Change of Control Agreement
Exhibit
10.2
This
Change of Control Agreement (“Agreement”) between Stratus Properties Inc., a
Delaware corporation (the “Company”), and Xxxx X. Xxxxx (the “Executive”) is
dated effective as of January 26, 2007 (the “Agreement Date”).
ARTICLE
I
Definitions
1.1 Board.
“Board”
shall mean the Board of Directors of the Company, or if after a Change of
Control, the Post-Transaction Corporation.
1.2 Cause.
“Cause”
shall mean:
(a) The
Executive’s willful and continued failure to perform substantially the
Executive’s duties with the Post-Transaction Corporation or its Affiliates
(other than any such failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance is delivered to
the
Executive by the Board, which specifically identifies the manner in which the
Board believes that the Executive has not substantially performed the
Executive’s duties;
(b) The
willful engaging by the Executive in conduct that is demonstrably and materially
injurious to the Post-Transaction Corporation or any or its Affiliates,
monetarily or otherwise; or
(c) The
final
conviction of the Executive or an entering of a guilty plea or a plea of no
contest by the Executive to a felony.
For
purposes of this provision, no act or failure to act, on the part of the
Executive, will be considered “willful” unless it is done, or omitted to be
done, by the Executive in bad faith or without a reasonable belief that the
act
or omission was in the best interest of the Post-Transaction Corporation or
its
Affiliates. Any act, or failure to act, based on authority given pursuant to
a
resolution duly adopted by the Board or the advice of counsel to the
Post-Transaction Corporation or its Affiliates will be conclusively presumed
to
be done, or omitted to be done, by the Executive in good faith and in the best
interests of the Post-Transaction Corporation or its Affiliates. The termination
of employment of the Executive will not be deemed to be for Cause unless and
until there has been delivered to the Executive a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters of the entire
membership of the Board at a meeting of the Board called and held for such
purpose (after reasonable notice is provided to the Executive and the Executive
is given an opportunity, together with counsel, to be heard before the Board),
finding that, in the good faith opinion of the Board, the Executive has engaged
in the conduct described in subparagraph (a), (b) or (c) above, and specifying
the particulars of such conduct.
1.3 Change
of Control.
(a)“Change
of Control” means (capitalized terms not otherwise defined will have the
meanings ascribed to them in paragraph (b) below):
(i) the
acquisition by any Person together with all Affiliates of such Person, of
Beneficial Ownership of the Threshold Percentage or more; provided, however,
that for purposes of this Section 1.3(a)(i), the following will not constitute
a
Change of Control:
(A) any
acquisition (other than a “Business Combination,” as defined below, that
constitutes a Change of Control under Section 1.3(a)(iii) hereof) of Common
Stock directly from the Company,
(B) any
acquisition of Common Stock by the Company or its subsidiaries,
(C) any
acquisition of Common Stock by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation or other entity
controlled by the Company, or
(D) any
acquisition of Common Stock pursuant to a Business Combination that does not
constitute a Change of Control under Section 1.3(a)(iii) hereof; or
(ii) individuals
who, as of the effective date of this Agreement, constitute the Board (the
“Incumbent Board”) cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent
to
the effective date of this Agreement whose election, or nomination for election
by the Company’s shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board will be considered a member
of
the Incumbent Board, unless such individual’s initial assumption of office
occurs as a result of an actual or threatened election contest with respect
to
the election or removal of directors or any other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the
Incumbent Board; or
(iii) the
consummation of a reorganization, merger or consolidation (including a merger
or
consolidation of the Company or any direct or indirect subsidiary of the
Company), or sale or other disposition of all or substantially all of the assets
of the Company (a “Business Combination”), in each case, unless, immediately
following such Business Combination:
(A) the
individuals and entities who were the Beneficial Owners of the Company Voting
Stock immediately prior to such Business Combination have direct or indirect
Beneficial Ownership of more than 50% of the then outstanding shares of common
stock, and more than 50% of the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors,
of
the Post-Transaction Corporation, and
(B) no
Person
together with all Affiliates of such Person (excluding the Post-Transaction
Corporation and any employee benefit plan or related trust of either the
Company, the Post-Transaction Corporation or any subsidiary of either
corporation) Beneficially Owns 30% or more of the then outstanding shares of
common stock of the Post-Transaction Corporation or 30% or more of the combined
voting power of the then outstanding voting securities of the Post-Transaction
Corporation, and
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(C) at
least
a majority of the members of the board of directors of the Post-Transaction
Corporation were members of the Incumbent Board at the time of the execution
of
the initial agreement, and of the action of the Board, providing for such
Business Combination; or
(iv) approval
by the shareholders of the Company of a complete liquidation or dissolution
of
the Company.
(b) As
used
in this Section 1.3 and elsewhere in this Agreement, the following terms have
the meanings indicated:
(i) Affiliate:
“Affiliate” means a Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
another specified Person.
