CHANGE OF CONTROL AGREEMENT
EXHIBIT
10.4
This
Change Of Control Agreement (“Agreement”)
is made by and between Chordiant
Software, Inc. (the
“Company”) and X.X.
Xxxxxx (“Executive”).
This Agreement will become effective upon its execution by both parties hereto
(the “Effective Date”).
RECITALS
Whereas
Executive
is employed by the Company pursuant to the terms of Executive’s offer letter
from the Company;
Whereas
Executive, prior to the Effective Date, may have been awarded, in respect
of the
Company’s Common Stock, stock options, stock appreciation rights, restricted
shares, or restricted stock units pursuant to the applicable award agreements
and equity incentive plans (collectively, “Prior Grants”);
Whereas
Executive, in the future, may be awarded, in respect of the Company’s Common
Stock, additional stock options, stock appreciation rights, restricted shares
or
restricted stock units, subject to the Board’s sole discretion, (together with
Prior Grants, collectively “Stock Awards”); and
Whereas
the Company believes it is imperative to provide Executive with accelerated
vesting of the Stock Awards, as well as other severance benefits, in the
event
that Executive is terminated without Cause (as defined herein) or resigns
for
Good Reason (as defined herein) in connection with a Change of Control (as
defined herein).
Now,
Therefore,
in consideration of the foregoing, the mutual covenants contained herein,
and
other good and valuable consideration, the parties hereto hereby agree as
follows:
1. Termination
of Employment.
(a) At-Will
Employment. Executive’s
employment is at-will, which means that the Company may terminate Executive’s
employment at any time, with or without advance notice, and with or without
Cause. Similarly, Executive may resign his/her employment at any time, with
or
without advance notice or Good Reason. Executive shall not receive any
compensation of any kind, including, without limitation, severance benefits,
following Executive’s last day of employment with the Company (the “Termination
Date”), except as expressly provided herein, as otherwise agreed in writing
between Executive and the Chief Executive Officer of the Company, or as provided
in any plan documents governing the Stock Awards. Executive shall devote
all
reasonable efforts to the performance of Executive’s duties, and shall perform
such duties in good faith.
(b) Termination
Related to a Change of Control.
If Executive’s employment is terminated without Cause or Executive resigns for
Good Reason within twelve (12) months after a Change of Control, and Executive
signs a release substantially in the form (whichever is applicable) attached
hereto as Exhibit
A (the
“Release”), then the Company shall provide Executive with the following
severance benefits:
(i) The
Company shall make severance payments to Executive in the form of continuation
of Executive’s base salary in effect on the Termination Date for six (6) months
following the Termination Date (the “Severance Period”). These payments will be
made on the Company’s ordinary payroll dates and will be subject to standard
payroll deductions and withholdings.
(ii) The
Company will pay Executive an amount equal to the Executive’s annual bonus
(provided the Executive is under a non-commission Company bonus plan). The
bonus
will be calculated at one of the following rates, whichever is higher: (1)
as if
both Executive and the Company achieved one hundred (100) percent of their
specified performance objectives; or (2) the actual performance of the Company
and Executive as measured against the specified performance objectives. This
amount will be paid over the entire Severance Period on the Company’s ordinary
payroll dates, in equal installments, and will be subject to standard payroll
deductions and withholdings.
(iii) The
Company will pay the premiums necessary to continue Executive’s life and health
insurance during the Severance Period.
(iv) The
Company will accelerate the vesting of the Stock Awards such that the lesser
of
the following shall vest within ten (10) days after the date Executive signs
the
Release: (a) 50% of the unvested shares, rights, or units, as applicable,
as of
the Termination Date subject to the Stock Awards (after taking into account
any
additional acceleration of vesting Executive may be receiving under any award
agreements or equity incentive plan documents governing the Stock Awards
instituted prior to or after the Effective Date); or (b) all such shares,
rights
or units that would have vested if Executive had worked for the Company for
twelve (12) additional months beyond the Termination Date. This acceleration
of
vesting will be in addition to any acceleration of vesting that the Executive
would otherwise receive under the Company’s 2000 Nonstatutory Equity Incentive
Plan, 1999 Equity Incentive Plan, 2005 Equity Incentive Plan or any other
equity
incentive plan documents governing the Stock Awards. With respect to all
Stock
Awards except the Prior Grants, Executive shall have sixty (60) months to
exercise any such vested Stock Awards in addition to any time specified in
the
award agreements and equity incentive plan documents governing such Stock
Awards, but in no event shall such exercise period extend beyond the expiration
date of the Stock Award. The Stock Awards shall continue to be governed by
the
terms of the applicable award agreements and equity incentive plan documents.
