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EXHIBIT 10.35
AUSPEX SYSTEMS, INC.
CHANGE OF CONTROL SEVERANCE AGREEMENT
This Change of Control Severance Agreement (the "Agreement") is made and
entered into by and between Xxxx X. Xxxxxxx (the "Employee") and Auspex Systems,
Inc., a Delaware corporation (the "Company"), effective as 01/01, 2000 (the
"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. The
Board of Directors of the Company (the "Board") recognizes that such
consideration can be a distraction to the Employee 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
employment and to motivate the Employee to maximize the value of the Company
upon a Change of Control for the benefit of its stockholders.
C. The Board believes that it is imperative to provide the Employee with
certain severance benefits upon Employee's termination of employment following a
Change of Control which provides the Employee with enhanced financial security
and provides incentive and encouragement to the Employee to remain with the
Company notwithstanding the possibility of a Change of Control.
D. Certain capitalized terms used in the Agreement are defined in
Section 6 below.
The parties hereto agree as follows:
1. Term of Agreement. This Agreement shall terminate upon the date
that all obligations of the parties hereto with respect to this Agreement have
been satisfied.
2. 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 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, benefits, damages, awards or
compensation other than as provided by this Agreement, or as may otherwise be
available in accordance with the Company's established employee plans and
practices or pursuant to other agreements with the Company.
3. Severance Benefits.
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(a) Involuntary Termination Other than for Cause; Voluntary
Termination for Good Reason; Death; Permanent and Total Disability. If the
Employee's employment is (i) involuntarily terminated by the Company other than
for Cause (as defined herein), (ii) voluntarily terminated by Employee for Good
Reason (as defined herein), (iii) terminates due to Employee's death or
"permanent and total disability" (as such term is defined under Internal Revenue
Code Section 22(e)(3) or its successor provision), in any case within twelve
(12) months following a Change of Control (as defined herein), then, subject
Section 3(e) below, the Employee shall receive the following severance benefits
from the Company:
(1) Severance Payments. Twelve equal monthly
payments yielding in aggregate an amount equal to one hundred percent (100%) of
the Employee's Annual Compensation (as defined herein);
(2) Medical Benefits. Payment of Employee's
Consolidated Budget Reconciliation Act of 1985 ("COBRA") premiums (the
"Company-Paid Coverage"). If Employee's health insurance coverage included
Employee's dependents immediately prior to the Change-in Control, such
dependents shall also be covered at Company's expense. Company-Paid Coverage
shall continue until the earlier of (a) twelve (12) months after the date of
termination of Employee's employment or (b) the date Employee becomes eligible
for coverage under another employer's health insurance plan. For purposes of
Title X of COBRA, the date of the "qualifying event" for Employee and his or her
dependents shall be the date upon which Employee's employment terminates.
(b) Timing of Severance Payments. Any severance payments to
which Employee is entitled under Section 3(a)(1) shall be paid by the Company to
the Employee (or to the Employee's successors in interest, pursuant to Section
7(b)) in cash installments with each installment being paid on or before the end
of month-long period following the Termination Date (e.g. on each monthly
"anniversary" of the Termination Date).
(c) Voluntary Resignation other than for Good Reason,
Termination For Cause. If the Employee's employment terminates by reason of the
Employee's voluntary resignation other than for Good Reason, or if the Employee
is terminated involuntarily by the Company for Cause, then the Employee shall
not be entitled to receive severance or other benefits except for those (if any)
as may then be established under the Company's then existing severance and
benefits plans and practices or pursuant to other agreements with the Company.
(d) Termination Apart from Change of Control. In the event
the Employee's employment is terminated for any reason, either prior to the
occurrence of a Change of Control or after the eighteen (18) month period
following a Change of Control, then the Employee shall be entitled to receive
severance and any other benefits only as may then be established under the
Company's existing severance and benefits plans and practices or pursuant to
other agreements with the Company.
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(e) Contingent Obligations. The Company's obligation to pay
the severance payments, or any portion thereof remaining unpaid, set forth in
Section 3(a)(1) above and pay the Company-paid Coverage, set forth in Section
3(a)(2) above, shall terminate immediately in the event that Employee breaches
either of Employee's obligations set forth in Section 9 below.
4. Attorney Fees, Costs and Expenses. The Company shall promptly
reimburse Employee, on a monthly basis, for the reasonable attorney fees, costs
and expenses incurred by the Employee in connection with any action brought by
Employee to enforce his rights hereunder, regardless of the outcome of the
action.
