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Exhibit 10.22
INCENTIVE COMPENSATION AGREEMENT
THIS AGREEMENT (this "Agreement") is dated as of October 4,
1995, for reference purposes only, by and between XXXXX XXXXXXXXXXX (the
"Employee") and Xxxxx Instruments Corp., a California corporation (the
"Company"). The parties hereto agree as follows:
1. ACCRUAL OF TERMINATION BENEFIT. Effective as of March 1,
1995, Employee shall accrue a termination benefit equal to 0.2% of the aggregate
book value of all outstanding common stock of Xxxxx Holding Corp., a California
corporation ("Xxxxx Holding"), for each twelve-month period that Employee has
been continuously and actively employed by the Company, commencing with March 1,
1995. Accordingly, Employee shall accrue a termination benefit of 0.2% of the
aggregate book value of Xxxxx Holding's outstanding common stock on February 28
of each of 1996, 1997, 1998, and 1999. The maximum accrual is 1.0% of the
aggregate book value of Xxxxx Holding's outstanding common stock and assumes
continuous and active employment by the Company through February 28, 1999. For
purposes of this Agreement, the "book value" of the outstanding common stock of
Xxxxx Holding shall be determined on a consolidated basis with the Company and
shall be based upon the books and records maintained by Xxxxx Holding and the
Company. The Company shall determine such book value. If there is any
disagreement between the parties hereto as to the book value as determined by
the Company, the Company's independent accountants shall determine such book
value and such determination shall be conclusive, final and binding on the
parties hereto.
2. VESTING OF TERMINATION BENEFIT. Employee shall vest in each
0.2% accrual of his termination benefit referred to in Section 1 on each
anniversary date referred to in Section 1. If Employee's employment with the
Company is terminated at any time during the term of this Agreement but prior to
any "sale of a substantial number of shares," whether such termination is
effected voluntarily by Employee or by the Company, with or without cause (and
including any termination as a result of Employee's disability), then the
Employee shall be entitled to receive payment from the Company equal to the
vested termination benefit percentage multiplied by the aggregate book value of
the outstanding common stock of Xxxxx Holding as of the end of the month
preceding the month in which Employee's employment with the Company ends. For
purposes hereof, a "sale of a substantial number of shares" shall be deemed to
mean (i) a sale of 80% or more of the outstanding Common Stock of Xxxxx Holding
or the Company whether by merger or otherwise, or (ii) a sale by shareholders of
25% or more of the outstanding Common Stock of Xxxxx Holding or the Company in
an underwritten public offering registered with the Securities and Exchange
Commission.
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Example: Employee receives 0.2% book value
accruals on February 28, 1996 and on February 28, 1997, but terminates his
employment with the Company on September 10, 1997. Employee has thus accrued and
vested in 0.4% of the book value of the outstanding common stock of Xxxxx
Holding. If on August 31, 1997, the book value of Xxxxx Holding's outstanding
common stock is $1,000,000 as determined on a consolidated basis, then Employee
shall be entitled to receive payment from the Company in the amount of 0.4% of
$1,000,000, or $4,000. This example assumes no "sale of a substantial number of
shares" prior to September 1, 1997.
3. PAYMENT OF TERMINATION BENEFIT. Any payments to
which Employee shall become entitled under Sections 1 and 2
hereof shall be made in a lump sum cash distribution within 30
days of Employee's termination.
4. INCENTIVE COMPENSATION FOR SALE OR PUBLIC OFFERING. If
during the period of this Agreement, there occurs a sale of a substantial number
of shares (as defined in Section 2 hereof), and Employee is then employed by the
Company, then the Employee shall, upon the closing of such event, be entitled to
a payment equal to 1.0% of the cash (non-cash consideration and/or cash
consideration received or to be received by any selling shareholder more than
six months after the closing date of such sale shall be disregarded) actually
received by the selling shareholders on the closing date of such sale in lieu of
any payment required to be made under Sections 1 and 2 hereof and, in such
event, no payment shall be required under Section 1 and 2 hereof. Any payment
hereunder shall be made to the Employee by the Company in a lump sum cash
distribution within 30 days of the closing of the sale of a substantial number
of shares.
