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EXHIBIT 10.16
TRANSITION AGREEMENT
THIS AGREEMENT (the "Agreement"), made as of the 9th day of July, 2000,
by and between JDS Uniphase Corporation, a Delaware corporation (the "Company"),
with its principal U.S. offices located at San Jose, California, and Donald R.
Scifres (the Executive").
WITNESSETH THAT
WHEREAS, the Company and SDL, Inc., a Delaware corporation ("SDL"), are
parties to an Agreement and Plan of Merger (the "Merger Agreement") pursuant to
which, at the Effective Time, Merger Sub (as such terms are defined in the
Merger Agreement) shall be merged with and into SDL and the separate existence
of Merger Sub shall thereupon cease, and SDL shall continue as the surviving
corporation as a wholly-owned subsidiary of the Company (the "Merger"),
WHEREAS, in connection with and as a condition of its willingness to
consummate the Merger, the Company desires to retain the Executive as the
Co-Chairman of the Board of Directors of the Company, and President of the
Actives Group reporting to the Chief Executive Officer of the Company, on the
terms hereinafter set forth, and to induce the Executive to enter into a
covenant against competition and certain other restrictive covenants intended to
protect the goodwill of SDL and the Company;
WHEREAS, the Executive has a significant financial interest in the
Merger, will be converting all of his shares in SDL (options to acquire shares
of SDL) into Company shares and options pursuant to the Merger and wishes to be
employed by SDL in such capacity on the terms hereinafter set forth, and
WHEREAS, the Company would not have entered into the Merger Agreement or
agreed to issue shares of the Company (or options for shares of the Company) for
the Executive's SDL shares and options if the Executive had not executed this
Agreement (and, in particular, the noncompete and nonsolicitation agreement
incorporated herein);
WHEREAS, the Executive is a party to an Employment Agreement dated July
17, 1992, as subsequently amended on February 19, 1993 and again on July 29,
1994, and a Change of Control Agreement dated February 10, 2000 (collectively,
the "Executive Agreements").
NOW, THEREFORE, in consideration of the mutual covenants and promises
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Executive
hereby agree as follows:
1. Assumption of Agreements. Except as noted below and as amended
hereby, the Executive Agreements shall be assumed by the Company. All references
to SDL, Inc. or the Company in the Executive Agreements shall become "Company"
as referenced in this Agreement.
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2. Modification of Change of Control Agreement.
(a) The definition of "Good Reason" of clause (i) of Section 2(i) in
the Change of Control Agreement dated February 10, 2000 (the "Change of Control
Agreement"), shall be amended by removing the words "a material and", inserting
the word "an" and by the addition of the following at the end thereof:
provided, however, that the changes in the Executive's status, title,
positions, responsibilities, duties and offices which occur immediately
after the Change of Control effected by the Company shall not constitute
Good Reason, and provided further, that no payment will be due Executive
under this Agreement or the Employment Agreement solely as a result of
the Merger as defined in the Transition Agreement between the Executive
and JDS Uniphase Corporation, dated July 9, 2000 (the "Transition
Agreement")
(b) The "Good Reason" definition in the Change of Control Agreement
is further amended by the addition of the following at the end thereof:
(vii) failure to be appointed or reappointed, or his removal as, a
member of the board of directors of SDL or the failure to be elected or
re-elected, or his removal as, a member of the board of directors of the
Company,
(viii) material breach by the Company of the Transition Agreement,
(ix) a Change of Control of JDS Uniphase Corporation or of SDL following
the Merger, and
(x) a change in Executive's reporting structure
3. Noncompete and Nonsolicitation Agreement. Executive will enter into a
noncompete and nonsolicitation agreement with the Company. This noncompete and
nonsolicitation agreement is attached as Appendix A of this Agreement, and is
incorporated herein by reference.
