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EXHIBIT 10.5
OPTICAL MICRO-MACHINES INCORPORATED
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement (this "Agreement") is made and entered
into effective as of January 24th, 2000 (the "Effective Date"), by and between
Hus Tigli (the "Officer") and Optical Micro-Machines Incorporated, a California
corporation (the "Company"). Certain capitalized terms used in this Agreement
are defined in Section 1 below.
RECITALS
A. It is expected that the Company from time to time will consider the
possibility of an acquisition by another company or other Change of Control. The
Board of Directors of the Company (the "Board") recognizes that such
consideration can be a distraction to the Officer and can cause the Officer to
consider alternative employment opportunities.
B. The Board believes that it is in the best interests of the Company
and its shareholders to provide the Officer with an incentive to continue his
employment and to maximize the value of the Company upon a Change of Control for
the benefit of its shareholders.
C. In order to provide the Officer with sufficient encouragement to
remain with the Company notwithstanding the possibility of a Change of Control,
the Board believes that it is imperative to provide the Officer with certain
benefits upon the Officer's termination of employment following a Change of
Control.
AGREEMENT
In consideration of the mutual covenants herein contained and the
continued employment of Officer by the Company, the parties agree as follows:
1. Definition of Terms. The following capitalized terms referred to in
this Agreement shall have the following meanings:
(a) Cause. "Cause" shall mean (A) willful and material
misconduct, including willful and material failure to perform the Officer's
duties as an officer or employee of the Company or a material breach of this
Agreement, any stock option or stock purchase agreement between the Officer and
the Company or the Employment, Confidential Information, Invention Assignment
and Arbitration Agreement between the Officer and the Company, (B) any act of
personal dishonesty taken by the Officer in connection with his responsibilities
as an officer or employee and intended to result in his substantial personal
enrichment, (C) gross negligence or breach of fiduciary duty, (D) the commission
of an act which constitutes unfair competition with the Company or any of its
subsidiaries, (E) conviction of a felony that is injurious to the Company, or
(F) a willful act by the Officer which constitutes gross misconduct and which is
injurious to the Company.
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(b) Change of Control. "Change of Control" shall mean a
transaction or series of transactions resulting in (A) the acquisition of all or
substantially all the assets of the Company or (B) an acquisition of the Company
by another corporation or entity by consolidation or merger in which the holders
of the Company's outstanding voting stock immediately prior to such transactions
own, immediately after such transactions, securities representing less than 50%
or more of the voting power of the corporation or other entity surviving such
transactions.
(c) Disability. "Disability" shall mean that the Officer has
been unable to perform his duties under this Agreement as the result of his
incapacity due to physical or mental illness, and such inability, at least 26
weeks after its commencement, is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to the Officer
or the Officer's legal representative (such agreement as to acceptability not to
be unreasonably withheld).
(d) Reduced Position. "Reduced Position" of a person shall mean,
without Officer's express written consent, a significant reduction of Officer's
duties, position, compensation, or responsibilities in the Surviving Entity
following the Change of Control, unless such Reduced Position is of equal or
greater organizational level, duties, authority, compensation, and status as the
position held by such Officer immediately prior to the date of such reduction in
position, all as reasonably determined by both the Board of Directors of the
Company and the CEO of the company acquiring or merging with the Company (or the
CEO of the parent of such company if it is a subsidiary acquisition or merger);
provided however, that a reduction in duties or responsibilities solely by
virtue of the Company being acquired and made part of a larger entity (as, for
example, when the Chief Financial Officer of Company remains the principal
financial officer of the Company following a Change of Control and is not made
the Chief Financial Officer of the acquiring corporation) shall not constitute a
"Reduced Position."
(e) Surviving Entity. "Surviving Entity" shall mean the
acquiring or resulting entity following the Change of Control.
(f) Termination Date. "Termination Date" shall mean the
effective date of any notice of termination delivered by one party to the other
hereunder.
2. Term of Agreement. This Agreement shall terminate upon the date that
all obligations of the parties hereto under this Agreement have been satisfied.
3. At-Will Employment. The Company and the Officer acknowledge that the
Officer's employment is and shall continue to be at-will, as defined under
applicable law. If the Officer's employment terminates for any reason, the
Officer shall not be entitled to any payments, benefits, damages, awards, or
compensation other than as provided by this Agreement, or as may otherwise be
established under the Company's established employee benefit plans or policies
at the time of termination.
