EXHIBIT 10.18
E.PIPHANY, INC.
CHANGE OF CONTROL SEVERANCE AGREEMENT
This Change of Control Severance Agreement (the "Agreement") is made and
entered into by and between Xxxxx Xxxxxx (the "Employee") and E.piphany, Inc.
(the "Company"), effective as of the latest date set forth by the signatures of
the parties hereto below.
WHEREAS, the Board of Directors of the Company (the "Board") may from
time to time consider the possibility of an acquisition of the Company by
another company or another change of control as a means of enhancing stockholder
value.
WHEREAS, the Board recognizes that such consideration can be a
distraction to the Employee and cause the Employee to consider alternative
employment opportunities.
WHEREAS, the Board believes that it is imperative to provide the
Employee with certain severance benefits upon Employee's termination of
employment following a Change of Control which provides the Employee with
enhanced financial security and provides incentive and encouragement to the
Employee to remain with the Company notwithstanding the possibility of a Change
of Control.
WHEREAS, certain capitalized terms used in the Agreement are defined in
Section 6 below.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Term of Agreement. This Agreement shall terminate upon the date that
all obligations of the parties hereto with respect to this Agreement have been
satisfied.
2. At-Will Employment. The Company and the Employee acknowledge that the
Employee's employment is and shall continue to be at-will, as defined under
applicable law. If the Employee's employment terminates for any reason,
including (without limitation) any termination prior to the announcement of a
Change of Control, the Employee shall not be entitled to any payments, benefits,
damages, awards or compensation except for those payments that may be available
in accordance with the Company's established employee plans and practices,
pursuant to other agreements with the Company or pursuant to applicable law.
3. Severance Benefits.
(a) Termination In Connection With A Change of Control. If the
Employee's employment is terminated by the Company without Cause or the Employee
resigns for Good Reason, at any time after the announcement of a Change of
Control and before eighteen (18) months following a Change of Control (a
"Severance Termination"), then, subject to Section 5, the Employee shall be
entitled to receive the following severance benefits:
(1) Severance Payment. A cash payment in an amount equal to
one hundred fifty percent (150%) of the Employee's Annual Compensation plus a
payment of seventy five percent (75%) of the then current year target bonus for
the Employee.
(2) Continued Employee Benefits. One hundred percent (100%)
Company-paid health, dental and life insurance coverage at the same level of
coverage as was provided to such employee immediately prior to the Termination
Date (the "Company-Paid Coverage"). If such coverage included the Employee's
dependents immediately prior to the Termination, such dependents shall also be
covered at Company expense. Company-Paid Coverage shall continue until the
earlier of (i) eighteen (18) months from the Termination Date, or (ii) the date
that the Employee and his or her dependents become covered under another
employer's group health, dental or life insurance plans that provide Employee
and his or her dependents with comparable benefits and levels of coverage. For
purposes of Title X of the Consolidated Budget Reconciliation Act of 1985
("COBRA"), the date of the "qualifying event" for Employee and his or her
dependents shall be the date upon which the Company-Paid Coverage terminates.
(3) Stock Option/Restricted Stock Accelerated Vesting. The
vesting of all outstanding stock options or restricted stock awards held by
Employee (collectively the "Options") extended to Employee under an approved
Company plan or program shall accelerate by twelve (12) months as of the
Termination Date (but, in no event, shall the Options become vested and
exercisable as to more than one hundred percent (100%) of the shares subject to
such Options). In the event that Employee is entitled to accelerated vesting of
a particular Option pursuant to the terms of both the applicable option (or
other) agreement and this Agreement, the vesting of the Option shall be
accelerated in accordance with whichever agreement (i.e, this Agreement or the
applicable agreement) results in greater economic value being delivered to the
Employee. (However, in no event shall the Employee be entitled to accelerated
vesting under both such agreements.) In addition, under no circumstances shall
any Option become vested and exercisable as to more than one hundred percent
(100%) of the shares subject to such Option. Employee's stock options shall
remain exercisable for such period of time as is prescribed in the respective
stock option agreements.
(4) Loan Forgiveness. All principal, interest and any other
amounts owed by the Employee to the Company pursuant to that certain Restricted
Stock Purchase Agreement, dated July 1, 1998, by and between the Employee and
the Company, as amended by the Board of Directors of the Company on November 10,
1998 and as further amended from time to time (the "Stock Purchase Agreement")
and any promissory notes entered into in connection with the Stock Purchase
Agreement shall be immediately deemed forgiven by the Company, all such
promissory notes shall be deemed cancelled, all related pledge agreements shall
be cancelled and any collateral securing Employee's obligations thereunder shall
be released and, if applicable, reconveyed by the Company to the Employee.
(5) Timing of Severance Payments. Any severance payment to
which Employee is entitled under Section 3(a)(1) shall be paid by the Company to
the Employee (or to the Employee's successor in interest, pursuant to Section
7(b)) in cash and in full, not later than thirty (30) calendar days following
the Termination Date, subject to Section 9(f).
