CHANGE OF CONTROL AGREEMENT
EXHIBIT 10.2
This Change Of Control Agreement (the “Agreement”) is made as of April 6, 2006
between Dot Hill Systems Corp., a Delaware corporation (the “Company”), and Xxxxxx X.
Xxxxx (“Employee”).
Whereas, in order to provide an incentive for Employee to participate actively in the
affairs and maximize the value of the Company, the Company is willing to provide Employee with
certain benefits on the terms and conditions set forth below.
Now Therefore, for good and valuable consideration, the sufficiency of which is
hereby acknowledged, Employee and the Company (each, a “Party,” and collectively, the “Parties”)
agree as follows:
1. Benefits in the Event of a Change of Control. If (i) a Change of Control (defined
below) occurs and (ii) during the period beginning two (2) months prior to the effective date of
such Change of Control and ending twenty-four (24) months after the effective date of such Change
of Control, Employee’s employment with the Company is terminated either (A) by the Company for
reasons other than Cause (defined below) or for no reason or (B) by Employee for Good Reason
(defined below), then, without further action by Employee or the Company, Employee shall be
entitled to the benefits set forth below:
(a) The vesting applicable to all options to purchase shares of the Company’s capital stock
(“Options”) and all shares of the Company’s capital stock which are subject to the company’s right
to repurchase such shares (“Restricted Stock”) held by Employee as of the effective date of such
termination shall be accelerated in full such that Employee shall have the right to exercise in
accordance with the terms thereof all or any portion of such Options (notwithstanding any vesting
schedule set forth in such Options) and any such Company repurchase rights with respect to such
Restricted Stock shall lapse in full; and
(b) Employee shall be entitled to a lump sum cash payment in an amount equal to one hundred
twenty-five percent (125%) of Employee’s annual base salary in effect as of the date of such
termination, subject to applicable withholdings as required by applicable law, payable on the
Effective Date specified in a Release delivered by Employee to the Company following such Change of
Control in the form attached hereto as Exhibit A.
2. Definitions. For purposes of this Agreement, capitalized terms used herein shall have
the following meanings:
(a) “Cause” shall be limited to the occurrence of any of the following events, as set forth in
a written resolution duly adopted by a majority of the Board: (i) Employee continuing to engage in
conduct which causes material harm to the Company after having been given thirty (30) days written
notice of such determination by the Board, (ii) Employee’s indictment for violation of any Law
constituting a felony (including the Foreign Corrupt Practices Act of 1977) or the foreign
equivalent thereof, (iii) Employee’s continuing failure to perform the lawful directives of the
Board or Employee’s employment duties and responsibilities to the Company,
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in each case in all material respects and after having been given thirty (30) days written
notice of such determination by the Board which written notice shall specifically identify the
directive alleged not to have been followed or the employment duties which it is alleged Employee
has continually failed to substantially perform, the basis for the Board’s determination thereof
and the specific corrective action that the Board proposes that Employee take, and (iv) Employee’s
incurable breach of any material element of the Company’s Confidential Information and Inventions
Agreement. In no event shall Employee’s death or Disability constitute Cause or the basis for any
termination therefor.
(b) “Change of Control” shall mean: (1) a dissolution or liquidation of the Company; (2) any
sale or transfer of all or substantially all of the assets of the Company; (3) any merger,
consolidation or similar transaction in which the holders of the Company’s outstanding voting
securities immediately prior to such transaction do not hold, immediately following such
transaction, securities representing fifty percent (50%) or more of the combined voting power of
the outstanding securities of the surviving entity; or (4) the acquisition by any person (within
the meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), in a single transaction or series of related transactions, of
beneficial ownership (within the meaning of Rule 13d-3 or any successor rule or regulation
promulgated under the Exchange Act) of securities representing fifty percent (50%) or more of the
combined voting power of the then-outstanding securities of the Company, excluding in any case
shares of capital stock of the Company purchased from the Company in a transaction the principal
purpose of which is to raise capital for the Company.
(c) “Good Reason” shall mean: (i) a reduction in Employee’s annual base salary, (ii) the
relocation of Employee’s full-time office to a location other than within sixty (60) miles of
Carlsbad, California, or (iii) a violation or breach by the Company, in any material respect, of
any of its obligations to Employee so long as Employee has given the Company thirty (30) days
notice of such breach and the Company has not cured the breach during that thirty (30) day period.
