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Exhibit 10.14
SDL, INC.
CHANGE OF CONTROL AGREEMENT
This Agreement, dated as of February 10, 2000, is entered into between
SDL, Inc., a corporation organized under the laws of the State of Delaware
("SDL") and Xxx Xxxxxxx (the "Executive").
WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that the possibility of a Change in Control (as hereafter defined) exists and
that the threat of the occurrence of a Change in Control can result in
significant distractions to its key management personnel because of the
uncertainties inherent in such a situation;
WHEREAS, the Board has determined that it is essential and in the best
interest of the Company and its stockholders to retain the services of the
Executive in the event of a threat or occurrence of a Change in Control and to
ensure the Executive's continued dedication and efforts in such event without
undue concern for the Executive's personal, financial and employment security;
and
WHEREAS, in order to induce the Executive to remain in the employ of the
Company, particularly in the event of a threat or the occurrence of a Change in
Control, the Company desires to enter into this Agreement with the Executive to
supplement the terms of the employment agreement between the Company and the
Executive, dated July 17, 1992, and to provide the Executive with certain
benefits in the event that the Executive's employment is terminated as a result
of, or in connection with, a Change in Control.
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:
1. TERM OF AGREEMENT. This Agreement shall commence as of February 10,
2000 (the "Effective Date") and shall continue in effect until the third
anniversary of the Effective Date, provided, that commencing on the second
anniversary of the Effective Date and on each subsequent anniversary thereof,
the term of this Agreement shall be automatically extended for one (1) year
unless either the Company or Executive shall have given written notice to the
other at least ninety (90) days prior thereto that the term of this Agreement
shall not be so extended; and provided, further, that notwithstanding any such
notice by the
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Company not to extend, the term of this Agreement shall not expire prior to the
expiration of four (4) years after the occurrence of a Change in Control.
2. DEFINITIONS.
a. ACCRUED COMPENSATION. For purposes of this Agreement, "Accrued Compensation"
shall mean an amount which shall include all amounts earned or accrued
through the "Termination Date" (as hereinafter defined) but not paid as of
the Termination Date, including (i) base salary, (ii) reimbursement for
reasonable and necessary expenses incurred by the Executive on behalf of the
Company during the period ending on the Termination Date, (iii) vacation pay
and (iv) bonuses and incentive compensation.
b. BASE AMOUNT. For purposes of this Agreement, "Base Amount" shall mean
Executive's annual base salary at the rate in effect on the Termination
date, including all amounts of base salary that are deferred under the
employee benefit plans of the Company or any other agreement or arrangement.
c. BONUS AMOUNT. For purposes of this Agreement, "Bonus Amount" shall mean the
average of the annual bonuses paid or payable to the Executive under the
Company's cash bonus incentive plan during the two (2) full fiscal years
ended prior to the fiscal year during which the Termination Date occurred.
d. EMPLOYMENT AGREEMENT. For purposes of this Agreement, "Employment Agreement"
shall mean the employment agreement executed between the Company and
Executive, dated July 17, 1992, and the amendments to that agreement dated
February 19, 1993 and July 29, 1994.
e. CAUSE. For purposes of this Agreement, "Cause" shall mean Executive's (i)
conviction of a felony involving moral turpitude (from which no further
appeals have been or can be taken), or (ii) gross abdication of his duties
as an employee and office of the Company (other than due to Executive's
illness or personal family problems), which conduct remains uncured by
Executive for a period of at least 30 days following written notice thereof
to Executive by the Company, in each case as determined in good faith by the
Company.
