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Exhibit
10.4
CHANGE OF CONTROL
SEVERANCE AGREEMENT
THIS CHANGE OF
CONTROL SEVERANCE AGREEMENT (this “Agreement”), dated
as of December 21, 2005, is made and entered by and between
Sologic, Inc., a Delaware corporation (the "Company"), and Carl L.
Smith III (the “Executive").
WITNESSETH:
WHEREAS, the
Executive is a key employee of the Company or one or more of It's
Subsidiaries (as defined below) and has made and is expected to
continue to Make major contributions to the short-and long-term
profitability, growth and Financial strength of the
Company;
WHEREAS, the Company
recognizes that, as is the case for most Companies, the possibility
of a Change in Control (as defined below) exists and That such
possibility, and the uncertainty it may create among management,
may Result in the distraction or departure of management personnel,
to the detriment of the Company and its
stockholders;
WHEREAS, the Company
desires to assure itself of both present and future Continuity of
management and desires to establish certain minimum severance
benefits for certain of its senior executives, including the
Executive, applicable in the event of a Change in Control;
and
WHEREAS, the Company
wishes to ensure that its senior executives are not unduly
distracted by the circumstances attendant to the possibility of a
Change in Control and to encourage the continued attention and
dedication of such executives, including the Executive, to their
assigned duties with the Company; and
WHEREAS, the Company desires to provide additional inducement for
the Executive to continue to remain in the employ
of
the
Company.
NOW, THERFORE, the
Company and the Executive agree as follows:
1. Certain Defined
Terms. In addition to terms defined elsewhere herein, the following
terms have the following meanings when used in this Agreement with
initial capital letters:
(a) "Base Pay" means
the annual base salary rate as in effect from time to
time.
(b) "Board”
means the Board of Directors of the Company.
(c) “Cause"
means that, prior to any termination pursuant to Section 3(b), the
Executive shall have
(i) been
convicted of a criminal Violation involving,
in each fraud,
embezzlement or theft in connection with his duties or in the
course of his employment with the Company or any
Subsidiary;
(ii) committed intentional
wrongful damage to of Company or any Subsidiary;
or
(iii) committed intentional
wrongful disclosure of secret processes or confidential information
of the Company or any Subsidiary and any such act shall have been
demonstrably and materially harmful to the Company. For purposes of
this Agreement, no act or failure to act
on the part of the Executive shall be deemed
"intentional”
if it
was due primarily to an error in judgment or negligence, but shall
be deemed "intentional" only if done or omitted to be done by the
Executive not in good faith and without reasonable belief that the
Executive’s action or omission was in the best interest of
the Company. Notwithstanding the foregoing, the Executive shall not
be deemed to have been terminated for “Cause" hereunder
unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not
less than three quarters of the Board then in office at a meeting
of the Board called and held for such purpose, after reasonable
notice to the Executive and an opportunity for the Executive,
together with the Executive's counsel (if the Executive chooses to
have counsel present at such meeting), to be heard before the
Board, finding that, in the good faith opinion of the Board, the
Executive had committed an act constituting "Cause" as herein
defined and specifying the particulars thereof in detail. Nothing
herein will limit the right of the Executive or his beneficiaries
to contest the validity or propriety of any such
determination.
