Exhibit 10.1
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement (the "Agreement") is made and entered into
effective as of November 3, 2000, by and between Xxxx X. Xxxxxxxx (the
"Employee") and KeraVision, Inc., a Delaware corporation (the "Company").
RECITALS
A. It is expected that another company or other entity may from time to
time consider the possibility of acquiring the Company or that a change in
control may otherwise occur, with or without the approval of the Company's Board
of Directors (the "Board"). The Board recognizes that such consideration can be
a distraction to the Employee, a corporate officer of the Company, and can cause
the Employee to consider alternative employment opportunities. The Board has
determined that it is in the best interests of the Company and its stockholders
to assure that the Company will have the continued dedication and objectivity of
the Employee, notwithstanding the possibility, threat or occurrence of a Change
of Control (as defined below) of the Company.
B. The Board believes that it is in the best interests of the Company and
its stockholders to provide the Employee with an incentive to continue his or
her employment with the Company.
C. The Board believes that it is imperative to provide the Employee with
certain benefits upon a Change of Control and, under certain circumstances, upon
termination of the Employee's employment in connection with a Change of Control,
which benefits are intended to provide the Employee with financial security and
provide sufficient income and encouragement to the Employee to remain with the
Company notwithstanding the possibility of a Change of Control.
D. To accomplish the foregoing objectives, the Board of Directors has
directed the Company, upon execution of this Agreement by the Employee, to agree
to the terms provided in this Agreement.
E. Certain capitalized terms used in the Agreement are defined in Section
4 below.
In consideration of the mutual covenants contained in this Agreement, and
in consideration of the continuing employment of Employee by the Company, the
parties agree as follows:
1. At-Will Employment. The Company and the Employee acknowledge that the
Employee's employment is and shall continue to be at-will, as defined under
applicable law. If
the Employee's employment terminates for any reason, including (without
limitation) any termination prior to a Change of Control, the Employee shall not
be entitled to any payments or benefits, other than as provided by this
Agreement, or as may otherwise be available in accordance with the terms of
Employee's Employment Agreement with the Company dated as of July 19, 1999 (the
"Employment Agreement") the Company's established employee plans and written
policies at the time of termination. The terms of this Agreement shall terminate
upon the earlier of (i) the date on which Employee ceases to be employed as a
corporate officer of the Company, other than as a result of an involuntary
termination by the Company without Cause (ii) the date that all obligations of
the parties hereunder have been satisfied, or (iii) two (2) years after a Change
of Control. A termination of the terms of this Agreement pursuant to the
preceding sentence shall be effective for all purposes, except that such
termination shall not affect the payment or provision of compensation or
benefits on account of a termination of employment occurring prior to the
termination of the terms of this Agreement.
2. Stock Options/Restricted Stock. Subject to Sections 5 and 6 below, in
the event of a Change of Control and regardless whether the Employee's
employment with the Company is terminated in connection with the Change of
Control, each stock option and each share of restricted stock then held by, or
issued to, the Employee shall become fully vested and immediately exercisable,
as applicable, on the effective date of the transaction and each such stock
option shall be exercisable to the extent so vested in accordance with the
provisions of the Option Agreement and Plan pursuant to which such stock option
was granted.
3. Change of Control.
(a) Termination Following A Change of Control. Subject to Section 5 and 6
below, if the Employee's employment with the Company is terminated at any time
within two (2) years after a Change of Control, then the Employee shall be
entitled to receive severance benefits as follows:
(i) Voluntary Resignation. If the Employee voluntarily resigns from
the Company (other than as an Involuntary Termination (as defined below) or if
the Company terminates the Employee's employment for Cause (as defined below)),
then the Employee shall not be entitled to receive severance payments. The
Employee's benefits will be terminated under the terms of the Employee Agreement
and the Company's then existing benefit plans and policies in accordance with
such plans and policies in effect on the date of termination or as otherwise
determined by the Board of Directors of the Company.
