1
EXHIBIT 10.15
AGREEMENT
This Agreement is made as of January 5, 1998 between TPG PARTNERS II, L.P.
("TPG"), a limited partnership and XXXXXX X. XXXXXXXX ("XXXXXXXX").
R E C I T A L S
A. TPG has entered into agreements under which it has the right to
acquire all or substantially all of the outstanding capital stock of Zilog,
Inc., a corporation (the "COMPANY") and hopes to complete the acquisition of
such stock ("ACQUISITION") no later than March 31, 1998 (the "OUTSIDE DATE").
If the Acquisition is completed, TPG would like Xxxxxxxx to become the
President and Chief Executive Officer ("CEO") of the Company.
X. Xxxxxxxx plans to resign as President of the Microelectronics Group
of Lucent Technologies, Inc. ("EMPLOYER"), with such resignation to be
effective as of January 6, 1998 (the "EFFECTIVE DATE"). Xxxxxxxx is willing to
enter into this Agreement and, if the Acquisitions is completed on or before
the Outside Date, to become CEO of the Company upon the terms herein.
NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:
1. PAYMENT OF BONUSES.
1.1 ONE MILLION DOLLAR BONUS. TPG will cause the Company to pay to
Xxxxxxxx the sum of One Million Dollars ($1,000,000.00) concurrently with the
completion of the Acquisition, if the Acquisition is completed by the Outside
Date. Such payment, subject only to such condition, is fully earned by Xxxxxxxx
on the date hereof and not subject to any other condition, except as provided
in Sections 1.6 and 2.
1.2 EIGHT MILLION DOLLAR BONUS. TPG agrees to cause the Company to
pay an additional Eight Million Dollars ($8,000,000.00) to Xxxxxxxx, together
with interest from the Effective Date until paid at the rate of eight percent
(8%) per annum, compounded annually (the "$8 MILLION BONUS"), on January 2,
2002 or, at Xxxxxxxx'x election, on the first to occur of the following events:
(i) change in control of the Company (as defined below); (ii) a "PUBLIC
OFFERING," which is the sale of any class of stock in the Company to the public
wherein the Company receives gross proceeds of at least $20 million (other than
a sale exclusively to then existing shareholders of the Company); and (iii) as
provided in Section 4.7 below. The parties agree that the foregoing amounts are
fully earned by Xxxxxxxx as of the Effective Date and are not subject to any
condition or restriction, except as provided in Sections 1.6 and 2.
-1-
2
1.3 EFFECT OF DEATH, DISABILITY OR FAILURE OF THE ACQUISITION TO
OCCUR BY THE OUTSIDE DATE. In the event Xxxxxxxx is prevented from serving as
CEO of the Company on account of his death or permanent disability (as defined
below) prior to the date of the Acquisition, or in the event the Acquisition is
not completed on or before the Outside Date. TPG will pay (or will cause the
Company to pay) Xxxxxxxx or his estate, as the case may be, (i) within 30 days
after the Outside Date Two Million Dollars ($2,000,000), less any amounts paid
to Xxxxxxxx pursuant to Section 1.1 above, plus (ii) on September 1, 1999, the
$8 Million Bonus, less any amounts paid to Xxxxxxxx pursuant to Section 1.2
above.
1.4 EFFECT OF ADVERSE COURT ORDER.
(a) In the event the Acquisition is completed by the Outside Date but
Xxxxxxxx is prevented from serving as CEO of the Company on account of a court
order, the parties shall cooperate and use their commercially reasonable efforts
to have such court order rescinded or terminated so that Xxxxxxxx may serve as
CEO as contemplated hereunder. In the event that by December 31, 1998 (or such
earlier date as TPG shall reasonably determine, based on its determination (in
the exercise of its sole discretion) that the chances of causing such court
order to be rescinded or overturned are poor) [the "TERMINATION DATE"], the
parties are unable, despite having used such commercially reasonable efforts,
to have such court order rescinded or terminated so that Xxxxxxxx may serve as
CEO of the Company, then (A) TPG shall pay, or shall cause the Company to pay
to Xxxxxxxx: (i) within ten days after the Termination Date the sum of
$2,000,000, less any amount previously paid pursuant to Section 1.1 above; and
(ii) on September 1, 1999, the $8 Million Bonus, less any amount previously
paid pursuant to Section 1.2 above; and (B) neither the Company nor TPG will
have any obligation to cause Xxxxxxxx, and Xxxxxxxx will have no obligation, to
be employed by the Company. In the event that the commencement date of the
employment of Xxxxxxxx by the Company is extended past the Outside Date by
reason of this paragraph, the dates of grant and exercisability of stock
options provided for herein shall be commensurately extended.
