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Exhibit (10)(n)
CHANGE OF CONTROL AGREEMENT
This CHANGE OF CONTROL AGREEMENT (the "Agreement") dated August 29, 2000 (the
"Effective Date") sets forth the mutual and binding understanding of the
undersigned regarding the special incentives to be afforded to Richard Schaub,
Jr. (the "Executive") by The First Years Inc., a Massachusetts corporation and
its subsidiaries (together called the "Company") in order to ensure that the
Company will have the dedication of the Executive, notwithstanding a Change of
Control of the Company (as defined herein).
The Company recognizes that as is the case with many publicly-held corporations,
the possibility of a Change of Control of the Company may occur and that such
possibility, and the uncertainty and questions which it may raise, may result in
the distraction of the Executive to the detriment of the Company and to its
stockholders.
The Board of Directors of the Company has determined that appropriate steps
should be taken to have and encourage the attention and dedication of the
Executive to his assigned duties without distraction in the face of potentially
disturbing circumstances arising from the possibility of a Change of Control of
the Company.
In consideration of the Executive's accepting employment with the Company, the
Company agrees to provide the Executive with the payments and benefits set forth
in this Agreement in the event the Executive's employment is terminated under
the circumstances described below, subsequent to a Change of Control of the
Company.
The Executive wishes to accept employment with the Company on the terms herein
provided.
NOW, THEREFORE, in consideration of the mutual premises and the respective
covenants and agreements of the parties herein contained, the parties hereto
agree as follows:
1. DEFINITIONS.
The terms "Cause," "Change of Control," "Date of Termination,"
"Disability," "Good Reason," and "Notice of Termination" are defined in
Exhibit A attached hereto and incorporated herein by reference.
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2. TERM OF AGREEMENT.
The term of this Agreement shall commence on the Effective Date and
shall continue until the second anniversary of the Effective Date;
provided, however, that this Agreement shall continue in full force and
effect for further successive terms of one (1) year on the same terms
and conditions as are set forth herein; and provided further that, if a
Change of Control shall have occurred during the original or any
extended term, this Agreement shall continue in effect for a period of
not less than twenty-four (24) months beyond the month in which such
Change of Control occurs (the "Term").
3. EMPLOYMENT STATUS.
The parties acknowledge that this Agreement does not constitute an
employment contract or impose on the Company any obligation to retain
the Executive as an employee; that such relationship is on an at-will
basis; and that this Agreement also does not prevent the Executive from
terminating his employment at any time.
4. COMPENSATION UPON TERMINATION, DEATH OR DISABILITY FOLLOWING A CHANGE
OF CONTROL.
(a) ENTITLEMENT TO PAYMENTS AND BENEFITS.
In the event a Change of Control shall have occurred during
the Term and the Executive's employment with the Company is
subsequently terminated by the Company for any reason other
than for Cause or Disability, or by the Executive for Good
Reason, within twenty-four (24) months after such Change of
Control, the Executive shall be entitled to the payments and
benefits provided below in Section 4(c). In the event the
Executive's termination of employment is due to the
Executive's death or Disability after the occurrence of a
Change of Control, the Executive will only be entitled to the
payments and benefits provided below in Section 4(b).
