LOAN
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement (the "Agreement") is made and
entered into effective as of _________, by and between Xxxxx Xxxxxxx
(the "Employee") and XxxxxxxXxx.xxx a Delaware corporation (the
"Company").
RECITALS
A. It is expected 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
recognizes that such consideration can be a distraction to the
Employee and can cause the Employee to consider alternative employment
opportunities. The Board has determined that it is in the best
interests of the Company and its shareholders to assure that the
Company will have the continued dedication and objectivity of the
Employee, notwithstanding the possibility, threat or occurrence of a
Hostile Takeover or a Change of Control (as defined below) of the
Company.
B. The Board believes that it is in the best interests of the
Company and its shareholders to provide the Employee with an incentive
to continue his or her employment with the Company.
C. The Board believes that it is imperative to provide the
Employee with certain benefits upon a Hostile Takeover 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 Hostile Takeover or 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. The Board, for the reasons set forth above, authorized the
Company to enter into Change of Control Agreements ("Agreements") with
certain of its executive corporate officers substantially in the form
hereof.
F. Certain capitalized terms used in the Agreement are
defined in Section 4 below.
In consideration of the mutual covenants herein contained, 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 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 Employee's offer letter from the Company and 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
executive corporate officer of the Company, (ii) the date that all
obligations of the parties hereunder have been satisfied, or (iii) two
(2) years 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. Hostile Takeover. Subject to Section 7(l) below, in
the event of a Hostile Takeover and regardless of whether the
Employee's employment with the Company is terminated in connection
with such takeover, each stock option granted for the Company's
securities held by the Employee shall become immediately exercisable
and vested, and shall be considered "Vested Shares" under each such
stock option, on the effective date of the Hostile Takeover as to 100%
of the shares issuable upon exercise of such option and shall be
exercisable in full in accordance with the provisions of the Option
Agreement and Plan pursuant to which such option was granted; and the
Company's right of repurchase with respect to such shares and any
shares previously issued upon exercise of stock options held by the
Employee shall immediately lapse on such date.
3. Change of Control.
(a) Termination Following A Change of Control.
Subject to Section 7(l) below, if the Employee's employment with the
Company is terminated at any time within six (6) months after a Change
of Control, then the Employee shall be entitled to receive severance
benefits as follows:
(i) Voluntary Resignation. If the Employee
voluntarily resigns from the Company, other than as an Involuntary
Termination (as defined below), or if the Company terminates the
Employee's employment for Cause (as defined below), then the Employee
shall not be entitled to receive severance payments. The Employee's
benefits will be terminated under the Company's then existing benefit
plans and policies in accordance with such plans and policies in
effect on the date of termination or as otherwise determined by the
Board of Directors of the Company.
(j) Involuntary Termination. If the
Employee's employment is terminated as a result of an Involuntary
Termination other than for Cause, the Employee shall be entitled to
receive the following benefits: (i) monthly severance payments during
the period from the date of the Employee's termination until the date
12 months after the effective date of the termination (the "Severance
Period") equal to the monthly salary which the Employee was receiving
immediately prior to the Change of Control; (ii) monthly severance
payments during the Severance Period equal to 1/12th of the Employee's
"target bonus" (as defined below for the fiscal year in which the
termination occurs (iii) continuation of health and life insurance
benefits through the end of the Severance Period substantially
identical to those to which the Employee was entitled immediately
prior to the Change of Control; (iv) each stock option held by the
Employee shall become immediately exercisable and vested, and shall be
considered "Vested Shares" under each such stock option, on the date
of termination as to 100% of the shares issuable upon exercise of such
option and shall be exercisable in full in accordance with the
provisions of the Option Agreement and Plan pursuant to which such
option was granted; and the Company's right of repurchase with
respect to such shares and any shares previously issued upon exercise
of stock options held by the Employee shall immediately lapse on such
date (v) outplacement services with a total value not to exceed
$15,000. The severance payments described in subsection (i) and (ii)
above shall be paid during the Severance Period in accordance with the
Company's standard payroll practices. For purposes of this Agreement,
the term "target bonus" shall mean that dollar amount that is
prescribed in your offer letter and established by the Company under
its Management Bonus Program as a portion of such base salary payable
to the Company as a bonus if the Company pays bonuses at one-hundred
percent (100%) of its operating plan.