4. Termination, Relocation or Reduced Position.
(a) Accelerated Vesting on a Change of Control. Effective on the
closing of a Change of Control, Officer's stock options and any right held by
the Company to repurchase shares
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of the Company, subject to Section 5 below, shall vest or lapse, as applicable,
with respect to 0% of the total number of shares which are unvested on the date
of the Change of Control.
(b) Termination or Reduced Position Following a Change of
Control. If within TWELVE (12) months after a Change of Control, (i) the
Officer's employment with the Company is terminated without Cause by the
Surviving Entity or the Company or (ii) the Officer is requested to relocate to
a facility more than 50 miles distant from the Company's current location, or
(iii) the Officer is relegated without Cause to a Reduced Position in the
Surviving Entity or Company (each an "Acceleration Event"), then the Officer's
vesting of stock options or lapsing of the right of repurchase by the Company or
Surviving Entity shall, subject to Section 5 below, immediately vest with
respect to 100% of the total number of shares which are unvested as of the date
of the Acceleration Event and shall become fully exercisable for the period
prescribed by the terms of such options.
(c) Voluntary Resignation; Termination For Cause. If the
Officer's employment terminates by reason of the Officer's voluntary resignation
(and not in connection with a demotion to a Reduced Position), or if the Officer
is terminated for Cause, then the Officer shall not be entitled to acceleration
of his option(s) or other benefits, except for those (if any) as may then be
established under the Company's then existing severance and benefits plans and
policies at the Termination Date.
(d) Termination on No Change of Control or for No Cause. If the
Officer's employment is terminated by the Board within the first 12 months of
employment for (i) No Cause, and there is (ii) no change of Control, then the
Officer's vesting of stock options or lapsing of the right of repurchase by the
Company or Surviving Entity shall, subject to Section 5 below, immediately vest
up TO 6 MONTHS of shares. In addition, the Officer will receive monthly
severance payments from the Company for a period of TWELVE (12) MONTHS.
(e) Disability; Death. If the Company terminates the Officer's
employment as a result of the Officer's Disability, or such Officer's employment
is terminated due to the death of the Officer, then the Officer shall not be
entitled to acceleration of his or her option(s) or other benefits, except for
those (if any) as may then be established under the Company's then existing
severance and benefits plans and policies at the time of such Disability or
death.
(f) Accrued Wages and Vacation; Expenses. Without regard to the
reason for termination of the Officer's employment upon a termination for any
reason: (i) the Company shall pay the Officer any unpaid base salary due for
periods prior to the Termination Date; (ii) the Company shall pay the Officer
all of the Officer's accrued and unused vacation through the Termination Date;
and (iii) following submission of proper expense reports by the Officer, the
Company shall reimburse the Officer for all expenses reasonably and necessarily
incurred by the Officer in connection with the business of the Company prior to
the Termination Date. These payments shall be made promptly upon termination and
within the period of time mandated by law.
5. Limitation on Payments. In the event that the option
acceleration provided for in this Agreement or benefits otherwise payable to the
Officer (i) constitute "parachute payments" within the meaning of Section 280G
of the Internal Revenue Code of 1986, as amended (the "Code") and
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(ii) but for this Section 5, would be subject to the excise tax imposed by
Section 4999 of the Code, then the Officer's options shall either be accelerated
(a) to the full extent provided herein, or
(b) to such lesser extent as would result in no portion of such
benefit being subject to excise tax under Section 4999 of the Code, whichever of
the foregoing amounts, taking into account the applicable federal, state, and
local income taxes and the excise tax imposed by Section 4999, results in the
receipt by the Officer, on an after-tax basis, of the greatest benefit from the
acceleration of his option(s) pursuant to Section 4(a)(i), notwithstanding that
all or some portion of such benefits may be taxable under Section 4999 of the
Code. Unless the Company and the Officer otherwise agree in writing, any
determination required under this Section 5 shall be made in writing by the
Company's independent public accountants (the "Accountants"), whose
determination shall be conclusive and binding upon the Officer and the Company
for all purposes. For purposes of making the calculations required by this
Section 5, the Accountants may make reasonable assumptions and approximations
concerning applicable taxes and may rely on reasonable, good faith
interpretations concerning the application of Sections 280G and 4999 of the
Code. The Company and the Officer shall furnish to the Accountants such
information and documents as the Accountants may reasonably request in order to
make a determination under this Section 5. The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section 5.
