Exhibit 10.1
SCANSOFT, INC.
EMPLOYMENT AGREEMENT
This Agreement is entered into as of April 23, 2003, by and between
ScanSoft, Inc. (along with its successors and assigns, the "Company") and Xxxxxx
X. Xxxxxxxxx (the "Executive").
1. Duties and Scope of Employment.
(a) Positions and Duties. Executive will serve as President of the
Company. Executive will render such business and professional services in the
performance of Executive's duties consistent with Executive's position within
the Company and as reasonably assigned to Executive by the Chief Executive
Officer of the Company. The period of Executive's employment under this
Agreement is referred to herein as the "Employment Term." The Employment Term
shall commence upon the Effective Date (as defined in Section 15 below).
(b) Board Membership. During the Employment Term, Executive will
serve as a member of the Board of Directors of the Company (the "Board"),
subject to any required stockholder approval.
(c) Obligations. During the Employment Term, Executive will devote
Executive's full business efforts and time to the Company. For the duration of
the Employment Term, Executive agrees not to actively engage in any other
employment, occupation or consulting activity for any direct or indirect
remuneration without the prior approval of the Board of Directors of the
Company, which approval will not be unreasonably withheld; provided, however,
that Executive may, without the approval of the Board, serve in any capacity
with any civic, educational or charitable organization, subject to Section 5
herein.
2. At-Will Employment. Executive and the Board acknowledge that this
employment relationship may be terminated at any time, upon ninety (90) days
written notice to the other party, with or without good cause or for any or no
cause, at the option either of the Board or Executive. Executive understands and
agrees that neither Executive's job performance nor promotions, commendations,
bonuses or the like from the Company give rise to or in any way serve as the
basis for modification, amendment, or extension, by implication or otherwise, of
Executive's employment with the Company. However, as described in this
Agreement, Executive may be entitled to severance benefits depending upon the
circumstances of Executive's termination of employment.
3. Compensation.
(a) Base Salary. The Company will pay Executive as compensation for
Executive's services a base salary at the annualized rate of $275,000 through
the first year of the Employment Term, $300,000 through the second year of the
Employment Term, and $325,000 through the third year of the Employment Term
(respectively, the "Base Salary"). Upon the third anniversary of the
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Employment Term, if no explicit terms to the contrary have been discussed and
agreed upon by Executive and the Company, the Base Salary shall increase by
$25,000 each year of the Employment Term, commencing on the third anniversary of
the Effective Date. The Base Salary will be paid through payroll periods that
are consistent with the Company's normal payroll practices and will be subject
to the usual, required withholding.
(b) Performance Bonus. For each fiscal year of the Company,
Executive will be eligible to receive a target bonus of up to fifty percent
(50%) of Executive's then Base Salary based upon the achievement of performance
criteria established within four (4) months of the start of the applicable bonus
period by the Compensation Committee of the Board, after consultation with
Executive (for the fiscal year ending on December 31, 2003, the bonus shall be
prorated based on the number of months actually worked). The performance
standards will be based on the Company's achievement of revenue, diluted
earnings per share ("EPS") and time to market ("TTM") goals. The actual
percentage of Base Salary payable as a bonus for any year will depend upon the
extent to which the applicable performance criteria have been achieved. Any
bonus that actually is earned will be paid as soon as practicable (but no later
than 2-1/2 months) after the end of the fiscal year for which the bonus is
earned, but only if Executive was employed with the Company through the end of
such fiscal year.
(c) Success Bonus. If, on the first (1st) anniversary of the
Effective Date, the Company has achieved the performance goals established,
within four (4) months of the Effective Date, by the Compensation Committee of
the Board, after consultation with Executive, then Executive will fully vest in
fifty percent (50%) of Executive's then unvested shares of restricted Company
common stock that were assumed in the Merger (the "Restricted Stock"), but only
if Executive was employed with the Company through the first (1st) anniversary
of the Effective Date. The performance goals to be established will be based
upon factors and criteria, to be agreed upon by the Compensation Committee of
the Board after consultation with Executive, relating to the successful
integration of the Company's business after the Merger.
