CHANGE OF CONTROL AGREEMENT
This CHANGE OF CONTROL AGREEMENT (this "AGREEMENT"), is made this 26th
day of March, 1999, between Xxxx X. Xxxxxx ("EXECUTIVE") and Dynamic Materials
Corporation, a Delaware corporation (the "COMPANY").
RECITALS
WHEREAS, the Company wishes to assure itself of continuity of
management in the event of any actual or threatened change in the control of the
Company;
WHEREAS, the Company believes it is important that Executive be able to
assess and advise the Company whether supporting a change in control would be in
the best interests of the Company and its shareholders without being influenced
by the uncertain effect of such a change upon Executive's role within the
Company;
WHEREAS, Executive has been employed by the Company and the Company
wishes to demonstrate to Executive the Company's concern for his welfare.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto agree as follows:
ARTICLE I. OPERATION OF AGREEMENT
1.1 This Agreement will be binding immediately upon its execution by
the parties hereto, but will operate as an employment contract only during the
"Term of Employment" as described below.
1.2 The "Term of Employment" is the period beginning on the date of a
"CHANGE OF CONTROL" and ending on the earliest of:
(a) Executive's 65th birthday,
(b) Executive's death,
(c) the date on which the Agreement terminates in accordance
with paragraph 1.4 below, and
(d) the date on which all rights and obligations of the
parties hereto have been satisfied in accordance with the terms of this
Agreement.
Neither the expiration of the Term of Employment nor the termination of this
Agreement will relieve the Company of the obligation to provide Executive, in
accordance with the terms hereof, the payments, benefits and coverage to which
he has become entitled under this Agreement.
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1.3 "CHANGE OF CONTROL" means a change of control of the Company of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A (or in response to any similar item on any
similar schedule or form) promulgated under the Securities Exchange Act of 1934,
as amended (the "Act"), whether or not the Company is then subject to such
reporting requirement; provided, however, that without limitation, such a Change
of Control shall be deemed to have occurred if:
(a) the Company has achieved net operating income for the four
quarter period immediately prior to the occurrence of any of the events
described in paragraph 1.3(b) below,
and
(b) the occurrence of any of the following events:
(i) any person or group (as such terms are used in
connection with Sections 13(d) and 14(d) of the Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Company in an amount sufficient to be deemed an
Acquiring Person as defined in the Company's Rights Agreement dated as of
January 8, 1999;
(ii) the Company is a party to a merger or
consolidation whereby 50% or more of the assets or outstanding shares of Common
and Preferred Stock of the Company are transferred to an acquiror, other than a
merger solely to effect reincorporation or a merger of the Company as to which
stockholder approval is not required pursuant to Section 251(f) or 253 of the
Delaware General Corporation Law;
(iii) sale, lease, exchange or other transfer of 50%
or more of assets or other reorganization, or a proxy contest, as a consequence
of which members of the Board of Directors in office immediately prior to such
transaction or event constitute less than a majority of the Board of Directors
thereafter; or
(iv) during any period of 12 consecutive months,
individuals who at the beginning of such period constituted the Board of
Directors (including for this purpose any new director whose election or
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds of the directors then still in office who were directors at
the beginning of such period) cease for any reason to constitute at least a
majority of the Board of Directors.
Notwithstanding the foregoing provisions of this paragraph 1.3, a
"Change of Control" will not be deemed to have occurred solely because of the
acquisition of securities of the Company (or any reporting requirement under the
Act relating thereto) by an employee benefit plan maintained by the Company for
its employees.
1.4 This Agreement shall terminate as of the first anniversary of the
Change of Control.
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ARTICLE II. EMPLOYMENT
2.1 The Company agrees to employ Executive throughout the Term of
Employment as Vice President of Corporate Development of the Company without
materially reducing Executive's authority, status or salary below the level he
possessed immediately prior to the Change of Control. The Company agrees that
Executive's situs of employment will be within a 60 miles radius of such
Executive's situs of employment immediately before the Change of Control.
