EXHIBIT 10.18
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement (the "Agreement") is made and entered
into effective as of May 13, 1997, by and between Xxxxxxx X. Xxxxxxxx (the
"Employee") and Conceptus, 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, an executive 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
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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 the Company's then existing employee plans and written
policies in effect 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 an executive 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. Subject to Sections 5 and 6 below, 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 of Control, each stock
option granted for the Company's securities held by the Employee shall become
fully vested and immediately exercisable on the effective date of the
transaction and shall be exercisable to the extent so vested in accordance with
the provisions of the Stock Option Agreement and Stock Option 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 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
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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 $15,000. 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 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.
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
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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 13, 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) 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 (ii) the
Employee's refusal to relocate to a location more than 50 miles from the
Company's current location.
5. LIMITATION ON PAYMENTS. To the extent that any of the
payments or benefits provided for in this Agreement to the Employee
constitute "parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code") and, but for this
Section 5, would be subject to the excise tax imposed by Section 4999 of the
Code, the Company shall reduce the aggregate amount of such payments and
benefits such that the present value thereof (as determined under the Code
and the applicable regulations) is equal to 2.99 times the Employee's "base
amount" as defined in Section 280G(b)(3) of the Code.
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 option shares 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
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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.
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(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 Santa Clara, 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.
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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.
CONCEPTUS, INC. XXXXXXX X. XXXXXXXX
By: Xxxxxxx Xxxxx /s/ Xxxxxxx X. Xxxxxxxx
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Title: Senior Vice President and Chief Financial Officer
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