1
EXHIBIT 10(m)
AGREEMENT
AGREEMENT, dated as of September 1, 1998, by and between
SENSORMATIC ELECTRONICS CORPORATION, a Delaware corporation having its principal
place of business at 000 Xxxxxx Xxxx, Xxxx Xxxxx, Xxxxxxx 00000 ("Sensormatic"),
and XXXXXXX X. XXXXXX ("Executive"), residing at 0000 X.X. 00xx Xxxx, Xxxx
Xxxxx, Xxxxxxx 00000.
W I T N E S S E T H:
WHEREAS, as of December 21, 1995, Executive became the Senior
Vice President and Chief Financial Officer of Sensormatic, and has made and is
expected to make a significant contribution to the performance and growth of
Sensormatic;
WHEREAS, the Board of Directors of Sensormatic recognizes
that, as is the case with many publicly-held corporations, the possibility of a
Change in Control (as defined below) exists and that such possibility, and the
uncertainty which it may raise among Sensormatic's management, may result in the
distraction or departure of management personnel to the detriment of Sensormatic
and its stockholders, particularly at a time when Sensormatic is placing heavy
demands on its management in connection with its efforts to expand its product
lines and markets, restructure its operations and reduce its expenses;
WHEREAS, the Board of Directors of Sensormatic has determined
that it is in the best interest of Sensormatic and its stockholders to provide
to Executive certain rights as to termination compensation in the event of a
Change in Control; and
WHEREAS, the Board of Directors of Sensormatic believes that
the grant of such rights to Executive will help assure Executive's continuing
dedication to his duties to Sensormatic, notwithstanding the occurrence of any
Change in Control, and, in particular, will enable Executive to objectively and
impartially assess, and advise the Board of Directors with respect to, any
proposal received by Sensormatic regarding a Change in Control and to take such
action regarding any such proposal as the Board of Directors may deem to be
appropriate;
WHEREAS, this Agreement was contemplated by the Executive's
Employment Agreement with Sensormatic dated as of December 21, 1995 (the
"Employment Agreement");
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration, the parties hereto agree as follows:
1. TERM.
(a) The term of this Agreement shall commence on the date
hereof (which for all purposes of this Agreement shall mean the date first above
written) and shall continue after a
2
Change in Control for so long as Sensormatic has or may have any obligations
under Sections 6, 7, 8, 12, 13 or 16 hereof.
(b) Notwithstanding the provisions of Section 1(a) hereof,
this Agreement shall terminate automatically in the event of the voluntary or
involuntary termination of Executive's employment with Sensormatic prior to the
occurrence of a Change in Control, so long as, at the time of such termination
of employment, no Attempted Change in Control shall have occurred and then be
pending. Notwithstanding anything contained in this Agreement to the contrary,
if Executive's employment is terminated by Sensormatic prior to a Change in
Control, which Change in Control occurs, and Executive reasonably demonstrates
that such termination was at the request of a third party who effectuates such
Change in Control or that such termination was directly related to or in
anticipation of such Change in Control, then for all purposes of this Agreement,
Executive shall be entitled to the payments and other benefits provided under
this Agreement, offset by any amounts previously paid pursuant to the Employment
Agreement.
2. SALARY AND BONUS. Executive's present base salary is
$350,002 per year and Executive's target bonus is deemed to be $175,000 per
year. After the date of this Agreement, Executive's annual base salary and
target bonus (subject to Section 3(b) of the Employment Agreement) may be
increased or decreased, to the extent permitted under the Employment Agreement,
as determined by Sensormatic's Board of Directors or any compensation committee
thereof, provided, however, that none of the following shall be effective during
the pendency of an Attempted Change in Control or in the event of a Change in
Control or at any time within 36 months after a Change in Control has occurred:
(i) any decrease in Executive's annual base salary or target bonus from the
amounts set forth above (or any greater amounts subsequently so determined and
approved), (ii) any decrease in the actual amount paid to Executive as a bonus
from the amount of the bonus actually paid for the most recently concluded
fiscal year (except to the extent that such actual amount paid in the
then-current fiscal year exceeds 150% of the greater of the target bonus then in
effect or $175,000), or (iii) any change in the formula then in effect for
calculation of Executive's bonus that could be reasonably anticipated to result
in a decrease in the amount payable thereunder.
3. FRINGE BENEFITS. Sensormatic currently provides to
Executive the fringe benefits listed below, without cost to Executive, and,
while nothing in this Agreement shall be deemed to require Sensormatic to
continue any such benefits or to prohibit Sensormatic from modifying any such
benefits in any respect (subject to the express terms of the Employment
Agreement, as applicable), except that there shall be no material reduction in
any such currently provided benefits (and there shall be no material reduction
in any additional benefits subsequently approved by Sensormatic's Board of
Directors or any committee thereof) during the pendency of an Attempted Change
in Control or in the event of a Change in Control or at any time within 36
months after a Change in Control has occurred (and, in addition, there shall
not, at any time following a Change in Control, be any change in Sensormatic's
Senior Executive Defined Contribution Retirement Plan or any similar or
successor plan (the "Senior Executive
-2-
3
Plan", which shall include, for all purposes of this Agreement, any Senior
Executive Defined Contribution Retirement Agreement between Sensormatic and
Executive under such Plan) resulting in a reduction of Executive's benefits
thereunder), it is anticipated that such benefits (together with any such
additional benefits) shall continue to be provided to Executive on the same or a
substantially similar basis in the future in accordance with the terms of the
applicable benefit plans and policies:
(a) group medical and group dental plans in which Executive
and his eligible dependents are participants;
(b) life insurance on Executive's life and accidental death
and dismemberment insurance, each equal to two times Executive's annual
base salary (but not to exceed $800,000 or such greater amount as may
be established by Sensormatic for such purposes from time to time);
(c) participation in Sensormatic's retirement and/or profit
sharing plans (including the Senior Executive Plan) and in
Sensormatic's annual contributions, if any, thereto, provided that such
participation is contingent on Executive's continued qualification
prior to any such Change in Control or Attempted Change in Control as
an eligible participant under the provisions of such plans as then in
effect and on Executive's election to continue his participation in
such plans;
(d) the use of a Sensormatic owned or leased automobile and
comprehensive insurance protection on such vehicle;
(e) disability income protection in an amount equal to not
less than 60% of his annual base salary and target bonus;
(f) payment of such social (i.e., non-golfing) country club or
beach club fees and airline club room fees as are necessary or
advisable, in the opinion of Executive and the President of
Sensormatic, for Executive's professional activities, including the
entertainment of business associates/clients, and commensurate with
those provided to him under his Employment Agreement as of the date
this Agreement;
(g) reimbursement of Executive for reasonable travel and
entertainment expenses incurred by Executive in connection with the
business of Sensormatic; and
(h) the provision to Executive of office space befitting
Executive's position, secretarial help, and access to telephone
service, including WATS lines.
Further, Sensormatic expects that, during the term of this Agreement, and so
long as Executive continues to be employed by Sensormatic, Executive's position
shall continue to be located in
-3-
4
Palm Beach County or Broward County, Florida, and that the duties and
responsibilities of Executive's position shall not be significantly diminished.