(ii) Beneficial
Owner: “Beneficial Owner” (and variants thereof), with respect to a security,
means a Person who, directly or indirectly (through any contract, understanding,
relationship or otherwise), has or shares (A) the power to vote, or direct
the
voting of, the security, and/or (B) the power to dispose of, or to direct the
disposition of, the security.
(iii) Company
Voting Stock: “Company Voting Stock” means any capital stock of the Company that
is then entitled to vote for the election of directors.
(iv) Majority
Shares: “Majority Shares” means the number of shares of Company Voting Stock
that could elect a majority of the directors of the Company if all directors
were to be elected at a single meeting.
(v) Person:
“Person” means a natural person or entity, and will also mean the group or
syndicate created when two or more Persons act as a syndicate or other group
(including without limitation a partnership, limited partnership, joint venture
or other joint undertaking) for the purpose of acquiring, holding, or disposing
of a security, except that “Person” will not include an underwriter temporarily
holding a security pursuant to an offering of the security.
(vi) Post-Transaction
Corporation: Unless a Change of Control includes a Business Combination,
“Post-Transaction Corporation” means the Company after the Change of Control. If
a Change of Control includes a Business Combination, “Post-Transaction
Corporation” will mean the corporation or other entity resulting from the
Business Combination unless, as a result of such Business Combination, an
ultimate parent entity controls the Company or all or substantially all of
the
Company’s assets either directly or indirectly, in which case, “Post-Transaction
Corporation” will mean such ultimate parent entity.
(vii) Threshold
Percentage: “Threshold Percentage” means 30% of all then outstanding Company
Voting Stock.
1.4 Code.
“Code”
shall mean the Internal Revenue Code of 1986, as amended from time to
time.
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1.5 Common
Stock:
“Common
Stock” shall mean the common stock, $0.01 par value per share, of the
Company.
1.6 Company.
As used
in this Agreement, “Company” shall mean the Company as defined above and any
successor to or assignee of (whether direct or indirect, by purchase, merger,
consolidation or otherwise) all or substantially all of the assets of the
Company.
1.7 Disability.
“Disability” shall mean:
(a) A
disability entitling the Executive to receive benefits under a long-term
disability insurance policy maintained by the Post-Transaction Corporation
or an
Affiliate in effect at the time either because he is totally disabled or
partially disabled, as such terms are defined in such policy in effect as of
the
Agreement Date or as similar terms are defined in any successor policy.
(b) If
there
is no long-term disability plan in effect covering the Executive, and if (i)
a
physical or mental illness renders the Executive incapable of satisfactorily
discharging his duties and responsibilities to the Post-Transaction Corporation
or an Affiliate for a period of 90 consecutive days, and (ii) such incapacity
is
certified in writing by a duly qualified physician chosen by the
Post-Transaction Corporation or an Affiliate and reasonably acceptable to the
Executive or his legal representatives, then the Board will have the power
to
determine that the Executive has become disabled. If the Board makes such a
determination, the Post-Transaction Corporation or its Affiliate will have
the
continuing right and option, during the period that such disability continues,
and by notice given in the manner provided in this Agreement, to terminate
the
status of Executive as an officer and employee. Any such termination will become
effective 60 days after such notice of termination is given, unless within
such
60-day period, the Executive becomes capable of rendering services of the
character contemplated hereby (and a physician chosen by the Post-Transaction
Corporation or an Affiliate and reasonably acceptable to the Executive or his
legal representatives so certifies in writing) and the Executive in fact resumes
such services.
(c) The
“Disability Effective Date” will mean the date on which termination of
Executive’s status as an officer and employee becomes effective due to
Disability.
1.8 Good
Reason.
“Good
Reason” shall mean:
(a) Any
failure of the Post-Transaction Corporation to provide the Executive with the
position, authority, duties and responsibilities at least commensurate in all
material respects with the most significant of those held, exercised and
assigned at any time during the 120-day period immediately preceding the Change
of Control. Executive’s position, authority, duties and responsibilities after a
Change of Control shall not be considered commensurate in all material respects
with Executive’s position, authority, duties and responsibilities prior to a
Change of Control unless after the Change of Control the Executive holds an
equivalent position in the Post-Transaction Corporation;
(b) The
assignment to the Executive of any duties inconsistent in any material respect
with Executive’s position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as contemplated by Section
2.1(b) of this Agreement, or any
4
other
action that results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith that is remedied within 10 days after
receipt of written notice thereof from the Executive to the Post-Transaction
Corporation;
(c) Any
failure by the Post-Transaction Corporation or its Affiliates to comply with
any
of the provisions of this Agreement, other than an isolated, insubstantial
and
inadvertent failure not occurring in bad faith that is remedied within 10 days
after receipt of written notice thereof from the Executive to the
Post-Transaction Corporation; or
(d) The
Post-Transaction Corporation or its Affiliates requiring the Executive to be
based at any office or location other than as provided in Section 2.1(b)(ii)
hereof or requiring the Executive to travel on business to a substantially
greater extent than required immediately prior to the Change of
Control.