(iii) Involuntary Termination for Cause. If
the Employee's employment is terminated for Cause, then the Employee
shall not be entitled to receive severance payments. The Employee's
benefits will be terminated under the Company's then existing benefit
plans and policies in accordance with such plans and policies in
effect on the date of termination.
(b) Termination Apart from A Change of Control. In
the event the Employee's employment terminates for any reason, either
prior to the occurrence of a Change of Control or after the two year
period following the effective date of a Change of Control, then the
Employee shall not be entitled to receive any severance payments under
this Agreement. The Employee's benefits will be terminated under the
terms of the Company's then existing benefit plans and policies in
accordance with such plans and policies in effect on the date of
termination or as otherwise determined by the Board of Directors of
the Company.
4. Definition of Terms. The following terms referred
to in this Agreement shall have the following meanings:
(a) Change of Control. "Change of Control" shall
mean the occurrence of any of the following events:
(i) Ownership. Any "Person" (as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended) is or becomes the "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/Sales of Assets. A merger or
consolidation of the Company, whether or not approved by the Board of
Directors of the Company, other than a merger or consolidation which
would result in holders of more than fifty percent (50%) of the voting
power represented by the voting securities of the Company outstanding
immediately prior thereto continuing to hold (either by the voting
securities remaining outstanding or by being converted into voting
securities of the surviving entity) more than 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 Company sells all substantially all of
the Company's assets.
(iii) Change in Board Composition. A
change in the composition of the Board of Directors of the Company, as
a result of which fewer than a majority of the directors are Incumbent
Directors. "Incumbent Directors" shall mean directors who either
(A) are directors of the Company as of the date of this Agreement or
(B) are elected, or nominated for election, to the Board of Directors
of the Company with the affirmative votes of at least a majority of
the Incumbent Directors at the time of such election or nomination
(but shall not include an individual whose election or nomination is
in connection with an actual or threatened proxy contest relating to
the election of directors to the Company).
(b) Cause. "Cause" shall mean (i) gross negligence
or 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) Hostile Takeover. "Hostile Takeover" shall
mean a transaction or series of transactions that results in any
person becoming the Beneficial Owner, directly or indirectly, of
securities of the Company representing more than fifty percent (50%)
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.
(d) Involuntary Termination. "Involuntary
Termination" shall include any termination by the Company other than
for Cause and the Employee's voluntary termination, 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; (ii) any reduction of the Employee's base compensation
(other than in connection with a general decrease in base salaries for
most officers of the Company and any successor corporation); or
(iii) the Employee's refusal to relocate to a facility or location
more than 50 miles from the Company's current location.
5. Successors. Any successor to the Company (whether
direct 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 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.
(a) No Duty to Mitigate. The Employee shall not be
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 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 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 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,
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
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 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 their own expenses, legal fees and other fees incurred in
connection with this Agreement.
(h) No Assignment of Benefits. The rights of any
person 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 Agreement will be subject to withholding of applicable income
and employment taxes.
(j) Assignment by Company. The Company may assign
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 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 counterparts, each of which shall be deemed an original, but all of
which together will constitute one and the same instrument.
(l) Limitation on Payments. In the event that the
severance and other 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 Sections 2 and 3 shall be payable either:
(a) in full, or
(b) 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, results in the
receipt by the Employee on an after-tax basis, of the greatest amount
of benefits under Sections 2 and 3, 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 7(l) 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 7(l), 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 7(l).
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.
XXXXXXXXXX.XXX XXXXX XXXXXXX
By:
______________________________
Title:
6