(d) “Disability” shall mean Employee’s failure or inability, for reasons of health, to perform
Employee’s usual and customary duties on behalf of the Company in the usual and customary manner
for a total of more than ninety (90) consecutive business days (excluding Saturdays, Sundays and
Holidays (days during which the Company is closed due to a recognized holiday)).
3. Golden Parachute Taxes. In the event that any payment or distribution by the Company,
or the grant of any benefit by the Company, to or for the benefit of Employee (whether paid or
payable, distributed or distributable or granted or to be granted pursuant to the terms of this
Agreement or otherwise) (collectively, “Benefits”) would be nondeductible by the Company for
federal income tax purposes because of Section 280G of the Internal Revenue Code (the “Code”)
and/or would cause Employee to be liable for an excise tax pursuant to Section 4999 of the Code,
then the Benefits paid, distributed or granted to Employee under this Agreement shall equal (i) the
full amount of such Benefits or (ii) the Reduced Amount (as defined below), whichever of the
foregoing amounts is determined by the Company to result, on an after-tax basis, in the receipt by
Employee of the greatest amount of such Benefits, notwithstanding that all or some portion of the
Benefits may be taxable under Section 4999 of
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the Code. In making its determination pursuant to the preceding sentence, the Company shall take
into account all applicable Federal, state, and local employment and income taxes, as well as the
excise tax imposed by Section 4999 of the Code. For purposes of this Section 4, the “Reduced
Amount” shall be the maximum amount payable to Employee that would result in no portion of the
Benefits being (i) nondeductible by the Company under Section 280G of the Code or (ii) subject to
an excise tax liability under Section 4999 of the Code. Notwithstanding the foregoing and any
other provision contained herein, in the event (as a result of Benefits to be received under this
Agreement or any other plan or arrangement between the Employee and the Company) of any required
reduction, as a result of Section 4999 of the Code, of Benefits to be received by Employee,
reduction shall be made from such other plan or arrangement prior to any reduction relating to
Benefits to be received by Employee under this Agreement.
4. Application of Code Section 409A. If the Company determines that any of the Benefits
fail to satisfy the distribution requirement of Section 409A(a)(2)(A) of the Code as a result of
Section 409A(a)(2)(B)(i) of the Code, the payment of such benefit shall be accelerated to the
minimum extent necessary so that such benefit is not subject to the provisions of Section
409A(a)(1) of the Code. (It is the intention of the preceding sentence to apply the short-term
deferral provisions of Section 409A of the Code, and the regulations and other guidance thereunder,
to the Benefits, and the payment schedule as revised after the application of the preceding
sentence shall be referred to as the “Revised Payment Schedule.”) However, if there is no Revised
Payment Schedule that would avoid the application of Section 409A(a)(1) of the Code, the payment of
such benefits shall not be paid pursuant to a Revised Payment Schedule and instead shall be delayed
to the minimum extent necessary so that such benefits are not subject to the provisions of Section
409A(a)(1) of the Code. The Board may attach conditions to or adjust the amounts paid pursuant to
this Section 4 to preserve, as closely as possible, the economic consequences that would have
applied in the absence of this Section 4; provided, however, that no such condition or adjustment
shall result in the payments being subject to Section 409A(a)(1) of the Code.
5. General Provisions.
(a) This Agreement shall be governed by the laws of the State of California (without regard to
principles of conflict of laws).
(b) Any notice, demand or request required or permitted to be given by either the Company or
Employee pursuant to the terms of this Agreement shall be in writing and shall be deemed given when
delivered personally or deposited in the U.S. mail, First Class with postage prepaid, and addressed
to the parties at such addresses as have been previously furnished by the Parties or such other
address as a Party may request by notifying the other in writing.
(c) The rights and obligations of Employee under this Agreement may not be transferred or
assigned without the prior written consent of the Company.
(d) This Agreement is meant to supplement the terms of stock option agreement(s) or other
agreement(s) pursuant to which Employee acquired the Options, as well as any written employment
agreement between the Company and Employee. To the extent that the terms and conditions of this
Agreement are inconsistent with those found in such stock option agreement(s)
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or other agreement(s) (employment or otherwise), the terms and conditions of this Agreement
shall be controlling.