(b) Xxxxxxxx hereby represents and warrants to TPG that, to the best
of his knowledge, after consultation with counsel, the execution, delivery and
performance of this Agreement do not violate any provision of any agreement
which Xxxxxxxx has with the Employer. TPG acknowledges, however, that Xxxxxxxx
has an obligation to the Employer not to disclose certain confidential
information, that Xxxxxxxx intends to honor such obligation and that honoring
such obligation does not violate the foregoing representation and warranty made
by Xxxxxxxx. TPG further acknowledges that Xxxxxxxx is making no warranty or
representation to TPG or the Company concerning whether the "inevitable
disclosure" doctrine is applicable to the transactions contemplated herein.
1.5 MAXIMUM AMOUNTS PAYABLE. In no event shall Xxxxxxxx be entitled to
receive, pursuant to this Section 1, payments in excess of Nine Million Dollars
($9,000,000), if
-2-
3
he becomes CEO of the Company, and Ten Million Dollars ($10,000,000) if he does
not, in each case plus interest on the $8,000,000 payment described above.
1.6 RETURN OF BONUSES. Notwithstanding Sections 1.1.1.2 and 4.7,
Xxxxxxxx shall promptly return to TPG or the Company, as appropriate, all
payments made to him pursuant to this Section 1 and any shares of Company stock
issued to him pursuant to Section 4.3(a), and Xxxxxxxx shall forfeit any
compensation and shares which have not been paid or delivered to him hereunder,
should the Acquisition be completed on or before the Outside Date and any of
the following occur:
(a) Within one year of the date hereof, Xxxxxxxx both
terminates his employment with the Company pursuant to Section 4.7(e) below and
(without the written consent of the Company) becomes employed by the Employer
(other than an account of the acquisition of an interest in the Company by the
Employer); or
(b) Xxxxxxxx is prevented from becoming CEO of the Company by
a court order initiated by the Employer and, within one year after the date
hereof, Xxxxxxxx becomes employed by the Employer, without the written consent
of the Company; or
(c) Xxxxxxxx refuses to become CEO of the Company on the terms
of this Agreement upon the completion of the Acquisition, assuming that he (i)
is not prevented from doing so by court order or (ii) has not died or become
severely disabled.
In addition, Xxxxxxxx shall promptly return to the Company or TPG, as
appropriate, any portion of the $8 Million Bonus paid to him (and shall forfeit
any unpaid portion) if, after having been employed by the Company pursuant to
this Agreement, Xxxxxxxx terminates this Agreement pursuant to Section 4.7(e)
below prior to January 1, 1999.
1.7 OTHER EMPLOYMENT. In the event that the Acquisition is not
consummated by the Outside Date, TPG and Xxxxxxxx desire to negotiate in good
faith concerning additional potential employment opportunities for Xxxxxxxx
with TPG or its portfolio companies, appropriately considering and giving
credit for the payments described in this Section 1 against bonus compensation
that might be paid to Xxxxxxxx in connection with any such opportunity, it
being understood that Xxxxxxxx shall in no event to be obligated to accept any
such opportunity, nor shall anything in this subsection 1.7 be deemed to be a
condition to the receipt by Xxxxxxxx of any payment to which he is otherwise
entitled.
2. RESIGNATION FROM EMPLOYER: EFFECTIVENESS OF AGREEMENT. Xxxxxxxx
plans to tender his resignation to Employer, effective on the Effective Date,
in consideration of this Agreement. The parties acknowledge that by resigning,
Xxxxxxxx will forfeit considerable potential compensation, including certain
future stock option and restricted stock rights. The obligations of Xxxxxxxx
herein, as well as his rights to receive the payments and other benefits of
this Agreement, are contingent upon his resignation from the Employer becoming
effective on or before the Effective Date.
-3-
4
3. EMPLOYMENT BY THE COMPANY; INTERIM ARRANGEMENTS.
3.1 EMPLOYMENT. If TPG completes the Acquisition by the Outside
Date, then:
(a) TPG shall cause Xxxxxxxx to become CEO, and a member of the
Board of Directors, of the Company effective upon such completion;
(b) TPG shall cause the Company to adopt (and its Board of
Directors to approve) the employment of Xxxxxxxx on all of the terms set
out in Section 4 below; and
(c) Xxxxxxxx agrees to become the CEO of the Company and a
member of its Board of Directors, effective upon the completion of the
Acquisition, on all of the terms set out in Section 4 below.