(b) DISABILITY OR DEATH. If the Executive's employment terminates
by reason of Disability or death during the Term, following a
Change of Control, the
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Executive shall be entitled to the following benefits:
(i) ACCRUED OBLIGATION. The Company shall pay to the
Executive (or in the event of his death, his legal
representative) a lump sum amount in cash equal to
the sum of (A) the Executive's Base Salary through
the Date of Termination to the extent not theretofore
paid; and (B), any accrued vacation pay and any other
amounts due the Executive as of the Date of
Termination, in each case to the extent not
theretofore paid. (The amounts specified in Clauses
(A) and (B) shall be hereinafter referred to as the
"Accrued Obligation".) The amounts specified in this
Section 4(b)(i) shall be paid within ten (10) days
after the Date of Termination;
(ii) BASE SALARY. The Company shall continue to pay the
Executive (or, in the event of his death, his legal
representative) (A) for a period of one hundred and
twenty (120) days following the Date of Termination
the Executive's annual base salary in effect
immediately prior to the Date of Termination, in
accordance with the Company's general payroll
practices; provided, however, that in the event of
termination of Executive's employment by reason of
Disability, such base salary payments shall be
reduced by the amount of any disability insurance
proceeds paid to the Executive under any individual
or group policies, the premiums of which had been
paid by the Company or by the Executive and
reimbursed by the Company; and (B), a pro-rata
portion of any awards or payments earned by the
Executive under any annual cash-based incentive
compensation or bonus plans in respect of the fiscal
year in which occurs the Date of Termination, payable
in accordance with the Company's practices with
respect to the payment of bonuses;
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(iii) STOCK OPTIONS. With respect to any vested options to
purchase the common stock of the Company, including
incentive stock options ("ISOs"), held by the
Executive on the Date of Termination, the Executive
(or, in the event of his death, his legal
representative) may exercise such options until the
earlier of one (1) year from the Date of Termination
or the expiration date of such option; and,
(iv) BENEFITS. In the event of termination by reasons of
Disability, the Executive shall, for a period of one
hundred and twenty (120) days from the Date of
Termination, continue to participate in all savings,
retirement, pension, profit-sharing, 401-k, and
welfare plans, (including without limitation, group
medical, dental, hospitalization, disability, life
insurance plans), and fringe benefit plans
(collectively "the Benefits") that the Executive was
participating in and receiving on the Date of
Termination.
(c) TERMINATION BY THE EXECUTIVE OR THE COMPANY. If the Company
shall terminate the Executive's employment other than for
Cause during the Term following the occurrence of a Change of
Control, or if the Executive shall terminate his employment
for Good Reason during the Term following the occurrence of a
Change of Control, the Executive shall be entitled to the
following benefits:
(i) ACCRUED OBLIGATION. The Company shall pay to the
Executive the Accrued Obligation within ten (10) days
after the Date of Termination.
(ii) PAYMENTS. The Company shall pay to the Executive a
lump sum amount in cash, within ten (10) days
following the Date of Termination, equal to two (2)
times the sum of (A) the Executive's base salary then
in effect on the Date of Termination, and (B) the
highest amount of awards or compensation paid to the
Executive under any and all of the Company's annual
cash-based incentive
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compensation or bonus plans in respect of the three
most recent fiscal years of the Company ended prior
to the Date of Termination (the two most recent
fiscal years in the event the Executive has been
employed by the Company for less than three full
fiscal years or the prior fiscal year in the event
the Executive has been employed by the Company for
less than two years). If, however, on the Date of
Termination the Executive has been employed by the
Company for less than one full fiscal year, the
Company will pay the Executive a lump-sum amount in
cash, within ten (10) days following the Date of
Termination, equal to two (2) times the sum of (A)
the Executive's base salary then in effect on the
Date of Termination, and (B), the estimated amount of
the awards or the compensation that would have been
payable to the Executive under any and all of the
Company's annual cash-based incentive compensation or
bonus plans with respect to the fiscal year in which
the Date of Termination occurs. The amount of such
estimated annual incentive compensation or awards
will be determined by the Board of Directors either
by annualizing the amount of such annual incentive
compensation or awards actually paid to the Executive
during the fiscal year in which the Date of
Termination occurs or by making a reasonable estimate
of such compensation or awards, and such
determination of the Board shall be conclusive and
final.
(iii) BENEFITS. The Executive will continue to participate
in the Benefits set forth in Sections 4(b)(iv) of
this Agreement, in effect on the Date of Termination,
for a period of two (2) years from the Date of
Termination;
(iv) STOCK OPTIONS. With respect to each option to
purchase common stock of the Company held by the
Executive on the Date of Termination, all such
options shall become immediately exercisable in full,
and each option may be exercised by the Executive
until the earlier of (A) the two (2) year anniversary
date of
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the Date of Termination or (B) the expiration date of
such option. Notwithstanding the foregoing, any ISOs
held by the Executive on the Date of Termination may
not be exercised more than three (3) months after the
Date of Termination.
