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EXHIBIT 10.37
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT (this "Agreement") is made effective
as of January 27, 1997 between Calnetics Corporation, a California corporation
(the "Company"), and Xxxxxx Xxxx Xxxxxxxx (the "Executive").
The Company's Board of Directors has determined that it is in the best
interests of the Company and its shareholders to reinforce and encourage the
continued attention and dedication of the Executive to his duties without
distraction in potentially disturbing circumstances arising from the possibility
of a change in control of the Company.
This Agreement sets forth the severance compensation which the Company
agrees it will pay to the Executive if the Executive's employment with the
Company terminates under one of the circumstances described herein following a
Change in Control of the Company (as defined herein).
1. Term. This Agreement shall terminate, except to the extent that any
obligation of the Company hereunder remains unpaid as of such time, upon the
termination of the Executive's employment with the Company based on death,
Disability (as defined in Section 3(b)), Retirement (as defined in Section 3(c))
or Cause (as defined in Section 3(d)) or by the Executive other than for Good
Reason (as defined in Section 3(e)).
2. Change in Control. No compensation shall be payable under this
Agreement unless and until (a) there shall have been a Change in Control of the
Company while the Executive is still an employee of the Company and (b) the
Executive's employment by the Company thereafter shall have been terminated in
accordance with Section 3. For purposes of this Agreement, a Change in Control
of the Company shall be deemed to have occurred if (i) there shall be
consummated (x) any consolidation or merger of the Company in which the Company
is not the continuing or surviving corporation or pursuant to which shares of
the Company's Common Stock are converted into cash, securities or other
property, other than a merger of the Company in which the holders of the
Company's Common Stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation immediately
after the merger, or (y) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of the Company, or (ii) the shareholders of the Company shall
approve any plan or proposal for the liquidation or dissolution of the Company,
or (iii) any person (as such term is used in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), shall become
the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act)
of 30% or more of the Company's outstanding Common Stock (excluding Xxxxxxx X.
Xxxxxxx and shares deemed beneficially owned by him), or (iv) during any period
of two consecutive years, individuals who at the beginning of such period
constitute the entire Board of Directors shall cease for any reason to
constitute a majority thereof unless the election, or the nomination for
election by the Company shareholders, of each new director was approved by a
vote of at least a majority of the directors then still in office who were
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directors at the beginning of the period.
3. Termination Following Change in Control. (a) If a Change in Control
of the Company shall have occurred while the Executive is still an employee of
the Company, the Executive shall be entitled to the compensation provided in
Section 4 upon the subsequent termination of the Executive's employment with the
Company by the Executive or by the Company unless such termination is as a
result of (i) the Executive's death; (ii) the Executive's Disability (as defined
in Section 3(b) below); (iii) the Executive's Retirement (as defined in Section
3(c) below); (iv) the Executive's termination by the Company for Cause (as
defined in Section 3(d) below); or (v) the Executive's decision to terminate
employment other than for Good Reason (as defined in Section 3(e) below).
(b) Disability. If, as a result of the Executive's incapacity due to
physical or mental illness, the Executive shall have been absent from his duties
with the Company on a full-time basis for three months, and within 30 days after
written notice of termination is thereafter given by the Company the Executive
shall not have returned to the full-time performance of the Executive's duties,
the Company may terminate this Agreement for "Disability."
(c) Retirement. The term "Retirement" as used in this Agreement shall
mean termination by the Company or the Executive of the Executive's employment
based on the Executive's having reached age 65 or such other age as shall have
been fixed in any arrangement established with the Executive's consent with
respect to the Executive.
(d) Cause. The Company may terminate the Executive's employment for
Cause. For purposes of this Agreement only, the Company shall have "Cause" to
terminate the Executive's employment only on the basis of fraud,
misappropriation or embezzlement on the part of the Executive. Notwithstanding
the foregoing, the Executive shall not be deemed to have been terminated for
Cause unless and until there shall have been delivered to the Executive a copy
of a resolution duly adopted by the affirmative vote of not less than
three-fourths of the entire membership of the Company's Board of Directors at a
meeting of the Board called and held for the purpose (after reasonable notice to
the Executive and an opportunity for the Executive, together with the
Executive's counsel, to be heard before the Board), finding that in the good
faith opinion of the Board the Executive was guilty of fraud, misappropriation
or embezzlement and specifying the particulars thereof in detail.
