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Exhibit 10(m)
AGREEMENT RE: CHANGE IN CONTROL
This AGREEMENT RE: CHANGE IN CONTROL (this "Agreement") is dated as of
November 1, 2000 and is entered into by and between Xxxxxxx X. Xxxxxx, Xx.
("Executive") and Xxxxxxxx, Inc., a Delaware corporation (the "Company").
BACKGROUND
The Company believes that because of its position in the industry,
financial resources and historical operating results there is a possibility that
the Company may become the subject of a Change in Control (as defined below),
either now or at some time in the future.
The Company believes that it is in the best interest of the Company and its
stockholders to xxxxxx Executive's objectivity in making decisions with respect
to any pending or threatened Change in Control of the Company and to assure that
the Company will have the continued dedication and availability of Executive,
notwithstanding the possibility, threat or occurrence of a Change in Control.
The Company believes that these goals can best be accomplished by alleviating
certain of the risks and uncertainties with regard to Executive's financial and
professional security that would be created by a pending or threatened Change in
Control and that inevitably would distract Executive and could impair his
ability to objectively perform his duties for and on behalf of the Company.
Accordingly, the Company believes that it is appropriate and in the best
interest of the Company and its stockholders to provide to Executive
compensation arrangements upon a Change in Control that lessen Executive's
financial risks and uncertainties and that are reasonably competitive with those
of other corporations.
With these and other considerations in mind, the Compensation Committee of
the Company has authorized the Company to enter into this Agreement with the
Executive to provide the protections set forth herein for Executive's financial
security following a Change in Control.
NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration the receipt of which is hereby acknowledged, it is hereby
agreed as follows:
AGREEMENT
1. Term of Agreement. This Agreement shall be effective from the date
first written above and, subject to the provisions of Section 4, shall extend to
(and thereupon automatically terminate) one (1) day after Executive's
termination of employment with the Company for any reason. No termination of
this Agreement shall limit, alter or otherwise affect Executive's rights
hereunder with respect to a Change in Control which has occurred prior to such
termination, including without limitation Executive's right to receive the
various benefits hereunder.
2. Purpose of Agreement. The purpose of this Agreement is to provide
that, in the event of a "Change in Control," Executive may become entitled to
receive certain additional benefits, as described herein, in the event of his
termination under specified circumstances.
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3. Change in Control. As used in this Agreement, the phrase "Change in
Control" shall mean:
(i) Except as provided by subparagraph (iii) hereof, the
acquisition (other than from the Company) by any person, entity or "group",
within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (excluding, for this purpose, the
Company or its subsidiaries, or any executive benefit plan of the Company or its
subsidiaries which acquires beneficial ownership of voting securities of the
Company), of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of forty percent (40%) or more of either the then
outstanding shares of common stock or the combined voting power of the Company's
then outstanding voting securities entitled to vote generally in the election of
directors; or
(ii) Individuals who, as of the date hereof, constitute the Board
of Directors of the Company (as of the date hereof the "Incumbent Board") cease
for any reason to constitute at least a majority of the Board of Directors of
the Company, provided that any person becoming a director subsequent to the date
hereof whose election, or nomination for election by the Company's stockholders,
is or was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board (other than an election or nomination of an
individual whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the Directors of the
Company, as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) shall be, for purposes of this Agreement, considered as
though such person were a member of the Incumbent Board; or
(iii) Approval by the stockholders of the Company of a
reorganization, merger or consolidation with any other person, entity or
corporation, other than
(1) 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 another entity) more than fifty percent (50%) of the
combined voting power of the voting securities of the Company or such other
entity outstanding immediately after such merger or consolidation, or
(2) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no person
acquires forty percent (40%) or more of the combined voting power of the
Company's then outstanding voting securities; or
(iv) Approval by the stockholders of the Company of a plan of
complete liquidation of the Company or an agreement for the sale or other
disposition by the Company of all or substantially all of the Company's assets.
4. Effect of a Change in Control. In the event of a Change in Control,
Sections 6 through 11 of this Agreement shall become applicable to Executive.
These Sections shall continue to remain applicable until the third anniversary
of the date upon which the Change in Control occurs. On such third anniversary
date, and provided that the employment of Executive
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has not been terminated on account of a Qualifying Termination (as defined in
Section 5 below), this Agreement shall terminate and be of no further force or
effect.
