EXHIBIT 10.6
xXxxxxxxxxx.xxx, Inc.
CHANGE IN CONTROL
and
EXECUTIVE RETENTION AGREEMENT
September 28, 1999
Xxxxxx X. Xxxxxxxx
0000 Xxx Xxx Xxxxxxxx
Xxx Xxxxxxxx, Xxxxxxxxxx 00000
Dear Xx. Xxxxxxxx:
xXxxxxxxxxx.xxx, Inc., for itself, its successors and assigns
(collectively, the "Company") considers it essential to the best interests of
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its shareholders to xxxxxx the continued employment of key management personnel.
As is the case with many publicly-held corporations, the Board of Directors of
the Company (the "Board") recognizes that the possibility of a change in control
of the Company may exist. This possibility raises a great deal of uncertainty
and questions among management, and could lead to the departure or distraction
of management personnel to the detriment of the Company and its stockholders.
The Board has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Company's
senior management, including you, to their assigned duties without distraction
in the face of potentially disturbing circumstances arising from the possibility
of a change in control of the Company.
In order to induce you to remain in the employ of the Company so that you
may continue to exercise your special skills and knowledge on behalf of the
Company, and to assist the Board of Directors in the event a change in control
transaction is considered, the Company agrees that you shall receive the
severance benefits set forth in this letter agreement ("Agreement") in the event
your employment with the Company is terminated within the meaning of this
Agreement following a change in control of the Company (as "Change in Control"
is defined below) during the term or any extended term of this Agreement
This Agreement is not intended to alter materially the compensation and
benefits that you could reasonably expect in the absence of a Change in Control
of the Company and, accordingly, this Agreement, though taking effect upon
execution hereof, will be operative only upon a Change in Control of the
Company, in which event, it will supercede any then existing or operative
employment agreements.
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1. Term of Agreement. This Agreement shall commence on the date hereof
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and shall continue in effect through December 31, 2001; provided, however,
that (i) commencing on January 1, 2002 and each January 1 thereafter, the
term of this Agreement shall automatically be extended for one additional
year unless, not later than September 30 of the preceding year, the Company
shall have given notice to you that it does not wish to extend this
Agreement; (ii) if a "Change in Control" of the Company occurs during the
original or extended term of this Agreement, this Agreement shall continue
in effect for a period of thirty-six (36) months beyond the month in which
such Change in Control occurs; and (iii) the Company shall have no right to
give notice that it does not wish to extend this Agreement during any
period while a tender offer for the purchase of a substantial portion of
the Company's common shares is outstanding or a proxy contest for the
election of directors to the Board is in progress or the Company is
conducting discussions or taking any other action which is reasonably
likely to lead to a Change in Control, and no purported notice by the
Company that it does not wish to extend this Agreement shall become
effective if a Change in Control actually occurs during the period of 180
days following the delivery of such notice to you.
2. Change in Control. No benefits shall be payable hereunder unless
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there shall have been a Change in Control of the Company as set forth
below. For purposes of this Agreement a Change in Control of the Company
shall mean a change in control of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), whether or not the Company is then subject to such
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reporting requirement; 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 Section 13(d) and 14(d) of the Exchange Act), other than a
trustee or other fiduciary holding securities under an employee benefit
plan of the Company, is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities
of the Company representing thirty-five percent (35%) or more of the
combined voting power of the Company's then outstanding voting securities;
(ii) there is a merger or consolidation of the Company in which the Company
does not survive as an independent public company; (iii) the business or
businesses of the Company for which your services are principally performed
are disposed of by the Company pursuant to a partial or complete
liquidation of the Company, a sale of assets (including stock of a
subsidiary) of the Company, or otherwise; or (iv) during any period of two
(2) consecutive years during the term of this Agreement, individuals who,
at the beginning of such period constitute the Board, cease for any reason
to constitute at least a majority thereof, unless the election of each
director who was not a director at the beginning of such period has been
approved in advance by directors representing at least two-thirds of the
directors then in office who were directors at the beginning of the period.
No transaction which effects a mere reincorporation of the Company, or a
transaction which reorganizes the Company, shall be considered a "Change in
Control" for purposes of this Agreement.
3. Termination After Change In Control. If any of the events described in
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Section 2 hereof constituting a Change in Control have occurred, you shall
be entitled to the benefits provided in Section 4 hereof upon the
termination of your employment during the term of this
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Agreement, unless such termination is because of (a) your death or
disability or (b) by you other than for Good Reason.
