Exhibit 10.16
DIGITALTHINK, INC.
CHANGE OF CONTROL SEVERANCE AGREEMENT
This Change of Control Severance Agreement (the "Agreement") is made
and entered into by and between Xxx X. Xxxxxxx (the "Employee") and
DigitalThink, Inc., a Delaware Corporation (the "Company"), effective as of
September 14, 2001 (the "Effective Date").
RECITALS
1. It is expected that the Company from time to time will consider the
possibility of an acquisition by another company or other change of control. The
Board of Directors of the Company (the "Board") recognizes that such
consideration can be a distraction to the Employee and can cause the Employee to
consider alternative employment opportunities. The Board has determined that it
is in the best interests of the Company and its stockholders to assure that the
Company will have the continued dedication and objectivity of the Employee,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined herein) of the Company.
2. The Board believes that it is in the best interests of the Company and
its stockholders to provide the Employee with an incentive to continue his or
her employment and to motivate the Employee to maximize the value of the Company
upon a Change of Control for the benefit of its stockholders.
3. The Board believes that it is imperative to provide the Employee with
certain severance benefits upon the Employee's termination of employment
following a Change of Control. These benefits will provide the Employee with
enhanced financial security and incentive and encouragement to remain with the
Company notwithstanding the possibility of a Change of Control.
4. Certain capitalized terms used in the Agreement are defined in Section 6
below.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. Term of Agreement. This Agreement shall 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 the Employee acknowledge that the
Employee's employment is and shall continue to be at-will, as defined under
applicable law, except as may otherwise be specifically provided under the terms
of any written formal employment agreement between the Company and the Employee
(an "Employment Agreement"). If the Employee's employment terminates for any
reason, including (without limitation) any termination prior to a Change of
Control, the Employee shall not be entitled to any payments, benefits, damages,
awards or compensation other than as provided by this Agreement or under his or
her Employment Agreement.
3. Severance Benefits.
(a) Involuntary Termination Following a Change of Control. If within
twelve (12) months following a Change of Control (i) the Employee terminates his
or her employment with the Company (or any parent or subsidiary of the Company)
for "Good Reason" (as defined herein) or (ii) the Company (or any parent or
subsidiary of the Company) terminates the Employee's employment for other than
"Cause" (as defined herein), and the Employee signs and does not revoke a
standard release of claims with the Company in a form acceptable to the Company,
then the Employee shall receive the following severance from the Company:
(i) Options. All of the Employee's then outstanding options to
purchase shares of the Company's Common Stock (the "Options") that would have
otherwise vested at any time following such termination (as if the Employee had
remained continuously employed with the Company during such period) shall
immediately vest and became exercisable (that is, in addition to the shares
subject to the Options which have vested and become exercisable as of the date
of such termination, including any acceleration provided for in Section 3), but
in no event shall the number of shares subject to such Options which so vest
exceed the total number of shares subject to such Options.
(b) Voluntary Resignation; Termination for Cause. If the Employee's
employment with the Company terminates (i) voluntarily by the Employee or (ii)
for Cause by the Company, then the Employee shall not be entitled to receive
severance or other benefits except for those (if any) as may then be established
under the Company's then existing severance and benefits plans and practices or
pursuant to other written agreements with the Company.
(c) Disability; Death. If the Company terminates the Employee's
employment as a result of the Employee's Disability, or the Employee's
employment terminates due to his or her death, then the Employee shall not be
entitled to receive severance or other benefits except for those (if any) as may
then be established under the Company's then existing written severance and
benefits plans and practices or pursuant to other written agreements with the
Company.
(d) Termination Apart from Change of Control. In the event the
Employee's employment is terminated for any reason, either prior to the
occurrence of a Change of Control or after the twelve (12)-month period
following a Change of Control, then the Employee shall be entitled to receive
severance and any other benefits only as may then be established under the
Company's existing written severance and benefits plans and practices or
pursuant to other written agreements with the Company.