For
purposes of this Section 1.4, any determination of “Good Reason” made by the
Executive in good faith and based upon his reasonable belief and understanding
shall be conclusive.
1.9 Termination
Date.
“Termination Date” shall mean, if Executive’s status as an officer and employee
is terminated (i) by reason of Executive’s death, the date of Executive’s death,
(ii) by reason of Disability, the Disability Effective Date, (iii) by the
Company other than by reason of death or Disability, the date of delivery of
the
notice of termination or any later date specified in the notice of termination,
which date will not be more than 30 days after the giving of the notice, or
(iv)
by the Executive other than by reason of death, the date of delivery of the
notice of termination or any later date specified in the notice of termination,
which date will not be more than 30 days after the giving of the
notice.
ARTICLE
II
Change
of Control Benefit
2.1 Employment
Term and Capacity after Change of Control.
(a)
This
Agreement shall commence on the Agreement Date and continue in effect through
January 26, 2010. If the Executive continues to serve as an officer of the
Company and a Change of Control occurs on or before January 26, 2010, then
the
Executive’s employment term (the “Employment Term”) shall continue through the
later of the third anniversary of the Change of Control, subject to any earlier
termination of Executive’s status as an officer and employee pursuant to this
Agreement.
(b) After
a
Change of Control and during the Employment Term, (i) the Executive’s position
(including status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and assigned at
any
time during the 120-day period immediately preceding the Change of Control
and
(ii) the Executive’s services shall be performed at the location where the
Executive was employed immediately preceding the Change of Control or any office
or location less than 35 miles from such location. Executive’s position,
authority, duties and responsibilities after a Change of Control shall not
be
considered commensurate in all material respects with Executive’s position,
authority, duties and
5
responsibilities
prior to a Change of Control unless after the Change of Control the Executive
holds an equivalent position in the Post-Transaction Corporation.
2.2 Compensation
and Benefits.
During
the Employment Term, the Executive shall be entitled to the following
compensation and benefits:
(a) Salary.
An
annual salary (“Base Salary”) at the highest rate in effect for the Executive at
any time during the 120-day period immediately preceding the Change of Control,
payable to the Executive at such intervals no less frequent than the most
frequent intervals in effect at any time during the 120-day period immediately
preceding the Change of Control or, if more favorable to the Executive, the
intervals in effect at any time after the Change of Control for other most
senior executives of the Post-Transaction Corporation and its
Affiliates.
(b) Bonus.
Executive shall be entitled to participate in an annual incentive bonus program
applicable to other most senior executives of the Post-Transaction Corporation
and its Affiliates but in no event shall such program provide the Executive
with
incentive opportunities less favorable than the most favorable of those provided
by the Company and its Affiliates for the Executive under the Company’s annual
cash plan as in effect for Executive at any time during the 120-day period
immediately preceding the Change of Control or, if more favorable to the
Executive, those provided generally at any time after the Change of Control
to
other most senior executives of the Post-Transaction Corporation and its
Affiliates. Any such bonus shall be paid in cash no later than 90 days following
the close of the fiscal year for which it is earned.
(c) Fringe
Benefits.
The
Executive shall be entitled to fringe benefits (including, but not limited
to,
automobile allowance, air travel, and reimbursement for club membership dues)
in
accordance with the most favorable agreements, plans, practices, programs and
policies of the Company and its Affiliates in effect for the Executive at any
time during the 120-day period immediately preceding the Change of Control
or,
if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other most senior executives of the Post-Transaction
Corporation and its Affiliates.
(d) Expenses.
The
Executive shall be entitled to receive prompt reimbursement for all reasonable
business expenses (including food and lodging) incurred by the Executive in
accordance with the most favorable agreements, policies, practices and
procedures of the Company and its Affiliates in effect for the Executive at
any
time during the 120-day period immediately preceding the Change of Control
or,
if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other most senior executives of the Post-Transaction
Corporation and its Affiliates.
(e) Incentive,
Savings and Retirement Plans.
The
Executive shall be entitled to participate in all incentive, savings and
retirement plans, practices, policies and programs applicable generally to
other
most senior executives of the Post-Transaction Corporation and its Affiliates,
but in no event shall such plans, practices, policies and programs provide
the
Executive with incentive opportunities (measured with respect to both regular
and special incentive opportunities, to the extent, if any, that such
distinction is applicable), savings
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opportunities
and retirement benefit opportunities, in each case, less favorable than the
most
favorable of those provided by the Company and its Affiliates for the Executive
under any agreements, plans, practices, policies and programs as in effect
at
any time during the 120-day period immediately preceding the Change of
Control.
(f) Welfare
Benefit Plans.
