1
EXHIBIT 10.24
SIMPLEX SOLUTIONS, INC.
MANAGEMENT CONTINUITY AGREEMENT
This Management Continuity Agreement (the "Agreement") is dated as of
January 20, 1999 by and between Xxxx Xxxxxx ("Employee") and Simplex Solutions,
Inc., a Delaware corporation (the "Company" or "Simplex").
RECITALS
A. It is expected that another company may from time to time consider
the possibility of acquiring the Company or that a change in control may
otherwise occur, with or without the approval of the Company's Board of
Directors. The Board of Directors recognizes that such consideration can be a
distraction to Employee and can cause Employee to consider alternative
employment opportunities. The Board of Directors 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 below) of the Company.
B. The Company's Board of Directors believes it is in the best interests
of the Company and its stockholders to retain Employee and provide incentives to
Employee to continue in the service of the Company.
C. The Board of Directors further believes that it is imperative to
provide Employee with certain benefits upon a Change of Control and, under
certain circumstances, upon termination of Employee's employment in connection
with a Change of Control, which benefits are intended to provide Employee with
financial incentives to remain with the Company, notwithstanding the possibility
of a Change of Control.
D. To accomplish the foregoing objectives, the Board of Directors has
directed the Company, upon execution of this Agreement by Employee, to agree to
the terms provided in this Agreement.
Now therefore, in consideration of the mutual promises, covenants and
agreements contained herein, and in consideration of the continuing employment
of Employee by the Company, the parties hereto agree as follows:
1. AT-WILL EMPLOYMENT. The Company and Employee acknowledge that
Employee's employment is and shall continue to be at-will, as defined under
applicable law, and that Employee's employment with the Company may be
terminated by either party at any time for any or no reason. If Employee's
employment terminates for any reason, Employee shall not be entitled to any
payments, benefits, damages, award or compensation other than as provided in
this Agreement, or as may otherwise be available in accordance with the terms of
the Company's established employee
2
plans and written policies at the time of termination. The terms of this
Agreement shall terminate upon the earlier of (i) the date on which Employee
ceases to be employed as an executive corporate officer of the Company, other
than as a result of an Involuntary Termination, or (ii) the date that all
obligations of the parties hereunder have been satisfied. A termination of the
terms of this Agreement pursuant to the preceding sentence shall be effective
for all purposes, except that such termination shall not affect the payment or
provision of compensation or benefits on account of a termination of employment
occurring prior to the termination of the terms of this Agreement. The rights
and duties created by this Section 1 may not be modified in any way except by a
written agreement executed by an officer of the Company upon direction from the
Board of Directors.
2. TREATMENT OF STOCK OPTIONS UPON A CHANGE OF CONTROL.
(a) INVOLUNTARY TERMINATION FOLLOWING A CHANGE OF CONTROL. In the
event that Employee's employment is terminated as a result of an Involuntary
Termination at any time within six (6) months following the effective date of a
Change of Control, then, to the extent not limited by the provisions of Section
5, that portion of all unvested Company Common Stock and options to purchase
Company's Common Stock granted to Employee over the course of his or her
employment with the Company and held by Employee on the date of termination of
employment shall become immediately vested on such date as to that number of
shares that is equal to the greater of (i) that number of shares that would have
vested in accordance with the terms of such option or stock purchase agreement,
as the case may be, (assuming that Employee had remained in Continuous Status as
an Employee, as defined in the relevant plan and stock purchase or option
agreement, for twelve (12) months after the date of termination of employment)
as of the date twelve (12) months after the date of termination of employment
and (ii) that number of shares which, combined with all other shares in which
Employee shall have vested prior to such date, equals 150,000 shares. Each such
option (if any) shall be exercisable in accordance with the provisions of the
option agreement and plan pursuant to which such option was granted.
(b) CONTINUED EMPLOYMENT FOLLOWING A CHANGE OF CONTROL. In the
event Employee remains an Employee of the Company until the date six (6) months
after the effective date of a Change of Control, then, to the extent not limited
by the provisions of Section 5, that portion of all stock and options to
purchase the Company's Common Stock granted to Employee over the course of his
or her employment with the Company and held by Employee on the date (the
"Determination Date") six (6) months after the effective date of the Change of
Control shall become immediately vested on the Determination Date as to that
number of shares that is agreed to the greater of (i) that number of shares that
would have vested in accordance with the terms of such option or sotck purchase
agreement, as the case may be, (assuming that Employee had remained in
Continuous Status as an Employee, as defined in the relevant plan and option
agreement, for twelve (12) months after the Determination Date) as of the date
twelve (12) months after the Determination Date and (ii) that number of shares
which, combined with all other shares in which Employee shall have vested prior
to such date, equals 150,000 shares. Each such option (if any) shall be
exercisable in accordance with the provisions of the option agreement and plan
pursuant to which such option was granted. The balance of shares that are not so
exercisable
-2-
3
shall continue to become exercisable each month thereafter according to the
terms of such options for so long as the employee remains an employee of (or
consultant to) the Company.
