EXHIBIT 10.35
MANAGEMENT CONTINUITY AGREEMENT
THIS AGREEMENT, made this seventh day of September, 1998, between Xxxx
X. Xxxxx ("Executive") and Topform, Inc., a Delaware corporation (the
"Company").
WITNESSETH:
WHEREAS, the Company desires to assure itself of continuity of
management in the event of any actual or threatened change in the control of
the Company, and
WHEREAS, the Company believes it is important that Executive be able to
assess and advise the Company of whether supporting a change in control would
be in the best interests of the Company and its shareholders without being
influenced by the uncertain effect of such a change upon Executive's role
within the Company, and
WHEREAS, Executive has been employed by the Company and its predecessors
since December of 1995 and the Company wishes to demonstrate to Executive the
Company's concern for his welfare;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto agree as follows:
ARTICLE I. OPERATION OF AGREEMENT.
1.1. This Agreement will be binding immediately upon the execution by the
parties hereto, but will operate as an employment contract only during the
"Term of Employment" as described below.
1.2. The "Term of Employment" is the period beginning on the date of a
"Change of Control" and ending on the earliest or:
(a) Executive's 70th birthday;
(b) Executive's death;
(c) the date on which the Agreement terminates in accordance with
paragraph 1.4 below; and
(d) the date on which all rights and obligations of the parties hereto
have been satisfied in accordance with the terms of this Agreement.
Neither the expiration of the Term or Employment nor the termination of
this Agreement will relieve the Company of the obligations to provide
Executive, in accordance with the terms hereof, the payments, benefits and
coverage to which he has become entitled under this Agreement.
1.3. "Change of Control" means a change of control of the Company of a
nature that would be required to be reported in responses to item 6(e) of
Schedule 14A (or in response to any similar item on any similar schedule or
form) promulgated under the Securities Exchange Act of 1934 (the "Act"),
whether or not the Company is then subject to such reporting requirement;
provided, however, that, without limitation, such a Change of Control shall
be deemed to have occurred if:
(a) any person or group (as such terms are used in connection with
Sections 13(d) and 14(d) of the Act) is or becomes the "beneficial owner" (as
defined in Rule 13d and 13d-5 under the Act), directly or indirectly, of
securities of the Company representing 20% or more of the combined voting
power of the Company's then outstanding securities; or
(b) The Company is a party to a merger, consolidation, sale of assets
or other reorganization, or
a proxy contest, as a consequence of which members of the Board of Directors
in office immediatley prior to such transaction or even constitute less than
a majority of the Board or Directors thereafter; or
(c) during any period of twenty-four consecutive months, individuals
who at the beginning of such period constituted the Board of Directors
(including for this purpose any new director whose election or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of such period) cease for any reason to constitute at least a
majority of the Board of Directors.
Notwithstanding the foregoing provisions of this paragraph 1.3, a
"Change of Control" will not be deemed to have occurred solely because of the
acquisition of securities of the Company (or any reporting requirement under
the Act relating thereto) by an employee benefit plan maintained by the
Company for its employees.
1.4. Either the Company or Executive may, by giving 60 days' written notice
to the other party, terminate the Agreement as of the third, or any
subsequent, anniversary of the Change of Control.
ARTICLE II. EMPLOYMENT
2.1. The Company agrees to employ Executive throughout the Term of Employment
as President of the Company without reducing Executive's authority or status
and without imposing on Executive travel requirements or other duties
substantially more onerous than those to which he was subject immediately
prior to the Change of Control. The Company agrees to provide Executive with
an office and executive secretarial support similar to those provided
immediately before change of Control and further agrees that Executive's
situs of employment will be in San Diego, California, or at the Executive's
option, such other location in the vicinity to which The Company's executive
headquarters may be moved.
2.2. Executive agrees, subject to paragraph 4.4 below, to remain in the
Company's employ during the Term of Employment, as described in paragraph 2.1.
Excluding periods of vacation and sick leave, Executive agrees to devote
reasonable attention and time during normal business hours to the business
and affairs of the Company to the extent necessary to discharge
responsibilities assigned to Executive hereunder and to use reasonable
efforts to perform such responsibilities faithfully and efficiently. No
greater time, attention or effort to discharge responsibilities shall be
rquired of Executive than was required prior to the Change of Control.
