EXHIBIT 10.19
Change in Control
Agreement
This Agreement is made and entered into as of the date set forth on the
signature page hereto, by and between Bcom3 Group, Inc. ("Bcom3") and the
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individual whose name is set forth on the signature page hereto (the
"Executive"). Other capitalized terms used herein are defined in Article II
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below.
Bcom3 and the Executive desire to enter into this Agreement for the purpose of
specifying certain payments and other benefits to which the Executive will be
entitled in certain circumstances as described below. Therefore, in
consideration of the mutual covenants and agreements set forth below, Bcom3 and
the Executive hereby covenant and agree as follows:
Article I. Change in Control
Section 1.01 Payments
In the event of an Eligible Termination, Bcom3 will promptly pay to the
Executive:
(a) any accrued but unpaid salary and unreimbursed expenses for the period
ending on the Termination Date;
(b) a pro rata portion of the Executive's aggregate target incentive bonus for
the then current calendar year, based on days elapsed through the
Termination Date;
(c) any prior year annual bonus (or other incentive) earned but unpaid as of
the Termination Date;
(d) any amount owing with respect to unused vacation days as of the
Termination Date;
(e) a lump sum payment equal to either (i) three times the Executive's Annual
Cash Compensation as of the Termination Date, in the event of a 3X
Termination; or (ii) two times the Executive's Annual Cash Compensation as
of the Termination Date, in the event of a 2X Termination; or (iii) one
times the Executive's Annual Cash Compensation as of the Termination Date,
in the event of a 1X Termination; and
(f) any amounts owing to the Executive in accordance with the provisions of
Appendix I to this Agreement.
No such payment shall be reduced by any amount the Executive may earn or receive
from employment or any other source of income after the Termination Date, and
the Executive shall not have any obligation to seek other employment or
otherwise to mitigate Bcom3's payment obligations.
Section 1.02 Benefits
In the event of an Eligible Termination, Bcom3 will also provide the following
benefits (or, at Bcom3's election, may substitute benefits or cash payments that
are of equivalent economic value) to the Executive:
(a) all of the Executive's benefits under medical, dental, life,
long-term disability, accidental death and disability, and other
similar welfare benefit plans, and all of the Executive's benefits
under deferred compensation, profit sharing, long-term incentive,
defined contribution, defined benefit, pension, retirement, and
other similar qualified and nonqualified benefit plans, will be
continued for either (i) three years from the Termination Date, in
the event of a 3X Termination; or (ii) two years from the
Termination Date, in the event of a 2X Termination; or (iii) one
year from the Termination Date, in the event of a 1X Termination;
provided, however, that such continuing benefits shall be
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reduced to the extent the Executive receives replacement benefits
from a new employer during the continuation period, and COBRA will
continue thereafter as provided by law;
(b) all of the Executive's benefits under deferred compensation, profit
sharing, long-term incentive, defined contribution, defined benefit,
pension, retirement, and other similar qualified and nonqualified
benefit plans, that are subject to vesting over a period of
continuing employment, shall vest immediately, effective as of the
Termination Date, to the extent such benefits have not already
vested; and
(c) the Executive will be entitled to receive up to twelve months of
executive-level outplacement assistance.
Section 1.03 Stock and Stock Options
If, at the time of an Eligible Termination, the Executive holds stock in Bcom3
(or stock in a successor corporation or a new parent holding company), then the
Executive will become entitled to hold his or her stock subject to the least
restrictive provisions that are then applicable to any group of employees (or
former employees) of Bcom3; provided, however, that, if the Executive is still
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subject to a "never lapse" restriction for federal income tax purposes at the
time of the Eligible Termination, such restriction will not lapse solely by
reason of the Eligible Termination, and instead the Executive will become
entitled to hold his or her shares, subject to such restriction, for up to 10
years thereafter.
. Example 1. If the current provisions of the Stock Purchase Agreement
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survive a Change in Control, so that the Executive remains subject
to a "never lapse" restriction, then the Executive will become
entitled to have his or her Eligible Termination treated as an
"Agreed Separation" for purposes of the Stock Purchase Agreement.