Example: Employee receives 0.2% book value
accruals on February 28, 1996 and on February 28, 1997, for a total book value
accrual of 0.4%. On October 1, 1997, 25% of the Company's outstanding common
stock held by its shareholder(s) is sold in an underwritten public offering
registered with the Securities and Exchange Commission and in consideration
therefor, such shareholder(s) receives a cash consideration at closing of
$10,000,000 in the aggregate. Within 30 days of the closing of such sale,
Employee is entitled to receive a lump sum cash distribution from the Company in
an amount equal to 1.0% of $10,000,000, or $100,000.
Example: Assume the same facts as in the
preceding example, except that on October 1, 1997, 80% of the Company's or Xxxxx
Holding's common stock is sold to a third party. In addition, assume that in
cash consideration therefor, the shareholder(s) receives a total of $20,000,000
in cash on the closing date. Within 30 days of the closing of such sale,
Employee is entitled to receive a lump sum cash distribution from
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the Company or its successor in an amount equal to 1.0% of $20,000,000, or
$200,000.
5. ASSIGNABILITY. The rights and benefits of Employee
hereunder are not assignable or transferable and any purported transfer,
assignment, pledge or other encumbrance or attachment of any payments or
benefits under this Agreement shall not be permitted or recognized. The
obligations of the Company hereunder shall be binding upon the successors and
assigns of the Company.
6. WITHHOLDING. The Company shall have the right to deduct
from any payment hereunder, any federal, state or local taxes, if any, required
by law to be withheld with respect to such payments.
7. LIMITATION ON BENEFITS. The accruals of stock value to
which Employee is entitled under Agreement are devices used solely for the
measurement and determination of the amounts to be paid as cash under this
Agreement. Such accruals shall not be as property or as a trust fund of any
kind. All amounts at any time attributable to such accruals shall be and remain
the sole property of the Company, and the Employee's such accruals are limited
to the right to receive cash as herein provided. The Employee shall not be
entitled to any voting rights or any other rights normally associated shares of
common stock of the Company or Xxxxx Holding or an interest therein.
8. RELEASE AND SATISFACTION. Any payment to the Employee in
accordance with the provisions of this Agreement shall, to the extent thereof,
be in full satisfaction of all claims against the Company hereunder, and, to the
extent permitted by law, the Company may require the Employee, as a condition
precedent to such payment, to execute a receipt and release to such effect.
9. LIMITATION ON RIGHTS. Employee's being a party to this
Agreement shall not give him any right to be retained in the employ of the
Company or any rights or interest other than to the payments provided for
herein. The employment rights of the Employee shall not be enlarged, guaranteed
or affected by reason of any provisions of this Agreement. The Company reserves
the right to dismiss the Employee at any time, with or without cause, without
any liability for any claim against the Company under this Agreement, except for
payment of vested benefits to the extent expressly provided herein. This
Agreement shall create a contractual obligation on the part of the Company as to
such vested amounts and shall not be construed as creating a trust. This
Agreement, in and of itself, has no assets and is not funded. The Employee shall
have only the rights of a general and unsecured creditor of the Company with
respect to vested amounts payable hereunder.
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10. FUTURE MERGER. If at any time in the future Xxxxx Holding
is merged into the Company, or if the Company is merged into Xxxxx Holding, this
Agreement shall be and remain in full force and effect and the accrual of
benefits hereunder shall be based on the value of the outstanding common stock
of the surviving entity.
11. GOVERNING LAW. The validity of this Agreement or any of
its provisions shall be construed administered and governed in all respects by
the laws of the State of California. If any provisions of this instrument shall
be held by a court of competent jurisdiction to be invalid or unenforceable, the
remaining provisions hereof shall continue to be fully effective.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date set forth above.
XXXXX INSTRUMENTS CORP.,
a California corporation
By: /s/ XXXX X. XXXXXX
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Title: CHAIRMAN & CEO 10/4/95
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/s/ XXXXX XXXXXXXXXXX
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EMPLOYEE
Acknowledged and agreed to:
XXXXX HOLDING CORP.,
a California corporation
By: /s/ XXXX X. XXXXXX
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Title: PRESIDENT 10/4/95
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