3.1. Disability. If, as a result of your incapacity due to physical
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or mental illness, you shall have been absent from the full-time
performance of your duties with the Company for six (6) consecutive
months, and within thirty (30) days after written notice of
termination is given you shall not have returned to the full-time
performance of your duties, your employment may be terminated for
"Disability." Termination by the Company or you of your employment
based on "Retirement" shall mean termination in accordance with the
Company's retirement policy at normal retirement age generally
applicable to its salaried employees or in accordance with any
retirement arrangement established with your consent with respect to
you.
3.2. Cause. Termination by the Company of your employment for
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"Cause" shall mean termination upon (A) the willful and continued
failure by you to substantially perform your duties with the Company
(other than any such failure resulting from your incapacity due to
physical or mental illness or any such actual or anticipated failure
after the issuance of a Notice of Termination, as defined in
Subsection 3.4, by you for Good Reason) after a written demand for
substantial performance is delivered to you by the Board, which demand
specifically identifies the manner in which the Board believes that
you have not substantially performed your duties, or (B) the willful
engaging by you in conduct which is demonstrably and materially
injurious to the Company, monetarily or otherwise. For purposes of
this subsection, no act, or failure to act, on your part shall be
deemed "willful" unless done, or omitted to be done, by you not in
good faith and without reasonable belief that your action or omission
was in the best interest of the Company. Notwithstanding the
foregoing, you shall not be deemed to have been terminated for Cause
unless and until there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than
three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board called and held for such purpose (after
reasonable notice to you and an opportunity for you, together with
your counsel, to be heard before the Board), finding that in the good
faith opinion of the Board you were guilty of conduct set forth above
in clauses (A) or (B) of the first sentence of this Subsection and
specifying the particulars thereof in detail.
3.3. Good Reason. You shall be entitled to terminate your employment
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for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean, without your express written consent, any of the following:
3.3.1. a substantial adverse alteration in the nature or
status of your responsibilities from those in effect immediately
prior to a Change in Control;
3.3.2. the transfer of your responsibilities to an office or
location more than 25 miles more distant from your place of
residence immediately prior to a Change in Control, or the
Company requiring you to be based anywhere other than the
metropolitan area in which you are based prior to a Change in
Control, except for
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required travel on the Company's business to an extent
substantially consistent with your business travel obligations
prior to the Change in Control;
3.3.3. a reduction by the Company in your annual base salary, bonus
computation, as in effect on the date hereof or as the same may
be increased from time to time;
3.3.4. the failure by the Company, without your consent, to pay to
you any portion of your current compensation, or to pay to you
any portion of an installment of deferred compensation under any
deferred compensation program of the Company within seven (7)
days of the date such compensation is due;
3.3.5. the failure by the Company to continue in effect any
compensation plan in which you participate, unless an equitable
and substantially equivalent arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to
such plan, or the failure by the Company to continue your
participation therein on a basis not materially less favorable,
both in terms of the amount of benefits provided and the level of
your participation relative to other participants, as existed at
the time of the Change in Control;
3.3.6. the failure by the Company to continue to provide you with
benefits substantially similar to those enjoyed by you under any
of the Company's pension, retirement, savings, deferred
compensation, auto allowance, life insurance, medical, health and
accident, or disability plans (whether or not qualified under the
Internal Revenue Code) in which you were participating at the
time of a Change in Control, the taking of any action by the
Company which would directly or indirectly materially reduce any
of such benefits or deprive you of any material fringe benefit
enjoyed by you at the time of the Change in Control, or the
failure by the Company to provide you with the number of paid
vacation days to which you are entitled on the basis of years of
service with the Company in accordance with the Company's normal
vacation policy in effect at the time of the Change in Control;
3.3.7. the failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to perform this
Agreement, as contemplated in Section 5 --hereof, or
3.3.8. any purported termination of your employment which is not
effected pursuant to a Notice of Termination satisfying the
requirements of Subsection 3.4 below (and, if applicable, the
requirements of Subsection 3.2 above); for purposes of this
Agreement, no such purported termination shall be effective.
Your right to terminate your employment pursuant to this Subsection
3.3 shall not be affected by your incapacity due to physical or mental illness.
Your continued employment shall not constitute consent to, or a waiver of rights
with respect to, any circumstance constituting Good Reason hereunder.