. Example 2. If a public company uses its stock to acquire Bcom3 in a
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Change in Control transaction, and a group of Bcom3 employees (or
former employees) have come to hold their new public company shares
free of any repurchase and transfer restrictions (or perhaps subject
only to transfer restrictions coterminous with their noncompete and
nonsolicitation covenants), and the Executive is no longer subject
to a "never lapse" restriction at the time of his or her Eligible
Termination, then the Executive will be entitled to hold his or her
public company shares subject to the least restrictive such
provisions.
If the Executive holds stock options in Bcom3 (or "rollover" stock options in a
successor corporation or a new parent holding company) at the time of an
Eligible Termination, then (a) the Executive will be deemed to have immediately
satisfied any remaining vesting or other similar conditions to the full
exercisability of his or her stock options, (b) the Executive will remain
entitled to exercise his or her options until the final expiration date that
would have applied if he or she had remained an employee, and (c) the Executive
will be entitled, upon exercise of his or her stock options, to hold the
resulting shares of stock subject to the same provisions that would have applied
if he or she had held stock (instead of stock options) in Bcom3 (or a successor
corporation or a new parent holding company) at the time of the Eligible
Termination.
Section 1.04 Conditions
In connection with any Eligible Termination, Bcom3 may elect to prepare and
deliver to the Executive for his or her signature a Separation Agreement,
containing a mutual legal release and a reiteration of the restrictive covenants
(including, without limitation, the restrictive covenants contained in the Stock
Purchase Agreement) to which the Executive is already subject at that time
(applied, however, as if the Executive were retiring or leaving voluntarily
rather than in a Discharge Without Cause or a Constructive Discharge). If Bcom3
prepares and delivers such a Separation Agreement to the Executive, then all
payments and benefits under this Agreement will be conditioned upon the
Executive executing the Separation Agreement and returning it to Bcom3, and the
expiration of any rescission or revocation period provided by law.
Article II. Definitions
"Annual Cash Compensation," as of any determination date, means the sum of (x)
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the Executive's annual base salary plus (y) the Executive's aggregate target
incentive bonus for the then current calendar year (or, if greater, the highest
aggregate cash compensation the Executive has earned in annual salary and
bonuses from the Bcom3 Companies with respect to any of the then previous three
calendar years); provided, however, that the amounts in clauses (x) and (y)
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shall be determined without giving effect to any reduction in the Executive's
annual base salary or aggregate target incentive bonus that may have occurred
during the period beginning 90 days prior to the consummation of a Change in
Control and ending on the determination date.
"Bcom3" has the meaning set forth in the preamble to this Agreement.
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"Bcom3 Company" means any of Bcom3 and the Bcom3 Subsidiaries.
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"Bcom3 Subsidiary" means any corporation or other entity of which outstanding
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shares or ownership interests representing 50% or more of the combined voting
power of such corporation or other entity entitled to elect the management
thereof are owned, directly or indirectly, by Bcom3.
"Board" means the Board of Directors of Bcom3.
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"Cause" means (a) the Executive's substantial, willful, and continued failure to
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perform his or her duties with any Bcom3 Company (other than as a result of his
or her Disability or as a result of his or her Resignation) as reasonably
directed by the Board or a supervisor within a reasonable period of time after a
written demand for such performance is delivered to the Executive by the Board,
which demand specifically identifies the manner in which the Board believes that
the Executive has not performed his or her duties; (b) any willful act or
omission by the Executive constituting dishonesty, disloyalty, or fraud, which
in any such case results in a material injury to the financial condition or
business reputation of Bcom3 or any of its clients; (c) the indictment of the
Executive for a felony or a crime involving moral turpitude under the laws of
the United States or any state thereof or any other jurisdiction in which the
Bcom3 Companies conduct business; or (d) any material breach by the Executive of
a noncompete, nonsolicitation, or confidentiality covenant to which he or she is
a party for the benefit of a Bcom3 Company. For purposes of this definition, no
action (or failure to act) by the Executive shall be deemed willful if it was
done (or omitted to be done) by the Executive in good faith and with a
reasonable belief that such action (or failure to act) was in the best interests
of the Bcom3 Companies, and no failure by the Executive to attain financial or
other business objectives shall in and of itself be deemed a failure to perform
duties.