Notwithstanding anything to the contrary contained herein, the maximum number
of
months of additional vesting that may be credited to any Stock Award under
this
Agreement, when added to any additional vesting provided by any award agreement
or equity incentive plan documents, shall not exceed twenty-four (24) months
in
the aggregate.
(v) With
respect to any Prior Grant intended to be an incentive stock option, the
acceleration of the vesting of the Prior Grant and the extension of the time
that Executive shall have to exercise the Prior Grant as provided in Paragraph
1(b)(iv) of this Agreement are deemed to be a modification of the Prior Grant
within the meaning of Section 424(h) of the Internal Revenue Code (“Code”). Such
modification shall result in the granting of a new option as of the date
of
execution of this Agreement, including providing a new grant date for purposes
of starting the holding period specified in Section 422(a)(1) of the Code
and
for purposes of the provision that the option price be not less than the
fair
market value of the stock at the time such option is granted as specified
in
Section 422(b)(4) of the Code. If Executive and the Company agree that the
Prior
Grant shall remain an incentive stock option and if the new option meets
the
requirements for incentive stock options specified in Section 422(b) of the
Code, and the $100,000 per year limitation specified in Section 422(d) of
the
Code as of the date of execution of this Agreement, then the unexercised
portion
of the Prior Grant shall be appropriately modified as to the date of grant
and
the option price; provided, however, that the option price shall be the greater
of the original option price of the Prior Grant or the fair market value
of the
stock on the date of execution of this Agreement. If Executive and the Company
do not agree that such Prior Grant shall remain an incentive stock option,
then
the Prior Grant shall be deemed to be a nonstatutory stock option as of the
date
of execution of this Agreement, and the Prior Grant shall be appropriately
modified to reflect such changed status.
(c) Termination
For Cause Procedure. The
Company may not terminate Executive’s employment for Cause unless and until
Executive receives a copy of a resolution duly adopted by the affirmative
vote
of at least a majority of the Board of Directors of the Company (“Board”)
finding that in the good faith opinion of the Board, Executive was guilty
of the
conduct constituting “Cause” and specifying the particulars thereof in detail.
The Company shall provide Executive with reasonable notice of the Board vote
and
an opportunity for Executive, together with Executive’s counsel, to be heard
before the Board.
2. Definitions.
(a) Definition
of Cause. For
purposes of this Agreement, “Cause” shall mean that Executive has committed, or
there has occurred, one or more of the following events: (1) conviction of
any
felony or misdemeanor involving moral turpitude, fraud or act of dishonesty
against the Company; (2) a finding by the Board, after a good faith and
reasonable factual investigation, that Executive has engaged in gross
misconduct; or (3) material violation or material breach of any Company policy
or statutory, fiduciary, or contractual duty of Executive to the Company;
provided,
however,
that in the event that any of the foregoing events occurs, the Company shall
provide notice to Executive describing the nature of such event and Executive
shall thereafter have ten (10) days to cure such event if such event is capable
of being cured.
(b) Definition
of Good Reason. For
purposes of this Agreement, “Good Reason” shall mean that any one of the
following events occurs during the Executive’s employment with the Company
without Executive’s consent: (i) any reduction of Executive’s annual base salary
(including bonus) as of the time period immediately preceding the Change
of
Control, except to the extent that the annual base salary (including bonus)
of
all other officers of the Company is similarly reduced; (ii) any material
reduction in the package of benefits and incentives provided to the Executive,
or any action by the Company which would materially and adversely affect
the
Executive’s participation or reduce the Executive’s benefits under any such
plans, except to the extent that such benefits and incentives of all other
officers of the Company are similarly reduced; (iii) any material change
in
Executive’s position or responsibilities (including the person or persons to
whom Executive has reporting responsibilities) that represents an adverse
change
from Executive’s position or responsibilities as in effect at any time within
ninety (90) days preceding the date of the Change of Control or at any time
thereafter, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith that is remedied by the Company
promptly after notice thereof is given by Executive; (iv) the Company’s
requiring Executive to relocate to any place outside of a twenty-five (25)
mile
driving distance of Executive’s current work site, except for reasonably
required travel on the business of the Company or its affiliates that is
not
materially greater than such travel requirements prior to the Change in Control
or unless Executive accepts such relocation opportunity; or (v) any failure
to
pay Executive any compensation or benefits to which Executive is entitled
within
fifteen (15) days of the date due. Executive may terminate his or her employment
for Good Reason so long as Executive tenders his resignation to the Company
within thirty (30) days after the occurrence of the event which forms the
basis
for his resignation for Good Reason. Executive shall provide written notice
to
the Company describing the nature of the event which forms the basis for
Executive’s resignation for Good Reason, and the Company shall thereafter have
ten (10) days to cure such event.