5. Limitation on Payments. In the event that the severance and
other benefits provided for in this Agreement or otherwise payable to the
Employee (i) constitute "parachute payments" within the meaning of Section 28OG
(as it may be amended or replaced) of the Internal Revenue Code of 1986, as
amended or replaced (the "Code") and (ii) but for this Section 5, would be
subject to the excise tax imposed by Section 4999 (as it may be amended or
replaced) of the Code (the "Excise Tax"), then the Employee's severance benefits
hereunder Section 3 shall be either
(a) delivered in full, or
(b) delivered as to such lesser extent which would result in no
portion of such severance benefits being subject to the
Excise Tax,
whichever of the foregoing amounts, taking into account the applicable federal,
state and local income taxes and the Excise Tax, results in the receipt by the
Employee on an after-tax basis, of the greatest amount of severance benefits,
notwithstanding that all or some portion of such severance benefits may be
taxable under the Excise Tax. Unless the Company and the Employee otherwise
agree in writing, any determination required under this Section 5 shall be made
in writing in good faith by the accounting firm serving as the Company's
independent public accountants immediately prior to the Change of Control (the
"Accountants"). In the event of a reduction in benefits hereunder, the Employee
shall be given the choice of which benefits to reduce. For purposes of making
the calculations required by this Section 5, the Accountants may make reasonable
assumptions and approximations concerning applicable taxes and may rely on
reasonable, good faith interpretations concerning the application of the Code.
The Company and the Employee shall furnish to the Accountants such information
and documents as the Accountants may reasonably request in order to make a
determination under this Section. The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section 5.
6. Definition of Terms. The following terms referred to in this
Agreement shall have the following meanings:
(a) Annual Compensation. "Annual Compensation" means an
amount equal to the sum of Employee's (i) annual Company salary at the highest
rate in effect in the twelve months immediately preceding the Change of Control,
and (ii) 100% of the Employee's annual target bonus as in effect immediately
prior to the Change of Control.
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(b) Cause. "Cause" shall mean either (i) any act of personal
dishonesty taken by the Employee in connection with his responsibilities as an
employee and intended to result in substantial personal enrichment of the
Employee, (ii) Employee's conviction of a felony, (iii) a willful act by the
Employee which constitutes gross misconduct and which is injurious to the
Company, or (iv) following delivery to the Employee of a written demand for
performance from the Company which describes the basis for the Company's belief
that the Employee has not substantially performed his duties, continued
substantial violations by the Employee of the Employee's obligations to the
Company which are demonstrably willful and deliberate on the Employee's part.
(c) Change of Control. "Change of Control" means the
occurrence of any of the following events:
(i) Any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the
"beneficial owner" (as defined in Rule l3d-3 under said Act) ("Beneficial
Owner"), directly or indirectly, of securities of the Company representing fifty
percent (50%) or more of the total voting power represented by the Company's
then outstanding voting securities;
(ii) A change in the composition of the Board
occurring within a two-year period, 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 the date hereof, or
(B) are elected, or nominated for election, to the Board with the affirmative
vote of at least a majority of the Incumbent Directors at the time of such
election or nomination;
(iii) The consummation of a merger or consolidation of
the Company with any other corporation, 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
or the entity that controls the Company or controls such surviving entity) at
least fifty percent (50%) of the total voting power represented by the voting
securities of the Company or such surviving entity or the entity that controls
the Company or controls such surviving entity outstanding immediately after such
merger or consolidation; or
(iv) The consummation of the sale or disposition by
the Company at least fifty percent (50%) of the Company's assets.
