CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS CHANGE IN CONTROL SEVERANCE AGREEMENT (this "Agreement"), dated as
of November 15, 1999, by and between Sterling Software, Inc., a Delaware
corporation (the "Company"), and Xxx X. XxXxxxxxx, Xx. (the "Executive").
WITNESSETH:
WHEREAS, the Executive is a senior executive of the Company and is
expected to make major contributions to the profitability, growth and financial
strength of the Company;
WHEREAS, the Company recognizes that, as is the case of most companies,
the possibility of a Change in Control (as hereinafter defined) exists;
WHEREAS, the Company desires to assure itself of both present and
future continuity of management and desires to establish certain minimum
severance benefits for certain of its senior executives, including the
Executive, applicable in the event of a Change in Control; and
WHEREAS, the Company desires to provide additional inducement for the
Executive to remain in the ongoing employ of the Company;
NOW, THEREFORE, the Company and the Executive agree as follows:
1. CERTAIN DEFINED TERMS: In addition to terms defined elsewhere
herein, the following terms have the following meanings when used in this
Agreement with initial capital letters:
(a) "Base Pay" means the Executive's annual fixed or base
compensation, as may be determined from time to time by the Company,
whether acting through its Board of Directors (the "Board") or a
committee thereof, its President and CEO or otherwise.
(b) "Change in Control" means the occurrence during the Term
of any of the following events:
(i) The Company is merged, consolidated or
reorganized into or with another corporation or other legal
person, and as a result of such merger, consolidation or
reorganization less than two-thirds of the combined voting
power of the then-outstanding securities entitled to vote
generally in the election of directors ("Voting Stock") of
such corporation or person immediately after such transaction
are held in the aggregate by the holders of Voting Stock of
the Company immediately prior to such transaction;
(ii) The Company sells or otherwise transfers all
or substantially all of its assets to another corporation or
other legal person, and less than two-thirds of the combined
voting power of the then-outstanding Voting Stock of such
corporation or person is held in the aggregate by the holders
of Voting Stock of the Company immediately prior to such sale
or transfer;
(iii) There is a report filed on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form or report),
each as promulgated pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act"), disclosing that any
person (as the term "person" is used in Section 13(d)(3) or
Section 14(d)(2) of the Exchange Act) has become the
beneficial owner (as the term "beneficial owner" is defined
under Rule 13d-3 or any successor rule or regulation
promulgated under the Exchange Act) of securities representing
20% or more of the combined voting power of the
then-outstanding Voting Stock of the Company;
(iv) The Company files a report or proxy statement
with the Securities and Exchange Commission pursuant to the
Exchange Act disclosing in response to Form 8-K or Schedule
14A (or any successor schedule, form or report or item
therein) that a change in control of the Company has occurred
or will occur in the future pursuant to any then-existing
contract or transaction; or
(v) If, at any time during any period of two
consecutive years, individuals who at the beginning of any
such period constitute the Directors of the Company cease for
any reason to constitute at least a majority thereof;
provided, however, that for purposes of this clause (v) each
Director (other than a Director whose initial assumption of
office is in connection with an actual or threatened election
contest) who is first elected, or first nominated for election
by the Company's stockholders, by a vote of at least
two-thirds of the Directors of the Company (or a committee
thereof) then still in office who were Directors of the
Company at the beginning of any such period will be deemed to
have been a Director of the Company at the beginning of such
period.
Notwithstanding the foregoing provisions of Sections 1(b)(iii) or
1(b)(iv), unless otherwise determined in a specific case by majority
vote of the Board, a "Change in Control" shall not be deemed to have
occurred for purposes of Section 1(b)(iii) or 1(b)(iv) solely because
(A) the Company, (B) an entity in which the Company directly or
indirectly beneficially owns 50% or more of the outstanding Voting
Stock (a "Subsidiary"), or (C) any Company-sponsored employee stock
ownership plan or any other employee benefit plan of the Company or any
Subsidiary either files or becomes obligated to file a report or a
proxy statement under or in response to Schedule 13D, Schedule 14D-1,
Form 8-K or Schedule 14A (or any successor schedule, form or report or
item therein) under the Exchange Act disclosing beneficial ownership by
it of shares of Voting Stock of the Company, whether in excess of 20%
or otherwise, or because the Company reports that a change in control
of the Company has occurred or will occur in the future by reason of
such beneficial ownership or any increase or decrease thereof.
