GENESIS MICROCHIP INC. CHANGE OF CONTROL SEVERANCE AGREEMENT
Exhibit
10.3
GENESIS
MICROCHIP INC.
This
Change of Control Severance Agreement (the “Agreement”) is made and entered into
effective as of March
2,
2007
(the
“Effective Date”), by and between Xxxxxxx
Xxxxx
(“Executive”) and Genesis Microchip Inc., a Delaware corporation (the
“Company”). Certain capitalized terms used in this Agreement are defined in
Section 1 below.
RECITALS
A. It
is
expected that the Company from time to time will consider the possibility of
a
Change of Control. The Board of Directors of the Company (the “Board”)
recognizes that such consideration can be a distraction to Executive and can
cause Executive to consider alternative employment opportunities.
B. The
Board
believes that it is in the best interests of the Company and its shareholders
to
provide Executive with an incentive to continue Executive’s employment and to
maximize the value of the Company upon a Change of Control for the benefit
of
its shareholders.
C. In
order
to provide Executive with enhanced financial security and sufficient
encouragement to remain with the Company notwithstanding the possibility of
a
Change of Control, the Board believes that it is imperative to provide Executive
with certain severance benefits upon Executive’s termination of employment
following a Change of Control.
AGREEMENT
In
consideration of the mutual covenants herein contained and the continued
employment of Executive by the Company, the parties agree as
follows:
1. Definition
of Terms.
The
following terms referred to in this Agreement will have the following
meanings:
(a) Cause.
“Cause”
means (a) any act of dishonesty or fraud taken by Executive that is in
connection with his or her responsibilities as an employee which is intended
to
result in substantial personal enrichment of Executive or
which
has a
material
and
detrimental
effect
on the Company’s reputation or business; (b) Executive’s conviction of, or no
contest plea to, a felony; (c) a willful act by Executive which constitutes
misconduct and is injurious to the Company; (d) a material breach of the terms
of any confidentiality, invention assignment or proprietary information
agreement with the Company; or (e) continued violations by Executive of
Executive’s obligations to the Company or written Company policies after there
has been delivered to Executive a written demand for performance from the
Company which describes the basis for the Company’s belief that Executive has
not substantially performed his or her duties.
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(b) Change
of Control.
“Change
of Control” means the occurrence of any of the following events:
(i) the
approval by shareholders of the Company 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) more than fifty
percent (50%) of the total voting power represented by the voting securities
of
the Company or such surviving entity outstanding immediately after such merger
or consolidation;
(ii) the
approval by the shareholders of the Company of a plan of complete liquidation
of
the Company or an agreement for the sale or disposition by the Company of all
or
substantially all of the Company’s assets;
(iii) any
“person” (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended) becoming the “beneficial owner” (as defined in
Rule 13d-3 under said Act), directly or indirectly, of securities of the Company
representing 50% or more of the total voting power represented by the Company’s
then outstanding voting securities; or
(iv) a
change
in the composition of the Board, as a result of which fewer than a majority
of
the directors are Incumbent Directors. “Incumbent Directors” will 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 transactions described in subsections (i), (ii), or (iii)
or
in connection with an actual or threatened proxy contest relating to the
election of directors of the Company.
(c) Disability.
“Disability” means that Executive has been unable to perform his or her Company
duties as the result of his or her incapacity due to physical or mental illness,
and such inability, at least twenty-six (26) weeks after its commencement or
one
hundred eighty (180) days in any consecutive twelve (12) month period, 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 representative
(such agreement as to acceptability not to be unreasonably withheld).
Termination resulting from Disability may only be effected after at least thirty
(30) days’ written notice by the Company of its intention to terminate
Executive’s employment. In the event that Executive resumes the performance of
substantially all of his or her duties hereunder before the termination of
his
or her employment becomes effective, the notice of intent to terminate will
automatically be deemed to have been revoked.
(d) Good
Reason.
“Good
Reason” means without Executive’s express written consent (a) a significant
reduction of Executive’s duties, position or responsibilities relative to
Executive’s duties, position or responsibilities in effect immediately prior to
such reduction, or the removal of Executive from such position, duties and
responsibilities, unless Executive is provided with comparable or greater
duties, position and responsibilities; provided, however, that a reduction
in
duties, position or responsibilities solely by virtue of the Company being
acquired and made part of a larger entity, whether as a subsidiary, business
unit or otherwise (as, for example, when the Chief Financial Officer of the
Company remains the Chief Financial Officer of the Company following a Change
in
Control where the Company becomes a wholly owned subsidiary of the acquiror,
but
is not made the Chief Financial Officer of the acquiring corporation) will
not
constitute “Good Reason;” (b) a reduction by the Company of Executive’s base
salary as in effect immediately prior to such reduction, other than
substantially similar reductions that are also applied to substantially similar
employees of the Company; or (c) the imposition of a requirement for the
relocation of Executive to a facility or location more than fifty (50) miles
from Executive’s current work location.
