CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS CHANGE IN CONTROL SEVERANCE AGREEMENT ("Agreement"), is made and
entered into this 21st day of May, 1996 by and between Embrex, Inc. ("Company"),
a North Carolina corporation, and Catherine A. Ricks ("Employee").
WHEREAS, the Board of Directors ("Board") of the Company considers the
maintenance of a vital management group to be essential in protecting and
enhancing the best interests of the Company and its shareholders;
WHEREAS, the Board recognizes that the possibility of a Change in
Control (as hereinafter defined) exists and that the threat of or the occurrence
of a Change in Control can result in significant distractions of its key
management personnel because of the uncertainties inherent in such a situation;
WHEREAS, the Board has determined that it is in the best interest of
the Company and its shareholders to ensure the Employee's continued dedication
and efforts on behalf of the Company; and
WHEREAS, in order to induce the Employee to remain in the employ of the
Company, particularly in the event of a threat of or the occurrence of a Change
in Control and to dispel any concerns that the Employee may have about taking an
active part in the defense against an inappropriate attempt to bring about a
Change in Control of the Company, the Company desires to enter into this
Agreement with the Employee to provide the Employee with certain payments and
benefits in the event that her employment with the Company is terminated as a
result of, or in connection with, a Change in Control.
NOW, THEREFORE, in consideration of the mutual agreements herein set
forth, the legal sufficiency and adequacy of which are hereby acknowledged, the
parties agree as follows:
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1. Employment. Employee acknowledges that she is employed with the
Company pursuant to an Employment Agreement dated October 16, 1989 and hereby
agrees that to the extent any provision of this Agreement should be contrary to
any provision of the Employment Agreement, the terms of this Agreement shall
control.
2. Definitions. For purposes of this Agreement, the following
terms have the meanings indicated:
(A) "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates (as such term is
hereinafter defined) and Associates (as such term is hereinafter defined) of
such Person, shall be the Beneficial Owner (as such term is hereinafter defined)
of thirty-three percent (33%) or more of the shares of Common Stock then
outstanding, but shall not include (i) the Company, (ii) any Subsidiary of the
Company, (iii) any employee benefit plan or employee stock plan of the Company
or of any Subsidiary of the Company, (iv) any dividend reinvestment plan of the
Company, or (v) any Person or entity organized, appointed, or established by the
Company for or pursuant to the terms of such plan. Notwithstanding the
foregoing, no Person shall become an "Acquiring Person" as the result of an
acquisition of Common Stock by the Company which, by reducing the number of
shares outstanding, increases the proportionate number of shares beneficially
owned by such Person to thirty-three percent (33%) or more of the Common Stock
of the Company then outstanding; provided, however, that if a Person shall
become the Beneficial Owner of thirty-three (33%) or more of the Common Stock of
the Company, then outstanding by reason of such an acquisition and shall, after
such acquisition, become the Beneficial Owner of any additional shares of Common
Stock, then such Person shall be deemed to be an "Acquiring Person." In
addition, notwithstanding the foregoing, if the Board of Directors of the
Company determines in good faith that a Person who would otherwise be an
"Acquiring
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Person," as defined pursuant to the foregoing provisions of this Paragraph (A),
has become such inadvertently, and such Person divests as promptly as
practicable a sufficient number of shares of Common Stock so that such Person
would no longer be an "Acquiring Person" as defined pursuant to the foregoing
provisions of this Paragraph (A), then such Person shall not be deemed to be an
"Acquiring Person" for any purposes of this Agreement.