(c) "Employee Benefits" means the perquisites, benefits and
service credit for perquisites or benefits as provided under any and
all employee perquisite or benefit policies, plans, programs or
arrangements in which Executive is entitled to participate, including
without limitation any stock option, stock purchase, stock
appreciation, savings, pension, 401(k), employee stock ownership
(ESOP), employee stock purchase (ESPP), supplemental executive
retirement, or other retirement income or welfare benefit, deferred
compensation, incentive compensation, group or other life, health,
medical/hospital or other insurance (whether funded by actual insurance
or self-insured by the Company), disability, salary
2
continuation, expense reimbursement, executive automobile, tax and
financial planning, club memberships, incentive travel, tax
reimbursement and other employee benefit policies, plans, programs or
arrangements that may now exist or any successor policies, plans,
programs or arrangements that may be adopted hereafter by the Company.
(d) "Incentive Pay" means the aggregate annual bonus,
incentive or other payments of cash compensation, in addition to Base
Pay, made or authorized or contemplated to be made in regard to
services rendered by the Executive in any fiscal year pursuant to any
bonus, incentive compensation, profit-sharing, performance,
discretionary pay or similar agreement, policy, plan, program or
arrangement (whether or not funded) of the Company or any successor
thereto.
(e) "Severance Period" means the period of time commencing on
the date of the first occurrence of a Change in Control and continuing
until the earliest of (i) the fourth anniversary of the occurrence of
the Change in Control, or (ii) the Executive's death; provided,
however, that commencing on each anniversary of the Change in Control,
the Severance Period will automatically be extended for an additional
year unless, not later than 90 calendar days prior to such anniversary
date, either the Company or the Executive shall have given written
notice to the other that the Severance Period is not to be so extended.
(f) "Term" means the period commencing as of the date first
set forth above and expiring as of the later of (i) the close of
business on December 31, 2004, or (ii) the expiration of the Severance
Period; provided, however, that (A) commencing on January 1, 2001 and
each January 1 thereafter, the Term of this Agreement will
automatically be extended for an additional year unless, not later than
September 30 of the immediately preceding year, the Company or the
Executive shall have given written notice that it or the Executive, as
the case may be, does not wish to have the Term extended and (B)
subject to the last sentence of Section 8, if, prior to a Change in
Control, the Executive ceases for any reason to be an employee of the
Company or any Subsidiary, thereupon without further action the Term
shall be deemed to have expired and this Agreement will immediately
terminate and be of no further effect.
2. OPERATION OF AGREEMENT: This Agreement will be effective and binding
immediately upon its execution, but, anything in this Agreement to the contrary
notwithstanding, this Agreement will not be operative unless and until a Change
in Control occurs. Upon the occurrence of a Change in Control at any time during
the Term, without further action, this Agreement shall become immediately
operative.
3. TERMINATION FOLLOWING A CHANGE IN CONTROL: (a) In the event of the
occurrence of a Change in Control, the Executive's employment may be terminated
by the Company during the Severance Period. If, during the Severance Period, the
Executive's employment is terminated by the Company or any Subsidiary other than
as a result of the Executive's death, the Executive will be entitled to the
compensation and benefits provided by Section 4 hereof.