Executive may:
(a) serve on corporate, civic and charitable boards or committees,
(b) deliver lectures, fulfill speaking engagements and teach at
educational institutions and
(c) manage personal investments
(d) manage such other ventures or businesses of any type similar to
those managed prior to the "Change in Control".
so long as such activities do not significantly interfere with the
performance of Executive's responsibilities. To the extent that any such
activities have been conducted by Executive prior to the Change of Control,
such prior conduct, and any subsequent conduct similar in nature and scope,
shall not be deemed to interfere with the performance of Executive's
responsibilities.
2.3. For purposes of this Agreement, employment by a subsidiary of the
Company will be deemed to be employment by the Company, and the Company may
cause its obligations hereunder to be discharged through such a subsidiary,
provided that the Company will remain liable for the discharge of all such
obligations and that the rights, benefits, authority and status of the
Executive are in no way diminished thereby. A subsidiary is any corporation
more than 50% of the voting stock of which is owned by the Company or another
subsidiary of the Company.
ARTICLE III. COMPENSATION
3.1. The Company will pay as compensation to Executive for his services as an
employee during the Term of Employment:
(a) base annual salary at a rate equal to the highest rate that
Executive would have reasonably expected to receive without a
Change of Control, but in no case less than the rate of base salary
in effect for Executive immediately prior to the Change of Control;
plus
(b) an annual bonus equal to the average bonus (as a percentage of base
salary) paid to the Executive for the three full fiscal years of
the Company immediately preceding the Change of Control,
3.2. In addition, for his services as an employee during the term of
Employment, Executive will:
(a) participate fully in the Company's stock option plan (and/or any
successor plan);
(b) participate fully in all pension, profit sharing and similar
benefit plans of the Company;
(c) participate fully, together with his dependents and beneficiaries
in all life insurance plans, accident and health plans and other
welfare plans, maintained or sponsored by the Company immediately
prior to the Change of Control, or receive substantially equivalant
coverage (or the full value thereof in cash) from the Company;
(d) participate fully in additional benefit plans offered by the
Company to executives before or after the Change of Control; and
(e) receive fringe benefits (which shall not include any benefit
referred to elsewhere in this Article III) substantially equivalent
to those provided to Executive immediately prior to the Change of
Control as well as reimbursement, upon proper accounting of
reasonable expenses and disbursements incurred by Executive in the
course of his duties.
3.3. Amounts payable under this Article III for services rendered by
Executive during his employment constitute reasonable compensation for such
services. If any such amount (or, if by reason of such amount, any other
amount in the nature of compensation payable to Executive) is determined to
be subject to the excise tax imposed by Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code"), or any successor provision, the
Company will pay to Executive in cash an additional amount necessary to cause
the total payments (including the additional payment required by this
paragraph 3.3) and benefits received by him under this Article III (net of
all federal and state taxes, including all taxes payable under Section 4999
of the Code) to be equal to the total payments and benefits Executive would
have received under this Article III (net of all federal, state and local
taxes) if Section 4999 of the Code had not applied. This paragraph 3.3 does
not apply to amounts payable under Article 4.
ARTICLE IV. TERMINATION OF EMPLOYMENT
4.1. In the event Executive's employment is terminated by the Company during
the Term of Employment for any reason other than "Cause" (as defined in
paragraph 4.5 below) the Company will pay Executive:
(a) a lump sum cash payment, payable within ninety (90) days of his
termination, equal to 300% of the sum of:
(i) Executive's highest annual base salary in effect at any time
prior to his termination, or the rate that would be in effect
during the unexpired term of any agreement that existed prior
to a Change of Control, which ever is greater, plus
(ii) the highest aggregate amount included by the Company on his
Form W-2 and/or 1099 for fringe benefits (limited in accordance
with paragraph 3.2(e) above) provided in any of the three
calendar years prior to his termination, plus
(iii) his highest bonus for any of the three full fiscal years of
the Company immediately proceding his termination, plus
(b) a lump sum cash payment, payable within ninety (90) days of his
termination equal to 300% of the employer contribution made for his
benefit under the Company's employee benefit plans for the last
fiscal year of the Company ending prior to the Change of Control.
4.2. In the event of termination described in paragraph 4.3 above, Executive,
together with his dependents and beneficiaries, will continue following his
termination to participate fully in accordance with paragraph 3.2(c) above in
all life insurance plans, accident and health plans and other welfare plans,
maintained or sponsored by the Company immediately prior to the Change of
Control, or receive substantially equivalent coverage (or the fill value
thereof in cash) from the Company, until the later of
(a) the end of Executive's Term of Employment, or
(b) the third anniversary of his termination.
