Exhibit 10.36
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement (this "Agreement") is made as of
this 21st day of July, 2004 by and between Xxxx Xxxxx (the "Executive") and
Parlex Corporation (the "Company").
WHEREAS, the Executive is an employee of the Company and provides
personal services to the Company, and Company provides Executive with
certain compensation and benefits in return for such services;
WHEREAS, Executive and the Company have heretofore entered into the
Parlex Corporation Employee Agreement - Confidential Information and Trade
Secrets (the "Employee Agreement") providing for certain agreements between
the Executive and the Company regarding the Executive's employment with the
Company;
WHEREAS, the Company's Board of Directors (the "Board") has
determined that it is in the best interests of the Company and its
shareholders for the Company to agree to provide the Executive with
benefits under the circumstances described below; and
WHEREAS, the Company wishes to ensure the continued dedication of the
Executive to Company duties in the event of an actual or threatened Change
of Control (as defined below) of the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
1.
a. If beginning six (6) months and ending seven (7) months after
the Effective Date (as defined below) of the Change of Control,
the Executive shall elect to terminate his employment with the
Company for Good Reason (as defined below), the Executive shall
give the Company at least two weeks notice of such termination
(such date, the "Termination Date"). Following such
termination, the Executive shall continue to receive from the
Company the greater of his monthly base compensation (less
standard federal and state payroll tax deductions and
employment benefit deductions) at (i) the Effective Date or
(ii) the Termination Date, for a period of six (6) months from
the Termination Date. Such amounts shall be payable to the
Executive in semi-monthly installments, in accordance with the
regular payroll practices of the Company. Additionally, all
stock options granted to the Executive shall be immediately and
automatically accelerated and become fully vested and all
unexercised stock options shall be exercisable by the Executive
during the period ending ninety (90) days following the
Termination Date, but in no event later than the expiration
date of any stock option. For purposes of this Agreement,
"Good Reason" shall mean (i) failure of the Company to continue
the Executive in the position of General Manager or a
comparable position that he held immediately prior to the
Change of Control; or (ii) material and substantial diminution
in the nature or scope of the Executive's responsibilities,
duties or authority that he had immediately prior to the Change
of Control; however, any diminution of the business of the
Company, including without limitation the sale or transfer of
any or all of the assets of the Company, shall not constitute
"Good Reason"; or (iii) material reduction in the Executive's
base salary or benefits from that he had immediately prior to
the Change of Control; or (iv) the relocation of the
Executive's principal office, without his prior consent, to a
location more than thirty (30) miles from its location on the
day prior to the Change of Control.
b. If, within seven (7) months following the Effective Date (as
defined below) of a Change of Control or within sixty (60) days
prior to the Effective Date, the Company terminates the
Executive's employment without Cause (as defined below), the
Company shall pay to the Executive the greater of his monthly
base compensation (less standard federal and state payroll tax
deductions and employment benefit deductions) at (i) the
Effective Date or (ii) the Termination Date, for a period of
nine (9) months from the Termination Date; provided, however,
in the event that the Executive is terminated within sixty (60)
days prior to the Effective Date and prior to the Effective
Date the Executive has received any compensation in connection
with his termination, any amounts previously paid to the
Executive in connection with his termination will be credited
against any amounts owed pursuant to this clause (b). All
amounts owed pursuant to this clause (b) shall be payable to
the Executive in semi-monthly installments, in accordance with
the regular payroll practices of the Company, and such payments
shall begin after the Effective Date. Additionally, all stock
options granted to the Executive shall be immediately and
automatically accelerated and become fully vested and all
unexercised stock options shall be exercisable by the Executive
during the period ending ninety (90) days after the date of
termination by the Company, but in no event later than the
expiration date of any stock option.
