UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
May 11, 2020
Date of Report
(Date of earliest event reported)
Cornerstone OnDemand, Inc.
(Exact name of registrant as specified in its charter)
Commission File Number 001-35098
Delaware |
13-4068197 |
|
(State or other jurisdiction of
|
(IRS Employer
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1601 Cloverfield Blvd.
Suite 620 South
Santa Monica, CA 90404
(Address of principal executive offices, including zip code)
(310) 752-0200
(Registrant’s telephone number, including area code)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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Common Stock, par value $0.0001 per share |
CSOD |
Nasdaq Stock Market LLC (Nasdaq Global Select Market) |
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
☐ | Emerging growth company |
☐ | If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. |
Item 2.02 | Results of Operations and Financial Condition. |
On May 11, 2020, Cornerstone OnDemand, Inc. (the “Company”) issued a press release reporting results for the fiscal quarter ended March 31, 2020. The press release is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.
The information set forth under this Item 2.02, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
The attached press release includes a discussion of certain non-GAAP financial measures as well as a reconciliation of such non-GAAP financial measures to the corresponding GAAP financial measures.
Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
Appointment of Phil Saunders as Chief Executive Officer and Director
On May 6, 2020, the Board of Directors of the Company (the “Board”) appointed Phil Saunders as the Chief Executive Officer (the “CEO”) of the Company, effective as of June 15, 2020 (the “Employment Start Date”), and as a member of the Board, effective as of July 1, 2020. In connection with Mr. Saunders’ appointment to the Board, the Board expanded its size to ten members and appointed Mr. Saunders to fill the newly created seat. Mr. Saunders will serve as a member of the Board until the Company’s 2021 annual meeting of stockholders.
Prior to his appointment as CEO and a member of the Board, Mr. Saunders most recently served as the Company’s interim Chief Operating Officer following the Company’s acquisition in April 2020 of Saba Software, Inc., where Mr. Saunders was Chief Executive Officer and a member of the board of directors. Prior to joining Saba in 2015, Mr. Saunders was Chief Revenue Officer and a member of the board of directors of Gemalto N.V. (previously SafeNet, Inc.).
There are no arrangements or understandings between Mr. Saunders and any other persons pursuant to which he was selected as the Company’s Chief Executive Officer and a member of the Board. There are also no family relationships between Mr. Saunders and any director or executive officer of the Company and he has no direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.
Saunders Employment Agreement
The Company entered into an employment agreement, dated May 1, 2020 (the “Saunders Employment Agreement”) with Mr. Saunders, which amends and restates in its entirety a prior employment agreement entered into between the Company and Mr. Saunders.
Employment. Mr. Saunders’ employment with the Company is “at-will” and may be terminated by the Company at any time with or without cause or with or without notice.
Salary and Bonus. Mr. Saunders will receive an annual base salary of $500,000, with a target annual performance bonus of 100% of his base salary. Subject to his continued employment as the CEO through the first annual anniversary of the Employment Start Date, Mr. Saunders is eligible to receive an additional bonus of $550,000 (less applicable tax withholdings), payable within 30 days following the anniversary date.
Equity Awards. Subject to the approval of the compensation committee of the Board (the “Compensation Committee”), Mr. Saunders will be granted the following restricted stock unit awards: (i) an award based on a target value of $2,000,000, with 40% of the award scheduled to vest on the first annual anniversary of the vesting commencement date and 20% of the award vesting annually thereafter, (ii) two awards based on a target value of $3,000,000 and $500,000, respectively, both subject to performance-based vesting with performance metrics to be determined by the Company and a vesting period not to exceed three years, with a minimum of $750,000 in target value becoming eligible to be earned within the first two years of the vesting period, and (iii) an award based on a value of $1,150,000, scheduled to vest on the first annual anniversary of the grant date, with the actual number of restricted stock units that vest equal to the number of shares of the Company’s common stock that Mr. Saunders purchases on the open market during the period between the award’s grant date and June 16, 2020 (the “Matching Shares”). All vesting is subject to Mr. Saunders’ continued employment (and, in the case of the grant referenced in (iii) above, subject to Mr. Saunders continuing to own the Matching Shares) with the Company on each scheduled vesting date.
Severance Benefits. The Company has entered into a Change of Control Severance Agreement with Mr. Saunders, as described below.
Indemnification. The Company has entered into its standard form of indemnification agreement with Mr. Saunders, a copy of which has been filed as Exhibit 10.1 to the Company’s Registration Statement on Form S-1 (File No. 333-169621) filed with the Securities and Exchange Commission on December 17, 2010 and is incorporated herein by reference.
Saunders Change of Control Severance Agreement
On May 1, 2020, the Company entered into a Change of Control Severance Agreement with Mr. Saunders (the “Agreement”), which amends and restates in its entirety a prior Change of Control Severance Agreement entered into between the Company and Mr. Saunders.
Term. The Agreement has an initial term of three years commencing on May 1, 2020 (the “Saunders Initial Term”). On the third anniversary of the Saunders Initial Term, the Agreement will renew automatically for additional one-year terms (each, a “Saunders Additional Term”) unless either party to the Agreement provides the other with written notice of non-renewal at least 60 days prior to the date of automatic renewal. If a Change of Control (as such term is defined in the Agreement) occurs when there are fewer than 12 months remaining during the Saunders Initial Term or a Saunders Additional Term, the term of the Agreement will extend automatically through the date that is 12 months following the effective date of the Change of Control. Additionally, if there is an initial occurrence of an act or omission by the Company that could constitute “Good Reason” for termination, and the expiration date of any Company cure period related to such act or omission could occur following the expiration of the Saunders Initial Term or a Saunders Additional Term, the term of the Agreement will extend automatically through the date that is 30 days following the expiration of such cure period. If Mr. Saunders becomes entitled to severance benefits pursuant to the Agreement, the Agreement will not terminate until all obligations of the Company under the Agreement have been satisfied.
Severance Benefits Outside the Change of Control Period. If the Company terminates Mr. Saunders’ employment with the Company without Cause (as such term is defined in the Agreement) (excluding death or Disability (as such term is defined in the Agreement)) or if Mr. Saunders resigns for Good Reason (as such term is defined in the Agreement), and, in each case, such termination occurs outside the period beginning three months prior to, and ending 12 months following, a Change of Control (such period, the “Change of Control Period”), then subject to Mr. Saunders signing and not revoking a separation agreement and release of claims in favor of the Company and his continued compliance with the terms of his Confidential Information and Invention Assignment Agreement entered into with the Company (the “Saunders Severance Requirement”), Mr. Saunders will receive the following from the Company:
• | Continuing payments of severance pay (less applicable withholding taxes) at a rate equal to Mr. Saunders’ annual base salary as in effect immediately prior to his termination date for a period of 18 months. |
• | A lump-sum payment (less applicable withholding taxes) equal to 150% of Mr. Saunders’ full annual bonus for the year of termination at target level as in effect immediately prior to his termination date. |
• | If Mr. Saunders elects continuation coverage pursuant to COBRA for himself and his eligible dependents, the Company will reimburse him for the COBRA premiums for such coverage until the earlier of (A) a period of 18 months from the date of termination, or (B) the date upon which Mr. Saunders and/or his eligible dependents are covered under similar plans. If the Company determines that it cannot provide the foregoing benefit without violating applicable law or being subject to an excise tax, the Company will in lieu of the COBRA reimbursement pay Mr. Saunders a monthly payment in an amount equal to the monthly COBRA premium that he would have been required to pay to continue his group health coverage that will end on the earlier of (A) the date upon which Mr. Saunders obtains other employment, or (B) the date the Company has paid an amount equal to 18 payments (the “Saunders COBRA Benefits”). |
• | 18 months of accelerated vesting with respect to Mr. Saunders’ all then unvested equity awards. |
Severance Benefits During the Change of Control Period. If the Company terminates Mr. Saunders’ employment with the Company without Cause (excluding death or Disability) or if Mr. Saunders resigns for Good Reason, and in each case such termination occurs during the Change of Control Period, then subject to Mr. Saunders satisfying the Saunders Severance Requirement, Mr. Saunders will receive the following from the Company:
• | A lump-sum payment (less applicable withholding taxes) equal to 150% of Mr. Saunders’ annual base salary as in effect immediately prior to his termination date or, if greater, at the level in effect immediately prior to the Change of Control. |
• | A lump-sum payment (less applicable withholding taxes) equal to 150% of Mr. Saunders’ full annual bonus for the year of termination at target level as in effect immediately prior to his termination date. |
• | The Saunders COBRA Benefits. |
• | 100% of Mr. Saunders then-outstanding and unvested equity awards will become vested in full (and if the amount of the award to vest is determined based on the achievement of performance criteria, then the equity awards will vest based on achievement at target levels for the relevant performance period(s)) and Mr. Saunders will have up to one-year following his termination date to exercise any stock options or stock appreciation rights. |
Termination Due to Death or Disability. If the Company terminates Mr. Saunders’ employment as a result of his Disability or if his employment terminates due to his death, then subject to Mr. Saunders satisfying the Saunders Severance Requirement (as applicable), Mr. Saunders’ then outstanding and unvested equity awards will vest as if Mr. Saunders’ termination were treated as a termination without Cause (and either within or outside of the Change of Control Period, as applicable).
Excise Tax. In the event that the severance payments and other benefits payable to Mr. Saunders constitute “parachute payments” under Section 280G of the U.S. tax code and would be subject to the applicable excise tax, then Mr. Saunders’ severance benefits will be either (i) delivered in full or (ii) delivered to such lesser extent which would result in no portion of such benefits being subject to the excise tax, whichever results in the receipt by Mr. Saunders on an after-tax basis of the greatest amount of benefits.
Appointment of Adam Miller
On May 6, 2020, the Board appointed Adam Miller as the Company’s Co-Chairperson of the Board, effective as of June 15, 2020 (the “Miller Effective Date”). Elisa Steele, who currently serves as Chairperson of the Board, also will become Co-Chairperson of the Board on the Miller Effective Date.
There are no arrangements or understandings between Mr. Miller and any other persons pursuant to which he was selected as the Company’s Co-Chairperson of the Board. There are also no family relationships between Mr. Miller and any director or executive officer of the Company and he has no direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.
Miller Employment Agreement
The Company entered into an amended and restated employment agreement, effective as of the Miller Effective Date (the “Miller Employment Agreement”), with Mr. Miller, which amended and restated in its entirety Mr. Miller’s prior employment agreement with the Company.
Employment. Mr. Miller’s employment with the Company is “at-will” and may be terminated by the Company at any time with or without cause or with or without notice.
Term. The Miller Employment Agreement has an initial term of three years (the “Miller Initial Term”). On the third anniversary of the Miller Effective Date, the Miller Employment Agreement will renew automatically for additional one-year terms (each, a “Miller Additional Term”) unless either party to the Miller Employment Agreement provides the other with written notice of non-renewal at least 60 days prior to the date of automatic renewal. The remainder of the description of the term of Mr. Saunders’ Agreement also applies to the term of the Miller Employment Agreement. .
Compensation. For fiscal year 2020, Mr. Miller’s base salary and performance bonus opportunity as was in effect immediately prior to the Miller Effective Date will continue in effect and unchanged. For fiscal year 2021 and beyond, and on at least an annual basis and at the same time compensation decisions are made for other executives, the Board or the Compensation Committee will consider and review Mr. Miller’s base salary, performance bonus opportunity, and equity.
Severance Benefits Outside the Change of Control Period. If the Company terminates Mr. Miller’s employment with the Company without Cause (as such term is defined in the Miller Employment Agreement) or if Mr. Miller resigns for Good Reason (as such term is defined in the Miller Employment Agreement), and, in each case, such termination occurs outside the period beginning three months prior to, and ending 12 months following, a Change of Control (such period, the “Miller Change of Control Period”), then subject to Mr. Miller signing and not revoking a separation agreement and release of claims in favor of the Company and his continued compliance with the terms of his Proprietary Information and Inventions Agreement entered into with the Company (the “Miller Severance Requirement”), Mr. Miller will receive the following from the Company:
• | Continuing payments of severance pay (less applicable withholding taxes) at a rate equal to the rate of the CEO’s annual base salary, as then in effect, for a period of 18 months. |
• | A lump-sum payment (less applicable withholding taxes) equal to 150% of the CEO’s full annual bonus for the year of termination at target level as in effect immediately prior to his termination date. |
• | 100% premiums paid by the Company for continued health, dental and vision benefits for Mr. Miller (and any eligible dependents) under the Company’s health, dental and vision plans until the earlier of (A) 18 months, (provided Mr. Miller validly elects to continue coverage under COBRA) or (B) the date upon which Mr. Miller and Mr. Miller’s eligible dependents become covered under similar plans (the “Miller COBRA Benefits”). |
• | 100% of Mr. Miller’s then-outstanding and unvested equity awards will become vested in full (and if the amount of the award to vest is determined based on the achievement of performance criteria, then the equity awards will vest based on achievement at target levels for the relevant performance period(s)) and Mr. Miller will have up to the award’s expiration date to exercise any stock options or stock appreciation rights (the “Miller Equity Award Benefits”). |
Severance Benefits During the Change of Control Period. If the Company terminates Mr. Miller’s employment with the Company without Cause or if Mr. Miller resigns for Good Reason, and in each case such termination occurs during the Change of Control Period, then subject to Mr. Miller satisfying the Miller Severance Requirement, Mr. Miller will receive the following from the Company:
• | A lump-sum payment (less applicable withholding taxes) equal to 150% of the CEO’s annual base salary as in effect immediately prior to Mr. Miller’s termination date or, if greater, at the level in effect immediately prior to the Change of Control. |
• | A lump-sum payment (less applicable withholding taxes) equal to 150% of the CEO’s full annual bonus for the year of termination at target level as in effect immediately prior to Mr. Miller’s termination date. |
• | The Miller COBRA Benefits. |
• | The Miller Equity Award Benefits. |
Termination Due to Death or Disability; Termination due to Company Non-Renewal. If the Company terminates Mr. Miller’s employment as a result of his Disability (as such term is defined in the Miller Employment Agreement) or if his employment terminates due to his death, then subject to Mr. Miller satisfying the Miller Severance Requirement (as applicable), Mr. Miller’s then Mr. Miller will receive the Miller Equity Award Benefits. Additionally, if the term of the Miller Employment Agreement expires solely as a result of the Company’s non-renewal of the agreement, then subject to Mr. Miller satisfying the Miller Severance Requirement, Mr. Miller will receive the Miller Equity Award Benefits.