(c) TERMINATION FOR CAUSE OR VOLUNTARY RESIGNATION. If Employee's
employment is terminated for Cause or as the result of Employee's voluntary
resignation at any time, then Employee shall not be entitled to receive payment
of any severance benefits pursuant to the terms of this Agreement. Employee will
receive payment(s) for all salary, bonuses and unpaid vacation accrued as of the
date of Employee's termination of employment and Employee's benefits will be
continued under the Company's then existing benefit plans and policies in
accordance with such plans and policies in effect on the date of termination and
in accordance with applicable law.
(d) INVOLUNTARY TERMINATION. If Employee's employment is
terminated as a result of an Involuntary Termination at any time, then Employee
shall not be entitled to receive payment of any severance benefits under the
terms of this Agreement except as set forth herein. Employee will receive
payment(s) for all salary, bonuses and unpaid vacation accrued as of the date of
Employee's termination of employment and Employee's benefits will be continued
under the Company's then existing benefit plans and policies in accordance with
such plans and policies in effect on the date of termination and in accordance
with applicable law.
3. DEFINITION OF TERMS. The following terms referred to in this
Agreement shall have the following meanings:
(a) CHANGE OF CONTROL. "Change of Control" shall mean the
occurrence of any of the following events:
(i) OWNERSHIP. Any "Person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is
or becomes the "Beneficial Owner" (as defined in Rule l3d-3 under said Act),
directly or indirectly, of securities of the Company representing 50% or more of
the total voting power represented by the Company's then outstanding voting
securities without the approval of the Board;
(ii) MERGER/SALE OF ASSETS. A merger or consolidation of
the Company whether or not approved by the Board, 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 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 the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of all or substantially all of the
Company's assets; or
(iii) CHANGE IN BOARD COMPOSITION. A change in the
composition of the Board, 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
-3-
4
January 1, 1999 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 an Incumbent Director 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).
(b) CAUSE. "Cause" shall mean (i) gross negligence or willful
misconduct in the performance of Employee's duties to the Company where such
gross negligence or willful misconduct has resulted or is likely to result in
substantial and material damage to the Company or its subsidiaries (ii) repeated
unexplained or unjustified absence from the Company, (iii) a material and
willful violation of any federal or state law; (iv) commission of any act of
fraud with respect to the Company or (v) conviction of a felony or a crime
involving moral turpitude causing material harm to the standing and reputation
of the Company, in each case as determined in good faith by the Board.
(c) INVOLUNTARY TERMINATION. "Involuntary Termination" shall
include any termination by the Company other than for Cause and Employee's
voluntary termination, upon 30 days prior written notice to the Company,
following (i) a material reduction or change in job duties, responsibilities and
requirements inconsistent with the Employee's position with the Company and the
Employee's prior duties, responsibilities and requirements or a change in
Employee's reporting relationship such that Employee is no longer reporting to
the Board; (ii) any reduction of Employee's base compensation (other than in
connection with a general decrease in base salaries for most officers of the
successor corporation); or (iii) Employee's refusal to relocate to a facility or
location more than 30 miles from the Company's current location.
4. LIMITATION ON PAYMENTS. In the event that the severance and other
benefits provided for in this Agreement to the Employee (i) constitute
"parachute payments" within the meaning of Section 280G of the Internal Revenue
Code of 1986, as amended (the "Code") and (ii) but for this Section, would be
subject to the excise tax imposed by Section 4999 of the Code, then the
Employee's severance benefits under Sections 2(a) and 2(b) shall be payable
either:
(a) in full, or
(b) as to such lesser amount which would result in no portion of
such severance benefits being subject to excise tax under Section 4999 of the
Code, whichever of the foregoing amounts, taking into account the applicable
federal, state and local income taxes and the excise tax imposed by Section
4999, results in the receipt by the Employee on an after-tax basis, of the
greatest amount of severance benefits under Section 2(a) and 2(b),
notwithstanding that all or some portion of such severance benefits may be
taxable under Section 4999 of the Code. Unless the Company and the Employee
otherwise agree in writing, any determination required under this Section 4
shall be made in writing by independent public accountants agreed to by the
Company and the Employee (the "Accountants"), whose determination shall be
conclusive and binding upon the Employee and the Company for all purposes. For
purposes of making the calculations required by this Section 4, the Accountants
may make reasonable assumptions and approximations concerning applicable taxes
and
-4-
5
may rely on reasonable, good faith interpretations concerning the application of
Section 280G and 4999 of the Code. 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 4.