(c) Definition
of Change of Control. For
purposes of this Agreement, a “Change of Control” means: (i) a dissolution,
liquidation or sale of all or substantially all of the assets of the Company;
(ii) a merger or consolidation in which the Company is not the surviving
corporation; (iii) a reverse merger in which the Company is the surviving
corporation but the shares of the Company’s common stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise; or (iv) the acquisition
by
any person, entity or group within the meaning of Section 13(d) or 14(d)
of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), or any
comparable successor provisions (excluding any employee benefit plan, or
related
trust, sponsored or maintained by the Company or any Affiliate of the Company)
of the beneficial ownership (within the meaning of Rule 13d-3 promulgated
under
the Exchange Act, or comparable successor rule) of securities of the Company
representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors.
3. Gross
Up Provision.
(a) In
the event that the payments and benefits provided for in this Agreement (such
payments and benefits hereinafter referred to as “Payments”) constitute
“parachute payments” within the meaning of Section 280G of the Internal Revenue
Code of 1986, as amended (the “Code”), would be subject to the excise tax
imposed by Section 4999 of the Code (the “Excise Tax”), and the aggregate value
of such Payments, as determined in accordance with Section 280G of the Code
and
the Treasury Regulations thereunder is less than the product obtained by
multiplying 3.59 by Executive’s “base amount” within the meaning of Code Section
280G(b)(3), then such Payments shall be reduced to the extent necessary (but
only to that extent) so that no portion of such Payments will be subject
to the
Excise Tax. Alternatively, in the event that the Payments constitute “parachute
payments” within the meaning of Section 280G of the Code, the Payments would be
subject to the Excise Tax, and the aggregate value of the Payments, as
determined in accordance with Section 280G of the Code and the Treasury
Regulations thereunder is equal to or greater than the product obtained by
multiplying 3.59 by Executive’s “base amount” within the meaning of Code Section
280G(b)(3), then Executive shall receive (i) a payment from the Company
sufficient to pay such excise tax plus any interest or penalties incurred
by
Executive with respect to such excise tax, plus (ii) an additional payment
from
the Company sufficient to pay the excise tax and federal and state income
and
employment taxes arising from the payments made by the Company to Executive
pursuant to this sentence (together, the “Excise Tax Gross-Up Payment”).
Notwithstanding anything to the contrary set forth herein, the maximum amount
of
the Excise Tax Gross - Up Payment which the Company shall be obligated to
pay
shall be one time the Executive’s base salary.
(b) For
purposes of determining whether any of the Payments will be subject to the
Excise Tax and the amount of such Excise Tax:
(i) any
other payments or benefits received or to be received by Executive in connection
with transactions contemplated by a Change in Control, including Executive’s
termination of employment (whether pursuant to the terms of this Agreement
or
any other plan, arrangement or agreement with the Company), shall be treated
as
“parachute payments” within the meaning of Section 280G of the Code or any
similar or successor provision, and all “excess parachute payments” within the
meaning of Section 280G or any similar or successor provision shall be treated
as subject to the Excise Tax, unless in the opinion of tax counsel selected
by
the Company such other payments or benefits (in whole or in part) do not
constitute parachute payments, or such parachute payments (in whole or in
part)
represent reasonable compensation for services actually rendered within the
meaning of Section 280G (or any similar or successor provision of the Code)
in
excess of the base amount within the meaning of Section 280G (or any similar
or
successor provision of the Code), or such Payments are otherwise not subject
to
the Excise Tax;
(ii) the
amount of the Payments which shall be treated as subject to the Excise Tax
shall
be equal to the lesser of (a) the total amount of the Payments or (b) the
amount
of the excess parachute payments within the meaning of Section 280G; and
(iii) the
value of any non-cash benefits or any deferred payment or benefit shall be
made
by the accounting firm that is the Company’s outside tax accountants at the time
of such determination, which firm must be reasonably acceptable to Executive
(the “Accounting Firm”) in accordance with the principles of Section 280G of the
Code.
