
the Executive additional compensation in an amount equal to the
difference between:
(1) the maximum per share consideration
received by any shareholder for his or her shares of common
stock in connection with the Change of Control and
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(2) the average per Share price received by
the Executive in connection with any offer or sale of his
Shares within six (6) months after the Change of Control,
which difference shall then be multiplied by the number of Shares
offered or sold by the Executive within six (6) months after the Change
of Control.
(c) Stock Options. In the event of a Change of
Control, the Executive (or, in the event of his death, his Beneficiary)
shall have the right at any time thereafter to exercise any outstanding
Employer stock option in full, whether or not the option was
theretofore exercisable. Any Shares acquired by the Executive or his
Beneficiary, as applicable, upon the exercise of any outstanding stock
option shall be subject to the provisions of this paragraph 2.
3. BENEFICIARY DESIGNATION. The Executive may designate a
beneficiary to receive any remaining severance benefits under paragraph 1 in the
event of the Executive's death after the commencement of payment of any
severance benefits (the "Beneficiary") and to exercise any outstanding Employer
stock options or demand registration rights and/or receive any remaining
compensation payments under paragraph 2 in the event of the Executive's death.
Such designation shall be made by filing a written designation with the Board in
such form as the Board or its Compensation Committee may provide and may be
changed by the Executive from time to time by similar action. If no such
designation is made by the Executive or if the Executive is not survived by his
designated Beneficiary, any remaining benefits or payments under paragraphs 1
and 2 at the time of the Executive's death shall be paid to the Executive's
estate and any options and/or demand registration rights may be exercised under
paragraph 2 by the personal representative of the Executive's estate.
4. SUCCESSORS. The Employer shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Employer to assume
its obligations under this Agreement in the same manner and to the same extent
that the Employer would be required to perform it if no such succession had
taken place. The failure of the Employer to obtain such assumption prior to the
effectiveness of any such succession shall entitle the Executive to (i) the
severance benefits set forth in paragraph 1 on the same terms to which he would
be entitled thereunder if his employment were terminated for any reason other
than Cause following a Change of Control; provided, however, for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be considered as though such date were his employment
termination date; and (ii) the additional compensation payment set forth in
paragraph 2 on the same terms to which he would be entitled thereunder if he
exercised his demand registration rights with respect to all of his Shares and
did not receive any proceeds from the sale of the Shares.
5. ALTERNATIVE DISPUTE RESOLUTION. All claims, disputes and
other matters in question between the parties arising under this Agreement shall
be resolved in accordance with the mediation, arbitration or alternative dispute
resolution provisions of the Employment
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Agreement or any successor employment agreement then in effect between the
Employer and the Executive. If no written employment agreement is in effect at
the time such a claim, dispute or matter in question arises, or if the
employment agreement then in effect does not include any mediation, arbitration
or dispute resolution provisions, then the claim, dispute or other matter in
question shall be decided by arbitration in Phoenix, Arizona, in accordance with
the National Rules for the Resolution of Employment Disputes of the American
Arbitration Association (including such procedures governing the selection of
the specific arbitrator or arbitrators), unless the parties mutually agree
otherwise. The Employer shall pay the costs of any such arbitration. The award
by the arbitrator or arbitrators shall be final, and judgment may be entered
upon it in accordance with applicable law in any state or Federal court having
jurisdiction thereof.
6. EXPENSES AND INTEREST. If a dispute arises with respect to
the enforcement of the rights of the Executive under this Agreement or if any
arbitration or legal proceeding is brought by the Executive to enforce or
interpret any provision of this Agreement, or to recover damages for breach
hereof, and the Executive is the prevailing party, he shall be entitled to
recover from the Employer any reasonable attorneys' fees and necessary costs and
disbursements incurred as a result of such dispute or legal proceeding, and
prejudgment interest on any money judgment obtained by him calculated at the
prime rate, as published in the Wall Street Journal, from the date that payments
to him should have been made under this Agreement. The Employer shall not be
entitled to recover from the Executive any attorneys' fees, costs, disbursements
or interest as a result of any dispute or legal proceeding involving the
Employer and the Executive.
7. EFFECT ON EMPLOYMENT AGREEMENT. This Agreement supplements,
and does not replace, the Employment Agreement. However, if there is any
conflict between the provisions of this Agreement and the Employment Agreement,
the provisions of this Agreement shall control.