(B) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
(C) A Person shall be deemed the "Beneficial Owner" of and
shall be deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has the
right or obligation to acquire (whether such right is
exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding
(whether or not in writing) or upon the exercise of conversion
rights, exchange rights, rights, warrants or options, or
otherwise; provided, however, that a Person shall not be
deemed the "Beneficial Owner" of, or to "beneficially own,"
(a) securities tendered pursuant to a tender or exchange offer
made by such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for
purchase or exchange, or (b) at any time prior to the
occurrence of a Triggering Event, securities issuable upon
exercise of the Rights ("Triggering Event" and "Rights" shall
have the respective meanings ascribed to such terms as set
forth in the Rights Agreement between Embrex, Inc. and Branch
Banking & Trust Company as Rights Agent, dated as of March 21,
1996 and as in effect on the date
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hereof ("Rights Agreement")), or (c) from and after the
occurrence of a Triggering Event, securities issuable upon
exercise of Rights which were acquired by such Person or any
of such Person's Affiliates or Associates prior to the
Distribution Date (as defined in the Rights Agreement) or
pursuant to Section 3(a) or Section 22 of the Rights Agreement
(the "Original Rights") or pursuant to Section 11(i) of the
Rights Agreement in connection with an adjustment made with
respect to any Original Rights;
(ii) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has the
right to vote or dispose of or has "beneficial ownership" of
(as determined pursuant to Rule 13d-3 of the General Rules and
Regulations under the Exchange Act and any successor provision
thereof), including pursuant to any agreement, arrangement or
understanding, whether or not in writing; provided, however,
that a Person shall not be deemed the "Beneficial Owner" of,
or to "beneficially own," any security under this subparagraph
(ii) as a result of an agreement, arrangement or understanding
to vote such security if such agreement, arrangement or
understanding: (a) arises solely from a revocable proxy given
in response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable provisions
of the General Rules and Regulations under the Exchange Act,
and (b) is not also then reportable by such Person on Schedule
13D under the Exchange Act (or any comparable or successor
report); or
(iii) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate
thereof) with which such Person (or any of such Person's
Affiliates or Associates) has any agreement, arrangement or
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understanding (whether or not in writing), but excluding
customary agreements with and between underwriters and selling
group members with respect to a bona fide public offering of
securities until the expiration of forty days after the date
of such acquisition, for the purpose of acquiring, holding,
voting (except pursuant to a revocable proxy as described in
the provision to subparagraph (ii) of this paragraph (C)) or
disposing of any voting securities of the Company.
(D) "Continuing Director" shall mean (i) any member of the
Board of Directors of the Company, while such Person is a member of the Board of
Directors, who is not an Acquiring Person, or an Affiliate or Associate of an
Acquiring Person, or a representative of an Acquiring Person or of any such
Affiliate or Associate, and was a member of the Board of Directors prior to the
date of this Agreement, or (ii) any Person who subsequently becomes a member of
the Board of Directors, while such Person is a member of the Board of Directors,
who is not an Acquiring Person, or an Affiliate or Associate of an Acquiring
Person, or a representative of an Acquiring Person or of any such Affiliate or
Associate, if such Person's nomination for election or election to the Board of
Directors is recommended or approved by a majority of the Continuing Directors.
(E) "Person" shall mean any individual, firm, corporation,
partnership, limited liability company or other entity.
(F) "Subsidiary" shall mean, with reference to any other
Person, any corporation or other entity of which securities or other ownership
interests having ordinary voting power, in the absence of contingencies, to
elect at least a majority of the directors or other persons performing similar
functions is beneficially owned, directly or indirectly, by such Person, or
which is otherwise controlled by such Person.
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(G) "Termination Date" shall mean the date on which the
Employee's employment with the Company is terminated by the Employee for Good
Reason or by the Company for reasons other than Cause, Disability, or death.
3. Change in Control. For purposes of this Agreement, a
"Change in Control" shall mean the occurrence of any one of the following
events:
(A) Any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan or employee stock plan of the Company or of
any Subsidiary of the Company, any dividend reinvestment plan of the Company, or
any Person or entity organized, appointed, or established by the Company for or
pursuant to the terms of any such plan) alone or together with its Affiliates or
Associates, shall, at any time after the date hereof, become an Acquiring
Person; or
(B) The Continuing Directors cease for any reason to
constitute a majority of the Board of Directors of the Company; or
(C) Directly or indirectly:
(i) the Company shall consolidate with, or merge with
and into, any other Person (other than a Subsidiary of the
Company), and the Company shall not be the continuing or
surviving corporation of such consolidation or merger; or
(ii) any Person (other than Subsidiary of the
Company) shall consolidate with, or merge with or into, the
Company, and the Company shall be the continuing or surviving
corporation of such consolidation or merger, and in connection
with such consolidation or merger, all or part of the
outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other Person or
cash or any other property; or
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(iii) the Company shall sell or otherwise transfer
(or one or more of its Subsidiaries shall sell or otherwise
transfer) in one transaction or a series of related
transactions, assets or earning power aggregating more than
fifty percent (50%) of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to any Person
or Persons (other than the Company or any Subsidiary of the
Company).
4. Termination Following Change in Control. After the occurrence of a
Change in Control, Employee shall be entitled to receive payments and benefits
pursuant to this Agreement if, within two (2) years after the occurrence of a
Change in Control, her employment with the Company is terminated under any of
the following circumstances:
(A) The Company terminates Employee's employment for reasons
other than "Cause," "Disability," or death. For purposes of this Agreement,
"Cause" shall be defined as:
(i) the willful and continued failure by Employee to
perform substantially her duties with the Company (other than
any such failure resulting from her Disability) for a
significant period of time, after a demand for substantial
performance is delivered to Employee by the Board or a
committee thereof, which specifically identifies the manner in
which the Board believes that Employee has not substantially
performed her duties; or
(ii) the willful engaging by Employee in gross
misconduct materially and demonstrably injurious to the
Company. No act, or failure to act, on Employee's part shall
be considered "willful" unless done, or omitted to be done, by
Employee in the absence of good faith and without a reasonable
belief that her action or failure to act was in the best
interest of the Company.
