Severance Agreement
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EXHIBIT 10.40
SEVERANCE AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of the 12th day
of August, 1998, by and between Silicon Valley Bancshares ("Bancshares") and
Xxxx X. Xxxx ("Xx. Xxxx").
RECITALS
WHEREAS, Xx. Xxxx is the President and Chief Executive Officer of Bancshares
and Silicon Valley Bank (the "Bank");
WHEREAS, Bancshares has made an equity investment in non-voting preferred
stock (the "Preferred Stock") of garage.com-TM- (the "Company") and, in that
regard, has been offered membership on the Company's board of directors;
WHEREAS, Bancshares has asked, and Xx. Xxxx has agreed, to serve as a
director of the Company;
WHEREAS, the Company offered to Bancshares the opportunity to purchase
75,000 shares of the Company's common stock (the "Common Stock"), in regard to
services provided by Xx. Xxxx on the Company's board of directors;
WHEREAS, Xx. Xxxx'x service on the board of directors of the Company will
provide value to Bancshares;
WHEREAS, Bancshares purchased the Common Stock for a total purchase price of
$750;
WHEREAS, the Company intends to form a California limited liability company
each year during its existence (the "LLCs") to hold and distribute securities,
or the proceeds from the sale or disposition of such securities, that the
Company receives in each particular year from entities that seek to raise
capital using the Company's Internet matchmaking service; and
WHEREAS, the Company intends to allocate an interest in each of the annual
LLCs to its holders of common and preferred stock, including Bancshares. For
purposes of this Agreement, "Interests" means the interests allocated by the
Company in each of the annual LLCs to Bancshares related solely to Bancshares'
ownership of the Common Stock granted in regard to Xx. Xxxx'x services on the
Company's board of directors.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants set forth below, the parties agree as follows:
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AGREEMENT
1. RIGHTS IN THE STOCK AND THE INTERESTS. Except as otherwise provided in
this Agreement, Bancshares shall have all right, title and interest in the
Common Stock and the Interests.
2. XX. XXXX'X SEPARATION. Upon the earlier of (i) a Covered Termination;
or (ii) a Qualified Separation of Xx. Xxxx from Bancshares and the Bank
(collectively, "Xx. Xxxx'x Separation"), the determination of the value of the
Common Stock and the Interests will be made in accordance with Section 3 of this
Agreement. For purposes of this Agreement, a "Covered Termination" shall have
the meaning as defined in the then existing Change in Control Agreement among
Xx. Xxxx, Bancshares and the Bank; and a "Qualified Separation" shall mean where
Xx. Xxxx voluntarily resigns as an officer of Bancshares and the Bank and, in
the sole discretion of Bancshares, determines that Xx. Xxxx continues to add
value to Bancshares and the Bank. Factors to be considered in this determination
include, but are not limited to: (1) Xx. Xxxx'x promotion and support of the
interests of the Bank in the marketplace and community; (2) Xx. Xxxx'x promotion
and support of the interests of the Bank with clients, venture capitalists and
prospective Bank clients; (3) Xx. Xxxx'x promotion and support of the interests
of the Bank through civic activities; (4) Xx. Xxxx'x continued service to the
Bank (i.e., as a consultant); (5) Xx. Xxxx'x continued addition of value to a
Bank-related project; or (6) Xx. Xxxx providing referrals to the Bank.
Bancshares' shall make this determination one time only, within three (3) months
following Xx. Xxxx'x separation.
3. DETERMINED VALUE. The term "Determined Value" shall mean fifty percent
(50%) of the present value of the fair market value of the then-vested Common
Stock and the Interests, valued as of the date of Xx. Xxxx'x Separation, and
determined as follows: (i) within twenty (20) days of Xx. Xxxx'x Separation,
Bancshares and Xx. Xxxx shall each select a business valuation appraiser, each
of whom is an accredited senior appraiser by the American Society of Appraisers;
(ii) within twenty (20) days of their selection, the appraisers selected by
Bancshares and Xx. Xxxx shall promptly meet and confer and select an independent
business valuation appraiser who is an accredited senior appraiser by the
American Society of Appraisers (the "Independent Appraiser"); (iii) the
Independent Appraiser shall promptly conduct an appraisal of the Common Stock
and the Interests and determine the fair market value of the Common Stock and
the Interests discounted to present value; and (iv) the Independent Appraiser
shall then promptly prepare and deliver to Bancshares and Xx. Xxxx a written
report reflecting the fair market value of the Common Stock and the Interests
discounted to present value (the "Appraisal Report"). The fair market value
determined under this Section 3 will include an amount representing the value of
the goodwill of the Company. The Determined Value established by the Independent
Appraiser is conclusive and binding upon the parties. Bancshares will pay the
fees and expenses charged by the Independent Appraiser.
4. CLOSING. Within twenty (20) days of the delivery of the Appraisal
Report, but no earlier than ninety-five (95) days from the date of Xx. Xxxx'x
Separation, Bancshares will pay to
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Xx. Xxxx the amount of the Determined Value. Notwithstanding the foregoing,
if Xxxxx X. Xxxxxxx, Xx. ("Xx. Xxxxxxx") is then participating in the payment
from Bancshares to Xx. Xxxx pursuant to the Severance Agreement between
Bancshares and Xx. Xxxxxxx dated August 12, 1998, Bancshares will pay to Xx.
Xxxx only one-half of the amount of the Determined Value (with the other half
then being paid to Xx. Xxxxxxx).
5. ATTORNEYS' FEES. In any action at law or in equity, including any
arbitration proceeding, to enforce any of the provisions or rights under this
Agreement, the unsuccessful party to the action, as determined by the court or
the arbitrator in its final judgment or decree, shall pay the successful party
all costs, expenses and reasonable attorneys' fees incurred by the successful
party (including, without limitation, costs, expenses and fees on any appeal),
and, if the successful party shall recover judgment in any such action or
proceeding, such costs, expenses and attorneys' fees shall be included as part
of the judgment.
6. AMENDMENTS. No change in, modification of or addition to the terms of
this Agreement shall be valid unless set forth in a writing signed by Bancshares
and Xx. Xxxx and specifically stating that it constitutes an amendment to this
Agreement.
7. CHOICE OF LAW. It is the intention of the parties that the laws of the
State of California shall govern the validity of this Agreement, the
construction of its terms and the interpretation of the rights and duties of the
parties.
8. BINDING ON HEIRS, SUCCESSORS AND ASSIGNS. This Agreement and all of its
terms, conditions and covenants are intended to be fully effective and binding,
to the extent permitted by law, on the heirs, executors, administrators,
successors and assigns of the parties to this Agreement.
9. ASSIGNMENT. Except as otherwise provided in this Agreement, neither
this Agreement nor any right or interest is assignable by any of the parties
without the prior written consent of all of the parties.
10. ARBITRATION. Any dispute between the parties arising out of or in
connection with this Agreement shall be referred to arbitration in Santa Xxxxx
County, California in accordance with the Commercial Rules of the American
Arbitration Association. The award shall be final and binding upon the parties
and judgment of such award may be entered in any court having jurisdiction.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date and year first above written.
SILICON VALLEY BANCSHARES XXXX X. XXXX
By:
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