4. EMPLOYMENT COMMITMENT. As partial consideration for the
benefits available to Executive under this Agreement, Executive hereby agrees to
remain as an officer and employee of Sensormatic during any Attempted Change in
Control and for a period of six months immediately after a Change in Control
first occurs (the "Commitment Period"), and during the Commitment Period to
devote substantially all his business time and efforts to the business and
affairs of Sensormatic, provided that Executive shall be entitled to terminate
his employment by Sensormatic during an Attempted Change in Control or at any
time following a Change in Control in circumstances which constitute an
involuntary termination pursuant to Section 10 hereof. Neither Executive's
participation in other businesses, as a director or otherwise, with the approval
of Sensormatic's Board of Directors (which approval shall be deemed to include
the Board of Directors not objecting to such participation following disclosure
thereof to the Board of Directors by Executive, and which approval may not be
withdrawn following such Change in Control), nor Executive's engaging in
charitable activities and community affairs or managing his personal investments
and affairs, shall be deemed to contravene the foregoing provision. In the event
that Executive voluntarily terminates his employment with Sensormatic (other
than by resignation contemplated in Section 10 hereof) at any time during the
Commitment Period, Executive shall not be entitled to any of the benefits
provided for in this Agreement, other than those provided under Sections 6(a),
6(b), 6(c), 6(d), 7(a)(ii), 12, 13 and 16 hereof, and shall promptly repay to
Sensormatic, on an after-tax basis, any benefits previously received by him
pursuant to any provisions of Sections 6 or 7 of this Agreement not referred to
in this sentence, but Sensormatic shall have no other remedy for Executive's
failure to remain an employee and officer as required by this Section 4. Any
amounts or benefits received by Executive pursuant to the Employment Agreement
or any other compensation plan or arrangement of Sensormatic, even if similar or
identical to those to which he would be entitled under this Agreement, shall not
be deemed received pursuant to this Agreement or be repayable to Sensormatic for
purposes of the preceding sentence.
5. CHANGE IN CONTROL.
(a) For purposes of this Agreement, the term "Change in
Control" shall mean a change in control of Sensormatic of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
provided, that, without limitation, such a change in control shall be deemed to
have occurred if (i) any person (as such term is used in Sections 13(d) and
14(d) of the Exchange Act, "Person") is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act, "Beneficial Owner"), directly or
indirectly, of securities of Sensormatic representing 30% or more of the
combined voting power of Sensormatic's then outstanding voting securities, (ii)
Sensormatic consummates a merger, consolidation, share exchange, division or
other reorganization of Sensormatic with any other corporation or entity, unless
the shareholders of Sensormatic immediately prior to such transaction
beneficially own, directly or
-4-
5
indirectly, (A) if Sensormatic is the surviving corporation in such transaction,
60% or more of the combined voting power of Sensormatic's outstanding voting
securities as well as 60% or more of the total market value of Sensormatic's
outstanding equity securities, (B) if Sensormatic is not the surviving
corporation, 80% or more of the combined voting power of the surviving entity's
outstanding voting securities as well as 80% or more of the total market value
of such entity's outstanding equity securities, or (C) in the case of a
division, 80% or more of the combined voting power of the outstanding voting
securities of each entity resulting from the division as well as 80% or more of
the total market value of each such entity's outstanding equity securities, in
each case in substantially the same proportion as such shareholders owned shares
of Sensormatic prior to such transaction; (iii) Sensormatic adopts a plan of
complete liquidation or winding-up of Sensormatic; (iv) the shareholders of
Sensormatic approve an agreement for the sale or disposition (in one transaction
or a series of transactions) of all or substantially all of Sensormatic's
assets; or (v) during any period of 24 consecutive months, individuals (y) who
at the beginning of such period constitute the Board of Directors of Sensormatic
or (z) whose election, appointment or nomination for election was approved prior
to such election or appointment by a vote of at least two-thirds of the
directors in office immediately prior to such election or appointment who were
directors at the beginning of such two-year period (other than any directors who
prior to the Change in Control were associated or affiliated with any Person
involved with any Change in Control or Attempted Change in Control), cease for
any reason to constitute at least three-fourths of the Board of Directors of
Sensormatic.
(b) For purposes of this Agreement, an "Attempted Change in
Control" shall be deemed to have occurred (i) if any Person files (or fails to
file when required to do so) with the Securities and Exchange Commission (the
"SEC") a Statement on Schedule 13D relating to voting securities of Sensormatic
(A) disclosing the acquisition of 10% or more thereof or (B) while disclosing
the acquisition of less than 10% of such voting securities, indicates an
intention to effect any of the transactions listed in Item 4 of Schedule 13D or
otherwise to effect a Change in Control, (ii) upon the public announcement
(including, without limitation, the filing with the SEC of a Statement on
Schedule 14D-1) by any Person of an intention to make a tender offer or
otherwise to effect a Change in Control, (iii) in the event of any solicitation
of proxies for the election of directors of Sensormatic pursuant to Rule 14a-11
of the Rules and Regulations under the Exchange Act or the filing of a Statement
on Schedule 14B in anticipation thereof, (iv) the receipt by Sensormatic from
any Person of any other communication proposing, or indicating an intention, to
effect a Change in Control by the acquisition of voting securities of
Sensormatic, the solicitation of proxies for the election of directors or
otherwise or (v) if the Board of Directors of Sensormatic or an authorized
committee thereof otherwise determines that an Attempted Change in Control is
pending. The termination of the pendency of an Attempted Change in Control shall
be determined by the Board of Directors of Sensormatic (or an authorized
committee thereof); PROVIDED, that any Attempted Change in Control shall in any
event be deemed to have terminated upon the occurrence of a Change in Control.
(c) A Change in Control shall be deemed, for purposes of this
Agreement, to be: (i) "non-approved" if (A) in connection with the consideration
thereof by the Board of
-5-
6
Directors of Sensormatic, a majority of the Previous Members of the Board of
Directors (as defined below), either before or after such Change in Control, (x)
votes to disapprove of such Change in Control, (y) votes to approve of such
Change in Control, but as a consequence of the existence of a competing proposal
for a Change in Control, or (z) otherwise expressly declares that such Change in
Control is "non-approved", or (B) a majority of the Previous Members of the
Board of Directors neither expressly approves nor disapproves of such Change in
Control, or (ii) "approved" if in connection with the consideration thereof by
the Board of Directors of Sensormatic, a majority of the Previous Members of the
Board of Directors, either before or after such Change in Control, (x) approves
of such Change in Control (other than as a consequence of the existence of a
competing proposal for a Change of Control) or (y) otherwise expressly declares
that such Change in Control is "approved", notwithstanding clause (A)(y) of this
Section 5(c). The majority of the Previous Members of the Board of Directors
shall indicate its approval or disapproval of a Change in Control by a statement
or statements in writing to such effect. For purposes of this Agreement,
Previous Members of the Board of Directors shall mean members of the Board of
Directors of Sensormatic as of the date of a Change in Control (the first Change
in Control, if there are more than one) who had been in office for a period of
at least two years immediately prior to such Change in Control (other than
directors who prior to such Change in Control were appointed or elected as
directors as a consequence of their association or affiliation with any Person
effecting such Change in Control).
