CHANGE OF CONTROL AGREEMENT
EXHIBIT 10.9
This
Change of Control Agreement (the “Agreement”) is made
this 16th day of March, 2009 (“Effective Date”)
between Xxxxxx X. Xxxxx (the “Executive”) and
Electroglas, Inc., a Delaware corporation (the “Company”).
WHEREAS,
the Executive is employed by the Company; and
WHEREAS,
the Company desires to retain the services of Executive through in event of a
Change of Control (as hereinafter defined) of the Company.
NOW,
THEREFORE, in consideration of the mutual covenants contained herein, the
parties hereto agree as follows:
1. Definitions.
(a) Change of
Control. For purposes of this Agreement only, a “Change of Control”
shall be defined as any of the following transactions, the Closing Date of which
occurs during calendar year 2009, provided, however, that the
Company’s existing pre Change of Control Board of Directors (the “Board”) shall
determine under parts (iii) and (iv) whether multiple transactions are related,
and its determination shall be final, binding and conclusive:
(i) a
merger or consolidation in which the Company is not the surviving entity, except
for a transaction the principal purpose of which is to change the state in which
the Company is incorporated;
(ii) the
sale, transfer or other disposition of all or substantially all of the assets of
the Company;
(iii) any
reverse merger or series of related transactions culminating in a reverse merger
(including, but not limited to, a tender offer followed by a reverse merger) in
which the Company is the surviving entity but (A) the shares of the Company’s
common stock outstanding immediately prior to such merger are converted or
exchanged by virtue of the merger into other property, whether in the form of
securities, cash or otherwise, or (B) in which securities possessing more than
ninety percent (90%) of the total combined voting power of the Company’s
outstanding securities are transferred to a person or persons different from
those who held such securities immediately prior to such merger or the initial
transaction culminating in such merger; or
(iv) acquisition
in a single or series of related transactions by any person or related group of
persons (other than the Company or by a Company-sponsored employee benefit plan)
of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act)
of securities possessing more than ninety percent (90%) of the total combined
voting power of the Company’s outstanding securities.
(b) Cause. For
purposes of this Agreement only, “for Cause” shall
mean: (i) Executive commits a crime involving dishonesty, breach of trust,
or physical harm to any person; (ii) Executive willfully engages in conduct
that is in bad faith and materially injurious to the
Company, including but not limited to, misappropriation of trade secrets, fraud
or embezzlement; (iii) Executive commits a material breach of this
Agreement, which breach is not cured within twenty days after written notice to
Executive from the Company; (iv) Executive willfully refuses to implement
or follow a lawful policy or directive of the Company, which breach is not cured
within twenty days after written notice to Executive from the Company; or
(v) Executive engages in misfeasance or malfeasance demonstrated by a
pattern of failure to perform job duties diligently and
professionally.
(c) Good
Reason. For purposes of this Agreement only, “Good Reason” shall
mean any of the following events if (i) the event is effected by the
Company without the consent of Executive, and (ii) such event occurs after
a Change of Control (as hereinafter defined): (A) a change in
Executive’s position with the Company which materially reduces Executive's level
of responsibility; (B) a material reduction in Executive’s base salary,
except for reductions that are comparable to reductions generally applicable to
similarly situated executives of the Company; or (C) a relocation of
Executive’s principal place of employment by more than fifty miles; provided, however,
that Executive shall give written notice to the Board within 30
days of Executive’s knowledge of the situation(s) giving rise
to the alleged Good Reason; provided, further that
in such case, (x) the Company shall have 30 days after
delivery of such written notice to cure the situation, and (y) only if
the Company does not cure the situation within that time and Executive
within 15 days of the end of such period terminates employment in accordance
with this provision shall Good Reason exist; provided, further, that
notwithstanding the definition herein, the Board (as constituted immediately
prior to a Change of Control) have determined in its sole discretion whether
Good Reason exists for purposes of this Agreement, taking into consideration the
Executive’s compensation from the Company following the Change of
Control.
(d) Closing
Date. “Closing Date” shall
mean the date of the first closing of any transactions constituting a Change of
Control.
(e) Termination
Date. “Termination Date”
shall mean the date the Executive’s employment is terminated by the Company
other than for Cause or is terminated by the Executive for Good Reason (a “Qualifying
Termination”).
(f) Company. “Company” shall mean
Electroglas, Inc. and its successors or assigns (including without limitation,
any entity, entities or persons acquiring control of the Company through a
Change of Control).
2. Term; Change of Control
Bonus. If, within the three (3) month period beginning with
the Closing Date of a Change of Control, Executive shall experience a Qualifying
Termination, then the Company shall pay the Executive the Change of Control
Bonus. The Change of Control Bonus, if any, shall be paid promptly
following the effectiveness of the release of claims provided for in
Section 4(a), but in no event later than two and one-half (2½) months
following the calendar year of the Termination Date. The “Change of Control
Bonus” shall equal two hundred seventy-five thousand dollars
($275,000). No Change of Control Bonus shall be payable with respect
to a termination of employment that is not a Qualifying Termination or a
termination occurring after the end of the Term.