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(e) Termination
Date.
“Termination Date” will mean the effective date of any notice of termination
delivered by one party to the other hereunder pursuant to Section 8(b) or
otherwise.
2. Term
of Agreement.
This
Agreement is effective as of the Effective Date and will remain in effect
through the second anniversary of the Effective Date, except in the event of
a
Change in Control during such term, in which case this Agreement will remain
in
effect through, and automatically terminate upon, the completion of all payments
under the terms of this Agreement. No severance benefits will be paid under
this
Agreement with respect to any termination of employment effective after the
date
of the Agreement’s termination.
3. At-Will
Employment.
The
Company and Executive acknowledge that Executive’s employment is and will
continue to be at-will, as defined under applicable law. If Executive’s
employment terminates for any reason, Executive will not be entitled to any
payments, benefits, damages, awards or compensation other than as provided
by
this Agreement, or as may otherwise be established under the Company’s then
existing employee benefit plans or policies at the time of
termination.
4. Severance
Benefits.
(a) Termination
Within Twelve Months Following a Change of Control.
If
within the twelve (12) month period following a Change of Control, the Company
(or any parent or subsidiary of the Company) terminates Executive’s employment
for reasons other than Cause, death or Disability or Executive resigns from
such
employment for Good Reason, then, subject to Executive complying with Section
4(d), Executive will receive the following severance benefits from the
Company:
(i) Executive
will be entitled to receive a lump sum cash payment equal to (a) one (1) year
of
Executive’s base salary, as in effect on the Termination Date, and (b) an amount
representing Executive’s forgone annual bonus opportunity determined by
multiplying 25% of Executive’s annual base salary, as in effect on the
Termination Date, by a fraction with a numerator equal to the number of days
between the start of the Company’s fiscal year during which the termination
occurs and the Termination Date and a denominator equal to 365, with such
amounts payable within thirty (30) days following the Termination
Date.
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(ii) Fifty
percent (50%) of Executive’s then outstanding, unvested equity compensation
awards will become fully vested and, if applicable, exercisable. The period
over
which such equity compensation awards may be exercised will be governed by
the
applicable provisions of the Company’s equity award plans and related equity
award agreements.
(iii) The
Company will reimburse Executive for the premiums paid for the continued
coverage of Executive (and any eligible dependents) under the Company’s medical,
dental and vision plans at the same level of coverage in effect on the
Termination Date until the earlier of (a) twelve (12) months after the
Termination Date (provided Executive validly elects to continue coverage under
the Consolidated Omnibus Budget Reconciliation Act (“COBRA”)), or (b) the date
upon which Executive and Executive’s eligible dependents become covered under
similar plans.
(b) Termination
Apart from a Change of Control.
If
Executive’s employment with the Company terminates prior to a Change of Control
or after twelve (12) months following a Change of Control, then Executive will
not be entitled to receive severance or other benefits hereunder, but may be
eligible for those benefits (if any) as may then be established under the
Company’s then existing severance and benefits plans and policies at the time of
such termination or pursuant to a written agreement between Executive and the
Company.
(c) Accrued
Wages and Vacation; Expenses.
Without
regard to the reason for, or the timing of, Executive’s termination of
employment: (i) the Company will pay Executive any unpaid base salary due for
periods prior to the Termination Date; (ii) the Company will pay Executive
all
of Executive’s accrued and unused vacation through the Termination Date; and
(iii) following submission of proper expense reports by Executive, the Company
will reimburse Executive for all expenses reasonably and necessarily incurred
by
Executive in connection with the business of the Company prior to the
Termination Date. These payments will be made promptly upon termination and
within the period of time mandated by law.
(d) Release
and Non-Disparagement Agreement.
As a
condition to receiving severance benefits pursuant to Section 4(a) of this
Agreement, Executive will be required to sign (and any such agreement must
become effective) a waiver and release of all claims arising out of his or
her
employment with the Company and its subsidiaries and affiliates (including
termination therefrom) and an agreement not to disparage the Company, its
directors, or its executive officers, in a form reasonably satisfactory to
the
Company.
5. Section
409A.
(a) Amendment.