(d) Stock Options. On the Effective Date, Executive will be granted
a stock option to purchase one million (1,000,000) shares of the Company's
Common Stock at an exercise price equal to the fair market value of the
Company's Common Stock on the date of grant (the "Option"). Subject to the
accelerated vesting provisions set forth herein, the Option will vest as to 1/16
of the shares subject to the Option on the date that is three (3) months from
the Effective Date, and 1/16 of the original number of shares subject to the
Option will vest on the date that falls at the end of every three (3) month
period thereafter, subject to Executive's continued employment with the Company
on the relevant vesting date(s). In no event will the Option be exercisable
beyond the eighth (8th) anniversary of the Effective Date. The Option will be
subject to the terms, definitions and provisions of the stock option plan, which
is intended to be the SpeechWorks International, Inc. 2000 Employee, Director
and Consultant Stock Plan (the "Option Plan"), and the stock option agreement
(the "Option Agreement") under which it is granted, both which documents are
incorporated herein by reference.
(e) Employee Benefits. During the Employment Term, Executive will be
entitled to participate in the employee benefit plans currently and hereafter
maintained by the Company of general applicability to other senior executives of
the Company, including, without limitation, the
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Company's group medical, dental, vision, disability, life insurance, and
flexible-spending account plans. The Company reserves the right to cancel or
change the benefit plans and programs it offers to its employees at any time.
4. Severance. Upon termination of employment for any reason, Executive
shall receive payment of (a) his Base Salary, as then in effect, through the
date of termination of employment, and (b) all accrued vacation, expense
reimbursements and any other benefits (other than severance benefits, except as
provided below) due to Executive through the date of termination of employment
in accordance with established Company plans and policies or applicable law (the
"Accrued Obligations"). In addition, the following shall apply:
(a) Involuntary Termination other than for Cause, Death or
Disability. If Executive's employment with the Company is terminated for a
reason other than (i) Cause, (ii) Executive becoming Disabled or (iii)
Executive's death, or if the Executive terminates his employment with the
Company for Good Reason, then, subject to Executive's compliance with the
provisions in Section 4(e), Executive will be entitled to: (i) continuing
payments of Executive's Base Salary, as then in effect, during the Severance
Period, to be paid periodically in accordance with the Company's normal payroll
policies and subject to the usual, required withholding; (ii) continued payment
by the Company of the group medical, dental and vision continuation coverage
premiums for Executive and Executive's eligible dependents under Title X of the
Consolidated Budget Reconciliation Act of 1985, as amended ("COBRA") during the
Severance Period under the Company's group health plans, as then in effect;
(iii) immediately fully vest on the termination date in that portion of
Executive's stock options and unvested Restricted Stock that would have vested
during the Severance Period; and (iv) exercise the vested portion of the
Executive's outstanding options until the earlier of (A) one year from the date
of termination, or (B) the end of the term of the applicable option.
(b) Change of Control Benefits. If, within six (6) months following
a Change of Control, Executive's employment with the Company is terminated for a
reason other than (i) Cause, (ii) Executive becoming Disabled or (iii)
Executive's death, or if the Executive terminates his employment with the
Company for Good Reason, then, subject to Executive's compliance with the
provisions in Section 4(e), Executive also will be entitled to automatic
acceleration of Executive's outstanding stock options and unvested Restricted
Stock so as to make the stock options and unvested Restricted Stock one-hundred
percent (100%) vested.
(c) Resignation After One (1) Year. If, after the one (1) year
anniversary of the Effective Date, the Executive terminates his employment with
the Company for any or no reason, then, subject to Executive's compliance with
the provisions in Section 4(e), Executive will be entitled to: (i) continuing
payments of Executive's Base Salary, as then in effect, during the Severance
Period, to be paid periodically in accordance with the Company's normal payroll
policies and subject to the usual, required withholding; (ii) continued payment
by the Company of the group medical, dental and vision continuation coverage
premiums for Executive and Executive's eligible dependents under COBRA during
the Severance Period under the Company's group health plans, as then in effect;
(iii) immediately fully vest on the termination date in that portion of
Executive's stock options and unvested Restricted Stock that would have vested
during the Severance Period;
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and (iv) exercise the vested portion of the Executive's outstanding options
until the earlier of (A) one year from the date of termination, or (B) the end
of the term of the applicable option.
(d) Other Termination. If the Executive terminates Executive's
employment with the Company other than for Good Reason and on or prior to the
one (1) year anniversary of the Effective Date, or if Executive's employment
with the Company is terminated for Cause, due to Executive's death or due to
Executive becoming Disabled then Executive will receive payment of the Accrued
Obligations but he shall not be entitled to any other compensation or benefits
(including, without limitation, accelerated vesting of stock options) from the
Company, except to the extent provided under the applicable stock option
agreement(s), Company benefit plans or as may be required by law (for example,
under COBRA).