(ii) Involuntary Termination. If the Employee's employment is
terminated as a result of an Involuntary Termination other than for Cause, the
Employee shall be entitled to receive the following benefits: (i) severance
payments during the period from the date of the Employee's termination until the
date 18 months after the effective date of the termination (the "Severance
Period") equal to the salary which the Employee was receiving at the time of
such termination, which payments shall be paid during the Severance Period in
accordance with the Company's standard payroll practices; (ii) monthly severance
payments during the Severance Period equal to 1/12th of the Employee's "target
bonus" (as defined below) for the fiscal year in which the termination occurs
(or for the prior fiscal year if a target bonus has not yet been determined for
the fiscal year in which the termination occurs); (iii) continuation of all
health
and life insurance benefits through the end of the Severance Period
substantially identical to those to which the Employee was entitled immediately
prior to the termination, or to those being offered to officers of the Company,
or a successor corporation, if the Company's benefit programs are changed during
the Severance Period; and (iv) outplacement services with a total value not to
exceed $20,000. For purposes of this Agreement, the term "target bonus" shall
mean the Employee's base salary in effect on the termination date multiplied by
that percentage of such base salary that is prescribed by the Company under its
Executive Bonus Program as the percentage of such base salary payable to the
Employee as a bonus if the Company pays bonuses at one-hundred percent (100%) of
its operating plan.
(iii) Involuntary Termination for Cause. If the Employee's employment
is terminated for Cause, then the Employee shall not be entitled to receive
severance payments. The Employee's benefits will be terminated under the
Company's then existing benefit plans and policies in accordance with such plans
and policies in effect on the date of termination.
(b) Termination Apart from A Change of Control. In the event the Employee's
employment terminates for any reason, either prior to the occurrence of a Change
of Control or after the two year period following the effective date of a Change
of Control, then the Employee shall not be entitled to receive any severance
payments under this Agreement. The Employee's benefits will be terminated under
the terms of the Employment Agreement and the Company's then existing benefit
plans and policies in accordance with such plans and policies in effect on the
date of termination or as otherwise determined by the Board of Directors of the
Company, to the extent that the Board of Directors provides for greater
benefits.
4. Definition of Terms. The following terms referred to in this Agreement
shall have the following meanings:
(a) Change of Control. "Change of Control" shall mean the occurrence of any
of the following events:
(i) Ownership. Any "Person" (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the
"Beneficial Owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing twenty percent (20%) or
more of the total voting power represented by the Company's then outstanding
voting securities without the approval of the Board of Directors of the Company;
or
(ii) Merger/Sale of Assets. A merger or consolidation of the Company
whether or not approved by the Board of Directors of the Company, other than a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the stockholders
of the Company
approve a plan of complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all of the Company's
assets.
(iii) Change in Board Composition. A change in the composition of the
Board of Directors of the Company, as a result of which fewer than a majority of
the directors are Incumbent Directors. "Incumbent Directors" shall mean
directors who either (A) are directors of the Company as of May 6, 1997 or (B)
are elected, or nominated for election, to the Board of Directors of the Company
with the affirmative votes of at least a majority of the Incumbent Directors at
the time of such election or nomination (but shall not include an individual
whose election or nomination is in connection with an actual or threatened proxy
contest relating to the election of directors to the Company).
(b) Cause. "Cause" shall mean (i) gross negligence or willful misconduct in
the performance of the Employee's duties to the Company where such gross
negligence or willful misconduct has resulted or is likely to result in
substantial and material damage to the Company or its subsidiaries, (ii)
repeated unexplained or unjustified absence from the Company, (iii) a material
and willful violation of any federal or state law; (iv) commission of any act of
fraud with respect to the Company; or (v) conviction of a felony or a crime
involving moral turpitude causing material harm to the standing and reputation
of the Company, in each case as determined in good faith by the Board of
Directors of the Company.
(c) Involuntary Termination. "Involuntary Termination" shall include any
termination by the Company other than for Cause and the Employee's voluntary
termination, upon 30 days prior written notice to the Company, following (i) a
material reduction or change in job duties, responsibilities and requirements
inconsistent with the Employee's position with the Company and the Employee's
prior duties, responsibilities and requirements; (ii) any reduction of the
Employee's base compensation (other than in connection with a general decrease
in base salaries for most similarly situated employees of the successor
corporation); or (iii) the Employee's refusal to relocate to a location more
than 50 miles from the Company's current location.