(b) In the event of the occurrence of a Change in Control, the
Executive may terminate his or her employment with the Company during the
Severance Period, with the right to the compensation and benefits as provided in
Section 4, upon the occurrence of one or more of the
3
following events (regardless of whether any other reason for such termination
exists or has occurred, including without limitation, other employment):
(i) Failure to elect or reelect or otherwise to maintain
the Executive in the office of the Company which the Executive held
immediately prior to a Change in Control, or the removal of the
Executive as a Director of the Company (or any successor thereto) if
the Executive shall have been a Director of the Company immediately
prior to the Change in Control;
(ii) (A) A significant adverse change in the nature or
scope of the authorities, powers, functions, responsibilities or duties
attached to the position which the Executive held immediately prior to
the Change in Control, (B) a reduction in the aggregate amount of the
Executive's Base Pay or Incentive Pay as in effect for the Executive
immediately prior to the occurrence of a Change in Control or such
higher amount of Base Pay or Incentive Pay as may thereafter be
determined by the Company, whether acting through the Board or a
committee thereof, its President and CEO or otherwise, or (C) the
termination or denial of the Executive's rights to Employee Benefits or
a reduction in the scope or value thereof, any of which is not remedied
by the Company within 10 calendar days after receipt by the Company of
written notice from the Executive of such change, reduction,
termination or denial, as the case may be;
(iii) A determination by the Executive (which determination
will be conclusive and binding upon the parties hereto provided it has
been made in good faith and in all events will be presumed to have been
made in good faith unless otherwise shown by the Company by clear and
convincing evidence) that a change in circumstances has occurred
following a Change in Control, including, without limitation, a change
in the scope of the business or other activities for which the
Executive was responsible immediately prior to the Change in Control,
which has rendered the Executive substantially unable to carry out, has
substantially hindered Executive's performance of, or has caused
Executive to suffer a substantial reduction in, any of the authorities,
powers, functions, responsibilities or duties attached to the position
held by the Executive immediately prior to the Change in Control, which
situation is not remedied within 10 calendar days after written notice
to the Company from the Executive of such determination. For the
avoidance of doubt, but without limiting the generality of the
foregoing, if the Company or its successor following a Change in
Control ceases to be an independent, publicly held, New York Stock
Exchange-listed company, the Executive may in good faith determine that
such circumstance, in and of itself, constitutes a substantial
reduction in his authorities, powers, functions, responsibilities or
duties;
(iv) The liquidation, dissolution, merger, consolidation or
reorganization of the Company or transfer of all or substantially all
of its business and/or assets, unless the successor or successors (by
liquidation, merger, consolidation, reorganization, transfer or
otherwise) to which all or substantially all of its business and/or
assets have been transferred (directly or by operation of law) assumed
all duties and obligations of the Company under this Agreement pursuant
to Section 10(a);
(v) The Company relocates its principal executive offices,
or requires the Executive to have his principal location of work
changed, to any location which is in excess
4
of 25 miles from the location thereof immediately prior to the Change
in Control, or requires the Executive to travel away from his office in
the course of discharging his responsibilities or duties hereunder at
least 20% more (in terms of aggregate days in any calendar year or in
any calendar quarter when annualized for purposes of comparison to any
prior year) than was required of Executive in any of the three full
years immediately prior to the Change in Control without, in either
case, his prior written consent; or
(vi) Without limiting the generality or effect of the
foregoing, any material breach of this Agreement by the Company or any
successor thereto.