This
Agreement will be deemed amended to the extent necessary to avoid imposition
of
any additional tax or income recognition prior to actual payment to Employee
under Code Section 409A and any temporary or final Treasury Regulations and
guidance promulgated thereunder and the parties agree to cooperate with each
other and to take reasonably necessary or desirable steps in this
regard.
(b) Distributions.
In the
event that the Company determines that Section 409A of the Code, or its
regulations and other guidance issued thereunder, would require the delay in
the
payment of any severance benefits under Section 4(a) to Executive in the event
Executive is considered to be a “Specified Employee” (as defined below), the
Company will, irrespective of any election to the contrary or any other term
of
the Agreement, delay the payment of severance benefits until the date which
is
at least six (6) months after the Termination Date. For the purposes of this
Section 5(b), the term “Specified Employee” has the meaning given such term in
Section 409A(a)(2)(B)(i) of the Code.
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6. Limitation
on Payments.
In the
event that the severance and other benefits provided for in this Agreement
or
otherwise payable to Executive (i) constitute “parachute payments” within the
meaning of Section 280G of the Code, and (ii) would be subject to the excise
tax
imposed by Section 4999 of the Code (the “Excise Tax”), then Executive’s
benefits under this Agreement will be either
(a) delivered
in full, or
(b) delivered
as to such lesser extent which would result in no portion of such 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 Executive
on an
after-tax basis, of the greatest amount of benefits, notwithstanding that all
or
some portion of such benefits may be taxable under Section 4999 of the
Code.
Unless
the Company and Executive otherwise agree in writing, any determination required
under this Section will be made in writing by the Company’s independent public
accountants (the “Accountants”), whose determination will be conclusive and
binding upon Executive and the Company for all purposes. In the event of a
reduction in benefits hereunder, Executive will be given the choice of which
benefits to reduce. For purposes of making the calculations required by this
Section, the Accountants may make reasonable assumptions and approximations
concerning applicable taxes and may rely on reasonable, good faith
interpretations concerning the application of Section 280G and 4999 of the
Code.
The Company and Executive will 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 will bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section.
7. Successors.
(a) Company’s
Successors.
Any
successor to the Company (whether direct or indirect and whether by purchase,
lease, merger, consolidation, liquidation or otherwise) to all or substantially
all of the Company’s business and/or assets will assume the Company’s
obligations under this Agreement and agree expressly to perform the Company’s
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” will
include any successor to the Company’s business and/or assets which executes and
delivers the assumption agreement described in this subsection (a) or which
becomes bound by the terms of this Agreement by operation of law.
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(b) Executive’s
Successors.
Without
the written consent of the Company, Executive will not assign or transfer this
Agreement or any right or obligation under this Agreement to any other person
or
entity. Notwithstanding the foregoing sentence, the terms of this Agreement
and
all rights of Executive hereunder will inure to the benefit of, and be
enforceable by, Executive’s personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees.
8. Notices.
(a) General.
Notices
and all other communications contemplated by this Agreement will be in writing
and will 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 Executive, mailed notices will be addressed
to
Executive at the home address which Executive most recently communicated to
the
Company in writing. In the case of the Company, mailed notices will be addressed
to its corporate headquarters, and all notices will be directed to the attention
of its Secretary.
(b) Notice
of Termination.
Any
termination by the Company for Cause or by Executive as a result of Good Reason
will be communicated by a notice of termination to the other party hereto given
in accordance with this Section. Such notice will indicate the specific
termination provision in this Agreement relied upon, will set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination under the provision so indicated, and will specify the Termination
Date (which will be not more than 30 days after the giving of such notice).
The
failure by Executive to provide the notice or to include in the notice any
fact
or circumstance which contributes to a showing of Good Reason will not waive
any
right of Executive hereunder or preclude Executive from asserting such fact
or
circumstance in enforcing his rights hereunder.
9. Arbitration.
(a) Any
dispute or controversy arising out of, relating to, or in connection with this
Agreement, or the interpretation, validity, construction, performance, breach,
or termination thereof, will be settled by binding arbitration to be held in
Santa Clara, California, in accordance with the National Rules for the
Resolution of Employment Disputes then in effect of the American Arbitration
Association (the “Rules”). The arbitrator may grant injunctions or other relief
in such dispute or controversy. The decision of the arbitrator will be final,
conclusive and binding on the parties to the arbitration. Judgment may be
entered on the arbitrator’s decision in any court having
jurisdiction.
