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EXHIBIT 10.30
AUSPEX SYSTEMS, INC.
CHANGE OF CONTROL SEVERANCE AGREEMENT
This Change of Control Severance Agreement (the "Agreement") is made and
entered into by and between Xxxxx X. Xxxxx (the "Employee") and Auspex Systems,
Inc., a Delaware corporation (the "Company"), effective as of June 16 1999 (the
"Effective Date").
R E C I T A L S
A. It is expected that the Company from time to time will consider the
possibility of an acquisition by another company or other change of control. The
Board of Directors of the Company (the "Board") recognizes that such
consideration can be a distraction to the Employee and can cause the Employee 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 the Employee,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company.
B. The Board believes that it is in the best interests of the Company
and its stockholders to provide the Employee with an incentive to continue his
employment and to motivate the Employee 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 the Employee with
certain severance benefits upon Employee's termination of employment following a
Change of Control which provides the Employee with enhanced financial security
and provides incentive and encouragement to the Employee to remain with the
Company notwithstanding the possibility of a Change of Control.
D. The Board also wishes to provide Employee with certain severance
benefits in the event of his termination of employment under certain
circumstances not associated with a Change of Control.
E. Certain capitalized terms used in the Agreement are defined in 6
below.
The parties hereto agree as follows:
1. Term of Agreement. 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 the Employee acknowledge that the
Employee's employment is and shall continue to be at-will, as defined under
applicable law. If the Employee's employment terminates for any reason,
including (without limitation) any termination prior to a Change of Control, the
Employee 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
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in accordance with the Company's established employee plans and practices or
pursuant to other agreements with the Company.
3. Severance Benefits.
(a) Severance Benefits Associated with a Change of Control. If the
Employee's employment terminates after a Change of Control under the
circumstances described below in this Section 3(a), the Employee shall be
entitled to the benefits set forth in this Section 3(a):
(i) Termination of Employment under Certain Circumstances
Immediately Following Change of Control. If, within thirty (30) days after a
Change of Control, the Employee's employment is (A) voluntarily terminated by
Employee for Good Reason (as defined herein), (B) involuntarily terminated by
the Company other than for Cause (as defined herein) or (C) terminated due to
Employee's death or "permanent and total disability" (as such term is defined
under Internal Revenue Code Section 22(e)(3) or its successor provision), the
Employee shall receive severance pay in the form of equal monthly payments
yielding in aggregate an amount equal to one hundred fifty percent (150%) of the
Employee's Annual Compensation (as defined herein).
(ii) Additional Severance Pay for Extended Service. If requested
to remain as an employee of the Company following a Change of Control and
Employee elects to do so, and if Employee's employment thereafter terminates for
any of the reasons specified in paragraph 3(a)(i) above, the Employee shall be
entitled to receive severance pay in the form of (A) monthly payments yielding
in aggregate an amount equal to one hundred fifty percent (150%) of the
Employee's Annual Compensation plus (B) one additional such monthly payment for
each month of continued employment following the Change of Control, up to a
maximum of twelve (12) additional payments, plus (C) a pro rata portion of the
bonus that would otherwise be payable to Employee for the year in which
termination occurs based on the number of full calendar months of his employment
subsequent to the Change of Control.
(b) Severance Benefits upon Termination of Employment not Associated with
a Change of Control. If the Employee's employment is terminated prior
to a Change of Control (as defined herein) or more than twenty-four (24) months
after a Change of Control for any of the reasons set forth below in this
paragraph 3(b), then the Employee shall be entitled to receive severance pay in
the form of equal monthly payments yielding in aggregate an amount equal to one
hundred fifty percent (150%) of the Employee's Annual Compensation (as defined
herein), plus a pro rata portion of the bonus that would otherwise be payable
to Employee for the year in which termination occurs based on the number of
full calendar months of his employment during the fiscal year in which
termination occurs. A termination of employment for any of the following
reasons shall trigger the severance benefits specified in this paragraph 3(b):
(A) voluntarily termination of employment by Employee for Good Reason (as
defined herein); (B) involuntarily termination of employment by the Company
other than for Cause (as defined herein); or (C) termination of employment due
to Employee's death or "permanent and total disability" (as such term is
defined under Internal Revenue Code Section 22(e)(3) or its successor
provision).