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For purposes of this Agreement, "Disability" shall mean a physical or
mental infirmity which impairs the Employee's ability substantially to perform
her employment duties for the Company and which continues for a period of at
least one hundred and eighty (180) consecutive days.
(B) The Employee terminates her employment with the Company
for "Good Reason." For purposes of this Agreement, "Good Reason" shall mean the
occurrence after a Change in Control of any of the following events or
conditions:
(i) a change in the Employee's status, title,
position or responsibilities (including reporting
responsibilities) which, in the Employee's reasonable
judgment, represents an adverse change from her status, title,
position or responsibilities in effect immediately prior
thereto; the assignment to Employee of any duties or
responsibilities which in the Employee's reasonable judgment,
are inconsistent with her status, title, position or
responsibilities; or any removal of Employee from or failure
to reappoint or reelect him to any of such positions, status,
or title except in connection with the termination of her
employment for Disability, Cause, or death, or by the Employee
other than for Good Reason;
(ii) a reduction in the Employee's base salary;
(iii) the Company's requiring the Employee to be based at any
place outside a 30 mile radius from Durham, North Carolina,
except for reasonably required travel on the Company's
business which is not greater than such travel requirements
prior to the Change in Control;
(iv) the failure by the Company to continue in
effect any compensation, welfare or benefit plan in which
Employee is participating at the time of a
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Change in Control without substituting plans providing
Employee with substantially similar or greater benefits, or
the taking of any action by the Company which would adversely
affect Employee's participation in or materially reduce
Employee's benefits under any of such plans or deprive
Employee of any material fringe benefit enjoyed by Employee at
the time of the Change in Control;
(v) any purported termination of Employee's
employment for Cause or Disability without grounds therefore;
(vi) the insolvency or the filing (by any party
including the Company) ofa petition for bankruptcy of the
Company;
(vii) any material breach by the Company of any
provision of this Agreement; or
(viii) the failure of the Company to obtain an
agreement, satisfactory to the Employee, from any successor or
assign of the Company to assume and agree to perform this
Agreement.
5. Severance Pay and Benefits. In the event that Employee's
employment with the Company terminates under any of the circumstances described
in Paragraph 4 above, Employee shall be entitled to receive all of the
following:
(A) all accrued compensation and any pro-rata bonuses
Employee may have earned up to the Termination Date;
(B) a severance payment equal to two and nine-tenths (2.9)
times the amount of the Employee's most recent annual compensation, including
the amount of her most recent annual bonus. The severance payment shall be paid
in thirty-four (34) equal monthly installments without interest, commencing one
month after the Termination Date;
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(C) a continuation of benefits. The Company shall maintain in
full force and effect, for two (2) years after the Termination Date, all life
insurance, health, accidental death and dismemberment, and disability plans and
other benefit programs in which Employee is entitled to participate immediately
prior to the Termination Date provided that Employee's continued participation
is possible under the general terms and provisions of such plans and programs.
Employee's continued participation in such plans and programs shall be at no
greater cost to Employee than the cost she bore for such participation
immediately prior to the Termination Date. If Employee's participation in any
such plan or program is barred, the Company shall arrange upon comparable terms,
and at no greater cost to Employee than the cost she bore for such plans and
programs prior to the Termination Date, to provide Employee with benefits
substantially similar to, or greater than, those which she is entitled to
receive under any such plan or program; and
(D) a lump sum payment (or otherwise as specified by Employee
to the extent permitted by the applicable plan) of any and all amounts
contributed to a Company pension or retirement plan which Employee is entitled
to under the terms of any such plan.
6. No Duty to Mitigate. Employee shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other employment
or otherwise, and no such payment shall be offset or reduced by the amount of
any compensation or benefits provided to the Employee in any subsequent
employment. The severance pay and benefits under this Agreement shall be in lieu
of any other severance pay to which Employee may be entitled from the Company.
7. Stock Options. Upon the occurrence of a Change in Control, all
stock options shall immediately vest and, except as may be required by the
nature of the transaction constituting the Change in Control, the options shall
remain exercisable for the duration of the
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original option term. If plans or agreements to which outstanding options have
been issued do not provide for immediate vesting, the Company shall use its best
efforts to effect amendments permitting the acceleration of vesting so long as
no material adverse accounting treatment results to the Company.