5. Qualifying Termination. If following, or within ninety (90) days
prior to, a Change in Control Executive's employment with the Company and its
affiliated companies is terminated, such termination shall be conclusively
considered a "Qualifying Termination" unless:
(a) Executive voluntarily terminates his employment with the
Company and its affiliated companies. Executive, however, shall not be
considered to have voluntarily terminated his employment with the Company
and its affiliated companies if, following, or within ninety (90) days
prior to, the Change in Control, Executive's overall compensation is
reduced or adversely modified in any material respect or Executive's
authority or duties are materially changed, and subsequent to such
reduction, modification or change Executive elects to terminate his
employment with the Company and its affiliated companies. For such
purposes, Executive's authority or duties shall conclusively be considered
to have been "materially changed" if, without Executive's express and
voluntary written consent, there is any substantial diminution or adverse
modification in Executive's title, status, overall position,
responsibilities, reporting relationship, general working environment
(including without limitation secretarial and staff support, offices, and
frequency and mode of travel), or if, without Executive's express and
voluntary written consent, Executive's job location is transferred to a
site more than fifty (50) miles away from his place of employment ninety
(90) days prior to the Change in Control. In this regard as well,
Executive's authority and duties shall conclusively be considered to have
been "materially changed" if, without Executive's express and voluntary
written consent, Executive no longer holds the same title or no longer has
the same authority and responsibilities or no longer has the same reporting
responsibilities, in each case with respect and as to a publicly held
parent company which is not controlled by another entity or person.
(b) The termination is on account of Executive's death or
Disability. For such purposes, "Disability" shall mean a physical or mental
incapacity as a result of which Executive becomes unable to continue the
performance of his responsibilities for the Company and its affiliated
companies and which, at least three (3) months after its commencement, is
determined to be total and permanent by a physician agreed to by the
Company and Executive, or in the event of Executive's inability to
designate a physician, Executive's legal representative. In the absence of
agreement between the Company and Executive, each party shall nominate a
qualified physician and the two physicians so nominated shall select a
third physician who shall make the determination as to Disability.
(c) Executive is involuntarily terminated for "Cause." For this
purpose, "Cause" shall be limited to only three types of events:
(1) the willful and deliberate refusal of Executive to comply
with a lawful, written instruction of the Board of Directors, which
refusal is not remedied by Executive within a reasonable period of
time after his receipt of
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written notice from the Company identifying the refusal, so long as
the instruction is consistent with the scope and responsibilities of
Executive's position prior to the Change in Control;
(2) an act or acts of personal dishonesty by Executive which were
intended to result in substantial personal enrichment of Executive at
the expense of the Company; or
(3) Executives conviction of any felony involving an act of moral
turpitude.
6. Severance Payment. If Executive's employment is terminated as a
result of a Qualifying Termination, the Company shall pay Executive within
thirty (30) days after the Qualifying Termination a cash lump sum equal to two
(2) times Executive's Compensation (the "Severance Payment").
(a) For purposes of this Agreement, Executive's "Compensation"
shall equal the sum of (i) Executive's highest annual salary rate with the
Company within the three year period ending on the date of Executive's
Qualifying Termination, plus (ii) a "Bonus Increment." The Bonus Increment
shall equal the annualized average of all bonuses and incentive
compensation payments paid to Executive during the two (2) year period
immediately before the date of Executive's Qualifying Termination under all
of the Company's bonus and incentive compensation plans or arrangements.
(b) In lieu of a cash lump sum, Executive may, in his sole
discretion, elect to receive the Severance Payment provided by this Section
in equal annual installments over three (3) years. Such installments shall
be paid to Executive on each anniversary of the date of Executive's
Qualifying Termination, beginning with the first such anniversary and
continuing on each such anniversary thereafter until fully paid. Such
election to receive the Severance Payment in installments may be made
and/or revoked by Executive at any time prior to the occurrence of a Change
in Control by written notice to the Board of Directors of the Company. Upon
the occurrence of a Change in Control, any such election to receive the
Severance Payment in installments that has been made and not revoked prior
to the Change in Control shall be irrevocable and binding on both the
Company and Executive. In the event that at the time of a Change in Control
there is not in effect an election by Executive to receive the Severance
Payment in installments, such Severance Payment shall be paid to Executive
in a single cash lump sum as provided in subparagraph (a) above.