3.2 INTERIM ARRANGEMENTS. From the Effective Date until the later
of (i) the earlier of the completion of the Acquisition by TPG or the Outside
Date or (ii) if Section 1.4 is applicable, the Termination Date:
(a) Xxxxxxxx agrees to assist TPG at its expense (including
travel, lodging and the like) in completing the Acquisition, including by
assisting in fund raising therefor;
(b) TPG agrees to cause the Company to pay Xxxxxxxx an amount
equal to $66,667.00 per month, prorated for partial months, payable on the
first and 15th day of each month, or payable in such other fashion as may be
mutually acceptable to the parties; and
(c) TPG agrees to cause the Company to pay or reimburse
Xxxxxxxx for the cost to Xxxxxxxx, with respect to such period, of COBRA
benefits and a continuation of his existing life insurance benefits with the
Employer which Xxxxxxxx elects to obtain.
In the event the Acquisition is not completed by the Outside Date, TPG shall
pay the amounts in clauses (b) and (c) above.
3.3 NON-PAYMENT OF EMPLOYER BONUS. Xxxxxxxx is entitled to receive
a bonus of $350,000 from the Employer on January 15, 1998. If the Employer does
not pay all of such bonus, TPG will pay Xxxxxxxx fifty percent (50%) of that
portion which the Employer does not pay, no later than the Outside Date.
4. TERMS OF THE EMPLOYMENT AGREEMENT. The employment agreement between
the Company and Xxxxxxxx shall have the following terms:
-4-
5
4.1 POSITION/TITLE/JOB DESCRIPTION. Xxxxxxxx will be the President
and Chief Executive Officer of the Company and shall report only to the Board
of Directors. He shall have such responsibilities and authority as are
customarily held by chief executive officers of corporations comparable to the
Company. Xxxxxxxx will devote his full business time to his duties and
responsibilities as an employee, officer and director of the Company, except as
provided in Section 4.8 below.
4.2 TERM. The term shall be five years. Xxxxxxxx'x employment with
the Company shall commence no later than the Outside Date unless extended as
contemplated in Section 1.4 and shall end on the fifth anniversary of the date
of commencement (the "Scheduled Termination Date").
4.3 COMPENSATION. As compensation, Xxxxxxxx shall receive:
(a) 50,000 shares of the voting common stock of the Company on
each of May 1, 1998, 1999, 2000 and 2001 (a total of 200,000 shares). Such
shares shall become fully deliverable (all 200,000 shares) and vested on
the earliest to occur of (i) a change in the control of the Company (as
defined below), (ii) Xxxxxxxx ceasing to be employed by the Company for
any reason, or (iii) a Public Offering.
(b) Within 30 days after completion of the Acquisition, the
Company will xxxxx Xxxxxxxx options, in form reasonably satisfactory to
Xxxxxxxx, to purchase an additional 1,000,000 shares of the voting common
stock of the Company (subject to restrictions on exercise as provided
below) and which expire ten years after the date of the grant of the
options. The exercise price for 500,000 shares of such stock shall be $5
per share and the exercise price for the other 500,000 shares shall be $10
per share. The options shall become exercisable in accordance with the
following schedule, provided that Xxxxxxxx is employed by the Company on
the date set forth in the schedule for exercise. Notwithstanding the
foregoing, the options shall become immediately exercisable upon the
occurrence of any of the events described in Sections 4.7(b), (c), (d),
(f) and (g) and Section 4.10, or in the event of a Public Offering.