(c) A termination by the Company pursuant to Section 3(a) or
by the Executive pursuant to Section 3(b) will not affect any rights which the
Executive may have pursuant to any agreement, policy, plan, program or
arrangement of the Company providing Employee Benefits, which rights shall be
governed by the terms thereof. The Company and the Executive are parties to a
Severance Agreement, dated as of November 15, 1999 (as such agreement may be
amended from time to time, the "Severance Agreement"). Notwithstanding anything
contained in this Agreement to the contrary, in the event the Executive's
employment with the Company is terminated under circumstances in which the
Executive would otherwise be entitled to receive payments and benefits under
both this Agreement and the Severance Agreement, the Executive shall have the
right to elect to receive payments and benefits under either this Agreement or
the Severance Agreement, but not both (except that the Executive may in all
events receive all payments and benefits to which he or she is entitled under
the Severance Agreement during the period between the Termination Date and the
Election Date (as such terms are defined below)). Within five business days
following the date of the termination of the Executive's employment with the
Company under the circumstances described in the preceding sentence (the
"Termination Date"), which shall be the effective date of such termination if
the termination is pursuant to Section 3(a) or such other date that may be
specified by the Executive if the termination is pursuant to Section 3(b), the
Company shall provide the Executive, in writing, a reasonably detailed
determination of the payments and other benefits under each of this Agreement
and the Severance Agreement. Executive shall make the election provided for in
this Section 3(c) by providing the Company written notice thereof within 30 days
after the Executive's receipt of the written determination referred to in the
preceding sentence; provided, however, that if such election is not so made
within such 30-day period, the Executive shall be irrevocably deemed to have
elected to receive payments and benefits under this Agreement (the date on which
such election is so made or deemed to have been made being the "Election Date").
4. SEVERANCE COMPENSATION AND BENEFITS: (a) If, following the
occurrence of a Change in Control, the Company terminates the Executive's
employment during the Severance Period pursuant to Section 3(a) (other than as a
result of the Executive's death), or if the Executive terminates his employment
during the Severance Period pursuant to Section 3(b), the Company will:
(i) pay to the Executive, within five business days after
the Termination Date (or, in the event that the circumstance described
in Section 3(c) hereof is applicable, within five business days after
the Election Date), a lump sum payment (the "Severance Payment") in an
amount equal to four times the sum of (A) Base Pay (the aggregate
amount and the components of which shall be determined based on the
highest rate in effect for any period prior to the Termination Date),
plus (B) Incentive Pay in an amount
5
equal to the higher of (i) the highest annual amount of Incentive Pay
paid to or earned by the Executive with respect to any fiscal year
during the three fiscal years immediately preceding the fiscal year in
which the Termination Date occurs, and (ii) 100% of the Incentive Pay
amount payable upon the attainment of 100% of the objective(s) and 100%
of the targeted or planned amount(s) specified in or pursuant to the
applicable agreement, policy, plan, program or arrangement, whether or
not attained as of such Termination Date, for such Executive for the
fiscal year in which the Termination Date occurs; provided however,
that the Severance Payment shall be reduced by the aggregate amount of
all cash payments, if any, previously received by the Executive
pursuant to the Severance Agreement prior to the Election Date.
(ii) (A) for 48 months following the Termination Date (the
"Continuation Period"), arrange at its sole expense, to provide the
Executive with Employee Benefits that are substantially similar to the
better of (when considered in the aggregate) (X) those Employee
Benefits which the Executive was receiving or entitled to receive
immediately prior to the Change in Control, or (Y) those Employee
Benefits which the Executive was receiving or entitled to receive
immediately prior to the Termination Date, and (B) such Continuation
Period will be considered service with the Company for the purpose of
determining service credits under or in respect of any Employee
Benefits applicable to the Executive, his dependents or his
beneficiaries; provided that for purposes of this Section 4(a)(ii),
Employee Benefits shall not include any Incentive Pay and nothing in
this Section 4(a) shall be construed to require the Company to make any
new grants of stock options to the Executive. If and to the extent that
any Employee Benefit described in subsection (A) or (B) of this Section
4(a)(ii) cannot be paid or provided under any applicable law or
regulation or under the terms of any policy, plan, program or
arrangement of the Company, then the Company will take all action
necessary to ensure that such Employee Benefit is provided through
other means to the Executive, his dependents and beneficiaries, as
applicable, or the Company shall timely pay to the Executive a lump sum
amount in cash equal to the fair market value of such foregone Employee
Benefit. Notwithstanding the immediately preceding sentence, the
Company shall make any payment that may be necessary to ensure that the
Executive's after tax position with respect to any Employee Benefits
received pursuant to this Section 4(a)(ii) is not worse than the
Executive's after-tax position in the event such Employee Benefits had
been provided to the Executive while he was employed by the Company.