Excise Tax. In the event that the severance payments and other benefits payable to Mr. Miller constitute “parachute payments” under Section 280G of the U.S. tax code and would be subject to the applicable excise tax, then Mr. Miller’s severance benefits will be either (i) delivered in full or (ii) delivered to such lesser extent which would result in no portion of such benefits being subject to the excise tax, whichever results in the receipt by the Mr. Miller on an after-tax basis of the greatest amount of benefits.
Indemnification. The Company previously entered into its standard form of indemnification agreement with Mr. Miller, a copy of which has been filed as Exhibit 10.1 to the Company’s Registration Statement on Form S-1 (File No. 333-169621) filed with the Securities and Exchange Commission on December 17, 2010 and is incorporated herein by reference.
The foregoing descriptions of the Saunders Employment Agreement, the Agreement and the Miller Employment Agreement are qualified in their entirety by reference to the full text of the applicable agreement, copies of which are filed as Exhibits 10.1, 10.2 and 10.3 to this report and are incorporated by reference herein.
Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Cornerstone OnDemand, Inc. |
/s/ Brian L. Swartz |
Brian L. Swartz |
Chief Financial Officer |
Date: May 11, 2020
Exhibit 10.1
CORNERSTONE OnDEMAND, INC.
EMPLOYMENT AGREEMENT
This Employment Agreement (the Agreement) is entered into as of May 1, 2020 by and between Cornerstone OnDemand, Inc., a Delaware corporation (the Company), and Phil Saunders (Executive). Upon the Effective Date (as defined below), this Agreement amends and restates in its entirety the Employment Agreement by and between the Company and Executive entered into as of February 24, 2020 (such agreement, the Prior Agreement).
RECITALS
WHEREAS, the Company wishes to retain the services of Executive and Executive wishes to be employed with the Company on the terms and subject to the conditions set forth in this Agreement;
NOW THEREFORE, in consideration of the foregoing recital and the respective undertakings of the Company and Executive set forth below, the Company and Executive agree as follows:
1. Effective Date. The effective date of this Agreement and Executives start date of employment pursuant to the terms of this Agreement will be May 11, 2020 (the Effective Date).
2. Duties and Scope of Employment. Commencing on June 15, 2020, Executive will serve as the Companys Chief Executive Officer and will report to the Companys Board of Directors (the Board). Executive shall have the authority generally allowed to persons discharging the duties of such position. Executive shall perform his duties faithfully and satisfactorily to the performance standards reasonably expected of a person in such position. Executive will render such business and professional services in the performance of his duties, consistent with Executives position within the Company, as will reasonably be assigned to him by the Board. Executive will devote substantially his full business efforts and time to the performance of Executives duties hereunder, provided however, that Executive may serve on outside board positions or provide other advisory services that are not competitive with the Company subject to the requirement that such service on outside boards of directors or advisory services do not materially interfere with Executives performance of his duties under this Agreement and the Board approves such board membership or advisory services (which will not be unreasonably withheld). Executives principal place of employment shall be at his home located in [***], but Executive shall travel to the Companys offices located in Santa Monica, California as often as required to perform Executives duties and/or as requested by the Board.
3. Board Membership. Executive will be appointed to serve as a member of the Board as of July 1, 2020. At each annual meeting of the Companys stockholders while Executive is the Companys Chief Executive Officer upon which Executives term as a Board member is scheduled to expire, the Company will nominate Executive to serve as a member of the Board. Executives continued service as a member of the Board will be subject to any required stockholder approval.
4. At-Will Employment. The parties agree that Executives employment with the Company will be at-will employment and may be terminated by the Company at any time with or without cause or with or without notice. However, as described in the Change of Control Severance Agreement (the CoC Agreement) entered into between Executive and the Company, Executive may be entitled to severance benefits depending upon the circumstances of Executives termination of employment following the Effective Date, subject to the terms and conditions of the CoC Agreement.
5. Compensation.
(a) Base Salary. Executive shall receive an annual base salary of $500,000 (the Base Salary) payable in accordance with the Companys normal payroll practices and subject to the usual, required withholdings. Executives salary will be subject to review and any adjustments will be made based upon the Companys normal performance review practice.
(b) Performance Bonus. Executive will be eligible for an annual performance bonus with a target level of 100% of his Base Salary based upon performance criteria as established by the Compensation Committee of the Board (the Compensation Committee) and subject to the terms and conditions of the Companys executive bonus plan for the applicable fiscal year. Any earned bonus will be paid as soon as practicable after the Board or the Compensation Committee determines that the bonus has been earned, but in no event will the bonus be paid after the later of (i) the fifteenth (15th) day of the third (3rd) month following the close of the Companys fiscal year in which the bonus is earned or (ii) March 15 following the calendar year in which the bonus is earned.
(c) Additional Bonus. In addition to any performance bonus that Executive may become entitled to receive pursuant to Section 5(b), and subject to Executives continued employment as the Companys Chief Executive Officer through the one (1) year anniversary of the Effective Date, Executive will receive a one-time bonus of $550,000, less applicable tax withholdings, to be paid within thirty (30) days following that anniversary date.
(d) Equity Awards.
(i) Restricted Stock Units. Subject to the approval of the Compensation Committee, following the Effective Date, Executive will be granted an award of restricted stock units based on a target value of $2,000,000 (the Initial RSU Award) pursuant to the terms of the Companys 2010 Equity Incentive Plan (the Equity Plan). Except in the case of accelerated vesting upon certain terminations of employment as set forth in the CoC Agreement, the Initial RSU Award will vest as follows: 40% of the shares subject to the Initial RSU Award will vest on the first annual anniversary of the vesting commencement date, and 20% of the shares subject to the Initial RSU Award will vest on each annual anniversary thereafter, in each case subject to Executive continuing to be a Service Provider (as defined in the Equity Plan) through each scheduled vesting date. In addition, and subject to the approval of the Compensation Committee, following the Effective Date, Executive will be granted one additional award of restricted stock units based on a target value of $3,000,000 (the Initial PSU Award) and a second, additional award of restricted stock units based on a target value of $500,000 (the Supplemental PSU Award) (together, the PSU Awards). The vesting requirements applicable to the PSU Awards
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will be performance-based, and the performance metrics for the PSU Awards will be determined by the Company with the vesting period for the PSU Awards not to exceed three (3) years; provided, however that a minimum of $750,000 in target value of the PSU Awards will become eligible to be earned within the first two (2) years of the vesting period.
(ii) Additional Award. Subject to the approval of the Compensation Committee, following the Effective Date, Executive will be granted an award of restricted stock units with a value of $1,150,000 with the actual number of restricted stock units subject to the award equal to that value divided by the closing price per share of the Companys common stock on the date of grant, rounded down to the nearest whole restricted stock unit (the Additional Award). Except in the case of accelerated vesting upon certain terminations of employment as set forth in the CoC Agreement, the Additional Award will be scheduled to vest as to 100% of the Matching RSUs on the one (1) year anniversary of the grant date of the Additional Award subject to Executive continuing to be a Service Provider through the scheduled vesting date and Executive continuing to own the Matching Shares described below. For purposes of this Agreement, Matching RSUs will mean a number of restricted stock units subject to the Additional Award that is equal to the number of shares of the Companys common stock that Executive purchases on the open market during the period between the grant date of the Additional Award and June 16, 2020 (the Matching Shares). Any restricted stock units subject to the Additional Award that do not become Matching RSUs as of June 16, 2020, will immediately terminate and be cancelled and Executive will have no further rights with respect to those restricted stock units.
(iii) Terms of Awards. The Initial RSU Award, the PSU Awards and the Additional Award each will be subject to the terms and conditions of the Equity Plan and to a restricted stock unit agreement consistent with the terms of this Agreement by and between Executive and the Company, each of which documents are incorporated herein by reference.
(iv) Additional Future Equity Awards. Executive will be eligible to receive awards of stock options, restricted stock units or other equity awards covering shares of Company common stock pursuant to any plans or arrangements the Company may have in effect from time to time, including but not limited to any focal grants. The Board or the Compensation Committee will determine in its discretion whether Executive will be granted any such equity awards and the terms of any such award in accordance with the terms of any applicable plan or arrangement that may be in effect from time to time.
6. Other Benefits. Executive shall be entitled to participate in executive benefit plans and programs of the Company, if any, on the same terms and conditions as other similarly-situated employees to the extent that Executives position, tenure, salary, age, health and other qualifications make Executive eligible to participate in such plans or programs, subject to the rules and regulations applicable thereto. The Company reserves the right to cancel or change the benefit plans and programs it offers to its employees at any time.
7. Vacations; Holidays, Sick Days. Executive shall be entitled to annual paid vacation, paid holidays, and paid sick leave in accordance with the Companys applicable policies, which may change from time to time.
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8. Change of Control Agreement. Executive and the Company have entered into the CoC Agreement and such document is incorporated herein by reference.
9. Expenses. The Company will reimburse Executive for standard business expenses pursuant to the Companys standard policies in effect from time to time. In addition, the Company shall reimburse Executive for tax preparation expenses paid to Deloitte LLP and its affiliates with respect to Executives personal tax returns for the 2019 calendar year in a manner consistent with past practice during Executives employment with Saba Software, Inc., not to exceed $5,000 per year. In the event that any expense reimbursements are taxable to Executive, such reimbursements will be made in the time frame specified by Treasury Regulation Section 1.409A-3(i)(1)(iv) unless another time frame that complies with or is exempt from Section 409A (as defined below) is specified in the Companys expense reimbursement policy.
10. Section 409A. It is the intent of this Agreement to be exempt from or comply with the requirements of Section 409A (as defined below) so that none of the payments and benefits to be provided under this Agreement will be subject to the additional tax imposed under Section 409A, and any ambiguities or ambiguous terms in this Agreement will be interpreted to be so exempt or so comply. Notwithstanding anything to the contrary in this Agreement, if Executive is deemed on the date of termination to be a specified employee within the meaning of that term for purposes of Section 409A, then with regard to any payment or the provision of any benefit that is considered deferred compensation under Section 409A payable on account of a separation from service, such payment or benefit shall not be made or provided until the date which is the earlier of (a) the expiration of the six (6)-month period measured from the date of Executives separation from service, and (b) the date of Executives death, to the extent required under Section 409A. In no event will the Company reimburse Executive for any taxes imposed or other costs incurred as a result of Section 409A. The Company and Executive agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition under Section 409A prior to actual payment to Executive. For purposes of this Agreement, Section 409A means Section 409A of the Internal Revenue Code of 1986, as amended, and the final regulations and any guidance promulgated thereunder and any state law equivalent.
11. Proprietary Information and Inventions Agreement. Executive has entered into the Companys standard Employment, Confidential Information, Invention Assignment, and Arbitration Agreement (the Confidentiality Agreement), which agreement is incorporated herein by reference.
12. No Conflict. Executive represents and warrants that his employment by the Company as described herein shall not conflict with and will not be constrained by any prior employment or consulting agreement or relationship.
13. Miscellaneous.
(a) Governing Law. This Agreement will be governed by the laws of the State of New Jersey (with the exception of its conflict of law provisions).
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(b) Assignment. This Agreement and all rights hereunder shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective personal or legal representatives, executors, administrators, heirs, distributees, devisees, legatees, successors and assigns. This Agreement is personal in nature, and neither of the parties to this Agreement shall, without the written consent of the other, assign or transfer this Agreement or any right or obligation under this Agreement to any other person or entity; except that the Company may assign this Agreement to any of its affiliates or wholly-owned subsidiaries or to any successor-in-interest by virtue of a reorganization, merger or other form of business combination, provided, that such assignment will not relieve the Company of its obligations hereunder. Any attempted assignment, transfer, conveyance or other disposition of Executives right to compensation or other benefits will be null and void.
(c) Notices. All notices, requests, demands and other communications called for hereunder will be in writing and will be deemed given (a) on the date of delivery if delivered personally; (b) one (1) day after being sent overnight by a well-established commercial overnight service, or (c) four (4) days after being mailed by registered or certified mail, return receipt requested, prepaid and addressed to the parties or their successors at the following addresses, or at such other addresses as the parties may later designate in writing:
If to the Company:
Attn: General Counsel
Cornerstone OnDemand, Inc.,
1601 Cloverfield Blvd., Suite 620
Santa Monica, CA 90404
If to Executive:
at the last residential address known by the Company
(d) Acknowledgment. Executive acknowledges that he has had the opportunity to discuss this matter with and obtain advice from his private attorney, has had sufficient time to, and has carefully read and fully understands all the provisions of this Agreement, and is knowingly and voluntarily entering into this Agreement.
(e) Severability. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement will continue in full force and effect without said provision.
(f) Integration. This Agreement, along with the documents incorporated by reference herein, represents the entire agreement and understanding between the parties as to the subject matter herein and supersedes all prior or contemporaneous agreements whether written or oral, including but not limited to the Prior Agreement and the Employment Agreement, dated June 5, 2015, between Executive and Saba Software, Inc. (the 2015 Agreement) (except as otherwise specifically provided herein); provided, however, Executive remains bound by the restrictive covenants only as those covenants relate to the period of Executives employment or service with Saba Software, Inc. prior to the Effective Date and nothing in this Agreement shall affect or supersede the intellectual property and non-disclosure obligations set forth in Section 6 of the 2015 Agreement, which will continue in effect following the Effective Date as it relates to Executives
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employment or service with Saba Software, Inc. prior to the Effective Date. In consideration of this offer of employment and the compensation and benefits being provided to Executive hereunder, Executive further acknowledges and agree that his acceptance of the offer set forth in this Agreement, and the terms and conditions of Executives employment herein, shall neither constitute a termination without Cause, a constructive termination, or constitute a good reason for Executives resignation or any other such triggering event pursuant to the Prior Agreement, the CoC Agreement, the 2015 Agreement or otherwise, and Executive is not entitled to and will not receive any severance, equity vesting acceleration, or other similar benefits other than as expressly set forth in the CoC Agreement. No waiver, alteration, or modification of any of the provisions of this Agreement will be binding unless in writing and signed by the Company and Executive.
(g) Arbitration. Any dispute or controversy arising out of or relating to any interpretation, construction, performance or breach of this agreement or the Confidentiality Agreement, will be settled by arbitration pursuant to the arbitration provisions set forth in the Dispute Resolution Agreement, which was entered into as of March 13, 2020, by and between the Company and Executive (the Dispute Resolution Agreement), which agreement is incorporated herein by reference.
(h) Tax Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable taxes.
(i) Headings. All captions and section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement.
(j) Counterparts. This Agreement may be executed manually or electronically in counterparts, PDF or facsimile, each an original and each having the same force and effect as an original and shall constitute an effective, binding agreement on the part of each of the undersigned.
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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year first above written.