"Change in Control" means the occurrence of one or more of the following events
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at any time on or before December 31, 2005:
(i) if any "person" or "group" (as those terms are used in Sections
13(d) and 14(d) of the Exchange Act), other than an Exempt Person,
is or becomes the "beneficial owner" (as such term is defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of Bcom3 representing one-third or more of the combined
voting power of Bcom3's then outstanding securities; or
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board and any new directors
whose election by the Board or nomination for election by Bcom3's
stockholders was approved by at least two-thirds of the directors
then still in office who either were directors at the beginning of
the period or whose election was previously so approved, or who were
elected by Dentsu, cease for any reason to constitute a majority
thereof; or
(iii) the stockholders of Bcom3 approve a merger or consolidation of Bcom3
with any other corporation, other than a merger or consolidation (A)
which would result in all or a portion of the voting securities of
Bcom3 outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity or a direct or indirect parent of
the surviving entity) more than two-thirds of the combined voting
power of the voting securities of Bcom3 or such surviving entity (or
direct or indirect parent of such surviving entity) outstanding
immediately after such merger or consolidation or (B) by which the
corporate existence of Bcom3 is not affected and following which
Bcom3's directors retain their positions with Bcom3 (and constitute
at least a majority of the Board) or (C) with Dentsu; or
(iv) the stockholders of Bcom3 approve a plan of complete liquidation of
Bcom3 or an agreement for the sale or disposition by Bcom3 of all or
substantially all Bcom3's assets, other than a sale to an Exempt
Person.
"Constructive Discharge" means a material diminution in the Executive's
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reporting relationship, a material diminution in the Executive's duties and
responsibilities taken as a whole (not taking into account changes -- such as
changes in public reporting requirements -- that occur solely by reason of Bcom3
being a subsidiary of another company rather than the top-most company in a
group of companies), a reduction in his or her base salary, a material reduction
in his or her bonus opportunity or level of benefits other than a reduction in
level of benefits that is reasonably consistent with changes affecting all
senior executives of the company, or a requirement that he or she relocate or
commute to another metropolitan area (whether or not such developments have also
resulted in a Resignation by the Executive).
"Dentsu" means Dentsu Inc. or a direct or indirect 100% affiliate of Dentsu Inc.
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(i.e., a company that owns 100% of, that is 100% owned by, or that is under 100%
common control with, Dentsu Inc.).
"Disability" means a physical or mental condition that renders the Executive
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incapable, after reasonable accommodation, of performing his or her normal
duties.
"Discharge Without Cause" means the Bcom3 Company that employs the Executive has
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terminated his or her employment, other than for Cause, and the Executive has
not been offered immediate equivalent employment, on terms that would not
constitute a Constructive Discharge, with another Bcom3 Company (or another
company under common ownership and control with the Bcom3 Companies).
"Eligible Termination" means (a) a Discharge Without Cause (or a Constructive
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Discharge) during the period beginning 90 days prior to a Change in Control and
ending on the one-year anniversary of such Change in Control (a "3X
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Termination"); during the period beginning immediately after the one-year
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anniversary of such Change in Control and ending on the two-year anniversary of
such Change in Control (a "2X Termination"); or during the period beginning
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immediately after the two-year anniversary of such Change in Control and ending
on the three-year anniversary of such Change in Control (a "1X Termination"); or
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(b) a Resignation during the 30-day period beginning immediately after the
one-year anniversary of a Hostile Change in Control (also a "3X Termination").
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"Executive" has the meaning set forth in the preamble to this Agreement.