In addition, notwithstanding any previous determination that a
Change in Control was "approved", such Change in Control may subsequently be
determined, in good faith, to be "non-approved" by a majority of the Previous
Members of the Board of Directors who are then still in office with Sensormatic
or a corporate successor of Sensormatic (or if fewer than two such Previous
Members of the Board of Directors are still in office, then by a majority of the
Previous Members of the Board of Directors, whether or not still in office)
within the 36-month period immediately following such Change in Control, if
during such period there occur (1) events of the types referred to in Section 10
hereof with respect to individuals who were officers of Sensormatic at the time
of the Change in Control, (2) defaults by Sensormatic under this Agreement or
any similar agreement, (3) the involuntary termination (other than for cause or
in the event of death or permanent disability) of the employment of a number of
the officers of Sensormatic who were officers immediately prior to such Change
in Control exceeding 40% of the total number of such officers, or (4) the
transfer (by sale, merger or otherwise) of all or substantially all the equity
securities of Sensormatic acquired by the Person effecting such Change in
Control, of all or substantially all the assets of Sensormatic, or of all or
substantially all the equity securities of Sensormatic's successor corporation,
directly or indirectly, to a third party (other than a majority owned affiliate
of such Person). In the event of such a subsequent determination, Executive
shall be entitled to all benefits arising under this Agreement out of a
"non-approved" Change in Control as if such Change in Control had been deemed
"non-approved" initially. Any additional benefits arising out of such
"non-approved" Change in Control which Executive is entitled to receive through
the date of such determination shall be paid or satisfied promptly by
Sensormatic. For purposes of this Section 5(c), the term "officers"
-6-
7
shall not include individuals whose only office with Sensormatic is Assistant
Secretary or Assistant Treasurer.
(d) For the purposes of this Section 5, references to
provisions of the Exchange Act and rules, regulations and schedules thereunder
shall be to such provisions as they are in effect and interpreted as of the date
of this Agreement.
6. BENEFITS ON "NON-APPROVED" CHANGE IN CONTROL.
(a) BENEFITS EFFECTIVE UPON A CHANGE IN CONTROL. In the event
a "non-approved" Change in Control occurs, Executive shall be entitled to the
following benefits:
(i) All stock options issued by Sensormatic to Executive,
whether or not then exercisable, shall remain fully exercisable or shall become
fully exercisable immediately (or, notwithstanding the foregoing, in the event
of an Attempted Change in Control involving a proposed Reorganization Event (as
such term is defined in Section 6(a)(ii) hereof)), such options shall become
fully exercisable thirty days before the date of such Reorganization Event), and
such options shall remain outstanding and fully exercisable for the stated term
thereof or until the later of (A) nine months following the voluntary or
involuntary termination of Executive's employment with Sensormatic (or, at the
option of Executive, in the case of an incentive stock option, three months
following such termination) or (B) the end of the respective post-termination
exercisability periods provided for in such options (including if applicable,
such periods in the event of death or disability); PROVIDED, that in no event
shall the term of such options be extended beyond their respective original
terms. In addition, any deferred vesting or forfeiture provisions applicable to
any shares of Sensormatic stock awarded to or otherwise held by Executive shall
be without further force or effect, and Executive shall have the unrestricted
right to such shares.
(ii) In the event that (A) such Change in Control is effected
through (w) a tender or exchange offer (a "Tender Offer") or (x) any means, in
one or more transactions, with the result in either case that any Person becomes
the Beneficial Owner, directly or indirectly, of securities of Sensormatic
representing 50% or more of the combined voting power of Sensormatic's then
outstanding voting securities (any such Change in Control referred to in this
clause (A), including pursuant to a Tender Offer, being hereinafter referred to
as a "Majority Acquisition"), (B) in connection with, as a result of or within
24 months immediately following a Change in Control, Sensormatic's Board of
Directors shall have approved a merger, consolidation, reclassification,
reorganization, dissolution, sale of all or substantially all of the assets of
Sensormatic or similar event (a "Reorganization Event") as a result of which
Sensormatic's Common Stock would cease to be outstanding or (C) in connection
with, as a result of or within 24 months immediately following a Change in
Control, Sensormatic's Common Stock ceases to be listed for trading on a
national securities exchange or quoted through NASDAQ or a comparable securities
quotation system, Executive shall have the right, exercisable by written notice
given at any time during the 13-month period immediately
-7-
8
following the date of such Change in Control (and, if later, the date of any
such Majority Acquisition, Reorganization Event or cessation of listing or
quotation), to require Sensormatic to purchase:
(1) any or all stock options issued by Sensormatic to
Executive, whether or not then exercisable, and/or any stock options
issued upon conversion of or in exchange for any such Sensormatic stock
options pursuant to any such Reorganization Event ("Conversion
Options"), at a purchase price equal to the excess of the aggregate
Fair Market Value (as defined below) of the shares of Sensormatic
Common Stock subject to such Sensormatic stock options over the
aggregate exercise price of such stock options (or, in the case of any
Conversion Options, such amount calculated with respect to the
Sensormatic stock options which were converted into or exchanged for
such Conversion Options); and/or
(2) any or all shares of Sensormatic Common Stock held by
Executive at or immediately prior to the date of such Change in Control
(including any shares of Sensormatic Common Stock (restricted or
otherwise, and whether or not vested) awarded to Executive pursuant to
any compensation plan or arrangement of Sensormatic) or issued pursuant
to the exercise of any such Sensormatic stock options following the
date of such Change in Control, and/or (without duplication) any shares
or other securities issued upon conversion of or in exchange for any
such shares of Common Stock pursuant to any such Reorganization Event
("Conversion Shares"), at a purchase price equal to the aggregate Fair
Market Value of such shares (or, in the case of any Conversion Shares
issued upon conversion of or in exchange for Common Stock, the Fair
Market Value of the shares of Common Stock which were converted into or
exchanged for such Conversion Shares); provided, that Sensormatic may
offset against the amount so payable for Common Stock or Conversion
Shares all amounts outstanding on any loans made to Executive for the
purchase of, or payment of taxes relating to, such shares of Common
Stock or Conversion Shares, as contemplated by Section 6(a)(iii) hereof
or otherwise.
Payment for any such options or shares shall be made by Sensormatic within 10
days after Executive's surrender of any such options, and/or within 10 days
after Executive's surrender of the certificates representing any such shares of
Common Stock or Conversion Shares (or, if such certificates are in Sensormatic's
possession, within 10 days after Executive's notice of exercise under this
Section 6(a)(ii)).
For purposes of this Section 6(a)(ii), the "Fair Market Value"
of a share of Sensormatic Common Stock means the highest fair market value per
share of Sensormatic Common Stock of the consideration paid in any transaction
by any Person who effects such Change in Control, in connection therewith,
whether through open market purchases, Tender Offers, Reorganization Events,
private transactions or otherwise.
-8-
9
(iii) Upon Executive's request, Sensormatic shall lend to
Executive, interest free, up to an amount equal to the aggregate exercise price
of the options referred to in Section 6(a)(i) hereof, should Executive elect to
exercise such options. If requested by Executive, Sensormatic shall also lend to
Executive, interest free (or, at Executive's option, provide a guaranty to
enable Executive to borrow), up to an amount equal to the percentage specified
in Section 6(a)(iv)(A) hereof times the Share Income (as such term is defined in
such Section) resulting from such exercise and/or vesting. Such loan or loans
shall be due and payable to Sensormatic upon the earliest of (A) the fifth
anniversary date of such loan or loans, (B) in the event that Executive's
employment with Sensormatic terminates, other than termination by Sensormatic
for Cause (as defined in Section 9 hereof, "Cause") upon the expiration of 30
months following such termination, or in the event that Executive's employment
is terminated by Sensormatic for Cause, upon the expiration of 30 days after
such termination, or (C) promptly (but in any event within five (5) business
days) after receipt of the proceeds of sale from the sale of such shares, to the
extent of the loan or loans applicable to such sold shares. Executive shall
deposit such shares with Sensormatic as security for any such loan, if
Sensormatic shall so request. Notwithstanding anything to the contrary contained
in this Section 6(a)(iii), Sensormatic's Stock Purchase Loan Plan or any
promissory note or security agreement executed by Executive pursuant to such
Plan, no additional collateral shall be required by Sensormatic in connection
with any such loan to Executive, and, if necessary to be in compliance with
applicable margin regulations under federal laws, such loans shall be unsecured;
and if, because of Internal Revenue Service rules or other rules, Sensormatic is
unable to lend such funds to Executive interest free and without any imputation
of interest, Sensormatic shall pay Executive a dollar amount of additional
compensation which shall equal the amount of interest required to be charged in
order to avoid such imputation in such instances and Executive shall then pay
Sensormatic the rate of interest on such loan required by law to avoid
imputation.