2.2 For purposes of this Agreement, employment by a subsidiary of the
Company will be deemed to be employment by the Company, and the Company may
cause its obligations hereunder to be discharged through such a subsidiary,
provided that the Company will remain liable for the discharge of all such
obligations and that the rights, benefits, authority, status and salary of the
Executive are in no way diminished thereby. A subsidiary is any corporation of
which more than 50% of the voting stock is owned by the Company or another
subsidiary of the Company.
ARTICLE III. COMPENSATION
3.1 The Company will pay as compensation to Executive for his services
as an employee during the Term of Employment base annual salary and bonus, with
similar performance goals, at a rate equal to or greater than the rate of base
salary and bonus in effect for Executive immediately prior to the Change of
Control as determined and approved by the Board of Directors in its customary
capacity.
3.2 In addition, for his services as an employee during the Term of
Employment, Executive will:
(a) participate fully in the Company's stock option plan
(and/or any successor plan);
(b) participate fully in all pension, profit sharing and
similar benefit plans of the Company;
(c) participate fully, together with his dependents and
beneficiaries, in all life insurance plans, accident and health plans and other
welfare plans, maintained or sponsored by the Company immediately prior to the
Change of Control, or receive substantially equivalent coverage (or the full
value thereof in cash) from the Company;
(d) participate fully in any additional benefit plans offered
by the Company to executives before or after the Change of Control; and
(e) receive fringe benefits (which shall not include any
benefit referred to elsewhere in this Article 3) substantially equivalent to
those provided to Executive immediately prior to the Change of Control as well
as reimbursement, upon proper accounting, of reasonable expenses
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and disbursements incurred by Executive in the course of his duties, including,
but not limited to, an automobile allowance and a mobile phone allowance.
3.3 Amounts payable under this Article 3 for services rendered by
Executive during his employment constitute reasonable compensation for such
services. If any such amount (or, if by reason of such amount, any other amount
in the nature of compensation payable to Executive) is determined to be subject
to the excise tax imposed by section 4999 of the Internal Revenue Code of 1986,
as amended (the "Code"), or any successor provision, the Company will pay to
Executive in cash an additional amount necessary to cause the total payments
(including the additional payment required by this paragraph 3.3) and benefits
received by him under this Article 3 (net of all federal and state taxes,
including all taxes payable under section 4999 of the Code) to be equal to the
total payments and benefits Executive would have received under this Article 3
(net of all federal, state and local taxes) if section 4999 of the Code had not
applied. This paragraph 3.3 does not apply to amounts payable under Article 4.
ARTICLE IV. TERMINATION OF EMPLOYMENT
4.1 In the event Executive's employment is terminated by the Company
during the Term of Employment for any reason other than "Cause" (as defined in
paragraph 4.5 below) the Company will pay Executive a lump sum cash payment,
payable within 10 days of his termination equal to one year of the Executive's
annual base salary in effect immediately prior to his termination and an amount
equal to the bonus earned by Executive in the fiscal year prior to the year in
which such termination takes place. In addition, one hundred percent (100%) of
all options to purchase Common Stock of the Company that are unvested at the
time of such termination as determined in this paragraph 4.1 shall immediately
vest and become exercisable.
4.2 In the event of a termination described in paragraph 4.1 above,
Executive together with his dependents and beneficiaries, will continue
following his termination to participate fully in accordance with paragraph
3.2(c), (d) and (e) above in all life insurance plans, accident and health
plans, other welfare plans, any additional benefit plans and any fringe
benefits, maintained or sponsored by the Company immediately prior to the Change
of Control, or receive substantially equivalent coverage (or the full value
thereof in cash) from the Company, until the first anniversary of his
termination.
The period of time between such a termination and the first anniversary
of the Change of Control will be counted as service with the Company for
purposes of any benefit plan of the Company in which Executive is participating
at the time of the termination.
