ILLUMINA, INC. AMENDED AND RESTATED CHANGE IN CONTROL SEVERANCE AGREEMENT
Exhibit 10.33
ILLUMINA, INC.
AMENDED AND RESTATED CHANGE IN CONTROL
SEVERANCE AGREEMENT
SEVERANCE AGREEMENT
This AMENDED AND RESTATED CHANGE IN CONTROL SEVERANCE AGREEMENT (the “Agreement”), is
made as of the 22nd day of October 2008 by and between ILLUMINA, INC., a Delaware
corporation (the “Company”) and Xxx X. Xxxxxxx (the “Executive”).
WHEREAS, the Executive is a key member of the management of the Company, and the Board of
Directors of the Company (the “Board”) considers it to be in the best interests of the Company and
its stockholders to xxxxxx the retention of its key management personnel;
WHEREAS, it is expected that from time to time the Board may consider the possibility of a
Change in Control of the Company, and the Board recognizes that a Change in Control and the
uncertainties that it may raise among management could result in the departure or distraction of
management personnel to the detriment of the Company;
WHEREAS, this Agreement is intended to create an incentive for the Executive to remain in the
employ of the Company and to maximize the value of the Company for the benefit of the stockholders
in connection with a Change in Control;
WHEREAS, the Executive and the Company are parties to a Change in Control Severance Agreement,
dated August 21, 2006 (the “Change in Control Agreement”); and
WHEREAS, the Executive and the Company desire to amend and restate the Change in Control
Agreement.
NOW, THEREFORE, in consideration of the covenants herein contained and the continued
employment of the Executive, the parties hereto agree as follows:
1. Agreement Term
This Agreement became effective on August 21, 2006 (the “Effective Date”) and shall continue
to be effective for the period beginning on the Effective Date and ending on the date that is the
third anniversary of the Effective Date, provided that such period shall be automatically extended
for an additional year on each anniversary of the Effective Date, unless written notice of
non-extension is provided by either party to the other party at least 90 days prior to such
anniversary (the “Agreement Term”).
In the event of a Change in Control occurring during the Agreement Term, the provisions of
this Agreement relating to severance rights and benefits of the Executive shall apply with respect
to any Covered Termination that occurs during the Protection Period that follows the Change in
Control, as provided in Section 3 hereof. The obligations of the Company hereunder with respect to
any such Covered Termination shall survive the expiration of the Agreement Term.
2. Change in Control
For purposes of this Agreement, “Change in Control” shall mean the occurrence of one
of the following during the Agreement Term:
(a) any merger or consolidation in which the Company shall not be the surviving entity (or
survives only as a subsidiary of another entity whose stockholders did not own all or substantially
all of the Company’s common stock in substantially the same proportions as immediately prior to
such transaction);
(b) the sale of all or substantially all of the Company’s assets to any other person or entity
(other than a wholly-owned subsidiary);
(c) the acquisition of beneficial ownership of a controlling interest (including, without
limitation, power to vote) in the outstanding shares of the Company’s common stock by any person or
entity (including a “group” as defined by or under Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended);
(d) a contested election of directors of the Company, as a result of which or in connection
with which the persons who were directors before such election or their nominees (the
“Incumbent Directors”) cease to constitute a majority of the Board; provided,
however that if the election, or nomination for election by the Company’s stockholders, of
any new director was approved by a vote of at least fifty percent (50%) of the Incumbent Directors,
such new director shall be considered as an Incumbent Director, or
(e) any other event specified by the Board.
3. Covered Terminations
(a) General. For purposes of this Agreement, “Covered Termination” shall mean
the occurrence of one of the following during the period beginning on the date of the event that
constitutes a Change in Control and ending on the second anniversary of such date (the
“Protection Period”):
(i) termination of employment by the Company other than for “Cause” (as defined in
Section 3(b) below); or
(ii) termination of employment by the Executive on account of “Good Reason” (as
defined in Section 3(c) below).
