ADEZA BIOMEDICAL CORPORATION AMENDED AND RESTATED MANAGEMENT CONTINUITY AGREEMENT
Exhibit (e)(3)
ADEZA
BIOMEDICAL CORPORATION
AMENDED
AND RESTATED
MANAGEMENT CONTINUITY AGREEMENT
MANAGEMENT CONTINUITY AGREEMENT
This Amended and Restated Management Continuity Agreement (the
“Agreement”) is dated as of January 12,
2007, by and between Xxxxxx X. Xxxxxx
(“Employee”) and Adeza Biomedical Corporation.,
a Delaware corporation (the “Company” or
“Adeza”). This Agreement amends
sections 2(b)(i) — (iv) and
section 5(a) of the Management Continuity Agreement entered
into by and between Employee and the Company on October 21,
2004. This Agreement is intended to provide Employee with
certain benefits described herein upon the occurrence of
specific events.
RECITALS
A. It is expected that another company 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 of
Directors recognizes that such consideration can be a
distraction to Employee and can cause Employee to consider
alternative employment opportunities. The Board of Directors 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 Company’s Board of Directors believes it is in
the best interests of the Company and its stockholders to retain
Employee and provide incentives to Employee to continue in the
service of the Company.
C. The Board of Directors further believes that it is
imperative to provide Employee with certain benefits upon a
Change of Control and, under certain circumstances, upon
termination of Employee’s employment, which benefits are
intended to provide Employee with financial security and provide
sufficient income and encouragement to 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 Employee, to agree to the terms provided in this
Agreement.
Now therefore, in consideration of the mutual promises,
covenants and agreements contained herein, and in consideration
of the continuing employment of Employee by the Company, the
parties hereto agree as follows:
1. At-Will Employment. The
Company and Employee acknowledge that Employee’s employment
is and shall continue to be at-will, as defined under applicable
law, and that Employee’s employment with the Company may be
terminated by either party at any time for any or no reason. If
Employee’s employment terminates for any reason, Employee
shall not be entitled to any payments, benefits, award or
compensation other than as provided in this Agreement. The terms
of this Agreement shall terminate upon the earlier of
(i) the date on which Employee ceases to be employed as an
executive corporate officer of the Company, other than as a
result of an involuntary termination by the Company without
Cause (as defined below) or Employee’s resignation for Good
Reason (as defined below); or (ii) the date that all
obligations of the parties hereunder have been satisfied. 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. The rights and duties created by this
Section 1 may not be modified in any way except by a
written agreement executed by an officer of the Company upon
direction from the Board of Directors.
2. Benefits Upon a Change of Control; Termination of
Employment.
(a) Treatment of Stock Options and Other Equity
Awards Upon a Change of Control. In
the event of a Change of Control and regardless of whether
Employee’s employment with the Company is terminated in
connection with the Change in Control, the vesting of each stock
option and other equity award to purchase
the Company’s Common Stock granted to Employee over the
course of his employment with the Company and held by Employee
on the effective date of a Change of Control shall accelerate
such that 50% of the aggregate number of unvested option shares
and other equity awards shall become immediately vested
immediately prior to the effective date of the Change of
Control, with the vesting acceleration applied with respect to
each outstanding option or equity award in the order in which
the award was granted. Each such option and equity award shall
be exercisable in accordance with the provisions of the
agreement and plan pursuant to which such option or award was
granted.