(c) The Severance Payment hereunder is in lieu of any severance
payment that Executive might otherwise be entitled to from the Company in
the event of a Change in Control under the Company's applicable severance
pay policies, if any, or under any other oral or written agreement;
provided, however, that Executive shall continue to be entitled to receive
the severance pay benefits under the Company's applicable policies, if any,
or under another written agreement if and to the extent Executive's
termination is not a Qualifying Termination after, or within ninety (90)
days prior to, a Change in Control.
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7. Additional Benefits.
(a) In the event of a Qualifying Termination, any and all unvested
stock options of Executive shall immediately become fully vested and
exercisable.
(b) In the event of a Qualifying Termination, Executive shall be
entitled to continue to participate in the following executive benefit
programs which had been made available to Executive (including his family)
before the Qualifying Termination: group medical insurance, group dental
insurance, group-term life insurance, and disability insurance. These
programs shall be continued at no cost to Executive, except to the extent
that tax rules require the inclusion of the value of such benefits in
Executive's income. The programs shall be continued in the same way and at
the same level as immediately prior to the Qualifying Termination. The
programs shall continue for Executive's benefit for two (2) years after the
date of the Qualifying Termination; provided, however, that Executive's
participation in each of such programs shall be earlier terminated or
reduced, as applicable, if and to the extent Executive receives benefits as
a result of concurrent coverage through another program.
8. Indemnification for Excise Tax. In the event that Executive becomes
entitled to receive a Severance Payment in accordance with the provisions of
Section 6 above, and such Severance Payment and any other benefits or payments
(including transfers of property) that Executive receives, or is to receive,
pursuant to this Agreement or any other agreement, plan or arrangement with the
Company in connection with a Change in Control of the Company ("Other Benefits")
shall be subject to the tax imposed pursuant to Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code")(or any successor thereto) or any
comparable provision of state law (an "Excise Tax"), the following rules shall
apply:
(a) The Company shall pay to Executive, within thirty (30) days
after the Executive's Qualifying Termination, an additional amount (the
"Gross-Up Payment") such that the net amount retained by Executive, after
deduction of any Excise Tax with respect to the Severance Payment or the
Other Benefits and any federal, state and local income tax, FICA tax, and
Excise Tax upon such Gross-Up Payment, is equal to the amount that would
have been retained by Executive if such Excise Tax were not applicable. It
is intended that Executive shall not suffer any loss or expense resulting
from the assessment of any Excise Tax or the Company's reimbursement of
Executive for payment of any such Excise Tax.
(b) For purposes of determining whether any of the Severance
Payments or Other Benefits will be subject to an Excise Tax and the amount
of such Excise Tax, (i) any other payments or benefits received or to be
received by Executive in connection with a Change in Control of the Company
or Executive's termination of employment (whether pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with the
Company, any person whose actions result in a Change in Control or any
person affiliated with the Company or such person) shall be treated as
"parachute payments" within the meaning of Section 280G(b)(2) of the Code
(or any successor thereto), and all "excess parachute payments" within the
meaning of Section 280G(b)(l) of the Code (or any successor thereto) shall
be treated as subject to the Excise Tax, unless
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in the opinion of tax counsel selected by the Company's independent
auditors and acceptable to Executive such other payments or benefits (in
whole or in part) do not constitute parachute payments, or such excess
parachute payments (in whole or in part) represent reasonable compensation
for services actually rendered within the meaning of Section 280G(b)(4) of
the Code (or any successor thereto), (ii) the amount of the Severance
Payments and Other Benefits which shall be treated as subject to the Excise
Tax shall be equal to the lesser of (A) the total amount of the Severance
Payments or Other Benefits or (B) the amount of excess parachute payments
within the meaning of Sections 280G(b)(l) and (4) of the Code (or any
successor or successors thereto), after applying clause (i), above, and
(iii) the value of any non-cash benefits or any deferred payment or benefit
shall be determined by the Company's independent auditors in accordance
with the principles of Sections 280G(d)(3) and (4) of the Code (or any
successor or successors thereto).
(c) For purposes of determining the amount of the Gross-Up Payment,
Executive shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rates of taxation in the state and locality of Executive's
residence on the date of the Executive's Qualifying Termination, net of the
maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes.