5. Limitation on Payments. In the event that the severance and other
benefits provided for in this Agreement to the Employee (i) constitute
"parachute payments" within the meaning of Section 280G of the Internal Revenue
Code of 1986, as amended (the "Code") and (ii) but for this Section, would be
subject to the excise tax imposed by Section 4999 of the Code, then the
Employee's benefits under Sections 2 and 3(a)(ii) shall be payable either:
(a) in full, or
(b) as to such lesser amount which would result in no portion of such
severance benefits 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 Employee on an after-tax basis, of the greatest amount of
benefits under Sections 2 and 3(a)(ii), notwithstanding that all or some
portion of such benefits may be taxable under Section 4999 of the Code. Unless
the Company and the Employee 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 Employee 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 Section 280G and 4999 of the Code. The Company and the Employee
shall furnish to the Accountants such information and documents as the
Accountants may reasonably request in order to make a determination under this
Section. The Company shall bear all costs the Accountants may reasonably incur
in connection with any calculations contemplated by this Section 5.
6. Certain Business Combinations. In the event it is determined by the
Board, upon consultation with Company management and the Company's independent
auditors, that the enforcement of any Section of this Agreement, including, but
not limited to, Section 2 hereof, which allows for the acceleration of vesting
of stock options upon the effective date of a Change of Control, would preclude
accounting for any proposed business combination of the Company involving a
Change of Control as a pooling of interests, and the Board otherwise desires to
approve such a proposed business transaction which requires as a condition to
the closing of such transaction that it be accounted for as a pooling of
interests, then any such Section of this Agreement shall be null and void. For
purposes of this Section 6, the Board's determination shall require the
unanimous approval of the non-employee Board members.
7. 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 obligations under this Agreement and agree expressly to perform the
obligations under this 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. The terms of this Agreement and all of the Employee's rights
hereunder shall inure to the benefit of, and be enforceable by, the Employee's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
8. Notice. 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. Mailed notices to the Employee shall be
addressed to the Employee at the home address which the Employee 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.
9. Miscellaneous Provisions.
(a) No Duty to Mitigate. The Employee shall not be required to mitigate the
amount of any payment contemplated by this Agreement (whether by seeking new
employment or in any
other manner), nor, except as otherwise provided in this Agreement, shall any
such payment be reduced by any earnings that the Employee 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 Employee and by an authorized officer of the Company (other
than the Employee). 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. This Agreement supersedes any agreement of
the same title and concerning similar subject matter dated prior to the date of
this Agreement, and by execution of this Agreement both parties agree that any
such predecessor agreement shall be deemed null and void.
(d) Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California without reference to conflict of laws provisions.
(e) Severability. If any term or provision of this Agreement or the
application thereof to any circumstance shall, in any jurisdiction and to any
extent, be invalid or unenforceable, such term or provision shall be ineffective
as to such jurisdiction to the extent of such invalidity or unenforceability
without invalidating or rendering unenforceable the remaining terms and
provisions of this Agreement or the application of such terms and provisions to
circumstances other than those as to which it is held invalid or unenforceable,
and a suitable and equitable term or provision shall be substituted therefor to
carry out, insofar as may be valid and enforceable, the intent and purpose of
the invalid or unenforceable term or provision.
(f) Arbitration. Any dispute or controversy arising under or in connection
with this Agreement may be settled at the option of either party by binding
arbitration in the County of Contra Costa, California, in accordance with the
rules of the American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court having jurisdiction. Punitive
damages shall not be awarded.
(g) Legal Fees and Expenses. The parties shall each bear their own
expenses, legal fees and other fees incurred in connection with this Agreement.
(h) 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 (h) shall be void.
(i) Employment Taxes. All payments made pursuant to this Agreement will be
subject to withholding of applicable income and employment taxes.
(j) Assignment by Company. The Company may assign its rights under this
Agreement to an affiliate, and an affiliate may assign its rights 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 Employee.
(k) 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.
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.
KERAVISION, INC. XXXX X. XXXXXXXX
BY: /s/ Xxxxxx X. Xxxxxx /s/ Xxxx X. Xxxxxxxx
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TITLE: Chairman & CEO