(iii) for the life of the Executive and his or her spouse,
to (A) arrange to provide (A) the Executive and his or her spouse with
retiree health benefits substantially identical to the "Benefits" that
would have been provided to the Executive and his or her spouse under
the Company's Employee Health Benefit Plan, as amended as of December
31, 1999 (the "Health Plan"), if the Executive had met the requirements
of Section 4.01(b)(iii) of the Health Plan as of the "Retiree Record
Date", and (B) the Executive with the right and opportunity to elect to
receive health benefits for his or her eligible dependents
substantially identical to the "Benefits" offered under Section
4.01(b)(iv) of the Health Plan. The terms "Benefits" and "Retiree
Record Date" shall have the respective meanings ascribed to such terms
in the Health Plan.
(b) Without limiting the rights of the Executive at law or in
equity, if the Company fails to make any payment or provide any benefit required
to be made or provided
6
hereunder on a timely basis, the Company will pay interest on the amount or
value thereof at an annualized rate of interest equal to the so-called composite
"prime rate" as quoted from time to time during the relevant period in the
Southwest Edition of THE WALL STREET JOURNAL. Such interest will be payable as
it accrues on demand. Any change in such prime rate will be effective on and as
of the date of such change.
(c) Notwithstanding any other provision of this Agreement to
the contrary, the parties' respective rights and obligations under this Section
4 and under Sections 5 and 7 will survive any termination or expiration of this
Agreement or the termination of the Executive's employment following a Change in
Control for any reason whatsoever.
5. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY: (a) Anything in this
Agreement to the contrary notwithstanding, in the event that this Agreement
shall become operative and it shall be determined (as hereafter provided) that
all or any portion of any payment or distribution by the Company or any of its
affiliates to or for the benefit of the Executive pursuant to the terms of this
Agreement or otherwise, including under any stock option or other agreement,
plan, policy, program or arrangement (a "Payment"), would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code") (or any successor provision thereto), by reason of being
considered "contingent on a change in ownership or control" of the Company,
within the meaning of Section 280G of the Code (or any successor provision
thereto), or to any similar tax imposed by state or local law, or any interest
or penalties with respect to such tax (such tax or taxes, together with any such
interest and penalties, being hereafter collectively referred to as the "Excise
Tax"), then the Executive shall be entitled to receive an additional payment or
payments (collectively, a "Gross-Up Payment"); provided, however, that no
Gross-Up Payment shall be made with respect to the Excise Tax, if any,
attributable to (i) any incentive stock option, as defined by Section 422 of the
Code ("ISO") granted prior to the execution of this Agreement, or (ii) any stock
appreciation or similar right, whether or not limited, granted in tandem with an
ISO described in clause (i). The Gross-Up Payment shall be in an amount such
that, after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including any Excise Tax imposed
upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payment.
(b) Subject to the provisions of Section 5(f), all
determinations required to be made under this Section 5, including whether an
Excise Tax is payable by the Executive and the amount of such Excise Tax and
whether a Gross-Up Payment is required to be paid by the Company to the
Executive and the amount of such Gross-Up Payment, if any, shall be made by a
nationally recognized accounting firm (the "Accounting Firm") selected by the
Executive in his sole discretion. The Executive shall direct the Accounting Firm
to submit its determination and detailed supporting calculations to both the
Company and the Executive within 30 calendar days after the Termination Date, if
applicable, and any such other time or times as may be requested by the Company
or the Executive. If the Accounting Firm determines that any Excise Tax is
payable by the Executive, the Company shall pay the required Gross-Up Payment to
the Executive within five business days after receipt of such determination and
calculations with respect to any Gross-Up Payment to the Executive. If the
Accounting Firm determines that no Excise Tax is payable by the Executive, it
shall, at the same time as it makes such determination, furnish the Company and
the Executive a written opinion to the effect that the Executive has substantial
authority not to report any Excise Tax on his federal, state or local income or
other tax return. As a result of the uncertainty in the application of Section
4999 of the Code (or any successor provision thereto) and
7
the possibility of similar uncertainty regarding applicable state or local tax
law at the time of any determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made (an "Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts or fails
to pursue its remedies pursuant to Section 5(f) and the Executive thereafter is
required to make a payment of any Excise Tax, the Executive shall direct the
Accounting Firm to determine the amount of the Underpayment that has occurred
and to submit its determination and detailed supporting calculations to both the
Company and the Executive as promptly as possible. Any such Underpayment shall
be promptly paid by the Company to, or for the benefit of, the Executive within
five business days after receipt of such determination and calculations.