(d) In the event that the Excise Tax is subsequently determined to
be less than the amount taken into account hereunder at the time of the
Executive's Qualifying Termination, the Executive shall repay to the
Company, at the time that the amount of such reduction in Excise Tax is
finally determined, the portion of the Gross-Up Payment attributable to
such reduction plus interest on the amount of such repayment at the rate
provided in Section 1274(b)(2)(B) of the Code (or any successor thereto)
(the "Applicable Rate"). In the event that the Excise Tax is determined to
exceed the amount taken into account hereunder at the time of such
Qualifying Termination (including by reason of any payment the existence or
amount of which cannot be determined at the time of the Gross-Up Payment),
the Company shall make an additional Gross-Up Payment in respect of such
excess (plus interest, determined at the Applicable Rate, payable with
respect to such excess) at the time that the amount of such excess is
finally determined.
9. Rights and Obligations Prior to a Change in Control. Prior to the
date which is ninety (90) days before a Change in Control, the rights and
obligations of Executive with respect to his employment by the Company shall be
determined in accordance with the policies and procedures adopted from time to
time by the Company and the provisions of any written employment contract in
effect between the Company and Executive from time to time. This Agreement deals
only with certain rights and obligations of Executive subsequent, or within
ninety (90) days prior to, a Change in Control, and the existence of this
Agreement shall not be treated as raising any inference with respect to what
rights and obligations exist prior to the date which is ninety (90) days before
a Change in Control. Unless otherwise expressly set forth in a separate written
employment agreement between Executive and the Company, the employment of
Executive is expressly at-will, and Executive or the Company may terminate
Executive's employment with the Company at any time and for any reason, with or
without cause, provided
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that if such termination occurs within ninety (90) days prior to or three (3)
years after a Change in Control and constitutes a Qualifying Termination (as
defined in Section 5 above) the provisions of this Agreement shall govern the
payment of the Severance Payment and certain other benefits as provided herein.
10. Non-Exclusivity of Rights. Subject to Section 6(c) hereof, nothing
in this Agreement shall prevent or limit Executive's continuing or future
participation in any benefit, bonus, incentive or other plan or program provided
by the Company or any of its affiliated companies and for which Executive may
qualify, nor shall anything herein limit or otherwise affect such rights as
Executive may have under any stock option or other agreements with the Company
or any of its affiliated companies. Except as otherwise provided in Section 6(c)
hereof, amounts which are vested benefits or which Executive is otherwise
entitled to receive under any plan or program of the Company or any of its
affiliated companies at or subsequent to the date of any Qualified Termination
shall be payable in accordance with such plan or program.
11. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counter-claim, recoupment,
defense or other claim, right or action which the Company may have against
Executive or others. In no event shall Executive be obligated to seek other
employment or to take any other action by way of mitigation of the amounts
payable to Executive under any of the provisions of this Agreement. The Company
agrees to pay, to the full extent permitted by law, all legal fees and expenses
which Executive may reasonably incur as a result of Executive's successful
collection efforts to receive amounts payable hereunder, or as a result of any
contest (regardless of the outcome thereof) by the Company or others of the
validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of any
contest by Executive about the amount of any payment pursuant to this Section).
12. Successors.
(a) This Agreement is personal to Executive, and without the prior
written consent of the Company shall not be assignable by Executive other
than by will or the laws of descent and distribution. This Agreement shall
inure to the benefit of and be enforceable by Executive's legal
representatives.
(b) The rights and obligations of the Company under this Agreement
shall inure to the benefit of and shall be binding upon the successors and
assigns of the Company.
13. Governing Law. This Agreement is made and entered into in the State
of California, and the internal laws of California shall govern its validity and
interpretation in the performance by the parties hereto of their respective
duties and obligations hereunder.
14. Modifications. This Agreement may be amended or modified only by an
instrument in writing executed by all of the parties hereto.
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15. Dispute Resolution.
(a) Any controversy or dispute between the parties involving the
construction, interpretation, application or performance of the terms,
covenants, or conditions of this Agreement or in any way arising under this
Agreement (a "Covered Dispute") shall, on demand by either of the parties
by written notice served on the other party in the manner prescribed in
Section 16 hereof, be referenced pursuant to the procedures described in
California Code of Civil Procedure ("CCP") Sections 638, et seq., as they
may be amended from time to time (the "Reference Procedures"), to a retired
Judge from the Superior Court for the County of San Diego or the County of
Orange for a decision.