f. CHANGE IN CONTROL. For purposes of this Agreement, a "Change in Control"
shall mean any of the following events:
(i) An acquisition (other than directly from the Company) of any voting
securities of the Company (the "Voting Securities") by any "Person" (as the
term is used for purposes of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended (the "1934 Act")) immediately after which
such
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Person has `Beneficial Ownership" (within the meaning of Rule 13d-3
promulgated under the 1934 Act), directly or indirectly, of securities of
the Company representing fifty percent (50%) or more of the combined voting
power of the Company's then outstanding Voting Securities;
(ii) The individuals who are members of the Board as of the date this
Agreement is approved by the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board; PROVIDED, HOWEVER,
that if the appointment, election or nomination for election by the
Company's stockholders, of any new director is approved by a vote of at
least two-thirds of the Incumbent Board, such new director shall, for
purposes of this Agreement, be considered a member of the Incumbent Board;
PROVIDED, FURTHER, HOWEVER, that no individual shall be considered a member
of the Incumbent Board if such individual initially assumed office as a
result of either an actual or threatened "Election Contest" (as described in
Rule 14a-11 promulgated under the 0000 Xxx) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board (a "Proxy Contest") including by reason of any agreement intended
to avoid or settle any Election Contest or Proxy Contest;
(iii) Approval by stockholders of the Company of a merger, consolidation or
reorganization involving the Company, unless such merger, consolidation or
reorganization 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) more than 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, consolidation, or reorganization;
(iv) A complete liquidation or dissolution of the Company, or
(v) An agreement for the sale or other disposition of all or substantially
all of the assets of the Company to any Person (other than a transfer to a
Subsidiary).
g. COMPANY. For purposes of this Agreement, the "Company" shall mean SDL, Inc.
and its Subsidiaries and shall include SDL's "Successors and Assigns" (as
hereinafter defined).
h. DISABILITY. For purposes of this Agreement, "Disability" shall mean a
physical or mental infirmity which impairs the Executive's ability to
substantially perform the Executive's duties with the Company for a period
of one hundred eighty (180) consecutive days and the Executive has not
returned to full time employment prior to the Termination Date as stated in
the "Notice
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of Termination".
i. GOOD REASON. For purposes of this Agreement, "Good Reason" shall mean the
occurrence after a Change in Control of any events or conditions described
in subsections (i) through (vi) below, PROVIDED, HOWEVER, that the Executive
gives the Company thirty (30) days Notice Termination (as defined below)
(during which time the Company will have an opportunity to correct the
condition constituting "Good Reason"), and PROVIDED, FURTHER, that such
notice is submitted by Executive no later than six (6) months after the
occurrence of the event that is the basis for "Good Reason";
(i) a change in the Executive's status, title, position or responsibilities
which represents a material and adverse change from the Executive's status,
title, position or responsibilities as in effect immediately prior to such
change; the assignment to the Executive of any duties or responsibilities
which are substantially inconsistent with the Executive's status, title,
position or responsibilities as in effect immediately prior to such
assignment; or any removal of the Executive from or failure to reappoint or
reelect the Executive to any of such offices or positions, except in
connection with the termination of the Executive's employment for
Disability, Cause, as a result of the Executive's death or by the Executive
other than for Good Reason;
(ii) a reduction in the Executive's base salary;
(iii) the Company's requiring the Executive to be based at any place which
results in Executive having to commute more than 25 miles from his
residence, except for reasonably required travel on the Company's
business which is not materially greater than such travel requirements prior
to the Change in Control;
(iv) a material reduction by the Company in the kind or level of employee
benefits (other than salary) to which the Executive is entitled at any time
within ninety (90) days preceding the date of a Change in Control or at any
time thereafter, (other than any such reduction which is part of, and
generally consistent with, a general reduction applicable to officers of the
Company);
(v) any material breach by the Company of any provision of this Agreement
or the Employment Agreement between Company and Executive;
(vi) the failure of the Company to obtain an agreement from any Successors
and Assigns to assume and agree to perform this Agreement, as contemplated
in Section 6 hereof.
j. NOTICE OF TERMINATION. For purposes of this Agreement, following a Change in
Control, "Notice of Termination" shall mean a written notice of
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termination of the Executive's employment from the Company, which notice
indicates the Termination Date (as defined below), the specific termination
provision in this Agreement relied upon and which sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated.
k. SUCCESSORS AND ASSIGNS. For purpose of this Agreement, "Successors and
Assigns" shall mean a corporation or other entity acquiring all or
substantially all of the assets and business of the Company (including this
Agreement) whether by operation of law or otherwise.
l. TERMINATION DATE. For purposes of this Agreement, "Termination Date" shall
mean, in the case of the Executive's death the Executive's date of death, in
the case of Good Reason, the last day of the Executive's employment (which
shall be no sooner than thirty (30) days after Executive submits his Notice
of Termination), and, in all other cases, the date specified in the Notice
of Termination; PROVIDED, HOWEVER, that if the Executive's employment is
terminated by the Company due to Disability, the date specified in the
Notice of Termination shall be at least 30 days from the date the Notice of
Termination is given to the Executive, provided that, in the case of
Disability, the Executive shall not have returned to the full-time
performance of the Executive's duties during such period of at least 30
days.