DATE OF VESTING # SHARES PRICE PER SHARE
Completion of the Acquisition 125,000 1/2 @ $5
(if by the Outside Date) 1/2 @ $10
December 31, 1998 125,000 1/2 @ $5
1/2 @ $10
End of each calendar quarter of 62,500 1/2 @ $5*
1999, 2000 and 2001 1/2 @ $10*
Total: 1,000,000 *(on pari pasu basis)
-5-
6
The number of shares of common stock set out in clauses (a) and (b)
above have been arrived at based on Exhibit "A" hereto, and to the extent the
capital structure of the Company on the date of the Acquisition differs from
the assumptions set out in Exhibit "A" hereto, the number of shares of common
stock and options provided to Xxxxxxxx under clauses (a) and (b) above shall be
adjusted in an equitable manner to take into account such differences. With
respect to all Company stock held by Xxxxxxxx from time to time, the Company
will provide to Xxxxxxxx "piggyback" registration rights and, upon request of
Xxxxxxxx no later than February 1, 2001 (i) the right to cause the Company to
register such stock on May 1, 2001, or (ii) at the Company's option in lieu of
the obligation to so register, the payment by the Company to Xxxxxxxx of the
appraised fair market value of Xxxxxxxx'x shares of common stock of the Company
on such date, without any discount for the fact that such stock is illiquid and
represents a minority holding in the Company. The appraisal shall be performed
by a single investment banking firm selected by both parties, acting
reasonably, the cost for which will be borne by the Company. If such shares or
any portion thereof are registered, the Company shall pay all costs of
registration, although Xxxxxxxx shall be subject to the underwriters' discount.
All Company stock held by Xxxxxxxx or which he is entitled to purchase shall be
subject to the antidilution provisions set out in Exhibit "B" attached hereto.
(c) Base salary of at least $800,000 per year, payable in
equal monthly installments.
(d) The $8,000,000 Bonus.
(e) An annual bonus of at least $600,000 for 1998, which
shall be deemed earned and paid in January, 1999. The Board of Directors may
elect to award a larger bonus for 1998 in its discretion, based on Xxxxxxxx'x
performance.
The Board of Directors of the Company will establish target bonuses for
Xxxxxxxx each year during the term of the employment agreement, each of which
shall be a minimum of $600,000. Xxxxxxxx shall be considered each year for
increases in both his salary and target bonuses, as well as for the grant of
additional stock options, in each case based on Xxxxxxxx'x performance.
4.4 BOARD MEMBERSHIP. Xxxxxxxx shall at all times during the term
of the employment agreement be a member of the Board of Directors of the
Company and shall serve on each committee concerned with the strategic
direction of the Company.
4.5 LOCATION; RELOCATION.
(a) Xxxxxxxx will relocate from his New Jersey home to a
home selected by him in Northern California. Xxxxxxxx shall perform his
obligations to the Company from a base in Northern California, and shall not be
required to relocate again
-6-
7
during the term of the employment agreement, although he shall travel as the
job requires.
(b) The Company will pay the following relocation expenses
incurred by Xxxxxxxx in connection with his move to California, all of which
shall be "grossed up" so there will be no after-tax consequences to Xxxxxxxx
of having received the following relocation benefits:
(i) Xxxxxxxx'x reasonable relocation costs to
California, including moving costs;
(ii) The cost of appropriate temporary quarters for
Xxxxxxxx and his immediate family, in California, from the date of his
employment with the Company until he moves into a new home in California, but
no later than December 31, 1998;
(iii) Travel to and from California and New Jersey,
and lodging, meals and related expenses for Xxxxxxxx and his immediate family
until he moves into a permanent home in California, and for a period of two
years from the date hereof, reasonable travel for his immediate family to and
from New Jersey; and
(iv) The Company will cause Xxxxxxxx'x New Jersey
home to be bought for its appraised value (as determined by an independent
appraiser mutually agreed upon by the parties) no later than six (6) months
after the date Xxxxxxxx puts the home on the market. If Xxxxxxxx sells his
house in an arms' length transaction with the consent of the Company for less
than such amount before that time, the Company shall pay him the difference
between such appraised value and the proceeds of sale.
4.6 BENEFITS.
Xxxxxxxx will enjoy the following benefits:
(a) Medical, dental, life and disability insurance and
coverage in amounts and coverage at least equivalent to that which is customary
for chief executive officers in the Company's industry. Should such amounts and
coverage, in any area, be materially less, or cost Xxxxxxxx materially more,
than the amounts and coverage Xxxxxxxx currently enjoys with the Employer, the
Company will at Xxxxxxxx'x election provide him with the equivalent coverage
and amounts, and at the same cost to Xxxxxxxx, as he enjoyed with the Employer,
but only if, in the Company's reasonable judgment, the extra cost of doing so
is not excessive and the providing of such extra benefits does not unduly
disrupt the continuity or effectiveness of similar benefits made available to
other senior executives of the Company. Evidence of insurability shall be
waived, although Xxxxxxxx will agree to a standard physical examination.
-7-
8
(b) The Company will acquire a suitable automobile for Xxxxxxxx
during the term of the employment agreement and will replace it with
a new automobile once every two years. The Company will pay all
reasonable expenses associated with the automobile, including
liability insurance.