8. Fees and Expenses. The Company agrees that if Employee is entitled
to any severance pay or benefits under this Agreement, and the Company or its
survivor disputes the obligation to pay such severance pay or benefits and the
Employee prevails, in whole or in part, the Company or its survivor shall
promptly pay or reimburse Employee for all expense incurred by Employee in such
dispute, including, but not limited to, attorneys fees and associated expenses.
9. Excise Tax Payments.
(A) In the event that any payment or benefit (within the
meaning of Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended
(the "Code")), to the Employee or for her benefit paid or payable or distributed
or distributable pursuant to the terms of this Agreement or otherwise in
connection with, or arising out of, her employment with the Company or a change
in ownership or effective control of the Company or of a substantial portion of
its assets (a "Payment" or "Payments"), would be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties are incurred by
the Employee with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Employee will be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Employee of all taxes (including any interest or penalties, other than interest
and penalties imposed by reason of the Employee's failure to file timely a tax
return or pay taxes shown due on her return, imposed with respect to such taxes
and the Excise
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Tax), including any Excise Tax imposed upon the Gross-Up Payment, the Employee
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments.
(B) An initial determination as to whether a Gross-Up Payment
is required pursuant to this Agreement and the amount of such Gross-Up Payment
shall be made at the Company's expense by an accounting firm selected by the
Company and reasonably acceptable to the Employee which is designated as one of
the five largest accounting firms in the United States (the "Accounting Firm").
The Accounting Firm shall provide its determination (the "Determination"),
together with detailed supporting calculations and documentation to the Company
and the Employee within ten days of the Termination Date if applicable, or such
other time as requested by the Company or by the Employee (provided the Employee
reasonably believes that any of the Payments may be subject to the Excise Tax)
and if the Accounting Firm determines that no Excise Tax is payable by the
Employee with respect to a Payment or Payments, it shall furnish the Employee
with an opinion reasonably acceptable to the Employee that no Excise Tax will be
imposed with respect to any such Payment or Payments. Within ten days of the
delivery of the Determination to the Employee, the Employee shall have the right
to dispute the Determination (the "Dispute"). The Gross-Up Payment, if any, as
determined pursuant to this Paragraph 9(B) shall be paid by the Company to the
Employee within five days of the receipt of the Accounting Firm's determination.
The existence of the Dispute shall not in any way affect the Employee's right to
receive the Gross-Up Payment in accordance with the Determination . Upon the
final resolution of a Dispute, the Company shall promptly pay to the Employee
any additional amount required by such resolution. If there is no Dispute, the
Determination shall be binding, final and conclusive upon the Company and the
Employee subject to the application of Paragraph 9(C) below.
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(C) Notwithstanding anything in this Agreement to the
contrary, in the event that, according to the Determination, an Excise Tax will
be imposed on any Payment or Payments, the Company shall pay to the applicable
government taxing authorities as Excise Tax withholding, the amount of the
Excise Tax that the Company has actually withheld from the Payment or Payments.
10. Successors and Assigns.
(A) This Agreement shall be binding upon and shall inure to
the benefit of the Company, its successors, and assigns, and the Company shall
require any successor or assign to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place.
(B) Neither this Agreement nor any right or interest hereunder
shall be assignable or transferable by the Employee, her beneficiaries, or legal
representatives except by will or by the laws of dissent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Employee's
legal personal representative.
11. Notice. Notice as provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when delivered in person or
mailed by United States Registered Mail, Return Receipt Requested, Postage
Pre-Paid, addressed to the respective addresses last given by each party to the
other, provided that all notices to the Company shall be directed to the
attention of the Board with a copy to Smith, Anderson, Blount, Dorsett, Mitchell
& Jernigan, Attn. Gerald F. Roach, Post Office Box 2611, Raleigh, North Carolina
27602-2611, counsel for the Company. All notices and communications shall be
deemed to have been received on the date of delivery thereof or on the third
business day of the mailing thereof, except that notice of change of address
shall be effective only upon receipt.
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12. Modifications. No provision of this Agreement may be modified,
waived, or discharged unless such modification, waiver, or discharge is agreed
to in writing signed by the Employee and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any conditional provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
of the same at any prior or subsequent time.
13. Entire Agreement. No agreement or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
14. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of North
Carolina.
15. Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first written above.
EMBREX, INC.
By:/s/ Randall L. Marcuson
ATTEST: Title: President and CEO
EMPLOYEE:
/s/ John Bradley /s/ Catherine A. Ricks
Corporate Secretary Catherine A. Ricks
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