COMPANY: | ||
Cornerstone OnDemand, Inc. | ||
By: | ||
/s/ Elisa A. Steele |
||
Elisa A. Steele, Chair of the Board | ||
EXECUTIVE: | ||
/s/ Phil Saunders |
||
Phil Saunders |
Exhibit 10.2
CORNERSTONE ONDEMAND, INC.
CHANGE OF CONTROL SEVERANCE AGREEMENT
This Change of Control Severance Agreement (the Agreement) is made and entered into by and between Phil Saunders (Executive) and Cornerstone OnDemand, Inc., a Delaware corporation (the Company), effective as of the effective date of Executives May 1, 2020 employment agreement (the Effective Date). This Agreement amends and restates in its entirety any change of control severance agreement made and entered into by and between Executive and the Company (the Prior Agreement).
RECITALS
1. The Compensation Committee (the Committee) of the Board of Directors of the Company (the Board) believes that it is in the best interests of the Company and its stockholders (i) to assure that the Company will have the continued dedication and objectivity of Executive, notwithstanding the possibility, threat, or occurrence of a Change of Control and (ii) to provide Executive with an incentive to continue Executives employment prior to a Change of Control and to motivate Executive to maximize the value of the Company upon a Change of Control for the benefit of its stockholders.
2. The Committee believes that it is imperative to provide Executive with certain severance benefits upon Executives termination of employment under certain circumstances. These benefits will provide Executive with enhanced financial security and incentive and encouragement to remain with the Company notwithstanding the possibility of a Change of Control.
3. Certain capitalized terms used in the Agreement are defined in Section 6 below.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto agree as follows:
1. Term of Agreement. This Agreement will have an initial term of three (3) years commencing on the Effective Date (the Initial Term). On the third anniversary of the Effective Date, this Agreement will renew automatically for additional one (1) year terms (each an Additional Term), unless either party provides the other party with written notice of non-renewal at least sixty (60) days prior to the date of automatic renewal. Notwithstanding the foregoing provisions of this paragraph, (a) if a Change of Control occurs when there are fewer than twelve (12) months remaining during the Initial Term or an Additional Term, the term of this Agreement will extend automatically through the date that is twelve (12) months following the effective date of the Change of Control, or (b) if an initial occurrence of an act or omission by the Company constituting the grounds for Good Reason in accordance with Section 6(g) hereof has occurred (the Initial Grounds), and the expiration date of the Company cure period (as such term is used in Section 6(g)) with respect to such
Initial Grounds could occur following the expiration of the Initial Term or an Additional Term, the term of this Agreement will extend automatically through the date that is thirty (30) days following the expiration of such cure period, but such extension of the term shall only apply with respect to the Initial Grounds. If Executive becomes entitled to benefits under Section 3 during the term of this Agreement, the Agreement will not terminate until all of the obligations of the parties hereto with respect to this Agreement have been satisfied.
2. At-Will Employment. The Company and Executive acknowledge that Executives employment is and will continue to be at-will, as defined under applicable law. As an at-will employee, either the Company or the Executive may terminate the employment relationship at any time, with or without Cause.
3. Severance Benefits.
(a) Termination without Cause or Resignation for Good Reason Outside a Change of Control Period. If the Company terminates Executives employment with the Company without Cause (excluding death or Disability) or Executive resigns from such employment for Good Reason; and, in each case, such termination occurs outside of the Change of Control Period, then subject to Section 4, Executive will receive the following:
(i) Accrued Compensation. The Company will pay Executive all accrued but unpaid vacation, expense reimbursements, wages, and other benefits due to Executive under any Company-provided plans, policies, and arrangements.
(ii) Continuing Salary Severance Payment. Executive will receive continuing payments of severance pay (less applicable withholding taxes) at a rate equal to Executives annual base salary as in effect immediately prior to Executives termination date, for eighteen (18) months from the date of such termination of employment, to be paid in accordance with the Companys normal payroll policies.
(iii) Bonus Payment. Executive will receive a lump-sum payment (less applicable withholding taxes) equal to 150% of Executives full annual bonus for the year of termination (whether established on a quarterly, semi-annual, annual and/or other periodic basis) at target level as in effect immediately prior to Executives termination date.
(iv) Continuation Coverage. If Executive elects continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (COBRA) within the time period prescribed pursuant to COBRA for Executive and Executives eligible dependents, then the Company will reimburse Executive for the COBRA premiums for such coverage (at the coverage levels in effect immediately prior to Executives termination) until the earlier of (A) a period of eighteen (18) months from the date of termination or (B) the date upon which Executive and/or Executives eligible dependents become covered under similar plans. The reimbursements will be made by the Company to Executive consistent with the Companys normal expense reimbursement policy. Notwithstanding the first sentence of this Section 3(a)(iv), if the Company determines in its sole discretion that it cannot provide the foregoing benefit without potentially violating, or being subject to an excise tax under, applicable law (including, without limitation, Section 2716 of the Public
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Health Service Act), the Company will in lieu thereof provide to Executive a taxable monthly payment, payable on the last day of a given month, in an amount equal to the monthly COBRA premium that Executive would be required to pay to continue Executives group health coverage in effect on the termination of employment date (which amount will be based on the premium for the first month of COBRA coverage), which payments will be made regardless of whether Executive elects COBRA continuation coverage and will commence on the month following Executives termination of employment and will end on the earlier of (x) the date upon which Executive obtains other employment or (y) the date the Company has paid an amount equal to eighteen (18) payments. For the avoidance of doubt, the taxable payments in lieu of COBRA reimbursements may be used for any purpose, including, but not limited to continuation coverage under COBRA, and will be subject to all applicable tax withholdings.
(v) Accelerated Vesting of Equity Awards. Executive will receive eighteen (18) months of accelerated vesting with respect to all then unvested Equity Awards and such Equity Awards shall become immediately vested and subject to exercise or, in the case of such shares as are subject to repurchase by the Company for the purchase price paid, no longer subject to such repurchase.
(b) Termination without Cause or Resignation for Good Reason During a Change of Control Period. If the Company terminates Executives employment with the Company without Cause (excluding death or Disability) or Executive resigns from such employment for Good Reason, and in each case ,such termination occurs during the Change of Control Period then subject to Section 4, Executive will receive the following:
(i) Accrued Compensation. The Company will pay Executive all accrued but unpaid vacation, expense reimbursements, wages, and other benefits due to Executive under any Company-provided plans, policies, and arrangements.
(ii) Severance Payment. Executive will receive a lump-sum payment (less applicable withholding taxes) equal to 150% of Executives annual base salary as in effect immediately prior to Executives termination date or, if greater, at the level in effect immediately prior to the Change of Control.
(iii) Bonus Payment. Executive will receive a lump-sum payment (less applicable withholding taxes) equal to 150% of Executives full annual bonus for the year of termination (whether established on a quarterly, semi-annual, annual and/or other periodic basis) at target level as in effect immediately prior to Executives termination date.
(iv) Continuation Coverage. If Executive elects continuation coverage pursuant to COBRA within the time period prescribed pursuant to COBRA for Executive and Executives eligible dependents, then the Company will reimburse Executive for the COBRA premiums for such coverage (at the coverage levels in effect immediately prior to Executives termination) until the earlier of (A) a period of eighteen (18) months from the date of termination or (B) the date upon which Executive and/or Executives eligible dependents become covered under similar plans. The reimbursements will be made by the Company to Executive consistent with the Companys normal expense reimbursement policy. Notwithstanding the first sentence of this
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Section 3(b)(iv), if the Company determines in its sole discretion that it cannot provide the foregoing benefit without potentially violating, or being subject to an excise tax under, applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company will in lieu thereof provide to Executive a taxable monthly payment, payable on the last day of a given month, in an amount equal to the monthly COBRA premium that Executive would be required to pay to continue Executives group health coverage in effect on the termination of employment date (which amount will be based on the premium for the first month of COBRA coverage), which payments will be made regardless of whether Executive elects COBRA continuation coverage and will commence on the month following Executives termination of employment and will end on the earlier of (x) the date upon which Executive obtains other employment or (y) the date the Company has paid an amount equal to eighteen (18) payments. For the avoidance of doubt, the taxable payments in lieu of COBRA reimbursements may be used for any purpose, including, but not limited to continuation coverage under COBRA, and will be subject to all applicable tax withholdings.
(v) Equity Awards.
(1) Accelerated Vesting of Equity Awards. One hundred percent (100%) of Executives then-outstanding and unvested Equity Awards will become vested in full. If, however, an outstanding Equity Award is to vest and/or the amount of the award to vest is to be determined based on the achievement of performance criteria, then the Equity Award will vest as to one hundred percent (100%) of the amount of the Equity Award assuming the performance criteria had been achieved at target levels for the relevant performance period(s).
(2) Extended Post-Termination Exercisability. Executives then- outstanding and unvested Equity Awards that are stock options or stock appreciation rights will remain exercisable until the one (1) year anniversary of the date of Executives termination of employment; provided, however, that in no event may Executive exercise an Equity Award after the expiration of such Equity Awards original term. Executive agrees and acknowledges that as to any of Executives stock options that were granted prior to the Effective Date and that qualify as incentive stock options under Section 422 of the Code, the extension of the post-termination exercise period pursuant to this Section 3(b)(v)(2) will be considered a modification of the incentive stock option and could result in immediately disqualifying any such options as incentive stock options. Further, Executive agrees and acknowledges that in any event, an incentive stock will convert to a nonstatutory stock option three months and one day after Executive ceases to be an employee of the Company or any parent or subsidiary corporation of the Company.
(c) Voluntary Resignation; Termination for Cause. If Executives employment with the Company terminates (i) voluntarily by Executive (other than for Good Reason) or (ii) for Cause by the Company, then Executive will not be entitled to receive severance or other benefits.
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(d) Disability; Death. If the Company terminates Executives employment as a result of Executives Disability, or Executives employment terminates due to Executives death, then, subject to Section 4:
(i) Accelerated Vesting of Equity Awards. Executives then outstanding and unvested Equity Awards will vest as provided in Sections 3(a)(iv) or 3(b)(v), as applicable, as if Executives termination were treated as a termination without Cause.
(ii) Other Benefits. Executive will not be entitled to receive any other severance or other benefits.
(e) Exclusive Remedy. In the event of a termination of Executives employment as set forth in Section 3(a) or Section 3(b) of this Agreement, the provisions of Section 3 are intended to be and are exclusive and in lieu of any other rights or remedies to which Executive or the Company otherwise may be entitled, whether at law, tort or contract, in equity, or under this Agreement (other than the payment of accrued but unpaid wages, as required by law, and any unreimbursed reimbursable expenses). Executive will be entitled to no benefits, compensation or other payments or rights upon a termination of employment other than those benefits expressly set forth in Section 3 of this Agreement.
4. Conditions to Receipt of Severance
(a) Release of Claims Agreement. The receipt of any severance payments or benefits (other than the accrued benefits set forth in either Sections 3(a)(i) or 3(b)(i)) pursuant to this Agreement is subject to Executive signing and not revoking a separation agreement and release of claims in substantially the form attached hereto as Exhibit A (the Release), which must become effective and irrevocable no later than the sixtieth (60th) day following Executives termination of employment (the Release Deadline). Any severance payments or benefits under this Agreement will be paid on, or, in the case of installments, will not commence until, the sixtieth (60th) day following Executives separation from service, or, if later, such time as required by Section 4(c)(iii), except that the acceleration of vesting of Equity Awards not subject to Section 409A will become effective on the date the Release becomes effective and irrevocable. Except as required by Section 4(c)(iii), any lump sum or installment payments that would have been made to Executive during the sixty (60) day period immediately following Executives separation from service but for the preceding sentence will be paid to Executive on the sixtieth (60th) day following his or her separation from service and the remaining payments will be made as provided in this Agreement. If the Release does not become effective and irrevocable by the Release Deadline, Executive will forfeit any right to severance payments or benefits under this Agreement. In no event will severance payments or benefits be paid or provided until the Release actually becomes effective and irrevocable.
(b) Confidential Information and Invention Assignment Agreements. Executives receipt of any payments or benefits under Section 3 (other than the accrued benefits set forth in either Sections 3(a)(i) or 3(b)(i)) will be subject to Executive continuing to comply with the terms of the Confidential Information and Invention Assignment Agreement between the Company and Executive, as such agreement may be amended from time to time.
(c) Section 409A.
(i) Notwithstanding anything to the contrary in this Agreement, no severance pay or benefits to be paid or provided to Executive, if any, pursuant to this Agreement that, when considered together with any other severance payments or separation benefits, are considered deferred compensation under Section 409A of the Code, and the final regulations and any guidance
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promulgated thereunder (Section 409A) (together, the Deferred Payments) will be paid or otherwise provided until Executive has a separation from service within the meaning of Section 409A. Similarly, no severance payable to Executive, if any, pursuant to this Agreement that otherwise would be exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(9) will be payable until Executive has a separation from service within the meaning of Section 409A.
(ii) It is intended that none of the severance payments under this Agreement will constitute Deferred Payments but rather will be exempt from Section 409A as a payment that would fall within the short-term deferral period as described in Section 4(c)(iv) below or resulting from an involuntary separation from service as described in Section 4(c)(v) below.
(iii) Notwithstanding anything to the contrary in this Agreement, if Executive is a specified employee within the meaning of Section 409A at the time of Executives termination (other than due to death), then the Deferred Payments, if any, that are payable within the first six (6) months following Executives separation from service, will become payable on the first payroll date that occurs on or after the date six (6) months and one (1) day following the date of Executives separation from service. All subsequent Deferred Payments, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit. Notwithstanding anything herein to the contrary, if Executive dies following Executives separation from service, but before the six (6) month anniversary of the separation from service, then any payments delayed in accordance with this paragraph will be payable in a lump sum as soon as administratively practicable after the date of Executives death and all other Deferred Payments will be payable in accordance with the payment schedule applicable to each payment or benefit. Each payment and benefit payable under this Agreement is intended to constitute a separate payment under Section 1.409A-2(b)(2) of the Treasury Regulations.
(iv) Any amount paid under this Agreement that satisfies the requirements of the short-term deferral rule set forth in Section 1.409A-1(b)(4) of the Treasury Regulations will not constitute Deferred Payments for purposes of clause (i) above.
(v) Any amount paid under this Agreement that qualifies as a payment made as a result of an involuntary separation from service pursuant to Section 1.409A-1(b)(9)(iii) of the Treasury Regulations that does not exceed the Section 409A Limit (as defined below) will not constitute Deferred Payments for purposes of clause (i) above.
(vi) The foregoing provisions are intended to comply with the requirements of Section 409A so that none of the severance payments and benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply. The Company and Executive agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition before actual payment to Executive under Section 409A.