The
Executive and the Executive’s family shall be eligible for participation in and
shall receive all benefits under welfare benefit plans, practices, policies
and
programs provided by the Post-Transaction Corporation and its Affiliates
(including, without limitation, medical, prescription, dental, disability,
employee life, group life, accidental death and travel accident insurance plans
and programs) to the extent applicable generally to other most senior executives
of the Post-Transaction Corporation and its Affiliates, but in no event shall
such plans, practices, policies and programs provide the Executive with
benefits, in each case, less favorable than the most favorable of any
agreements, plans, practices, policies and programs of the Company and its
Affiliates in effect for the Executive at any time during the 120-day period
immediately preceding the Change of Control.
(g) Indemnification
and Insurance.
The
Post-Transaction Corporation shall indemnify the Executive, to the fullest
extent permitted by applicable law, for any and all claims brought against
him
arising out his services during or prior to the Employment Term. In addition,
the Post-Transaction Corporation shall maintain a directors’ and officers’
insurance policy covering the Executive substantially in the form of the policy
maintained by the Company and its Affiliates at any time during the 120-day
period immediately preceding the Change of Control or, if more favorable to
the
Executive, as provided generally at any time thereafter with respect to other
most senior executives of the Post-Transaction Corporation and its
Affiliates.
(h) Office
and Support Staff.
The
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company and its Affiliates at any time during the
120-day period immediately preceding the Change of Control or, if more favorable
to the Executive, as provided generally at any time thereafter with respect
to
other most senior executives of the Post-Transaction Corporation and its
Affiliates.
(i) Vacation.
The
Executive shall be entitled to paid vacation in accordance with the most
favorable agreements, plans, policies, programs and practices of the Company
and
its Affiliates as in effect for the Executive at any time during the 120-day
period immediately preceding the Change of Control or, if more favorable to
the
Executive, as in effect generally at any time thereafter with respect to other
most senior executives of the Post-Transaction Corporation and its
Affiliates.
2.3 Obligations
upon Termination after a Change of Control.
(a) Termination
as a Result of Death, Disability or Retirement.
If,
after a Change of Control and during the Employment Term, (1) the Executive’s
status as an officer and employee is terminated by reason of the Executive’s
death, (2) the Post-Transaction Corporation terminates the Executive’s status as
an officer and employee by reason of Executive’s Disability,
7
or
(3)
the Executive retires and terminates his status as an officer and employee,
then, subject to Section 2.3(f):
(i) The
Post-Transaction Corporation or an Affiliate will pay to the Executive or his
legal representatives the Executive’s Base Salary earned through the Termination
Date to the extent not previously paid (the “Accrued Salary”);
(ii) The
Post-Transaction Corporation or an Affiliate will pay to the Executive or his
legal representatives a pro rata bonus in an amount determined by calculating
the average of the annual bonus received by the Executive in the three most
recently completed fiscal years prior to the Termination Date, then multiplying
such bonus amount by the fraction obtained by dividing the number of days in
the
year through the Termination Date by 365 (the “Pro Rata Bonus”), subject to any
requirement under Section 409A of the Code that such payment be delayed for
six
months following termination of employment; and
(iii) The
Post-Transaction Corporation or an Affiliate will pay or deliver, as
appropriate, all other benefits earned by the Executive or accrued for his
benefit pursuant to any employee benefit plans maintained by the
Post-Transaction Corporation or its Affiliates with respect to services rendered
by the Executive prior to the Termination Date.
(b) Termination
by Company for Cause; by Executive for other than Good Reason.
If,
after a Change of Control and during the Employment Term, the Executive’s status
as an officer and employee is terminated by the Post-Transaction Corporation
or
an Affiliate for Cause, or by the Executive for other than Good Reason, the
Post-Transaction Corporation or Affiliate will pay to the Executive the Accrued
Salary without further obligation to the Executive other than for obligations
by
law and obligations for any benefits earned by the Executive or accrued for
his
benefit pursuant to any employee benefit plans maintained by the
Post-Transaction Corporation or Affiliate with respect to services rendered
by
the Executive prior to the Termination Date.
(c) Termination
by Company for Reasons other than Death, Disability or Cause; by Executive
under
Certain Circumstances.