(b) Termination Following a Change of
Control. In the event that
Employee’s employment is terminated as a result of an
involuntary termination other than for Cause or if Employee
resigns for Good Reason at any time within 12 months
following the effective date of a Change of Control, then
Employee will be entitled to receive severance benefits as
follows: (i) severance payments during the period from the
date of Employee’s termination until the date
18 months after the effective date of the termination (the
“Severance Period”) equal to the base salary
which Employee was receiving immediately prior to the Change of
Control, which payments shall be paid during the Severance
Period in accordance with the Company’s standard payroll
practices, (ii) a lump sum payment as soon as practicable
after the date of termination of employment equal to 150% of the
bonus payment made to Employee for the Company’s fiscal
year prior to the Company’s fiscal year in which the
termination occurs, (iii) a lump sum payment as soon as
practicable after the date of termination of employment equal to
a pro-rata portion of the bonus payment made to Employee for the
Company’s fiscal year prior to the Company’s fiscal
year in which the termination occurs based on the number of
completed months of Employee’s employment during such
fiscal year; (iv) continuation of the health insurance
benefits provided to Employee immediately prior to the Change of
Control at Company expense pursuant to the terms of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended (“COBRA”) or other applicable law through the
earlier of the end of the Severance Period or the date upon
which Employee is no longer eligible for such COBRA or other
benefits under applicable law; and (v) each stock option
and equity award to purchase the Company’s Common Stock
granted to Employee over the course of his employment with the
Company and held by Employee on the date of termination of
employment shall become immediately vested on such date as to
that number of shares that would have vested in accordance with
the terms of such option or equity award as of the date
12 months after the date of termination of employment
(assuming that Employee had remained an employee of the Company
for 12 months after the date of termination of employment).
Each such option and equity award shall be exercisable in
accordance with the provisions of the agreement and plan
pursuant to which such option or award was granted, provided
however that the vested shares underlying an equity award
granted on or after July 23, 2004, shall remain exercisable
for a period of eighteen (18) months following
Employee’s termination date (but not later than the
expiration date of the award as set forth in the applicable
award agreement). In addition, Employee will receive payment(s)
for all salary, bonuses and unpaid vacation accrued as of the
date of Employee’s termination of employment.
(c) Termination Not Following a Change of
Control. In the event that
Employee’s employment is terminated as a result of an
involuntary termination other than for Cause or if Employee
resigns for Good Reason at any time prior to or more than
12 months following the effective date of a Change of
Control, then Employee will be entitled to receive severance
benefits as follows: (i) severance payments during the
period from the date of Employee’s termination until the
date 6 months after the effective date of the termination
(the “Benefit Period”) equal to the base salary
which Employee was receiving immediately prior to the Change of
Control, which payments shall be paid during the Benefit Period
in accordance with the Company’s standard payroll
practices, (ii) a lump sum payment as soon as practicable
after the date of termination of employment equal to 25% of the
bonus paid to Employee for the Company’s fiscal year prior
to the Company’s fiscal year in which the termination
occurs, and (iii) continuation of the health insurance
benefits provided to Employee immediately prior to the Change of
Control at Company expense pursuant to COBRA or other applicable
law through the earlier of the end of the Benefit Period or the
date upon which Employee is no longer eligible for such COBRA or
other benefits under applicable law. In addition, Employee will
receive payment(s) for all salary, bonuses and unpaid vacation
accrued as of the date of Employee’s termination of
employment.
(d) Termination for
Cause. If Employee’s employment
is terminated for Cause at any time, then Employee shall not be
entitled to receive payment of any severance benefits. Employee
will receive payment(s) for all salary, bonuses and unpaid
vacation accrued as of the date of Employee’s termination
of employment and Employee’s
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benefits will be continued under the Company’s then
existing benefit plans and policies in accordance with such
plans and policies in effect on the date of termination and in
accordance with applicable law.
(e) Voluntary Resignation other than for Good
Reason. If Employee voluntarily
resigns from the Company for any reason other than Good Reason,
then Employee shall not be entitled to receive payment of any
severance benefits. Employee will receive payment(s) for all
salary, bonuses and unpaid vacation accrued as of the date of
Employee’s termination of employment and Employee’s
benefits will be continued under the terms of the Company’s
then existing benefit plans and policies in accordance with such
plans and policies in effect on the date of termination and in
accordance with applicable law.