(b) The
arbitrator(s) will apply California law to the merits of any dispute or claim,
without reference to conflicts of law rules. The arbitration proceedings will
be
governed by federal arbitration law and by the Rules, without reference to
state
arbitration law. Executive hereby consents to the personal jurisdiction of
the
state and federal courts located in California for any action or proceeding
arising from or relating to this Agreement or relating to any arbitration in
which the parties are participants.
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(c) Executive
understands that nothing in this Section modifies Executive’s at-will employment
status. Either Executive or the Company can terminate the employment
relationship at any time, with or without Cause.
(d) EXECUTIVE
HAS READ AND UNDERSTANDS THIS SECTION, WHICH DISCUSSES ARBITRATION. EXECUTIVE
UNDERSTANDS THAT SUBMITTING ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN
CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION,
PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, CONSTITUTES
A
WAIVER OF EXECUTIVE’S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL
DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EXECUTIVE RELATIONSHIP,
INCLUDING BUT NOT LIMITED TO, THE FOLLOWING CLAIMS:
(i) ANY
AND
ALL CLAIMS FOR WRONGFUL DISCHARGE OF EMPLOYMENT; BREACH OF CONTRACT, BOTH
EXPRESS AND IMPLIED; BREACH OF THE COVENANT OF GOOD FAITH AND FAIR DEALING,
BOTH
EXPRESS AND IMPLIED; NEGLIGENT OR INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS;
NEGLIGENT OR INTENTIONAL MISREPRESENTATION; NEGLIGENT OR INTENTIONAL
INTERFERENCE WITH CONTRACT OR PROSPECTIVE ECONOMIC ADVANTAGE; AND
DEFAMATION.
(ii) ANY
AND
ALL CLAIMS FOR VIOLATION OF ANY FEDERAL STATE OR MUNICIPAL STATUTE, INCLUDING,
BUT NOT LIMITED TO, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, THE CIVIL RIGHTS
ACT OF 1991, THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, THE AMERICANS
WITH DISABILITIES ACT OF 1990, THE FAIR LABOR STANDARDS ACT, THE CALIFORNIA
FAIR
EMPLOYMENT AND HOUSING ACT, AND LABOR CODE SECTION 201, et
seq;
(iii) ANY
AND
ALL CLAIMS ARISING OUT OF ANY OTHER LAWS AND REGULATIONS RELATING TO EMPLOYMENT
OR EMPLOYMENT DISCRIMINATION.
10. Miscellaneous
Provisions.
(a) Effect
of Any Statutory Benefits.
To the
extent that any severance benefits are required to be paid to Executive upon
termination of employment with the Company as a result of any requirement of
law
or any governmental entity in any applicable jurisdiction, the aggregate amount
of severance benefits payable pursuant to Section 4 hereof will be reduced
by
such amount.
(b) No
Duty to Mitigate.
Executive will not be required to mitigate the amount of any payment
contemplated by this Agreement, nor will any such payment be reduced by any
earnings that Executive may receive from any other source.
(c) Waiver.
No
provision of this Agreement may be modified, waived or discharged unless the
modification, waiver or discharge is agreed to in writing and signed by
Executive and by 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 will be considered a waiver
of
any other condition or provision or of the same condition or provision at
another time.
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(d) Integration.
This
Agreement and any outstanding agreements relating to Executive’s equity awards
represent the entire agreement and understanding between the parties as to
the
subject matter herein and supersede all prior or contemporaneous agreements,
whether written or oral, with respect to this Agreement and any stock option
agreement or any restricted stock purchase agreement, provided,
that,
for clarification purposes, this Agreement will not affect any agreements
between the Company and Executive regarding intellectual property matters or
confidential information of the Company.
(e) Choice
of Law.
The
validity, interpretation, construction and performance of this Agreement will
be
governed by the internal substantive laws, but not the conflicts of law rules,
of the State of California.
(f) Severability.
The
invalidity or unenforceability of any provision or provisions of this Agreement
will not affect the validity or enforceability of any other provision hereof,
which will remain in full force and effect.
(g) Tax
Withholding.
All
payments made pursuant to this Agreement will be subject to withholding of
applicable income, employment and other taxes.
(h) Counterparts.
This
Agreement may be executed in counterparts, each of which will be deemed an
original, but all of which together will constitute one and the same
instrument.
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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 first above
written.
| COMPANY: | GENESIS MICROCHIP INC. | |
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| By: | /s/ Xxxxx Xxxxxx | |
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Title:
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President & CEO |
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EXECUTIVE:
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/s/
Xxxxxxx Xxxxx
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Signature
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Xxxxxxx
Xxxxx
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Printed
Name
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