(d) TERMINATION FOR OTHER REASON. If the Executive's employment
shall be terminated by the Company for cause during the Term
following the occurrence of a Change of Control, or by the
Executive other than for Good Reason during the Term following
the occurrence of a Change of Control, the Company shall not
have any further obligations to the Executive under this
Agreement other than the obligation to pay to the Executive
the Accrued Obligation within ten (10) days of the Date of
Termination and any post-employment benefits to which the
Executive is entitled under the terms of the Company's
employee benefit plans.
(e) CERTAIN RESTRICTIONS ON PAYMENT OF COMPENSATION AND BENEFITS.
Notwithstanding any other provision of this Agreement to the
contrary, if the Company or the Executive determines (on the
basis of advice from the Company's independent public
accountants) that part or all of the consideration,
compensation, or benefits to be paid to the Executive under
this Agreement or any other arrangement, plan or policy,
constitutes a "parachute payment" under Section 280G(b)(2) of
the Internal Revenue Code of 1986, as amended, then the
amounts constituting a "parachute payment" which would
otherwise be payable to or for the benefit of the Executive
shall be reduced to the extent necessary so that the reduced
payments do not constitute a "parachute payment".
5. ASSIGNMENT BY EXECUTIVE.
This Agreement is personal to the Executive and, without the prior
written consent of the Company, shall not be assignable by the
Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
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6. SUCCESSORS AND ASSIGNS OF THE COMPANY.
The rights and obligations of the Company under this Agreement shall
inure to the benefit of and shall be binding upon the successors and
assigns of the Company, including without limitation, any corporation,
individual or other person or entity which may acquire all or
substantially all of the assets and business of the Company, or with or
into which the Company may be consolidated or merged, or any surviving
corporation in any merger involving the Company. All references in this
Agreement to the Company shall be deemed to include all such successors
and assigns.
7. ARBITRATION OF DISPUTES.
(a) All controversies, claims, or disputes arising out of or
relating to this Agreement, or the breach thereof ("disputes")
shall be resolved by mutual agreement of the Executive and the
Board, acting by majority vote. In the event the Executive and
the Board fail to resolve a dispute by mutual consent within
thirty (30) days after a notice of dispute has been received
by one party from the other, then such dispute shall be
settled by arbitration administered by the American
Arbitration Association ("AAA") in accordance with its
Commercial Arbitration Rules.
(b) The arbitration shall be conducted in Boston, Massachusetts,
by a panel of three arbitrators with one arbitrator to be
selected by each party (the "appointed arbitrators"), and the
third arbitrator to be selected by mutual agreement of the two
appointed arbitrators from a list provided by the AAA, or
otherwise (the "third arbitrator"). If the parties fail to
agree on the third arbitrator within thirty (30) days of their
appointment, then the two appointed arbitrators shall request
the AAA to appoint the third arbitrator. All disputes shall be
resolved by a majority vote of such three arbitrators.
(c) Each party shall pay and be responsible for (i) its own
attorney's fees and costs; (ii) the expenses of the arbitrator
selected by such party; and (iii) the expenses of its own
witnesses. The expenses of
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the third arbitrator and all other expenses of arbitration
shall be borne equally the parties unless a majority of the
three arbitrators agree that the position of either party with
respect to a particular dispute was without a substantial
basis, in which event such expenses shall be assessed
entirely against such party, and each party shall bear the
expenses of its own respective arbitrator. The parties agree
that the arbitrators shall not be permitted to award punitive
damages.
(d) Any judgment upon the award rendered by the arbitrators shall
be final and binding on the parties and may be entered in any
court having jurisdiction thereof.
8. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of
Massachusetts, without reference to its principles of
conflicts of law. The captions of this Agreement are not part
of the provisions hereof and shall have no force or effect.
This Agreement may not be amended, modified, repealed, waived,
extended or discharged except by an agreement in writing
signed by the party against whom enforcement of such
amendment, modification, repeal, waiver, extension or
discharge is sought. No person, other than pursuant to a
resolution of the Board of Directors, shall have authority on
behalf of the Company to agree to amend, modify, repeal,
waive, extend or discharge any provision of this Agreement or
take any other action in respect thereto.