(e) Exclusive Remedy. In the event of a termination of Employee's
employment within twelve (12) months following a Change of Control, the
provisions of this Section 3 are intended to be and are exclusive and in lieu of
any other rights or remedies to which the Employee or the Company may otherwise
be entitled, whether at law, tort or contract, in equity, or under this
Agreement. The Employee shall be entitled to no benefits, compensation or other
payments or rights
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upon termination of employment following a Change in Control other than those
benefits expressly set forth in this Section 3.
4. Golden Parachute Excise Tax Gross-Up. In the event that the severance
and other benefits provided for in this Agreement or otherwise payable to the
Employee constitute "parachute payments" within the meaning of Section 280G of
the Internal Revenue Code of 1986, as amended (the "Code") and will be subject
to the excise tax imposed by Section 4999 of the Code, then the Employee shall
receive (i) a payment from the Company sufficient to pay such excise tax, and
(ii) an additional payment from the Company sufficient to pay the excise tax and
federal and state income taxes arising from the payments made by the Company to
the Employee pursuant to this sentence. Unless the Company and the Employee
otherwise agree in writing, the determination of the Employee's excise tax
liability and the amount required to be paid under this Section shall be made in
writing by the Company's accountants (the "Accountants"). In the event that the
excise tax incurred by the Employee is determined by the Internal Revenue
Service to be greater or lesser than the amount so determined by the
Accountants, the Company and the Employee agree to promptly make such additional
payment, including interest and any tax penalties, to the other party as the
Accountants reasonably determine is appropriate to ensure that the net economic
effect to the Employee under this Section, on an after-tax basis, is as if the
Code Section 4999 excise tax did not apply to the Employee. For purposes of
making the calculations required by this Section, the Accountants may make
reasonable assumptions and approximations concerning applicable taxes and may
rely on interpretations of the Code for which there is a "substantial authority"
tax reporting position. The Company and the Employee shall furnish to the
Accountants such information and documents as the Accountants may reasonably
request in order to make a determination under this Section. The Company shall
bear all costs the Accountants may reasonably incur in connection with any
calculations contemplated by this Section.
5. Definition of Terms. The following terms referred to in this Agreement
shall have the following meanings:
(a) Cause. "Cause" means (i) an act of dishonesty made by the Employee
in connection with such Employee's responsibilities as an employee, (ii) the
Employee's conviction of, or plea of nolo contendre to, a felony which the Board
reasonably believes had or will have a material detrimental effect on the
Company's reputation or business, (iii) the Employee's gross misconduct, (iv)
the Employee's continued substantial violations of such Employee's duties as an
employee after the Employee has received a written demand for performance from
the Company which specifically sets forth the factual basis for the Company's
belief that the Employee has not substantially performed such Employee's duties.
(b) Change of Control. "Change of Control" means the occurrence of any
of the following:
(i) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing fifty percent (50%) or
more of the total voting power represented by the Company's then outstanding
voting securities; or
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(ii) Any action or event occurring within a two-year period, as a
result of which fewer than a majority of the directors are Incumbent Directors.
"Incumbent Directors" shall mean directors who either (A) are directors of the
Company as of the date hereof, or (B) are elected, or nominated for election, to
the Board with the affirmative votes of at least a majority of the Incumbent
Directors at the time of such election or nomination (but shall not include an
individual whose election or nomination is in connection with an actual or
threatened proxy contest relating to the election of directors to the Company);
or
(iii) The consummation of a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at least fifty
percent (50%) of the total voting power represented by the voting securities of
the Company or such surviving entity outstanding immediately after such merger
or consolidation; or
(iv) The consummation of the sale, lease or other disposition by
the Company of all or substantially all the Company's assets.
(c) Disability. "Disability" shall mean that the Employee has been
unable to perform his Company duties as the result of his incapacity due to
physical or mental illness, and such inability, at least twenty-six (26) weeks
after its commencement, is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Employee or the
Employee's legal representative (such Agreement as to acceptability not to be
unreasonably withheld). Termination resulting from Disability may only be
effected after at least thirty (30) days' written notice by the Company of its
intention to terminate the Employee's employment. In the event that the Employee
resumes the performance of substantially all of his or her duties hereunder
before the termination of his or her employment becomes effective, the notice of
intent to terminate shall automatically be deemed to have been revoked.