4.3 (a) Upon the occurrence of any breach by the Company of this
Agreement within the meaning of paragraph 4.3(b), below, Executive may give the
Company written notice of his intention to resign effective the 30th day
following the receipt of such notice. If the Company does not provide or
determine a reasonably adequate remedy such breach within 30 days of the date of
such notice, Executive's resignation will become effective on such 30th day. If
Executive resigns in
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accordance with this paragraph during the Term of Employment, his employment
will be deemed to have been terminated by the Company for reasons other than
Cause [(and he will be deemed to have offered to continue to provide services to
the Company),] and he will be entitled to all the payments and rights and
benefits described in paragraphs 4.1 and 4.2, provided that such payments and
rights and benefits will in no event be less than they would have been had such
termination taken place on the date that the Company first breached this
Agreement.
(b) The following events are breaches by the Company of this
Agreement within the meaning of this paragraph 4.3(b):
(i) any material reduction of, or failure to pay,
Executive's salary or bonus as described in paragraph 3.1 above;
(ii) any failure to provide the benefits required by
paragraph 3.2 above or to make any payment that might be due in
accordance with paragraph 3.3 above;
(iii) assignment to Executive of any duties
inconsistent in any respect with his position (including status,
offices and titles), authority, duties or responsibilities as
contemplated by paragraph 2.1 above or any other action by the Company
that results in a material diminution of such position or authority;
(iv) failure after a Change of Control to comply with
and satisfy paragraph 7.1 or 7.2 below;
relocation of the Company's principal executive offices, or any event that
causes Executive to have his principal place of work changed, to any location
outside a 60-mile radius of the Executive's place of work immediately prior to
the Change of Control; and
(vi) without limiting the generality or effect of the
foregoing, any other material breach of this Agreement by the Company
or any successor thereto or transferee of substantially all the assets
thereof.
4.4 If Executive is dismissed by the Company for Cause, he will not be
entitled to payments or benefits provided under paragraphs 4.1 or 4.2 above.
"Cause" shall mean: (I) material and willful dishonesty with respect to the
Company or its subsidiaries; (ii) material and willful misfeasance or
nonfeasance of duty by the Executive intended to injure or having the effect of
injuring in some material fashion the reputation, business or business
relationships of the Company or any of its subsidiaries or any of their
respective officers, directors or employees; (iii) the willful commission by
Executive of theft, embezzlement or other serious and substantial crimes against
the Company or any of its subsidiaries; (iv) the conviction of the Executive of
any felony, any crime involving moral turpitude or any crime that could reflect
in some material fashion unfavorably upon the Company or any of its
subsidiaries; and (v) continued substantial and repeated neglect of his duties
as an Executive (including continued and prolonged absences from the Company's
headquarters or Executive's
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prescribed post), gross negligence or willful misconduct in the performance of
his duties, or substantial breaches of this Agreement or other agreement related
to Executive's employment. For purposes of this definition, no act or omission
shall be considered to have been "willful" unless it was not in good faith and
Executive had knowledge at the time that the act or omission was not in the best
interest of the Company.
4.5 If Executive's employment is alleged to be terminated for Cause or
if Executive's right to resign under paragraph 4.3 is disputed, Executive may
initiate binding arbitration before the American Arbitration Association by
serving a notice to arbitrate upon the Company or, at Executive's election,
institute judicial proceedings, in either case within 90 days of the effective
date of his termination or, if later, his receipt of notice of termination, or
such longer period as may be reasonably necessary for Executive to take such
action if illness or incapacity should impair his taking such action within the
90-day period. Each Party agrees to pay its own costs and expenses relating to
such arbitration or judicial proceeding, and share equally the costs of such
arbitration or judicial proceeding.
4.6 Termination of employment due to the death or total and permanent
disability of Executive will not be considered a termination for purposes of
this Article 4.
4.7 If Executive dies following a termination of employment that
entitled him to benefits under this Article 4 but prior to receipt of all such
benefits:
(a) his beneficiary (as designated to the Company in writing)
or, if none, his estate, will be entitled to receive all unpaid amounts due
hereunder; and
(b) his beneficiary or estate will be entitled to exercise
options in accordance with paragraph 4.3 above and the terms of the options.
