Exhibit 10.28
CHANGE IN CONTROL AND SALARY CONTINUATION AGREEMENT
THIS AGREEMENT is made as of this 3rd day of March, 2006, by and
between Universal Electronics Inc., a Delaware corporation (the "Corporation")
and Robert P. Lilleness (the "Executive").
WITNESSETH:
WHEREAS, the Corporation, on behalf of itself and its subsidiaries,
wishes to attract and retain well-qualified executive and key personnel and to
assure both itself and the Executive of continuity of management in the event of
any actual or threatened Change in Control (as defined in Paragraph 2) of the
Corporation; and
WHEREAS, to achieve this purpose, the Board of Directors of the
Corporation considered and approved this Agreement to be entered into with the
Executive as being in the best interests of the Corporation and its
stockholders;
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties hereto agree a follows:
1. Operation of Agreement. The "effective date of this Agreement" shall be
the date on which a Change in Control occurs, and this Agreement shall
not have any force or effect whatsoever prior to that date.
2. Change in Control. For the purposes of this Agreement, a "Change in
Control" shall be deemed to occur when and only when the first of the
following events occurs:
a. Any "person" or "group" (as such terms are used in Sections
3(a), 3(d), and 14(d) of the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated
thereunder (the "1934 Act"), other than (i) a trustee or other
fiduciary holding securities under any employee benefit plan
of the Corporation or any of its subsidiaries or (ii) a
corporation owned directly or indirectly by the stockholders
of the Corporation in substantially the same proportions as
their ownership of stock in the Corporation, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the 1934
Act)), directly or indirectly, of securities of the
Corporation representing 20% or more of the total voting power
of the then outstanding securities of the Corporation entitled
to vote generally in the election of directors (the "Voting
Stock"); or
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b. Individuals who are members of the Incumbent Board, cease to
constitute a majority of the Board of Directors of the
Corporation; or
c. (i) The merger or consolidation of the Corporation with any
other corporation or entity, other than a merger or
consolidation which would result in the Voting Stock
outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into
voting securities of the surviving entity) at least 80% of the
total voting power represented by the Voting Stock or the
voting securities of such surviving entity outstanding
immediately after such merger or consolidation, (ii) the sale,
transfer or disposition of all or substantially all of the
Corporation's assets to any other corporation or entity,
and/or (iii) the dissolution or liquidation of the
Corporation.
The term "Incumbent Board" shall mean (i) the members of the Board of
Directors on March 3, 2006, and (ii) any individual who becomes a
member of the Board of Directors after March 3, 2006, if his or her
election or nomination for election as a director was approved by the
affirmative vote of a majority of the then Incumbent Board.
3. Employment. The Corporation hereby agrees to continue the Executive in
its employ and/or the employ of one or more of its subsidiaries and the
Executive hereby agrees to remain in the employ of the Corporation
and/or such subsidiaries, for the period commencing on the effective
date of this Agreement and ending on the second anniversary of such
date (the "employment period"), to exercise such authority and perform
such executive duties as are commensurate with the authority being
exercised and duties being performed by the Executive immediately prior
to the effective date of this Agreement, which services shall be
performed at a location within the metropolitan area in which the
Executive was employed immediately prior to the effective date of this
Agreement. During the employment period, the Executive agrees to devote
Executive's full business time exclusively to such executive duties and
shall perform such duties faithfully.
4. Compensation, Compensation Plans, Benefits and Perquisites. During the
employment period, the Executive shall be compensated as follows:
a. Executive shall receive an annual salary at a rate which is
not less than Executive's rate of annual salary immediately
prior to the effective date of this Agreement, with the
opportunity for increases from time to time thereafter which
are in accordance with the Corporation's regular practices.
b. Executive shall be eligible to participate on a reasonable
basis in the Corporation's stock option plans, annual
incentive bonus programs and any other bonus and incentive
compensation plans (whether now or hereinafter in effect) in
which
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executives with comparable authority and duties are eligible
to participate, which plans must provide opportunities to
receive compensation which are at least as great as the
opportunities under the plans in which the Executive was
participating immediately prior to the effective date of this
Agreement.
c. Executive shall be entitled to receive employee benefits and
perquisites which are the greater of the employee benefits and
perquisites provided by the Corporation to executives with
comparable duties or the employee benefits and perquisites to
which Executive was entitled immediately prior to the
effective date of this Agreement. Such benefits and
perquisites shall include, but not be limited to, the benefits
and perquisites included under the Universal Electronics Inc.