(e) Conditions to Receive Severance Package. Except for the Accrued
Obligations, the applicable provisions of the Option Plan and Option Agreement,
and other payments to which Executive may be entitled by law, the severance
payments, continued benefits, continued vesting, vesting acceleration and the
ability to exercise stock options described in this Section 4 will be provided
to Executive if the following conditions are satisfied: (i) Executive complies
with all surviving provisions of the Confidential Information Agreement and any
confidentiality or proprietary rights agreement signed by Executive; and (ii)
Executive executes and delivers to the Company, and does not revoke, a full
general release, in a form acceptable to the Company, releasing all claims,
known or unknown, that Executive may have against the Company, and any
subsidiary or related entity, their officers, directors, employees and agents,
arising out of or any way related to Executive's employment or termination of
employment with the Company.
(f) Cause. For purposes of this Agreement, "Cause" means Executive's
employment with the Company is terminated after a majority of the Board has
found any of the following to exist: (i) Executive's theft, dishonesty that
materially xxxxx the Company or falsification of any Company records; (ii)
disclosure of the Company's confidential or proprietary information which
violates the terms of the Confidential Information Agreement; (iii) Executive's
continued substantial willful nonperformance (except by reason of Disability) of
his employment duties after Executive has received a written demand for
performance by the Board and has failed to cure such nonperformance within 15
business days of receiving such notice; or (iv) Executive's conviction of, or
plea of nolo contendere to, a felony which such conviction or plea materially
xxxxx the business or reputation of the Company.
(g) Change of Control. For the purposes of this Agreement, a "Change
of Control" means: (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 50% or more of the total
voting power represented by the Company's then outstanding voting securities; or
(ii) a change in the composition of the Board occurring within a two-year
period, as a result of which fewer than a majority of the directors are
Incumbent Directors. "Incumbent Directors" will mean directors who either (A)
are members of the Board as of the Effective Date, or (B) are elected, or
nominated for election, to the Board with the affirmative votes of at least a
majority of the Board at the time of such election or nomination (but will 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
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Company); or (iii) the date of the consummation of a merger or consolidation of
the Company with any other corporation that has been approved by the
stockholders of the Company, 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) 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
or consolidation; or (iv) the date of the consummation of the sale or
disposition by the Company of all or substantially all the Company's assets.
Notwithstanding the foregoing, the Merger will not constitute a Change of
Control for purposes of this Agreement.
(h) Disabled. For purposes of this Agreement, "Disabled" means
Executive being unable to perform the principal functions of his duties due to a
physical or mental impairment, but only if such inability has lasted or is
reasonably expected to last for at least six months. Whether Executive is
Disabled will be determined by the Board based on evidence provided by one or
more physicians selected by the Board.
(i) Good Reason. For purposes of this Agreement, "Good Reason" means
(i) without the Executive's consent, a significant reduction of the Executive's
duties, position, reporting status, or responsibilities relative to the
Executive's duties, position, reporting status, or responsibilities in effect
immediately prior to such reduction, or the removal of the Executive from such
position, duties and responsibilities or change in reporting status, unless the
Executive is provided with comparable duties, position and responsibilities or
reporting status; provided, however, that a reduction in duties, position,
reporting status or responsibilities solely by virtue of the Company being
acquired and made part of a larger entity will not constitute "Good Reason" to
the extent Executive remains the President of a division or subsidiary of the
acquiror, which division or subsidiary conducts substantially the same core
operations, business and activities as were conducted by the Company prior to
any such acquisition or similar corporate transaction; (ii) without the
Executive's consent, a substantial reduction, by the Board of the Executive's
Base Salary as in effect immediately prior to such reduction (unless such
reduction is part of an overall Company effort that effects similarly situated
senior executives of the Company); (iii) without the Executive's consent, the
requirement that Executive relocate his principal place of employment more than
fifty (50) miles from the current location of the Company's principal executive
offices; (iv) a material breach by the Company of this Agreement; (iv) failure
of Executive to be nominated as a Board member; and (v) failure of the Board to
maintain (for any reason, and for the period, if any, specified by Section 5.17
of the Reorganization Agreement) the requisite number of Company Designated
Directors as contemplated by Section 5.17 of the Reorganization Agreement.