(c) For
purposes of determining the amount of the Excise Tax Gross-Up Payment, Executive
shall be deemed to pay federal income taxes at the highest marginal rate
of
federal income taxation in the calendar year in which the Excise Tax Gross-Up
Payment is to be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of Executive’s residence on the date
the Excise Tax Gross-Up Payment is to be made, net of the permissible reduction
in federal income taxes which could be obtained from deduction of such state
and
local taxes.
(d) In
the event that the Excise Tax is subsequently determined to be less than
the
amount taken into account under this Section 3, Executive shall repay to
the
Company (promptly following the time at which the amount of such reduction
in
Excise Tax is finally determined the portion of the Excise Tax Gross-Up Payment
attributable to such reduction (plus the portion of the Excise Tax Gross-Up
Payment attributable to the Excise Tax and federal, state and local income
tax
imposed on the Excise Tax Gross-Up Payment being repaid by Executive if such
repayment results in a reduction in Excise Tax and/or a federal, state or
local
income tax deduction) plus interest on the amount of such repayment at the
rate
provided in Section 1274(b)(2)(B) of the Code.
(e) In
the event that the Excise Tax is subsequently determined to exceed the amount
taken into account under this Section 3 (including by reason of any payment
the
existence or amount of which cannot be determined at the time of the Excise
Tax
Gross-Up Payment), the Company shall make an additional Excise Tax Gross-Up
Payment in respect of such excess (plus any interest payable with respect
to
such excess at the rate provided in Section 1274(b)(2)(B) of the Code) promptly
following the time at which the amount of such excess is finally determined
in
accordance with the principles set forth in this Section 3.
(f) All
determinations required to be made under this Section 3 shall be made by
the
Accounting Firm. The Company shall cause the Accounting Firm to provide detailed
supporting calculations of its determinations to the Company and Executive.
All
fees and expenses of the Accounting Firm shall be borne solely by the Company.
The Accounting Firm’s determinations must be made with substantial authority
(within the meaning of Section 6662 of the Code).
4. Other
Employment Terms and Conditions. The
employment relationship between the parties shall be governed by the general
employment policies and procedures of the Company, including those relating
to
the protection of confidential information and assignment of inventions;
provided, however, that when the terms of this Agreement differ from or are
in
conflict with the Company’s general employment policies or procedures, this
Agreement shall control.
5. General
Provisions.
(a) This
Agreement, including all exhibits hereto, constitutes the complete, final
and
exclusive embodiment of the entire agreement between the parties with regard
to
the subject matter hereof. It is entered into without reliance on any promise
or
representation, written or oral, other than those expressly contained herein,
and it supersedes any other such promises or representations. Notwithstanding
the foregoing, nothing in this Agreement shall affect the parties’ obligations
under the Stock Agreements or the Executive’s Employee Proprietary Information
and Inventions Agreement. This Agreement cannot be modified except in a writing
signed by Executive and a duly-authorized member of the Board.
(b) Whenever
possible, each provision of this Agreement will be interpreted in such a
manner
as to be effective under applicable law. The invalidity or unenforceability
of
any provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement. Any invalid or unenforceable provision
shall be modified so as to be rendered valid and enforceable in a manner
consistent with the intent of the parties insofar as possible.
(c) The
Executive’s or the Company’s failure to insist upon strict compliance with any
provision of this Agreement or the failure to assert any right the Executive
or
the Company may have hereunder shall not be deemed to be a waiver of such
provision or right or any other provision or right of this
Agreement.
(d) This
Agreement may be executed in several counterparts, each of which shall be
deemed
to be an original but all of which together will constitute one and the same
instrument. Facsimile signatures shall be deemed as effective as
originals.
(e) This
Agreement is intended to bind and inure to the benefit of and be enforceable
by
Executive, the Company and their respective successors, assigns, heirs,
executives and administrators, except that Executive may not assign any of
his
duties hereunder and he may not assign any of his rights hereunder without
the
written consent of the Company. This Agreement shall be interpreted and enforced
in accordance with the laws of the State of California.
(f) If
either party hereto bring any action to enforce such party’s rights hereunder,
the prevailing party in any such action shall be entitled to recover such
party’s reasonable attorneys’ fees and costs incurred in connection with such
action.