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(b) Voluntary Resignation; Termination For Cause. If the Employee's
employment terminates by reason of the Employee's voluntary resignation (and is
not a Severance Termination), or if the Employee is terminated for Cause, then
the Employee shall not be entitled to receive severance or other benefits except
for those (if any) as may then be established under the Company's then existing
option, severance and benefits plans and practices, pursuant to other agreements
with the Company or pursuant to applicable law.
(c) Disability; Death. If the Company terminates the Employee's
employment as a result of the Employee's Disability, or such Employee's
employment is terminated due to the death of the Employee, then the Employee
shall not be entitled to receive severance or other benefits except for those
(if any) as may then be established under the Company's then existing severance
and benefits plans and practices or pursuant to other agreements with the
Company.
(d) Termination Apart from Change of Control. In the event the
Employee's employment is terminated for any reason, either prior to the
announcement of a Change of Control or after the eighteen (18) month period
following a Change of Control, then the Employee shall be entitled to receive
severance and any other benefits only as may then be established under the
Company's existing severance and benefits plans and practices, pursuant to other
agreements with the Company or pursuant to applicable law.
4. Attorney Fees, Costs and Expenses. The Company shall reimburse Employee
for the reasonable attorney fees, costs and expenses incurred by the Employee in
connection with any action brought by Employee to enforce his or her rights
hereunder, provided such action is not decided in favor of the Company.
5. Limitation on Payments.
(a) In the event that the severance and other benefits provided for
in this Agreement or otherwise payable 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 5, would be subject
to the excise tax imposed by Section 4999 of the Code, then the Employee's
severance benefits under Section 3(a)(1) shall be either
(A) delivered in full, or
(B) delivered as to such lesser extent 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, notwithstanding that all or some
portion of such severance benefits may be taxable under
Section 4999 of the Code. Any taxes due under Section 4999
shall be the responsibility of the employee.
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(b) If a reduction in the payments and benefits that would otherwise
be paid or provided to the Employee under the terms of this Agreement is
necessary to comply with the provisions of Section 5(a), the Employee shall be
entitled to select which payments or benefits will be reduced and the manner and
method of any such reduction of such payments or benefits (including but not
limited to the number of options that would vest under Section 3(a)) subject to
reasonable limitations (including, for example, express provisions under the
Company's benefit plans) (so long as the requirements of Section 5(a) are met).
Within thirty (30) days after the amount of any required reduction in payments
and benefits is finally determined in accordance with the provisions of Section
5(c), the Employee shall notify the Company in writing regarding which payments
or benefits are to be reduced. If no notification is given by the Employee, the
Company will determine which amounts to reduce. If, as a result of any reduction
required by Section 5(a), amounts previously paid to the Employee exceed the
amount to which the Employee is entitled, the Employee will promptly return the
excess amount to the Company.
(c) Unless the Company and the Employee otherwise agree in writing,
any determination required under this Section 5 shall be made in writing by the
Company's accountants immediately prior to Change of Control, 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 5, the accountants may, after taking into account the information
provided by the Employee, make reasonable assumptions and approximations
concerning applicable taxes and may rely on reasonable, good faith
interpretations concerning the application of Sections 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 5.
6. Definition of Terms. The following terms referred to in this Agreement
shall have the following meanings:
(a) Annual Compensation. "Annual Compensation" means an amount equal
to the greater of (i) Employee's Company base salary for the twelve (12) months
preceding the Change of Control or (ii) Employee's current Company base salary
on an annualized basis.
(b) Cause. "Cause" shall mean (i) any act of personal dishonesty
taken by the Employee in connection with his responsibilities as an employee and
intended to result in significant personal enrichment of the Employee, (ii) the
conviction of, or a plea of "guilty" or "no contest" to, a felony under the laws
of the United States, any state thereof or any foreign country, which conviction
or plea negatively and materially reflects on the Employee's fitness to perform
his or her duties or materially xxxxx the Company's reputation or financial
status, (iii) willful misconduct by the Employee that is materially injurious to
the Company, (iv) any act of fraud, dishonesty or moral turpitude by the
Employee that is materially injurious to the Company; or (v) for a period of not
less than thirty (30) days following delivery to the Employee of a written
demand for performance from the Company that describes the basis for the
Company's belief that the Employee has not substantially performed his duties,
continued violations by the Employee of the Employee's obligations to the
Company that are demonstrably willful and deliberate on the Employee's part.
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Any dismissal for cause in accordance with Subsection (v) of this definition
must be approved by the Company's Board of Directors prior to the dismissal
date.
(c) Change of Control. "Change of Control" means the occurrence of
any of the following events:
(1) 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 fifty percent (50%) or
more of the total voting power represented by the Company's then outstanding
voting securities;
(2) A change in the composition of the Board occurring
within a twelve-month period, 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 the date hereof, or (B) are
appointed, 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 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);
(3) The consummation of a merger or consolidation of
the Company with any other corporation, other than a merger or consolidation
that 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
or such surviving entity's parent) at least fifty percent (50%) of the total
voting power represented by the voting securities of the Company or such
surviving entity or such surviving entity's parent outstanding immediately after
such merger or consolidation;
(4) The consummation of the sale or disposition by the
Company of all or seventy-five percent (75%) or more of the Company's assets.