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5. Limitation on Payments. In the event that the severance and other benefits provided for in this Agreement or otherwise payable to Executive (i) constitute parachute payments within the meaning of Section 280G of the Code, and (ii) but for this Section 5, would be subject to the excise tax imposed by Section 4999 of the Code, then Executives benefits under Section 3 will be either:
(a) delivered in full, or
(b) delivered as to such lesser extent which would result in no portion of such 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 Executive on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be taxable under Section 4999 of the Code. If a reduction in severance and other benefits constituting parachute payments is necessary so that benefits are delivered to a lesser extent, reduction will occur in the following order: (i) reduction of cash payments; (ii) cancellation of awards granted contingent on a change in ownership or control (within the meaning of Code Section 280G), (iii) cancellation of accelerated vesting of Equity Awards; (iv) reduction of employee benefits. In the event that acceleration of vesting of Equity Awards is to be reduced, such acceleration of vesting will be cancelled in the reverse order of the date of grant of Executives Equity Awards.
Unless the Company and Executive otherwise agree in writing, any determination required under this Section 5 will be made in writing by the Companys independent public accountants immediately prior to a Change of Control or such other person or entity to which the parties mutually agree (the Firm), whose determination will be conclusive and binding upon Executive and the Company. For purposes of making the calculations required by this Section 5, the Firm may 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 Executive will furnish to the Firm such information and documents as the Firm may reasonably request in order to make a determination under this Section. The Company will bear all costs the Firm may incur in connection with any calculations contemplated by this Section 5.
6. Definition of Terms. The following terms referred to in this Agreement will have the following meanings:
(a) Cause. Cause will mean (i) an act of material dishonesty made by Executive in connection with Executives carrying out his or her job responsibilities to the Company intended to result in substantial personal enrichment of the Executive; (ii) Executives conviction of, or plea of nolo contendere to a felony which the Board reasonably believes had or will have a material detrimental effect on the Companys reputation or business; (iii) a willful act by the Executive which constitutes gross misconduct and which is injurious to the Company or its affiliates; (iv) Executives willful and material breach of this Agreement, including without limitation, his or her intentional failure to perform his or her stated duties, and his or her continued failure to cure such breach to the reasonable satisfaction of the Board within ten (10) days following written notice of such breach to Executive from the Company; and (v) Executives material violation of a Company policy that results in a material detrimental effect on the Companys reputation or business.
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The foregoing definition does not in any way limit the Companys ability to terminate Executives employment relationship at any time as provided in Section 2 above, and the term Company will be interpreted to include any subsidiary, parent, affiliate or successor thereto, if applicable.
(b) Change of Control. Change of Control means the occurrence of any of the following events:
(i) A change in the ownership of the Company which occurs on the date that any one person, or more than one person acting as a group (Person), acquires ownership of the stock of the Company that, together with the stock held by such Person, constitutes more than fifty percent (50%) of the total voting power of the stock of the Company; provided, however, that for purposes of this subsection, the acquisition of additional stock by any one Person, who is considered to own more than fifty percent (50%) of the total voting power of the stock of the Company will not be considered a Change of Control; or
(ii) A change in the effective control of the Company which occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by Directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election. For purposes of this clause (ii), if any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered a Change of Control; or
(iii) A change in the ownership of a substantial portion of the Companys assets which occurs on the date that any Person acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than fifty percent (50%) of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions; provided, however, that for purposes of this subsection (iii), the following will not constitute a change in the ownership of a substantial portion of the Companys assets: (A) a transfer to an entity that is controlled by the Companys stockholders immediately after the transfer, or (B) a transfer of assets by the Company to: (1) a stockholder of the Company (immediately before the asset transfer) in exchange for or with respect to the Companys stock, (2) an entity, fifty percent (50%) or more of the total value or voting power of which is owned, directly or indirectly, by the Company, (3) a Person, that owns, directly or indirectly, fifty percent (50%) or more of the total value or voting power of all the outstanding stock of the Company, or (4) an entity, at least fifty percent (50%) of the total value or voting power of which is owned, directly or indirectly, by a Person described in this subsection (iii)(B)(3). For purposes of this subsection (iii), gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
For purposes of this definition, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company.
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Notwithstanding the foregoing, a transaction will not be deemed a Change of Control unless the transaction qualifies as a change in control event within the meaning of Code Section 409A, as it has been and may be amended from time to time, and any proposed or final Treasury Regulations and Internal Revenue Service guidance that has been promulgated or may be promulgated thereunder from time to time.
Further and for the avoidance of doubt, a transaction will not constitute a Change of Control if: (i) its sole purpose is to change the state of the Companys incorporation, or (ii) its sole purpose is to create a holding company that will be owned in substantially the same proportions by the persons who held the Companys securities immediately before such transaction.
(c) Change of Control Period. Change of Control Period will mean the period beginning three (3) months prior to, and ending twelve (12) months following, a Change of Control.
(d) Code. Code will mean the Internal Revenue Code of 1986, as amended.
(e) Disability. Disability will mean that Executive has been unable to engage in any substantial gainful activity by reason of any medically determinable physical impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months. Alternatively, Executive will be deemed disabled if determined to be totally disabled by the Social Security Administration. Termination resulting from Disability may only be effected after at least thirty (30) days written notice by the Company of its intention to terminate Executives employment. In the event that Executive resumes the performance of substantially all of Executives duties hereunder before the termination of Executives employment becomes effective, the notice of intent to terminate based on Disability will automatically be deemed to have been revoked.
(f) Equity Awards. Equity Awards will mean Executives outstanding stock options, stock appreciation rights, restricted stock units, performance shares, performance stock units and any other Company equity compensation awards.
(g) Good Reason. Good Reason will mean without Executives express written consent (i) a significant reduction or adverse change in Executives duties, position, reporting relationship or responsibilities, or the removal of Executive from such duties, position or responsibilities; (ii) a reduction by the Company in the base salary of Executive as in effect immediately prior to such reduction unless (a) such reduction is part of a salary reduction plan across the Companys entire senior management team, (b) such reduction does not have a disproportionate effect on Executive in comparison to other members of the senior management team of the Company and (c) such reduction is not in excess of ten percent (10%) of Executives base salary; (iii) a material reduction by the Company in the kind or level of benefits to which Executive was entitled immediately prior to such reduction with the result that Executives overall benefits package is significantly reduced disproportionally to other members of senior management; (iv) a material breach by the Company of a term of this Agreement or any other agreement between the Company and Executive, including the failure of the Company to obtain assumption of this Agreement by any successor; and (v) the relocation of Executive to a facility or a location more than thirty-five (35) miles from Executives then present employment location. In addition, Executive must provide written notice to the Company of the existence of the one or more of the above conditions within ninety (90) days of its initial existence and the Company must be provided with thirty (30) days to cure the condition. If the condition is not cured within such thirty (30) day period, the Executive must terminate employment within thirty (30) days of the end of such cure period in order to qualify as a termination for Good Reason.
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For purposes of the Good Reason definition, the term Company will be interpreted to include any subsidiary, parent, affiliate or successor thereto, if applicable.
(h) Section 409A Limit. Section 409A Limit will mean two (2) times the lesser of: (i) Executives annualized compensation based upon the annual rate of pay paid to Executive during the Executives taxable year preceding the Executives taxable year of Executives termination of employment as determined under, and with such adjustments as are set forth in, Treasury Regulation 1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance issued with respect thereto; or (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year in which Executives employment is terminated.
7. Successors.
(a) The Companys 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 Companys business and/or assets will 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 will include any successor to the Companys 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) Executives Successors. The terms of this Agreement and all rights of Executive hereunder will inure to the benefit of, and be enforceable by, Executives 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 will be in writing and will be deemed to have been duly given when sent electronically or personally delivered when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid or when delivered by a private courier service such as UPS, DHL or Federal Express that has tracking capability. In the case of Executive, notices will be sent to the e-mail address or addressed to Executive at the home address, in either case which Executive most recently communicated to the Company in writing. In the case of the Company, electronic notices will be sent to the e-mail address of the Chief Executive Officer and the General Counsel and mailed notices will be addressed to its corporate headquarters, and all notices will be directed to the attention of its Chief Executive Officer and General Counsel.
(b) Notice of Termination. Any termination by the Company for Cause or by Executive for Good Reason will be communicated by a notice of termination to the other party hereto given in accordance with Section 8(a) of this Agreement. Such notice will indicate the specific
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termination provision in this Agreement relied upon, will set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and will specify the termination date (which will be not more than ninety (90) days after the giving of such notice).
9. Resignation. Upon the termination of Executives employment for any reason, Executive will be deemed to have resigned from all officer and/or director positions held at the Company and its affiliates voluntarily, without any further required action by Executive, as of the end of Executives employment and Executive, at the Boards request, will execute any documents reasonably necessary to reflect Executives resignation.
10. Arbitration. Any dispute or controversy arising out of or relating to any interpretation, construction, performance or breach of this Agreement, will be settled by arbitration pursuant to the arbitration provisions set forth in the Dispute Resolution Agreement, which was entered into as of March 13, 2020, by and between the Company and Executive (the Dispute Resolution Agreement), which agreement is incorporated herein by reference.
11. Miscellaneous Provisions.
(a) No Duty to Mitigate. Executive will not be required to mitigate the amount of any payment contemplated by this Agreement, nor will any such payment be reduced by any earnings that Executive may receive from any other source.
(b) Waiver. No provision of this Agreement will be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by Executive and by an authorized officer of the Company (other than Executive). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party will be considered a waiver of any other condition or provision or of the same condition or provision at another time.
(c) Headings. All captions and section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement.
(d) Entire Agreement. This Agreement along with the Dispute Resolution Agreement and Executives Employment Agreement constitutes the entire agreement of the parties hereto and supersedes in their entirety all prior representations, understandings, undertakings or agreements (whether oral or written and whether expressed or implied) of the parties with respect to the subject matter hereof, including, but not limited to, any rights to severance and/or change of control benefits set forth in any severance plan or policy, or pursuant to other written agreements with the Company. No waiver, alteration, or modification of any of the provisions of this Agreement will be binding unless in writing and signed by duly authorized representatives of the parties hereto and which specifically mention this Agreement.
(e) Choice of Law. The validity, interpretation, construction and performance of this Agreement will be governed by the laws of the State of New Jersey (with the exception of its conflict of laws provisions). Subject to the terms of the Dispute Resolution Agreement, any claims or
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legal actions by one party against the other arising out of the relationship between the parties contemplated herein (whether or not arising under this Agreement) will be commenced or maintained in any state or federal court located in the jurisdiction where Executive resides, and Executive and the Company hereby submit to the jurisdiction and venue of any such court.
(f) Severability. The invalidity or unenforceability of any provision or provisions of this Agreement will not affect the validity or enforceability of any other provision hereof, which will remain in full force and effect.
(g) Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable income, employment and other taxes.
(h) Counterparts. This Agreement may be executed manually or electronically in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.
[Signature Page to Follow]
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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year set forth below.
COMPANY | CORNERSTONE ONDEMAND, INC. | |||||
By: |
/s/ Elisa A. Steele |
|||||
Elisa A. Steele, Chair of the Board | ||||||
Date: May 1, 2020 | ||||||
EXECUTIVE | By: |
/s/ Philip S. Saunders |
||||
Date: May 1, 2020 |
[signature page of the Change of Control Severance Agreement]
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EXHIBIT A
FORM OF RELEASE OF CLAIMS
This release of claims (this Agreement) is made by and between Cornerstone OnDemand, Inc. (the Company), and (Executive). The Company and Executive are sometimes collectively referred to herein as the Parties and individually referred to as a Party.
RECITALS
WHEREAS, Executive signed a [Confidential Information and Invention Assignment Agreement] with the Company on (the Confidentiality Agreement);
WHEREAS, Executive signed a Change of Control Severance Agreement with the company on (the Change of Control Agreement), which, among other things, provides for certain severance benefits to be paid to Executive by the Company upon the termination of Executives employment including following a Change of Control (as defined in the Change of Control Agreement) of the Company;
WHEREAS, Executive was employed by the Company until [Click And Type Date], when Executives employment was terminated (Termination Date);
WHEREAS, in accordance with Section 4 of the Change of Control Agreement between the Company and Executive, Executive has agreed to enter into and not revoke a separation agreement and release of claims in favor of the Company as a condition to receiving the severance benefits described in the Change of Control Agreement; and
WHEREAS, the Parties wish to resolve any and all disputes, claims, complaints, grievances, charges, actions, petitions and demands that Executive may have against the Company and any of the Releasees (as defined below), including, but not limited to, any and all claims arising out of or in any way related to Executives employment relationship with the Company and the termination of that relationship.
NOW THEREFORE, for good and valuable consideration, including the mutual promises and covenants made herein, the Company and Executive hereby agree as follows:
COVENANTS
1. Termination. Executives employment with the Company terminated on the Termination Date.
2. Payment of Salary and Receipt of All Benefits. Executive acknowledges and represents that, other than the consideration to be paid in accordance with the terms and conditions of the Change of Control Agreement, the Company has paid or provided all salary, wages, bonuses, accrued vacation/paid time off, premiums, leaves, housing allowances, relocation costs, interest, severance,
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outplacement costs, fees, reimbursable expenses, commissions, draws, stock, stock options or other equity awards (including restricted stock unit awards), vesting, and any and all other benefits and compensation due to Executive and that no other reimbursements or compensation are owed to Executive.