The period of time between such a termination and the next following
anniversary of the Change of Control will be counted as service with the
Company for purposes of any benefit plan of the Company in which Executive is
participating at the time of the termination.
4.3. In the event of a termination described in paragraph 4.1 above,
Executive will become immediately entitled to exercise any and all stock
options previously granted to him by the Company notwithstanding any
provision to the contrary of the option or any plan under which it was
granted.
4.4. (a) Upon the occurrence of any breach by the Company of this Agreement
within the meaning of paragraph 4.4(b), below, Executive may give the Company
written notice of his intention to resign effective the 30th day following
the date of such notice. If the Company does not fully remedy such breach
within 15 days of the date of such notice, Executive's resignation will
become effective on such 30th day. If Executive resigns in accordance with
this paragraph during the Term of Employment, his employment will be deemed
to have been terminated by the Company for, reasons other than Cause (and he
will be deemed to have offered to continue to provide services to the
Company) and he will be entitled to all the payments and rights and benefits
described in paragraphs 4.1, 4.2 and 4.3; provided that such payments and
rights and benefits will in no event be less than they would have been had
such termination taken place on the date that the Company first breached this
Agreement.
(b) The following events are breaches by the Company of this Agreement
within the meaning of this paragraph 4.4(b):
(i) any reduction of, or failure to pay Executive's salary or
bonus as described in paragraph 3.1 above;
(ii) any failure to provide the benefits required by paragraph
3.2 above or to make any payment which might be due in
accordance with paragraph 3.3 above;
(iii) assignment to Executive of any duties inconsistent in any
respect with his position (including status, offices and
titles), authority, duties or responsibilities as
contemplated by paragraph 2.1 above or any other action by
the Company which results in a diminution of such position,
authority, duties or responsibilities;
(iv) failure after a Change of Control to comply with and satisfy
paragraph 8.1 or 8.2 below;
(v) relation of the Company's principal executive offices, or
any event that causes Executive to have his principal place of
work changed, to any location outside the area;
(vi) any requirement by the Company that Executive travel away
from his office in the course of his duties significantly
more than the number of consecutive days or aggregate days
in any calendar year than was required of him prior to the
Change of Control; and
(vii) without limiting the generality or effect of the foregoing,
any other material breach of this Agreement by the Company
or any successor thereto or transferee of substantially all
the assets thereof.
4.5. If Executive is dismissed by the Company for Cause, he will not be
entitled to payments, benefits or acceleration of exercisability of options
provided under paragraphs 4.1, 4.2 or 4.3 above. "Cause" means only the
willful commission by Executive of theft, embezzlement or other serious and
substantial crimes against the Company. For purposes of this definition, no
act or omission shall be considered to have been "willful" unless it was not
in good faith and Executive had knowledge at the time that the act or
omission was not in the best interest of the Company.
4.6. If Executive's employment is alleged to the terminated for Cause or if
Executive's right to resign under paragraph 4A is disputed, Executive may
initiate binding arbitration in San Diego, California, before the American
Arbitration Association by Serving a notice to arbitrate upon the Company or,
at Executive's election, institute judicial proceedings in either case
within 90 days of the effective date of his termination or, if later, his
receipt of notice of termination, or such longer period as may be reasonably
necessary for Executive to take such action if illness or incapacity should
impair his taking such action within the 90 day period. The Company agrees
(i) to pay the costs and expenses (including fees of counsel
to Executive of any such arbitration and/or juidical
proceeding, including Executive's counsel fees), and
(ii) to pay interest to Executive on any amounts ultimately
found to be due to Executive hereunder during any period of
time that such amounts are withheld pen dins arbitration
and/or judicial proceedings. Such interest will be at the
base rate most recently announced by the prior to the
commencement of the arbitration.
4.7. Termination of employment due to the death or total permanent
disability of Executive will not be considered a termination for purposes of
this Article 4.
4.8. If Executive dies following a termination of employment which entitled
him to benefits under this Article 4 but prior to receipt of all such
benefits:
(a) his beneficiary (as designated to the Company in writing) or, if
none, his estate, will be entitled to receive all unpaid amounts
due hereunder, and
(b) his beneficiary or estate will be entitled to exercise options in
accordance with paragraph 4.3 above and the terms of the options.