(iv)(A) If a Majority Acquisition shall have occurred or if,
in connection with, as a result of or within 24 months immediately following a
Change in Control, either a Reorganization Event shall have occurred or
Sensormatic's Common Stock ceases to be listed for trading on a national
securities exchange or quoted through NASDAQ or a comparable securities
quotation system, then Executive shall have the right, exercisable during the
period and in the manner described in Section 6(a)(iv)(B) hereof, to require
Sensormatic to purchase any or all of Executive's Option Acquired Shares and
Award Shares (as defined below), and/or any or all Conversion Shares issued with
respect to any Option Acquired Shares or Award Shares. The price at which
Executive shall be entitled to sell any Option Acquired Share to Sensormatic
under this Section 6(a)(iv) shall equal the sum of (x) the option exercise price
paid (including payments made by promissory notes issued under Sensormatic's
Stock Purchase Loan Plan or otherwise) by Executive in acquiring such share,
plus (y) an amount equal to a percentage, determined as provided below in this
clause (A), of the difference between such option exercise price and the Market
Value (as defined below) of a share of Sensormatic Common Stock on the date the
share was acquired. The price at which Executive shall be entitled to sell any
Award Share under this Section 6(a)(iv)(A) shall be equal to the Market Value of
such share on the date Executive's right to such share vested, multiplied by the
percentage determined as provided
-9-
10
below in this clause (A). The price at which Executive shall be entitled to sell
any Conversion Shares pursuant to this Section 6(a)(iv)(A) shall be calculated
as set forth above with respect to Option Acquired Shares or Award Shares, as
applicable, based upon the purchase price, date of purchase and Market Value of
any Option Acquired Shares, and the vesting date and Market Value of any Award
Shares, which were converted into or exchanged for any such Conversion Shares
sold. The percentage referred to in this Section 6(a)(iv)(A) shall be equal to
the sum of (1) the highest marginal net rate of income tax (federal, state and
local) applicable to an individual residing where the Executive resided at the
time the Executive reported income ("Share Income") with respect to the Option
Acquired Shares or Award Shares, as the case may be, plus (2) the Medicare
employee tax rate, plus (3) a percentage equal to (x) that part, if any, of the
Share Income that was actually subject to employee Social Security tax,
multiplied by (y) the social security employee tax rate, divided by (z) the
total Share Income (in each case as applicable at the time such share was
purchased by Executive, in the case of any Option Acquired Shares, or at the
time Executive's right to such share vested, in the case of any Award Shares).
The purchase price payable by Sensormatic shall in all events be equitably
adjusted to reflect any stock dividends, stock splits, extraordinary dividends
or similar events since the date of acquisition by Executive of any such shares.
For purposes of this Section 6(a)(iv), the term "Option
Acquired Shares" shall mean shares of Sensormatic Common Stock acquired by
Executive upon exercise of options granted to Executive, the term "Award Shares"
shall mean shares of Sensormatic Common Stock awarded to Executive pursuant to
Sensormatic's Stock Incentive Plan or any other compensation plan or arrangement
of Sensormatic, other than pursuant to the exercise of options, and the term
"Market Value" shall mean the average of the high and low sales prices of a
share of such Common Stock on the applicable date (or most recent date on which
one or more sales occurred) as reported through NASDAQ or the principal exchange
on which such Common Stock was listed for trading.
(B) Executive may exercise his right to sell Option Acquired
Shares, Award Shares and/or Conversion Shares under this Section 6(a)(iv) at any
time within 13 months following any of the events specified in the first
sentence of Section 6(a)(iv)(A) hereof by giving written notice of such exercise
to Sensormatic, which notice shall set forth the Option Acquired Shares, Award
Shares and/or Conversion Shares to be sold, the exercise price paid by Executive
in acquiring any such Option Acquired Shares or Conversion Shares, the highest
marginal tax rates applicable for purposes of the respective calculations
specified in Section 6(a)(iv)(A) hereof and the Market Value of the Common Stock
or Conversion Shares, as applicable, on each date that any applicable Option
Acquired Shares or Conversion Shares to be sold were purchased by Executive or
Executive's right to any applicable Award Shares vested, as the case may be. The
information set forth in such notice shall be presumed to be correct.
(C) In addition to the purchase price for the Option Acquired
Shares, Award Shares or Conversion Shares being sold to Sensormatic under this
Section 6(a)(iv), Sensormatic shall pay to Executive an amount (the "Tax
Payment") equal to a percentage (determined
-10-
11
pursuant to the following sentence) of the excess, if any, of (1) the product of
the number of such Option Acquired Shares, Award Shares and/or Conversion Shares
being sold multiplied by the Market Value of a share of Sensormatic Common Stock
or Conversion Shares, as applicable, on the Purchase Date (as such term is
defined in Section 6(a)(iv)(D) hereof) or such other value of a share of
Sensormatic Common Stock or Conversion Shares as may be required to be used to
determine the amount, if any, recognizable as ordinary income arising out of the
sale of such shares to Sensormatic, over (2) the aggregate purchase price for
all such Option Acquired Shares, Award Shares and/or Conversion Shares being
sold by Executive. The percentage referred to in the preceding sentence shall be
determined in accordance with Section 6(a)(iv)(A) hereof as applicable on the
Purchase Date.
(D) Within 10 days after Executive's surrender of the
certificates representing any such Option Acquired Shares, Award Shares and/or
Conversion Shares or, if such certificates are in Sensormatic's possession,
within 10 days after Executive's notice of exercise under this Section 6(a)(iv)
(the "Purchase Date"), Sensormatic shall purchase the Option Acquired Shares,
Award Shares and/or Conversion Shares referred to in such notice by paying to
Executive (subject to offset as provided in the following sentence) the full
purchase price thereof, as calculated under Section 6(a)(iv)(A) hereof, plus the
Tax Payment applicable thereto. Sensormatic may offset against payment of any or
all of such purchase price and the related Tax Payment all or a portion of any
indebtedness of Executive then outstanding under Sensormatic's Stock Purchase
Loan Plan attributable to any Option Acquired Shares and/or Conversion Shares
sold to Sensormatic hereunder.
(E) Executive's rights under this Section 6(a)(iv) are
independent of and not limited by, and do not constitute any limitation of,
Executive's rights under Section 6(a)(ii) hereof. Executive may exercise any
rights under either Section 6(a)(ii) hereof or this Section 6(a)(iv), in whole
or in part (but without duplication), in Executive's sole discretion.