(b) NOTICES. All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other
party or by registered or certified mail, return receipt
requested, postage prepaid, addressed to the Company's
headquarters and, in the case of the Executive, to the address
on the signature page of this Agreement or, in either case, to
such other address as any party shall have subsequently
furnished to the other parties in writing. Notice and
communications
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shall be effective when actually received by the addressee.
(c) SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(d) TAXES. The Company may withhold from any amounts due and
payable under this Agreement such federal, state or local
taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
(e) NO WAIVER. Any party's failure to insist upon strict
compliance with any provision hereof or the failure to assert
any right such party may have hereunder shall not be deemed to
be a waiver of such provision or right or any other provision
or right of this Agreement.
(f) ENTIRE AGREEMENT; SURVIVAL. This Agreement entered into as of
the date hereof between the Company and the Executive contains
the entire agreement of the Executive and the Company with
respect to the subject matter of the Agreement, and all
promises, representations, understandings, arrangements and
prior agreements, are merged into, and superseded by, this
Agreement. Any provision hereof which by its terms applies in
whole or part after a termination of the Executive's
employment hereunder shall survive such termination.
IN WITNESS WHEREOF, the Executive has executed this Agreement and, pursuant to
due authorization from its Board of Directors, the Company has caused this
Agreement to be executed as of the day and year first above written.
THE FIRST YEARS INC.
/s/ Richard F. Schaub, Jr. By: /s/ Ronald J. Sidman
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Richard Schaub, Jr. Name: Ronald J. Sidman
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Title: President and CEO
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EXHIBIT A.
DEFINITIONS
1. CAUSE.
"Cause" shall mean (i) the willful and continued failure by the
Executive to substantially perform the Executive's duties with the
Company (other than any such failure resulting from the Executive's
incapacity due to physical or mental illness) after a written demand
for substantial performance is delivered to the Executive by the Chief
Executive Officer of the Company ("CEO"), which demand specifically
identifies the manner in which the CEO believes that the Executive has
not substantially performed the Executive's duties; (ii) the willful
commission of any fraud, misappropriation, or any other misconduct
which is demonstrably and materially injurious to the Company,
monetarily or otherwise, including a breach of Sections 4 or 6 of the
Non-compete Agreement between the Company and the Executive dated
August 29, 2000; or (iii) conviction of a felony. For purposes of
clauses (i) and (ii) of this definition, no act, or failure to act, on
the Executive's part, shall be deemed "willful" unless done, or omitted
to be done, by the Executive not in good faith and without reasonable
belief that the Executive's act, or failure to act, was in the best
interest of the Company.
2. CHANGE OF CONTROL.
A "Change of Control" shall be deemed to have occurred if the event set
forth in any one of the following paragraphs shall have occurred:
(a) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities
acquired directly from the Company) representing 25% or more
of the combined voting power of the Company's then outstanding
securities, excluding any Person who becomes such a Beneficial
Owner in
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connection with a transaction described in clause (i) of
paragraph (c) below; or
(b) the following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals
who, on the date hereof, constitute the Board of Directors and
any new director (other than a director whose initial
assumption of office is in connection with an actual or
threatened election contest), whose appointment or election by
the Board was approved or recommended by a vote of at least
two-thirds (2/3) of the directors then still in office who
either were directors on the date hereof or whose appointment,
election or nomination for election was previously so approved
or recommended; or
(c) there is consummated a merger or consolidation of the Company
with any other corporation, other than (i) a merger or
consolidation which would result in the voting securities of
the Company outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity or any parent thereof) at least 60% of
the combined voting power of the securities of the Company or
such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation; or (ii) a
merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in
which no Person is or becomes the Beneficial Owner, directly
or indirectly, of securities of the Company (not including in
the securities beneficially owned by such Person any
securities acquired directly from the Company) representing
25% or more of the combined voting power of the Company's then
outstanding securities; or
(d) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition of the
Company of all or substantially all of the Company's assets,
other than a sale or disposition by the Company of all or
substantially all of the Company's assets to an
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entity, at least 60% of the combined voting power of the
voting securities of which are owned by stockholders of the
Company in substantially the same proportions as their
ownership of the Company immediately prior to such sale.