(d) Good Reason. "Good Reason" shall mean (i) without the
Employee's express written consent, a material reduction of the Employee's
duties, title, authority or responsibilities, relative to the Employee's duties,
title, authority or responsibilities as in effect immediately prior to such
reduction, or the assignment to Employee of such reduced duties, title,
authority or responsibilities; provided, however, that a reduction in duties,
title, authority or responsibilities solely by virtue of the Company being
acquired and made part of a larger entity (as, for example, when the Chief
Financial Officer of Auspex remains as such following a Change of Control and is
not made the Chief Financial Officer of the acquiring corporation) shall not
constitute "Good
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Reason;" (ii) without the Employee's express written consent, a material
reduction, without good business reasons, of the facilities and perquisites
(including office space and location) available to the Employee immediately
prior to such reduction; (iii) a reduction by the Company in the base salary of
the Employee as in effect immediately prior to such reduction; (iv) a material
reduction by the Company in the kind or level of employee benefits, including
bonuses, to which the Employee was entitled immediately prior to such reduction
with the result that the Employee's overall benefits package is materially
reduced; (v) the relocation of the Employee to a facility or a location more
than thirty (30) miles from the Employee's then present location, without the
Employee's express written consent; (vi) any purported termination of the
Employee by the Company which is not effected for Disability or for Cause, or
any purported termination for which the grounds relied upon are not valid; (vii)
the failure of the Company to obtain the assumption of this agreement by any
successors contemplated in Section 7(a) below; or (viii) any act or set of facts
or circumstances which would, under California case law or statute constitute a
constructive termination of the Employee.
(e) Termination Date. "Termination Date" shall mean (i) if
this Agreement is terminated by the Company for Disability, thirty (30) days
after notice of termination is given to the Employee (provided that the Employee
shall not have returned to the performance of the Employee's duties on a
full-time basis during such thirty (30)-day period), (ii) if the Employee's
employment is terminated by the Company for any other reason, the date on which
a notice of termination is given, provided that if within thirty (30) days after
the Company gives the Employee notice of termination, the Employee notifies the
Company that a dispute exists concerning the termination or the benefits due
pursuant to this Agreement, then the Termination Date shall be the date on which
such dispute is finally determined, either by mutual written agreement of the
parties, or a by final judgment, order or decree of a court of competent
jurisdiction (the time for appeal therefrom having expired and no appeal having
been perfected), or (iii) if the Agreement is terminated by the Employee, the
date on which the Employee delivers the notice of termination to the Company.
7. Successors.
(a) Company's Successors. Any successor to the Company
(whether direct or indirect and whether by purchase, 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. For all purposes under this Agreement, the term
"Company" shall include any successor to the Company's business and/or assets
which executes and delivers the assumption agreement described in this Section
7(a) or which becomes bound by the terms of this Agreement by operation of law.
(b) Employee's Successors. The terms of this Agreement and
all rights of the Employee 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.
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8. Notice.
(a) General. 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. In the case of the
Employee, mailed notices shall be addressed to him at the home address which he
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.
(b) Notice of Termination. Any termination by the Company
for Cause or by the Employee as a result of a voluntary resignation or an
Involuntary Termination shall be communicated by a notice of termination to the
other party hereto given in accordance with Section 8(a) of this Agreement. Such
notice shall indicate the specific termination provision in this Agreement
relied upon, shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination under the provision so indicated, and
shall specify the termination date (which shall be not more than 30 days after
the giving of such notice). The failure by the Employee to include in the notice
any fact or circumstance which contributes to a showing of Involuntary
Termination shall not waive any right of the Employee hereunder or preclude the
Employee from asserting such fact or circumstance in enforcing his rights
hereunder.
9. Employee Obligations. Notwithstanding any other obligations of
Employee to Company following his or her termination from the Company and
pursuant to any other agreements, Employee hereby agrees that he or she shall be
bound by the following restrictions for a period of one (1) year from the
Termination Date:
(a) Non-Solicitation. Employee agrees that he shall not
either directly or indirectly solicit, induce, attempt to hire, recruit,
encourage, take away, hire any employee of the Company or cause an employee to
leave their employment either for Employee or for any other entity; and
(b) Non Disparagement. The Employee agrees to refrain from
any defamation, libel or slander of the Company, or tortious interference with
the contracts and relationships of the Company.
10. Miscellaneous Provisions.
(a) No Duty to Mitigate. The Employee shall not be required
to mitigate the amount of any payment contemplated by this Agreement, nor 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
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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
represents the entire understanding of the parties hereto with respect to the
subject matter hereof and supersedes all prior arrangements and understandings
regarding same.
(d) Choice of Law. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of California.
(e) Severability. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.
(f) Withholding. All payments made pursuant to this
Agreement will be subject to withholding of applicable income and employment
taxes to the extent required by law.
(g) 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
set forth above.
COMPANY AUSPEX SYSTEMS, INC.
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/s/ XXXXX X. XXXXX
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Xxxxx X. Xxxxx, Chief Executive Officer
EMPLOYEE /s/ XXXX X. XXXXXXX
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