(c) The Company will provide customary directors' and officers'
liability insurance for Xxxxxxxx, the other members of the Board of
Directors and the other executives of the Company, and will provide
an indemnity of Xxxxxxxx with respect to his activities on behalf of
the Company in the form of Exhibit "C" attached hereto.
(d) The Company will purchase for Xxxxxxxx from the Employer
Xxxxxxxx'x home computer system and assist Xxxxxxxx in integrating
the system with the computer systems of the Company.
(e) The Company will adopt (and the Board of Directors will
approve) retirement, incentive and savings plans for its senior
executives which are recommended by Xxxxxxxx and reasonably
acceptable to the Board of Directors, and Xxxxxxxx will be entitled
to participate fully in such plans on the same basis as other senior
executives.
(f) Xxxxxxxx will be entitled to four weeks of paid vacation
each year, with the unlimited right to carry over unused vacation
days, and sick days and similar benefits consistent with policy
applicable to other senior executives of the Company.
(g) The Company will pay or reimburse Xxxxxxxx'x reasonable
expenses incurred in promoting the business of the Company and in
attending professional and educational events which are reasonably
related to the business of the Company. Such expenses may include, at
Xxxxxxxx'x election, initiation payments and dues at such clubs as
Xxxxxxxx shall reasonably request.
(h) The Company will create such qualified and non-qualified
stock option plans for its senior executives and others as are
recommended by Xxxxxxxx and reasonably acceptable to the Board of
Directors, and Xxxxxxxx shall be entitled to participate fully in
the award of options under such plans on the same basis as other
senior executives of the Company.
4.7 TERMINATION.
The employment agreement described in this Section 4 will be subject
to termination prior to the Scheduled Termination Date in the following
circumstances:
(a) For "cause" by the Company (as defined below), in which
case Xxxxxxxx shall be paid his base salary earned prior to the date of
termination, and all
-8-
9
stock options which have not become exercisable shall immediately expire
as of the commencement of business on the date of termination. In
addition, all stock options which are exercisable on the date of
termination must be exercised within six months after the date of
termination; otherwise, they shall be void.
(b) Prior to April 1, 1999, without cause by the Company, in
which event the Company shall, as a condition to termination, pay Xxxxxxxx
an amount equal to $2,400,000 (three times his base salary), plus
$1,800,000 (three times his first year's minimum bonus). In addition, all
stock options held by Xxxxxxxx which have not become exercisable will
automatically become exercisable in full, and both those stock options and
any other stock options Xxxxxxxx holds shall remain exercisable until the
later of (A) December 31, 2004 or (B) the earlier of (i) ten years from
the date of grant or (ii) a Public Offering of voting common stock of the
Company after the date of termination.
(c) After April 1, 1999, without cause by the Company, in which
event the Company shall, as a condition to termination, pay Xxxxxxxx an
amount equal to two times the base salary (but based on a base salary of
no less than $800,000) earned by Xxxxxxxx during the preceding twelve
months plus two times the last bonus (but based on a bonus of no less than
$600,000) earned by Xxxxxxxx. In addition, all stock options held by
Xxxxxxxx which have not become exercisable will automatically become
exercisable in full, and both those stock options and any other stock
options Xxxxxxxx holds shall remain exercisable until the later of (A)
December 31, 2004 or (B) the earlier of (i) ten years from the date of
grant or (ii) a Public Offering of voting common stock of the Company
after the date of termination.
(d) For "good reason" by Xxxxxxxx, which means that the Company
has committed a material breach of this agreement and has not cured such
breach within 30 days after notice of such breach from Xxxxxxxx. In such
event, the Company shall make the same payments to Xxxxxxxx as are set
forth in paragraph (b) above, and the other provisions of paragraph (b)
shall apply, in the event the termination is effective prior to April 1,
1999; otherwise, the Company shall make the same payments to Xxxxxxxx as
are set forth in paragraph (c) above, and the other provisions of paragraph
(c) shall apply.
(e) By Xxxxxxxx for any reason, in which case Xxxxxxxx shall be
paid his unpaid salary earned prior to the date of termination, and all
stock options which were exercisable immediately prior to such date of
termination shall remain exercisable until 24 months after the date of
termination. All stock options which were not exercisable at the date of
termination shall lapse, and Xxxxxxxx shall have no right to exercise them
at any time.