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3. TERMINATION OF EMPLOYMENT
a. If, during the term of this Agreement, the Executive's employment with the
Company shall be terminated within four (4) years following a Change in
Control, the Executive shall bc entitled to the following compensation and
benefits:
(i) If the Executive's employment with the Company shall be terminated
(1) by thc Company for Cause or Disability, (2) by reason of the Executive's
death or (3) by the Executive other than for Good Reason, the Company shall
pay to the Executive the Accrued Compensation. Additionally, the Company
shall reimburse Executive for any amounts paid by Executive to retain
medical insurance coverage under COBRA and shall provide Executive with
disability insurance benefits for a period of twelve (12) months following
the Termination Date, pursuant to the provisions of paragraph 4 (c) of the
Employment Agreement. If such termination is other than by reason of
Executive's death, the Company also shall continue to maintain a life
insurance policy on Executive's life for a period of twelve (12) months
following the Termination Date, subject to the provisions of paragraph 4(b)
of the Employment Agreement. In the event Executive's employment is
terminated by reason of Executive's death or Disability, Executive (or his
estate) also shall be entitled to receive the severance benefits set forth
in paragraph 5(b) of the Employment Agreement. However, the life and
disability insurance benefits and/or payments provided to Executive for
purposes of retaining medical insurance coverage under COBRA under this
paragraph 3(a)(i) shall terminate at such time, if any, Executive commences
employment whereby he can obtain comparable benefits.
(ii) If the Executive's employment with the Company shall be terminated for
any reason other than as specified in Section 3(a)(i), the Executive shall
be entitled to the following:
(1) the Company shall pay the Executive all Accrued
Compensation;
(2) the Company shall pay the Executive as severance pay and
in lieu of any further compensation for periods subsequent
to the Termination Date, in a single payment, an amount in
cash equal to two (2) times the sum of (A) the Base
Amount, and the greater of (B) the Bonus Amount, or (C)
the amount equivalent to twelve (12) times the sum of 5%
of Executive's then-current annual base salary;
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(3) for a number of months equal to twenty-four (24) months
(the "Continuation Period"), the Company shall, at its
expense, continue on behalf of the Executive and the
Executive's dependants and beneficiaries the life
insurance, disability, medical, dental and hospitalization
benefits provided (A) to the Executive at any time during
the 90-day period prior to the Change in Control at any
time thereafter or (B) to other similarly situated
executives who continue in the employ of the Company
during the Continuation Period. The coverage and benefits
(including deductibles and costs) provided in this Section
3(a)(ii)(3) during the Continuation Period shall be no
less favorable to the Executive and the Executive's
dependents and beneficiaries, than the most favorable of
such coverage and benefits during any of the periods
referred to in clauses (A) and (B) above. The Company's
obligation hereunder with respect to the foregoing
benefits shall be limited to the extent that the Executive
obtains any such benefits pursuant to a subsequent
employer's benefit plans, in which case the Company may
reduce the coverage of any benefits it is required to
provide the Executive hereunder as long as the aggregate
coverage and benefits of the combined benefit plans are no
less favorable to the Executive than the coverage and
benefits required to bc provided hereunder. This
subsection (3) shall not be interpreted so as to limit any
benefits to which the Executive or the Executive's
dependents or beneficiaries may be entitled under any of
the Company's employee benefit plans, programs or
practices following the Executive's termination of
employment, including without limitation, retiree medical
and life insurance benefits;
(4) the restrictions on any outstanding equity incentive
awards, including stock options and restricted stock,
granted to the Executive under the Company's stock option
and other stock incentive plans, or under any other
incentive plan or arrangement shall lapse and such
incentive award shall become 100% vested and, in the case
of stock options, immediately exercisable;
b. The amounts provided for in Sections 3(a)(1) and (2) shall be paid in a
single lump sum cash payment within forty five (45) days after the
Executive's Termination Date (or earlier, if required by applicable law).