(v)(A) Subject to Section 4 hereof, if either a Majority
Acquisition occurs or, in connection with, as a result of or within 24 months
following a Change in Control, a Reorganization Event occurs, then Sensormatic
shall pay to Executive (irrespective of whether he is then employed by
Sensormatic or its successor; PROVIDED, HOWEVER, that in the event that
Executive voluntarily terminates his employment with Sensormatic (other than by
resignation contemplated by Section 10 hereof) prior to the occurrence of the
event giving rise to the right to receive the cash bonus payment provided for in
this Section 6(a)(v), Executive shall have no right to receive such bonus
payment), within thirty days after the effective date of such Majority
Acquisition or Reorganization Event, as the case may be, a cash bonus payment
equal to a percentage (determined pursuant to Sections 6(a)(v)(B) and 6(a)(v)(C)
hereof) of Executive's "Special Bonus Base" (as defined below). Executive's
Special Bonus Base shall equal three times the greater of (x) the sum of
Executive's annual base salary in effect at the end of the last full month
preceding the first public announcement relating to the proposed Majority
Acquisition or Reorganization Event, as the case may be, plus the bonus paid to
Executive by Sensormatic with respect to the
-11-
12
most recently completed fiscal year of Sensormatic prior to such month, or (y)
the sum of Executive's annual base salary and target bonus as specified in
Section 2 hereof.
(B) The percentage of the Special Bonus Base which Executive
shall be entitled to receive under this Section 6(a)(v) shall be calculated on
the basis of the Premium (as defined below) paid or offered to holders of
Sensormatic's Common Stock in connection with a Majority Acquisition or
Reorganization Event. "Premium" shall mean the percentage which results from
dividing (1) the amount by which the Event Value (as defined below) exceeds the
Pre-Event Share Price (as defined below), by (2) the Pre-Event Share Price. The
"Pre-Event Share Price" shall be equal to the average of the closing sales
prices (or if there is no sales price, the last bid price) for a share of
Sensormatic's Common Stock, as such prices are reported through NASDAQ or the
principal exchange on which such shares are listed for trading, on the last
business day of each week during the twenty-six weeks immediately preceding the
first to occur of (x) the first public announcement relating to any proposed
Change in Control or Reorganization Event, or (y) any event resulting in the
pendency of an Attempted Change in Control which culminates, directly or
indirectly, in the Change in Control giving rise to Executive's rights under
this Section 6(a)(v). In the case of any Reorganization Event or Tender Offer,
or combination or series of Reorganization Events and/or Tender Offers, "Event
Value" shall mean the fair market value of the consideration paid per share of
Sensormatic Common Stock pursuant to such Reorganization Event or Tender Offer
determined as of the effective date of the Reorganization Event or of the
consummation of the Tender Offer, as the case may be, provided that in the event
that different prices are paid per share of Sensormatic Common Stock pursuant to
such Reorganization Event, Tender Offer or any combination or series thereof,
the "Event Value" shall be equal to the fair market value of the aggregate
consideration paid pursuant to all such Tender Offers and/or Reorganization
Events (determined as of the dates set forth above) divided by the number of
shares of Sensormatic Common Stock purchased pursuant to all such Tender Offers
and/or Reorganization Events. In case of any other transaction or series of
transactions giving rise to the right of Executive to receive the bonus provided
for in this Section 6(a)(v), "Event Value" shall mean the highest fair market
value of the consideration paid per share of Sensormatic Common Stock pursuant
to any such transaction, determined as of the date of payment thereunder. The
determination of Event Value shall be conclusively made by an investment banking
firm selected by the Previous Members of the Board of Directors who are not
entitled to receive bonuses under this Section 6(a)(v) or analogous provisions
of other agreements; PROVIDED, that in the event that the Previous Members of
the Board of Directors fail to make such selection within 45 days after
consummation of the transaction giving rise to the right to rights under this
Section 6(a)(v), or the selected investment banking firm fails to make such a
determination within an additional 90 days, Event Value shall be determined by
arbitration under Section 16. Sensormatic shall PAY all fees and expenses of any
such investment banker.
(C) The percentage of the Special Bonus Base which Executive
shall be entitled to receive as a bonus under this Section 6(a)(v) shall be 20%
if the Premium is at least 20% and shall increase by 3.2% for each one percent
(and by a fraction of 3.2% for each fraction
-12-
13
of one percent) by which the Premium exceeds 20%. For example, if the Premium
were 30%, Executive would be entitled to a bonus of 52% of the Special Bonus
Base; if the Premium were 40.5%, Executive would be entitled to a bonus of 85.6%
of the Special Bonus Base; and if the Premium were 50%, Executive would be
entitled to a bonus of 116% of the Special Bonus Base. The maximum bonus which
Executive shall be entitled to receive is 167% of the Special Bonus Base. No
bonus shall be payable pursuant to this Section 6(a)(v) if the Premium is less
than 20%.
(b) BENEFITS ON TERMINATION. In the event of any termination,
other than termination by Sensormatic for Cause, of Executive's employment with
Sensormatic at any time following a "non-approved" Change in Control, Executive
shall be entitled to the following benefits:
(i) Subject to Section 4 hereof, Sensormatic shall,
as soon as practicable, pay to Executive a lump sum payment equal to
the amount of any then unvested interest which Executive may have had
on the date of such "non-approved" Change in Control (less any amount
of such interest subsequently vested), and as supplemented thereafter
through the date of such termination, in Sensormatic's profit sharing,
ESOP or other retirement plans (other than the Retirement Plan); and
(ii) Unless a trust or other arrangement previously
determined in writing to be satisfactory by a majority of the Previous
Members of the Board of Directors then in office assuring payment of
benefits to or for the benefit of Executive under Sensormatic's
Retirement Plan in the event of a Change in Control has been previously
established and is then in effect, Sensormatic shall take such steps as
are necessary, within 30 days after such termination, to fully fund all
of Executive's benefits under such Plan (after giving effect to the
change in control provisions of such Plan) through paid-up insurance,
annuity contracts and/or other similar means, so that the ultimate
payment of benefits (at a rate not less than the greater of the rates
in effect under such Plan at the date of such termination or
immediately after such Change in Control) upon Executive's attaining
retirement age under such Plan or upon his earlier death or disability
(as defined in such Plan) (despite Executive's no longer being employed
by Sensormatic) shall be assured beyond any reasonable doubt; PROVIDED,
HOWEVER, that either such manner of funding shall be structured so as
not to constitute "constructive receipt" by Executive of the benefits
in question for income tax purposes, or the benefits in question shall
be paid out in a lump sum, discounted to present value in the manner
provided in Section 8(a). In addition, following any such termination
which is involuntary, the non-competition provisions included in such
Plan shall have no force or effect.