(e) Good Reason. The Executive may terminate the Executive's employment
for Good Reason following a Change in Control. For purposes of this Agreement,
"Good Reason" shall mean any of the following (without the Executive's express
written consent):
(i) the assignment to the Executive by the Company of duties
inconsistent with the Executive's position, duties, responsibilities and status
with the Company immediately prior to a Change in Control of the Company, or a
change in the Executive's titles or offices as in effect immediately prior to a
Change in Control of the Company, or any removal of the Executive from or any
failure to reelect the Executive to any of such positions, except in connection
with the termination of his employment for Disability, Retirement or Cause or as
a result of the Executive's death or by the Executive other than for Good
Reason; provided that, "Finance" may be removed from the Executive's Vice
President title at the Company's
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discretion;
(ii) a reduction by the Company in the Executive's base salary
as in effect on the date hereof or as the same may be increased from time to
time during the term of this Agreement or the Company's failure to increase
(within 12 months of the Executive's last increase in base salary) the
Executive's base salary after a Change in Control of the Company in an amount
which at least equals, on a percentage basis, the average percentage increase in
base salary for all officers of the Company effected in the preceding 12 months;
(iii) any failure by the Company to continue in effect any
benefit plan or arrangement in which the Executive is participating at the time
of a Change in Control of the Company (or any successor plans providing the
Executive with substantially similar benefits) (hereinafter referred to as
"Benefit Plans"), or the taking of any action by the Company which would
adversely affect the Executive's participation in or materially reduce the
Executive's benefits under any such Benefit Plan or deprive the Executive of any
material fringe benefit enjoyed by the Executive at the time of a Change in
Control of the Company;
(iv) any failure by the Company to continue in effect any
incentive plan or arrangement in which the Executive is participating at the
time of a Change in Control of the Company (or any successor plans or
arrangements providing him with substantially similar benefits) (hereinafter
referred to as "Incentive Plans"),or the taking of any action by the Company
which would adversely affect the Executive s participation in any such Incentive
Plan or reduce the Executive's benefits under any such Incentive Plan, expressed
as a percentage of his base salary, by more than 10% in any fiscal year as
compared to the immediately preceding fiscal year;
(v) any failure by the Company to continue in effect any plan
or arrangement to receive securities of the Company in which the Executive is
participating at the time of a Change in Control of the Company (or successor
plans or arrangements providing him with substantially similar benefits)
(hereinafter referred to as "Securities Plans") or the taking of any action by
the Company which would adversely affect the Executive's participation in or
materially reduce the Executive's benefits under any such Securities Plan;
(vi) a relocation of the Company's principal executive offices
to a location other than in Orange, Los Angeles, Riverside or San Bernardino
County, California, or the Executive's relocation to any place other than the
location at which the Executive performed the Executive's duties immediately
prior to a Change in Control of the Company, except for required travel by the
Executive on the Company's business to an extent substantially consistent with
the Executive's business travel obligations at the time of a Change in Control
of the Company;
(vii) any failure by the Company to provide the Executive with
the number of paid vacation days to which the Executive is entitled at the time
of a Change in Control of the Company;
(viii) any material breach by the Company of any provision
of this Agreement;
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(ix) any failure by the Company to obtain the assumption of
this Agreement by any successor or assign of the Company; or
(x) any purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of Section 3(f).
(f) Notice of Termination. Any termination of the Executive's
employment by the Company or by the Executive shall be communicated by a Notice
of Termination. For purposes of this Agreement only, a "Notice of Termination"
shall mean a written notice which shall indicate those specific termination
provisions in this Agreement relied upon and which sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated.
(g) Date of Termination. "Date of Termination" shall mean (a) if this
Agreement is terminated by the Company for Disability, 30 days after Notice of
Termination is given to the Executive (provided that the Executive shall not
have returned to the performance of the Executive's duties on a full-time basis
during such 30-day period) or (b) if the Executive's employment is terminated by
the Company for any other reason, the date on which a Notice of Termination is
given; provided that if within 30 days after any Notice of Termination is given
to the Executive by the Company the Executive notifies the Company that a
dispute exists concerning the termination, the Date of Termination shall be the
date the dispute is finally determined, whether by mutual agreement of the
parties or upon final judgment, order or decree of a court of competent
jurisdiction (the time for appeal therefrom having expired and no appeal having
been perfected).