(d) "Change in
Control" means the occurrence during the Term of any of the
following events:
(i) the acquisition by any
individual, entity or group (within the meaning of Section
13(d) (3) or 14(d) (2) of the Exchange Act) (a
"Person”) of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of or more
of the combined voting power of the then-outstanding Voting
Stock of the Company; provided, however, that:
(1) for purposes of this
Section 1 (d) (i), the following
acquisitions shall not constitute a Change in Control: (A)
any acquisition of Voting Stock of the Company directly from
the Company that is approved by a majority of the Incumbent Directors, (B)
any acquisition of Voting Stock of the Company by the Company
or any Subsidiary; (C) any acquisition of Voting Stock of the
Company by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any Subsidiary, (D)
any acquisition of Voting Stock of the Company by any Person
pursuant to a Business Combination that complies with clauses
(A), (8) and (C) of Section 1(d) (iii)
below;
(2) if any Person acquires
beneficial ownership of 20% or more of combined voting power
of the then-outstanding Voting Stock of the Company as a
result of a transaction described in clause
(1)
(A) of
Section 1 (d) (i) and such Person
thereafter becomes the beneficial owner of any additional
shares of Voting Stock of the Company representing 1% or more
of the then-outstanding Voting Stock of the Company, other
than in an acquisition directly from the Company that is
approved by a majority
of the
Incumbent Directors or other than as a result of a stock
dividend, stock split or similar transaction effected by the
Company in which all holders of Voting Stock are treated
equally, such subsequent acquisition shall be treated as a
Change in Control;
(3) a Change in Control
will not be deemed to have occurred if a Person acquires
beneficial ownership of 20% or more of the Voting Stock of
the Company as a result of a reduction in the number of
shares of Voting Stock of the Company outstanding unless and
until such Person thereafter becomes the beneficial owner of
any additional shares of Voting Stock of the Company
representing 1 % or more of the
then-outstanding Voting Stock of the Company, other than as a
result of a stock dividend, stock split or similar
transaction effected by the Company in which all holders of
Voting Stock are treated equally; and
(4) at least a majority of the
Incumbent Directors determine in good faith that a Person has
acquired beneficial ownership of 20 % or more of the Voting Stock
of the Company inadvertently, and such Person divests as promptly
as practicable a sufficient number of shares so that such Person
beneficially owns less than 20% of the Voting Stock of the Company
then no Change in Control shall have occurred as a result of such
Person's acquisition; or
(ii) a majority of the Directors
are not Incumbent Directors; or
(iii) the consummation of
a reorganization, merger or consolidation, or sale or other
disposition of all or substantially all of the assets of the
Company or the acquisition of assets of another corporation,
or other transaction (each, a “Business
Combination"), unless, in each case, immediately following
such Business Combination (A) all or substantially all of the
individuals entities who were the beneficial owners of Voting
Stock of the Company immediately prior to such Business
Combination beneficially own, directly or indirectly, more
than 60% of the combined voting power of the then outstanding
shares of Voting Stock of the entity resulting from such
Business Combination (including, without limitation, an
entity which as a result of such transaction owns the Company
or all or substantially all of the Company's assets either
directly or through one or more subsidiaries), (B) no Person
(other than the Company, such entity resulting from such
Business Combination, or any employee benefit plan (or
related trust) sponsored or maintained by the Company, any Subsidiary or
such entity resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of the
combined voting power of the then outstanding shares of
Voting Stock of the entity resulting from such Business
Combination, and (C) at least a majority of the members of
the Board of Directors of the entity resulting from such
Business Combination were Incumbent Directors at the time of
the execution of the initial agreement or of the action of
the Board providing for such Business Combination;
or
(iv) approval by the
shareholders of the Company of a complete liquidation or
dissolution of the Company, except pursuant to a Business
Combination that complies with clauses (A), (B) and (C) of
Section 1(d) (iii).
(e) "Employee Benefits"
means the perquisites, benefits and service credit for
benefits as provided under any and all employee retirement
income and Welfare Benefit policies, plans, programs or
arrangements in which Executive is entitled to
participate, including
without
limitation any stock option, performance share, performance
unit, stock purchase, stock appreciation, savings, pension,
supplemental executive retirement, or other retirement income
or Welfare deferred compensation, incentive compensation,
group or life; health, medical/hospital or other insurance
(whether funded by actual insurance or self-insured by the
Company or a Subsidiary), disability,
salary continuation, expense reimbursement and other employee
benefit policies. plans, programs or arrangements that may
now exist or any equivalent successor policies, plans,
programs or arrangements that may be adopted hereafter by the
Company or a Subsidiary, providing perquisites, benefits and
service credit for benefits at least great in the aggregate
as are payable hereunder immediately prior to a Change in
Control.
(f) “Exchange
Act" means the Securities Exchange Act of 1934, as
amended.