8. NOT A CONTRACT OF EMPLOYMENT. The terms and conditions of
this Agreement shall not be deemed to constitute a contract of employment
between the Employer and the Executive. Neither the Executive nor his
Beneficiary shall have any rights against the Employer, except as may otherwise
be specifically provided herein. Moreover, nothing in this Agreement shall be
deemed to give the Executive the right to be retained in the employment of the
Employer or to interfere with the right of the Employer to discipline or
discharge him at any time whether with or without Cause nor to restrict the
Executive's rights to terminate his employment with the Employer for any reason.
9. NONALIENATION OF BENEFITS. The Executive shall not
transfer, assign, alienate, anticipate, pledge or encumber any part of such
benefits, nor shall such benefits or any assets of the Employer be subject to
seizure by legal process by any creditor of the Executive. Any attempt to effect
such a diversion or seizure as aforedescribed shall be deemed null and void for
all purposes hereunder.
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\ 10. UNSECURED RIGHTS. The Executive or his Beneficiary shall
not have any right or interest in the benefits under paragraph 1, except for the
right to receive a distribution as provided herein. The position of the
Executive and his Beneficiary with respect to such distribution is that of a
general unsecured creditor of the Employer.
11. GENERAL.
(a) Survival. The rights and obligations of the
parties hereto shall survive the term of the Executive's employment
under the Employment Agreement to the extent that any performance is
required under this Agreement after the expiration or termination of
such term.
(b) Notices. All notices, demands and other
communications provided for by this Agreement shall be in writing and
shall be deemed to have been given at the time the same is delivered in
person or is mailed by registered or certified mail addressed as
follows:
To the Employer: 0000 Xxxx Xxxxxx Xxxxx Xxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Secretary
To the Executive: 0000 Xxxxx Xxxx Xxxxxx Xxxxx
Xxxxxxxx Xxxxxx, Xxxxxxx 00000
Either party wishing to change the address to which notices, requests,
demands and other communications under this Agreement are to be sent
shall give notice of such change to the other party.
(c) Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the Employer, its
successors and assigns, and the Executive, his heirs, executors,
administrators and legal representatives. The Executive shall not have
the right to transfer, assign, or delegate this Agreement or any of his
rights or obligations hereunder without the prior written consent of
the Employer.
(d) Governing Law. This Agreement shall be governed
by the laws of the State of Arizona.
(e) Waiver. The waiver or failure of either party to
insist in any one or more instances upon performance of any term,
covenant or condition of this Agreement shall not be construed as a
waiver of future performance of any such term, covenant or condition,
but the obligations of either party with respect to such term, covenant
or condition shall continue in full force and effect. No course of
dealing shall be implied or arise from any waiver or series of waivers
of any right or remedy hereunder.
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(f) Severability. Each provision of this Agreement
shall be interpreted where possible in a manner necessary to sustain
its legality and enforceability. If any provision of this Agreement
shall be unenforceable or invalid under applicable law, such provision
shall be limited to the minimum extent necessary to render the same
enforceable or valid. The unenforceability of any provision of this
Agreement in a specific situation, or the unenforceability of any
portion of any provision of this Agreement in a specific situation,
shall not affect the enforceability of (1) that provision or portion of
provision in another situation or (2) the other provisions or portions
of provisions of this Agreement if such other provisions or the
remaining portions could then continue to conform with the purposes of
this Agreement and the terms and requirements of applicable law.
(g) Amendments. This Agreement shall not be amended
orally, but only by a written instrument executed by each party to this
Agreement.
(h) Headings. The headings used in this Agreement are
for convenience only, shall not be deemed to constitute a part hereof,
and shall not be deemed to limit, characterize or in any way affect the
construction or enforcement of the provisions of this Agreement.
(i) Entire Agreement. This Agreement embodies the
entire agreement and understanding between the parties with respect to
the subject matter hereof and supersedes all prior agreements and
understandings between the Employer and the Executive with respect to
the subject matter hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
STYLING TECHNOLOGY CORPORATION
By: /s/ Xxxxxxx X. Xxxxxx
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Its: Executive Vice President
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EXECUTIVE
/s/ Xxx X. Xxxxxxx
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Xxx X. Xxxxxxx
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