6. Severance. If within TWELVE (12) months after a Change of Control,
(i) the Officer's employment with the Company is terminated without Cause by the
Surviving Entity or the Company or (ii) the Officer is requested to relocate to
a facility more than 50 miles distant from the Company's current location, or
(iii) the Officer is relegated without Cause to a Reduced Position in the
Surviving Entity or the Company, then subject to Section 5 above, the Officer
shall receive monthly severance payments from the Company or the Surviving
Entity for a period of TWELVE (12) MONTHS following such date of termination.
Severance payments shall be equivalent to Officer's salary and cost of benefit
continuation for those periods, provided that the Officer elects his COBRA
rights upon termination. Notwithstanding the above, monthly severance and
benefit payments shall cease immediately upon the Officer's obtaining employment
with comparable or greater salary, position, perquisites, and benefits as
Officer's position with the Company immediately prior to such termination.
7. Prior Agreements. This Agreement represents the entire agreement and
understanding between the parties hereto with respect to the acceleration of
vesting of capital stock, and all prior agreements and understandings, written
and oral, with respect to the matters set forth in this Agreement are hereby
superseded and replaced in their entirety with this Agreement.
8. Successors.
(a) Company's Successors. Any successor to the Company (whether
direct or indirect and whether by purchase, lease, merger, consolidation,
liquidation, or otherwise) to all or substantially all of the Company's business
and/or assets shall assume the Company's obligations under this Agreement and
agree expressly to perform the Company's obligations under this
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Agreement in the same manner and to the same extent as the Company would be
required to perform such obligations in the absence of a succession. For all
purposes under this Agreement, the term "Company" shall include any successor to
the Company's business and/or assets which executes and delivers the assumption
agreement described in this subsection (a) or which becomes bound by the terms
of this Agreement by operation of law.
(b) Officer's Successors. The terms of this Agreement and all
rights of the Officer hereunder shall inure to the benefit of, and be
enforceable by, the Officer's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees, and legatees.
9. Notices.
(a) General. Notices and all other communications contemplated
by this Agreement shall be in writing and shall be deemed to have been duly
given when personally delivered or when mailed by U.S. registered or certified
mail, return receipt requested and postage prepaid. In the case of the Officer,
mailed notices shall be addressed to him at the home address which he most
recently communicated to the Company in writing. In the case of the Company,
mailed notices shall be addressed to its corporate headquarters, and all notices
shall be directed to the attention of its Secretary.
(b) Notice of Termination. Any termination by the Company for
Cause or by the Officer as a result of a voluntary resignation or an Involuntary
Termination shall be communicated by a notice of termination to the other party
hereto given in accordance with this Section 9. Such notice shall indicate the
specific termination provision in this Agreement relied upon, shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination under the provision so indicated, and shall specify the Termination
Date (which shall be not more than 30 days after the giving of such notice). The
failure by the Officer to include in the notice any fact or circumstance which
contributes to a showing of Involuntary Termination shall not waive any right of
the Officer hereunder or preclude the Officer from asserting such fact or
circumstance in enforcing his rights hereunder.
10. Arbitration.
(a) At the option of either party, any dispute or controversy
arising out of, relating to, or in connection with this Agreement, or the
interpretation, validity, construction, performance, breach, or termination
thereof, may be settled by binding arbitration to be held in [SAN DIEGO] County,
California, in accordance with the National Rules for the Resolution of
Employment Disputes then in effect of the American Arbitration Association (the
"Rules"). The arbitrator may grant injunctions or other relief in such dispute
or controversy. The decision of the arbitrator shall be final, conclusive, and
binding on the parties to the arbitration. Judgment may be entered on the
arbitrator's decision in any court having jurisdiction.
(b) The arbitrator(s) shall apply California law to the merits
of any dispute or claim, without reference to rules of conflicts of law. The
arbitration proceedings shall be governed by federal arbitration law and by the
Rules, without reference to state arbitration law. Officer hereby consents to
the personal jurisdiction of the state and federal courts located in California
for any
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action or proceeding arising from or relating to this Agreement or relating to
any arbitration in which the parties are participants.