4. Period of Employment. Section 1 of Executive's Employment Agreement
is amended and restated in its entirety to read as follows
The Company hereby employs Scifres as the Co-Chairman of the Board of
Directors of the Company and President of the Actives Group, which
position will result in Scifres being an "Executive Officer" of the
Company for purposes of Section 16 of the Securities Exchange Act of
1934, as amended, with the duties and responsibilities described in
Section 2, for the compensation specified in Section 2, for the
compensation specified in Sections 3 and 4 and for the period commencing
at the Effective Time (as defined in the Agreement; and Plan of Merger
between JDS Uniphase Corporation and SDL) and ending on termination as
provided in Section 5. Scifres hereby accepts employment by the Company
in such capacity, upon the terms and conditions set forth in this
Agreement.
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5. Position and Duties. Section 2 of Executive's Employment Agreement is
amended and restated in its entirety to read as follows:
Scifres accepts employment with the Company and shall, during the term
of this Agreement, have overall responsibility for the management and
operations of the Actives Group, including responsibility for decisions
regarding compensation and benefits matters at the Actives Group, as
Co-Chairman of the Board of Directors of the Company and President of
the Actives Group. Scifres shall report to Jozef Straus, Chief Executive
Officer and shall have duties and responsibilities that are commensurate
with his title and reporting structure. Scifres shall, during the term
of this Agreement, devote his best effort and entire working time,
attention and skill exclusively to the business and affairs of SDL and
the Actives Group, provided that Scifres's participation on board of
directors of other companies and other activities Scifres currently
participates in as identified in Exhibit 1 hereto, as amended with the
consent of the Company, shall not be deemed a violation of this
provision unless such activities materially interfere with Scifres's
duties hereunder. The location of employment, headquarters and travel
responsibilities will be consistent with 2(i)(iii) of the Change of
Control Agreement with the Company, dated February 10, 2000 (the "Change
of Control Agreement"), regardless of whether such Change of Control
Agreement is then in effect.
6. Compensation. Section 3 of Executive's Employment Agreement is
amended and restated in its entirety to read as follows:
"For all services rendered by Scifres to the Company and for all
obligations assumed by him pursuant to this Agreement, the Company
shall, subject to Scifres's performance of such obligations, pay to
Scifres the compensation set forth in this Section 3 and provide the
other benefits set forth in this Agreement
(a) Salary. Scifres shall receive a base salary on a per annum basis
("Base Salary") equal to Three Hundred Thousand Dollars ($300,000) commencing as
of the Effective Time. The foregoing Base Salary shall be subject to annual
increases on July 1 of each year during the term of this Agreement, commencing
July 1, 2001, as determined by the Company in its sole discretion.
(b) Bonuses. Scifres shall be eligible to receive a bonus each year
equal to an amount of up to one hundred and twenty percent (120%) of his Base
Salary, which bonus shall be paid to Scifres on an annual basis upon his
reaching the performance goals mutually established from time to time hereafter
by Scifres and the Company. Under the plan to be established, the target bonus
each year will be 60% of Scifres' Base Salary (the "Target Bonus"), with an
opportunity to earn from 0% to 200% of the Target Bonus based on actual
performance compared to the annual goals to be established for the plan.
(c) Stock Options. Within 10 days of the Effective Time, Scifres
shall be granted 200,000 nonqualified Company stock options (the "Initial
Options"). Such Initial
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Options will be subject to the terms of a stock option agreement which will
provide for an option term of no more than 10 years, vesting 50% after one (1)
year and 100% after two (2) years and an exercise price equal to the fair market
value of Company common stock an the date of grant. If the employment of Scifres
is terminated without Cause or terminates for Good Reason (as such terms are
defined in Scifres's Change of Control Agreement, as amended by the Transition
Agreement, made as of July 9, 2000, between Scifres and JDS Uniphase Corporation
(the "Transition Agreement"), regardless of whether such Change of Control
Agreement is then in effect), then such Initial Options shall become immediately
vested and exercisable. If Scifres's employment terminates for any reason, all
vested Initial Options shall remain exercisable for the remainder of their
10-year term.