In addition, if the Executive is terminated by the Company other than for Cause following the
execution of a definitive agreement or the occurrence of such other definitive event which if
consummated will result in a Change in Control, but prior to the consummation of the Change in
Control, such termination will be deemed a Covered Termination to the extent the Board, in its
discretion, determines such termination to be at the direction or request of a party to the Change
in Control transaction or is otherwise related to such pending Change in Control.
A Covered Termination shall not include termination of employment of the Executive for Cause
or by reason of death or Disability, nor a termination of employment by the Executive other than
for Good Reason. For purposes of this Agreement, “Disability” shall mean the inability to
perform the Executive’s duties due to physical or mental illness or impairment continuing for a
period of six consecutive months.
Notwithstanding anything to the contrary in this Agreement, for purposes of this Agreement,
any reference to “termination,” as it relates to a Covered Termination, shall refer to a
termination of employment which constitutes a “separation from service” within the meaning
of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).
(b) Termination For Cause. For purposes of this Agreement, a termination of the
Executive’s employment by the Company shall be deemed a termination for “Cause” in the
event of:
| (A) | the Executive’s repeated failure or refusal to materially perform the Executive’s duties to the Company (other than by reason of temporary illness or other excused absence), as such duties existed immediately prior to the Change in Control; | ||
| (B) | the Executive’s criminal conviction or a plea of nolo contendere with respect to a crime constituting a felony or a crime of moral turpitude; or | ||
| (C) | the Executive’s engagement in an act of malfeasance, fraud or dishonesty in connection with the Company that materially damages the business or reputation of the Company. |
Notwithstanding the foregoing, the Executive’s employment shall be considered to have been
terminated for Cause only if, prior to such termination for Cause, (1) the Company shall have given
to the Executive written notice stating with specificity the reason for the Executive’s termination
and the provision of this Section 3(b) that is relied upon, and (2) if such reason for termination
is item (i) or (iii) above, then a period of 15 days from the giving of such notice shall have
elapsed without the Executive’s having cured or remedied such reason for termination during such
15-day period, unless such reason for termination cannot be cured or remedied within 15 days, in
which case the period for remedy or cure shall be extended for a reasonable time (not to exceed 15
days), provided the Executive has made and continues to make a diligent effort to effect such
remedy or cure.
(c) Good Reason. For purposes of this Agreement, the termination of employment by the
Executive shall be deemed on account of “Good Reason” in the event of:
| (i) | any reduction in the Executive’s annual base salary amount or annual target bonus percentage from that in effect immediately prior to the Change in Control; | ||
| (ii) | any reduction or other adverse change in the position, title, duties, responsibilities, level of authority or reporting relationships of the Executive from that in effect immediately prior to the Change in Control, including, without limitation, (a) in the event the Executive is a member of the Board at the time of the Change in Control, the Executive ceases to serve as a member of the board of directors of the ultimate parent corporation that controls the operations of the Company, (b) in the event the Executive is the most senior executive in a particular Company function at the time of the Change in Control, the Executive ceases to be the most senior executive in such function, (c) in the event the Executive performs at the time of the Change in Control external duties typical in a public company, the Executive ceases to perform such duties or (d) any other such reduction attributable to the fact that the Company ceases to be a public company as a result of the Change in Control; or | ||
| (iii) | a relocation, without the Executive’s written consent, of the Executive’s principal place of business by more than 35 miles from the Executive’s principal place of business immediately prior to the Change in Control. |
Notwithstanding the foregoing, the Executive’s employment shall be considered to have been
terminated on account of Good Reason only if, prior to such termination on account of Good Reason,
(1) the Executive shall have given to the Company written notice stating with specificity the
reason for the Executive’s termination and the provision of this Section 3(c) that is relied upon,
and (2) a period of 15 days from the giving of such notice shall have elapsed without the Company’s
having cured or remedied such reason for termination during such 15-day period, unless such reason
for termination cannot be cured or remedied within 15 days, in which case the period for remedy or
cure shall be extended for a reasonable time (not to exceed 15 days), provided the Company has made
and continues to make a diligent effort to effect such remedy or cure. Unless the Executive shall
have provided his written consent, the Executive’s
continued employment shall not constitute consent to, or a waiver of rights with respect to,
any event or condition constituting Good Reason.