(e) Any Party’s failure to enforce any provision or provisions of this Agreement shall not in
any way be construed as a waiver of any such provision or provisions, nor prevent any Party from
thereafter enforcing each and every other provision of this Agreement. The rights granted the
Parties herein are cumulative and shall not constitute a waiver of any Party’s right to assert all
other legal remedies available to it under the circumstances.
(f) Employee agrees upon request to execute any further documents or instruments necessary or
desirable to carry out the purposes or intent of this Agreement.
(g) In case any provision of this Agreement shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in any way be affected
or impaired.
(h) This Agreement, in whole or in part, may be modified, waived or amended upon the written
consent of the Company and Employee.
(i) This Agreement may be executed in one or more counterparts, each of which shall be deemed
an original, but all of which shall constitute one instrument.
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In Witness Whereof, the undersigned have set their hand as of the date first above written.
Employee
|
Dot Hill Systems Corp. | |||||
/s/ Xxxxxx X. Xxxxx
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/s/ Xxxx Xxxxxxxxxxx | |||||
Xxxxxx X. Xxxxx
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Xxxx Xxxxxxxxxxx, | |||||
| President and Chief Executive Officer |
[Signature Page To Change Of Control Agreement]
Exhibit A
RELEASE AND WAIVER OF CLAIMS
In consideration of the payments and other benefits set forth in the Change of Control
Agreement dated April 6, 2006, between Dot Hill Systems Corp. (the “Company”) and Xxxxxx X. Xxxxx
(“Employee”), to which this form is attached, Employee hereby furnishes the Company with the
following release and waiver.
Employee hereby releases, and forever discharges the Company, its officers, directors, agents,
employees, stockholders, successors, assigns and affiliates, of and from any and all claims,
liabilities, demands, causes of action, costs, expenses, attorneys’ fees, damages, indemnities and
obligations of every kind and nature, in law, equity, or otherwise, known and unknown, suspected
and unsuspected, disclosed and undisclosed, arising at any time prior to and including Employee’s
employment termination date with respect to any claims relating to Employee’s employment and the
termination of Employee’s employment, including but not limited to, claims pursuant to any federal,
state or local law relating to employment, including, but not limited to, discrimination claims,
claims under the California Fair Employment and Housing Act, and the Federal Age Discrimination in
Employment Act of 1967, as amended (“ADEA”), the Federal Americans with Disabilities Act (“AD”) or
claims for wrongful termination, breach of the covenant of good faith, contract claims, tort
claims, and wage or benefit claims, including but not limited to, claims for salary, bonuses,
commissions, stock, stock options, vacation pay, fringe benefits, severance pay or any form of
compensation.
Employee also acknowledges that Employee has read and understood Section 1542 of the
California Civil Code which reads as follows: “A general release does not extend to claims which
the creditor does not know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the debtor.” Employee
hereby expressly waives and relinquishes all rights and benefits under that section and any law of
any jurisdiction of similar effect with respect to any claims Employee may have against the
Company.
Employee acknowledges that, among other rights, Employee is waiving and releasing any rights
Employee may have under ADEA, that this waiver and release is knowing and voluntary, and that the
consideration given for this waiver and release is in addition to anything of value to which
Employee was already entitled as an employee of the Company. Employee further acknowledges that
Employee has been advised, as required by the Older Workers Benefit Protection Act, that: (a) the
waiver and release granted herein does not relate to claims which may arise after this release and
waiver is executed; (b) Employee has the right to consult with an attorney prior to executing this
release and waiver (although Employee may choose voluntarily not to do so); and (c) if on the date
of execution of this release and waiver Employee is age 40 or older, then (I) Employee has
twenty-one (21) days from the date Employee receives this release and waiver, in which to consider
this release and waiver (although Employee may choose voluntarily to execute this release and
waiver earlier); and (II) Employee has seven (7) days following the execution of this release and
waiver to revoke Employee’s consent to this release and waiver. This release and waiver shall be
effective as of the date of execution hereof; provided that if on the date of execution of this
release and waiver Employee is age 40 or older, then this release and waiver shall not be effective
until the foregoing seven (7) day revocation
period has expired. The date as of which this release and waiver is effective as aforesaid
shall be deemed the “Effective Date” hereof.
Date:
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By: | |||||||||
| Xxxxxx X. Xxxxx |