1
EXHIBIT
10.9
3. No Employment Agreement,
Employment at Will. Executive and the Company each acknowledge
and agree that: (i) this Agreement does not provide for the
terms and conditions of Executive’s employment with the Company prior to any
Change of Control and does not require or obligate Executive to provide services
to the Company or the Company to continue to employ Executive; and
(ii) Executive’s employment with the Company is and remains an employment
relationship terminable at will and without advance notice by either Executive
or the Company.
4. Conditions to
Benefits.
(a) Release of Claims
Agreement. The receipt of any Change of Control Bonus pursuant
to Section 2 will be subject to Executive signing and not revoking a release of
claims agreement in a form reasonably acceptable to the Company, and such
release becoming effective within forty-five (45) days of Executive’s Qualifying
Termination. No Change of Control Bonus will be paid until the release of claims
agreement becomes effective.
(b) Other
Requirements. Executive’s receipt of the Change of Control
Bonus will be subject to Executive continuing to comply with the terms of any
form of confidential information agreement and the provisions of this Section
4.
5. Stock Option
Acceleration. If during calendar year 2009 there occurs a
Change of Control while Executive remains in the employment of the Company, all
outstanding options to purchase Company stock held by Executive shall vest and
become fully exercisable immediately prior to, and contingent on, the Change of
Control. The vesting acceleration provided for herein shall
supplement, and not replace, any acceleration provided for in the governing
option documents.
6. Notices. All
notices or other communications required or permitted hereunder shall be made in
writing and shall be deemed to have been duly given if delivered by hand, by
facsimile or mailed, postage prepaid, by certified or registered mail, return
receipt requested, and addressed to the Company at:
Electroglas,
Inc.
0000
Xxxxxxxxx Xxx
Xxx Xxxx,
XX 00000-0000
Attn:
or to the
Executive at:
Notice of
change of address shall be effective only when done in accordance with this
Section.
7. Successors. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective heirs, executors, administrators, successors and
assigns.
8. Taxes. All
amounts paid under this Agreement shall be paid less all applicable state and
federal tax withholdings (if any) and any other withholdings required by any
applicable jurisdiction or authorized by Executive. Notwithstanding
any other provision of this Agreement whatsoever, the Company, in its sole
discretion, shall have the right to provide for the application and effects of
Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) (relating to
deferred compensation arrangements) and any related administrative guidance
issued by the Internal Revenue Service. Notwithstanding any
inconsistent provision of this Agreement, if Executive is a “specified employee”
within the meaning of Section 409A of the Code at the time of Executive’s
Qualifying Termination, then only that portion of the Change of Control Bonus
provided for hereunder, together with any other severance payments or benefits
that may otherwise be considered deferred compensation under Section 409A, which
(a) do not exceed the Section 409A Limit (as defined below), and (b) which
qualify as separation pay under Treasury Regulation Section 1.409A-1(b)(9)(iii),
may be paid within the first six (6) months following Executive’s Qualifying
Termination in accordance with Section 2 above or (for payments or benefits not
provided under this Agreement) with the payment schedule applicable to each such
other payment or benefit. Otherwise, the portion of the Change of
Control Bonus, together with any other severance payments or benefits that may
be considered deferred compensation under Section 409A, that would otherwise be
payable within the six (6) month period following Executive’s Qualifying
Termination will accrue during that six (6) month period and will be paid in a
lump sum on the date six (6) months and one (1) day following the date of
Executive’s Qualifying Termination (or the next business day if such date is not
business day), provided Executive has complied with the requirements for such
payment. For purposes of this Agreement, “Section 409A Limit”
means the lesser of two (2) times: (i) Executive’s “annualized
compensation,” as determined under Treasury Regulation Section
1.409A-1(b)(9)(iii)(A)(1), or (ii) the maximum amount that may be taken into
account under a qualified plan pursuant to Section 401(a)(17) of the Code for
the year of the termination, or such successor limit as may
apply. Notwithstanding anything to the contrary, no actions taken
pursuant to this section shall reduce the total amount of payments and benefits
owed to Executive and to be paid to Executive under this Agreement.
9. Governing
Law. The interpretation, performance and enforcement of this
Agreement shall be governed by the laws of the State of California.
10. Entire
Agreement. This Agreement represents the entire Agreement and
understanding between the Company and the Executive concerning the Executive’s
Qualifying Termination of employment with the Company after a Change of
Control. This Agreement supersedes any prior agreement or
understanding of the parties with respect to the subject matter
hereof.
11. No Oral
Modification. This Agreement may only be amended in a writing
signed by the Executive and the Company.
12. Counterparts. This
Agreement may be executed in counterparts, and each counterpart shall have the
same force and effect as the original and shall constitute an effective, binding
agreement on the part of each of the undersigned.
13. Attorneys’
Fees. If any legal action, arbitration or other proceeding is
brought to interpret or enforce the terms of this Agreement, the prevailing
party shall be entitled to recover reasonable attorneys’ fees and any other
costs incurred in that proceeding, in addition to any other relief to which it
is entitled.
[Remainder of page left intentionally
blank.]
2
EXHIBIT
10.9
IN
WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the
date first above written.
Electroglas,
Inc.,
a
Delaware corporation
By: /s/ C. Xxxxx
Xxxxxx
Name: C. Xxxxx Xxxxxx
Title: Director & Comp Committee
Chair
EXECUTIVE
/s/ Xxxxxx X.
Xxxxx
Xxxxxx X.
Xxxxx
3