(f) On Xxxxxxxx'x death, in which case all base salary earned
to date but unpaid shall be paid, together with a bonus equal to the prior
year's bonus (or, if
-9-
10
applicable, the 1998 bonus), prorated for the year of death. All stock
options of Xxxxxxxx which have not become exercisable will be
automatically exercisable in full, and both those options and any other
stock options Xxxxxxxx holds shall remain exercisable until the later of
the dates set forth in subclauses (A) and (B) of clause (c) above.
(g) On Xxxxxxxx'x permanent disability (i.e., his inability
to perform his material responsibilities to the Company for a period of six
consecutive months), Xxxxxxxx shall be entitled to the benefits in section
4.6(a) for a period of five years thereafter and shall be further entitled
to the same benefits as in Section 4.7(f).
In addition to the above payments and provisions, and to the extent
not inconsistent therewith, on Xxxxxxxx ceasing to be an employee of the
Company, Xxxxxxxx shall be entitled to such payouts and benefits under the then
existing Company retirement and other fringe benefit programs as are normally
provided by the Company to its senior level employees in similar circumstances.
Lastly, the $8 Million Bonus (including accrued interest to the date of
payment) shall, at the option of Xxxxxxxx, become due and payable in full on
the later of the date of termination or September 1, 1999, in the event of a
termination pursuant to this Section 4.7, provided, that this sentence shall
apply to a termination pursuant to Section 4.7(e) only if, on the later of the
date of termination or September 1, 1999, the Company can pay such amount
without violating the provisions of any lending agreement it then has with an
institutional lender unaffiliated with TPG. If such amount cannot be paid on
such date for that reason, the Company shall pay such amount as soon as
possible, but in no event later than January 2, 2002.
4.8 OTHER ACTIVITIES. Xxxxxxxx shall be entitled to serve on the
Boards of Directors of other companies and in civic, cultural, philanthropic
and professional organizations, so long as such service does not detract from
Xxxxxxxx'x performance of his obligations to the Company. Without limiting the
generality of the foregoing, Xxxxxxxx shall be entitled to serve on the Boards
of Directors of the three companies upon whose boards he currently serves;
i.e., Lyondell Petrochemical Company, I-Stat Corporation and ITT Industries,
Inc. Xxxxxxxx is currently considering whether to resign from one of such
boards and to serve on the Dupont board. Except as described in this Section
4.8, without the consent of the Company's Board of Directors, Xxxxxxxx shall
not provide any services to any other entity during the terms of the employment
agreement.
4.9 NO OFFSET; EXCISE TAX.
(a) The payments and other consideration to Xxxxxxxx under this
Agreement shall be made without offset or deduction of any kind by the
Company, except customary deductions for taxes and other deductions
required by law.
(b) The amounts to which Xxxxxxxx is entitled hereunder shall
be increased to the extent necessary to pay (i) any excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the "CODE")
on any portion of the compensation or benefits payable to Xxxxxxxx in
connection with a change in control of
-10-
11
the Company (as defined below) and (ii) any such excise tax and any other
taxes imposed by the Code or under state or local law on the payments
provided for in this subsection 4.9(b). Xxxxxxxx and the Company agree to
reasonably cooperate to mitigate the amount of any such tax that might
become payable. The Company shall pay to Xxxxxxxx the payments, or portions
thereof, provided for in this subsection 4.9(b) not later than fifteen (15)
days prior to the date on which such taxes, or portions thereof, are due as
determined by the tax counsel referred to below. Tax counsel selected by
the Company and reasonably acceptable to Xxxxxxxx shall determine whether
the increase provided for by this subsection 4.9(b) shall be required,
based on the actual tax rates to which Xxxxxxxx is subject at the time.
Xxxxxxxx shall provide such counsel with such information as such counsel
reasonably requests in connection with such determination. All
determinations of tax counsel shall be binding on Xxxxxxxx and the Company.
Tax counsel shall determine that payments shall be increased only if, and
to the extent that, it is more likely than not that the payments or
benefits are subject to a tax. In making the determinations required by
this subsection 4.9(b), tax counsel may rely on benefit consultants,
accountants or other experts. The Company agrees to pay all reasonable fees
and expenses of such tax counsel. If, subsequent to the payment to Xxxxxxxx
of payments pursuant to this subsection 4.9(b), the tax counsel referred to
in this Section 4.9(b) reasonably determines that the amount of the
payments paid pursuant to this subsection 4.9(b) are greater than, or less
than, the amount required to have been paid, Xxxxxxxx shall reimburse the
Company an amount, or the Company shall pay to Xxxxxxxx an additional
amount, respectively, based upon such determination. In the event that tax
counsel referred to in this subsection 4.9(b) reasonably determines that
Xxxxxxxx is required to pay excise tax, interest or penalties to a
governmental taxing authority as a result of his non-payment of taxes where
such tax counsel had determined that such taxes need not be paid, the
Company shall pay to Xxxxxxxx an additional amount equal to (i) the amount
of such interest and/or penalties, (ii) the excise tax which was not paid
and (iii) any excise tax and any other taxes imposed by the Code or under
state or local law on the payments provided for in this sentence.