(c) ADDITIONAL BENEFITS IN THE CASE OF A VOLUNTARY
TERMINATION. Subject to Section 4 hereof, in the event of Executive's voluntary
termination of employment with Sensormatic (other than by resignation
contemplated in Section 10 hereof) within the 24-month period immediately
following a "non-approved" Change in Control:
-13-
14
(i) Executive shall be entitled to receive, for
each of the 12 months immediately following the effective date of such
termination and irrespective of whether Executive commences new
employment within such period, the greatest of (A) 1/12 of the amount
of Executive's most recent rate of annual base salary, plus 1/12 of
Executive's most recent annual bonus, (B) 1/12 of Executive's annual
base salary and target bonus in effect immediately prior to the date of
such Change in Control or (C) 1/12 of Executive's annual base salary
and target bonus as specified in Section 2 hereof;
(ii) If Executive has not commenced new regular,
full time employ ment during the first 12 months following the
effective date of such termination, Executive shall receive for each of
the 13th through 24th months following such effective date of
termination in which Executive was not so employed for the entire month
the amount payable under Section 6(c)(i) hereof;
(iii) Within 30 days after the effective date of
such termination, Sensormatic shall pay to Executive an amount equal to
his pro rata annual bonus for the year in which termination occurs,
based on the target bonus for such year; and
(iv) During that portion of the periods set forth
in Sections 6(c)(i) and 6(c)(ii) hereof during which Executive has not
commenced new regular, full time employment,
(x) Sensormatic shall continue to provide to
Executive the fringe benefits enumerated in Sections 3(a),
(b), (c) and (e) hereof on at least the same basis as in
effect immediately prior to the Change in Control, and shall,
if requested by Executive, provide Executive with office space
appropriate for his level and in close proximity to the office
he occupied at the time of the Change in Control, secretarial
help and local and long distance telephone service; and
(y) Sensormatic shall provide Executive with
appropriate out-placement services, including counseling and
traveling expenses to such out-placement services, when
necessary, as well as to potential job interviews when not
paid by the potential employer, all without charge to
Executive.
(d) ADDITIONAL BENEFITS IN CASE OF AN INVOLUNTARY TERMINATION.
In the event of the involuntary termination (other than termination by
Sensormatic for Cause) of Executive's employment with Sensormatic within the
36-month period immediately following a "non-approved" Change in Control:
(i) Executive shall be entitled to receive, for each
of the 24 months immediately following the effective date of such
termination and irrespective of whether Executive commences new
employment within such period, the greatest of (A) 1/12 of the amount
of Executive's most recent rate of annual base salary, plus 1/12 of
Executive's
-14-
15
most recent annual bonus, (B) 1/12 of Executive's annual base salary
and target bonus in effect immediately prior to the date of such Change
in Control or (C) 1/12 of Executive's annual base salary and target
bonus as specified in Section 2 hereof;
(ii) If Executive has not commenced new regular, full
time employment during the first 24 months following the effective
date of such termination, Executive shall receive for each of the 25th
through 30th months following such effective date of termination in
which Executive was not so employed for the entire month the amount
payable under Section 6(d)(i) hereof;
(iii) During that portion of the periods set forth in
Sections 6(d)(i) and 6(d)(ii) hereof during which Executive has not
commenced new regular, full time employment, Executive shall be
entitled to the benefits set forth in Section 6(c)(iv) hereof;
(iv) Within 30 days after the effective date of such
termination, Sensormatic shall pay to Executive an amount equal to his
pro rata annual bonus for the year in which termination occurs, based
on the target bonus for such year; and
(v) On the date of such termination, ownership of the
car which Sensormatic was providing to Executive shall immediately be
transferred to Executive free and clear of any liens or other
obligations, if such car is then owned by Sensormatic. If such car is
then leased, rather than owned, by Sensormatic, Executive shall
continue to have the use of such car and Sensormatic shall continue to
pay all lease payments and insurance premiums with respect thereto
until the end of the then existing term, at which time Sensormatic
shall purchase such car and shall transfer title to such car to
Executive. If, on the date of such termination, Sensormatic is paying a
car allowance to Executive in lieu of providing a car to Executive, for
each month in which Sensormatic is obligated to make a monthly payment
to Executive under Sections 6(d)(i) or 6(d)(ii) hereof, Executive shall
receive 1/12 of the amount of Executive's most recent rate of annual
car allowance.
7. BENEFITS ON "APPROVED" CHANGE IN CONTROL.
(a) BENEFITS EFFECTIVE UPON CHANGE IN CONTROL.
(i) Subject to Section 4 hereof, in the event an
"approved" Change in Control occurs, Executive shall be entitled to all
of the rights and compensation set forth in Section 6(a) hereof.
(ii) ADDITIONAL BENEFITS IN THE CASE OF A VOLUNTARY
TERMINATION. Subject to Section 4 hereof, in the event of Executive's
voluntary termination of employment with Sensormatic (other than by
resignation contemplated in Section 10
-15-
16
hereof) within the 24-month period immediately following a
"non-approved" Change in Control:
(A) Executive shall be entitled to receive,
for each of the 12 months immediately following the effective
date of such termination and irrespective of whether Executive
commences new employment within such period, the greatest of
(x) 1/12 of the amount of Executive's most recent rate of
annual base salary, plus 1/12 of Executive's most recent
annual bonus, (y) 1/12 of Executive's annual base salary and
target bonus in effect immediately prior to the date of such
Change in Control or (z) 1/12 of Executive's annual base
salary and target bonus as specified in Section 2 hereof;
(B) If Executive has not commenced new
regular, full time employment during the first 12 months
following the effective date of such termination, Executive
shall receive for each of the 13th through 24th months
following such effective date of termination in which
Executive was not so employed for the entire month the amount
payable under Section 7(a)(ii)(A) hereof;
(C) Within 30 days after the effective date
of such termination, Sensormatic shall pay to Executive an
amount equal to his pro rata annual bonus for the year in
which termination occurs, based on the target bonus for such
year; and
(D) During that portion of the periods set
forth in Sections 7(a)(ii)(A) and 7(a)(ii)(B) hereof during
which Executive has not commenced new regular, full time
employment, Executive shall be entitled to the benefits set
forth in Section 6(c)(iv) hereof.
(b) ADDITIONAL BENEFITS UPON INVOLUNTARY TERMINATION. In the
event that Executive's employment with Sensormatic is involuntarily terminated
(other than for Cause) within the 36-month period following an "approved" Change
in Control:
(i) Executive shall be entitled to receive, for each
of the first 24 months immediately following the effective date of such
termination and irrespective of whether Executive commences new
employment within such period, the greatest of (A) 1/12 of the amount
of Executive's most recent rate of annual salary, plus 1/12 of the
amount of Executive's most recent annual bonus, (B) 1/12 of Executive's
annual base salary and target bonus in effect immediately prior to the
date of such Change in Control or (C) 1/12 of Executive's annual base
salary and target bonus as specified in Section 2 hereof;
-16-
17
(ii) If Executive has not commenced new regular, full
time employment during the first 24 months following the effective
date of such termination, Executive shall receive for each of the 25th
through 30th months following such effective date of termination in
which Executive was not so employed for the entire month the amount
payable under Section 7(b)(i) hereof;
(iii) Within 30 days after the effective date of such
termination, Sensormatic shall pay to Executive an amount equal to his
pro rata annual bonus for the year in which termination occurs, based
on the target bonus for such year; and
(iv) During that portion of the period set forth in
Section 7(b)(i) hereof during which Executive has not commenced new
regular, full time employment, Executive shall be entitled to all of
the rights and compensation set forth in Section 6(c)(iv) hereof.
(c) CONSULTING SERVICES. For a period of one year following
Executive's voluntary termination (other than by resignation contemplated in
Section 10 hereof or in Section 4(c) of the Employment Agreement (or the
corresponding provision of any successor agreement)), following an "approved"
Change in Control, of his employment with Sensormatic in which Executive
receives payments under Section 7(a)(ii) hereof, or, if shorter, the period
beginning on the date of such termination and ending six months after the
appointment of a new chief financial officer (other than an interim or acting
chief financial officer) (the "Payment Period"), Executive agrees to make
himself available at the executive offices of Sensormatic in Palm Beach County
or Broward County, Florida to advise and consult with Sensormatic with respect
to matters specified by the chief executive officer, chief financial officer or
Board of Directors of Sensormatic and appropriate for a former chief financial
officer. Executive shall perform such services at such times as are (i)
reasonably requested by the chief executive officer, chief financial officer or
Board of Directors of Sensormatic, (ii) reasonably acceptable to Executive and
(iii) consistent with Executive's duties and obligations in the course of his
then occupation or employment, if any. Executive shall use reasonable efforts to
comply with such requests to perform up to 250 hours of such services during the
Payment Period.