(c) The Company and the Executive shall each provide the
Accounting Firm access to and copies of any books, records and documents in the
possession of the Company or the Executive, as the case may be, reasonably
requested by the Accounting Firm, and otherwise cooperate with the Accounting
Firm in connection with the preparation and issuance of the determinations and
calculations contemplated by this Section 5. Any determination by the Accounting
Firm as to the amount of any Gross-Up Payment or Underpayment shall be binding
upon the Company and the Executive.
(d) The federal, state and local income or other tax returns
filed by the Executive shall be prepared and filed on a consistent basis with
the determination of the Accounting Firm with respect to the Excise Tax payable
by the Executive. The Executive shall make proper payment of the amount of any
Excise Tax, and at the request of the Company, provide to the Company true and
correct copies (with any amendments) of his federal income tax return as filed
with the Internal Revenue Service and corresponding state and local tax returns,
if relevant, as filed with the applicable taxing authority, and such other
documents reasonably requested by the Company, evidencing such payment. If prior
to the filing of the Executive's federal income tax return, or corresponding
state or local tax return, if relevant, the Accounting Firm determines that the
amount of the Gross-Up Payment should be reduced, the Executive shall within
five business days pay to the Company the amount of such reduction.
(e) The fees and expenses of the Accounting Firm for its
services in connection with the determinations and calculations contemplated by
this Section 5 shall be borne by the Company. If such fees and expenses are
initially paid by the Executive, the Company shall reimburse the Executive the
full amount of such fees and expenses within five business days after receipt
from the Executive of a statement therefor and reasonable evidence of his
payment thereof.
(f) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service or any other taxing authority that, if
successful, would require the payment by the Company of a Gross-Up Payment. Such
notification shall be given as promptly as practicable but no later than 10
business days after the Executive actually receives notice of such claim and the
Executive shall further apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid (in each case, to the extent
known by the Executive). The Executive shall not pay such claim prior to the
earlier of (i) the expiration of the 30-calendar-day period following the date
on which he gives such notice to the Company and (ii) the date that any payment
of amount with respect to such claim is due. If the Company notifies the
Executive in writing prior to the expiration of such period that it desires to
contest such claim, the Executive, subject to the provisions of Section 5(h) of
this Agreement, shall:
8
(i) provide the Company with any written records or
documents in his possession relating to such claim reasonably requested
by the Company;
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from time to
time, including without limitation accepting legal representation with
respect to such claim by an attorney competent in respect of the
subject matter and reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order
effectively to contest such claim; and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including interest and penalties) incurred in connection with such
contest and shall indemnify and hold harmless the Executive, on an after-tax
basis, for and against any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limiting the foregoing provisions of this
Section 5(f), the Company shall control all proceedings taken in connection with
the contest of any claim contemplated by this Section 5(f) and, at its sole
option, may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim
(provided, however, that the Executive may participate therein at his own cost
and expense) and may, at its option, either direct the Executive to pay the tax
claimed and xxx for a refund or contest the claim in any permissible manner, and
the Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if the
Company directs the Executive to pay the tax claimed and xxx for a refund, the
Company shall advance the amount of such payment to the Executive on an
interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income or other tax, including interest
or penalties with respect thereto, imposed with respect to such advance; and
provided further, however, that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Executive with respect
to which the contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of any such contested claim
shall be limited to issues with respect to which a Gross-Up Payment would be
payable hereunder and the Executive shall be entitled to settle or contest, as
the case may be, any other issue raised by the Internal Revenue Service or any
other taxing authority.
