Exhibit 10.13
STRATOS LIGHTWAVE, INC.
MANAGEMENT RETENTION AGREEMENT
This MANAGEMENT RETENTION AGREEMENT (the "Agreement") is entered into as of
October 17, 2002, by and between Stratos Lightwave, Inc., a Delaware corporation
(the "Company") and Xxxxxx Xxxxxx ("Executive"). Certain capitalized terms used
in this Agreement are defined in Section 5 below.
R E C I T A L S:
A. The Company from time to time may consider a Change of Control. The
Board of Directors of the Company (the "Board") recognizes that such
consideration can be a distraction to Executive and may cause Executive to
consider alternative employment opportunities. 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 Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control.
B. The Board believes that it is in the best interests of the Company and
its stockholders to provide Executive with an incentive to continue his
employment and to motivate Executive to maximize the value of the Company upon a
Change of Control for the benefit of its stockholders.
C. The Board believes that it is imperative to provide Executive with
severance benefits upon Executive's termination of employment following a Change
of Control which provides Executive with enhanced financial security and
incentive and encouragement to remain with the Company notwithstanding the
possibility of a Change of Control.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Term. This Agreement shall terminate upon the date that all obligations
of the parties hereto with respect to this Agreement have been satisfied.
2. At-Will Employment. The Company and Executive acknowledge and agree that
Executive's employment is and shall continue to be at-will, as defined under
applicable law, and may be terminated by either party at any time, with or
without cause or notice. If Executive's employment terminates for any reason,
including without limitation, any termination prior to a Change of Control,
Executive shall not be entitled to any payments, benefits, damages, awards or
compensation other than as provided by this Agreement, or as may otherwise be
available in accordance with the Company's established employee plans or
pursuant to other written agreements with the Company.
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3. Change of Control Severance Benefits.
(a) Right to Severance Benefits. If, within thirty-six (36) months
following a Change of Control, Executive's employment is terminated: (i)
involuntarily by the Company other than for Cause, death or Disability, or (ii)
voluntarily by Executive for Good Reason, then Executive shall be entitled to
the following benefits:
(i) A lump-sum cash payment, payable within ten (10) days after the
termination of Executive's employment, equal to three hundred percent
(300%) of the Executive's Annual Base Salary;
(ii) A lump-sum cash payment, payable within ten (10) days after the
termination of Executive's employment, equal to the aggregate amount of
deferred matching incentive bonus payments payable to Executive under the
Company's Key Employee Incentive Bonus Plan (or similar incentive bonus
plan) to which Executive would have been entitled if he had remained in the
employ of the Company for thirty-six (36) months after the termination of
Executive's employment;
(iii) A lump-sum cash payment, payable within ten (10) days after the
termination of Executive's employment, equal to Executive's estimated bonus
for the fiscal quarter in which Executive's termination occurs, based on
the Company's projected financial performance for such fiscal quarter as
set forth in the most recent financial forecast provided by management to
the Company's Board of Directors.
(iv) One hundred percent (100%) of the unvested portion of any stock
option, restricted stock or other Company equity compensation held by
Executive shall be automatically accelerated in full so as to become
completely vested and all outstanding stock options held by Executive shall
remain exercisable until the earlier of (A) thirty-six (36) months after
Executive's termination of employment, or (B) the termination date
specified for such options at the time of their grant.
(v) Company-paid health, long-term disability and life insurance
coverage at the same level of coverage as was provided to Executive
immediately prior to the Change of Control and at the same ratio of Company
premium payment to Executive premium payment as was in effect immediately
prior to the Change of Control (the "Company-Paid Coverage"). If such
coverage included Executive's dependents immediately prior to the Change of
Control, such dependents shall also be covered at the Company's expense.
Company-Paid Coverage shall continue until the earlier of: (A) three (3)
years from the date of termination, or (B) the date upon which Executive
and his dependents become covered under another employer's group health,
long-term disability or life insurance plans that provide Executive and his
dependents with comparable benefits and levels of coverage. For purposes of
Title X of the Consolidated Budget Reconciliation Act of 1985 ("COBRA"),
the date of the "qualifying event" for Executive and his dependents shall
be the date upon which the Company-Paid Coverage commences, and each month
of Company-Paid Coverage provided hereunder shall offset a month of
continuation coverage otherwise due under COBRA.