(d) Disability. "Disability" shall mean that the Employee has been
unable to perform his or her Company duties as the result of his or her
incapacity due to physical or mental illness, and such inability, at least
twenty-six (26) weeks after its commencement, is determined to be total and
permanent by a physician selected by the Company or its insurers and acceptable
to the Employee or the Employee's legal representative (such Agreement as to
acceptability not to be unreasonably withheld). Termination resulting from
Disability may only be effected after at least thirty (30) days' written notice
by the Company of its intention to terminate the Employee's employment. In the
event that the Employee resumes the performance of substantially all of his or
her duties hereunder before the termination of his or her employment becomes
effective, the notice of intent to terminate shall automatically be deemed to
have been revoked.
(e) Good Reason. "Good Reason" means, without the Employee's express
written consent, any of the following events:
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(i) a material reduction by the Company of the impact and
nature of Employee's duties, responsibilities or
authority, relative to the impact and nature of the
Employee's duties, responsibilities or authority as in
effect immediately prior to the Change of Control;
(ii) a reduction by the Company in the base salary or target
bonus opportunity of the Employee as in effect immediately
prior to the Change in Control;
(iii) a material reduction by the Company in the kind or level
of employee benefits (i.e., health, vision, life, 401k or
the like) to which the Employee was entitled immediately
prior to the Change of Control; or
(iv) the relocation by the Company of the Employee's location
of employment to a facility or a location more than fifty
(50) miles from the Employee's location of employment
immediately prior to the Change of Control.
(f) Termination Date. "Termination Date" shall mean (i) if this
Agreement is terminated by the Company for Disability, thirty (30) days after
notice of termination is given to the Employee (provided that the Employee shall
not have returned to the performance of the Employee's duties on a full-time
basis during such thirty (30)-day period), (ii) if the Employee's employment is
terminated by the Company for any other reason, the date on which a notice of
termination is given to Employee, or (iii) if the Agreement is terminated by the
Employee, the date on which the Employee delivers the notice of termination to
the Company.
7. Successors.
(a) Company's Successors. Any successor to the Company (whether
direct or indirect and whether by purchase, 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. For all purposes under this Agreement, the term
"Company" shall include any successor to the Company's business and/or assets
which executes and delivers the assumption agreement described in this Section
7(a) or which becomes bound by the terms of this Agreement by operation of law.
(b) Employee's Successors. The terms of this Agreement and all rights
of the Employee hereunder shall inure to the benefit of, and be enforceable by,
the Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
8. Notice.
(a) General. 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. In the case of the Employee,
mailed notices shall be addressed to him at the home address that he most
recently communicated to the Company in writing. In the case of the Company,
mailed notices shall be
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addressed to its corporate headquarters, and all notices shall be directed to
the attention of its Secretary.
(b) Notice of Termination. Any termination by the Company for Cause
or by the Employee as a result of a voluntary resignation or an Involuntary
Termination shall be communicated by a notice of termination to the other party
hereto given in accordance with Section 8(a) of this Agreement. Such notice
shall indicate the specific termination provision in this Agreement relied upon,
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination under the provision so indicated, and shall
specify the termination date (which shall be not more than thirty (30) days
after the giving of such notice). The failure by the Employee to include in the
notice any fact or circumstance which contributes to a showing of Involuntary
Termination shall not waive any right of the Employee hereunder or preclude the
Employee from asserting such fact or circumstance in enforcing his or her rights
hereunder.
9. Miscellaneous Provisions.
(a) No Duty to Mitigate. The Employee shall not be required to
mitigate the amount of any payment contemplated by this Agreement, nor shall any
such payment be reduced by any earnings that the 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 the Employee and by an authorized officer of the Company
(other than the 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. This Agreement and any outstanding stock option,
stock purchase or related agreements (including without limitation the Stock
Purchase Agreement), represent the entire understanding of the parties hereto
with respect to the subject matter hereof and supersedes all prior arrangements
and understandings regarding same. Other than the agreements described in the
preceding sentence, 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.
(d) Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be construed and enforced in accordance
with, and the rights of the parties shall be governed by, the laws of the State
of California without regard to principles of conflicts of laws.
(e) Severability. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or enforceability
of any other provision hereof, which shall remain in full force and effect.
(f) Withholding. All payments made pursuant to this Agreement will be
subject to withholding of applicable income and employment taxes.
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(g) 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.
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IN WITNESS WHEREOF, each of the parties has executed this Agreement on
the dates indicated below.
COMPANY E.PIPHANY, INC.
By:
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Name:
------------------------
Title:
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Date:
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EMPLOYEE:
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Name: Xxxxx Xxxxxx
Date:
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