(d) In the event of any termination of Executive's employment
to which this Section 6(c) or 6(d) or this Section 7 is applicable, Executive
shall be under no obligation to seek other employment and there shall be no
offset against amounts due Executive under this Agreement on account of any
remuneration attributable to any subsequent employment that he may obtain,
except as expressly set forth in Section 6(c) or 6(d) or this Section 7.
8. BENEFITS ON DEATH OR DISABILITY.
(a) In the event of Executive's death at any time within 36
months after a Change in Control and prior to any termination of Executive's
employment, or in the event that Executive had died prior to a Change in Control
and that as of the date of such Change in Control
-17-
18
there remain outstanding amounts payable under Sensormatic's Senior Executive
Plan for Executive, unless in either case a trust or other arrangement
previously determined in writing to be satisfactory by a majority of the
Previous Members of the Board of Directors then in office assuring payment of
benefits to or for the benefit of the Executive under such Plan in the event of
a Change in Control has been previously established and is then in effect,
Sensormatic shall promptly pay to Executive's designated beneficiary or
Executive's heirs, executors, administrators or personal representatives
(collectively, "Successors") all of the remaining benefits under such Plan to
which Executive's Successors are then entitled, in the form of a lump sum
payment equal to the amount of such benefits discounted to present value using
an interest rate equal to the rate published by Pension Benefit Guaranty
Corporation for the purpose of discounting pension benefits to present value in
the event of a lump sum prepayment thereof, as then in effect, but such discount
rate shall in no event be greater than ten percent (10%) PER ANNUM.
(b) In the event of Executive's death or permanent and total
disability (within the meaning of Section 22(e)(3) of the Internal Revenue Code
of 1986, as amended and in effect and interpreted as of the date of this
Agreement) at any time within the 24-month period immediately following a
Change in Control and prior to any termination of Executive's employment,
Executive or Executive's Successors shall be entitled to all of the benefits of
Executive provided under this Agreement as if Executive had voluntarily
terminated his employment with Sensormatic (but without giving effect to Section
4 hereof or to the loss of benefits upon voluntary termination under Section
6(e)(i) hereof), including, without limitation, those set forth in Section 6(c)
hereof.
(c) In the event of Executive's death or disability after
termination of Executive's employment with Sensormatic, Executive or Executive's
Successors shall be entitled to receive all remaining benefits to which
Executive is entitled under this Agreement.
9. TERMINATION FOR CAUSE. In the event that Executive's
employment with Sensormatic is terminated for Cause at any time after any Change
in Control, Executive shall not be entitled to any of the benefits set forth in
Sections 6, 7 or 8 of this Agreement not yet received by him, except to the
extent that Executive exercised rights prior to such termination with respect to
options, Award Shares or Conversion Shares as provided under Sections 6(a), 6(b)
and 6(d) hereof. The foregoing shall not affect any rights of Executive accrued
other than by virtue of this Agreement. For purposes of this Agreement,
Sensormatic shall be deemed to have terminated Executive's employment with
Sensormatic for Cause only if such termination is effected for any of the
following reasons:
(a) willful misconduct by Executive in the performance of
Executive's duties resulting in material economic harm to Sensormatic;
or
(b) the conviction of Executive for a felony involving moral
turpitude under federal or state law;
-18-
19
PROVIDED, HOWEVER, that the determination of the existence of the grounds
referred to in subparagraph (a) of this Section 9 shall be made, in good faith,
only (i) by a majority of the Previous Members of the Board of Directors who
are then in office with Sensormatic or a corporate successor of Sensormatic,
provided that such majority shall consist of not less than two persons; and
PROVIDED, FURTHER, that Executive shall be given prior written notice by the
Board of Directors of the intention to terminate him for Cause and the specific
grounds for such termination, as determined in accordance with this Section 9,
and shall be entitled to a hearing before such Previous Members of the Board of
Directors (or a committee thereof designated by such Previous Members) before
such termination becomes effective or (ii) if at least two Previous Members of
the Board of Directors are not then in office, by a majority of the persons who
are then, and were, for a period of two years immediately prior to such Change
in Control, officers of Sensormatic (or, if Sensormatic is then a division, such
persons who were previously such officers of Sensormatic and are then employed
in an executive or managerial capacity in the division).
10. INVOLUNTARY TERMINATION EVENTS. By way of illustration,
and not of limitation, each of the following events shall constitute involuntary
termination of Executive's employment with Sensormatic, PROVIDED that Executive
resigns from such employment within six months following such event, but in no
case later than 36 months immediately following a Change in Control, and
PROVIDED, FURTHER, that Executive shall not have consented to such event in
writing:
(a) Executive is assigned any duties or responsibilities that
are materially inconsistent with Executive's position, office, duties,
responsibilities or status immediately prior to the date of such Change in
Control, or which materially impair Executive's ability to function as President
or Chief Executive Officer of Sensormatic, or a material change is made in
Executive's reporting responsibilities, titles or offices from those in effect
immediately prior to such Change in Control, or Executive is removed from, or is
not re-elected to, any such position or office, or as a director of Sensormatic,
following such Change in Control, unless in connection with the termination of
Executive's employment with Sensormatic for Cause or by reason of his death or
disability;
(b)(i) Executive's annual rate of salary or target bonus is
reduced below the greater of the amounts (x) paid therefor immediately preceding
the date of such Change in Control or (y) expressly set forth in Section 2
hereof, (ii) the formula for the calculation of Executive's bonus is changed in
a manner that could reasonably be anticipated to decrease the amount payable
thereunder or (iii) any other change is made with respect to Executive's salary
or bonus that would violate Section 2;
(c) a material reduction is made in the benefits set forth in
paragraphs (a) through (i) of Section 3 hereof or to any additional benefits or
perquisites which may have been granted to Executive subsequent to the date of
this Agreement (other than changes made in benefit plans required by law or
applicable regulations thereunder), as they may be in effect
-19-
20
immediately prior to the date of such Change in Control, or if any increase is
made in the cost to Executive for such benefits; or
(d) Executive is transferred or required to transfer to a
location outside of a 25-mile radius of Sensormatic's then-current headquarters
in Palm Beach County or Broward County, Florida, or the principal place of
business of Sensormatic in which Executive's major duties have been carried out
is transferred to a location outside of a 25-mile radius of Sensor matic's
then-current headquarters in Palm Beach County or Broward County, Florida.
(e) Sensormatic fails to obtain the assumption in writing of
its obligation to perform this Agreement by any successor to all or
substantially all of the assets and/or business of Sensormatic within 15 days
after a Reorganization Event or any other transaction occurring in connection
with, as a result of or within 24 months following a Change in Control pursuant
to which Sensormatic is not the surviving corporation.
11. PAYMENTS. All monthly payments that Executive (or his
Successors) is entitled to receive under Sections 6 or 7 of this Agreement shall
be paid by or on behalf of Sensormatic on or before the 10th day of each month
in which payable, except that any payments required to be made under the plans
referred to in Section 7(a) hereof shall be made in accordance with the terms of
such plans. Any lump sum payable to Executive under Sections 6, 7, 8(a) or 12 of
this Agreement shall be paid by or on behalf of Sensormatic within 10 days after
Executive's right to such payment accrues, except as otherwise expressly set
forth any provision of such Sections.