(c) The Company and Officer shall each pay one-half of the costs
and expenses of such arbitration, and each shall separately pay its counsel fees
and expenses.
(d) Officer understands that nothing in this Section 10 modifies
Officer's at-will employment status. Either Officer or the Company can terminate
the employment relationship at any time, with or without cause.
(e) OFFICER HAS READ AND UNDERSTANDS SECTION 10, WHICH DISCUSSES
ARBITRATION. OFFICER UNDERSTANDS THAT ELECTING TO SUBMIT ANY CLAIMS ARISING OUT
OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION,
VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH, OR TERMINATION THEREOF TO BINDING
ARBITRATION, CONSTITUTES A WAIVER OF OFFICER'S RIGHT TO A JURY TRIAL AND RELATES
TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE
EMPLOYER/EMPLOYEE RELATIONSHIP, INCLUDING BUT NOT LIMITED TO, THE FOLLOWING
CLAIMS:
i. ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE OF
EMPLOYMENT; BREACH OF CONTRACT, BOTH EXPRESS AND IMPLIED; BREACH OF THE COVENANT
OF GOOD FAITH AND FAIR DEALING, BOTH EXPRESS AND IMPLIED; NEGLIGENT OR
INTERNATIONAL INFLICTION OF EMOTIONAL DISTRESS; NEGLIGENT OR INTENTIONAL
MISREPRESENTATION; NEGLIGENT OR INTENTIONAL INTERFERENCE WITH CONTRACT OR
PROSPECTIVE ECONOMIC ADVANTAGE; AND DEFAMATION.
ii. ANY AND ALL CLAIMS FOR VIOLATION OF ANY FEDERAL
STATE OR MUNICIPAL STATUTE, INCLUDING, BUT NOT LIMITED TO, TITLE VII OF THE
CIVIL RIGHTS ACT OF 1964, THE CIVIL RIGHTS ACT OF 1991, THE AGE DISCRIMINATION
IN EMPLOYMENT ACT OF 1967, THE AMERICANS WITH DISABILITIES ACT OF 1990, THE FAIR
LABOR STANDARDS ACT, THE CALIFORNIA FAIR EMPLOYMENT AND HOUSING ACT, AND LABOR
CODE SECTION 201, et seq;
iii. ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER LAWS
AND REGULATIONS RELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION.
11. Miscellaneous Provisions.
(a) No Duty to Mitigate. The Officer shall not be required to
mitigate the amount of any payment contemplated by this Agreement, nor shall any
such payment be reduced by any earnings that the Officer may receive from any
other source.
(b) Waiver. No provision of this Agreement shall be modified,
waived, or discharged unless the modification, waiver, or discharge is agreed to
in writing and signed by the Officer and by
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an authorized officer of the Company (other than the Officer). No waiver by
either party of any breach of, or of compliance with, any condition or provision
of this Agreement by the other party shall be considered a waiver of any other
condition or provision or of the same condition or provision at another time.
(c) Whole Agreement. No agreements, representations, or
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof.
(d) Choice of Law. The validity, interpretation, construction
and performance of this Agreement shall be governed by the internal substantive
laws of the State of California, without regard to such State's conflicts of law
rules.
(e) Severability. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.
(f) No Assignment of Benefits. The rights of any person to
payments or benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by operation of
law, including (without limitation) bankruptcy, garnishment, attachment, or
other creditor's process, and any action in violation of this subsection(f)
shall be void.
(g) Employment Taxes. All payments made pursuant to this
Agreement will be subject to withholding of applicable income and employment
taxes.
(h) Assignment by Company. The Company may assign its rights and
obligations under this Agreement to an affiliate, and an affiliate may assign
its rights and obligations under this Agreement to another affiliate of the
Company or to the Company, provided, however, that no assignment shall be made
if the net worth of the assignee is less than the net worth of the Company at
the time of assignment. In the case of any such assignment, the term "Company"
when used in a Section of this Agreement shall mean the corporation that
actually employs the Officer.
(i) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together will constitute one and the same instrument.
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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the day and year
first above written.
COMPANY: OPTICAL MICRO-MACHINES INCORPORATED
By: /s/ Xxxx Xxxxxx
Title: Chairman of the Board_________________
OFFICER: By: /s/ Hus Tigli
Name: Hus Tigli
Address: 0000 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
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