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"Exempt Person" means Dentsu, any employee benefit plan of Bcom3, a trustee or
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other administrator or fiduciary holding securities under an employee benefit
plan of Bcom3, or any voting trustee under the Voting Trust Agreement.
"Hostile Change in Control" means any Change in Control that was not approved in
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advance by the Board.
"Initial Public Offering" means the consummation of a sale by Bcom3 to the
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public of shares of Common Stock of Bcom3 through a firm commitment
underwriting, registered under the Securities Act of 1933, as amended, in which
at least 10% of the outstanding shares of Common Stock of Bcom3 come to be held
by public stockholders.
"Resignation" means the Executive has voluntarily terminated his or her
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employment with the Bcom3 Company that employs him or her, and has not
immediately thereafter become an employee of any other Bcom3 Company (or any
other company under common ownership and control with the Bcom3 Companies).
"Stock Purchase Agreement" means that certain Stock Purchase Agreement between
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the Executive and the Company, as the same may be amended from time to time.
"Termination Date" means, in the event of an Eligible Termination, the last date
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on which the Executive is a full-time employee of a Bcom3 Company.
"Voting Trust Agreement" means that certain Voting Trust Agreement, amended and
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restated as of April 18, 2001, by and among the owners of shares of Common Stock
of the Company who are or may become parties thereto and the voting trustees
thereunder, as the same may be amended from time to time.
Article III. Miscellaneous
Section 3.01 Prompt Payments
Bcom3 will make all payments owing to the Executive under this Agreement
promptly (and in any event within five business days) after the amount so owing
is determined.
Section 3.02 Successors and Assigns
This Agreement shall be binding upon, and inure to the benefit of, Bcom3 and its
successors and permitted assigns and any person acquiring, whether by merger,
consolidation, purchase of assets, or otherwise, all or substantially all of
Bcom3's assets and business. Bcom3 may assign any or all of its obligations
under this Agreement, as appropriate, to any Bcom3 Subsidiary that employs the
Executive; provided, however, that Bcom3 shall remain ultimately responsible for
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the performance of all such assigned obligations.
Section 3.03 Nonalienation
The rights of the Executive under this Agreement are not subject in any manner
to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment, or garnishment by creditors of the Executive or of his or her
beneficiary. So long as the
Executive lives, no person, other than the Executive, shall have any interest in
his or her rights under this Agreement.
Section 3.04 Amendments and Waivers
This Agreement may be amended or cancelled only by mutual agreement of the
parties in writing. No waiver by either party hereto of a breach of any
provision of this Agreement by the other party will operate or be construed as a
waiver of any subsequent breach by such other party of any similar or dissimilar
provisions at the same time or at any prior or subsequent time. The failure of
either party hereto to take any action by reason of such breach will not deprive
such party of the right to take such action at any time while such breach
continues.
Section 3.05 Confidentiality
Except as may be required by the lawful order of a court or agency of competent
jurisdiction, or except to the extent the Executive has express written
authorization from Bcom3, the Executive shall not disclose the existence or the
substance of this Agreement to any person other than his or her spouse, his or
her immediate family members, and his or her legal, accounting, and tax advisers
(after taking reasonable precautions to ensure that such other persons preserve
the confidentiality of such information in turn).
Section 3.06 Applicable Law
This Agreement shall be governed by and construed in accordance with the
domestic laws of the State of Illinois without giving effect to any choice or
conflict of law provision or rule (whether of the State of Illinois or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Illinois.
Section 3.07 Severability
Any term or provision of this Agreement that is invalid or unenforceable in any
situation in any jurisdiction shall not affect the validity or enforceability of
the remaining terms and provisions hereof or the validity or enforceability of
the offending term or provision in any other situation or in any other
jurisdiction.