ARTICLE V. NO OBLIGATION TO MITIGATE
There shall be no requirement on The Executive's part to seek other
employment or otherwise mitigate in order to be entitled to the Sail amount
of any payments or benefits hereunder.
ARTICLE VI. LIMITATION
6.1. Notwithstanding any other provision of this Agreement, and except as
provided in paragraph 6.2 below. The payments or benefits to which Executive
will be entitled under Article 4 of this Agreement will be reduced to the
extent necessary so that Executive will not be liable for the federal excise
tax levied on certain excess "parachute payments" under section 4999 of the
Code.
6.2. The limitation of paragraph 6.1 will not apply if:
(a) the difference between
(i) the present value of all payments to which Executive is
entitled under Article 4 of this Agreement determined
without regard to paragraph 6-1" less
(ii) the present value of all federal, state, and other income
and excise taxes for which Executive is liable as a result
of such payments;
exceeds
(b) the difference between
(i) the present value of all payments to which Executive is
entitled under Article 4 of this Agreement calculated as
if the limitation of paragraph 6.1 applies, less
(ii) the present value of all federal, state, and other income
withholding taxes which Executive is liable as a result of
such reduced payments.
Present values will be determined using the interest rate specified in
section 280G of the code and will be the present values as of the date on
which Executive's employment terminates (unless it is necessary to use a
different date in order to avoide adverse consequences under section 280 C).
6.3. (a) Whether payments to the Executive are to be reduced pursuant to
paragraph 6.1, and the extent to which they are to be so reduced,
will be determined by the Executive. Executive may, at the expense
of the Company, hire an accounting firm, law firm or employment
consulting firm selected by Executive to assist him in such
determination.
(b) If a reduction is made pursuant to paragraph 6.1, Executive will
have the right to determine which payments and benefits will be
reduced,
ARTICLE VII. EXPENSES
7.1. It is the intent of the Company That The Executive not be required to
incur any expenses associated with the enforcement of his rights under this
Agreement by legal action or arbitration proceeding because the cost and
expense thereof would substantially detract from the benefits intended to be
extended to the Executive hereunder. Accordingly, if Executive determines in
good faith that the Company has failed to comply with any of its obligations
under this Agreement, or if the Company or any other person takes any action
to declare this Agreement void or unenforceable, or institutes any legal
action or arbitration proceeding designed to deny Executive, or to recover
from him, the benefits intended to be provided hereunder, or in the event of
actions instituted as contemplated by paragraph 4.6 above, the Company
irrevocably authorizes Executive from time to time to retain counsel of his
choice, at the expense of the Company as hereafter provided, to represent
Executive in connection with any and all actions and proceedings, whether by
or against the Company or any director, officer, stockholder or other person
affiliated with the Company, which may adversely affect Executive's rights
under this Agreement. In addition, notwithstanding any existing or prior
attorney client relationship between the Company and such counsel, the
Company irrevocably consents to Executive's entering into an attorney-client
relationship with such counsel and agrees that a confidential relationship
shall exist between Executive and such counsel. Without limiting the effect
of paragraph 4.6 above or of the foregoing provisions of this paragraph 7.1,
the Company shall pay or cause to be paid and shall be solely responsible for
any and all attorneys' and related fees and expenses incurred by Executive as
a result of the Company's failure to perform under this Agreement.
7.2. Without limiting the effect of paragraph 7.1 above, in order to ensure
the benefits intended to be provided to the Executive under such paragraph,
the Company will, if a Change of Control becomes likely or occurs use
reasonable efforts to obtain an irrevocable $5,000,000 letter of credit
issued by a bank having combined capital and surplus in excess of
$100,000,000, or alternatively to place that amount in escrow or trust with
such a bank, to provide a fund for the benefit of Executive and other
employees of the Company
with similar agreements with respect to enforcement of their rights under
their agreements, all on such terms as the Company shall consider appropriate
when it obtains such a letter of credit or establishes such a fund.