4. Severance Benefits
In the event that the Executive’s employment with the Company is terminated during the
Protection Period in a manner that constitutes a Covered Termination under Section 3 hereof, the
Company shall provide the Executive with the following payments and benefits:
| (i) | Severance Payment. The Executive shall receive a lump-sum cash severance payment in an amount equal to two times the sum of (A) the Executive’s then-current annual base salary amount, plus (B) the greater of (1) the Executive’s then-current annual target bonus or other annual target incentive amount or (2) the amount of the annual bonus or other incentive paid or payable to the Executive for the most recently completed fiscal year; determined in each case as provided above without regard to any deductions, withholdings or deferrals of base salary or annual bonus or other incentive and disregarding any reductions in base salary or annual bonus or other incentive that are the basis for a Good Reason termination. The lump-sum severance amount shall be paid by the Company within 15 days following the effective date of the Covered Termination. | ||
| (ii) | Accrued Rights. The Executive shall receive, within 15 days following the effective date of the Covered Termination, a lump-sum cash payment equal to the sum of (A) the Executive’s earned but unpaid base salary through the date of the Covered Termination, (B) any earned but unpaid bonus or other incentive payment for any completed fiscal year prior to the year of the Covered Termination, (C) a pro-rata portion of the Executive’s annual target bonus or other annual target incentive for the fiscal year in which the termination occurs, based on the portion of the fiscal year for which the Executive was employed and assuming performance under the bonus or other incentive plan at the applicable target levels and (D) any other amounts due to the Executive from the Company as of the date of the Covered Termination, including any unreimbursed business expenses. The Executive shall also be entitled to all payments and rights under all employee benefit plans, fringe benefit programs and payroll practices of the Company in accordance with their terms. Notwithstanding the foregoing, all payments under this Section 4(ii) shall be paid or made within 15 days following the effective date of the Covered Termination. | ||
| (iii) | Welfare Benefits. The Executive (and the Executive’s eligible dependents) shall be entitled to continued medical and dental coverage and benefits under the Company’s group benefit plans for a period of 24 months following the Executive’s Covered Termination, to be provided on the same terms, and with the same Executive cost-sharing, as active Executives of the Company are provided during this period of continued benefits. | ||
| (iv) | Equity Rights. All stock options or other equity or equity-based awards that are held by the Executive at the time of the Change in Control that have not previously become vested and (if applicable) exercisable shall, upon the Covered Termination, become immediately and fully vested and exercisable, and any repurchase or similar rights held by the Company or other restrictions on the awards shall lapse, without regard to the terms of any applicable award agreement or plan document, and such awards shall otherwise continue to apply on the same terms. |
| (v) | Indemnification. The Executive shall continue to be entitled, in respect of any period that the Executive served as an officer or director of the Company, and effective until the expiration of all applicable statute of limitations periods, to (i) all indemnification rights provided under any indemnification agreements between the Executive and the Company or provided by the Company’s Certificate of Incorporation and By-Laws or otherwise in effect at the time of the Covered Termination and (ii) coverage under any officers’ and directors’ liability insurance policy in effect at the time of the Covered Termination. | ||
| (vi) | Perquisites. The Executive shall be entitled to the continuation of all executive perquisites to which the Executive was entitled immediately prior to the date of the Covered Termination for a period of 24 months following the date of such Covered Termination, to be provided on the same terms, and at the same cost to the Executive, as active executives of the Company are provided during this period. | ||
| (vii) | Outplacement. The Executive shall be provided, at the Company’s sole expense, with professional outplacement services consistent with the Executive’s duties or profession and of a type and level customary for persons in the Executive’s position, as selected by the Company for a maximum period of two (2) years following the Executive’s Covered Termination. | ||
| (viii) | Payments. Notwithstanding the foregoing, if the Executive is a “specified employee” within the meaning of Section 409A of the Code at the time of a Covered Termination, any portion of the payments under this Section 4 due hereunder during the first (6) months following the date of the Executive’s Covered Termination, to extent that such payments constitute “deferred compensation” under Section 409A of the Code, shall not be paid during such six-month period and instead shall be paid on the first business day following the expiration of such six-month period. The remaining portion of the payments due hereunder shall be paid as provided in the applicable provisions of this Section 4. | ||
