EXHIBIT 10.24
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement (the "Agreement") is made and entered
into effective as of September 10th, 2001, by and between Xxxxx X. Xxxx (the
"Employee") and XXXX Medical Systems, Inc., a Delaware corporation (the
"Company").
RECITALS
A. It is understood that another company or other entity may from time
to time consider the possibility of acquiring the Company or that a change in
control may otherwise occur, with or without the approval of the Company's Board
of Directors (the "Board"). The Board has identified the Employee, an officer of
the Company, as a key employee whose continued employment with the Company is
critical to the Company's future success and has determined that it is important
to provide Employee with an incentive to continue his or her employment with the
Company in the event that the Company consummates a Change of Control
transaction. For purposes of this Agreement, this shall include Employee's
employment in a majority-owned subsidiary or other surviving entity of an
acquiring Company.
B. To accomplish the foregoing objectives, the Board of Directors has
directed the Company, upon execution of this Agreement by the Employee, to agree
to the terms provided in this Agreement.
C. The Board believes that it is imperative to provide the Employee
with certain benefits upon a Change of Control and, under certain circumstances,
upon termination of the Employee's employment in connection with a Change of
Control, which benefits are intended to provide the Employee with financial
security and provide sufficient income and encouragement to the Employee to
remain with the Company notwithstanding the possibility of a Change of Control.
D. To accomplish the foregoing objectives, the Board of Directors has
directed the Company, upon execution of this Agreement by the Employee, to agree
to the terms provided in this Agreement.
E. Certain capitalized terms used in the Agreement are defined in
Section 3 below.
In consideration of the mutual covenants contained in this Agreement,
and in consideration of the continuing employment of Employee by the Company,
the parties agree as follows:
1. At-Will Employment. The Company and the Employee acknowledge
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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 or benefits, other than as
provided by this Agreement, or as may otherwise be available in accordance with
the terms of the Company's established employee plans and written policies at
the time of termination. The terms of this Agreement shall terminate upon the
earlier of (i) the
date on which Employee ceases to be employed as an officer of the Company, other
than as a result of an involuntary termination by the Company without Cause,
(ii) the date that all obligations of the parties hereunder have been satisfied,
or (iii) twelve (12) months after a Change of Control. A termination of the
terms of this Agreement pursuant to the preceding sentence shall be effective
for all purposes, except that such termination shall not affect the payment or
provision of compensation or benefits on account of a termination of employment
occurring prior to the termination of the terms of this Agreement.
2. Change of Control.
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(a) Stock Options and Restricted Stock. Subject to Section 4
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below, in the event of a Change of Control, on the effective date of the
transaction, fifty percent (50%) of all unvested options to purchase the
Company's securities held by the Employee (the "Option") prior to the effective
date of the Change of Control transaction shall become fully vested and
immediately exercisable and shall be exercisable to the extent so vested in
accordance with the provisions of the Option Agreement and Plan pursuant to
which such Option was granted and repurchase rights of the Company with respect
to fifty percent (50%) of the shares of restricted stock held by the Employee
purchased by the Employee pursuant to the terms of a Stock Purchase Agreement
shall immediately lapse. In addition, on each one month anniversary of the
effective date of the Change of Control transaction 1/12 of all remaining
unvested options held by the Employee shall become fully vested and immediately
exercisable and repurchase rights of the Company with respect to 1/12 of all
remaining shares of restricted stock held by Employee shall lapse.
(b) Termination Following A Change of Control. If the Employee's
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employment with the Company is involuntarily terminated at any time within
twelve (12) months after a Change of Control all unvested options held by the
Employee shall become fully vested and immediately exercisable and shall be
exercisable to the extent so vested in accordance with the provisions of the
Option Agreement and Plan pursuant to which such Option was granted and
repurchase rights of the Company with respect to all of the shares of restricted
stock held by the Employee purchased by the Employee pursuant to the terms of a
Stock Purchase Agreement shall immediately lapse.
(i) Voluntary Resignation and Termination for Cause. If the
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Employee voluntarily resigns from the Company or is terminated for Cause
following the Change of Control, then the Employee shall not be entitled to any
acceleration of the vesting of his or her unvested options or lapse of
repurchase rights with respect to his or her restricted stock.
3. Definition of Terms. The following terms referred to in this
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Agreement shall have the following meanings:
(a) Change of Control. "Change of Control" shall mean the
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consummation of any of the following events:
(i) Ownership. Any "Person" (as such term is used in
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Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is
or becomes the
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"Beneficial Owner" (as defined in Rule 13d-3 under said Act), 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 without the approval of the Board of Directors of the Company;
or
(ii) Merger/Sale of Assets. A merger or consolidation of
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the Company whether or not approved by the Board of Directors of the Company,
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) at least fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the stockholders
of the Company approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
of the Company's assets.
(b) Cause. "Cause" shall mean (i) gross negligence or
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willful misconduct in the performance of the Employee's duties to the Company
where such gross negligence or willful misconduct has resulted or is likely to
result in substantial and material damage to the Company or its subsidiaries,
(ii) repeated unexplained or unjustified absence from the Company, (iii) a
material and willful violation of any federal or state law; (iv) commission of
any act of fraud with respect to the Company; or (v) conviction of a felony or a
crime involving moral turpitude causing material harm to the standing and
reputation of the Company, in each case as determined in good faith by the Board
of Directors of the Company.