3. 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 50% or more of the total voting power
represented by the Company’s then outstanding voting
securities without the approval of the Board;
(ii) Merger/Sale of
Assets. A merger or consolidation of
the Company whether or not approved by the Board, 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 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; or
(iii) Change in Board
Composition. A change in the
composition of the Board, 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
August 1, 2004 or (B) are elected, or nominated for
election, to the Board with the affirmative votes of at least a
majority of the Incumbent Directors at the time of such election
or nomination (but an Incumbent Director 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”
for termination of Employee’s employment will exist if
Employee is terminated by the Company, for any of the following
reasons, as determined in good faith by the Company:
(i) Employee’s gross negligence or willful failure
substantially to perform his duties and responsibilities to the
Company or deliberate violation of a Company policy;
(ii) Employee’s commission of any act of fraud,
embezzlement, dishonesty or any other willful misconduct that
has caused or is reasonably expected to result in material
injury to the Company; (iii) unauthorized use or disclosure
by Employee of any proprietary information or trade secrets of
the Company or any other party to whom the Employee owes an
obligation of nondisclosure as a result of his relationship with
the Company; or (iv) Employee’s willful breach of any
of his obligations under any written agreement or covenant with
the Company.
(c) Good
Reason. “Good Reason”
for Employee’s resignation of his employment will exist if
Employee tenders his resignation to the Company with
30 days prior written notice to the Company within
120 days of the occurrence of any of the following events:
(i) a material reduction in the Employee’s job
responsibilities, as of immediately prior to the Change of
Control for purposes of Section 2(b) above and as of
immediately prior to the termination date for purposes of
Section 2(c) above; (ii) relocation by the Company of
the Employee’s work site which has the effect of increasing
Employee’s then-current commute by more than 50 miles;
(iii) any reduction in Employee’s then-current base
salary
and/or
target bonus (other than in connection with a general decrease
in the base salaries and target bonus for all other executives
of the Company); (iv) a material reduction in
Employee’s benefits (other than a general decrease in the
benefit
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programs offered to all other executives of the Company); or
(v) the Company’s failure to obtain agreement from any
acquiror or successor to assume the Company’s obligations
under this Agreement.
4. Parachute Payments. In
the event that the severance and other benefits provided for in
this Agreement to Employee (the “Benefit”),
determined without regard to any additional payment required
under this section 4, would (i) constitute
“parachute payments” within the meaning of
Section 280G of the Internal Revenue Code of 1986, as
amended (the “Code”), and (ii) be subject to the
excise tax imposed by Section 4999 of the Code or any
interest or penalties payable with respect to such excise tax
(such excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the “Excise
Tax”), then Employee shall be entitled to receive from
the Company an additional payment (the “Gross-Up
Payment”) in an amount sufficient to reimburse Employee
for both (A) such Excise Tax, and (B) the income,
excise, employment and any other taxes imposed on the Gross Up
Payment provided under this Section 4. The accounting firm
engaged by the Company for general audit purposes as of the day
prior to the effective date of the Change of Control shall
perform the foregoing calculations. The Company shall bear all
expenses with respect to the determinations by such accounting
firm required to be made hereunder. The accounting firm engaged
to make the determinations hereunder shall provide its
calculations, together with detailed supporting documentation,
to the Company and to Employee within fifteen (15) calendar
days after the date on which Employee’s right to the
Benefit is triggered (if requested at that time by the Company
or by Employee) or such other time as requested by the Company
or by Employee. If the accounting firm determines that no Excise
Tax is payable with respect to the Benefit, it shall furnish the
Company and Employee with an opinion reasonably acceptable to
Employee that no Excise Tax will be imposed with respect to such
Benefit. Any good faith determinations of the accounting firm
made hereunder shall be final, binding and conclusive upon the
Company and Employee.
5. Limitations and Conditions on Benefits
(a) Income and Employment
Taxes. Employees agrees that he shall
be responsible for any applicable taxes of any nature (including
any penalties or interest that may apply to such taxes) that the
Company reasonably determines apply to any payment made
hereunder, that his receipt of any benefit hereunder is
conditioned on his satisfaction of any applicable withholding or
similar obligations that apply to such benefit, and that any
cash payment owed hereunder will be reduced to satisfy any such
withholding or similar obligations that may apply.