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3.4. Notice of Termination. Any purported termination of your
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employment by the Company or by you shall be communicated by written
Notice of Termination to the other party hereto in accordance with
Section 6 hereof for purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the provision
so indicated.
3.5. Date of Termination. "Date of Termination" shall mean (A) if
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your employment is terminated for Disability, thirty (30) days after
Notice of Termination is given (provided that you shall not have
returned to the full-time performance of your duties during such
thirty (30) day period), and (B) if your employment is terminated
pursuant to Subsection 3.2 or 3.4 above or for any reason other than
Disability, the date specified in the Notice of Termination (which, in
the case of a termination pursuant to Subsection (ii) above shall not
be less than thirty (30) days, and in the case of a termination
pursuant to Subsection (iii) above shall not be less than thirty (30)
nor more than sixty (60) days, respectively, from the date such Notice
of Termination is given); provided that if within thirty (30) days
after any Notice of Termination is given the party receiving such
Notice of Termination notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the date
on which the dispute is finally determined, either by mutual written
agreement of the parties, by a binding arbitration award, or by a
final judgment, order or decree of a court of competent jurisdiction
(which is not appealable or the time for appeal therefrom having
expired and no appeal having been perfected); provided further that
the Date of Termination shall be extended by a notice of dispute only
if such notice is given in good faith and the party giving such notice
pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, the Company will
continue to pay you your full compensation in effect when the notice
giving rise to the dispute was given (including, but not limited to,
base salary) and continue you as a participant in all compensation,
pension, benefit and insurance plans in which you were participating
when the notice giving rise to the dispute was given, until the
dispute is finally resolved in accordance with this Subsection.
Amounts paid under this Subsection are in addition to all other
amounts due under this Agreement and shall not be offset against or
reduce any other amounts due under this Agreement.
4. Compensation Following Termination. Following a Change in Control, as
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defined by Section 2, upon termination of your employment or during a
period of disability you shall be entitled to the following benefits:
4.1. During any period that you fail to perform your full-time duties
with the Company as a result of incapacity due to physical or mental
illness, you shall continue to receive your base salary at the rate in
effect at the commencement of any such period, together with all
compensation payable to you under the Company's short-term and long-
Xx. Xxxxxx X. Xxxxxxxx
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term disability insurance program or other plan during such period,
until this Agreement is terminated pursuant to Section 3 hereof.
Thereafter, your benefits shall be determined in accordance with the
Company's insurance and retirement programs then in effect.
4.2. If your employment shall be terminated by the Company for cause
or by you other than for Good Reason, Disability, Death or Retirement,
the Company shall pay you your full base salary through the Date of
Termination at the rate in effect at the time Notice of Termination is
given, plus all other amounts to which you are entitled under any
compensation plan of the Company at the time such payments are due,
and the Company shall have no further obligations to you under this
Agreement.
4.3. If your employment shall be terminated by the Company or by you
for Retirement, or by reason of your Death, your benefits shall be
determined in accordance with the Company's retirement and insurance
programs then in effect.
4.4. If your employment shall be terminated (a) by the Company other
than for Cause, Retirement or Disability or (b) by you for Good
Reason, then you shall be entitled to the benefits provided below:
4.4.1. The Company shall pay you your full base salary through your
Date of Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you are
entitled under any compensation plan of the Company, at the time
such payments are due except as otherwise provided below;
4.4.2. In lieu of any further salary payments to you for periods
subsequent to your Date of Termination, the Company shall pay as
severance pay to you a lump sum severance payment (the "Severance
Payment") equal to two (2) times the sum of (x) your annual base
salary in effect immediately prior to the occurrence of the
circumstance giving rise to the Notice of Termination given in
respect thereof, and (y) the amount of any bonus paid to you
during the 12 calendar months preceding the occurrence of the
circumstance which provided the reason for the Notice of
Termination given in respect thereof or, if no bonus was paid the
prior fiscal year because you were hired within the previous
sixteen months, an amount equal to your stated bonus opportunity
for the current fiscal year. In addition, the Company shall pay
your current auto allowance for a 36-month period.
4.4.3. Effective upon your Date of Termination you shall become
vested with all unvested benefits which you have then accrued
under any stock option, retirement or deferred compensation plan,
program or agreement of the Company in which you participate,
payable subject to the same actuarial and interest factors
applicable and in accordance with the options available and
selected by you under such plans or programs.