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(c) Timing of Severance Payments. Any severance payments to which
Employee is entitled under this Section 3 shall be paid by the Company to the
Employee (or to the Employee's successors in interest, pursuant to Section 7(b))
in cash installments with each installment being paid on or before the end of
each month-long period following the Termination Date (e.g. on each monthly
"anniversary" of the Termination Date).
(d) Medical Benefits. Employee shall be entitled to payment of
Employee's Consolidated Budget Reconciliation Act of 1985 ("COBRA") premiums
(the "Company-Paid Coverage") in the event Employee becomes entitled to receive
severance payments under either paragraph 3(a) or 3(b) above. If Employee's
health insurance coverage included Employee's dependents immediately prior to
the termination of employment, such dependents shall also be covered at
Company's expense. Company-Paid Coverage shall continue until the earlier of:
(a) the end of the Applicable Coverage Period (as defined below) or (b) the date
Employee becomes eligible for coverage under another employer's health insurance
plan. For purposes of Title X of COBRA, the date of the "qualifying event" for
Employee and his dependents shall be the date upon which Employee's employment
terminates. The "Applicable Coverage Period" for purposes of this Section
3(b)(iii) shall mean the period during which Employee receives severance
payments under either paragraph 3(b)(i) or 3(b)(ii).
(e) Voluntary Resignation other than for Good Reason; Termination
For Cause. If the Employee's employment terminates by reason of the Employee's
voluntary resignation other than for Good Reason, or if the Employee is
terminated involuntarily by the Company for Cause, then the Employee 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 and practices or pursuant to other agreements with the Company.
(f) Contingent Obligations. The Company's obligation to pay the
severance payments, or any portion thereof remaining unpaid, set forth in this
Section 3 and pay the Company-paid Coverage set forth in Section 3(d) shall
terminate immediately in the event that Employee breaches any of Employee's
obligations set forth in Section 9 below.
4. Attorney Fees, Costs and Expenses. The Company shall promptly
reimburse Employee, on a monthly basis, for the reasonable attorney fees, costs
and expenses incurred by the Employee in connection with any action brought by
Employee to enforce his rights hereunder, regardless of the outcome of the
action
5. Limitation on Payments. In the event that the severance and other
benefits provided for in this Agreement or otherwise payable to the Employee (i)
constitute "parachute payments" within the meaning of Section 280G (as it may be
amended or replaced) of the Internal Revenue Code of 1986, as amended or
replaced (the "Code") and (ii) but for this Section 5, would be subject to the
excise tax imposed by Section 4999 (as it may be amended or replaced) of the
Code (the "Excise Tax"), then the Employee's severance benefits hereunder
Section 3 shall be either
(a) delivered in full, or
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(b) delivered as to such lesser extent which would result in no
portion of such severance benefits being subject to the Excise Tax,
whichever of the foregoing amounts, taking into account the applicable federal,
state and local income taxes and the Excise Tax, results in the receipt by the
Employee on an after-tax basis, of the greatest amount of severance benefits,
notwithstanding that all or some portion of such severance benefits may be
taxable under the Excise Tax. Unless the Company and the Employee otherwise
agree in writing, any determination required under this Section 5 shall be made
in writing in good faith by the accounting firm serving as the Company's
independent public accountants immediately prior to the Change of Control (the
"Accountants"). In the event of a reduction in benefits hereunder, the Employee
shall be given the choice of which benefits to reduce. For purposes of making
the calculations required by this Section 5, the Accountants may make reasonable
assumptions and approximations concerning applicable taxes and may rely on
reasonable, good faith interpretations concerning the application of the Code.
The Company and the Employee shall furnish to the Accountants such information
and documents as the Accountants may reasonably request in order to make a
determination under this Section. The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section 5.