3. Release of Claims. Executive agrees that the consideration to be paid in accordance with the terms and conditions of the Change of Control Agreement represents settlement in full of all outstanding obligations owed to Executive by the Company and its current and former officers, directors, employees, agents, investors, attorneys, stockholders, administrators, affiliates, benefit plans, plan administrators, insurers, trustees, divisions, and subsidiaries, and predecessor and successor corporations and assigns (collectively, the Releasees). Executive, on Executives own behalf and on behalf of Executives respective heirs, family members, executors, agents, and assigns, hereby and forever releases the Releasees from, and agrees not to sue concerning, or in any manner to institute, prosecute, or pursue, any claim, complaint, charge, duty, obligation, demand, or cause of action relating to any matters of any kind, whether presently known or unknown, suspected or unsuspected, that Executive may possess against any of the Releasees arising from any omissions, acts, facts, or damages that have occurred up until and including the Effective Date of this Agreement, including, without limitation the following:
(a) any and all claims relating to or arising from Executives employment relationship with the Company and the termination of that relationship;
(b) any and all claims relating to, or arising from, Executives right to purchase, or actual purchase of shares of stock of the Company, including, without limitation, any claims for fraud, misrepresentation, breach of fiduciary duty, breach of duty under applicable state corporate law, and securities fraud under any state or federal law;
(c) any and all claims for wrongful discharge of employment; termination in violation of public policy; discrimination; harassment; retaliation; breach of contract, both express and implied; breach of covenant of good faith and fair dealing, both express and implied; promissory estoppel; negligent or intentional infliction of emotional distress; fraud; negligent or intentional misrepresentation; negligent or intentional interference with contract or prospective economic advantage; unfair business practices; defamation; libel; slander; negligence; personal injury; assault; battery; invasion of privacy; false imprisonment; conversion; and disability benefits;
(d) any and all claims for violation of any federal, state, or municipal statute, including, but not limited to, Title VII of the Civil Rights Act of 1964; the Civil Rights Act of 1991; the Rehabilitation Act of 1973; the Americans with Disabilities Act of 1990; the Equal Pay Act; the Fair Labor Standards Act; the Fair Credit Reporting Act; the Age Discrimination in Employment Act of 1967; the Older Workers Benefit Protection Act; the Employee Retirement Income Security Act of 1974; the Worker Adjustment and Retraining Notification Act; the Family and Medical Leave Act; the Sarbanes-Oxley Act of 2002; the California Family Rights Act; the California Labor Code; the California Workers Compensation Act; and the California Fair Employment and Housing Act;1
1 |
References to California statutes will only be included in this Agreement if Executive resides in California at the time Executives employment relationship is terminated. Otherwise, statutes specific to the state in which Executive resides at the time of termination will be substituted. |
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(e) any and all claims for violation of the federal, or any state, constitution;
(f) any and all claims arising out of any other laws and regulations relating to employment or employment discrimination;
(g) any claim for any loss, cost, damage, or expense arising out of any dispute over the non-withholding or other tax treatment of any of the proceeds received by Executive as a result of this Agreement; and
(h) any and all claims for attorneys fees and costs.
Executive agrees that the release set forth in this Section 3 (the Release) will be and remain in effect in all respects as a complete general release as to the matters released. The Release does not extend to any severance obligations due Executive under the Change of Control Agreement. The Release does not release claims that cannot be released as a matter of law, including, but not limited to, Executives right to file a charge with or participate in a charge by the Equal Employment Opportunity Commission, or any other local, state, or federal administrative body or government agency that is authorized to enforce or administer laws related to employment, against the Company (with the understanding that any such filing or participation does not give Executive the right to recover any monetary damages against the Company; Executives release of claims herein bars Executive from recovering such monetary relief from the Company). Executive represents that Executive has made no assignment or transfer of any right, claim, complaint, charge, duty, obligation, demand, cause of action, or other matter waived or released by this Section 3. Nothing in this Agreement waives Executives rights to indemnification or any payments under any fiduciary insurance policy, if any, provided by any act or agreement of the Company, state or federal law or policy of insurance.
4. [Acknowledgment of Waiver of Claims under ADEA. Executive acknowledges that Executive is waiving and releasing any rights Executive may have under the Age Discrimination in Employment Act of 1967 (ADEA) and that this waiver and release is knowing and voluntary. Executive agrees that this waiver and release does not apply to any rights or claims that may arise under the ADEA after the Effective Date of this Agreement. Executive acknowledges that the consideration given for this waiver and release Agreement is in addition to anything of value to which Executive was already entitled. Executive further acknowledges that Executive has been advised by this writing that (a) Executive should consult with an attorney prior to executing this Agreement; (b) Executive has at least 21 days within which to consider this Agreement; (c) Executive has 7 days following the execution of this Agreement by the parties to revoke the Agreement; (d) this Agreement will not be effective until the revocation period has expired; and (e) nothing in this Agreement prevents
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or precludes Executive from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties or costs for doing so, unless specifically authorized by federal law. In the event Executive signs this Agreement and delivers it to the Company in less than the 21-day period identified above, Executive hereby acknowledges that Executive has freely and voluntarily chosen to waive the time period allotted for considering this Agreement. Executive acknowledges and understands that revocation must be accomplished by a written notification to the Chief Legal Officer of the Company that is received prior to the Effective Date.]2
5. [California Civil Code Section 1542. Executive acknowledges that Executive has been advised to consult with legal counsel and is familiar with the provisions of California Civil Code Section 1542, a statute that otherwise prohibits the release of unknown claims, which provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.
Executive, being aware of California Civil Code Section 1542, agrees to expressly waive any rights Executive may have thereunder, as well as under any other statute or common law principles of similar effect.
OR
Unknown Claims. Executive acknowledges that Executive has been advised to consult with legal counsel and that Executive is familiar with the principle that a general release does not extend to claims that the releaser does not know or suspect to exist in his or her favor at the time of executing the release, which, if known by him or her, must have materially affected his or her settlement with the releasee. Executive, being aware of this principle, agrees to expressly waive any rights Executive may have to that effect, as well as under any other statute or common law principles of similar effect.]3
6. No Pending or Future Lawsuits. Executive represents that Executive has no lawsuits, claims, or actions pending in Executives name, or on behalf of any other person or entity, against the Company or any of the other Releasees. Executive also represents that Executive does not intend to bring any claims on Executives own behalf or on behalf of any other person or entity against the
2 |
This provision will only be included in this Agreement if Executive is age 40 or older at the time Executives employment relationship is terminated. |
3 |
If Executive resides in California at the time Executives employment relationship is terminated, the first provision California Civil Code Section 1542 will be included in this Agreement, otherwise the second provision Unknown Claims will be used. |
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Company or any of the other Releasees. Executive confirms that Executive has no knowledge of any wrongdoing involving improper or false claims against a federal or state governmental agency, or any other wrongdoing that involves Executive or any other present or former Company employees, including violations of the federal and state securities laws or the Sarbanes-Oxley Act of 2002.
7. Sufficiency of Consideration. Executive hereby acknowledges and agrees that Executive has received good and sufficient consideration for every promise, duty, release, obligation, agreement and right contained in this Release.
8. Confidential Information. Executive reaffirms and agrees to observe and abide by the terms of the Confidentiality Agreement, specifically including the provisions therein regarding nondisclosure of the Companys trade secrets and confidential and proprietary information, which agreement will continue in force; provided, however, that: (a) as to any provisions regarding competition contained in the Confidentiality Agreement that conflict with the provisions regarding competition contained in the Change of Control Agreement, the provisions of the Change of Control Agreement will control; (b) as to any provisions regarding solicitation of employees contained in the Confidentiality Agreement that conflict with the provisions regarding solicitation of employees contained in this Agreement, the provisions of this Agreement will control.
9. Return of Company Property; Passwords and Password-protected Documents. Executive confirms that Executive has returned to the Company in good working order all keys, files, records (and copies thereof), equipment (including, but not limited to, computer hardware, software and printers, wireless handheld devices, cellular phones and pagers), access or credit cards, Company identification, and any other Company-owned property in Executives possession or control. Executive further confirms that Executive has cancelled all accounts for Executives benefit, if any, in the Companys name, including, but not limited to, credit cards, telephone charge cards, cellular phone and/or pager accounts and computer accounts. Executive also confirms that Executive has delivered all passwords in use by Executive at the time of Executives termination, a list of any documents that Executive created or of which Executive is otherwise aware that are password- protected, along with the password(s) necessary to access such password-protected documents.
10. No Cooperation. Executive agrees that Executive will not knowingly encourage, counsel, or assist any attorneys or their clients in the presentation or prosecution of any disputes, differences, grievances, claims, charges, or complaints by any third party against any of the Releasees, unless under a subpoena or other court order to do so or as related directly to the ADEA waiver in this Agreement. Executive agrees both to immediately notify the Company upon receipt of any such subpoena or court order, and to furnish, within three (3) business days of its receipt, a copy of such subpoena or other court order. If approached by anyone for counsel or assistance in the presentation or prosecution of any disputes, differences, grievances, claims, charges, or complaints against any of the Releasees, Executive will state no more than that Executive cannot provide any such counsel or assistance.
11. Nondisparagement. Executive agrees that Executive will not in any way, directly or indirectly, do or say anything at any time which disparages the Company, its business interests or reputation, or that of any of the other Released Parties.
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12. No Admission of Liability. Executive understands and acknowledges that this Agreement constitutes a compromise and settlement of any and all actual or potential disputed claims by Executive. No action taken by the Company hereto, either previously or in connection with this Agreement, will be deemed or construed to be (a) an admission of the truth or falsity of any actual or potential claims or (b) an acknowledgment or admission by the Company of any fault or liability whatsoever to Executive or to any third party.
13. Solicitation of Employees. Executive agrees that for a period of 12 months immediately following the Effective Date of this Agreement, Executive will not directly or indirectly (a) solicit, induce, recruit or encourage any of the Companys employees to leave their employment at the Company or (b) attempt to solicit, induce, recruit or encourage, either for Executive or for any other person or entity, any of the Companys employees to leave their employment.
14. Costs. The Parties will each bear their own costs, attorneys fees and other fees incurred in connection with the preparation of this Agreement.
15. Arbitration. THE PARTIES AGREE THAT ANY AND ALL DISPUTES ARISING OUT OF THE TERMS OF THIS AGREEMENT, THEIR INTERPRETATION, AND ANY OF THE MATTERS HEREIN RELEASED, WILL BE SUBJECT TO ARBITRATION IN SANTA CLARA COUNTY, BEFORE JUDICIAL ARBITRATION & MEDIATION SERVICES (JAMS), PURSUANT TO ITS EMPLOYMENT ARBITRATION RULES & PROCEDURES (JAMS RULES). THE ARBITRATOR MAY GRANT INJUNCTIONS AND OTHER RELIEF IN SUCH DISPUTES. THE ARBITRATOR WILL ADMINISTER AND CONDUCT ANY ARBITRATION IN ACCORDANCE WITH CALIFORNIA LAW, INCLUDING THE CALIFORNIA CODE OF CIVIL PROCEDURE, AND THE ARBITRATOR WILL APPLY SUBSTANTIVE AND PROCEDURAL CALIFORNIA LAW TO ANY DISPUTE OR CLAIM, WITHOUT REFERENCE TO ANY CONFLICT-OF-LAW PROVISIONS OF ANY JURISDICTION. TO THE EXTENT THAT THE JAMS RULES CONFLICT WITH CALIFORNIA LAW, CALIFORNIA LAW WILL TAKE PRECEDENCE. THE DECISION OF THE ARBITRATOR WILL BE FINAL, CONCLUSIVE, AND BINDING ON THE PARTIES TO THE ARBITRATION. THE PARTIES AGREE THAT THE PREVAILING PARTY IN ANY ARBITRATION WILL BE ENTITLED TO INJUNCTIVE RELIEF IN ANY COURT OF COMPETENT JURISDICTION TO ENFORCE THE ARBITRATION AWARD. THE PARTIES TO THE ARBITRATION WILL EACH PAY AN EQUAL SHARE OF THE COSTS AND EXPENSES OF SUCH ARBITRATION, AND EACH PARTY WILL SEPARATELY PAY FOR ITS RESPECTIVE COUNSEL FEES AND EXPENSES; PROVIDED, HOWEVER, THAT THE ARBITRATOR WILL AWARD ATTORNEYS FEES AND COSTS TO THE PREVAILING PARTY, EXCEPT AS PROHIBITED BY LAW. THE PARTIES HEREBY AGREE TO WAIVE THEIR RIGHT TO HAVE ANY DISPUTE BETWEEN THEM RESOLVED IN A COURT OF LAW BY A JUDGE OR JURY. NOTWITHSTANDING THE FOREGOING, THIS SECTION WILL NOT PREVENT EITHER PARTY FROM SEEKING INJUNCTIVE RELIEF (OR ANY OTHER PROVISIONAL REMEDY) FROM ANY COURT HAVING JURISDICTION OVER THE PARTIES AND THE SUBJECT MATTER OF THEIR DISPUTE RELATING TO THIS AGREEMENT AND THE AGREEMENTS INCORPORATED HEREIN BY REFERENCE. SHOULD ANY PART OF THE ARBITRATION AGREEMENT CONTAINED IN THIS PARAGRAPH CONFLICT WITH ANY OTHER ARBITRATION AGREEMENT BETWEEN THE PARTIES, THE PARTIES AGREE THAT THIS ARBITRATION AGREEMENT WILL GOVERN.4
|
4 |
References to California will only be included in this Agreement if Executive resides in California at the time Executives employment relationship is terminated. |
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16. Authority. The Company represents and warrants that the undersigned has the authority to act on behalf of the Company and to bind the Company and all who may claim through it to the terms and conditions of this Agreement. Executive represents and warrants that Executive has the capacity to act on Executives own behalf and on behalf of all who might claim through Executive to bind them to the terms and conditions of this Agreement. Each Party warrants and represents that there are no liens or claims of lien or assignments in law or equity or otherwise of or against any of the claims or causes of action released herein.
17. No Representations. Executive represents that Executive has had the opportunity to consult with an attorney, and has carefully read and understands the scope and effect of the provisions of this Agreement. Executive has relied upon any representations or statements made by the Company that are not specifically set forth in this Agreement.
18. Severability. In the event that any provision or any portion of any provision hereof or any surviving agreement made a part hereof becomes or is declared by a court of competent jurisdiction or arbitrator to be illegal, unenforceable, or void, this Agreement will continue in full force and effect without said provision or portion of provision.
19. Entire Agreement. This Agreement represents the entire agreement and understanding between the Company and Executive concerning the subject matter of this Agreement and Executives employment with and separation from the Company and the events leading thereto and associated therewith, and supersedes and replaces any and all prior agreements and understandings concerning the subject matter of this Agreement and Executives relationship with the Company, with the exception of the Change of Control Agreement, the Confidentiality Agreement, and Executives written equity compensation agreements with the Company.
20. No Oral Modification. This Agreement may only be amended in writing signed by Executive and the Chairman of the Board of Directors of the Company.
21. Governing Law. This Agreement will be governed by the laws of the State of California, without regard for choice-of-law provisions. Executive consents to personal and exclusive jurisdiction and venue in the State of California.5
5 |
References to California will only be included in this Agreement if Executive resides in California at the time Executives employment relationship is terminated. |
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22. Effective Date. [Executive understands that this Agreement will be null and void if not executed by Executive within 21 days. Each Party has seven days after that Party signs this Agreement to revoke it. This Agreement will become effective on the eighth (8th)day after Executive signed this Agreement, so long as it has been signed by the Parties and has not been revoked by either Party before that date (the Effective Date).]6 OR [This Agreement will be effective after it has been signed or executed by both Parties (the Effective Date)].7
23. Counterparts. This Agreement may be executed in counterparts and by facsimile, and each counterpart and facsimile will have the same force and effect as an original and will constitute an effective, binding agreement on the part of each of the undersigned.