Section 3.08 Notices
All notices, demands, claims, and other communications provided for in this
Agreement shall be in writing and shall either be delivered personally, or else
sent by U.S. mail (return receipt requested and postage prepaid), facsimile, or
prepaid overnight courier (or, in the case of international communications,
two-day courier) to the parties as set forth below. Such notices, demands,
claims, and other communications shall be deemed given:
(a) in the case of delivery by certified or registered U.S. mail, on the fifth
day after deposit in the U.S. mail;
(b) in the case of delivery by first-class U.S. mail or by facsimile, on the
date when the transmitting party receives confirmation of receipt by
facsimile, telephone, or otherwise; or
(c) in the case of domestic delivery by overnight courier, on the first day
after posting with such courier, or, in the case of international delivery
by two-day courier, on the second day after posting with such courier;
provided, however, that in no event shall any such communications be deemed to
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have been given later than the date they are actually received. Communications
that are to be delivered by the U.S. mail or by courier shall be delivered (i)
to Bcom3 at 00 Xxxx Xxxxxx Xxxxx, Xxxxxxx, XX, 00000, to the attention of the
Chief Executive Officer and with a copy to the attention of the Chief Legal
Officer, and (ii) to the Executive at his or her address for notices set forth
on the signature page hereto. Either party, by written notice furnished to the
other party, may modify the applicable delivery address, except that notice of
change in address shall be effective only upon receipt.
Section 3.09 Arbitration
Any controversy or claim arising out of or relating to this Agreement (or the
breach thereof) shall be settled by final, binding, and non-appealable
arbitration in Chicago, Illinois, employing three arbitrators. The arbitration
shall be conducted in accordance with the rules of the American Arbitration
Association then in effect. Bcom3 shall appoint one of the arbitrators, the
Executive shall appoint one of the arbitrators, and the first two arbitrators
shall appoint the third arbitrator (or, if the first two arbitrators have not
agreed on the third arbitrator within 30 days after the appointment of the
second arbitrator, then the American Arbitration Association shall appoint the
third arbitrator). The arbitrators shall also allocate the costs and expenses of
any such arbitration between the parties, taking into account the relative
merits of their respective positions. At the Executive's request, Bcom3 will
promptly advance to the Executive the amount of all reasonable costs and
expenses (including, without limitation, reasonable attorneys' fees) he or she
may incur in connection with the arbitration of any controversy or dispute
arising out of or relating to this Agreement, on an interest-free basis, and
shall indemnify and hold the Executive harmless, on an after-tax basis, from any
excise tax, income tax, interest, and/or penalties related to such advance or to
any imputed income associated with such advance. Any such advance shall be
repaid or forgiven, as appropriate, depending upon the final allocation of such
costs and expenses by the arbitrators.
Section 3.10 Other Agreements
For avoidance of doubt, this Agreement is not intended to supercede any
employment contract or other agreement between the Executive and any of the
Bcom3 Companies in any respect; provided, however, that, if the Executive is a
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party to any employment contract or other agreement with any of the Bcom3
Companies, or is a beneficiary of any plan, policy, or practice of any of the
Bcom3 Companies, in any such case providing the Executive with specific payments
and benefits as a result of what would be his or her Eligible Termination
hereunder, then the Executive shall be entitled to the greater of
(x) the payments and benefits described in this Agreement or (y) such other
specific payments and benefits (but, in order to avoid duplication, not both).
If the Executive is a beneficiary of any statutorily required payments or
benefits upon what would be his or her Eligible Termination hereunder, including
a requirement imposed by law outside the U.S., then such statutory requirements
shall be satisfied, and the payments and benefits described in this Agreement
shall be correspondingly reduced.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement, effective as of the date set forth below.
BCOM3 GROUP, INC.
Effective Date:
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By /s/ Xxxxx X. Xxxxx
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Xxxxx X. Xxxxx
January 17, 2002 Chairman and CEO
Signature of Executive:
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(X) /s/ Xxxxxx X. Xxxxxxxx
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Please Print Name and Address:
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Xxxxxx X. Xxxxxxxx
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Appendix I
Excise Tax Reimbursement
If the Executive receives any payment or other benefit from any of the Bcom3
Companies under this Agreement or otherwise which is or becomes subject to the
tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code"), or any similar tax that may be imposed (any such tax imposed by
Section 4999 or other similar tax being referred to herein as an "Excise Tax"),
Bcom3 will pay the Executive such additional amount (a "Gross-Up Payment") as is
required to offset such Excise Tax, and as is required to offset all taxes on
such additional amount itself, with the result that the Executive is placed in
the same position, after tax, as if there had been no such Excise Tax on such
payment or other benefit.
