eyeonics, inc. CHANGE OF CONTROL SEVERANCE AGREEMENT
EXHIBIT 10.8
eyeonics, inc.
This Change of Control Severance Agreement (the “Agreement”) is entered into between eyeonics,
inc. (the “Company,” which term shall include any successor by merger, consolidation, sale of
substantially all of the Company’s assets or otherwise) and Xxxxxxx X. Xxxxx (“Executive”)
effective as of the 13th day of July, 2007, or the inception of Executive’s employment with the
Company, whichever is later (“Effective Date”).
RECITALS
1. 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 Executive and can cause
Executive 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 Executive, notwithstanding the possibility, threat or
occurrence of a Change of Control (as defined herein) of the Company.
2. The Board believes that it is in the best interests of the Company and its stockholders to
provide Executive with an incentive to continue Executive’s employment and to motivate Executive to
maximize the value of the Company upon a Change of Control for the benefit of its stockholders.
3. The Board believes that it is imperative to provide Executive with certain benefits upon a
Change of Control and certain severance benefits upon Executive’s termination of employment in
connection with a Change of Control. These benefits will provide Executive with enhanced financial
security and incentive and encouragement to remain with the Company notwithstanding the possibility
of a Change of Control.
4. Certain capitalized terms used in the Agreement are defined in Section 10 below.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto
agree as follows:
1. Term of Agreement. This Agreement will terminate upon the date that all of the
obligations of the parties hereto with respect to this Agreement have been satisfied.
2. At-Will Employment. The Company and Executive acknowledge that Executive’s
employment is and will continue to be at-will, as defined under applicable law.
3. Benefits.
(a) Benefits Upon a Change of Control. Upon a Change of Control, the Executive will
receive the following benefits:
(i) Immediately prior to and subject to the consummation of the Change of Control: (A) one
hundred percent (100%) of the Executive’s then outstanding and unvested stock options will vest,
become immediately exercisable and remain exercisable for the period prescribed in the applicable
stock option agreement and (B) one hundred percent (100%) of the Executive’s then outstanding and
unvested other awards, if any, relating to the Company’s equity (whether stock appreciation
rights, shares of restricted stock, restricted stock units, or otherwise) will vest and become
exercisable, payable or realizable, as the case may be, in accordance with their terms.
(b) Severance Benefits. If, during the period following the commencement of efforts
to sell the Company and prior to a Change of Control or twelve (12) months following or otherwise
in connection with a Change of Control, the Company terminates Executive’s employment without
Cause, or if Executive terminates Executive’s employment for Good Reason, the Company will, subject
to Sections 4, 5 and 13 of this Agreement, provide severance benefits to Executive as set forth
below in this Section 3(b). In the event of termination by Executive for Good Reason, the twelve
(12) month period referred to above will be extended, if necessary, by the notice and cure periods
described in Section 12(c).
(i) The Company will pay to Executive within ten (10) days after the termination a lump-sum
cash amount equal to one hundred percent (100%) of the sum of (a) Executive’s then current annual
base salary in effect immediately prior to the termination (or, if Executive’s base salary has been
reduced within sixty (60) days prior to the termination or at any time after the Change of Control,
Executive’s base salary in effect prior to the reduction), plus (b) the Executive’s target bonus
for the current year or for the year immediately prior to the Change of Control whichever is
higher. The foregoing payments are in addition to and not in lieu of salary for the current year
that has been earned but not yet paid and the target bonus for the current year, which will be
equitably prorated and paid together with the foregoing severance benefits.
(ii) The Company will continue to provide Executive, for a period of one (1) year from the
date of termination or until Executive commences new employment providing substantially similar
benefits, whichever is earlier (the “Severance Benefit Period”), with any medical, dental,
disability, life insurance and automobile reimbursement benefits and other perquisites in effect at
the time of termination (or, if the level of benefits has been reduced within sixty (60) days prior
to the termination, the level of benefits prior to the reduction). To the extent the Company is
unable to provide such benefits to Executive under its existing plans and arrangements it will
reimburse Executive for the costs of substantially similar benefits upon comparable terms.