Scifres will also be eligible for annual grants of stock options,
consistent with SDL past practices, or if more favorable, with grants made to
other similarly situated executives of the Company.
(d) Outstanding Stock Options. Notwithstanding anything to the
contrary, in the event that Scifres's employment with the Company is terminated
without Cause or for Good Reason (as such terms are defined in the Change of
Control Agreement, as amended by the Transition Agreement, regardless of whether
such Change of Control Agreement is then in effect), or in the event of
Scifres's death, disability or retirement at or after age 55, all unvested stock
options granted to Scifres before the Effective Time (the "Prior Options") shall
become immediately vested and exercisable and, together with all vested stock
options granted before the Effective Time, may be exercised for the balance of
the full remaining life of the options (i.e., full 10-year term).
(e) For purposes of clarification, if Executive's employment
Terminates for Cause or without Good Reason, then all vested Initial Options and
all vested Prior Options shall remain exercisable for the remainder of their
10-year term, however unvested options shall not accelerate and shall be
forfeited.
7. Employee Benefits. The first sentence of Section 4(a) Executive's
Employment Agreement is amended and restated in its entirety to read as follows:
The Company shall provide Scifres with health, disability, life
insurance and other welfare benefits, vacation, stock purchase and 401
(k) plans which are no less favorable than those provided to Scifres at
the Effective Time, or if more favorable, under employee benefit plans
provided to similarly situated executives of the Company of similar rank
and responsibility.
8. Additional Cash Payments.
(a) Within 10 days of the Effective Time and in consideration for
Executive accepting the terms of the attached Noncompetition and Nonsolicitation
Agreement and the amendments to the Executive Agreements, the Executive shall
receive a cash payment of $75 Million.
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(b) Notwithstanding anything in the Executive Agreements to the
contrary, in the event that any of the payments or benefits provided under this
Agreement or the Executive Agreements result in Executive being subject to the
golden parachute excise tax imposed by Section 4999 of the Internal Revenue
Code, the Company shall make such additional payment as will make executive
whole for such tax obligation, as set forth in Appendix B, which is incorporated
herein by reference.
9. Current Board Participation and Other Activities. Executive's
Employment Agreement is amended by the addition of Exhibit 1 at the end thereof.
10. Board of Directors. Section 4(c) of Executive's Employment Agreement
shall be amended to refer to the Board of the Company and the Board of SDL.
Executive acknowledges and agrees that the Voting Agreement referenced
in his July 17, 1992 Employment Agreement at Section 4(c) is no longer in force
and effect.
11. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and any affiliate thereof, their perspective
successors, permitted assigns and legal representatives.
12. Construction/Interpretation. The Executive acknowledges that the
Executive has been advised by the Company to review the terms of this Agreement
with legal counsel of the Executive's choice and that the Executive has been
given reasonable opportunity to seek such legal advice. The parties hereto
acknowledge and agree that: (i) each party and their counsel have (or had the
opportunity to) reviewed and negotiated the terms and provisions of this
Agreement and have contributed to its revision; (ii) the rule of construction to
the effect that any ambiguities are resolved against the drafting party shall
not be employed in the interpretation of this Agreement, and (iii) the terms and
provisions of this Agreement shall be construed fairly as to all parties hereto
and not in favor of or against any party, regardless of which party was
generally responsible for the preparation of this Agreement.