401(K) and Profit Sharing Plan, the Universal Electronics Inc.
1993 Stock Incentive Plan, the Universal Electronics Inc. 1995
Stock Incentive Plan, the Universal Electronics Inc. 1996
Stock Incentive Plan, the Universal Electronics Inc. 1998
Stock Incentive Plan, the Universal Electronics Inc. 1999
Stock Incentive Plan, the Salaried Employee Cash Incentive
Program, and the Universal Electronics Inc. group health
insurance program, which includes comprehensive medial
insurance, group disability, group life insurance, and
executive bonus (supplemental life) and such other plans as
shall be developed and implemented from time to time.
5. Termination Following Change in Control
a. For purposes of this Agreement, the term "termination" shall
mean (i) termination by the Corporation of the employment of
the Executive with the Corporation and all of its subsidiaries
for any reason other than death, disability or "cause" (as
defined below), or (ii) resignation of the Executive (1) for
"good reason" (as defined below), or (2) without regard to
reason if notice of Executive's decision to resign is
delivered to the Corporation within sixty (60) calendar days
following the effective date of this Agreement.
b. The term "good reason" shall mean (i) a significant change in
the nature or scope or the location for the exercise or
performance of the Executive's authority or duties from those
referred to in Section 3, a reduction in total compensation,
compensation plans, benefits or perquisites from those
provided in Section 4, or the breach by the Corporation of any
other provision of this Agreement; or (ii) a reasonable
determination by the Executive that, as a result of a Change
in Control and a change in circumstances thereafter
significantly affecting Executive's position, Executive is
unable to exercise the authorities, power, function or duties
attached to Executive's position and contemplated by Section 3
of the Agreement.
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c. The term "cause" means (i) the willful and continued failure
by the Executive to substantially perform Executive's duties
with the Corporation and/or, if applicable, one or more of its
subsidiaries (other than any such failure resulting from
Executive's incapacity due to physical or mental illness)
after a demand for substantial performance is delivered to
Executive by the Board of Directors of the Corporation which
specifically identifies the manner in which the Board believes
the Executive has not substantially performed Executive's
duties, (ii) the willful engaging by the Executive in gross
misconduct materially and demonstrably injurious to the
property or business of the Corporation or any of its
subsidiaries, or (iii) Executive's commission of fraud,
misappropriation or a felony. For purposes of this paragraph,
no act or failure to act on the Executive's part will be
considered "willful" unless done, or omitted to be done, by
Executive not in good faith and without reasonable belief that
Executive's action or omission was in the interests of the
Corporation or not opposed to the interests of the
Corporation.
6. Confidentiality. The Executive agrees that during and after the
employment period, Executive shall retain in confidence any
confidential information known to Executive concerning the Corporation
and its subsidiaries and their respective business for as long as such
information is not publicly disclosed.
7. No Obligation to Mitigate Damages. The Executive shall not be obligated
to seek other employment in mitigation of amounts payable or
arrangements made under the provisions of this Agreement and the
obtaining of any such other employment shall in no event effect any
reduction of the Corporation's obligations under this Agreement.