Following the Severance Benefit Period, the Company shall permit Executive to elect to continue the
medical and dental benefits under COBRA, which election shall be made at the time of termination
and paid by the Company for the Severance Benefit Period as provided herein (subject to Executive’s
continued eligibility for such benefits under COBRA).
(iii) The Company will make reasonable and customary outplacement services available to
Executive for the Severance Benefit Period.
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(iv) To the extent not otherwise provided for under the Company’s stock plans, the vesting of
all awards relating to the Company’s common stock other than stock options (whether stock
appreciation rights, shares of restricted stock, restricted stock units, or otherwise
(collectively, the “Equity Awards”)) shall be subject to the terms and conditions of the applicable
Equity Award agreement entered into between the Executive and the Company.
4. Release of Claims Agreement. The receipt of any severance or other benefits
pursuant to Section 3 will be subject to Executive signing and not revoking a release of claims
agreement in such form as reasonably required by the Company at the time of any termination of
employment.
5. Excise Taxes. In the event that it is determined that any payment or benefit
provided by the Company to or for the benefit of Executive, either under this Agreement or
otherwise, will be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
or any successor provision (“Section 4999”), the Company will, prior to the date on which any
amount of the excise tax must be paid or withheld, make an additional lump-sum payment (the
“gross-up payment”) to Executive. The gross-up payment will be sufficient, after giving effect to
all federal, state and other taxes and charges with respect to the gross-up payment, to make
Executive whole for all taxes (including withholding taxes) imposed under Section 4999.
Determinations under this Section 5 will be made by the Company’s then current firm of
independent auditors (the “Firm”). The determinations of the Firm will be binding upon the Company
and the Executive except as the determinations are established in resolution (including by
settlement) of a controversy with the Internal Revenue Service to have been incorrect. All fees
and expenses of the Firm will be paid by the Company.
If the Internal Revenue Service asserts a claim that, if successful, would require the Company
to make a gross-up payment or additional gross-up payment, the Company and Executive will cooperate
fully in resolving the controversy with the Internal Revenue Service. The Company will make or
advance such gross-up payments as are necessary to prevent Executive from having to bear the cost
of payments made to the Internal Revenue Service in the course of, or as a result of, the
controversy. The Firm will determine the amount of such gross-up payments or advances and will
determine after resolution of the controversy whether any advances must be returned by Executive to
the Company. The Company will bear all expenses of the controversy and will gross Executive up for
any additional taxes that may be imposed upon Executive as a result of payment of such expenses.
6. Withholding. All payments required to be made by Company to Executive under this
Agreement will be subject to the withholding of such amounts, if any, relating to tax and other
payroll deductions as may be required by law.
7. Arbitration. Any dispute or controversy between the parties involving the
construction or application of any terms, covenants or conditions of this Agreement, or any claim
arising out of or relating to this Agreement, or any claim arising out of or relating to
Executive’s employment by the Company that is not resolved within ten (10) days by the parties will
be settled by arbitration in the City of Irvine, California, in accordance with the rules of the
American Arbitration Association then in effect, and judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof. The Company and Executive
agree that arbitrator(s) will have no authority to award punitive or exemplary damages or so-called
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consequential or remote damages such as damages for emotional distress. Any decision of the
arbitrator(s) will be final and binding upon the parties. Either party may request that the
arbitrator(s) submit written findings of fact and conclusions of law. The parties agree and
understand that they hereby waive their rights to a jury trial of any dispute or controversy
relating to the matters specified above in this Section 7. The Company will pay the cost of any
such arbitration.
8. No Duty to Mitigate. Benefits payable under Section 3 of this Agreement will
neither be governed by any duty to mitigate damages by seeking further employment nor offset by any
compensation that may be received from other employment.
9. Rights of Survivors. If Executive dies after becoming entitled to benefits under
Section 3 but before all such benefits have been provided, (a) all unpaid cash amounts will be paid
to the beneficiary that has been designated by Executive in writing (the “beneficiary”), or if
none, to Executive’s estate, (b) all applicable insurance coverage will be provided to Executive’s
family as though Executive had continued to live, and (c) any stock options that become exercisable
will be exercisable by the beneficiary, or if none, the Executive’s estate.
