Exhibit 10.8
IRIDEX CORPORATION
CHANGE OF CONTROL SEVERANCE
AGREEMENT
This Change of Control Severance
Agreement (the “Agreement”) is made and entered into by
and between James H. Mackaness (“Executive”) and
IRIDEX Corporation (the “Company”), effective as of
January 22, 2008 (the “Effective
Date”).
RECITALS
W HEREAS , it is expected that the Company from time to
time will consider the possibility of a merger with another
company, an acquisition by another company or other Change of
Control (as defined herein). The Board of Directors of the Company
(the “Board”) recognizes that such consideration can be
a distraction to Executive and can cause Executive to consider
alternative employment opportunities.
W HEREAS , the Board believes that it is in the best
interests of the Company and its stockholders to provide Executive
with an incentive to continue his or her employment to motivate
Executive to maximize the value of the Company upon a Change of
Control for the benefit of its stockholders.
W HEREAS , the Board believes that it is in the best
interests of the Company and its stockholders to provide Executive
with certain severance benefits upon Executive’s termination
of employment without cause or upon a constructive termination
following a Change of Control of the Company and to provide
Executive with certain severance benefits upon Executive’s
termination of employment without cause outside of the change of
control context, in order to provide Executive with enhanced
financial security and incentive to remain with the
Company.
W HEREAS , certain capitalized terms used in the
Agreement are defined in Section 5 below.
AGREEMENT
NOW , THEREFORE , in consideration of the
mutual promises and covenants contained herein, the parties hereto
agree as follows:
1. Term of Agreement . This
Agreement will terminate upon the date that all of the obligations
of the parties hereto with respect to this Agreement have been
satisfied.
2. At-Will Employment . The
Company and Executive acknowledge that Executive’s employment
is and will continue to be at-will, as defined under applicable
law, except as may otherwise be specifically provided under the
terms of a written formal employment agreement, if any, between the
Company and Executive (an “Employment Agreement”). If
Executive’s employment terminates for any reason, including
(without limitation) any termination prior to a Change of Control,
Executive will not be entitled to any payments, benefits, damages,
awards or compensation other than as provided by this
Agreement.
3. Severance Benefits
.
(a) Constructive Termination or
Termination without Cause Following a Change of Control . If,
in the event that (a) within twelve (12) months following
a Change of Control, or (b) at any time prior to a Change of
Control if such termination is effected at the request of an
Acquiror, (x) Executive terminates his or her employment with
the Company (or any parent or subsidiary or successor of the
Company) for Good Reason, or (y) the Company (or any parent or
subsidiary or successor of the Company) terminates
Executive’s employment without Cause, and, in each case,
Executive signs and does not revoke a standard release of claims
with the Company in a form acceptable to the Company, then
Executive will receive, in addition to Executive’s salary
payable through the date of termination of employment and any other
employee benefits earned and owed through the date of termination,
the following severance from the Company:
(i) Severance Payment . As
provided in Section 3(b) below, six (6) months severance
pay (less applicable withholding taxes) equal to the pro-rata
portion of Executive’s base salary (as in effect immediately
prior to (A) the Change of Control, or
(B) Executive’s termination, whichever is greater, the
“Severance Amount”).
(ii) Accelerated Vesting of
Options; Restricted Stock . Then-outstanding and unvested stock
options in Company common stock held by Executive
(“Options”) will immediately vest and become
exercisable as to fifty percent (50%) of the unvested shares
underlying such Options (the “Option Acceleration
Amount”). The Options will remain exercisable following the
termination for the period prescribed in the respective option
agreement, which will not extend past the term of each Option.
Additionally, fifty percent (50%) of any shares of restricted
stock (“Restricted Stock”) then-held by Executive will
immediately vest and the applicable Company right of repurchase or
reacquisition with respect to such shares of Restricted Stock will
lapse (the “Restricted Stock Acceleration
Amount”).
(iii) Continued Employee
Benefits . Reimbursement for a period of up to six
(6) months (less applicable withholding taxes, if any) for the
costs and expenses incurred by Executive and/or Executive’s
eligible dependents for coverage under the Company’s Benefit
Plans, provided that such coverage is timely elected under
COBRA.
(b) Timing of Severance
Payments . The Company will pay the severance payments to which
Executive is entitled under Section 3(a)(i) in a lump sum. If
Executive should die before all amounts have been paid, such unpaid
amounts will be paid in a lump sum payment (less any withholding
taxes) to Executive’s spouse, designated beneficiary, or
otherwise to the personal representative of Executive’s
estate.