24. Voluntary Execution of Agreement. Executive understands and agrees that Executive executed this Agreement voluntarily, without any duress or undue influence on the part or behalf of the Company or any third party, with the full intent of releasing all of Executives claims against the Company and any of the other Releasees. Executive expressly acknowledges that:
(a) |
Executive has read this Agreement; |
(b) |
Executive has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of Executives own choice or has elected not to retain legal counsel; |
(c) |
Executive understands the terms and consequences of this Agreement and of the releases it contains; and |
(d) |
Executive is fully aware of the legal and binding effect of this Agreement. |
* * * * *
IN WITNESS WHEREOF, the Parties have executed this Agreement on the respective dates set forth below.
COMPANY | CORNERSTONE ONDEMAND, INC. | |||||
By: |
|
|||||
Name: |
|
|||||
Title: |
|
6 |
This provision will only be included in this Agreement if Executive is age 40 or older at the time Executives employment relationship is terminated. |
7 |
This provision will only be included in this Agreement if Executive is under the age of 40 at the time Executives employment relationship is terminated. |
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Dated: | ||||||
EXECUTIVE | [ ], an individual | |||||
|
||||||
(Signature) | ||||||
Dated: |
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Exhibit 10.3
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement (this Agreement) is entered into and is effective as of June 15, 2020 (the Effective Date), by and between Cornerstone OnDemand, Inc., a Delaware corporation (the Company), and Adam Miller (Executive).
RECITALS
WHEREAS, the Company and Executive previously entered into that certain Employment Agreement, effective as of November 8, 2010 (the Prior Agreement);
WHEREAS, the Company and Executive wish to supersede the Prior Agreement and further desire that this Agreement amend and restate the Prior Agreement in its entirety;
WHEREAS, Executive has served as the President and Chief Executive Officer for the Company and as a member of the Companys Board of Directors (the Board), and, in such capacity, has performed such duties, services and responsibilities on behalf of the Company consistent with such position as may be reasonably assigned to Executive from time to time by the Board; and
WHEREAS, the Company wishes to continue to retain the services of Executive on behalf of the Company as its Co-Chairperson of the Board (Co-Chairperson) and Executive wishes to remain employed by the Company and render such services on the terms and conditions set forth in this Agreement.
CONSIDERATION AND AGREEMENT
NOW THEREFORE, in consideration of the foregoing recital and the respective undertakings of the Company and Executive set forth below, the Company and Executive agree as follows:
1. Duties and Scope of Services. Commencing on the Effective Date, Executive will serve as Co-Chairperson. Executive shall have the authority generally allowed to persons discharging the duties of such position including, but not limited to the duties, functions and responsibilities set forth in Exhibit A attached hereto. Executive will, in good faith, devote sufficient business efforts to the performance of Executives duties hereunder, provided however, that Executive may serve on outside board positions or provide other advisory services that are not competitive with the Company subject to the requirement that such service on outside boards of directors or advisory services do not materially interfere with Executives performance of his duties under this Agreement and the Board has approved such board membership or advisory services (which will not be unreasonably withheld). The Company and Executive have previously entered into an Indemnification Agreement dated February 2, 2011 (the Indemnification Agreement), which agreement is incorporated herein by reference. Executives principal place of employment shall continue to be at the Companys offices located in Santa Monica, California. The Company shall continue to furnish Executive with the same office space, equipment, technical, secretarial and clerical assistance and such other facilities, services and supplies as Executive has customarily received to enable Executive to perform the duties required of Executive hereunder in an efficient and professional manner.
2. Board Membership. Executive will continue to serve as a member of the Board following the Effective Date. At each annual meeting of the Companys stockholders while Executive is Co-Chairperson upon which Executives term as a Board member is scheduled to expire, the Company will nominate Executive to serve as Chair of the Board or Co-Chairperson. Executives continued service as a member of the Board will be subject to any required stockholder approval.
3. At-Will Employment. Subject to the terms hereof, Executives employment with the Company will be at-will employment and may be terminated by the Company at any time with or without cause or with or without notice. However, as described in this Agreement, Executive may be entitled to severance benefits depending upon the circumstances of Executives termination of employment following the Effective Date.
4. Term of Agreement. Subject to Section 3, this Agreement will have an initial term of three (3) years commencing on the Effective Date (the Initial Term). On the third anniversary of the Effective Date, this Agreement will renew automatically for additional one (1) year terms (each an Additional Term, and together with the Initial term, the Term), unless either party provides the other party with written notice of non-renewal at least sixty (60) days prior to the date of automatic renewal. Notwithstanding the foregoing provisions of this paragraph, (a) if a Change of Control occurs when there are fewer than twelve (12) months remaining during the Initial Term or an Additional Term, the term of this Agreement will extend automatically through the date that is twelve (12) months following the effective date of the Change of Control, or (b) if an initial occurrence of an act or omission by the Company constituting the grounds for Good Reason in accordance with Section 10(h) hereof has occurred (the Initial Grounds), and the expiration date of the Company cure period (as such term is used in Section 10(h)) with respect to such Initial Grounds could occur following the expiration of the Initial Term or an Additional Term, the term of this Agreement will extend automatically through the date that is thirty (30) days following the expiration of such cure period, but such extension of the term shall only apply with respect to the Initial Grounds. If Executive becomes entitled to benefits under Section 11 during the term of this Agreement, the Agreement will not terminate until all of the obligations of the parties hereto with respect to this Agreement have been satisfied.
5. Compensation. For fiscal year 2020, Executives base salary and performance bonus opportunity as was in effect immediately prior to the Effective Date will continue in effect and unchanged. For fiscal year 2021 and beyond, and on at least an annual basis and at the same time compensation decisions are made for other executives, the Board or the Compensation Committee of the Board (the Compensation Committee) will consider and review Executives base salary, performance bonus opportunity, and equity (the Total Compensation Opportunity). As part of the review, the Board or the Compensation Committee will consider, as it deems appropriate, market survey or other data provided by an independent third party for similarly situated executives at peer or otherwise comparable companies (based on industry and other data as determined by the Board or the Compensation Committee). In connection with this review, the Board or the Compensation Committee will adjust and establish Executives Total Compensation Opportunity.
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6. Other Benefits. Executive shall be entitled to participate in executive benefit plans and programs of the Company, if any, on the same terms and conditions as other similarly-situated employees to the extent that Executives position, tenure, salary, age, health and other qualifications make Executive eligible to participate in such plans or programs, subject to the rules and regulations applicable thereto. The Company reserves the right to cancel or change the benefit plans and programs it offers to its employees at any time.
7. Electronic Mail Access. Executives current electronic mailbox identification account maintained by the Company (the Executive E-mail Account) shall remain active indefinitely; provided that, upon Executives termination of employment, the Company shall forward any electronic mail that may be sent to or received by the Executive E-mail Account that does not contain confidential information as contemplated by the terms of the Proprietary Information and Inventions Agreement (the Confidentiality Agreement) on and after the Date of Termination to an electronic mailbox identification account designated by Executive.
8. Vacations; Holidays, Sick Days. Executive shall be entitled to annual paid vacation, paid holidays, and paid sick leave in accordance with the Companys applicable policies, which may change from time to time.
9. Expenses. The Company will reimburse Executive for standard business expenses pursuant to the Companys standard policies in effect from time to time. Executive shall be reimbursed for business-class air fare for all flights in excess of one (1) hour. The Company will reimburse Executive, or directly pay, reasonable attorneys fees related to the negotiation and review of this Agreement and related documentation up to a maximum of $15,000; provided that, Executive submits the invoice for such attorneys fees no later than thirty (30) days after the Effective Date. The Company shall reimburse Executive for the attorneys fees within thirty (30) days after Executive submits the invoice for such attorneys fees to the Company. In the event that any expense reimbursements are taxable to Executive, such reimbursements will be made in the time frame specified by Treasury Regulation Section 1.409A-3(i)(1)(iv) unless another time frame that complies with or is exempt from Section 409A (as defined below) is specified in the Companys expense reimbursement policy.
10. Definitions.
(a) Cause. Cause will mean (i) an act of material dishonesty made by Executive in connection with Executives carrying out his job responsibilities to the Company intended to result in substantial personal enrichment of the Executive; (ii) Executives conviction of, or plea of nolo contendere to a felony which the Board reasonably believes had or will have a material detrimental effect on the Companys reputation or business; (iii) a willful act by the Executive which constitutes gross misconduct and which is injurious to the Company or its affiliates; (iv) Executives willful and material breach of this Agreement, including without limitation, his intentional failure to perform his stated duties, and his continued failure to cure such breach to the reasonable satisfaction of the Board within ten (10) days following written notice of such breach to Executive from the Company; and (v) Executives material violation of a Company
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policy that results in a material detrimental effect on the Companys reputation or business. Notwithstanding the foregoing, failure of Executive to meet performance standards or objectives, by itself, shall not constitute Cause.
The foregoing definition does not in any way limit the Companys ability to terminate Executives employment relationship at any time as provided in Section 3 above, and the term Company will be interpreted to include any subsidiary, parent, affiliate or successor thereto, if applicable.
(b) Change of Control. Change of Control means the occurrence of any of the following events:
(i) A change in the ownership of the Company which occurs on the date that any one person, or more than one person acting as a group (Person), acquires ownership of the stock of the Company that, together with the stock held by such Person, constitutes more than fifty percent (50%) of the total voting power of the stock of the Company; provided, however, that for purposes of this clause (i), the acquisition of additional stock by any one Person, who is considered to own more than fifty percent (50%) of the total voting power of the stock of the Company will not be considered a Change of Control; or
(ii) A change in the effective control of the Company which occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election. For purposes of this clause (ii), if any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered a Change of Control; or
(iii) A change in the ownership of a substantial portion of the Companys assets which occurs on the date that any Person acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such Person or Persons) assets from the Company that have a total gross fair market value equal to or more than fifty percent (50%) of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions; provided, however, that for purposes of this clause (iii), the following will not constitute a change in the ownership of a substantial portion of the Companys assets: (A) a transfer to an entity that is controlled by the Companys stockholders immediately after the transfer, or (B) a transfer of assets by the Company to: (1) a stockholder of the Company (immediately before the asset transfer) in exchange for or with respect to the Companys stock, (2) an entity, fifty percent (50%) or more of the total value or voting power of which is owned, directly or indirectly, by the Company, (3) a Person, that owns, directly or indirectly, fifty percent (50%) or more of the total value or voting power of all the outstanding stock of the Company, or (4) an entity, at least fifty percent (50%) of the total value or voting power of which is owned, directly or indirectly, by a Person described in clause (iii)(B)(3). For purposes of this clause (iii), gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
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For purposes of this definition, Persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company.
Notwithstanding the foregoing, a transaction will not be deemed a Change of Control unless the transaction qualifies as a change in control event within the meaning of Code Section 409A.
Further and for the avoidance of doubt, a transaction will not constitute a Change of Control if: (i) its sole purpose is to change the state of the Companys incorporation, or (ii) its sole purpose is to create a holding company that will be owned in substantially the same proportions by the Persons who held the Companys securities immediately before such transaction.
(c) Change of Control Period. Change of Control Period will mean the period beginning three (3) months prior to, and ending twelve (12) months following, a Change of Control.
(d) Code. Code will mean the Internal Revenue Code of 1986, as amended.
(e) Date of Termination. Date of Termination will mean the date that the termination of Executives employment with the Company is effective on account of Executives death, Disability, termination by the Company for Cause or without Cause, or by Executive with or without Good Reason, as the case may be. The Initial Term or Additional Term, as the case may be, shall end on the Date of Termination.
(f) Disability. Disability will mean that Executive has been unable to engage in any substantial gainful activity by reason of any medically determinable physical impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months. Alternatively, Executive will be deemed disabled if determined to be totally disabled by the Social Security Administration. Termination resulting from Disability may only be effected after at least thirty (30) days written notice by the Company of its intention to terminate Executives employment. In the event that Executive resumes the performance of substantially all of Executives duties hereunder before the termination of Executives employment becomes effective, the notice of intent to terminate based on Disability will automatically be deemed to have been revoked.
(g) Equity Awards. Equity Awards will mean Executives outstanding stock options, stock appreciation rights, restricted stock units, performance shares, performance stock units and any other equity compensation awards of the Company.
(h) Good Reason. Good Reason will mean without Executives express written consent (i) a significant reduction or adverse change in Executives duties, position, reporting relationship or responsibilities, or the removal of Executive from such duties, position or responsibilities; (ii) a reduction by the Company in the Total Compensation Opportunity to an amount that is less than seventy-five percent (75%) of the then current annual compensation (including the amount of the base salary, annual bonus opportunity at target performance, and the
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grant date value of equity award(s)) of the Chief Executive Officer as in effect immediately prior to such reduction; (iii) a material reduction by the Company in the kind or level of benefits to which Executive was entitled immediately prior to such reduction with the result that Executives overall benefits package is significantly reduced disproportionally to other members of senior management; (iv) a material breach by the Company of a term of this Agreement or any other agreement between the Company and Executive, including the failure of the Company to obtain assumption of this Agreement by any successor; and (v) the relocation of Executive to a facility or a location more than thirty-five (35) miles from Executives then present employment location. In addition, Executive must provide written notice to the Company of the existence of the one or more of the above conditions within ninety (90) days of its initial existence and the Company must be provided with thirty (30) days to cure the condition. If the condition is not cured within such thirty (30) day period, the Executive must terminate employment within thirty (30) days of the end of such cure period in order to qualify as a termination for Good Reason.
For purposes of the Good Reason definition, the term Company will be interpreted to include any subsidiary, parent, affiliate or successor thereto, if applicable.
(i) Section 409A. Section 409A will mean Section 409A of the Code, as it has been and may be amended from time to time, and any proposed or final Treasury Regulations and Internal Revenue Service guidance that has been promulgated or may be promulgated thereunder from time to time.
(j) Section 409A Limit. Section 409A Limit will mean two (2) times the lesser of: (i) Executives annualized compensation based upon the annual rate of pay paid to Executive during the Executives taxable year preceding the Executives taxable year of Executives termination of employment as determined under, and with such adjustments as are set forth in, Treasury Regulation 1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance issued with respect thereto; or (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year in which Executives employment is terminated.