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c. The Executive 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 Executive in any subsequent employment except as
provided in Sections 3(a)(i) and (a)(ii)(3).
d. The severance pay and benefits provided for in this Section 3 shall br in
lieu of any other severance or termination pay to which the Executive may be
entitled under any employment agreement (including the Employment
Agreement). Nothing in this Agreement shall prevent or limit Executive's
continuing or future participation in any benefit, bonus, incentive, or
other plan or program provided by the Company (except for any severance or
termination policies, plans, programs or practices) and for which Executive
may quality, nor shall anything herein limit or reduce such rights as
Executive may have under any other agreements with the Company (except for
any severance or termination agreement). Executive's entitlement to amounts
which are vested benefits or any other compensation or benefits (including
but not limited to any deferred compensation distributions) shall be
determined in accordance with the Company's employee benefit plans and other
applicable programs, policies and practices then in effect, except as
explicitly modified by this Agreement.
4. NOTICE OF TERMINATION. Following a Change in Control, any purported
termination of the Executive's employment shall be communicated by Notice of
Termination to the Executive. For purposes of this Agreement, no such
purported termination shall be effective without such Notice of Termination.
5. LIMITATION ON PAYMENTS.
a. In the event that the severance and other benefits provided for in this
Agreement to the Executive (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 (the "Excise Tax"), then the
Executive's severance benefits under Sections 3(a)(ii)(1)-(4) (the
"Payments") shall be payable either:
(i) in full, or
(ii) 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 (the "Limited Payment Amount"),
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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 Executive on an after-tax basis of the
greatest amount of severance benefits under Sections 3(a)(ii)(1)-(4),
notwithstanding that all or some portion of such severance benefits may be
taxable under Section 4999 of the Code. Unless Executive shall have given prior
written notice specifying a different order to the Company to effectuate the
Limited Payment Amount, the Company shall reduce or eliminate the Payments by
(i) first reducing or eliminating those payments or benefits which are payable
in cash and then (ii) by reducing or eliminating non-cash payments or benefits,
in each case in reverse order beginning with payments or benefits which are to
he paid the farthest in time from the Determination (as hereinafter defined).
Any notice given by Executive pursuant to the preceding sentence shall take
precedent over the provisions of any other plan, arrangement or agreement
governing Executive's rights and entitlements to any benefits or compensation.
b. An initial determination as to whether the Payments shall be reduced to the
Limited Payment Amount and the amount of such Limited Payment Amount shall
be made at the Company's expense, by the accounting firm that is the
Company's independent accounting firm as of the date of the Change of
Control (the "Accounting Firm"). Thc Accounting Firm shall provide its
determination (the "Determination"), together with detailed supporting
calculations and documentation, to the Company and Executive within ten (10)
days of the Termination Date, if applicable, or such other time as requested
by the Company or by Executive (provided Executive 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 Executive with respect to a
Payment or Payments, it shall furnish Executive with an opinion reasonably
acceptable to Executive that no Excise Tax will he imposed with respect to
any such Payment or Payments. Within ten (10) days of the delivery of the
Determination to Executive, Executive shall have the right to dispute the
Determination (the "Dispute"). If there is no Dispute, the Determination
shall be binding, final and conclusive upon the Company and Executive,
subject to the application of Section 5(c) below.
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c. As a result of the uncertainty in the application of Sections 4999 and 280G
of the Code, it is possible that the Payments to be made to, or provided for
the benefit of, Executive either will be greater (an "Excess Payment") or
less (an "Underpayment") than the amounts provided for by the limitations
contained in Section 5(a). If it is established, pursuant to a final
determination of a court of an Internal Revenue Service (the "IRS")
proceeding which has been finally and conclusively received, than an Excess
Payment has been made, such Excess Payment shall be deemed for all purposes
to be a loan to Executive made on the date Executive received the Excess
Payment, which loan Executive must repay to thc Company together with
interest at the applicable federal rate under Code Section 7872(f)(2);
provided that no loan shall be deemed to have been made and no amount will
be payable by Executive to the Company unless, and only to the extent that,
the deemed loan and payment would either reduce the amount on which
Executive is subject to tax under Code Section 4999 or generate a refund of
tax imposed under Code Section 4999. In the event that it is determined, by
(i) the Accounting Firm, the Company (which shall include the position taken
by the Company, or together with its consolidated group, on its federal
income tax return) or the IRS, (ii) pursuant to a determination by a court,
or (iii) upon the resolution to Executive's satisfaction of the Dispute,
that an underpayment has occurred, the Company shall pay an amount equal to
the Underpayment to Executive within ten (10) days of such determination or
resolution, together with interest on such amount at the applicable federal
rate under Code Section 7872(f)(2) from the date such amount would have been
paid to Executive until the date of payment.