c. Executive, together with his dependents, shall be entitled to
participate in Company's then existing medical insurance plan
(or whatever medical insurance plan the Company provides for
its full time employees) that he is enrolled in on the
Termination Date for the Executive and his family (with
Executive still obligated to make the required employee
contribution) for the duration of the payment period specified
in Section 1(a) or 1(b), as the case may be. The Company shall
pay the portion of the monthly insurance premium for said
health insurance benefits that it pays for its full time
employees. Executive acknowledges that the type of medical
insurance coverage provided by the Company and the amount of
the employee contribution obligation of its full-time employees
may change during the term of this Agreement and therefore,
Executive shall be obligated to pay at the same rate and shall
receive the same medical insurance as that being offered
Company's full-time employees. Upon expiration of the payment
period specified in Section 1(a) or 1(b), as the case may be,
Executive shall be entitled to participate in Company's then
existing medical insurance plan on a COBRA basis but the
Company shall not be obligated to
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make any employer contribution towards the Executive's medical
insurance premiums. Executive shall make the required employee
contribution to Company ten (10) days prior to the end of each
calendar month.
d. For purposes of this Agreement, a termination for "Cause" shall
mean that the Executive shall have breached or failed to
perform his obligations and job responsibilities in accordance
with the terms and conditions of this Agreement or his job
description, shall demonstrate negligence, inefficiency, gross
misconduct, dishonesty, or insubordination in the execution of
his duties as an employee of the Company, or upon conviction of
a felony or any crime involving moral turpitude.
e. For purposes of this Agreement, the "Effective Date" shall mean
the date upon which a Change of Control (as defined below)
occurs.
f. The term of this Agreement shall begin on July 21, 2004 ("Start
Date") and shall terminate on the first anniversary of the
Start Date if there has not been a Change of Control prior to
such time, unless such term is extended by the Company in its
sole and absolute discretion. If there has been a Change of
Control prior to the first anniversary of the Start Date, the
termination rights under clauses (a) and (b) of this Section 1
shall terminate seven (7) months after the Effective Date and
this Agreement shall terminate when no further payments are
required hereunder in accordance with the terms hereof, unless
such term is extended by the Company in its sole and absolute
discretion.
2. For purposes of this Agreement, a Change of Control will occur
if:
a. the Company shall reorganize, merge or consolidate with any
corporation and the Company shall not be the "surviving
corporation" (as defined below); or
b. the Company shall sell or exchange all or substantially all of
its assets to a corporation which is not a wholly owned
subsidiary of the Company; or
c. any "person", as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934 (the "Act") (other than
the Company or a subsidiary or any employee benefit plan
(including its trustee) of either the Company or a subsidiary)
becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Act), directly or indirectly of securities of the Company
representing 30 percent or more of the combined voting power of
the Company's then outstanding securities and the effect of
which (as determined by the Board of Directors) is to take over
control or participate in the affairs of the Company. For
purposes of this Section, the term "person" shall exclude all
persons who are then officers or directors of the Company, or
spouses, or spouses, blood relatives or stepchildren of such
officers or directors, and trusts for the benefit of any such
persons, and the estates of any such persons; or
d. during any period of two consecutive years, the individuals
who, at the beginning of such period, constituted the Board of
Directors of the Company cease, for any reason, to constitute
at least a majority thereof, unless the election or nomination
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for election of each new director was approved by the vote of a
least a majority of the directors then still in office who were
directors at the beginning of the period.
As used herein, the Company shall not be deemed to be the "surviving
corporation" following a reorganization, merger or consolidation if,
following such transaction, the persons who were the beneficial owners of
the Company's voting securities immediately prior to the transaction
beneficially own less than fifty percent (50%) of the aggregate voting
power represented by all outstanding securities of the Company or other
entity resulting from such reorganization, merger or consolidation
immediately after such transaction.
3. If the Company is at any time before or after a Change of
Control merged or consolidated into or with any other corporation or other
entity (whether or not the Company is the surviving entity), or if
substantially all of the assets thereof are transferred to another
corporation or other entity, the provisions of this Agreement will be
binding upon and inure to the benefit of the corporation or other entity
resulting from such merger or consolidation or the acquirer of such assets.
The Company must require that any entity with which it merges or
consolidates or to which it agrees to transfer a substantial portion of its
assets expressly assume the obligations of the Company under this Agreement
and that any successor or successors of such an entity, whether by merger,
consolidation or transfer of assets, also expressly assume such
obligations.