4.4.4. For a thirty-six (36) month period after such termination,
the Company shall arrange to provide you and any of your
dependents with life, disability,
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accident and health insurance benefits substantially similar to
those which you and any of your dependents were receiving from
the Company immediately prior to the Notice of Termination
(however, you must make the required "employee contribution
payments," if any, to the Company on a monthly basis in the same
amount as before the Date of Termination or, in the case of
termination for Good Reason under paragraph 3.3 of this
Agreement, immediately prior to the reduction of benefits.
4.4.5. The Company shall also pay to you all legal fees and
expenses incurred by you as a result of such termination
(including all such fees and expenses, if any, incurred in
contesting or disputing any such termination or in seeking to
obtain or enforce any right or benefit provided by this
Agreement), except to the extent that the payment of such fees
and expenses would constitute, or would cause any other portion
of the Total Payments to constitute, an Excess Parachute Payment
as defined below.
4.4.6. Reduction For Excess Parachute Payments. In the event that
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any payment or benefit received or to be received by you in
connection with a Change in Control or the termination of your
employment following a Change in Control (whether pursuant to the
terms of this Agreement or any other plan, arrangement or
agreement with the Company, with any person whose actions result
in a Change in Control or any person affiliated with the Company
or such person (collectively with the Severance Payment, "Total
Payments") would constitute (in whole or in part) an Excess
Parachute Payment, the Severance Payment shall be reduced until
no portion of the Total Payments shall constitute an Excess
Parachute Payment.
4.4.6.1. Within six (6) days following delivery of written
notice by the Company to you of the Company's belief that
there is a payment due or benefit due which will result in
an excess parachute payment as defined in Section 280G of
the Code or any successor provision, the Company and you, at
the Company's expense, shall obtain the opinion of legal
counsel and certified public accountants, as the Company and
you may mutually agree upon, which opinions need not be
unqualified, which sets forth (i) the amount of your Base
Period Income, as defined in Section 280G of the Code, (ii)
the present value of Total Payments, and (iii) the amount
and present value of any excess parachute payments.
4.4.6.2. In the event such opinions determine that there
would be an excess parachute payment, the Termination
Payment hereunder or any other payment determined by such
counsel to be includable in Total Payments shall be reduced
or eliminated in the following order: (i) by the amount of
any options to purchase shares of the Company's capital
stock which have had their vesting rights accelerated
hereunder, and then (ii) by the amount of any cash received
hereunder, so that under the bases of calculation set forth
in such opinions there will be no excess parachute payment.
Xx. Xxxxxx X. Xxxxxxxx
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4.4.6.3. The provisions of this Section, including the
calculations, notices, and opinions provided for herein
shall be based upon the conclusive presumption that (X) the
compensation and benefits provided herein and (Y) any other
compensation, including but not limited to any accrued
benefits, earned by you prior to the Change in Control of
the Company pursuant to the Company's compensation programs
if such payments would have been made in the future in any
event, even though the timing of such payment is triggered
by the Change in Control of the Company, is reasonable,
provided, however, that in the event such legal counsel so
requests in connection with the Section 280G opinion
required by this Section, the Company and you shall obtain,
at the Company's expense, and the legal counsel may rely on
in providing the opinion, the advice of a firm of recognized
executive compensation consultants as to the reasonableness
of any item of compensation to be received by you.
4.4.6.4. For purposes of this limitation (i) no portion of
the Total Payments, the receipt or enjoyment of which you
shall have effectively waived in writing prior to the date
of payment of the Severance Payment shall be taken into
account; and (ii) no portion of the Total Payments shall be
taken into account which in the opinion of the tax counsel
selected by the Company and acceptable to you does not
constitute a "parachute payment" within the meaning of
section 28OG(b)(2) of the Code
4.4.6.5. In the event that the provisions of Sections 280G
and 4999 of the Code or any successor provision are repealed
without succession this Section shall be of no further force
or effect.
4.4.7. The payment provided for in Section 4.4.2 above shall
be made not later than the fifth day following the Date of
Termination; provided, however, that if the amount of such
payments, and the limitation on such payments set forth in
Section 4.4.6 above, cannot be finally determined on or before
such day, the Company shall pay to you on such day an estimate,
as determined in good faith by the Company, of the minimum amount
of such payments and shall pay the remainder of such payments
(together with interest at the rate provided in Section
1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined but in no event not later than the thirtieth day after
the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to
have been due, such excess shall constitute a loan by the Company
to you, payable on the fifth day after demand by the Company
(together with interest at the rate provided in Section 1274 (b)
(2)(B) of the Code).