4. Compensation upon Termination of Employment. If, following a Change
in Control, the Company shall terminate the Executive's employment other than
for the reasons specified in Sections 3(b), 3(c) or 3(d), or if the Executive
shall terminate his employment for Good Reason, then the Company shall pay to
the Executive as severance pay in a lump sum, in cash, on or before the tenth
day following the Date of Termination, an amount equal to one times the average
of the aggregate annual cash compensation (including bonuses) paid to the
Executive during the 3 calendar years preceding the Change in Control of the
Company; provided, however, that if the lump sum severance payment under this
Section 4, either alone or together with other payments which the Executive has
the right to receive from the Company, would constitute a "parachute payment"
(as defined in Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code")), such lump sum payment shall be reduced to the largest amount as
will result in no portion of the lump sum payment under this Section 4 being
subject to the excise tax imposed by Section 4999 of the Code. The determination
of any reduction in the lump sum payment under this Section 4 pursuant to the
foregoing proviso shall be made by the Executive in good faith, and such
determination shall be conclusive and binding on the Company.
5. No Obligation To Mitigate Damages; No Effect on Other
Contractual Rights.
(a) The Executive shall not be required to mitigate damages or the
amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor
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shall the amount of any payment provided for under this Agreement be reduced by
any compensation earned by the Executive as the result of employment by another
employer after the Date of Termination, or otherwise.
(b) The provisions of this Agreement, and any payment provided for
hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's existing rights, or rights which would accrue solely as
a result of the passage of time, under any Benefit Plan, Incentive Plan or
Securities Plan; provided, however, that this Agreement supersedes any prior
agreements, arrangements or understandings between the Company and the Executive
with respect to severance compensation following a Change in Control.
6. Successor to the Company. (a) The Company will require any successor
or assign (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets or stock of
the Company, by agreement in form and substance satisfactory to the Executive,
expressly, absolutely and unconditionally to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place. Any
failure of the Company to obtain such agreement prior to the effectiveness of
any such succession or assignment shall be a material breach of this Agreement
and shall entitle the Executive to terminate the Executive's employment for Good
Reason. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor or assign to its business and/or assets
or stock as aforesaid which executes and delivers the agreement provided for in
this Section 6 or which otherwise becomes bound by all the terms and provisions
of this Agreement by operation of law. If at any time during the term of this
Agreement the Executive is employed by any corporation a majority of the voting
securities of which is then owned by the Company, "Company" as used herein shall
in addition include such employer. In such event, the Company agrees that it
shall pay or shall cause such employer to pay any amounts owed to the Executive
pursuant to Section 4 hereof.
(b) This Agreement shall inure to the benefit of and be enforceable by
the Executive's personal and legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amounts are still payable to him hereunder, all such amounts shall
be paid in accordance with the terms of this Agreement to the Executive's
devisee, legatee, or other designee or, if there be no such designee, to the
Executive's estate.
7. Continuation of Employment. Nothing contained in this Agreement
shall be construed to create or imply any contract of employment between the
Executive and the Company, to confer upon the Executive any right to continue in
the employ of the Company (either before or after a Change in Control) or to
confer on the Company any right to require the Executive's continued employment.
Except as expressly set forth in this Agreement, the Company shall have the
right to deal with the Executive in the same manner as if this Agreement did not
exist, including without limitation with respect to all matters related to the
hiring, discharge, compensation and conditions of employment of the Executive.
The Company or the Executive may terminate the employment of the Executive at
any time for any reason, with or without cause.
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8. Notices. All notices, demands or other communications hereunder
shall be in writing and shall be delivered during normal business hours by hand,
by Federal Express, United Parcel Service or other reputable overnight delivery
service, by telecopy (confirmation of receipt received), or by United States
mail, certified or registered, return receipt requested, and shall be deemed
delivered when so delivered by hand, overnight delivery or telecopy, or if
mailed three (3) days after the date of mailing, properly addressed as follows:
If to the Company:
Calnetics Corporation
00000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn: President
FAX: (000) 000-0000
If to the Executive:
Xxxxxx Xxxxxxxx
c/o 00000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
FAX: (000) 000-0000
or such other address as either party may have furnished to the other
in writing in accordance herewith.
9. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. This Agreement shall be governed by and construed
in accordance with the laws of the State of California.
10. Validity. The invalidity or unenforceability of any provisions of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
11. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
12. Withholding of Taxes. The Company may withhold from any amounts
payable under this Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or government regulation or ruling.
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13. Legal Fees and Expenses. It is the intent of the Company that the
Executive not be required to incur any legal fees or disbursements associated
with the attempted and/or actual enforcement of his rights under this Agreement.
The Company or its successor shall promptly pay or cause to be paid and shall
reimburse the Executive for any and all reasonable attorneys' and related fees
and expenses so incurred by the Executive.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
CALNETICS CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx
President
EXECUTIVE
By: /s/ Xxxxxx Xxxxxxxx
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Xxxxxx Xxxxxxxx
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