Notwithstanding the foregoing, changes to Executive's position, duties and
responsibilities resulting from the Merger and specified in this Agreement will
not constitute Good Reason for purposes of this Agreement.
(j) Severance Period. For purposes of this Agreement, "Severance
Period" means the period beginning on the date of Executive's termination of
employment with the Company and ending on the date (i) eighteen (18) months
later, if Executive's employment with the Company is terminated pursuant to
Section 4(a) before the date six (6) months following the Effective Date, (ii)
fifteen (15) months later, if Executive's employment with the Company is
terminated pursuant to Section 4(a) on or after the date six (6) months
following the Effective Date and before the one (1)
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year anniversary of the Effective Date, and (iii) twelve (12) months later, if
Executive's employment with the Company is terminated pursuant to Section 4(a)
or 4(c) on or after the one (1) year anniversary of the Effective Date.
5. Confidential Information. Upon commencement of employment hereunder,
Executive agrees to enter into the Company's standard Confidential Information
and Invention Assignment Agreement, which will include non-competition,
non-solicitation, and non-disparagement clauses that will last for twelve (12)
months following Executive's termination of employment with the Company (the
"Confidential Information Agreement").
6. Assignment. This Agreement will be binding upon and inure to the
benefit of (a) the heirs, executors and legal representatives of Executive upon
Executive's death and (b) any successor of the Company. Any such successor of
the Company will be deemed substituted for the Company under the terms of this
Agreement for all purposes. For this purpose, "successor" means any person,
firm, corporation or other business entity which at any time, whether by
purchase, merger or otherwise, directly or indirectly acquires all or
substantially all of the assets or business of the Company. None of the rights
of Executive to receive any form of compensation payable pursuant to this
Agreement may be assigned or transferred except by will or the laws of descent
and distribution. Any other attempted assignment, transfer, conveyance or other
disposition of Executive's right to compensation or other benefits will be null
and void.
7. Notices. All notices, requests, demands and other communications called
for hereunder will be in writing and will be deemed given (i) on the date of
delivery if delivered personally, (ii) one (1) day after being sent by a well
established commercial overnight service, or (iii) four (4) days after being
mailed by registered or certified mail, return receipt requested, prepaid and
addressed to the parties or their successors at the following addresses, or at
such other addresses as the parties may later designate in writing:
If to the Company:
ScanSoft, Inc.
0 Xxxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attn: Chief Financial Officer
If to Executive:
at the last residential address known by the Company
With a Copy To:
Xxxxx X. Xxxxxxxx, Xx.
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
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8. Severability. In the event that any provision hereof becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement will continue in full force and effect without said
provision.
9. Entire Agreement. This Agreement, together with the Option Plan, Option
Agreement, Confidentiality Agreement, and any SpeechWorks confidentiality or
proprietary rights agreement signed by Executive, represents the entire
agreement and understanding between the Company and Executive concerning the
subject matter herein and Executive's employment relationship with the Company,
and supersedes and replaces any and all prior or contemporaneous agreements and
understandings whether written or oral between the Executive and the Company and
the Executive and SpeechWorks.
10. Arbitration and Equitable Relief.
(a) Except as provided in Section 10(d) below, Executive and the
Company agree that to the extent permitted by law, any dispute or controversy
arising out of, relating to, or in connection with this Agreement, or the
interpretation, validity, construction, performance, breach, or termination
thereof will be settled by arbitration to be held at a location within 30 miles
of the Company's principal executive offices in Massachusetts, in accordance
with the National Rules for the Resolution of Employment Disputes then in effect
of the American Arbitration Association (the "Rules"). The arbitrator may grant
injunctions or other relief in such dispute or controversy. The decision of the
arbitrator will be final, conclusive and binding on the parties to the
arbitration. Judgment may be entered on the arbitrator's decision in any court
having jurisdiction.
(b) The arbitrator will apply Massachusetts law to the merits of any
dispute or claim, without reference to rules of conflict of law. Executive
hereby expressly consents to the personal jurisdiction of the state and federal
courts located in Massachusetts for any action or proceeding arising from or
relating to this Agreement and/or relating to any arbitration in which the
parties are participants.
(c) The Company will pay the direct costs and expenses of the
arbitration. The Company and Executive each will separately pay its counsel fees
and expenses; provided, however, the Company shall reimburse Executive for his
reasonable costs (including without limitation attorneys' fees) incurred if
Executive succeeds on the merits with respect to a material breach of this
Agreement at any such arbitration, including enforcing any judgment entered on
an arbitrator's decision.