12. EXCISE TAXES. In the event that the aggregate of all
payments or benefits made or provided to Executive in connection with a Change
in Control under this Agreement and under all other plans and programs of
Sensormatic (the "Aggregate Payment") is determined to constitute a Parachute
Payment, as such term is defined in Section 280G(b)(2) of the Internal Revenue
Code, as amended, or any successor provision, Sensormatic shall pay to
Executive, prior to the time any excise tax imposed by Section 4999 of the
Internal Revenue Code, as amended, or any successor provision ("Excise Tax"), is
payable with respect to such Aggregate Payment, an additional amount which,
after the imposition of all income and excise taxes thereon, is equal to the
Excise Tax on the Aggregate Payment. The determination of whether the Aggregate
Payment constitutes a Parachute Payment and, if so, the amount to be paid to
Executive and the time of payment pursuant to this Section 12 shall be made by
an independent auditor (the "Auditor") jointly selected by Sensormatic and
Executive and paid by Sensormatic. The Auditor shall be a nationally recognized
United States public accounting firm which has not, during the two years
preceding the date of its selection, acted in any way on behalf of Sensormatic
or any affiliate thereof. If Executive and Sensormatic cannot agree on the firm
to serve as the Auditor, then Executive and Sensormatic shall each select one
nationally recognized United States accounting firm and those two firms shall
jointly select the accounting firm to serve as the Auditor. Notwithstanding the
foregoing, in the event that the amount of Executive's Excise Tax liability is
subsequently determined to be greater than the Excise Tax liability with
-20-
21
respect to which an initial payment to Executive under this Section 12 has been
made, Sensormatic shall pay to Executive an additional amount with respect to
such additional Excise Tax (and any interest and penalties thereon) at the time
that the amount of the actual Excise Tax liability is finally determined, such
additional amount to be calculated in the same manner as such initial payment.
Executive and Sensormatic shall cooperate with each other in connection with any
action, arbitration, suit, investigation or proceeding (collectively,
"Proceeding") relating to the existence or amount of liability for Excise Tax,
and all expenses relating to any such Proceeding (including all reasonable
attorney's fees and other expenses incurred by Executive in connection
therewith) shall be paid by Sensormatic promptly upon notice of demand from
Executive.
13. COSTS OF COLLECTION. Sensormatic agrees upon demand to pay
all costs and expenses of Executive (including, without limitation, reasonable
counsel fees and expenses) in connection with the enforcement, whether through
negotiations, arbitration or legal proceedings or otherwise, of this Agreement
and the collection of any benefits due to Executive hereunder.
14. NO EFFECT ON EMPLOYMENT. This Agreement is not, and
nothing hereby shall be deemed to create, a contract of employment between
Sensormatic and Executive. The right of Sensormatic to terminate Executive's
employment with Sensormatic or any subsidiary thereof, at any time at will or as
otherwise provided in the Employment Agreement or any other agreement between
Sensormatic and Executive, shall not be affected or limited by this Agreement
and is specifically reserved. Further, this Agreement shall not be deemed to
require Sensormatic to continue, or to continue unmodified, any benefit plan or
policy, whether or not referred to in Section 3 hereof, provided that no Change
in Control shall have occurred and no Attempted Change in Control shall have
occurred and then be pending.
15. CONFLICTS WITH OTHER AGREEMENTS. Nothing contained in or
arising out of this Agreement shall be deemed to discharge, release or modify
the obligations of Sensormatic to Executive under the provisions of the
Employment Agreement or any other agreement between them or of any plan or
program of Sensormatic, regardless of whether the subject matter of any
provision thereof is the same or similar to that of any provision of this
Agreement, the rights and remedies of Executive under this Agreement and any
other such agreement, plan or program being cumulative and not in substitution
of each other; provided, however, that nothing in this Agreement shall entitle
Executive to receive duplicative payments of salary, bonus or other benefits.
Further, nothing in this Agreement shall diminish or otherwise adversely affect
Exec utive's rights or benefits accruing as a consequence of his death or
disability, at any time after a Change in Control, under the terms and
conditions of the plans or programs of Sensormatic in which Executive is a
participant immediately prior to any Change in Control and any additional plan
or program of Sensormatic in which Executive is a participant at the time of
Executive's death or disability.
16. MAINTENANCE OF PLANS. Sensormatic agrees that, for not
less than 36 months after a Change in Control (whether "approved" or
"non-approved"), it shall maintain in
-21-
22
effect the plans and programs in which Executive is a participant immediately
prior to such Change in Control (or comparable plans and programs) to the extent
necessary to assure that the rights and benefits of Executive thereunder shall
be no less favorable after such Change in Con trol than immediately prior
thereto, provided, that Sensormatic shall in no event make any change in the
event of or at any time after a Change in Control in the Senior Executive Plan
resulting in a reduction of Executive's benefits thereunder.
17. ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement shall be settled by arbitration before the American
Arbitration Association in Miami, Florida, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association. Judgment upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. Any costs, including, without limitation, attorneys' fees
and disbursements, incurred by Executive in such arbitration or in connection
with any appeal therefrom or any action brought to enforce or collect any such
award or judgment thereon, shall be reimbursed by Sensormatic, provided, that
Sensormatic shall not be required to reimburse Executive hereunder in the event
that the arbitral panel or appeals court finds that Executive's claims and/or
defenses are substantially without reasonable basis.
18. SURVIVAL. This Agreement shall be binding on, enforceable
against and inure to the benefit of Executive and his heirs, executors,
administrators, personal representatives, successors and assigns and Sensormatic
and its successors and assigns, including, without limitation, any corporation
with or into which Sensormatic is merged or consolidated, or any entity which
acquires all or substantially all of the business and assets of Sensormatic, in
connection with any Change in Control. In connection with any sale, merger or
consolidation described in the preceding sentence, Sensormatic shall take all
actions permissible under applicable law in order to cause such other
corporation to expressly assume Sensormatic's liabilities, obligations and
duties hereunder.
19. NOTICES. Any notice given to a party pursuant to or in
connection with this Agreement shall be in writing and shall be deemed to have
been given when delivered personally or sent by Federal Express or a similar
overnight courier service or by certified or registered mail, postage prepaid,
return receipt requested, duly addressed to the party concerned at the address
indicated at the beginning of this Agreement or to such changed address as such
party may subsequently give such notice of.
20. SEVERABILITY. If any provision of this Agreement is found
to be invalid or unenforceable by a court of competent jurisdiction or an
arbitral panel under Section 17 hereof, this Agreement shall be interpreted and
enforceable as if such provision were severed or limited, but only to the extent
necessary to render such provision and this Agreement enforceable.
-22-
23
21. GOVERNING LAW. This Agreement shall in all respects be
governed by and construed in accordance with the laws of the State of Florida
applicable to agreements made and fully to be performed in such state, without
giving effect to conflicts of law principles.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first set forth above.
SENSORMATIC ELECTRONICS
CORPORATION
By: /s/ Xxxxxx X. Xxxxxxxx
-----------------------------------
Xxxxxx X. Xxxxxxxx
President and Chief Executive
Officer
/s/ Xxxxxxx X. Xxxxxx
-----------------------------------
Xxxxxxx X. Xxxxxx
-23-