10. Successors. This Agreement will inure to and be binding upon the Company’s
successors. The Company will require any successor to all or substantially all of the business and
assets of the Company by sale, merger or consolidation (where the Company is not the surviving
corporation), lease or otherwise, by agreement in form and substance satisfactory to Executive, to
assume this Agreement expressly. This Agreement is not otherwise assignable by the Company or by
the Executive.
11. Subsidiaries. For purposes of this Agreement, employment by a corporation or other
entity that is controlled directly or indirectly by the Company will be deemed to be employment by
the Company. Thus, references in the Agreement to “Company” include such corporations or other
entities where appropriate in the context.
12. Definitions.
(a) “Cause” for purposes of this Agreement, will mean: (i) Executive’s willful and continued
failure to perform the duties and responsibilities of Executive’s position after there has been
delivered to Executive a written demand for performance from the Board which describes the basis
for the Board’s belief that Executive has not substantially performed Executive’s duties and
provides Executive with thirty (30) days to take corrective action; (ii) any act of personal
dishonesty taken by Executive in connection with Executive’s responsibilities as an employee of the
Company with the intention or reasonable expectation that such action may result in the substantial
personal enrichment of Executive; (iii) Executive’s conviction of, or plea of nolo contendere to, a
felony that the Board reasonably believes has had or will have a material detrimental effect on the
Company’s reputation or business; (iv) a breach of any fiduciary duty owed to the Company by
Executive that has a material detrimental effect on the Company’s reputation or business; (v)
Executive being found liable in any Securities and Exchange Commission or other civil or criminal
securities law action or entering any cease and desist order with respect to such action
(regardless of whether or not Executive admits or denies liability); or (vi) Executive (A)
obstructing or impeding; (B) endeavoring to influence, obstruct or impede, or (C) failing to
materially cooperate with, any investigation authorized by the Board or any governmental or
self-regulatory entity (an “Investigation”). However, Executive’s failure to waive attorney-client
privilege relating to communications with Executive’s own attorney in connection with an
Investigation will not constitute “Cause”.
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(b) “Change of Control” for purposes of this Agreement is defined in Exhibit A.
(c) “Good Reason” for purposes of this Agreement means, Executive’s resignation within thirty
(30) days following the expiration of any Company cure period (discussed below) following the
occurrence, without the Executive’s written consent, after a Change of Control of one or more of
the following: (i) a material reduction in Executive’s annual base salary or annual bonus
opportunity (except for a reduction in a similar percent or amount applicable to all other
similarly situated employees of the Company); and (ii) a material breach of any material provision
of this Agreement; or (iv) the relocation of Executive to a facility or location that is more than
fifty (50) miles from Executive’s then current principal place of employment. Notwithstanding the
foregoing, Executive will not resign for Good Reason without first providing the Company with
written notice within sixty (60) days of the event that Executive believes constitutes “Good
Reason” specifically identifying the acts or omissions constituting the grounds for Good
Reason and a reasonable cure period of not less than thirty (30) days following the date of such
notice.
13. Code Section 409A. Notwithstanding anything to the contrary in this
Agreement, if the Company reasonably determines, after consultation and agreement with Executive
(and Executive’s legal counsel as applicable) that Section 409A of the Code will result in the
imposition of interest and additional tax, Executive shall not be paid any compensation or benefits
hereunder upon a separation from service (within the meaning of Section 409A(a)(2)(A)(i) of the
Code and the regulations promulgated thereunder) until the date which is 6 months after the date of
such separation from service (or, if earlier, the date of death of the Executive). Such severance
or other benefits otherwise due to Executive on or within the six (6) month period following
Executive’s termination of employment will accrue during such six (6) month period and will become
payable in a lump sum payment on the date six (6) months and one (1) day following the date of
Executive’s termination. All subsequent payments, if any, will be payable as provided in this
Agreement. It is the intent of this Agreement to comply with the requirements of Section 409A of
the Code so that none of the severance payments and benefits to be provided hereunder will be
subject to the additional tax imposed under Section 409A of the Code, and any ambiguities herein
will be interpreted to so comply.