If,
after a Change of Control and during the Employment Term, (1) the
Post-Transaction Corporation or an Affiliate terminates the Executive’s status
as an officer and employee other than for Cause, death or Disability, or (2)
the
Executive terminates his status as an officer and employee for Good Reason,
then, subject to Section 2.3(f) hereof:
(i) The
Post-Transaction Corporation or an Affiliate will pay to the Executive the
Accrued Salary;
(ii) The
Post-Transaction Corporation or an Affiliate will pay to the Executive in a
lump
sum in cash on the first business day that is more than six months after the
Termination Date (A) the Pro Rata Bonus, and (B) an amount equal to 2.99 times
the sum of (x) the Executive’s Base Salary in effect at the Termination Date and
(y) the highest annual bonus awarded to the Executive during the three fiscal
years immediately preceding the Termination Date (excluding any payments for
long-term incentives);
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(iii) For
the
period commencing on the Termination Date and ending on the earlier of (A)
December 31st
of the
first calendar year following the calendar year in which the Termination Date
occurs, or (B) the date that the Executive accepts new employment (the
“Continuation Period”), the Post-Transaction Corporation or an Affiliate will at
its expense maintain and administer for the continued benefit of Executive
all
insurance and welfare benefit plans in which Executive was entitled to
participate as an employee as of the Termination Date; provided that Executive’s
continued participation is possible under the general terms and provisions
of
such plans and all applicable laws. The coverage and benefits (including
deductibles and costs) provided under any such benefit plan in accordance with
this paragraph during the Continuation Period will be no less favorable to
Executive than the most favorable of such coverages and benefits as of the
Termination Date; provided, however, in the event of the Disability of Executive
during the Continuation Period, benefits will, to the maximum extent possible,
not be paid for the Continuation Period but will instead commence immediately
following the end of the Continuation Period. If Executive’s participation in
any such benefit plan is barred or any such benefit plan is terminated, the
Post-Transaction Corporation or its Affiliate will provide Executive with
benefits substantially similar or comparable in value to those Executive would
otherwise have been entitled to receive under such plans. The Executive
acknowledges that if medical expenses are incurred during the Continuation
Period but reimbursed after the end of the second calendar year following the
calendar year in which the Termination Date occurs, then the Executive may
be
subject to taxes, penalties and interest under Section 409A of the Code. The
Executive agrees to submit (or cause healthcare providers to submit) for payment
or reimbursement all medical expenses covered under applicable plans that are
incurred during the Continuation Period no later than July 1st
of the
second calendar year following the calendar year in which the Termination Date
occurs, and the Post-Transaction Corporation or its Affiliate shall cause such
covered medical expenses to be reimbursed by December 31st
of such
year. At the end of the Continuation Period, the Executive will have the option
to have assigned to him, at no cost and with no apportionment of prepaid
premiums, any assignable insurance owned by the Post-Transaction Corporation
or
its Affiliate that relates specifically to the Executive. To the maximum extent
permitted by law, the Executive will be eligible for coverage under COBRA at
the
end of the Continuation Period or earlier cessation of the Post-Transaction
Corporation’s obligation under the foregoing provisions of this paragraph;
(iv) All
benefits that the Executive is entitled to receive pursuant to benefit plans
maintained by the Post-Transaction Corporation or an Affiliate under which
benefits are calculated based upon years of service or age will be calculated
by
treating the Executive as having attained two additional years of age and as
having provided two additional years of service as of the Termination Date;
and
(v) The
Post-Transaction Corporation or an Affiliate will pay or deliver, as
appropriate, all other benefits earned by the Executive or accrued for his
benefit pursuant to any employee benefit plans maintained by the
Post-Transaction Corporation or Affiliate with respect to services rendered
by
the Executive prior to the Termination Date.
(d) No
Acceleration of Payments.
No
acceleration of payments and benefits provided herein shall be permitted, except
that the Post-Transaction Corporation may accelerate payment, if permitted
under
the regulations under Section 409A of the Code, as necessary to allow the
Executive to pay FICA taxes on amounts payable hereunder and additional taxes
9
resulting
from the payment of such FICA amount or as necessary to pay taxes and penalties
arising as a result of the payments provided for in this Agreement failing
to
meet the requirements of Section 409A of the Code.
(e) Resignation
from Board of Directors.
If the
Executive is a director of the Post-Transaction Corporation or any of its
Affiliates and his status as an officer and employee is terminated for any
reason other than death, the Executive will, if requested by the
Post-Transaction Corporation, immediately resign as a director of the
Post-Transaction Corporation and its Affiliates. If such resignation is not
received within 20 business days after the Executive actually receives written
notice from the Post-Transaction Corporation requesting the resignation, the
Executive will forfeit any right to receive any payments pursuant to this
Agreement.
(f) Nondisclosure
and Proprietary Rights.
The
rights and obligations of the Company and the Executive contained in Article
III
hereof will continue to apply notwithstanding a termination following a Change
of Control.
(g) Most
Favorable Benefits.
It is
the intention of the parties that the terms of this Agreement provide payments
and benefits to the Executive that are equivalent or more beneficial to the
Executive than are otherwise available to the Executive under the terms of
any
applicable benefit plan or related compensation agreement. To that end, the
terms of the Agreement shall govern the payments and benefits to which the
Executive shall be entitled upon the termination of the Executive’s status as an
officer and employee as provided herein, except that if the terms of any
applicable benefit plan or related compensation agreement provide more favorable
benefits to the Executive than are provided hereunder, the terms of such plan
or
agreement shall control.
2.4 Excise
Tax Provision.
