CHANGE OF CONTROL AGREEMENT
EXHIBIT 10.4
This
Change of Control Agreement (the “Agreement”) is entered into
between Franklin Wireless Corp., a Nevada corporation (the “Company,” which term shall
include any successor by merger, consolidation, sale of substantially all of the
Company’s assets or otherwise), and XX Xxx (“Executive”) effective as of
the 21st day of September, 2009 (“Effective
Date”).
RECITALS
A. 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, whether voluntary or
involuntary. The Board of Directors of the Company (the “Board”) recognizes that such
consideration or concern 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 of the Company .
B. 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 for
the benefit of its stockholders.
C. The
Board believes that it is imperative to provide Executive with certain benefits
upon a change in control of the Company. These benefits will provide
Executive with enhanced financial security and incentive and encouragement to
remain with the Company.
NOW,
THEREFORE, in consideration of the mutual covenants contained herein, the
parties hereto agree as follows:
1. Definition.
“Change of Control” for
purposes of this Agreement will mean the occurrence of any one or more of the
following events:
(i) Any
person or company becomes the owner of more than fifty percent (50%) of the
Company’s Common Stock; or
(ii) 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 stockholders, 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; or
(iii) A
reorganization, merger, consolidation or similar transaction that will result in
the transfer of ownership of more than fifty percent (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 fifty percent (50%) of
the amount of Common Stock outstanding immediately prior to such issuance;
or
(iv)
Liquidation or dissolution of the Company or sale of substantially all of the
Company’s assets.
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. Severance
Payment. Upon a Change of Control, the Company will provide
the following benefits to Executive as set forth below in this
Section 3.
(i) The
Company will pay to Executive, within ten (10) days after the Change of
Control, a lump sum cash amount of Five Million Dollars ($5,000,000);
and
(ii)
Immediately prior to the Change of Control, one hundred percent
(100%) of 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.
4. Withholding. All
payments required to be made by the 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.
5. 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
San Diego, 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. Any
decision of the arbitrator(s) will be final and binding upon the
parties.
6. No Duty to Mitigate.
Benefits payable under Section 3 of this Agreement will neither be governed
by any duty to mitigate damages.
7. 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
Executive.
8. Code
Section 409A. Notwithstanding anything to the contrary in this
Agreement, if the Company reasonably determines, after consultation and
agreement with Executive 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 six (6) months after the
date of such separation from service (or, if earlier, the date of death of
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.
9. Term of Agreement.
This Agreement shall remain in effect for three years from the date hereof, at
which time it will expire.
10. 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.
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11. 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.
12. Controlling Law. This
Agreement will be controlled and interpreted pursuant to California
law.
13. 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.
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first set forth above.
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/s/
XX Xxx
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OC
Xxx
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Xxxxxxxx
Wireless Corp.
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By:
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/s/
Xxxx Xxxxxx
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Name:
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Xxxx
Xxxxxx
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Title:
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Chairman
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