All determinations required under this Appendix I, including, without
limitation, whether and when a Gross-Up Payment is required, the amount of such
Gross-Up Payment, and the assumptions to be utilized in arrived at such
determination, shall be made by Xxxxxxxx Group, Inc. ("Xxxxxxxx"), which shall
provide detailed supporting calculations both to Bcom3 and the Executive within
15 business days of the receipt of notice from Bcom3 or the Executive that there
has been a payment that could give rise to a Gross-Up Payment. All related
Xxxxxxxx fees and expenses shall be borne solely by Bcom3. Any Gross-Up Payment
shall be paid by Bcom3 to the Executive within five days of receipt of
Xxxxxxxx'x determination. Any determination by Xxxxxxxx shall be binding upon
Bcom3 and the Executive.
As a result of uncertainty in the application of Section 4999 or other
provisions of the Code at the time of the initial determination by Xxxxxxxx, it
is possible that the Gross-Up Payments determined by Xxxxxxxx will turn out to
be less than should have been made (an "Underpayment"). In the event that Bcom3
exhausts its remedies as set forth below in this Appendix I, and the Executive
is required to make an additional payment of tax, Xxxxxxxx shall determine the
amount of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by Bcom3 to or for the benefit of the Executive.
The Executive shall notify Bcom3 in writing of any claim by the Internal Revenue
Service that, if successful, would require the payment by Bcom3 of a Gross-Up
Payment. Such notification shall be given as soon as practicable but no later
than ten business days after the Executive is informed in writing of such claim
and shall apprise Bcom3 of the nature of such claim and the date on which such
claim is requested to be paid. The Executive shall not pay such claim prior to
the expiration of the 30-day period following the date on which it gives such
notice to Bcom3 (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due).
If Bcom3 notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive shall (1) give Bcom3
any information reasonably requested by Bcom3 relating to such claim, (2) take
such action in connection with contesting such claim as Bcom3 shall reasonably
request in writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney reasonably
selected by Bcom3, (3) cooperate with Bcom3 in good
faith in order to effectively contest such claim, and (4) permit Bcom3 to
participate in any proceedings relating to such claim. Bcom3 shall pay directly
all costs and expenses (including, without limitation, additional interest and
penalties) incurred in connection with such contest and shall indemnify and hold
the Executive harmless, on an after-tax basis, for any income tax, excise tax,
interest, and/or penalties imposed as a result of such representation and
payment of costs and expenses.
Bcom3 shall control all proceedings taken in connection with such contest and,
at its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings, and conferences with the taxing authority in respect of
such claim, and may, at its sole option, either direct the Executive to pay the
tax claimed and xxx for a refund or contest the claim in any permissible manner,
provided, however, that if Bcom3 directs the Executive to pay such claim and xxx
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for a refund, Bcom3 shall advance the amount of such payment to the Executive on
an interest-free basis, and shall indemnify and hold the Executive harmless, on
an after-tax basis, from any excise tax, income tax, interest, and/or penalties
related to such advance or to any imputed income associated with such advance.
Bcom3's control of the contest shall be limited to issues with respect to which
a Gross-Up Payment would be payable, and the Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
If Bcom3 advances any amount to pay a tax, and the Executive receives any refund
with respect to such claim, the Executive shall promptly pay to Bcom3 the amount
of such refund (together with any interest paid or credited, net of applicable
taxes). If Bcom3 advances any amount to pay a tax, and a final determination is
made that the Executive is not entitled to any refund with respect to such
claim, then such advance shall be forgiven and treated (to the extent of the
refund) as an offset to the amount of Gross-Up Payment required.