(g) For
purposes of construction, this Agreement shall be deemed to have been drafted
by
the Company, and the rule of construction of contracts that ambiguities are
construed against the drafting party shall be applied against the
Company.
(h) Any
notice required to be given or delivered to the Company under the terms of
this
Agreement shall be in writing and addressed to the Corporate Secretary of
the
Company at its principal corporate offices. Any notice required to be given
or
delivered to Executive shall be in writing and addressed to Executive at
the
address indicated herein or to the last known address provided by Executive
to
the Company. All notices shall be deemed to have been given or delivered
upon:
personal delivery; three (3) days after deposit in the United States mail
by
certified or registered mail (return receipt requested); one (1) business
day
after deposit with any return receipt express courier (prepaid); or one (1)
business day after transmission by facsimile.
In
Witness Whereof,
the parties have executed this Agreement as of the day and year written
below.
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/s/
X.X. Xxxxxx
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X.X.
XXXXXX
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Address:
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000
Xxxxxx Xxxxx
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Xxx
Xxxxx, XX 00000
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Date:
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July
20, 2006
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Chordiant
Software, Inc.
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Xxxx
X. Xxxxxxx Xx.
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Name:
Xxxx X. Xxxxxxx Xx.
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Title:
Vice President, Human Resources
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Date:
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April
13, 2007
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Exhibit A
- Release Agreements
Exhibit
A
RELEASE
AGREEMENT FOR EMPLOYEES 40 YEARS OF AGE OR OLDER
In
exchange for the severance benefits I am receiving to which I would not
otherwise be entitled, I hereby release, acquit and forever discharge the
Company, and its officers, directors, agents, servants, employees, attorneys,
shareholders, successors, assigns and affiliates, of and from any and all
claims, liabilities, demands, causes of action, costs, expenses, attorneys’
fees, damages, indemnities and obligations of every kind and nature, in law,
equity, or otherwise, known and unknown, suspected and unsuspected, disclosed
and undisclosed, arising out of or in any way related to agreements, events,
acts or conduct at any time prior to and including the execution date of
this
Release Agreement, including but not limited to: all such claims and demands
directly or indirectly arising out of or in any way connected with my employment
with the Company or the termination of that employment; claims or demands
related to salary, bonuses, commissions, stock, stock options, or any other
ownership interests in the Company, vacation pay, fringe benefits, expense
reimbursements, severance pay, or any other form of compensation; claims
pursuant to any federal, state or local law, statute, or cause of action
including, but not limited to, the federal Civil Rights Act of 1964, as amended;
the federal Americans with Disabilities Act of 1990; the federal Age
Discrimination in Employment Act of 1967, as amended (“ADEA”); the California
Fair Employment and Housing Act, as amended; tort law; contract law; wrongful
discharge; discrimination; harassment; fraud; defamation; emotional distress;
and breach of the implied covenant of good faith and fair dealing.
I
acknowledge that I am knowingly and voluntarily waiving and releasing any
rights
I may have under the ADEA, as amended. I also acknowledge that the consideration
given for the waiver and release in the preceding paragraph hereof is in
addition to anything of value to which I was already entitled. I further
acknowledge that I have been advised by this writing, as required by the
ADEA,
that: (a) my waiver and release do not apply to any rights or claims that
may arise after the execution date of this Release; (b) I have been advised
hereby that I have the right to consult with an attorney prior to executing
this
Release; (c) I have twenty-one (21) days to consider this Release (although
I may choose to voluntarily execute this release earlier); (d) I have seven
(7) days following my execution of this Release to revoke my agreement to
it;
and (e) this Release will not be effective until the date upon which the
revocation period has expired, which will be the eighth day after this Release
is executed by me.
I
UNDERSTAND THAT THIS RELEASE INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN
CLAIMS.
In giving this release, which includes claims which may be unknown to me
at
present, I acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: “A
general release does not extend to claims which the creditor does not know
or
suspect to exist in his favor at the time of executing the release, which
if
known by him must have materially affected his settlement with the
debtor.”
I
hereby expressly waive and relinquish all rights and benefits under that
section
and any law of any jurisdiction of similar effect with respect to my release
of
any unknown or unsuspected claims I may have against the Company.
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DATED:
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July
20, 2006
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AGREED:
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/s/
X.X. Xxxxxx
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X.X.
Xxxxxx
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