(a) Notwithstanding
any other provisions of this Agreement, if a Change of Control occurs during
the
original or extended term of this Agreement, in the event that any payment
or
benefit received or to be received by the Executive in connection with the
Change of Control of the Company or the termination of the Executive’s
employment under this Agreement or any other agreement between the Company
and
the Executive (all such payments and benefits, including the payments and
benefits under Section 2.3(c) hereof, being hereinafter called “Total Payments”)
would be subject (in whole or in part), to an excise tax imposed by section
4999
of the Code (the “Excise Tax”), then the cash payments under Section 2.3(c)
hereof shall first be reduced, and the noncash payments and benefits under
the
other sections hereof shall thereafter be reduced, to the extent necessary
so
that no portion of the Total Payments is subject to the Excise Tax but only
if
(A) the net amount of such Total Payments, as so reduced (and after subtracting
the net amount of federal, state and local income and employment taxes on such
reduced Total Payments) is greater than or equal to (B) the net amount of such
Total Payments without such reduction (but after subtracting the net amount
of
federal, state and local income and employment taxes on such Total Payments
and
the amount of Excise Tax to which the Employee would be subject in respect
of
such unreduced Total Payments); provided, however, that the Executive may elect
to have the noncash payments and benefits hereof reduced (or eliminated) prior
to any reduction of the cash payments under Section 2.3(c) hereof.
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(b) For
purposes of determining whether and the extent to which the Total Payments
will
be subject to the Excise Tax, (i) no portion of the Total Payments the receipt
or enjoyment of which the Executive shall have waived at such time and in such
manner as not to constitute a “payment” within the meaning of section 280G(b) of
the Code shall be taken into account, (ii) no portion of the Total Payments
shall be taken into account which, in the opinion of tax counsel (“Tax Counsel”)
reasonably acceptable to the Executive and selected by the accounting firm
(the
“Auditor”) which was, immediately prior to a Change of Control or other event
giving rise to a potential Excise Tax, the Company’s independent auditor, does
not constitute a “parachute payment” within the meaning of section 280G(b)(2) of
the Code (including by reason of section 280G(b)(4)(A) of the Code) and, in
calculating the Excise Tax, no portion of such Total Payments shall be taken
into account which, in the opinion of Tax Counsel, constitutes reasonable
compensation for services actually rendered, within the meaning of section
280G(b)(4)(B) of the Code, in excess of the “Base Amount” (within the meaning
set forth in section 280G(b)(3) of the Code) allocable to such reasonable
compensation, and (iii) the value of any non-cash benefit or any deferred
payment or benefit included in the Total Payments shall be determined by the
Auditor in accordance with the principles of sections 280G(d)(3) and (4) of
the
Code.
(c) At
the
time that payments are made under this Agreement, the Post-Transaction
Corporation shall provide the Executive with a written statement setting forth
the manner in which such payments were calculated and the basis for such
calculations including, without limitation, any opinions or other advice the
Post-Transaction Corporation has received from Tax Counsel, the Auditor or
other
advisors or consultants (and any such opinions or advice which are in writing
shall be attached to the statement).
2.5 Stock
Options; Restricted Stock Units.
The
foregoing benefits are intended to be in addition to the value of any options
to
acquire Common Stock of the Company, the exercisability of which is accelerated
pursuant to the terms of any stock option agreement, any restricted stock units
the vesting of which is accelerated pursuant to the terms of the restricted
stock unit agreement, and any other incentive or similar plan heretofore or
hereafter adopted by the Company.
2.6 Legal
Fees.
The
Company agrees to pay as incurred all legal fees and expenses that the Executive
may reasonably incur as a result of any contest (regardless of the outcome
thereof) by the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this Agreement
(including as a result of any contest by the Executive about the amount or
timing of any payment pursuant to this Agreement).
ARTICLE
III
Nondisclosure
and Proprietary Rights
3.1 Confidential
Information.
For
purposes of this Agreement, the term “Confidential Information” means any
information, knowledge or data of any nature and in any form (including
information that is electronically transmitted or stored on any form of magnetic
or electronic storage media) relating to the past, current or prospective
business or operations of the Company and its Affiliates, that at the time
or
times concerned is not generally known to persons engaged in businesses similar
to those conducted or contemplated by the Company and
11
its
Affiliates (other than information known by such persons through a violation
of
an obligation of confidentiality to the Company), whether produced by the
Company and its Affiliates or any of their consultants, agents or independent
contractors or by Executive, and whether or not marked confidential, including
without limitation information relating to the Company’s or its Affiliates’
products and services, business plans, business acquisitions, processes, product
or service research and development ideas, methods or techniques, training
methods and materials, and other operational methods or techniques, quality
assurance procedures or standards, operating procedures, files, plans,
specifications, proposals, drawings, charts, graphs, support data, trade
secrets, supplier lists, supplier information, purchasing methods or practices,
distribution and selling activities, consultants’ reports, marketing and
engineering or other technical studies, maintenance records, employment or
personnel data, marketing data, strategies or techniques, financial reports,
budgets, projections, cost analyses, price lists, formulae and analyses,
employee lists, customer records, customer lists, customer source lists,
proprietary computer software, and internal notes and memoranda relating to
any
of the foregoing.