ARTICLE VIII. MERGER OR ACQUISITION
8.1. If the Company is at any time before or after a Change of Control
merged with or consolidated into or with any other corporation or other
entity (whether or not the Company is the surviving entity), or if
substantially all of the assets of the Company are transferred to another
corporation or other entity, the corporation or other entity resulting from
such merger or consolidation, or the acquirer of such assets, shall by
agreement in term and substance satisfactory to Executive) expressly assume
the obligations of the Company under this Agreement. In any event, however,
the provisions of this Agreement shall be binding upon and inclusive to the
benefit of the corporation or other entity resulting from such merger or
consolidation or the acquirer of such assets, and this Article 8 will apply
in the event of any subsequent merger or consolidation or transfer of assets.
8.2. In the event of any merger, consolidation or sale of assets described
above, nothing contained in this Agreement will detract from or otherwise
limit Executive's right to or privilege of participation in any stock option
or purchase plan or any bonus, profit sharing, pension, group insurance,
hospitalization or other incentive or benefit plan or arrangement which may
be or become applicable to executives of the corporation resulting from such
merger or consolidation or the corporation acquiring such assets of the
Company.
8.3. In the event of any merger, consolidation or sale of assets described
above, references to the Company in this Agreement shall, unless the context
used suggest, otherwise, be deemed to include the entity resulting from such
merger or consolidation or the acquirer of such assets of the Company.
ARTICLE IX. WITHHOLDING
Any payments required to be made by the Company hereunder to Executive or his
dependents, beneficiaries or estate will be subject to The withholding of
such amounts relating to tax and/or other payroll deductions as may be
required by law.
ARTICLE X. AMENDMENT
No amendment, change or modification of this Agreement may be made except in
writing signed by both parties.
ARTICLE XI. GENERAL
11.1. The provisions of this Agreement shall be binding upon and shall inure
to the benefit of Executive, his executors, administration, legal
representatives and assigns, and the Company and its successors.
11.2. The validity, interpretation and effect of this Agreement shall be
governed by the laws of the Sate of California.
11.3. There shall be no right of set-off or counterclaim, with respect to
any claim, debt or obligation, against any payments to Executive, his
dependents, beneficiaries or estate provided for in this Agreement.
11.4. No right or interest to or in any payments shall be assignable by
Executive; provided, however, that this provision shall not preclude him from
designating one or more beneficiaries to receive any amount that may be
payable after his death and shall not preclude the legal representative of his
estate from assigning any right hereunder to the person or persons entitled
thereto under his will or, in the case of intestacy, to the person or persons
entitled thereto under the laws of intestacy applicable to his estate. The
term "beneficiary," as used in this Agreement shall mean a beneficiary or
beneficiaries so designated to receive any such amount, or if no beneficiary
has been so designated, the legal representative of the Executive's estate.
11.5. No right, benefit or interest hereunder shall be subject to
anticipation, alienation, sale,
assignment, encumbrance, charge, pledge, hypothecation, or set-off in respect
of any claim, debt or obligation, or to execution, attachment, levy or
similar process, or assignment by operation of law. Any attempt, voluntary or
involuntary, to effect any action specified in the immediately proceding
sentence to the flail extent permitted by law, be null, void and of no effect.
11.6. Commencing on the date of the Change of Control, this Agreement shall
govern Exeucitve's employment and compensation by the Company and the other
matters referred to herein, and any employment or severance agreement,
arrangement or policy otherwise applicable to the Executive superseded by
this Agreement.
11.7. The invalidity or unenforceability of any provision of this Agreement
shall not affect the valid enforceability of any other provision.
IN WITNESS WHEREOF, duly executed and delivered as of the date act
forth above.
Topform, Inc.
By /s/ Xxxxx Xxxxxxx
---------------------------------
Xxxxx Xxxxxxx
Executive
By /s/ Xxxx X. Xxxxx
---------------------------------
Xxxx X. Xxxxx
June 18, 1999
Xx. Xxxxx Xxxxxxx
0000 Xxxxxxxxx XX
Xxxxx 000
Xxxxxxxxxxx, Xxx Xxxxxx 00000
Re: Long-term Disability Insurance
Dear Xx. Xxxxxxx:
As discussed, the Board of True Vision International has agreed to
reimburse me the cost of my Long-term Disability coverage, plus any Income
Tax ensuing from such reimbursement. Attached is a request for reimbursement
for such insurance for $239.14.
If you have any questions regarding this matter, please feel free to contact
me at 000-000-0000.
Very Truly Yours,
/s/ Xxxx X. Xxxxx
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Xxxx X. Xxxxx
President
Agreed: /s/ Xxxxx Xxxxxxx Date: 6-18-99
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Xxxxx Xxxxxxx