13. Disputes/Reimbursement of Expenses. If any contest or dispute shall
arise under this Agreement, the Employment Agreement or the Change of Control
Agreement, not withstanding any provisions thereof to the contrary, involving
termination of Executive's employment with the Company or involving the failure
or refusal of the Company to perform fully in accordance with the terms hereof,
the Company shall reimburse Executive, on a current basis, for all reasonable
legal fees and expenses, if any, incurred by Executive in connection with such
contest or dispute (regardless of the result thereof), together with interest in
an amount equal to the prime rate of Citibank N.A. from time to time in effect,
but in no event higher than the maximum legal rate permissible under applicable
law, such interest to accrue from the date the Company receives Executive's
statement for such fees and expenses through the date of payment thereof,
regardless of whether or not Executive's claim is upheld by a court of competent
jurisdiction, provided, however, Executive shall be required to repay any such
amounts to the Company to the extent that a court issues a final and
non-appealable order setting
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forth the determination that the position taken by Executive was frivolous or
advanced by Executive in bad faith.
In addition, the Company shall reimburse the Executive for legal and
consulting fees and expenses arising in connection with entering into this
Agreement.
14. Governing Law. This Agreement and the rights and obligations of the
parties hereunder shall be governed by and construed and enforced with the laws
of the State of California without giving effect to the conflict of laws
principle thereof.
15. Severability. If any term or provision of this Agreement, or the
application thereof to any person or circumstance, shall, for any reason and to
any extent, be declared invalid or unenforceable by a court of competent
jurisdiction, the remainder of this Agreement and the application of such
provisions to other persons or circumstances shall not be affected thereby, but
rather shall be enforced to the fullest extent permitted by law.
16. Amendments to Agreement. No amendment or alteration of the terms of
this Agreement shall be valid or binding unless made in writing signed by
parties to this Agreement specifically referring to this Agreement.
17. Voiding Agreement. This Agreement will be null and void and given no
effect if the Merger contemplated by the Merger Agreement is not consummated.
18. Integration. The parties understand and agrees that this Agreement,
along with the Executive Agreements, represent the entire agreement between the
parties; that no representation or promise has been made by the Company
concerning the subject matter of those agreements, except as expressly set forth
in those agreements, and that all agreements and understandings between the
parties concerning the subject matter of those agreements are embodied and
expressed in those agreements. This Agreement and the Executive Agreements shall
supercede all prior or contemporaneous agreements and understandings between
Executive and the Company, whether written or oral, expressed or implied, with
respect to the subject matter of those agreements.
IN WITNESS WHEREOF, the parties have executed this Agreement, under
seal, as of the date first above written
EXECUTIVE: JDS UNIPHASE CORPORATION
By /s/ DONALD R. SCIFRES By /s/ MICHAEL PHILLIPS
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Donald R. Scifres Senior Vice President
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APPENDIX A
NONCOMPETITION AND NONSOLICITATION AGREEMENT
A. Non-Competition.
(a) During the Executive's employment by, or relationship with, the
Company and for a period of one (1) year following the Effective Time of the
Merger, the Executive will not directly or indirectly, either as principal,
agent, employee, consultant, officer, director, or stockholder of the Company,
engage in any business which is competitive with the photonics or optics
networking businesses of SDL or the Company (collectively, the "Business"),
provided, however, that nothing contained herein shall preclude the Executive
from purchasing or owning less than five percent (5%) of the stock or other
securities of (1) any company with securities Traded on a nationally recognized
securities exchange or (ii) any venture capital fund passive interest,
(b) For the purposes of this Section A, a business will be deemed
competitive with the Business if it involves the performing of services and/or
the production, manufacture, distribution, sale or development of any product
similar to services performed or products produced, manufactured, distributed,
sold or developed or being developed by the Business and/or the licensing of any
process or technology concerning production similar to those utilized, developed
or being developed by the Business during the period in which the Executive is
employed or otherwise affiliated with the Company.
(c) The Executive acknowledges that the Business has been and will be
conducted on a global basis by SDL and the Company, and that, accordingly, time
restrictions contained in this Section A shall apply in (i) any city, county or
other political subdivision of the State of California (including, without
limitation, the counties listed on Exhibit II hereto), and (ii) any city, county
or other political subdivision of any other state in the United States or any
country or other territory in the world, where the Company is selling or
delivering any of the Business' products or services or is otherwise carrying on
business or selling activities with respect to the Business or (y) has engaged
in any of the activities described in clause (x) within the most recent 12-month
period.