(g) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 5(f), the Executive receives any
refund with respect to such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 5(f)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
any taxes applicable thereto). If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 5(f), a determination is made
that the Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify the Executive in writing of its intent to
contest such denial or refund prior to the expiration of 30 calendar days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the
9
amount of any such advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid by the Company to the Executive pursuant to
this Section 5.
(h) Any information provided by Executive to the Company under
this Section 5 shall be treated confidentially by the Company and will not be
provided by the Company to any other person than the Company's professional
advisors without Executive's prior written consent except as required by law.
6. NO MITIGATION OBLIGATION: The Company hereby acknowledges that it
will be difficult and may be impossible for the Executive to find reasonably
comparable employment within a reasonable time period following the Termination
Date. In addition, the Company acknowledges that its severance pay plans and
policies applicable in general to its salaried employees typically do not
provide for mitigation, offset or reduction of any severance payments received
thereunder. Accordingly, the payment of the severance compensation by the
Company to the Executive in accordance with the terms of this Agreement is
hereby acknowledged by the Company to be reasonable, and the Executive will not
be required to mitigate the amount of any payment provided for in this Agreement
by seeking other employment or otherwise, nor will any profits, income, earnings
or other benefits from any source whatsoever create any mitigation, offset,
reduction or any other obligation on the part of the Executive hereunder or
otherwise.
7. LEGAL FEES AND EXPENSES: It is the intent of the Company that the
Executive not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement or defense of Executive's rights
under this Agreement by litigation or otherwise because the cost and expense
thereof would substantially detract from the benefits intended to be extended to
the Executive hereunder. Accordingly, if it should appear to the Executive that
the Company has failed to comply with any of its obligations under this
Agreement or in the event that the Company or any other person takes or
threatens to take any action to declare this Agreement void or unenforceable, or
institutes any litigation or other action or proceeding designed to deny, or to
recover from, the Executive the benefits provided or intended to be provided to
the Executive hereunder, the Company irrevocably authorizes the Executive from
time to time to retain counsel of Executive's choice, at the expense of the
Company as hereafter provided, to advise and represent the Executive in
connection with any such interpretation, enforcement or defense, including
without limitation the initiation or defense of any litigation or other legal
action, whether by or against the Company or any Director, officer, stockholder
or other person affiliated with the Company, in any jurisdiction.
Notwithstanding any existing or prior attorney-client relationship between the
Company and such counsel, the Company irrevocably consents to the Executive's
entering into an attorney-client relationship with such counsel and irrevocably
waives any related conflict of interest on the part of such counsel, and in that
connection the Company and the Executive agree that a confidential relationship
shall exist between the Executive and such counsel. Without respect to whether
the Executive prevails, in whole or in part, in connection with any of the
foregoing, the Company will pay and be solely financially responsible for any
and all attorneys' and related fees and expenses incurred by the Executive in
connection with any of the foregoing.
8. EMPLOYMENT RIGHTS: Nothing expressed or implied in this Agreement
will create any right or duty on the part of the Company or the Executive to
have the Executive remain in the employment of the Company or any Subsidiary
prior to or following any Change in Control. Any event or occurrence described
in Section 3(b)(i), (ii), (v) or (vi) hereof following the
10
commencement of a discussion with a third person that ultimately results in a
Change in Control shall be deemed to have occurred after a Change in Control for
the purposes of this Agreement.
9. WITHHOLDING OF TAXES: The Company may withhold from any amounts
payable under this Agreement all federal, state, city or other taxes as the
Company is required to withhold pursuant to any law or government regulation or
ruling.