(c) Severance Benefits
Eligibility . Notwithstanding any other provision in this
Agreement to the contrary, during the period commencing on the
Effective Date and continuing until the date three (3) months
after the Effective Date (the “Trial Period”), the
Executive shall be eligible to receive only one-half (1/2) of
the Severance Amount provided for in
Section 3(a)(i).
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(d) Voluntary Resignation;
Termination For Cause or without Cause Outside of the Context of a
Change of Control . If Executive’s employment with the
Company terminates (i) voluntarily by Executive (except upon a
termination for Good Reason (a) within twelve (12) months
following a Change of Control, or (b) at any time prior to a
Change of Control if such termination is at the request of an
Acquiror), (ii) for Cause by the Company (or any parent or
subsidiary or successor of the Company), or (iii) without
Cause by the Company (or any parent or subsidiary or successor of
the Company) if not (a) within twelve (12) months
following a Change of Control, or (b) at any time prior to a
Change of Control if such termination is at the request of an
Acquiror, then Executive will not be entitled to receive any
severance benefits and the sole obligation of the Company shall be
to pay to Executive, an amount equal to Executive’s base
salary payable through the date of termination of employment and
any other employee benefits earned and owed through the date of
termination.
(e) Disability; Death . If
the Company terminates Executive’s employment as a result of
Executive’s Disability, or Executive’s employment
terminates due to his or her death, then Executive will not be
entitled to receive severance benefits and the sole obligation of
the Company shall be to pay to Executive an amount equal to
Executive’s base salary payable to the date of termination of
employment and any other employee benefits earned and owed through
the date of termination to Executive, Executive’s spouse,
designated beneficiary, or otherwise to the personal representative
of Executive’s estate, as the case may be.
(f) Exclusive Remedy . In the
event of a termination of Executive’s employment with the
Company (or any parent or subsidiary or successor of the Company),
the provisions of this Section 3 are intended to be and are
exclusive and in lieu of any other rights or remedies to which
Executive or the Company may otherwise be entitled, whether at law,
tort or contract, in equity, or under this Agreement. Executive
will be entitled to no benefits, compensation or other payments or
rights upon termination of employment other than those benefits
expressly set forth in this Section 3.
(g) Section 409A .
Notwithstanding anything to the contrary in this Agreement, if
Executive is a “specified employee” within the meaning
of Section 409A of the Code and any final regulations and
guidance promulgated thereunder (“Section 409A”)
at the time of Executive’s termination, then only that
portion of the severance and benefits payable to Executive pursuant
to this Agreement (other than due to death), if any, and any other
severance payments or separation benefits which may be considered
deferred compensation under Section 409A (together, the
“Deferred Compensation Separation Benefits”), which
(when considered together) do not exceed the Section 409A
Limit (as defined below) may be made within the first six
(6) months following Executive’s termination of
employment in accordance with the payment schedule applicable to
each payment or benefit. Any portion of the Deferred Compensation
Separation Benefits in excess of the Section 409A Limit
otherwise due to Executive on or within the six (6) month
period following Executive’s termination will accrue during
such six (6) month period and will become payable in a lump
sum payment on the date six (6) months and one (1) day
following the date of Executive’s termination of employment
or the date of Executive’s death if earlier. All subsequent
Deferred Compensation Separation Benefits, if any, will be payable
in accordance with the payment schedule applicable to each payment
or benefit. The foregoing provisions are intended to comply with
the requirements of Section 409A so that none of the severance
payments and benefits to be provided hereunder will be subject to
the additional tax imposed under Section 409A, and any
ambiguities herein will be interpreted to so comply. The Company
and Executive agree to work together in good faith to consider
amendments to this Agreement and to take such reasonable actions
which are necessary, appropriate or desirable to avoid imposition
of any additional tax or income recognition prior to actual payment
to Executive under Section 409A.
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For purposes of this Agreement,
“Section 409A Limit” will mean the lesser of two
(2) times: (i) Executive’s annualized compensation
based upon the annual rate of pay paid to Executive during the
Company’s taxable year preceding the Company’s taxable
year of Executive’s termination of employment as determined
under Treasury Regulation 1.409A-l(b)(9)(iii)(A)(1) and any
Internal Revenue Service guidance issued with respect thereto; or
(ii) the maximum amount that may be taken into account under a
qualified plan pursuant to Section 401(a)(17) of the Code for
the year in which Executive’s employment is
terminated.
4. Limitation on Payments .
In the event that the severance and other benefits provided for in
this Agreement or otherwise payable to Executive
(i) constitute “parachute payments” within the
meaning of Section 280G of the Code and (ii) but for this
Section 4, would be subject to the excise tax imposed by
Section 4999 of the Code, then Executive’s severance
benefits under Section 3 will be either:
(a) delivered in full, or
(b) delivered as to such lesser
extent which would result in no portion of such