14. Amendment or Modification; Waiver. This Agreement may not be amended unless
agreed to in writing by Executive and the Company. No waiver by either party of any breach of this
Agreement will be deemed a waiver of a subsequent breach.
15. Severability. In the event that any provision of this Agreement is determined to
be invalid or unenforceable, the remaining provisions shall remain in full force and effect to the
fullest extent permitted by law.
16. Controlling Law. This Agreement will be controlled and interpreted pursuant to
California law.
17. Notices. Any notices required or permitted to be sent under this Agreement are to
be delivered by hand or mailed by registered or certified mail, return receipt requested, and
addressed as follows:
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If to the Company:
eyeonics, inc.
00000 Xxxxx Xxxxx Xxxxxxx, Xxxxx 000
Xxxxx Xxxxx, XX 00000
00000 Xxxxx Xxxxx Xxxxxxx, Xxxxx 000
Xxxxx Xxxxx, XX 00000
If to Executive:
00000 Xxxxxxxxxxx
Xxxxxxx Xxxxx, XX 00000
Xxxxxxx Xxxxx, XX 00000
Either party may change its address for receiving notices by giving to the other party.
18. Conflict. In the event of a conflict between this Agreement and the provisions of
any other compensation or benefit arrangement between the Company and Executive, this Agreement
shall prevail.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first set
forth above.
| EXECUTIVE |
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| /s/ Xxxxxxx X. Xxxxx | ||||
| Xxxxxxx X. Xxxxx | ||||
| eyeonics, inc. |
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| /s/ J. Xxxx Xxxxxx | ||||
| By: J. Xxxx Xxxxxx Title: Chief Executive Officer |
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Exhibit “A”
“Change of Control” means the occurrence of any one or more of the following events following
the completion of the sale of the Common Stock of the Company to the public pursuant to a
registration statement filed with the Securities and Exchange Commission:
(1) Any Person becomes the owner of more than 50% of the Company’s Common Stock; or
(2) If during any 12-month period, individuals who, as of the Effective Date, constitute the
Board of Directors of the Company (the “Continuing Directors”) cease for any reason to constitute
at least a majority of such Board; provided, however, that any individual becoming
a director after the Effective Date whose election or nomination for election by the Company’s
shareholders, was approved by a vote of at least a majority of the Continuing Directors will be
considered as though such individual were a Continuing Director, but excluding for this purpose any
such individual whose initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Securities Exchange Act of 1934 (the “Exchange Act”) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the Board.
(3) A reorganization, merger, consolidation or similar transaction that will result in the
transfer of ownership of more than 50% of the Company’s outstanding Common Stock or that will
result in the issuance of new shares of Company Common Stock in an amount equal to more than 50% of
the amount of Common Stock outstanding immediately prior to such issuance; or
(4) Liquidation or dissolution of the Company or sale of substantially all of the Company’s
assets.
In addition, for purposes of this definition, the following terms have the meanings set forth
below:
“Common Stock” means the then outstanding Common Stock of the Company plus, for purposes of
determining the stock ownership of any Person, the number of shares of Common Stock which such
Person has the right to acquire (whether such right is exercisable immediately or only after the
passage of time) upon the exercise of conversion rights, exchange rights, warrants or options or
otherwise. Notwithstanding the foregoing, the term Common Stock does not include shares of
preferred stock or convertible debt or options or warrants to acquire shares of common Stock
(including any shares of Common Stock issued or issuable upon the conversion or exercise thereof)
to the extent that the Board expressly so determines in any future transaction. A Person will be
deemed to be the “owner” of any Common Stock of which such Person would be the “beneficial owner”
as such term is defined in rule 13d-3 promulgated under the Exchange Act.
“Person” means an individual, a corporation, a limited liability company, an association, a
partnership, an estate, a trust or any other entity or organization, other than the Company or any
of its Affiliates.
Exhibit A-1