3.2 Nondisclosure
of Confidential Information.
Executive will hold in a fiduciary capacity for the benefit of the Company
all
Confidential Information obtained by Executive during Executive’s employment
(whether prior to or after the Agreement Date) and will use such Confidential
Information solely within the scope of his employment with and for the exclusive
benefit of the Company. For a period of five years after the Termination Date,
Executive agrees (a) not to communicate, divulge or make available to any person
or entity (other than the Company) any such Confidential Information, except
upon the prior written authorization of the Company or as may be required by
law
or legal process, and (b) to deliver promptly to the Company any Confidential
Information in his possession, including any duplicates thereof and any notes
or
other records Executive has prepared with respect thereto. In the event that
the
provisions of any applicable law or the order of any court would require
Executive to disclose or otherwise make available any Confidential Information,
Executive will give the Company prompt prior written notice of such required
disclosure and an opportunity to contest the requirement of such disclosure
or
apply for a protective order with respect to such Confidential Information
by
appropriate proceedings.
3.3 Injunctive
Relief; Other Remedies.
Executive acknowledges that a breach by Executive of Section 3.2 would cause
immediate and irreparable harm to the Company for which an adequate monetary
remedy does not exist; hence, Executive agrees that, in the event of a breach
or
threatened breach by Executive of the provisions of Section 3.2, the Company
will be entitled to injunctive relief restraining Executive from such violation
without the necessity of proof of actual damage or the posting of any bond,
except as required by non waivable, applicable law. Nothing herein, however,
will be construed as prohibiting the Company from pursuing any other remedy
at
law or in equity to which the Company may be entitled under applicable law
in
the event of a breach or threatened breach of this Agreement by Executive,
including without limitation the recovery of damages and/or costs and expenses,
such as reasonable attorneys’ fees, incurred by the Company as a result of any
such breach or threatened breach. In addition to the exercise of the foregoing
remedies, the Company will have the right upon the occurrence of any such breach
to offset the damages of such breach as determined by the Company, against
any
unpaid salary, bonus, commissions or reimbursements otherwise owed to Executive.
In particular, Executive acknowledges that the payments provided under Article
II are conditioned upon Executive fulfilling the nondisclosure agreements
contained in this Article
12
III.
If
Executive at any time materially breaches nondisclosure agreements contained
in
this Article III, then the Company may offset the damages of such breach, as
determined solely by the Company, against payments otherwise due to Executive
under Article II or, at the Company’s option, suspend payments otherwise due to
Executive under Article II during the period of such breach. Executive
acknowledges that any such offset or suspension of payments would be an exercise
of the Company’s right to offset or suspend its performance hereunder upon
Executive’s breach of this Agreement; such offset or suspension of payments
would not constitute, and shall not be characterized as, the imposition of
liquidated damages.
3.4 Governing
Law of this Article III; Consent to Jurisdiction.
Any
dispute regarding the reasonableness of the covenants and agreements set forth
in this Article III or duration thereof, or the remedies available to the
Company upon any breach of such covenants and agreements, will be governed
by
and interpreted in accordance with the laws of the State of the United States
or
other jurisdiction in which the alleged prohibited disclosure occurs, and,
with
respect to each such dispute, the Company and Executive each hereby consent
to
the jurisdiction of the state and federal courts sitting in the relevant State
(or, in the case of any jurisdiction outside the United States, the relevant
courts of such jurisdiction) for resolution of such dispute, and agree that
service of process may be made upon him or it in any legal proceeding relating
to this Article III by any means allowed under the laws of such
jurisdiction.
3.5 Executive’s
Understanding of this Article.
Executive hereby represents to the Company that he has read and understands,
and
agrees to be bound by, the terms of this Article III. Executive acknowledges
that the duration of the covenants contained in Article III are the result
of
arm’s length bargaining and are fair and reasonable in light of (a) the
importance of the functions performed by Executive and the length of time it
would take the Company to find and train a suitable replacement, and (b)
Executive’s level of control over and contact with the business and operations
of the Company and its Affiliates in various jurisdictions where same are
conducted. It is the desire and intent of the parties that the provisions of
this Agreement be enforced to the fullest extent permitted under applicable
law,
whether now or hereafter in effect and, therefore, to the extent permitted
by
applicable law, the parties hereto waive any provision of applicable law that
would render any provision of this Article III invalid or unenforceable.
ARTICLE
IV
Miscellaneous
4.1 Binding
Effect; Successors.
(a) This
Agreement shall be binding upon and inure to the benefit of the Company and
any
of its successors or assigns.
(b) This
Agreement is personal to the Executive and shall not be assignable by the
Executive without the consent of the Company (there being no obligation to
give
such consent) other than such rights or benefits as are transferred by will
or
the laws of descent and distribution.