6. Definition of Terms. The following terms referred to in this
Agreement shall have the following meanings:
(a) Annual Compensation. "Annual Compensation" means an amount equal to
the sum of Employee's (i) annual Company salary at the highest rate in effect in
the twelve months immediately preceding the Change of Control, and (ii) 100% of
the Employee's annual target bonus as in effect immediately prior to the Change
of Control.
(b) Cause. "Cause" shall mean either (i) any act of personal dishonesty
taken by the Employee in connection with his responsibilities as an employee and
intended to result in substantial personal enrichment of the Employee, (ii)
Employee's conviction of a felony, (iii) a willful act by the Employee which
constitutes gross misconduct and which is injurious to the Company, or (iv)
following delivery to the Employee of a written demand for performance from the
Company which describes the basis for the Company's belief that the Employee has
not substantially performed his duties, continued substantial violations by the
Employee of the Employee's obligations to the Company which are demonstrably
willful and deliberate on the Employee's part.
(c) Change of Control. "Change of Control" means the occurrence of any
of the following events:
(1) 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) ("Beneficial
Owner"), directly or indirectly, of securities of the Company representing fifty
percent (50%) or more of the total voting power represented by the Company's
then outstanding voting securities;
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(2) 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 vote of at least a
majority of the Incumbent Directors at the time of such election or nomination;
(i) 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 voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or the entity that
controls the Company or controls such surviving entity) at least fifty percent
(50%) of the total voting power represented by the voting securities of the
Company or such surviving entity or the entity that controls the Company or
controls such surviving entity outstanding immediately after such merger or
consolidation; or
(ii) The consummation of the sale or disposition by the Company
of all or substantially all of the Company's assets.
(d) Good Reason. "Good Reason" shall mean (i) without the Employee's
express written consent, a material reduction of the Employee's duties, title,
authority or responsibilities, relative to the Employee's duties, title,
authority or responsibilities as in effect immediately prior to such reduction,
or the assignment to Employee of such reduced duties, title, authority or
responsibilities; provided, however, that a reduction in duties, title,
authority or responsibilities solely by virtue of the Company being acquired and
made part of a larger entity (as, for example, when the Chief Financial Officer
of Auspex remains as such following a Change of Control and is not made the
Chief Financial Officer of the acquiring corporation) shall not constitute "Good
Reason;" (ii) without the Employee's express written consent, a material
reduction, without good business reasons, of the facilities and perquisites
(including office space and location) available to the Employee immediately
prior to such reduction; (iii) a reduction by the Company in the base salary of
the Employee as in effect immediately prior to such reduction; (iv) a material
reduction by the Company in the kind or level of employee benefits, including
bonuses, to which the Employee was entitled immediately prior to such reduction
with the result that the Employee's overall benefits package is materially
reduced; (v) the relocation of the Employee to a facility or a location more
than thirty (30) miles from the Employee's then present location, without the
Employee's express written consent; (vi) any purported termination of the
Employee by the Company which is not effected for Disability or for Cause, or
any purported termination for which the grounds relied upon are not valid; (vii)
the failure of the Company to obtain the assumption of this agreement by any
successors contemplated in Section 7(a) below; or (viii) any act or set of facts
or circumstances which would, under California case law or statute constitute a
constructive termination of the Employee.
(e) Termination Date. "Termination Date" shall mean (i) if this
Agreement is terminated by the Company for Disability, thirty (30) days after
notice of termination is given to the Employee (provided that the Employee shall
not have returned to the performance of the Employee's duties on a full-time
basis during such thirty (30)-day period), (ii) if the Employee's employment is
terminated by the Company for any other reason, the date on which a notice of
termination is given,
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provided that if within thirty (30) days after the Company gives the Employee
notice of termination, the Employee notifies the Company that a dispute exists
concerning the termination or the benefits due pursuant to this Agreement, then
the Termination Date shall be the date on which such dispute is finally
determined, either by mutual written agreement of the parties, or a by final
judgment, order or decree of a court of competent jurisdiction (the time for
appeal therefrom having expired and no appeal having been perfected), or (iii)
if the Agreement is terminated by the Employee, the date on which the Employee
delivers the notice of termination to the Company.