(b) The Reference Procedures shall be commenced by either party by
the filing in the Superior Court of the State of California for the County
of Orange or the County of San Diego of a petition pursuant to CCP Section
638(1) (a "Petition"). Said Petition shall designate as a referee a Judge
from the list of retired San Diego County and Orange County Superior Court
Judges who have made themselves available for trial or settlement of civil
litigation under said Reference Procedures. If the parties hereto are
unable to agree on the designation of a particular retired San Diego County
or Orange County Superior Court Judge or the designated Judge is
unavailable or unable to serve in such capacity, request shall be made in
said Petition that the Presiding or Assistant Presiding Judge of the Orange
County Superior Court or the San Diego County Superior Court, as relevant,
appoint as referee a retired San Diego County or Orange County Superior
Court Judge from the aforementioned list.
(c) Except as hereafter agreed by the parties, the referee shall
apply the internal law of California in deciding the issues submitted
hereunder. Unless formal pleadings are waived by agreement among the
parties and the referee, the moving party shall file and serve its
complaint within 15 days from the date a referee is designated as provided
herein, and the other party shall have 15 days thereafter in which to plead
to said complaint. Each of the parties reserves its respective rights to
allege and assert in such pleadings all claims, causes of action,
contentions and defenses which it may have arising out of or relating to
the general subject matter of the Covered Dispute that is being determined
pursuant to the Reference Procedures. Reasonable notice of any motions
before the referee shall be given, and all matters shall be set at the
convenience of the referee. Discovery shall be conducted as the parties
agree or as allowed by the referee. Unless waived by each of the parties, a
reporter shall be present at all proceedings before the referee.
(d) It is the parties' intention by this Section 15 that all issues
of fact and law and all matters of a legal and equitable nature related to
any Covered Dispute will be submitted for determination by a referee
designated as provided herein. Accordingly, the parties hereby stipulate
that a referee designated as provided herein shall have all powers of a
Judge of the Superior Court including, without limitation, the power to
grant equitable and interlocutory and permanent injunctive relief.
(e) Each of the parties specifically (i) consents to the exercise
of jurisdiction over his person by a referee designated as provided herein
with respect to any and all
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Covered Disputes; and (ii) consents to the personal jurisdiction of the
California courts with respect to any appeal or review of the decision of
any such referee.
(f) Each of the parties acknowledges that the decision by a
referee designated as provided herein shall be a basis for a judgment as
provided in CCP Section 644 and shall be subject to exception and review as
provided in CCP Section 645.
16. Notices. Any notice or communications required or permitted to be
given to the parties hereto shall be delivered personally or be sent by United
States registered or certified mail, postage prepaid and return receipt
requested, and addressed or delivered as follows, or at such other addresses the
party addressed may have substituted by notice pursuant to this Section:
Xxxxxxxx, Inc. Xxxxxxx X. Xxxxxx, Xx.
0000 Xxxxx Xxxxxx Xxxx 0 Xxxxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxx 00000 Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: President
17. Captions. The captions of this Agreement are inserted for
convenience and do not constitute a part hereof.
18. Severability. In case any one or more of the provisions contained in
this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if such invalid, illegal or unenforceable provision had never
been contained herein and there shall be deemed substituted for such invalid,
illegal or unenforceable provision such other provision as will most nearly
accomplish the intent of the parties to the extent permitted by the applicable
law. In case this Agreement, or any one or more of the provisions hereof, shall
be held to be invalid, illegal or unenforceable within any governmental
jurisdiction or subdivision thereof, this Agreement or any such provision
thereof shall not as a consequence thereof be deemed to be invalid, illegal or
unenforceable in any other governmental jurisdiction or subdivision thereof.
19. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
together constitute one in the same Agreement.
[Remainder of page left blank intentionally, signatures on following page]
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IN WITNESS HEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first written above in Carlsbad,
California.
Dated: December 13, 2000 XXXXXXXX, INC.
By: /s/ Xxxxxxx X. Xxxxx
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Title: Chief Financial Officer
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Dated: December 13, 2000 XXXXXXX X. XXXXXX, XX.
By: /s/ Xxxxxxx X. Xxxxxx, Xx.
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