(d) The Executive acknowledges and agrees that strict enforcement of
the terms of this Agreement is necessary for the purpose of ensuring the
preservation, protection and continuity of the business, trade secrets and
goodwill of the Company and that, in furtherance of such purpose, the
prohibition against competition imposed by this Section A is narrow, reasonable
and fair. The Executive further agrees that, given the Executive's experience,
knowledge and skills, substantial opportunities for employment outside of the
areas restricted by this Agreement are and will remain available to the
Executive. If any part of this Section A should be determined by a court of
competent jurisdiction to be unreasonable in duration, geographic area, or
scope, then this Agreement is intended to and shall extend only for such period
of time, in such area and with respect to such activities as are determined to
be reasonable.
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(e) Notwithstanding anything contained in this Section A to the contrary, the
Executive shall be permitted to serve as a director of, or an investor in, each
of the corporations set forth on Exhibit 1, which may be amended from time to
time by the mutual consent of the Executive and the Company.
A. Non-Solicitation
During the Executive's employment or relationship with the Company and
for a period of one (1) year following the Effective Time, the Executive will
not directly or indirectly, either as principal, agent, employee, consultant,
officer, director or stockholder, solicit any employee, consultant, independent
contractor or agent of the Business with the intention or effect of encouraging
such party to terminate his or her employment, agency or other relationship, as
applicable, with the Business.
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EXHIBIT 1
HomeFiber - approximately 10% interest
DMISI - approximately 10% interest
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EXHIBIT II
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CALIFORNIA COUNTIES
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Alameda Placer
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Alpine Plumas
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Amador Riverside
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Butt Sacramento
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Calaveras San Benito
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Colusa San Bernardino
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Contra Costa San Diego
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Del Norte San Francisco
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El Dorado San Joaquin
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Fresno San Luis Obispo
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Glenn San Mateo
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Humboldt Santa Barbara
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Imperial Santa Clara
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Inyo Santa Cruz
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Kern Shasta
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Kings Sierra
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Lake Siskiyou
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Lassen Solano
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Los Angeles Sonoma
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Madera Stanislaus
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Marin Sutter
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Mariposa Tehama
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Mendocino Trinity
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Merced Tulare
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Modoc Tuolumne
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Mono Ventura
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Monterey Yolo
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Napa Yuba
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Nevada
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Orange
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APPENDIX B
Certain Additional Payments by the Company
(a) Anything in this Agreement or the Executive Agreements to the contrary
notwithstanding, in the event it shall be determined that any payment,
award, benefit or distribution (or any acceleration of any payment,
award, benefit or distribution) by the Company (or any of its affiliated
entities) or any entity which effectuates a Change of Control (or any of
its affiliated entities) to or for the benefit of Executive (whether
pursuant to the terms of this Agreement or otherwise, but determined
without regard to any additional payments required under this Appendix
B) (the "Payments") would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), or any interest or penalties are incurred by Executive with
respect to such excise tax (such excise tax together with any such
interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Company shall pay to Executive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by
Executive of all taxes (including any Excise Tax) imposed upon the
Gross-Up Payment, Executive retains an amount of the Gross-Up Payment
equal to the sum of (x) the Excise Tax imposed upon the Payments and (y)
the product of any deductions disallowed because of the inclusion of the
Gross-up Payment in Executive's adjusted gross income and the highest