6. EMPLOYMENT TAXES. All payments made pursuant to this Agreement will be
subject to applicable withholdings of income and employment taxes.
7. SUCCESSORS: BINDING AGREEMENT. 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 Successors and Assigns to expressly assume and
agree to perform this Agreement in the sama manner and to the same extent
that the Company would be required to perform if no such succession or
assignment had taken place. Neither this Agreement nor any right or interest
hereunder shall be assignable or transferable by the Executive or the
Executive's beneficiaries or legal representatives, except by will or by the
laws of descent and distribution. This Agreement shall inure to the benefit
of and be enforceable by the Executive's legal representative.
8. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duty given
when personally delivered or sent by certified mail, return receipt
requested,
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postage prepaid, addressed to the respective addresses last given by each
party to the other, provided that all notices to the Company shall bc
directed to the attention of the Board with a copy to the Secretary of the
Company. All notices and communications shall be denied to have been
received on the date of delivery thereof or on the third business day after
the mailing thereof, except that notice of change of address shall be
effective only upon receipt.
9. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or limit
the Executive's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Company (except for any
severance or termination policies, plans, programs or practices) and for
which the Executive may qualify, nor shall anything herein limit or reduce
such rights as the Executive may have under any other agreements with the
Company (except for any severance or termination agreement). Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any plan or program of the Company shall be payable in accordance with
such plan or program, except as modified by this Agreement.
10. NO IMPLIED EMPLOYEE RIGHTS. Nothing in this Agreement shall alter
Executive's status as an "at will" employee of the Company or bc construed
to imply that Executive's employment is guaranteed for any period of time
except as otherwise agreed in a written agreement signed by a duly
authorized officer of the Company.
11. MISCELLANEOUS. No provision of this agreement may be modified, waived or
discharged, unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and the Company. No waiver by either
party hereto at any time of any breach by the other party hereto, or
compliance with any condition or provision of this Agreement to be performed
by the other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the or at any prior or subsequent time. No
agreement or representation, 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.
12. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of California without
giving effect to the conflict of laws principles thereof.
13. ARBITRATION. Any dispute or controversy arising under or in conjunction with
the subject matter, the interpretation, the application, or alleged breach
of this Agreement ("Arbitrable Claims") shall be resolved by binding
arbitration in the County of Santa Clara, California, in accordance with the
then-current
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National Rules for the Resolution of Employment Disputes of the American
Arbitration Association. Arbitration shall be final and binding upon the
parties and shall be the exclusive remedy for all Arbitration Claims.
Notwithstanding the foregoing, either party may bring an action in court to
compel arbitration under this Agreement to enforce an arbitration award, or
to seek injunctive relief pursuant to section 1281.8 of the California Code
of Civil Procedure. THE PARTIES WAIVE ANY RIGHT TO JURY TRIAL AS TO
ARBITRABLE CLAIMS.
14. LEGAL FEES AND EXPENSES. The parties shall each bear their own expenses,
legal fees and other fees incurred in connection with this Agreement.
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.
16. ENTIRE AGREEMENT. The parties agree that the terms of this Agreement are
intended to be the final expression of their agreement with respect to the
subject matter of this Agreement and may not be contradicted by evidence of
any prior or contemporaneous Agreement, except to the extent that the
provisions of any such agreement (i.e., the Employment Agreement) have been
expressly referred to in this Agreement as having continued effect.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its
duly authorized officer and the Executive has executed this Agreement as of the
day and year first above written.
SDL, INC.
By: /s/ Xxx Xxxxxxx
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