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 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) Employee's Successors. The terms of this Agreement and all rights of
the Employee hereunder shall inure to the benefit of, and be enforceable by, the
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
8. Notice.
(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 when mailed by U.S. registered or certified mail, return
receipt requested and postage prepaid. In the case of the Employee, 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 the Employee as a result of a voluntary resignation or an Involuntary
Termination 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 the Employee to include in the notice any
fact or circumstance which contributes to a showing of Involuntary Termination
shall not waive any right of the Employee hereunder or preclude the Employee
from asserting such fact or circumstance in enforcing his rights hereunder.
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9. Employee Obligations. Notwithstanding any other obligations of
Employee to Company following his termination from the Company and pursuant to
any other agreements, Employee hereby agrees that he shall be bound by the
following restrictions for a period of two (2) years from the Termination Date:
(a) Non-Solicitation.
(i) Employee agrees that he shall not either directly or
indirectly solicit, induce, attempt to hire, recruit, encourage, take away, hire
any employee of the Company or cause an employee to leave their employment
either for Employee or for any other entity or take any action which is intended
to induce any independent contractor, customer or supplier of the Company to
terminate his, her or its relationship with the Company; and
(ii) Employee agrees that he shall not interfere in any manner
that is injurious to the Company with the contractual or employment relationship
between the Company or any affiliated corporation and any employee, independent
contractor, customer or supplier of the Company or any affiliated corporation.
(b) Non Disparagement. The Employee agrees to refrain from any
defamation, libel or slander of the Company, or tortious interference with the
contracts and relationships of the Company.
(c) Non-Competition. The Employee shall not directly or indirectly
engage in (whether as an employee, consultant, proprietor, partner, director or
otherwise), or have any ownership interest in or participate in the financing,
operation, management or control of, any person, firm, corporation or business
that engages in the "Restricted Business" in a "Restricted Territory" (as such
terms are defined below). It is agreed that ownership of no more than 1% of the
outstanding voting stock of a publicly traded corporation, or (ii) any stock
owned as of the date hereof by Employee shall not constitute a violation of this
provision. As used in this Section 9(c), the term "Restricted Business" means
any business involving [the development, distribution and support of network
file/data servers and/or network data management products] conducted or proposed
to be conducted by the Company or any of its subsidiaries at the time Employee's
employment with the Company terminates, and "Restricted Territory" means the
[counties, cities or states of the United States of America].
Employee represents that he (i) is familiar with the covenants not to
solicit, not to disparate and not to compete, and (ii) is fully aware of his
obligations hereunder, including, without limitation, the reasonableness of the
length of time, scope and geographic coverage of these covenants.
10. Miscellaneous Provisions.
(a) No Duty to Mitigate. The Employee shall not be required to mitigate
the amount of any payment contemplated by this Agreement, nor shall any such
payment be reduced by any earnings that the Employee may receive from any other
source.
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(b) Waiver. No provision of this Agreement shall be modified, waived or
discharged unless the modification, waiver or discharge is agreed to in writing
and signed by the Employee and by an authorized officer of the Company (other
than the Employee). 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) Whole 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 except for the third paragraph of the offer
letter (the "Offer Letter") between the Company and Employee dated June 7, 1995,
which is hereby cancelled and superceded in its entirety. 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.
(d) Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California.
(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) Withholding. All payments made pursuant to this Agreement will be
subject to withholding of applicable income and employment taxes to the extent
required by law.
(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.
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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 above.
COMPANY AUSPEX SYSTEMS, INC.
By:
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R. Xxxxxxx Xxxxxxx
By:
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W. Xxxxx Xxxx, Ph.D.
By:
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Xxxxxxx Xxxxx, Vice President,
Human Resources
EMPLOYEE
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Xxxxx X. Xxxxx
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