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(b) Voluntary Resignation; Termination For Cause. If Executive's employment
terminates by reason of Executive's voluntary resignation and is not for Good
Reason, or if Executive is terminated for Cause, then Executive shall not be
entitled to receive severance or other benefits except for those, if any, as may
then be established under the Company's then existing severance and benefits
plans or pursuant to other written agreements with the Company.
(c) Disability; Death. If Executive's employment with the Company
terminates as a result of Executive's Disability, or if Executive's employment
is terminated due to the death of Executive, then Executive shall not be
entitled to receive severance or other benefits, except for those, if any, as
may then be established under the Company's then existing severance and benefits
plans or pursuant to other written agreements with the Company.
(d) Termination Apart from Change of Control. If Executive's employment is
terminated for any reason, either prior to the occurrence of a Change of Control
or after the thirty-six (36) month period following a Change of Control, then
Executive shall be entitled to receive severance and any other benefits only as
may then be established under the Company's then existing severance and benefits
plans or pursuant to other written agreements with the Company.
4. Parachute Payments.
(a) Excise Tax Gross-Up Payment. If the total amounts Executive would
receive on account of or following a Change of Control would subject Executive
to an excise tax under Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), the Company will promptly pay Executive, in addition to
such severance benefits, a "Gross-up Payment." The amount of the Gross-up
Payment will be equal to the entire excise tax Executive must pay, plus the
entire amount necessary to pay all federal, state, local, excise and payroll
taxes that will be assessed on the Gross-up Payment itself.
(b) Determination of Gross-up Payment. Within thirty (30) days after the
termination of Executive's employment, the independent auditors used by the
Company immediately prior to the Change of Control (the "Accountants") will make
an initial determination of whether the Company must pay a Gross-up Payment, and
if so, the amount of such payment. The Accountants will provide the Company and
Executive with its determination and detailed supporting calculations and
documentation. The Company will pay the expense of the initial determination.
Executive will have the right to accept the determination, or to have the
determination reviewed by an accounting firm selected by Executive, at
Executive's expense. The determination of the second accounting firm will be
binding, final and conclusive on the Company and Executive. The Company will pay
the Gross-up Payment finally determined under this Section 4(b) to Executive
within thirty (30) days after it is finally determined.
5. Definitions. The following terms referred to in this Agreement shall
have the following meanings:
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(a) "Annual Base Salary" shall mean an amount equal to Executive's then
current annual base salary.
(b) "Cause" shall mean (i) an act of personal dishonesty taken by the
Executive in connection with his responsibilities as an employee and intended to
result in personal enrichment of Executive, (ii) Executive being convicted of a
felony, (iii) a willful act by Executive which constitutes gross misconduct and
which is injurious to the Company, (iv) the willful and continued failure by
Executive to substantially perform his duties with the Company after a demand
for substantial performance is delivered to him by the Board of Directors of the
Company which specifically identifies the basis for the Board's belief that
Executive has not substantially performed his duties. For the purposes of this
paragraph, no act or failure to act on Executive's part will be considered
"willful" if Executive acted (or failed to act) in good faith or in the
reasonable belief that his act or omission was in the best interests of the
Company.
(c) "Change of Control" means the occurrence of any of the following
events:
(i) Any "person" (as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended) becomes the "beneficial
owner" (as defined in Rule 13d-3 under said Act), directly or indirectly,
of Company securities representing fifty percent (50%) or more of the total
voting power represented by the Company's then outstanding voting
securities; or
(ii) The consummation of the sale or disposition by the Company of all
or substantially all the Company's assets; or
(iii) The consummation of a merger or consolidation of the Company
with any other corporation, other than a merger or consolidation which
would result in the Company's voting securities outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or
by being converted into voting securities of the surviving entity or its
parent) at least fifty percent (50%) of the total voting power represented
by the Company's voting securities or such surviving entity or its parent
outstanding immediately after such merger or consolidation; or
(iv) A change in the composition of the Board occurring within a
two-year period, 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
hereof, or (B) are elected, or nominated for election, to the Board with
the affirmative votes of at least a majority of those directors whose
election or nomination was not in connection with any transaction described
in subsections (i), (ii), or (iii) above, or in connection with an actual
or threatened proxy contest relating to the election of directors to the
Company.