Notwithstanding any provision of this Agreement to the contrary,
if, at the time of Employee’s termination of employment, he
is a “specified employee” as defined in Code
Section 409A, and one or more of the payments or benefits
received or to be received by Employee pursuant to this
Agreement would constitute deferred compensation subject to Code
Section 409A, no such payment or benefit will be provided
under the Agreement until the earliest of (A) the date
which is six (6) months after Employee’s
“separation from service” for any reason, other than
death or “disability” (as such terms are used in
Section 409A(a)(2) of the Code), (B) the date of
Employee’s death or “disability” (as such term is
used in Section 409A(a)(2)(C) of the Code), or (C) the
effective date of a “change in the ownership or effective
control” or a “change in ownership of a substantial
portion of the assets” of the Company (as such terms are
used in Section 409A(a)(2)(A)(v) of the Code). The
provisions of this Section 5(a) shall only apply to the
extent required to avoid Employee’s incurrence of any
penalty tax or interest under Code Section 409A or any
regulations or Treasury guidance promulgated thereunder. In
addition, if any provision of the Agreement would cause Employee
to incur any penalty tax or interest under Code
Section 409A or any regulations or Treasury guidance
promulgated thereunder, the Company may reform such provision to
maintain to the maximum extent practicable in accordance with
the original intent of the applicable provision without
violating the provisions of Code Section 409A, including
without limitation to limit payment or distribution of any
amount of benefit hereunder in connection with a change of
control to a transaction meeting the definitions referred to in
clause (C) above, or in connection with a disability
as referred to in (B) above.
(b) Release Prior to Receipt of
Benefits. Prior to the receipt of any
benefits under this Agreement, Employee shall execute a release
of claims agreement (the “Release”) in the form
provided by the Company. Such Release shall specifically relate
to all of Employee’s rights and claims in existence at the
time of such execution and shall confirm Employee’s
obligations under the Company’s standard form of
proprietary information agreement.
6. Conflicts. Employee
represents that his performance of all the terms of this
Agreement will not breach any other agreement to which Employee
is a party. Employee has not, and will not during the term of
this
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Agreement, enter into any oral or written agreement in conflict
with any of the provisions of this Agreement. Employee further
represents that he is entering into or has entered into an
employment relationship with the Company of his own free will
and that he has not been solicited as an employee in any way by
the Company.
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
Employee’s rights hereunder and thereunder shall inure to
the benefit of, and be enforceable by, 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 Employee shall be addressed to Employee at the
home address which 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. 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 shall any such payment be reduced by any
earnings that 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 Employee and by an authorized officer of the
Company (other than 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 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. Employee
and the Company agree to attempt to settle any disputes arising
in connection with this Agreement through good faith
consultation. In the event that Employee and the Company are not
able to resolve any such disputes within fifteen (15) days
after notification in writing to the other, Employee and the
Company agree that any dispute or claim arising out of or in
connection with this Agreement will be finally settled by
binding arbitration in Santa Xxxxx County, California in
accordance with the rules of the American Arbitration
Association by one arbitrator mutually agreed upon by the
parties. The arbitrator will apply California law, without
reference to rules of conflicts of law or rules of statutory
arbitration, to the resolution of any dispute. Except as set
forth in Subparagraph (e) above, the arbitrator shall
not have authority to modify the terms of this Agreement. The
Company shall pay the costs of the arbitration proceeding. Each
party shall, unless otherwise determined by the
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arbitrator, bear its or his own attorneys’ fees and
expenses, provided however that if Employee prevails in an
arbitration proceeding, the Company shall reimburse Employee for
his reasonable attorneys’ fees and costs. Judgment on the
award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. Notwithstanding the foregoing, the
Company and Employee may apply to any court of competent
jurisdiction for preliminary or interim equitable relief, or to
compel arbitration in accordance with this paragraph, without
breach of this arbitration provision.
(g) Legal Fees and
Expenses. The parties shall each bear
their own expenses, legal fees and other fees incurred in
connection with the execution of 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 Section 10(h) shall be void.
(i) 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. 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.
(j) 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.
The parties have executed this Agreement on the date first
written above.
ADEZA BIOMEDICAL CORPORATION.
| By: |
/s/ Xxxxx
X. Xxxxxxxx
|
| Title: | President and CEO |
| Address: | 0000 Xxxx Xxxxx |
Xxxxxxxxx, Xxxxxxxxxx 00000
XXXXXX X. XXXXXX
| Signature: |
/s/ Xxxxxx
X. Xxxxxx
|
| Address: |
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