(d) Good Reason. "Good Reason" means without the Employee's express
written consent (i) a significant reduction of the Employee's duties, position
or responsibilities, or the removal of such Employee from such position and
responsibilities, unless the Employee is provided with a comparable position
(i.e., a position of equal or greater organizational level, duties, authority,
compensation and status); provided, however, that in an event, if following a
Change of Control, the Employee is not an executive of the parent corporation of
the ultimate parent entity of the Company, Good Reason shall exist; (ii) a
substantial reduction of the facilities and perquisites (including office space
and location) available to the Employee immediately prior to such reduction;
(iii) a reduction by the Company in the base compensation of the Employee as in
effect immediately prior to such reduction; (iv) a material reduction by the
Company in the kind or level of benefits to which the Employee was entitled
immediately prior to such reduction with the result that such Employee's overall
benefits package is significantly reduced; (v) the relocation of the Employee to
a facility or a location more than fifty (50) miles from such Employee's then
present location.
6. Successors.
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(a) The Company's Successors. Any successor to the Company (whether
direct or indirect and whether by purchase, merger, consolidation, liquidation
or otherwise) to all or substantially all of the Company's business and/or
assets shall assume the obligations under this Agreement and agree expressly to
perform the obligations under this Agreement in the same manner and to the same
extent as the Company would be required to perform such obligations in the
absence of a succession. For all purposes under this Agreement, the term
"Company" shall include any successor to the Company's business and/or assets
which executes and delivers the assumption agreement described in this Section
6(a) or which becomes bound by the terms of this Agreement by operation of law.
(b) The Employee's Successors. The terms of this Agreement and all
rights of the Employee hereunder shall inure to the benefit of, and be
enforceable by, the Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
7. Notice.
(a) General. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered or certified mail, return
receipt requested and postage prepaid. In the case of the Employee, mailed
notices shall be addressed to him or her at the home address which he or she
most recently communicated to the Company in writing. In the case of the
Company, mailed notices shall be addressed to its corporate headquarters, and
all notices shall be directed to the attention of its President.
(b) Notice of Termination. Any termination by the Company for Cause or
by the Employee for Good Reason or as a result of a voluntary resignation shall
be communicated by a notice of termination to the other party hereto given in
accordance with Section 7(a) of this Agreement. Such notice shall indicate the
specific termination provision in this Agreement relied upon, shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination under the provision so indicated, and shall specify the termination
date (which shall be not more than thirty (30) days after the giving of such
notice). The failure by the Employee to include in the notice any fact or
circumstance which contributes to a showing of Good Reason shall not waive any
right of the Employee hereunder or preclude the Employee from asserting such
fact or circumstance in enforcing his or her rights hereunder.
8. Miscellaneous Provisions.
(a) No Duty to Mitigate. The Employee shall not be required to
mitigate the amount of any payment contemplated by this Agreement, nor shall any
such payment be reduced by any earnings that the Employee may receive from any
other source.
(b) Waiver. No provision of this Agreement shall be modified, waived
or discharged unless the modification, waiver or discharge is agreed to in
writing and signed by the Employee and by an authorized officer of the Company
(other than the Employee). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by
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the other party shall be considered a waiver of any other condition or provision
or of the same condition or provision at another time.
(c) Headings. All captions and section headings used in this Agreement
are for convenient reference only and do not form a part of this Agreement.
(d) Entire Agreement. This Agreement constitutes the entire agreement
of the parties hereto and supersedes in their entirety all prior
representations, understandings, undertakings or agreements (whether oral or
written and whether expressed or implied) of the parties with respect to the
subject matter hereof.
(e) Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California.
(f) Severability. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or enforceability
of any other provision hereof, which shall remain in full force and effect.
(g) Withholding. All payments made pursuant to this Agreement will be
subject to withholding of applicable income and employment taxes.
(h) Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together will constitute
one and the same instrument.
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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company by its duly authorized officer, as of the day and year set
forth below.
COMPANY DIGITALTHINK, INC.
By:
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Title:
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EMPLOYEE By:
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Title:
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