(g) "Good Reason"
means the occurrence of one or more of the following events
(regardless of whether any other reason, other than Cause, for such
termination exists or has occurred, including without limitation
other employment):
(i) Failure to elect
or reelect or otherwise to maintain the Executive in the office or
the position, or substantially equivalent or better office or
position, of or with the Company and/or a Subsidiary (or any
successor thereto by operation of law of or otherwise), as the may
be, which the Executive held immediately prior to Change in
Control, or the removal of the Executive as a Director of the
Company and/or a Subsidiary (or any successor thereto) if the
Executive shall have been a Director of the Company and/or a
Subsidiary immediately prior to the Change in
Control;
(ii) Failure of the Company to remedy any of the following
within 10 calendar days after receipt by
the Company of written notice thereof from the Executive: (A) A
significant adverse change in the nature or scope of the authorities,
powers, functions, responsibilities or duties attached to the
position with the Company and any Subsidiary which the Executive
held immediately prior to the Change in Control, (B) a reduction in
the Executive's Base Pay received
from the Company or any Subsidiary, (C) a reduction in the
Executive's Incentive Pay as compared with the Incentive Pay most
recently paid prior to the Change in Control, or (D) the
termination or denial of the Executive's rights to Employee
Benefits or a reduction in the scope or value thereof;
(iii) The
liquidation, dissolution, merger, consolidation or reorganization
of the Company or the transfer of all or substantially all of its
business and/or assets, unless the successor or successors (by
liquidation, merger, consolidation reorganization, transfer or
otherwise) to which all or substantially all of its business and/or
assets have been transferred (by operation of law or otherwise)
assumed all duties and obligations of the Company under this
Agreement pursuant to Section 11(a);
(iv) The Company requires the Executive to have his principal
location of work changed to any location that is in excess of 50
miles from the location thereof immediately prior to the Change in
Control, or requires the Executive to travel away from his office
in the course of discharging his responsibilities or duties
hereunder at least 20% more (in terms of aggregate days
in any calendar year or in any calendar quarter when annualized for
purposes of comparison to any prior year) than was required of
Executive in any of the three full years immediately prior to
Change in Control without
in either case, his
prior written consent;
or
(v) Without limiting
the generality or effect of the foregoing, any material breach of
this Agreement by the Company or any successor thereto which is not
remedied by the Company within 10 calendar days after receipt by
the Company of written notice from the Executive of such
breach.
(h) "Incentive Pay" means an annual bonus, incentive or other
payment compensation, in addition to Base Pay, made or to be made
in regard to services rendered in any year or other period pursuant to
any bonus, incentive, profit-sharing, performance, discretionary
pay or similar agreement, policy, plan, program or arrangement
(whether or not funded) of the Company or a Subsidiary, or any
successor thereto. "Incentive Pay" does not include any stock
option, stock appreciation, stock purchase, restricted stock or
similar plan, program, arrangement or grant, whether or not
provided under an arrangement described in the preceding
sentence"
(I) Incumbent Directors" means the individuals who, as of the date
hereof, are Directors of the Company and any individual becoming a
Director subsequent to the date hereof whose election, nomination
for election by the Company's shareholders, or appointment, were
approved by a vote of at least two-thirds of the then Incumbent
Directors (either by a specific vote or by approval of the proxy
statement of the Company in which such person is named as a nominee
for director, without objection to such nomination); provided,
however, that an individual shall not be an Incumbent Director if
such individual's election or appointment to the Board occurs as a
result of an actual or threatened election contest (as described in
Rule 14a-12(c) of the Exchange Act) with respect to the election or
removal of Directors or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the
Board.
(j) "Retirement Plans" means the
benefit plans of the Company that are intended to be
qualified under Section 401 (a) of the Internal Revenue Code
of 1986, as amended (the "Code") and any supplemental executive
retirement benefit plan or any other plan that is a
successor thereto if the Executive was a
participant in such Retirement Plan on the date of
the
Change in
Control.
(k) “Severance
Period" means the period of time commencing on the date of the
first occurrence of a Change in Control and continuing until the
earlier of (i) the second anniversary of the occurrence of the
Change in Control, or (ii) the Executive's death; provided,
however, that commencing on each anniversary of the Change in
Control, the Severance Period will automatically be extended for an
additional year unless, not later than 90 calendar days prior
to
such anniversary
date, either the Company or the Executive shall have given written
notice to the other that the Severance Period is not to be so
extended.
(I) "Subsidiary"
means an entity in which the Company directly or indirectly
beneficially owns 50%
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