8. Severance Allowance
a. In the event of the termination of the Executive during the
employment period, the Executive shall be entitled to receive
a lump sum severance allowance within five days of such
termination, in an amount which is equal to the sum of the
following:
(i) The amount equivalent to salary payments for
24 calendar months, at the rate required by paragraph
4(a) and in effect immediately prior to termination
(without regard to any attempted reduction or
discontinuance of such salary); and
(ii) The amount equivalent to 24 calendar months
of bonus, at the greater of (A) the monthly rate of
the bonus payment for the bonus period in the year
immediately prior to Executive' s termination date,
or (B) the estimated amount of the bonus for the
period which includes Executive's termination
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date (without regard to any attempted reduction or
discontinuance of such bonus).
b. In addition to such amount under paragraph (a) above, the
Executive shall also receive, (i) in cash the value of the
incentive compensation (including, but not limited to,
employer contributions to the Universal Electronics Inc.
401(K) and Profit Sharing Plan and (ii) the rights to receive
grants of stock options and stock awards to which Executive
would have been entitled under all incentive compensation and
stock option and stock award plans maintained by the
Corporation if Executive had remained in the employ of the
Corporation for 24 months (without regard to any attempted
reduction or discontinuance of such incentive compensation).
The amount of such payment and/or grants shall be determined
as of the date of termination and shall be paid and/or issued
as promptly as practicable and in no event later than 30 days
after such termination.
c. The Corporation shall maintain in full force and effect for
the Executive's continued benefit (and, to the extent
applicable, the continued benefit of Executive's dependents)
all of the employee benefits (including, not limited to,
coverage under any medical and insurance plans, programs or
arrangements) to which Executive would have been entitled
under all employee benefit plans, programs or arrangements
maintained by the Corporation if Executive had remained in the
employ of the Corporation for 24 calendar months after
Executive's termination (without regard to any attempted
reduction or discontinuance of such benefits), or if such
continuation is not possible under the terms and provisions of
such plans, programs or arrangements, the Corporation shall
arrange to provide benefits at least equal to those which the
Executive (and, to the extent applicable, Executive's
dependents) would have been entitled to receive if the
Executive had remained a participant in such plans, programs
or for such 24-month period (without regard to any attempted
reduction or discontinuance of such benefits.
9. Adjustments in Case of "Excess Parachute Payments. In the event that
the aggregate present value (determined in accordance with applicable
federal, state and local income tax law, rules and regulations) of all
payments to be made and benefits to be provided to the Executive under
this Agreement and/or under any other plan, program or arrangement
maintained or entered into by the Corporation or any of its
subsidiaries shall result in "excess parachute payments" to the
Executive within the meaning of Section 280G of the Internal Revenue
Code of 1986, as amended (the "Code"), or any comparable provision of
successor legislation, which subject the Executive to the Excise Tax
under Section 4999 of the Code or any comparable provision of successor
legislation, the Corporation shall pay to the Executive an additional
amount (the "gross-up payment") calculated so that the net amount
received by Executive after deduction of the Excise Tax and of all
federal, state, and local income taxes
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upon the gross-up payment shall equal the payments to be made and the
benefits to be provided to the Executive under this Agreement. For
purposes of determining the amount of the gross-up payment, the
Executive shall be deemed to pay federal, state, and local income taxes
at the highest marginal rates thereof in the calendar year in which the
gross-up payment is to be made, net of the maximum reduction in federal
income taxes obtainable from deduction of such state and local taxes.
The computations required by this Section 9 shall be made by the
independent public accountants then regularly retained by the
Corporation, in consultation with tax counsel selected thereby and
acceptable to the Executive. Said accountants' and tax counsel's fees
shall be paid by the Corporation.
10. Interest; Indemnification
a. In the event any payment to Executive under this Agreement is
not paid within five business days after it is due, such
payment shall thereafter bear interest at the prime rate from
time to time in effect at Bank of America, Los Angeles,
California.
b. The Corporation hereby indemnifies the Executive for all legal
and accounting fees and expenses incurred by Executive in
contesting any action of the Corporation with respect to this
Agreement, including the termination of Executive's employment
hereunder, or incurred by Executive in seeking to obtain or
enforce any right or benefit provided by this Agreement.
11. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and if
sent by registered or certified mail to the Executive at the last
address Executive has filed in writing with the Corporation or, in the
case of the Corporation, at its principal executive offices.
12. Non-Alienation. The Executive shall not have any right to pledge,
hypothecate, anticipate or in any way create a lien upon any amounts
provided under this Agreement; and no benefits payable hereunder shall
be assignable in anticipation of payment either by voluntary or
involuntary acts, or by operation of law, except by will or the laws of
descent and distribution.
13. Governing Law. The provisions of this Agreement shall be construed in
accordance with the laws of the State of California, without regard to
its conflict of laws provisions.
14. Amendment. This Agreement may be amended or canceled only by mutual
agreement of the parties in writing without the consent of any other
person and, so long as the Executive lives, no person, other than the
parties hereto, shall have any rights under or interest in this
Agreement or the subject matter hereof.
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15. Successor to the Corporation. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the
Corporation and any successor of the Corporation.
16. Partial Invalidity. The various covenants and provisions of this
Agreement are intended to be severable and to constitute independent
and distinct binding obligations of the parties hereto. Should any
covenant or provision of this Agreement be determined to be void and
unenforceable, in whole or in part, to any party hereto or in any
circumstance, it shall not be deemed to affect or impair the validity
of any other covenant or provision of part thereof, and shall continue
in effect to the extent valid, enforceable and applicable in other
circumstances and to the other party, and such covenant or provision of
part thereof shall be deemed modified but only to such a minimum extent
required to permit it to remain valid, enforceable and applicable to
such party or circumstance. Without limiting the generality of the
foregoing, if the scope of any covenant, provision or part thereof
contained in this Agreement is too broad to permit enforcement to its
full extent, such covenant, provision or part thereof shall be enforced
to the maximum extent permitted by law, and the parties hereto agree
that such scope may be judicially modified accordingly.
17. Interpretation of Agreement. The parties have cooperated in the
drafting and preparation of this Agreement. Therefore, the parties
hereto agree that, in any construction to be made of this Agreement,
the same shall not be construed against any of the parties by reason of
its drafting or the identity of its preparer. Each of the parties
hereto has carefully read this Agreement and has been given the
opportunity to have it reviewed by legal counsel and negotiate its
terms.
18. Conflict with Executive Officer Employment Agreement. The parties agree
that the Executive Officer Employment Agreement between the Corporation
and the Executive dated April __, 2003 (the "EOEA") shall be and remain
in full force and effect in accordance with its terms subject to the
following: (a) Executive acknowledges that he has received notice from
the Corporation in accordance with the terms of the EOEA of the
Corporation's decision to not renew the EOEA and that as a result of
receiving this notice, the EOEA shall terminate without further action
by the parties at the end of business on the "Initial Term" (as such
term is defined within the EOEA), (b) to the extent that the terms of
this Agreement conflict with those of the EOEA prior to the termination
of the EOEA, the terms of the EOEA shall control until such time as the
EOEA terminates, at which time the terms of this Agreement shall
control, and (c) it is the intention of the parties to this Agreement
that this Agreement will serve to replace certain benefits and rights
given to Executive under the EOEA that terminate when the EOEA
terminates and therefore, the Executive agrees and acknowledges that
under no circumstances shall Executive receive remuneration (regardless
of whether such remuneration is considered compensation, benefits,
perquisites, or severance or the like) under both this Agreement and
the EOEA at the same time, that is the Executive
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shall first look to the EOEA for such remuneration until the EOEA
terminates and then to this Agreement.
IN WITNESS WHEREOF, the Executive has executed this Agreement and,
pursuant to the authorization from its Board of Directors, the Corporation has
caused this Agreement to be executed in its name on its behalf, and attested by
its Secretary, all as of the day and year first above written.
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Executive
UNIVERSAL ELECTRONICS INC.,
a Delaware corporation
By:
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Paul D. Arling, Chairman and Chief
Executive Officer
ATTEST:
- --------------------------------------
Richard A. Firehammer, Jr., Secretary
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