4.10 CHANGE IN CONTROL. Should there be a change in control of the
Company (as defined below) during the term of this Agreement (other than on
account of a Public Offering), at Xxxxxxxx'x election within one year after
such event, such event will be deemed to be a termination of Xxxxxxxx without
cause, in which case the provisions of Section 4.7(c) shall apply.
4.11 RESTRICTIVE COVENANT.
(a) Xxxxxxxx agrees not to disclose during the period of
employment to any person not employed by the Company or as Xxxxxxxx'x legal
counsel confidential information concerning the Company, including without
limitation any inventions, processes, methods of distribution or customers' or
Company trade secrets. At any time when he is not employed by the Company,
Xxxxxxxx agrees not to disclose to any person not employed by the Company or as
Xxxxxxxx'x legal counsel trade secrets of the
-11-
12
Company which he learned while employed by the Company, except as consented
to by the Company in writing. This clause (a) shall not preclude Xxxxxxxx
from use or disclosure of (i) non-proprietary or non-confidential
information, (ii) confidential information concerning the Company in the
conduct of Xxxxxxxx'x responsibilities hereunder or required by law or
court order or (iii) information which is available to or known by the
public.
(b) The parties hereto hereby declare that it is impossible to
measure in money the damages which will accrue to the Company by reason of
a failure by Xxxxxxxx to perform any of his obligations under this Section
4.11. Accordingly, if the Company institutes any action or proceeding to
enforce the provisions hereof, to the extent permitted by applicable law,
Xxxxxxxx hereby waives the claim or defense that the Company has an
adequate remedy at law, and Xxxxxxxx shall not urge in any such action or
proceeding the claim or defense that any such remedy at law exists.
(c) The restrictions in this Section 4.11 shall be in addition to any
restrictions imposed on Xxxxxxxx by statute or at common law.
5. ANNOUNCEMENT; CONFIDENTIALITY. TPG and Xxxxxxxx shall jointly
announce the existence of this Agreement and shall agree on all press releases
and information given to the media regarding this Agreement and Xxxxxxxx'x
leaving the Employer. Otherwise, the provisions of this Agreement shall be kept
strictly confidential by Xxxxxxxx and TPG and shall not be revealed to any
other person by either of them except (i) as required by law, (ii) to legal and
financial advisors; (iii) to the Company's Board of Directors after the
acquisition is completed, and (iv) as mutually agreed as necessary in
connection with the Company's business.
6. LITIGATION WITH EMPLOYER. In the unlikely event that the Employer (i)
contests Xxxxxxxx'x right to enter into, or carry out his obligations under,
this Agreement (including becoming employed by the Company), or (ii) attempts,
on account of this Agreement or Xxxxxxxx'x employment by the Company, to (A)
recover the value of options covering the stock of the Employer or its parent
which have been exercised by Xxxxxxxx prior to the date hereof or (B) deny to
Xxxxxxxx the benefit of any deferred compensation or non-qualified retirement
benefits to which Xxxxxxxx is entitled pursuant to the terms of such plan or
arrangement, then TPG agrees that it will at its expense provide legal counsel
reasonably acceptable to Xxxxxxxx to represent Xxxxxxxx in connection with any
discussions, litigation or other proceeding in connection therewith.
7. PREPARATION FEES. TPG agrees to pay, or reimburse Xxxxxxxx for, the
reasonable expenses incurred by Xxxxxxxx in negotiating and documenting this
Agreement and the Shareholders' Agreement described in Section 10 below,
including the reasonable fees and costs of attorneys and consultants.