| (ix) | Reimbursements. All reimbursements and in-kind benefits provided under this Agreement, shall be made or provided in accordance with the requirements of Section 409A of the Code, including, where applicable, the requirement that (A) any reimbursement shall be for expenses incurred during a specified period, (B) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year, (C) the reimbursement of an eligible expense shall be made on or before the last day of the calendar year following the year in which the expense is incurred (or such earlier date if specified in this Agreement), and (D) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit. |
5. Parachute Payment Limitation
Notwithstanding anything in this Agreement to the contrary, if it shall be determined that any
amount, right or benefit payable by the Company or any other person or entity to or for the
Executive’s benefit in connection with the Change in Control, whether pursuant to the terms of this
Agreement or otherwise (a “Payment”), would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code of 1986, as amended, and if it shall be determined that a
reduction of the Payments to a present value that is one dollar less than the minimum present value
that would result in the imposition of such excise tax would result in a larger after-tax benefit
to Executive than if such reduction had not occurred, then the Payments shall be reduced so as to
have a present value that is one dollar less than the minimum present value that would result in
the imposition of such excise tax. If the foregoing should result in a reduction in the Payments,
the reduction shall be applied first against all cash Payments and then,
if necessary, against non-cash Payments in order to satisfy the requirements of this Section
5. All determinations concerning the application of this Section 5 shall be made by a nationally
recognized accounting firm to be appointed by the Company. The determinations of the accounting
firm shall be conclusive and binding on the parties hereto for all purposes. All fees and expenses
of the accounting firm shall be paid by Company.
6. Enforceability
(a) Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the Company’s successors, including any entity that succeeds to the business and
interests of Company in connection with or following a Change in Control. This Agreement and all
rights hereunder are personal to the Executive and shall not be assignable by the Executive;
provided, however, that any amounts that shall have become payable under this
Agreement prior to the Executive’s death shall inure to the benefit of the Executive’s heirs or
other legal representatives, as the case may be.
(b) Severability. In the event that any provision of this Agreement is determined to
be partially or wholly invalid, illegal or unenforceable, then such provision shall be modified or
restricted to the extent necessary to make such provision valid, binding and enforceable, or if
such provision cannot be modified or restricted, then such provision shall be deemed to be excised
from this Agreement, provided that the binding effect and enforceability of the remaining
provisions of this Agreement shall not be affected or impaired in any manner. No waiver by a party
of any provisions or conditions of this Agreement shall be deemed a waiver of similar or dissimilar
provisions and conditions at the same time or any prior or subsequent time.
(c) Entire Agreement; Amendments. Except as otherwise specifically provided herein,
this Agreement constitutes the entire agreement between the parties respecting the subject matter
hereof and supersedes any prior agreements respecting severance benefits upon a Change in Control,
including the Change in Control Agreement. No amendment to this Agreement shall be deemed valid
unless in writing and signed by the parties.
(d) Governing Law. Notwithstanding any conflict of law or choice of law provision to
the contrary, this Agreement shall be construed and interpreted according to the laws of the State
of California.
7. Dispute Resolution
(a) Arbitration. Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a single arbitrator in the
State of California, in accordance with the National Rules for Resolution of Employment Disputes of
the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s
award in any court having jurisdiction. The Company shall pay all the costs and expenses of any
such arbitration proceeding.
(b) Attorney Fees. Subject to Section 4(ix), in the event that there is any
controversy or claim arising out of or relating to this Agreement, or to the interpretation, breach
or enforcement thereof, and any arbitration or other proceeding is commenced to enforce the
provisions of this Agreement, the Executive shall be entitled to payment of the Executive’s
reasonable attorney’s fees, costs and expenses; provided, however, that if the arbitrator or other
trier of fact determines that the claims of the Executive are frivolous, the Executive shall not be
reimbursed for any of such fees, costs and expenses and the Executive shall repay to the Company
any such reimbursements previously paid pursuant to this Section 7(b).