10. SUCCESSORS AND BINDING AGREEMENT: (a) The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation,
reorganization or otherwise) to all or substantially all of the business or
assets of the Company, by agreement in form and substance satisfactory to the
Executive, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent the Company would be required to perform if no
such succession had taken place. This Agreement will be binding upon and inure
to the benefit of the Company and any successor to the Company, including
without limitation any persons acquiring directly or indirectly all or
substantially all of the business or assets of the Company whether by purchase,
merger, consolidation, reorganization or otherwise (and such successor shall
thereafter be deemed the "Company" for the purposes of this Agreement), but will
not otherwise be assignable, transferable or delegable by the Company.
(b) This Agreement will inure to the benefit of and be
enforceable by the Executive and the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees and
legatees.
(c) This Agreement is personal in nature and neither of the
parties hereto shall, without the consent of the other, assign, transfer or
delegate this Agreement or any rights or obligations hereunder except as
expressly provided in Sections 10(a) and 10(b). Without limiting the generality
or effect of the foregoing, the Executive's right to receive payments hereunder
will not be assignable, transferable or delegable, whether by pledge, creation
of a security interest, or otherwise, other than by a transfer by Executive's
will or by the laws of descent and distribution and, in the event of any
attempted assignment or transfer contrary to this Section 10(c), the Company
shall have no liability to pay any amount so attempted to be assigned,
transferred or delegated.
11. NOTICES: For all purposes of this Agreement (except as otherwise
expressly provided in this Agreement with respect to notice periods), all
communications, including without limitation notices, consents, requests or
approvals, required or permitted to be given hereunder will be in writing and
will be deemed to have been duly given when hand delivered or dispatched by
electronic facsimile transmission (with receipt thereof orally confirmed), or
ten business days after having been mailed by United States registered or
certified mail, return receipt requested, postage prepaid, or five business days
after having been sent by a nationally recognized overnight courier service such
as Federal Express, UPS, or Purolator, addressed to the Company at 000 Xxxxxxxx
Xxxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000 (to the attention of the President of the
Company) and to the Executive at the Company's address, with a copy to the
Executive at his or her principal residence, or to such other address as any
party may have furnished to the other in writing and in accordance herewith,
except that notices of changes of address shall be effective only upon receipt.
12. GOVERNING LAW: The validity, interpretation, construction and
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the State of Delaware, without giving effect to the
principles of conflict of laws of such State.
11
13. VALIDITY: If any provision of this Agreement or the application of
any provision hereof to any person or circumstances is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and the
application of such provision to any other person or circumstances will not be
affected, and the provision so held to be invalid, unenforceable or otherwise
illegal will be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid or legal.
14. MISCELLANEOUS: No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing 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 such other party
will be deemed a waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. No agreements or representations, oral
or otherwise, expressed or implied with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement. References to Sections are to references to Sections of this
Agreement.
15. COUNTERPARTS: This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same agreement.
16. TERMINATION OF PRIOR AGREEMENTS. The Change in Control Severance
Agreement between the Executive and the Company, dated October 22, 1999, as
amended to the date hereof (the "Prior Agreement"), shall terminate
automatically upon the execution and delivery of this Agreement by the parties
hereto and shall thereafter be of no further force or effect; provided, however,
that if this Agreement is held by a court of competent jurisdiction to be wholly
invalid, unenforceable or otherwise illegal, the preceding clause shall have no
effect and the Prior Agreement shall be deemed to have continued at all times in
full force and effect. Subject to the immediately preceding proviso, this
Agreement supersedes all prior agreements, arrangements and understandings with
respect to the subject matter hereof.
[Remainder of page intentionally left blank -- signature page follows.]
12
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
STERLING SOFTWARE, INC.
By: /s/ Xxxxxxxx X. Xxxxxxxx
----------------------------------
Xxxxxxxx X. Xxxxxxxx
President &
Chief Executive Officer
/s/ Xxx X. XxXxxxxxx, Xx.
-------------------------------------
Xxx X. XxXxxxxxx, Xx.