For purposes of this definition, "Beneficial Owner" shall have the
meaning set forth in Rule 13d-3 under the Exchange Act; "Exchange Act"
shall mean the Securities Exchange Act of 1934, as amended from time to
time; and "Person" shall have the meaning given in Section 3(a)(9) of
the Exchange Act, as modified and used in Sections 13(d) and 14(d)
thereof, except that such term shall not include (i) the Company or any
of its subsidiaries; (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
"affiliates" within the meaning set forth in Rule 12b-2 promulgated
under Section 12 of the Exchange Act; (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities; or (iv)
a corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of
stock of the Company.
3. DATE OF TERMINATION.
"Date of Termination" means (i) if the Executive's employment is
terminated by the Executive for Good Reason, the date of receipt of the
Notice of Termination or any later date specified therein, as the case
may be; (ii) if the Executive's employment is terminated by the
Executive for any reason (other than for Good Reason) thirty (30) days
after Notice of Termination is given; (iii) if the Executive's
employment is terminated by the Company, the date on which the Company
notifies the Executive of such termination (except in the event of a
termination for Cause); (iv) if the Executive's employment is
terminated for Disability, the date of receipt of the Notice of
Termination; and (v) if the Executive's employment is terminated by
reason of death, the date of death.
4. DISABILITY.
"Disability" shall be deemed to occur if, as a result of the
Executive's incapacity due to physical or mental illness, (i) the
Executive shall have been absent from
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the full-time performance of his duties with the Company for a period
of one hundred and twenty (120) consecutive calendar days; and (ii) the
Company shall have given the Executive a Notice of Termination for
Disability.
5. GOOD REASON.
"Good Reason" shall mean the occurrence without the written consent of
the Executive of any of the following events that has not been fully
cured within thirty (30) days after written notice thereof has been
given by the Executive to the Company:
(i) Any significant diminution in the Executive's
position, duties, responsibilities, power, title or
office as in effect immediately prior to a Change
of Control;
(ii) Any reduction in Executive's annual base salary as in
effect on the date hereof or as the same may be
increased from time to time during the Term.
(iii) The failure of the Company to continue in effect any
material annual incentive compensation or bonus plan
in which the Executive participates immediately prior
to the Change of Control, unless an equitable
arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such
plan, or the failure by the Company to continue
Executive's participation therein (or in such
substitute or alternative plan) on a basis not
materially less favorable, both in terms of the
amount of benefits provided and the level of
Executive's participation relative to other
participants, as existed at the time of the change of
Control, or the failure by the Company to award cash
bonuses to its executives in amounts substantially
consistent with past practice in light of the
Company's financial performance;
(iv) The failure by the Company to continue to provide
Executive with benefits substantially similar to
those enjoyed by
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him under any of the Company's retirement, pension,
401-k, profit sharing plans or group life insurance,
medical, dental, hospitalization, or disability plans
in which Executive was participating at the time of
the Change of Control, or the taking of any action by
the Company which would directly or indirectly
materially reduce any of such benefits; or,
(v) Any requirement by the Company or of any person in
control of the Company that the location at which
Executive performs his principal duties for the
Company be changed to a new location outside a radius
of fifty (50) miles from the Company's current
headquarters in Avon, Massachusetts.
6. NOTICE OF TERMINATION.
Any termination by the Company or by the Executive shall be
communicated by Notice of Termination to the other party hereto given
in accordance with Section 8(b) of this Agreement. For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i)
indicates the specific termination provision in this Agreement, relied
upon; (ii) to the extent applicable, sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination
of the Executive's employment under the provision so indicated; and
(iii) if the Date of Termination is other than the date of receipt of
such notice, specifies the termination date which date shall be not
more than thirty (30) days after the giving of such notice. A Notice of
Termination for Cause is required to include a good faith opinion of
the CEO that the Executive was guilty of conduct set forth in clauses
(i) or (ii) of the definition of Cause herein, and specifying the
particulars thereof in detail.
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