5. CERTAIN BUSINESS COMBINATIONS. In the event it is determined by the
Board, upon consultation with the Company management and the Company's
independent auditors, that the enforcement of any agreement between Employee and
the Company, including the provisions of Section 2(a) and 2(b) of this
Agreement, which allows for the acceleration of vesting of stock options granted
for the Company's Common Stock upon the effective date of a Change of Control or
thereafter, would preclude accounting for any proposed business combination of
the Company involving a Change of Control as a pooling of interests, and the
Board otherwise desires to approve such a proposed business transaction which
requires as a condition to the closing of such transaction that it be accounted
for as a pooling of interests, then any such provision of this Agreement shall
be null and void. For purposes of this Section 5, the Board's determination
shall require the unanimous approval of the non-employee Board members.
6. CONFLICTS. Employee represents that his or her performance of all the
terms of this Agreement will not breach any other agreement to which Employee is
a party. Employee has not, and will not during the term of this Agreement, enter
into any oral or written agreement in conflict with any of the provisions of
this Agreement. Employee further represents that he or she is entering into or
has entered into an employment relationship with the Company of his or her own
free will and that he or she has not been solicited as an employee in any way by
the Company.
7. SUCCESSORS. Any successor to the Company (whether direct or indirect
and whether by purchase, lease, 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. The terms of this Agreement and all of Employee's rights hereunder
and thereunder shall inure to the benefit of, and be enforceable by, Employee's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
8. NOTICE. 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. Mailed notices to Employee shall be
addressed to Employee at the home address which Employee 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 Secretary.
-5-
6
9. MISCELLANEOUS PROVISIONS.
(a) NO DUTY TO MITIGATE. Employee shall not be required to
mitigate the amount of any benefits contemplated by this Agreement (whether by
seeking new employment or in any other manner), nor shall any such benefits be
reduced by any benefits that 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 Employee and by an authorized officer of the Company
(other than Employee). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by 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) WHOLE AGREEMENT. No agreements, representations or
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof. This Agreement
supersedes any agreement of the same title and concerning similar subject matter
dated prior to the date of this Agreement, and by execution of this Agreement
both parties agree that any such predecessor agreement shall be deemed null and
void.
(d) CHOICE OF LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California without reference to conflict of laws provisions.
(e) SEVERABILITY. If any term or provision of this Agreement or
the application thereof to any circumstance shall, in any jurisdiction and to
any extent, be invalid or unenforceable, such term or provision shall be
ineffective as to such jurisdiction to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable the remaining
terms and provisions of this Agreement or the application of such terms and
provisions to circumstances other than those as to which it is held invalid or
unenforceable, and a suitable and equitable term or provision shall be
substituted therefor to carry out, insofar as may be valid and enforceable, the
intent and purpose of the invalid or unenforceable term or provision.
(f) ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement may be settled at the option of either party by
binding arbitration in the County of Santa Clara, California, in accordance with
the rules of the American Arbitration Association then in effect. Judgment may
be entered on the arbitrator's award in any court having jurisdiction. Punitive
damages shall not be awarded.
(g) LEGAL FEES AND EXPENSES. The parties shall each bear their
own expenses, legal fees and other fees incurred in connection with this
Agreement.
-6-
7
(h) NO ASSIGNMENT OF BENEFITS. The rights of any person to
payments or benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by operation of
law, including (without limitation) bankruptcy, garnishment, attachment or other
creditor's process, and any action in violation of this Section 9(h) shall be
void.
(i) EMPLOYMENT TAXES. All payments made pursuant to this
Agreement will be subject to withholding of applicable income and employment
taxes.
(j) ASSIGNMENT BY COMPANY. The Company may assign its rights
under this Agreement to an affiliate, and an affiliate may assign its rights
under this Agreement to another affiliate of the Company or to the Company. In
the case of any such assignment, the term "Company" when used in a section of
this Agreement shall mean the corporation that actually employs the Employee.
(k) 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.
[SIGNATURE PAGE FOLLOWS]
-7-
8
The parties have executed this Agreement on the date first written
above.
SIMPLEX SOLUTIONS, INC.
By: /s/ [Signature Illegible]
-------------------------------------
Title: PRESIDENT & CEO
----------------------------------
Address: 00000 Xxxxxxxxx Xx.
--------------------------------
Xxxxxxxxx XX 00000
--------------------------------
XXXX XXXXXX
Signature: /s/ [Signature Illegible]
------------------------------
Address: 00000 Xxxxxxx Xxx.
--------------------------------
Xxxxxxxxx XX 00000
--------------------------------
-8-