11. Severance Benefits.
(a) Termination without Cause or Resignation for Good Reason during a Change of Control Period. In the event Executives employment is terminated as a result of either (i) termination by the Company without Cause or (ii) termination by Executive for Good Reason during the Change in Control Period, then, subject to Section 11(e):
(1) Executive will receive: (i) all accrued but unpaid vacation, expense reimbursements, wages, and other benefits due to Executive under any plans, policies, and arrangements provided by the Company (including, but not limited to, any bonuses earned prior to the termination of employment but not yet paid solely due to the Companys policy which shall be paid out at the earliest time as would not give rise to additional taxation under Section 409A); (ii) a lump-sum payment (less applicable withholding taxes) equal to one hundred fifty percent (150%) of the Chief Executive Officer of the Companys annual base salary as in effect immediately prior to the Date of Termination or, if greater, at the level in effect immediately prior to the Change of Control; (iii) a lump-sum payment (less applicable withholding taxes) equal to
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150% of the Chief Executive Officer of the Companys full annual bonus for the year of termination (whether established on a quarterly, semi-annual, annual and/or other periodic basis) at target level as in effect immediately prior to the Date of Termination; (iv) one hundred percent (100%) premiums paid by the Company for continued health, dental and vision benefits for Executive (and any eligible dependents) under the Companys health, dental and vision plans until the earlier of (x) eighteen (18) months (provided Executive validly elects to continue coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA)), or (y) the date upon which Executive and Executives eligible dependents become covered under similar plans;
(2) one hundred percent (100%) of Executives then-outstanding and unvested Equity Awards will become vested in full; provided however, if an outstanding Equity Award is to vest and/or the amount of the award to vest is to be determined based on the achievement of performance criteria, then the Equity Award will vest as to one hundred percent (100%) of the amount of the Equity Award assuming the performance criteria had been achieved at target levels for the relevant performance period(s); and
(3) Executives then-outstanding and unvested Equity Awards that are stock options or stock appreciation rights will remain exercisable until the expiration of such Equity Awards original term; provided that, Executive agrees and acknowledges that as to any of Executives stock options that were granted prior to the Effective Date and that qualify as incentive stock options under Section 422 of the Code, the extension of the post-termination exercise period pursuant to this Section 11(a)(3) will be considered a modification of the incentive stock option and could result in immediately disqualifying any such options as incentive stock options; provided further, that Executive agrees and acknowledges that in any event, an incentive stock option will convert to a nonstatutory stock option three (3) months and one (1) day after Executive ceases to be an employee of the Company or any parent or subsidiary corporation of the Company.
(b) Termination without Cause or for Good Reason outside a Change of Control Period. In the event Executives employment is terminated as a result of either (i) termination by the Company without Cause or (ii) termination by Executive for Good Reason at any time other than during the Change of Control Period, then, subject to Section 11(e):
(1) Executive will receive: (i) all accrued but unpaid vacation, expense reimbursements, wages, and other benefits due to Executive under any plans, policies, and arrangements provided by the Company (including, but not limited to, any bonuses earned prior to the termination of employment but not yet paid solely due to the Companys policy which shall be paid out at the earliest time as would not give rise to additional taxation under Section 409A); (ii) continuing payments of severance pay (less applicable withholding taxes) at a rate equal to the rate of the Chief Executive Officer of the Companys annual base salary, as then in effect, for eighteen (18) months from the Date of Termination in accordance with the Companys normal payroll policies; (iii) a lump sum payment (less applicable withholding taxes) equal to one hundred fifty percent (150%) of the Chief Executive Officer of the Companys full annual bonus for the year of termination (whether established on a quarterly, semi-annual, annual and/or other periodic basis) at target level as in effect immediately prior to the Date of Termination; (iv) one hundred percent (100%) premiums paid by the Company for continued health, dental and vision benefits for Executive (and any eligible dependents) under the Companys health, dental and vision
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plans until the earlier of (x) eighteen (18) months, (provided Executive validly elects to continue coverage under COBRA) or (y) the date upon which Executive and Executives eligible dependents become covered under similar plans; and
(2) Executive will receive the treatment set forth in Sections 11(a)(2) and 11(a)(3) in respect of his then-outstanding and unvested Equity Awards, subject to the conditions set forth therein.
(c) Notwithstanding Sections 11(a)(1)(iv) and 11(b)(1)(iv), if the Company determines in its sole discretion that it cannot provide the benefit without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company will, in lieu thereof, provide to Executive a taxable monthly payment in an amount equal to the monthly COBRA premium that Executive would be required to pay to continue his group health coverage in effect on the last date of employment with the Company (which amount will be based on the premium for the first (1st) month of COBRA coverage), which will be made regardless of whether Executive elects COBRA continuation coverage and will commence in the month following the month in which the Date of Termination occurs and will end at the times COBRA reimbursements would have otherwise ended.
(d) Expiration of the Term. Upon the expiration of the Term solely resulting from the Companys non-renewal, then, subject to Section 11(e):
(1) one hundred percent (100%) of Executives then-outstanding and unvested Equity Awards will become vested in full; provided however, if an outstanding Equity Award is to vest and/or the amount of the award to vest is to be determined based on the achievement of performance criteria, then the Equity Award will vest as to one hundred percent (100%) of the amount of the Equity Award assuming the performance criteria had been achieved at target levels for the relevant performance period(s); and
(2) Executives then-outstanding and unvested Equity Awards that are stock options or stock appreciation rights will remain exercisable until the expiration of such Equity Awards original term; provided that, Executive agrees and acknowledges that as to any of Executives stock options that were granted prior to the Effective Date and that qualify as incentive stock options under Section 422 of the Code, the extension of the post-termination exercise period pursuant to this Section 11(d)(2) will be considered a modification of the incentive stock option and could result in immediately disqualifying any such options as incentive stock options; provided further, that Executive agrees and acknowledges that in any event, an incentive stock option will convert to a nonstatutory stock option three (3) months and one (1) day after Executive ceases to be an employee of the Company or any parent or subsidiary corporation of the Company.
(e) Release of Claims Agreement. The receipt of any severance payments or benefits (other than the accrued benefits set forth in either Sections 11(a)(1)(i) or 11(b)(1)(i)) pursuant to this Agreement is subject to Executive signing and not revoking a separation agreement and release of claims in substantially the form attached hereto as Exhibit B (the Release), which must become effective and irrevocable no later than the sixtieth (60th) day following Executives termination of employment (the Release Deadline). Any severance
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payments or benefits under this Agreement will be paid on, or, in the case of installments, will not commence until, the sixtieth (60th) day following Executives separation from service, or, if later, such time as required by Section 13(c), except that the acceleration of vesting of Equity Awards not subject to Section 409A will become effective on the date the Release becomes effective and irrevocable. Except as required by Section 13(c), any lump sum or installment payments that would have been made to Executive during the sixty (60) day period immediately following Executives separation from service but for the preceding sentence will be paid to Executive on the sixtieth (60th) day following his separation from service and the remaining payments will be made as provided in this Agreement. If the Release does not become effective and irrevocable by the Release Deadline, Executive will forfeit any right to severance payments or benefits under this Agreement. In no event will severance payments or benefits be paid or provided until the Release actually becomes effective and irrevocable. Executives receipt of any payments or benefits under Section 11 (other than the accrued benefits set forth in either Sections 11(a)(1)(i) or 11(b)(1)(i)) will be subject to Executive continuing to comply with the terms of the Confidentiality Agreement between the Company and Executive.
(f) No Duty to Mitigate. Executive will not be required to mitigate the amount of any payment contemplated by this Agreement, nor will any earnings that Executive may receive from any other source reduce any such payment.
(g) Voluntary Resignation; Termination for Cause. If Executives employment with the Company is terminated (i) voluntarily by Executive without Good Reason or (ii) for Cause by the Company, then Executive will not be entitled to receive severance or other benefits (other than the payment of accrued but unpaid wages, as required by law, and any unreimbursed reimbursable expenses).
(h) Termination as a Result of Disability; Death. If the Company terminates Executives employment as a result of Executives Disability, or Executives employment terminates due to Executives death, then, subject to Section 11(e):
(i) Executives then outstanding and unvested Equity Awards will vest as provided in Sections 11(a)(2)-(3) or 11(b)(2), as applicable, as if Executives termination were treated as a termination without Cause; and
(ii) Executive will not be entitled to receive any other severance or benefits (other than the payment of accrued but unpaid wages, as required by law, and any unreimbursed reimbursable expenses).
(i) Exclusive Remedy. In the event of a termination of Executives employment as set forth in Section 11(a) or Section 11(b) of this Agreement, the provisions of Section 11 are intended to be and are exclusive and in lieu of any other rights or remedies to which Executive or the Company otherwise may be entitled, whether at law, tort or contract, in equity, or under this Agreement (other than the payment of accrued but unpaid wages, as required by law, and any unreimbursed reimbursable expenses). Executive will be entitled to no benefits, compensation or other payments or rights upon a termination of employment other than those benefits expressly set forth in Section 11 of this Agreement.
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12. Limitation on Payments. In the event that the severance and other benefits provided for in this Agreement or otherwise payable to Executive (i) constitute parachute payments within the meaning of Section 280G of the Code, and (ii) but for this Section 12, would be subject to the excise tax imposed by Section 4999 of the Code, then Executives benefits under Section 11 will be either:
(a) delivered in full, or
(b) delivered as to such lesser extent which would result in no portion of such 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 Executive on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be taxable under Section 4999 of the Code. If a reduction in severance and other benefits constituting parachute payments is necessary so that benefits are delivered to a lesser extent, reduction will occur in the following order: (i) reduction of cash payments; (ii) cancellation of awards granted contingent on a change in ownership or control (within the meaning of Code Section 280G); (iii) cancellation of accelerated vesting of Equity Awards; and (iv) reduction of employee benefits. In the event that acceleration of vesting of Equity Awards is to be reduced, such acceleration of vesting will be cancelled in the reverse order of the date of grant of Executives Equity Awards.
Unless the Company and Executive otherwise agree in writing, any determination required under this Section 12 will be made in writing by the Companys independent public accountants immediately prior to a Change of Control or such other person or entity to which the parties mutually agree (the Firm), whose determination will be conclusive and binding upon Executive and the Company. For purposes of making the calculations required by this Section 12, the Firm may 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 Executive will furnish to the Firm such information and documents as the Firm may reasonably request in order to make a determination under this Section. The Company will bear all costs the Firm may incur in connection with any calculations contemplated by this Section 12.
13. Section 409A.
(a) Notwithstanding anything to the contrary in this Agreement, no severance pay or benefits to be paid or provided to Executive, if any, pursuant to this Agreement that, when considered together with any other severance payments or separation benefits, are considered deferred compensation under Section 409A (together, Deferred Payments) will be paid or otherwise provided until Executive has a separation from service within the meaning of Section 409A. Similarly, no severance payable to Executive, if any, pursuant to this Agreement that otherwise would be exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(9) will be payable until Executive has a separation from service within the meaning of Section 409A.
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(b) It is intended that none of the severance payments under this Agreement will constitute Deferred Payments but rather will be exempt from Section 409A as a payment that would fall within the short-term deferral period as described in Section 13(d) below or resulting from an involuntary separation from service as described in Section 13(e) below.
(c) Notwithstanding anything to the contrary in this Agreement, if Executive is a specified employee within the meaning of Section 409A at the time of Executives termination (other than due to death), then the Deferred Payments, if any, that are payable within the first six (6) months following Executives separation from service, will become payable on the first payroll date that occurs on or after the date six (6) months and one (1) day following the date of Executives separation from service. All subsequent Deferred Payments, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit. Notwithstanding anything herein to the contrary, if Executive dies following Executives separation from service, but before the six (6) month anniversary of the separation from service, then any payments delayed in accordance with this paragraph will be payable in a lump sum as soon as administratively practicable after the date of Executives death and all other Deferred Payments will be payable in accordance with the payment schedule applicable to each payment or benefit. Each payment and benefit payable under this Agreement is intended to constitute a separate payment under Section 1.409A-2(b)(2) of the Treasury Regulations.
(d) Any amount paid under this Agreement that satisfies the requirements of the short-term deferral rule set forth in Section 1.409A-1(b)(4) of the Treasury Regulations will not constitute Deferred Payments for purposes of Section 13(a) above.
(e) Any amount paid under this Agreement that qualifies as a payment made as a result of an involuntary separation from service pursuant to Section 1.409A-1(b)(9)(iii) of the Treasury Regulations that does not exceed the Section 409A Limit (as defined above) will not constitute Deferred Payments for purposes of Section 13(a) above.
(f) The foregoing provisions are intended to comply with the requirements of Section 409A so that none of the severance payments and benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply. The Company and Executive agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition before actual payment to Executive under Section 409A.
14. Confidentiality Agreement. Executive has entered into the Confidentiality Agreement, which agreement is incorporated herein by reference.
15. No Conflict. Executive represents and warrants that his employment by the Company as described herein shall not conflict with and will not be constrained by any prior employment or consulting agreement or relationship.
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16. Miscellaneous.
(a) Waiver. No provision of this Agreement will be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by Executive and by an authorized officer of the Company (other than Executive). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party will be considered a waiver of any other condition or provision or of the same condition or provision at another time.
(b) Governing Law. The validity, interpretation, construction and performance of this Agreement will be governed by the laws of the State of California (with the exception of its conflict of laws provisions).
(c) Assignment. This Agreement and all rights hereunder shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective personal or legal representatives, executors, administrators, heirs, distributees, devisees, legatees, successors and assigns. This Agreement is personal in nature, and, except as provided in Sections 16(d) or 16(e), neither of the parties to this Agreement shall, without the written consent of the other, assign or transfer this Agreement or any right or obligation under this Agreement to any other person or entity. Any attempted assignment, transfer, conveyance or other disposition of Executives right to compensation or other benefits will be null and void.
(d) The Companys 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 Companys business and/or assets will 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; provided that, such assignment will not relieve the Company of its obligations hereunder. For all purposes under this Agreement, the term Company will include any successor to the Companys business and/or assets which executes and delivers the assumption agreement described in this Section 16(d) or which becomes bound by the terms of this Agreement by operation of law.
(e) Executives Successors. The terms of this Agreement and all rights of Executive hereunder will inure to the benefit of, and be enforceable by, Executives personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
(f) Notices.
(i) General. Notices and all other communications contemplated by this Agreement will be in writing and will be deemed to have been duly given when sent electronically or personally delivered when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid or when delivered by a private courier service such as UPS, DHL or Federal Express that has tracking capability. In the case of Executive, notices will be sent to the e-mail address or addressed to Executive at the home address, in either case which Executive most recently communicated to the Company in writing. In the case of the Company, electronic notices will be sent to the e-mail address of its Chief Executive Officer and General Counsel and mailed notices will be addressed to its corporate headquarters, and all notices will be directed to the attention of its Chief Executive Officer and General Counsel.
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(ii) Notice of Termination. Any termination by the Company for Cause or by Executive for Good Reason will be communicated by a notice of termination to the other party hereto given in accordance with Section 16(f)(i) of this Agreement. Such notice will indicate the specific termination provision in this Agreement relied upon, will set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and will specify the termination date (which will be not more than ninety (90) days after the giving of such notice).