ARTICLE V. NO OBLIGATION TO MITIGATE
5.1 There shall be no requirement on the Executive's part to seek other
employment or otherwise mitigate in order to be entitled to the full amount of
any payments or benefits hereunder.
5.2 In the event Executive obtains other employment, Executive shall
continue to be entitled to receive 25% of the full amount of any payments or
benefits hereunder regardless of his subsequent level of compensation. In
addition, Executive shall receive the difference between (i) the full amount of
any payments or benefits due under this Agreement less (ii) the full amount of
any payment or benefits from any other employment; provided, however, that {in
no event shall} [IF] Executve receives payments or benefits in an amount greater
than provided for in this Agreement, Executive shall be obligated to reimburse
to the Company such amount pursuant to a schedule agreed to by the Company and
Executive or, if a schedule cannot be agreed to, a reasonable schedule under the
circumstances.
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ARTICLE VI. LIMITATION
6.1 Notwithstanding any other provision of this Agreement, and except
as provided in paragraph 6.2 below, the payments or benefits to which Executive
will be entitled under Article 4 of this Agreement will be reduced to the extent
necessary so that Executive will not be liable for the federal excise tax levied
on certain "excess parachute payments" under section 4999 of the Code.
6.2 The limitation of paragraph 6.1 will not apply if:
(a) the difference between
(i) the present value of all payments to which
Executive is entitled under Article 4 of this Agreement determined
without regard to paragraph 6.1, less
(ii) the present value of all federal, state, and
other income and excise taxes for which Executive is liable as a result
of such payments;
exceeds
(b) the difference between
(i) the present value of all payments to which
Executive is entitled under Article 4 of this Agreement calculated as
if the limitation of paragraph 6.1 applies, less
(ii) the present value of all federal, state, and
other income and excise taxes for which Executive is liable as a result
of such reduced payments.
Present values will be determined using the interest rate specified in section
280G of the Code and will be the present values as of the date on which
Executive's employment terminates (unless it is necessary to use a different
date in order to avoid adverse consequences under section 280G).
To illustrate, an "excess parachute payment" is the difference between the
executive's average salary for the past five years and the parachute payment;
provided, however, that the parachute payment must be at least equal to three
times the executive's annual base salary before it is considered an "excess
parachute payment." For example, if an executive had an average base salary for
the past five years of $100,000.00 and receives a parachute payment of
$299,000.00, no excise tax is due. If the parachute payment is $301,000.00,
excise tax is due on the entire $201,000.00 difference.
6.3 (a) Whether payments to the Executive are to be reduced pursuant to
paragraph 6.1, and the extent to which they are to be so reduced, will be
determined by the Executive.
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(b) If a reduction is made pursuant to paragraph 6.1,
Executive will have the right to determine the payments and benefits that will
be reduced.
ARTICLE VII. EXPENSES
If Executive determines in good faith that the Company has failed to
comply with any of its obligations under this Agreement, or if the Company or
any other person takes any action to declare this Agreement void or
unenforceable, or institutes any legal action or arbitration proceeding designed
to deny Executive, or to recover from him, the benefits intended to be provided
hereunder, or in the event of actions instituted as contemplated by paragraph
4.5 above, the Company irrevocably authorizes Executive from time to time to
retain counsel of his choice, at the expense of the Executive as hereafter
provided, to represent Executive in connection with any and all actions and
proceedings, whether by or against the Company or any director, officer,
stockholder or other person affiliated with the Company, which may adversely
affect Executive's rights under this Agreement. Notwithstanding any existing or
prior attorney-client relationship between the Company and such counsel, the
Company irrevocably consents to Executive's entering into an attorney-client
relationship with such counsel and agrees that a confidential relationship shall
exist between Executive and such counsel.