(d) "Disability" shall mean that Executive has been unable to perform his
Company duties as the result of his incapacity due to physical or mental
illness, and such inability, at least 26 weeks after its commencement, is
determined to be total and permanent by a physician selected by the Company or
its insurers and acceptable to Executive or Executive's legal
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representative (such agreement as to acceptability not to be unreasonably
withheld). Termination resulting from Disability may only be effected after at
least 30 days' written notice by the Company of its intention to terminate
Executive's employment. If Executive resumes the performance of substantially
all of his duties before the termination of his employment becomes effective,
the notice of intent to terminate shall automatically be deemed to have been
revoked.
(e) "Good Reason" shall mean Executive voluntarily resigns after the
occurrence of any of the following: (i) without Executive's express written
consent, a significant change in the nature or scope of Executive's duties,
title, authority or responsibilities, relative to Executive's duties, title,
authority or responsibilities as in effect immediately prior to such change;
(ii) without Executive's express written consent, a significant change, without
good business reasons, of the facilities and perquisites (including office space
and location) available to Executive immediately prior to such change; (iii) a
reduction by the Company in Executive's base salary as in effect immediately
prior to such reduction; (iv) a material reduction by the Company in the
aggregate level of employee benefits, including bonuses, to which Executive was
entitled immediately prior to such reduction with the result that Executive's
aggregate benefits package is materially reduced (other than a reduction that
generally applies to Company employees); (v) Executive's relocation to a
facility or a location more than thirty-five (35) miles from Executive's then
present location, without Executive's express written consent; (vi) the
Company's failure to obtain the assumption of this agreement by any successors
contemplated in Section 7(a) below; or (vii) any act or set of facts or
circumstances which would, under Illinois case law or statute constitute a
constructive termination of Executive.
6. Non-Solicitation. In consideration for the severance benefits Executive
is to receive herein, if any, Executive agrees that he or she will not, at any
time during the three (3) years following his termination date, directly or
indirectly solicit any individuals to leave the Company's (or any of its
subsidiaries') employ for any reason or interfere in any other manner with the
employment relationships at the time existing between the Company (or any of its
subsidiaries) and its current or prospective employees.
7. Successors.
(a) Company's Successors. Any successor to the Company (whether direct or
indirect and whether by purchase, 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. For all purposes under this Agreement, the term "Company" shall
include any such 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 Agreement by operation of law.
(b) Executive's Successors. The terms of this Agreement and all rights of
the Executive hereunder shall inure to the benefit of, and be enforceable by,
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
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8. Notices.
(a) General. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or one day following mailing via Federal Express or similar
overnight courier service. In the case of Executive, mailed notices shall be
addressed to him at the home address which he 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.
(b) Notice of Termination. Any termination by the Company for Cause or by
Executive for Good Reason shall be communicated by a notice of termination to
the other party hereto given in accordance with Section 8(a) of this Agreement.
Such notice shall indicate the specific termination provision in this Agreement
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 30 days after
the giving of such notice). The failure by Executive to include in the notice
any fact or circumstance which contributes to a showing of Good Reason shall not
waive any right of Executive hereunder or preclude Executive from asserting such
fact or circumstance in enforcing his rights hereunder.
9. Miscellaneous Provisions.
(a) No Duty to Mitigate. Executive shall not be required to mitigate the
value of any benefits contemplated by this Agreement, nor shall any such
benefits be reduced by any earnings or benefits that Executive may receive from
any other source.
(b) Amendment and Waiver. No provision of this Agreement shall be amended,
modified, waived or discharged unless such amendment, modification, waiver or
discharge is agreed to in writing and signed by Executive and an authorized
officer of the Company (other than Executive). 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) Legal Fees and Expenses. The Company agrees to indemnify and promptly
reimburse Executive for all legal fees and expenses reasonably incurred by
Executive to seek to obtain or enforce any benefit or right provided by this
Agreement.
(d) Entire Agreement. No agreements, representations or 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 represents the entire
understanding of the parties hereto with respect to the subject matter hereof
and supersedes all prior arrangements and understandings regarding same.
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(e) Severability. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision hereof, which shall remain in full force and effect.
(f) Headings. All section headings herein are for convenience of reference
only and are not part of this Agreement, and no construction or reference shall
be derived therefrom.
(g) Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together will constitute one
and the same instrument.
(h) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Illinois, without regard to any
applicable conflicts of law principles.
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 set
forth below.
STRATOS LIGHTWAVE, INC. EXECUTIVE
By: /s/ Xxxxx X. XxXxxxxx By: /s/ Xxxxxx Xxxxxx
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Xxxxx X. XxXxxxxx Xxxxxx Xxxxxx
President and CEO
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