(c) The
Company shall require any successor to or assignee of (whether direct or
indirect, by purchase, merger, consolidation or otherwise) all or substantially
all of the assets
13
or
businesses of the Company (i) to assume unconditionally and expressly this
Agreement and (ii) to agree to perform or to cause to be performed all of the
obligations under this Agreement in the same manner and to the same extent
as
would have been required of the Company had no assignment or succession
occurred, such assumption to be set forth in a writing reasonably satisfactory
to the Executive.
(d) The
Company shall also require all entities that control or that after the
transaction will control (directly or indirectly) the Company or any such
successor or assignee to agree to cause to be performed all of the obligations
under this Agreement, such agreement to be set forth in a writing reasonably
satisfactory to the Executive.
4.2 Notices.
All
notices hereunder must be in writing and, unless otherwise specifically provided
herein, will be deemed to have been given upon receipt of delivery by: (a)
hand
(against a receipt therefor), (b) certified or registered mail, postage prepaid,
return receipt requested, (c) a nationally recognized overnight courier service
(against a receipt therefor) or (d) telecopy transmission with confirmation
of
receipt. All such notices must be addressed as follows:
If
to the
Company, to:
00
Xxx
Xxxxxxx Xxxxxxxxx
Xxxxx
000
Xxxxxx,
Xxxxx 00000
Attention:
Chairman of Corporate Personnel Committee
If
to the
Executive, to:
Xxxx
X.
Xxxxx
X.X.
Xxx
0000
Xxxxx,
Xxxxx 00000
or
such
other address as to which any party hereto may have notified the other in
writing.
4.3 Governing
Law.
Except
as provided in Article III hereof, this Agreement shall be construed and
enforced in accordance with and governed by the internal laws of the State
of
Delaware without regard to principles of conflict of laws.
4.4 Withholding.
The
Executive agrees that the Company has the right to withhold, from the amounts
payable pursuant to this Agreement, all amounts required to be withheld under
applicable income and/or employment tax laws, or as otherwise stated in
documents granting rights that are affected by this Agreement.
4.5 Amendment,
Waiver.
No
provision of this Agreement may be modified, amended or waived except by an
instrument in writing signed by both parties.
14
4.6 Severability.
If any
term or provision of this Agreement, or the application thereof to any person
or
circumstance, shall at any time or to any extent be invalid, illegal or
unenforceable in any respect as written, Executive and the Company intend for
any court construing this Agreement to modify or limit such provision so as
to
render it valid and enforceable to the fullest extent allowed by law. Any such
provision that is not susceptible of such reformation shall be ignored so as
to
not affect any other term or provision hereof, and the remainder of this
Agreement, or the application of such term or provision to persons or
circumstances other than those as to which it is held invalid, illegal or
unenforceable, shall not be affected thereby and each term and provision of
this
Agreement shall be valid and enforced to the fullest extent permitted by
law.
4.7 Waiver
of Breach.
The
waiver by either party of a breach of any provision of this Agreement shall
not
operate or be construed as a waiver of any subsequent breach
thereof.
4.8 Remedies
Not Exclusive.
No
remedy specified herein shall be deemed to be such party’s exclusive remedy, and
accordingly, in addition to all of the rights and remedies provided for in
this
Agreement, the parties shall have all other rights and remedies provided to
them
by applicable law, rule or regulation.
4.9 Company’s
Reservation of Rights.
Executive acknowledges and understands that the Executive serves at the pleasure
of the Board and that the Company has the right at any time to terminate
Executive’s status as an employee of the Company or any of its Affiliates, or to
change or diminish his status during the Employment Term, subject to the rights
of the Executive to claim the benefits conferred by this Agreement.
4.10 Prior
Change of Control Agreement.
Effective as of the Agreement Date, this Agreement supersedes any prior change
of control or nondisclosure agreement between the Executive and the
Company.
4.11 Counterparts.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed to be an original but all of which together shall constitute one and
the
same instrument.
4.12 Section
409A of the Internal Revenue Code.
In the
event that any of the compensation or benefits payable to the Executive
hereunder are considered to be non-qualified deferred compensation under Section
409A of the Code and any regulations issued or to be issued by the Department
of
the Treasury thereunder, the Company and the Executive shall negotiate in good
faith and agree to such amendments to this Agreement as they and their
respective tax counsel deem necessary to avoid the imposition of additional
taxes and penalties under Section 409A of the Code or such regulations, while
preserving the economic benefits intended to be conferred on the Executive
by
this Agreement.
15
IN
WITNESS WHEREOF, the Company and the Executive have caused this Agreement to
be
executed as of the Agreement Date.
By:
/s/ Xxxxx X. Xxxxxx
Xxxxx
X.
Xxxxxx
Director
and Chairman of the
Corporate
Personnel Committee of the
Board
of
Directors
Executive
/s/
Xxxx X. Xxxxx
Xxxx
X.
Xxxxx
Signature
Page of Change of Control Agreement
between
Stratus Properties Inc. and Xxxx X. Xxxxx
16