-12-
13
8. MISCELLANEOUS. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and may be amended
solely by a written instrument executed by both parties. The payments and other
consideration to Xxxxxxxx under this Agreement shall be made without offset or
deduction of any kind. This Agreement is binding upon and shall be enforceable
by the parties hereto and their respective heirs, successors and assigns, and
shall be construed in accordance with and governed by the laws of California,
without regard to conflict of law principles. In the event of litigation or any
other proceeding between the parties, or Xxxxxxxx and the Company, arising from
or pertaining to this Agreement or the employment agreement, the prevailing
party in such litigation or other proceeding shall be entitled to recover from
the non-prevailing party the prevailing party's reasonable attorneys' fees,
costs and expenses (not limited to taxable costs) including all expenses of
experts, appeal and actions to enforce awards. This Agreement may be executed in
counterparts, including by the exchange of facsimile signature pages containing
the signatures of one or both parties, and each counterpart so executed and
delivered shall constitute the same agreement.
9. DEFINITIONS.
(a) "Cause" shall mean (i) the willful and continued failure of
Xxxxxxxx substantially to perform his duties and responsibilities under
this Agreement (other than by reason of permanent disability or death),
after the Board of Directors of the Company delivers to Xxxxxxxx written
demand for substantial performance that identifies the manner in which the
Board of Directors believes that Xxxxxxxx has not substantially performed
hereunder, and the failure of Xxxxxxxx to cease such willful and continued
failure within 30 days after having received such demand and (ii)
conviction of a felony involving moral turpitude.
(b) "Change in control" of the Company shall mean the occurrence of
any of the following events: (i) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions, directly
or indirectly) of all or substantially all of the assets of the Company to
any Person or group of related persons for purposes of Section 13(d) of the
Securities Exchange Act of 1934 (a "Group"), together with any affiliates
thereof (other than to TPG or any of its affiliates, unless the transfer to
TPG and its affiliates is part of a larger transaction which would
otherwise cause a change in control to occur); (ii) the approval by the
holders of capital stock of the Company of any plan or proposal for the
liquidation or dissolution of the Company; (iii) any Person or Group (other
than TPG or its affiliates) shall become the owner, directly or indirectly,
beneficially or of record of shares representing more of the aggregate
voting power of the issued and outstanding stock entitled to vote in the
elections of directors (the "VOTING STOCK") of the Company than TPG and its
affiliates own, directly or indirectly, beneficially or of record; (iv) the
replacement of a majority of the Board of Directors of the Company over a
two-year period from the directors who constituted the Board of Directors
of the Company at the beginning of such two-year period and such
replacement shall not have been approved by a vote of at least a majority
of the Board of Directors of the Company then still in office who either
were members of such Board of Directors at
-13-
14
the beginning of such two-year period or whose election as a member of
such Board of Directors was previously so approved or who were nominated
by, or designees of, TPG or its Affiliates; (v) any person or Group other
than TPG or its affiliates shall have acquired the power to elect a
majority of the members of the Board of Directors of the Company; or (vi)
a merger or consolidation of the Company with another entity in which
holders of the common stock of the Company immediately prior to the
consummation of the transaction hold, directly or indirectly, immediately
following the consummation of the transaction less than 50% of the common
equity interest in the surviving corporation in such transaction.
(c) "Person" shall mean any individual, partnership, corporation,
limited liability company, unincorporated organization, trust or joint
venture, or a governmental agency or political subdivision thereof.
10. SHAREHOLDERS AGREEMENT. TPG has furnished Xxxxxxxx with a
proposed shareholders' agreement between TPG and certain other persons who
will be shareholders (other than Xxxxxxxx) of the Company immediately
following completion of the Acquisition. Xxxxxxxx agrees to review such
agreement carefully, and TPG and Xxxxxxxx agree to negotiate in good faith
with a view to making Xxxxxxxx a party to the shareholders' agreement, on
the same basis as Warburg Pincus, on the date the Acquisition is completed.
If Xxxxxxxx becomes a party, the parties anticipate that the registration
rights of Xxxxxxxx contained in Section 4.3(b) above and the antidilution
rights described in Exhibit "B" hereto would be superceded by the
shareholders' agreement.
-14-
15
11. SEVERABILITY. Following the completion of the Acquisition, each
party agrees to consider in good faith whether to sever this Agreement into
two separate agreements, one containing essential terms of employment and the
other containing the other terms contained herein.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
TPG PARTNERS II, L.P.
By: TPG GenPar II,L.P.
its general partner
By: TPG Advisors II, Inc.
its general partner
By: /s/ XXXXX X. XXXXXXX
------------------------------------
Xxxxx X. Xxxxxxx
Vice President
/s/ XXXXXX X. XXXXXXXX
----------------------------------------
XXXXXX X. XXXXXXXX
-15-