applicable marginal rate of federal income taxation for the calendar
year in which the Gross-up Payment is to be made. For purposes of
determining the amount of the Gross-up Payment, the Executive shall be
deemed to (i) pay federal income taxes at the highest marginal rates of
federal income taxation for the calendar year in which the Gross-up
Payment is to be made, (ii) pay applicable state and local income taxes
at the highest marginal rate of taxation for the calendar year in which
the Gross-up Payment is to be made, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such
state and local taxes and (iii) have otherwise allowable deductions for
federal income tax purposes at least equal to those which could be
disallowed because of the inclusion of the Gross-up Payment in the
Executive's adjusted gross income. Notwithstanding the foregoing
provisions of this Appendix B(a), if it shall be determined that
Executive is entitled to a Gross-Up Payment, but that the Payments would
not be subject to the Excise Tax if the Payments were reduced by an
amount that is less than 10% of the portion of the Payments that would
be treated as "parachute payments" under Section 280G of the Code, then
the amounts payable to Executive under this Agreement shall be reduced
(but not below zero) to the maximum amount that could be paid to
Executive without giving rise to the Excise Tax (the "Safe Harbor Cap"),
and no Gross-Up Payment shall be made to Executive. The reduction of the
amounts payable hereunder, if applicable, shall be made by reducing any
cash payments, unless an alternative method of reduction is elected by
Executive. For purposes of reducing the Payments to the Safe Harbor Cap,
only amounts payable under this Agreement (and no other Payments) shall
be reduced. If the reduction of the amounts
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payable hereunder would not result in a reduction of the Payments to the
Safe Harbor Cap, no amounts payable under this Agreement shall be
reduced pursuant to this provision.
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(b) Subject to the provisions of this Appendix B (a), all determinations
required to be made under this Appendix B, including whether and when a Gross-Up
Payment is required, the amount of such Gross-Up Payment, the reduction of the
Payments to the Safe Harbor Cap and the assumptions to be utilized in arriving
at such determinations, shall be made by the public accounting firm that is
retained by the Company as of the date immediately prior to the Change of
Control (the "Accounting firm") which shall provide detailed supporting
calculations both to the Company and Executive within fifteen (15) business days
of the receipt of notice from the Company or the Executive that there has been a
Payment, or such earlier time as is requested by the Company (collectively, the
"Determination"). In the event that the Accounting firm is serving as accountant
or auditor for the individual, entity or group effecting the Change of Control,
Executive may appoint another nationally recognized public accounting firm to
make the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company and the Company shall enter
into any agreement requested by the Accounting Firm in connection with the
performance of the services hereunder. The Gross-up Payment under this Appendix
B with respect to any Payments shall be made no later than thirty (30) days
following such Payment. If the Accounting Firm determines that no Excise Tax is
payable by Executive, it shall furnish Executive with a written opinion to such
effect, and to the effect that failure to report the Excise Tax, if any, on
Executive's applicable federal income tax return will not result in the
imposition of a negligence or similar penalty. In the event the Accounting Firm
determines that the Payments shall be reduced to the Safe Harbor Cap, it shall
furnish Executive with a written opinion to such effect. The Determination by
the Accounting Firm shall be binding upon the Company and Executive. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the Determination, it is possible that Gross-Up Payments which will not have
been made by the Company should have been made ("Underpayment") or Gross-up
Payments are made by the Company which should not have been made
("Overpayment"), consistent with the calculations required to be made hereunder.
In the event that the Executive thereafter is required to make payment of any
Excise Tax or additional, Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment (together
with interest, to the extent not already within the Excise Tax, at the rate
provided in Section 1274(b)(2)(B) of the Code) shall be promptly paid by the
Company to or for the benefit of Executive. In the event the amount of the
Gross-up Payment exceeds the amount necessary to reimburse the Executive for his
Excise Tax, the Accounting Firm shall determine the amount of the Overpayment
that has been made and any such Overpayment (together with interest at the rate
provided in Section 1274(b)(2) of the Code) shall be promptly paid by Executive
(to the extent he has received a refund if the applicable Excise Tax has been
paid to the Internal Revenue Service) to or for the benefit of the Company.
Executive shall cooperate, to the extent his expenses are reimbursed by the
Company, with any reasonable requests by the Company in connection with any
contests or disputes with the Internal Revenue Service in connection with the
Excise Tax.