(c) Involuntary Termination. "Involuntary Termination" shall
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include any termination by the Company other than for Cause and the Employee's
voluntary termination, upon 30 days prior written notice to the Company,
following (i) a material reduction or change in job duties, responsibilities and
requirements inconsistent with the Employee's position with the Company and the
Employee's prior duties, responsibilities and requirements, taking into account
the differences in job title and duties that are normally occasioned by reason
of an acquisition of one company by another and that do not actually result in a
material change in duties, responsibilities and requirements inconsistent with
an employee's prior position with the acquired company; (ii) any reduction of
the Employee's base and cash bonus compensation (other than in connection with a
general decrease in base salaries for most similarly situated employees of the
successor corporation); or (iii) the Employee's refusal to relocate to a
location more than 50 miles from the Company's current location.
4. Limitation on Payments.
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(a) In the event that the severance benefits provided for in
this Agreement to the Employee (i) constitute "parachute payments" within the
meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the
"Code") and (ii) but for this Section, would be subject to the excise tax
imposed by Section 4999 of the Code, then the Employee's benefits under Section
2 shall be payable either: (i) in full, or (ii) as to such lesser amount which
would result in no portion of such severance benefits being subject to excise
tax under Section 4999 of the Code, whichever of the foregoing amounts, taking
into account the applicable federal, state and local income taxes and the excise
tax imposed by Section 4999,
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results in the receipt by the Employee on an after-tax basis, of the greatest
amount of benefits under Section 2, notwithstanding that all or some portion of
such benefits may be taxable under Section 4999 of the Code. Unless the Company
and the Employee otherwise agree in writing, any determination required under
this Section 4 shall be made in writing by the Company's independent public
accountants (the "Accountants"), whose determination shall be conclusive and
binding upon the Employee and the Company for all purposes. For purposes of
making the calculations required by this Section 4, the Accountants may make
reasonable assumptions and approximations concerning applicable taxes and may
rely on reasonable, good faith interpretations concerning the application of
Section 280G and 4999 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 4.
(b) The payment of severance benefits provided for in
this Agreement shall be subject to all applicable income, employment and social
tax rules and regulations.
5. Successors. Any successor to the Company (whether direct
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or indirect and whether by purchase, lease, 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. The terms of this Agreement and all of the Employee's
rights 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.
6. Notice. Notices and all other communications contemplated
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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. Mailed notices to the
Employee shall be addressed to the Employee at the home address which the
Employee 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.
7. Miscellaneous Provisions.
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(a) No Duty to Mitigate. The Employee shall not be
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required to mitigate the amount of any payment contemplated by this Agreement
(whether by seeking new employment or in any other manner), nor, except as
otherwise provided in this Agreement, 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
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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 either party of any breach
of, or of compliance with, any condition or provision of this
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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
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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
supersedes any agreement of the same title and concerning similar subject matter
dated prior to the date of this Agreement, and by execution of this Agreement
both parties agree that any such predecessor agreement shall be deemed null and
void.
(d) Choice of Law. The validity, interpretation,
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construction and performance of this Agreement shall be governed by the laws of
the State of California without reference to conflict of laws provisions.
(e) Severability. If any term or provision of this
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Agreement or the application thereof to any circumstance shall, in any
jurisdiction and to any extent, be invalid or unenforceable, such term or
provision shall be ineffective as to such jurisdiction to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining terms and provisions of this Agreement or the application of such
terms and provisions to circumstances other than those as to which it is held
invalid or unenforceable, and a suitable and equitable term or provision shall
be substituted therefor to carry out, insofar as may be valid and enforceable,
the intent and purpose of the invalid or unenforceable term or provision.
(f) Arbitration. Any dispute or controversy arising
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under or in connection with this Agreement may be settled at the option of
either party by binding arbitration in the County of Santa Clara, California, in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction. Punitive damages shall not be awarded.
(g) Legal Fees and Expenses. The parties shall each bear
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their own expenses, legal fees and other fees incurred in connection with this
Agreement, except that if the Employee prevails in any action brought in
connection with this Agreement, the Company shall reimburse the Employee for
legal fees incurred in connection with that action.
(h) No Assignment of Benefits. The rights of any person
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to payments or benefits under this Agreement shall not be made subject to option
or assignment, either by voluntary or involuntary assignment or by operation of
law, including (without limitation) bankruptcy, garnishment, attachment or other
creditor's process, and any action in violation of this subsection (h) shall be
void.
(i) Employment Taxes. All payments made pursuant to this
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Agreement will be subject to withholding of applicable income and employment
taxes.
(j) Assignment by the Company. The Company may assign
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its rights under this Agreement to an affiliate, and an affiliate may assign its
rights under this Agreement to another affiliate of the Company or to the
Company; provided, however, that no assignment shall be made if the net worth of
the assignee is less than the net worth of the Company at the
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time of assignment. In the case of any such assignment, the term "Company" when
used in a section of this Agreement shall mean the corporation that actually
employs the Employee.
(k) Counterparts. This Agreement may be executed in
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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
first above written.
XXXX MEDICAL SYSTEMS, INC. EMPLOYEE
By: /s/ Xxxxx Xxxxxxx /s/ Xxxxx Xxxx
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Title: President and CEO
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