4.4.8. The Company shall, if requested by you within six (6)
months following the Date of Termination, pay for senior
executive outplacement services.
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4.5. You shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for
in this Section 4 be reduced by any compensation earned by you as the
result of employment by another employer, by retirement benefits, by
offset against any amount claimed to be owing by you to the Company or
otherwise.
5. Successors; Binding Agreement.
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5.1. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
assume expressly and agree in writing to perform this Agreement.
Failure of the Company to obtain such assumption and agreement prior
to the effectiveness of any such succession shall be a breach of this
Agreement and shall require the Company to pay to you compensation
from the Company in the same amount and on the same terms as you would
be entitled hereunder following a Change in Control of the Company
coupled with a Termination, except that for purposes of implementing
the foregoing, the date on which any such succession becomes effective
shall be deemed the date on which you shall receive such compensation
from the Company. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
5.2. This Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisee and legatees. If you should
die while any amount would still be payable to you hereunder if you
had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement
to your devises, legatee or other designee or, if there is no such
designee to your estate.
6. Notice. For purposes of this Agreement, notices and all other
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communications provided for in this Agreement shall be in writing and shall
be deemed to have been duly given when delivered or mailed by United States
Registered mail, return receipt requested, postage prepaid, addressed to
the respective addresses set forth on the first page of this Agreement,
provided that all notices to the Company shall be directed to the attention
of the Board with a copy to the Secretary of the Company, or to such other
address as either party may have furnished to the other in writing in
accordance herewith, except that notice of a change of address shall be
effective only upon receipt.
7. Miscellaneous. No provision of this Agreement may be modified,
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waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by you and such officer as may be
specifically designated by the Board. No waiver by either party hereto at
any time of any breach by the other party hereto of, or compliance with,
any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior
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or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been
made by either party which are not expressly set forth in this Agreement.
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of California.
8. Validity. The invalidity or unenforceability of any provision of this
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Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in several
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counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
10. Entire Agreement. This Agreement constitutes the entire agreement of
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the Parties with respect to the subject matter hereof and supersedes any
prior or contemporaneous agreements or understandings relating to the
subject matter hereof.
11. Headings. The headings of the Articles and Paragraphs of this
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Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof.
12. Severability. The provisions of this Agreement are severable. The
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invalidity, in whole or in part, of any provision of this Agreement shall
not affect the validity or enforceability of any other of its provisions.
If one or more provisions hereof shall be so declared invalid or
unenforceable, the remaining provisions shall remain in full force and
effect and shall be construed in the broadest possible manner to effectuate
the purposes hereof. The parties further agree to replace such void or
unenforceable provisions with provisions which will achieve, to the extent
possible, the economic, business and other purposes of the void or
unenforceable provisions.
13. Attorneys' Fees. In the event any party to this Agreement initiates
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any action, suit, motion, application, arbitration or other proceeding
which concerns the interpretation or enforcement of this Agreement, the
prevailing party in such action, suit, motion, application, arbitration or
other proceeding, or judgment creditor, shall be entitled to recover its
costs and attorneys' fees from the nonprevailing party or judgment debtor,
including costs and fees on appeal, if any.
14. Arbitration. Any dispute or controversy arising under or in connection
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with this Agreement shall be settled exclusively by arbitration in Orange
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County, California in accordance with the rules of the American Arbitration
Association then in effect, Discovery shall be allowed and shall be
governed under the discovery rules of the California Code of Civil
Procedure.
14.1. Judgment may be entered on the arbitrator's award in any court
having jurisdiction; provided, however, that you shall be entitled to
seek specific performance
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of your right to be paid until the Date of Termination during the
pendency of any dispute or controversy arising under or in connection
with this Agreement.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter which
will then constitute our agreement on this subject.
Sincerely,
xXxxxxxxxxx.xxx
a Nevada Corporation
By:_______________________________________
Its:_________________________________
AGREED TO THIS ________
day of _______________, 1999
_________________________________
(Signature)
_________________________________
(Print Name)
Approved by the Board of Directors of xXxxxxxxxxx.xxx on _______________, 1999.