In the event of any merger, consolidation, or sale of assets
described above, nothing contained in this Agreement will detract from or
otherwise limit Executive's right to participate or privilege of
participation in any stock option or purchase plan or any bonus, profit
sharing, pension, group insurance, hospitalization, or other incentive or
benefit plan or arrangement which may be or become applicable to executives
of the corporation resulting from such merger or consolidation or the
corporation acquiring such assets of the Company.
In the event of any merger, consolidation or sale of assets described
above, references to the Company in this Agreement shall unless the context
suggests otherwise be deemed to include the entity resulting from such
merger or consolidation or the acquirer of such assets of the Company.
4. All payments required to be made by the Company hereunder to
Executive or his dependents, beneficiaries, or estate will be subject to
the withholding of such amounts relating to tax and/or other payroll
deductions as may be required by law.
5. There shall be no requirement on the part of the Executive to
seek other employment or otherwise mitigate damages in order to be entitled
to the full amount of any payments and benefits to which Executive is
entitled under this Agreement, and the amount of such payments and benefits
shall not be reduced by any compensation or benefits received by Executive
from other employment.
6. Prior to Executive gaining the right to receive, and in
exchange for, the severance compensation, benefits and option acceleration
provided in hereunder, to which Executive would not otherwise be entitled,
Executive shall abide by the terms of its Employee Agreement with the
Company and shall first enter into and execute a release substantially in
the form attached hereto
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as Exhibit A (the "Release") upon Executive's termination of employment.
Unless the terms of the Employee Agreement are complied with and the
Release is executed by Executive and delivered to the Company within
twenty-one (21) days after the termination of Executive's employment with
the Company, Executive shall not receive (or continue to receive, in the
case of a breach after the Effective Date) any severance benefits provided
under this Agreement, acceleration, if any, of Executive's options as
provided in this Agreement shall not apply and Executive's options in such
event may be exercised following the date of Executive's termination only
to the extent provided under their original terms in accordance with the
applicable stock option plan and option agreements.
7. Nothing contained in this Agreement shall be construed as a
contract of employment between the Company and the Executive, or as a right
of the Executive to continue in the employ of the Company, or as a
limitation of the right of the Company to discharge the Executive with or
without Cause.
8. No amendment, change, or modification of this Agreement may be
made except in writing, signed by both parties. Payments made by the
Company pursuant to this Agreement shall be in lieu of payments and other
benefits, if any, to which Executive may be entitled under any other
severance agreement or severance plan of the Company. The provisions of
this Agreement shall be binding upon and shall inure to the benefit of
Executive, his executors, administrators, legal representatives and
assigns, and the Company and its successors.
9. The validity, interpretation and effect of this Agreement shall
be governed by the internal laws of The Commonwealth of Massachusetts.
10. The Company shall have no right of set-off or counterclaims, in
respect of any claim, debt, or obligation, against any payments to
Executive, his dependents, beneficiaries or estate provided for in this
Agreement.
11. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
12. No right or interest to or in any payments or benefits
hereunder shall be assignable by the Executive; provided, however, that
this provision shall not preclude him from designating one or more
beneficiary to receive any amount that may be payable after his death and
shall not preclude the legal representatives of his estate from assigning
any right hereunder to the person or persons entitled thereto under his
will or, in the case of intestacy, to the person or persons entitled
thereto under the laws of intestacy applicable to his estate. The term
"beneficiaries" as used in this Agreement shall mean a beneficiary or
beneficiaries so designated to receive any such amount, or if no
beneficiary has been so designated, the legal representatives of the
Executive's estate.
13. No right, benefit, or interest hereunder, shall be subject to
anticipation, alienation, sale, assignment, encumbrance, charge, pledge,
hypothecation, or set-off in respect of any claim, debt, or obligation, or
to execution, attachment, levy or similar process, or assignment by
operation of law. Any attempt, voluntary or involuntary, to effect any
action specified in the
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immediately preceding sentence shall, to the full extent permitted by law,
be null, void and of no effect.
IN WITNESS WHEREOF, the parties hereto have each caused this
Agreement to be duly executed and delivered as of the date set forth above.
PARLEX CORPORATION
/s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx
President
EXECUTIVE
/s/ Xxxx Xxxxx
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Name: Xxxx Xxxxx
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