8. Miscellaneous
(a) Tax Withholding. All payments required to be made to the Executive under this
Agreement shall be subject to withholding of amounts relating to income tax, excise tax, employment
tax and other payroll taxes to the extent required to be withheld pursuant to applicable law or
regulation.
(b) No Right of Employment. Nothing in this Agreement shall confer upon the Executive
any right to continue as an Executive of the Company or interfere in any way with the right of the
Company to terminate the Executive’s employment at any time, subject to the consequences of a
Covered Termination as provided herein.
(c) No Duplication of Benefits. In the event that the Executive is entitled to
severance payments or benefits under any other agreement, plan or program of the Company, or by
reason of any legal requirement, the severance benefits provided hereunder shall be reduced
accordingly to avoid duplication of benefits.
(d) No Mitigation or Offset. The Executive shall be under no obligation to minimize
or mitigate damages by seeking substitute employment or otherwise, and the obtaining of any such
other employment shall in no event affect any reduction of obligations hereunder for the payments
or benefits required to be provided to the Executive. Except as specifically provided herein, the
obligations of the Company hereunder shall not be affected by any set-off or counterclaim rights
that any party may have against the Executive.
(e) Other Compensation and Benefit Plans. Subject to the provisions of Section 8(c),
the rights and benefits of the Executive under this Agreement shall not be in lieu of the
Executive’s benefits under any compensation or benefit plan or program of the Company, which shall
be payable in accordance with the terms and conditions of such plans or programs.
(f) Notices. Any notice required or permitted to be given by this Agreement shall be
effective only if in writing, delivered personally or by courier or by facsimile transmission or
sent by express, registered or certified mail, postage prepaid, to the parties at the addresses
hereinafter set forth, or at such other places that either party may designate by notice to the
other.
Notice to the Company shall be addressed to:
Illumina, Inc.
0000 Xxxxx Xxxxxx Xxxxx
Xxx Xxxxx, XX 00000-0000
Attn: Xxxxxxxxx X. Xxxxx,
Senior Vice President and General Counsel
facsimile: (000) 000-0000
0000 Xxxxx Xxxxxx Xxxxx
Xxx Xxxxx, XX 00000-0000
Attn: Xxxxxxxxx X. Xxxxx,
Senior Vice President and General Counsel
facsimile: (000) 000-0000
Notice to the Executive shall be addressed to the Executive at the address indicated on the
signature page hereof.
(g) Captions and Headings. Captions and paragraph headings are for convenience only,
are not a part of this Agreement and shall not be used to construe any provision of this Agreement.
(h) Counterparts. This Agreement may be executed in counterparts, each of which shall
constitute an original, but both of which when taken together shall constitute one Agreement.
(i) Compliance with Section 409A of the Code. In the event that following the date
hereof either the Company or the Executive reasonably determines that any compensation or benefits
payable under this Agreement shall be subject to Section 409A of the Code, the Company and the
Executive shall cooperate in good faith to adopt such amendments to this Agreement or adopt other
policies and procedures (including amendments, policies and procedures with retroactive effect), or
take any other commercially reasonable actions necessary or appropriate to (1) exempt the
compensation and benefit payable under this Agreement from Section 409A of the Code and/or preserve
the intended tax treatment of the compensation and benefits provided with respect to this Agreement
or (2) comply with the requirements of Section 409A of the Code and the related Department of
Treasury guidance.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first
above written.
| ILLUMINA, INC. |
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| /s/ Xxxxxxxxx X. Xxxxx | ||||
| By: | Xxxxxxxxx X. Xxxxx | |||
| Its: | Sr. Vice President & Chief Financial Officer | |||
| EXECUTIVE |
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| /s/ Xxx X. Xxxxxxx | ||||
| Name: Xxx X. Xxxxxxx | ||||
| Address: 0000 Xxxxx Xxxxx Xxxxx Xxxxxx Xxxxx Xx, XX 00000 |
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