(d) The Company may apply to any court of competent jurisdiction for
a temporary restraining order, preliminary injunction, or other interim or
conservatory relief, as necessary to enforce the provisions of the confidential
information and trade secrets agreement between Executive and the Company,
without breach of this arbitration agreement and without abridgement of the
powers of the arbitrator.
(e) EMPLOYEE HAS READ AND UNDERSTANDS SECTION 10, WHICH DISCUSSES
ARBITRATION. EMPLOYEE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, EMPLOYEE
AGREES TO THE EXTENT PERMITTED BY LAW, TO SUBMIT ANY FUTURE CLAIMS ARISING OUT
OF, RELATING TO, OR IN CONNECTION WITH
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THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE,
BREACH, OR TERMINATION THEREOF TO BINDING ARBITRATION, AND THAT THIS ARBITRATION
CLAUSE CONSTITUTES A WAIVER OF EMPLOYEE'S RIGHT TO A JURY TRIAL AND RELATES TO
THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE
RELATIONSHIP, INCLUDING BUT NOT LIMITED TO, THE FOLLOWING CLAIMS:
(i) ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE OF EMPLOYMENT; BREACH
OF CONTRACT, BOTH EXPRESS AND IMPLIED; BREACH OF THE COVENANT OF GOOD FAITH AND
FAIR DEALING, BOTH EXPRESS AND IMPLIED; NEGLIGENT OR INTENTIONAL INFLICTION OF
EMOTIONAL DISTRESS; NEGLIGENT OR INTENTIONAL MISREPRESENTATION; NEGLIGENT OR
INTENTIONAL INTERFERENCE WITH CONTRACT OR PROSPECTIVE ECONOMIC ADVANTAGE; AND
DEFAMATION;
(ii) ANY AND ALL CLAIMS FOR VIOLATION OF ANY FEDERAL STATE OR
MUNICIPAL STATUTE, INCLUDING, BUT NOT LIMITED TO, THE AMERICANS WITH
DISABILITIES ACT OF 1990, THE FAIR LABOR STANDARDS ACT, AND ANY LAW OF THE STATE
OF CALIFORNIA; AND
(iii) ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER LAWS AND
REGULATIONS RELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION.
11. No Oral Modification, Cancellation or Discharge. This Agreement may be
changed or terminated only in writing (signed by Executive and the Company).
12. Withholding. The Company is authorized to withhold, or cause to be
withheld, from any payment or benefit under this Agreement the full amount of
any applicable withholding taxes.
13. Governing Law. This Agreement will be governed by the laws of the
Commonwealth of Massachusetts (with the exception of its conflict of laws
provisions).
14. Merger. At the same time as the execution of this Agreement, the
Company, Spiderman Acquisition Corp., a Delaware corporation and wholly-owned
subsidiary of Company ("Acquiring"), and SpeechWorks International, Inc.
("SpeechWorks"), have entered into an Agreement and Plan of Reorganization dated
as of the date hereof (the "Reorganization Agreement") pursuant to which
SpeechWorks will merge with and into Acquiring with the result that SpeechWorks
will be the surviving corporation and will become a wholly-owned subsidiary of
Company (the "Merger").
15. Effective Date. The Closing Date (as defined in the Reorganization
Agreement) will be the "Effective Date" of this Agreement and this Agreement
will be null and void and have no effect unless the Merger contemplated by the
Reorganization Agreement is consummated.
16. Acknowledgment. Executive acknowledges that he has had the opportunity
to discuss this matter with and obtain advice from his private attorney, has had
sufficient time to, and has carefully read and fully understands all the
provisions of this Agreement, and is knowingly and voluntarily entering into
this Agreement.
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17. Attorneys' Fees. Executive shall be reimbursed his reasonable
attorneys' fees incurred with respect to the negotiation of this Agreement.
{Signature Pages to Follow}
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IN WITNESS WHEREOF, the undersigned have executed this Agreement on the
respective dates set forth below:
EXECUTIVE
/s/ Xxxxxx X. Xxxxxxxxx Date: As of April 23, 2003
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Xxxxxx X. Xxxxxxxxx
COMPANY
/s/ Xxxx X. Xxxxx Date: As of April 23, 2003
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Xxxx X. Xxxxx
Chairman and Chief Executive Officer
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