ARTICLE VIII. MERGER OR ACQUISITION
8.1 If the Company is at any time before or after a Change of Control
merged with or consolidated into or with any other corporation or other entity
(whether or not the Company is the surviving entity), or if substantially all of
the assets of the Company are transferred to another corporation or other
entity, the corporation or other entity resulting from such merger or
consolidation, or the acquirer of such assets, shall (by agreement in form and
substance satisfactory to Executive) expressly assume the obligations of the
Company under this Agreement. In any event, however, the provisions of this
Agreement shall be binding upon and inure to the benefit of the corporation or
other entity resulting from such merger or consolidation or the acquirer of such
assets, and this Article 7 will apply in the event of any subsequent merger or
consolidation or transfer of assets.
8.2 In the event of any merger, consolidation or sale of assets
described above, nothing contained in this Agreement will detract from or
otherwise limit Executive's right to or privilege of participation in any stock
option or purchase plan or any bonus, profit sharing, pension, group insurance,
hospitalization or other incentive or benefit plan or arrangement that may be or
become applicable to executives of the corporation resulting from such merger or
consolidation or the corporation acquiring such assets of the Company.
8.3 In the event of any merger, consolidation or sale of assets
described above, references to the Company in this Agreement shall, unless the
context suggests otherwise, be deemed to include the entity resulting from such
merger or consolidation or the acquirer of such assets of the Company.
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ARTICLE IX. WITHHOLDING
All payments required to be made by the Company hereunder to Executive
or his dependents, beneficiaries or estate will be subject to the withholding of
such amounts relating to tax and/or other payroll deductions as may be required
by law.
ARTICLE X. AMENDMENT
No amendment, change or modification of this Agreement may be made
except in writing, signed by both parties.
ARTICLE XI. GENERAL
11.1 The provisions of this Agreement shall be binding upon and shall
inure to the benefit of Executive, his executors, administrators, legal
representatives and assigns, and the Company and its successors.
11.2 The validity, interpretation and effect of this Agreement shall be
governed by the laws of Colorado.
11.3 No right or interest to or in any payments shall be assignable by
Executive, provided, however, that this provision shall not preclude him from
designating one or more beneficiaries to receive any amount that may be payable
after his death and shall not preclude the legal representative of his estate
from assigning any right hereunder to the person or persons entitled thereto
under his will or, in the case of intestacy, to the person or persons entitled
thereto under the laws of intestacy applicable to his estate. The term
"beneficiaries" as used in this Agreement shall mean a beneficiary or
beneficiaries so designated to receive any such amount, or if no beneficiary has
been so designated, the legal representative of the Executive's estate.
11.4 No right, benefit or interest hereunder, shall be subject to
anticipation, alienation, sale, assignment, encumbrance, charge, pledge,
hypothecation, or set-off in respect of any claim, debt or obligation, or to
execution, attachment, levy or similar process, or assignment by operation of
law. Any attempt, voluntary or involuntary, to effect any action specified in
the immediately preceding sentence shall, to the full extent permitted by law,
be null, void and of no effect.
11.5 This Agreement does not supersede any other employment or
severance agreements Executive has with the Company, including, but not limited
to, the employment agreement attached hereto as Exhibit A (the "EMPLOYMENT
AGREEMENT"), any proprietary information agreement, or non-competition
agreement. Any payment made to Executive under the Employment Agreement shall be
deducted from amounts due and payable to Executive under this Agreement;
provided, however, that Executive shall not be liable for any amounts, either
under Article V herein or otherwise, in the event the amount paid under the
Employment Agreement exceeds the amount due under this Agreement.
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11.6 This Agreement embodies the complete agreement and understanding
among the parties and supersedes and preempts any prior understanding,
agreements or representations by or among th parties, written or oral, which may
have related to the subject matter hereof in any way, except as discussed in
paragraph 11.6 above.
11.7 The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision.
IN WITNESS WHEREOF, the Company and Executive have each caused this
Agreement to be duly executed and delivered as of the date set forth above.
DYNAMIC MATERIALS CORPORATION,
a Delaware corporation
ATTEST:
___________________________ By:______________________________________
Name:____________________________________
Its:_____________________________________
EXECUTIVE
ATTEST:
__________________________ _________________________________________
Xxxx X. Xxxxxx