(g) Resignation. Upon the termination of Executives employment for any reason, Executive will be deemed to have resigned from all officer and/or director positions held at the Company and its affiliates (other than a director position on the Board) voluntarily, without any further required action by Executive, as of the end of Executives employment and Executive, at the Boards request, will execute any documents reasonably necessary to reflect Executives resignation.
(h) Acknowledgment. Executive acknowledges that he has had the opportunity to discuss this matter with and obtain advice from his private attorney, has had sufficient time to, and has carefully read and fully understands all the provisions of this Agreement, and is knowingly and voluntarily entering into this Agreement.
(i) Severability. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement will continue in full force and effect without said provision.
(j) Integration. This Agreement, along with the documents incorporated by reference herein, represents the entire agreement and understanding between the parties as to the subject matter herein and supersedes all prior or contemporaneous agreements whether written or oral, including but not limited to the Prior Agreement. In consideration of this offer of continued employment and the compensation and benefits being provided to Executive hereunder, Executive further acknowledges and agrees that his acceptance of the offer set forth in this Agreement, and the terms and conditions of Executives employment herein, shall neither constitute a termination without Cause, a constructive termination, a non-renewal of the Prior Agreement, a material breach of the Prior Agreement or constitute a good reason for Executives resignation or any other such triggering event pursuant to the Prior Agreement or otherwise, and Executive is not entitled to and will not receive any severance, equity vesting acceleration, or other similar benefits other than as expressly set forth in this Agreement or in any Equity Award agreement governing Equity Awards outstanding as of the date of this Agreement. No waiver, alteration, or modification of any of the provisions of this Agreement will be binding unless in writing and signed by the Company and Executive.
(k) Arbitration. Any dispute or controversy arising out of or relating to any interpretation, construction, performance or breach of this Agreement will be settled by arbitration pursuant to the arbitration provisions set forth in the Confidentiality Agreement, which agreement is incorporated herein by reference.
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(l) Tax Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable taxes.
(m) Headings. All captions and section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement.
(n) Counterparts. This Agreement may be executed (including by electronic signature methods) in counterparts, PDF or facsimile, each an original and each having the same force and effect as an original and shall constitute an effective, binding agreement on the part of each of the undersigned.
[Signature Page Follows]
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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year first above written.
COMPANY: | ||
Cornerstone OnDemand, Inc. | ||
By: |
/s/ Elisa A. Steele |
|
Elisa A. Steele, Chair of the Board | ||
EXECUTIVE: | ||
/s/ Adam Miller |
||
Adam Miller |
[Signature Page to Employment Agreement]
EXHIBIT A
Position Title: Co-Chairperson
DUTIES AND RESPONSIBILITIES: Executives duties and responsibilities include, but are not limited to, the following:
i. |
co-chairing meetings of the Board; |
ii. |
co-planning the contents and agenda for meetings of the Board with the assistance of applicable management and directors; |
iii. |
recruiting and coaching the Companys executive officers including the Chief Executive Officer and such personnel as shall be in the best interests of the Company and its stockholders*; |
iv. |
developing and driving the Companys product strategy and content strategy*; |
v. |
advising and supporting the Chief Executive Officer of the Company on the Companys corporate strategy, including short- and long-range planning activities and mergers and acquisitions (both buy-side and sell-side mergers and acquisitions)*; and |
vi. |
providing thought leadership on behalf of the Company, including support for employee relations, investor relations, customer relations and public relations, as well as support with strategic accounts*. |
As Co-Chairperson, Executive shall report directly to the Board.
* |
If and as requested by the Board and/or the Chief Executive Officer, as applicable. |
EXHIBIT B
FORM OF RELEASE OF CLAIMS
This release of claims (this Agreement) is made by and between Cornerstone OnDemand, Inc. (the Company), and (Executive). The Company and Executive are sometimes collectively referred to herein as the Parties and individually referred to as a Party.
RECITALS
WHEREAS, Executive signed a [Confidential Information and Invention Assignment Agreement] with the Company on (the Confidentiality Agreement);
WHEREAS, Executive signed an Amended and Restated Employment Agreement with the company on (the Employment Agreement), which, among other things, provides for certain severance benefits to be paid to Executive by the Company upon the termination of Executives employment including following a Change of Control (as defined in the Employment Agreement) of the Company;
WHEREAS, Executive was employed by the Company until , when Executives employment was terminated (Termination Date);
[Click And Type Date]
WHEREAS, in accordance with Section 11 of the Employment Agreement between the Company and Executive, Executive has agreed to enter into and not revoke a separation agreement and release of claims in favor of the Company as a condition to receiving the severance benefits described in the Employment Agreement; and
WHEREAS, the Parties wish to resolve any and all disputes, claims, complaints, grievances, charges, actions, petitions and demands that Executive may have against the Company and any of the Releasees (as defined below), including, but not limited to, any and all claims arising out of or in any way related to Executives employment relationship with the Company and the termination of that relationship.
NOW THEREFORE, for good and valuable consideration, including the mutual promises and covenants made herein, the Company and Executive hereby agree as follows:
COVENANTS
1. Termination. Executives employment with the Company terminated on the Termination Date.
2. Payment of Salary and Receipt of All Benefits. Executive acknowledges and represents that, other than the consideration to be paid in accordance with the terms and conditions
of the Employment Agreement, the Company has paid or provided all salary, wages, bonuses, accrued vacation/paid time off, premiums, leaves, housing allowances, relocation costs, interest, severance, outplacement costs, fees, reimbursable expenses, commissions, draws, stock, stock options or other Equity Awards (as such term is defined in the Employment Agreement), vesting, and any and all other benefits and compensation due to Executive and that no other reimbursements or compensation are owed to Executive.
3. Release of Claims. Executive agrees that the consideration to be paid in accordance with the terms and conditions of the Employment Agreement represents settlement in full of all outstanding obligations owed to Executive by the Company and its current and former officers, directors, employees, agents, investors, attorneys, stockholders, administrators, affiliates, benefit plans, plan administrators, insurers, trustees, divisions, and subsidiaries, and predecessor and successor corporations and assigns (collectively, the Releasees). Executive, on Executives own behalf and on behalf of Executives respective heirs, family members, executors, agents, and assigns, hereby and forever releases the Releasees from, and agrees not to sue concerning, or in any manner to institute, prosecute, or pursue, any claim, complaint, charge, duty, obligation, demand, or cause of action relating to any matters of any kind, whether presently known or unknown, suspected or unsuspected, that Executive may possess against any of the Releasees arising from any omissions, acts, facts, or damages that have occurred up until and including the Effective Date of this Agreement, including, without limitation the following:
(a) any and all claims relating to or arising from Executives employment relationship with the Company and the termination of that relationship;
(b) any and all claims relating to, or arising from, Executives right to purchase, or actual purchase of shares of stock of the Company, including, without limitation, any claims for fraud, misrepresentation, breach of fiduciary duty, breach of duty under applicable state corporate law, and securities fraud under any state or federal law;
(c) any and all claims for wrongful discharge of employment; termination in violation of public policy; discrimination; harassment; retaliation; breach of contract, both express and implied; breach of covenant of good faith and fair dealing, both express and implied; promissory estoppel; negligent or intentional infliction of emotional distress; fraud; negligent or intentional misrepresentation; negligent or intentional interference with contract or prospective economic advantage; unfair business practices; defamation; libel; slander; negligence; personal injury; assault; battery; invasion of privacy; false imprisonment; conversion; and disability benefits;
(d) any and all claims for violation of any federal, state, or municipal statute, including, but not limited to, Title VII of the Civil Rights Act of 1964; the Civil Rights Act of 1991; the Rehabilitation Act of 1973; the Americans with Disabilities Act of 1990; the Equal Pay Act; the Fair Labor Standards Act; the Fair Credit Reporting Act; the Age Discrimination in Employment Act of 1967; the Older Workers Benefit Protection Act; the Employee Retirement Income Security Act of 1974; the Worker Adjustment and Retraining Notification Act; the Family and Medical Leave Act; the Sarbanes-Oxley Act of 2002; the California Family Rights Act; the California Labor Code; the California Workers Compensation Act; and the California Fair Employment and Housing Act;
(e) any and all claims for violation of the federal, or any state, constitution;
(f) any and all claims arising out of any other laws and regulations relating to employment or employment discrimination;
(g) any claim for any loss, cost, damage, or expense arising out of any dispute over the non-withholding or other tax treatment of any of the proceeds received by Executive as a result of this Agreement; and
(h) any and all claims for attorneys fees and costs.
Executive agrees that the release set forth in this Section 3 (the Release) will be and remain in effect in all respects as a complete general release as to the matters released. The Release does not extend to any severance obligations due to Executive under the Employment Agreement. The Release does not release claims that cannot be released as a matter of law, including, but not limited to, Executives right to file a charge with or participate in a charge by the Equal Employment Opportunity Commission, or any other local, state, or federal administrative body or government agency that is authorized to enforce or administer laws related to employment, against the Company (with the understanding that any such filing or participation does not give Executive the right to recover any monetary damages against the Company; Executives release of claims herein bars Executive from recovering such monetary relief from the Company). Executive represents that Executive has made no assignment or transfer of any right, claim, complaint, charge, duty, obligation, demand, cause of action, or other matter waived or released by this Section 3. Nothing in this Agreement waives Executives rights to indemnification or any payments under any fiduciary insurance policy, if any, provided by any act or agreement of the Company, state or federal law or policy of insurance.
4. [Acknowledgment of Waiver of Claims under ADEA. Executive acknowledges that Executive is waiving and releasing any rights Executive may have under the Age Discrimination in Employment Act of 1967 (ADEA) and that this waiver and release is knowing and voluntary. Executive agrees that this waiver and release does not apply to any rights or claims that may arise under the ADEA after the Effective Date of this Agreement. Executive acknowledges that the consideration given for this waiver and release Agreement is in addition to anything of value to which Executive was already entitled. Executive further acknowledges that Executive has been advised by this writing that (a) Executive should consult with an attorney prior to executing this Agreement; (b) Executive has at least 21 days within which to consider this Agreement; (c) Executive has 7 days following the execution of this Agreement by the parties to revoke the Agreement; (d) this Agreement will not be effective until the revocation period has expired; and (e) nothing in this Agreement prevents or precludes Executive from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties or costs for doing so, unless specifically authorized by federal law. In the event Executive signs this Agreement and delivers it to the Company in less than the 21-day period identified above, Executive hereby acknowledges that Executive has freely and voluntarily chosen to waive the time period allotted for considering this Agreement. Executive acknowledges and understands that revocation must be accomplished by a written notification to the Chief Legal Officer of the Company that is received prior to the Effective Date.]
5. [California Civil Code Section 1542. Executive acknowledges that Executive has been advised to consult with legal counsel and is familiar with the provisions of California Civil Code Section 1542, a statute that otherwise prohibits the release of unknown claims, which provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.
Executive, being aware of California Civil Code Section 1542, agrees to expressly waive any rights Executive may have thereunder, as well as under any other statute or common law principles of similar effect.
OR
Unknown Claims. Executive acknowledges that Executive has been advised to consult with legal counsel and that Executive is familiar with the principle that a general release does not extend to claims that the releaser does not know or suspect to exist in his or her favor at the time of executing the release, which, if known by him or her, must have materially affected his or her settlement with the releasee. Executive, being aware of this principle, agrees to expressly waive any rights Executive may have to that effect, as well as under any other statute or common law principles of similar effect.]
6. No Pending or Future Lawsuits. Executive represents that Executive has no lawsuits, claims, or actions pending in Executives name, or on behalf of any other person or entity, against the Company or any of the other Releasees. Executive also represents that Executive does not intend to bring any claims on Executives own behalf or on behalf of any other person or entity against the Company or any of the other Releasees. Executive confirms that Executive has no knowledge of any wrongdoing involving improper or false claims against a federal or state governmental agency, or any other wrongdoing that involves Executive or any other present or former Company employees, including violations of the federal and state securities laws or the Sarbanes-Oxley Act of 2002.
7. Sufficiency of Consideration. Executive hereby acknowledges and agrees that Executive has received good and sufficient consideration for every promise, duty, release, obligation, agreement and right contained in this Release.
8. Confidential Information. Executive reaffirms and agrees to observe and abide by the terms of the Confidentiality Agreement, specifically including the provisions therein regarding nondisclosure of the Companys trade secrets and confidential and proprietary information, which agreement will continue in force; provided, however, that: (a) as to any provisions regarding competition contained in the Confidentiality Agreement that conflict with the provisions regarding competition contained in the Employment Agreement, the provisions of the Employment Agreement will control; (b) as to any provisions regarding solicitation of employees contained in the Confidentiality Agreement that conflict with the provisions regarding solicitation of employees contained in this Agreement, the provisions of this Agreement will control.
9. Return of Company Property; Passwords and Password-protected Documents. Executive confirms that Executive has returned to the Company in good working order all keys, files, records (and copies thereof), equipment (including, but not limited to, computer hardware, software and printers, wireless handheld devices, cellular phones and pagers), access or credit cards, Company identification, and any other Company-owned property in Executives possession or control. Executive further confirms that Executive has cancelled all accounts for Executives benefit, if any, in the Companys name, including, but not limited to, credit cards, telephone charge cards, cellular phone and/or pager accounts and computer accounts. Executive also confirms that Executive has delivered all passwords in use by Executive at the time of Executives termination, a list of any documents that Executive created or of which Executive is otherwise aware that are password-protected, along with the password(s) necessary to access such password-protected documents.
10. No Cooperation. Executive agrees that Executive will not knowingly encourage, counsel, or assist any attorneys or their clients in the presentation or prosecution of any disputes, differences, grievances, claims, charges, or complaints by any third party against any of the Releasees, unless under a subpoena or other court order to do so or as related directly to the ADEA waiver in this Agreement. Executive agrees both to immediately notify the Company upon receipt of any such subpoena or court order, and to furnish, within three (3) business days of its receipt, a copy of such subpoena or other court order. If approached by anyone for counsel or assistance in the presentation or prosecution of any disputes, differences, grievances, claims, charges, or complaints against any of the Releasees, Executive will state no more than that Executive cannot provide any such counsel or assistance.
11. Nondisparagement. Executive agrees that Executive will not in any way, directly or indirectly, do or say anything at any time which disparages the Company, its business interests or reputation, or that of any of the other Released Parties.
12. No Admission of Liability. Executive understands and acknowledges that this Agreement constitutes a compromise and settlement of any and all actual or potential disputed claims by Executive. No action taken by the Company hereto, either previously or in connection with this Agreement, will be deemed or construed to be (a) an admission of the truth or falsity of any actual or potential claims or (b) an acknowledgment or admission by the Company of any fault or liability whatsoever to Executive or to any third party.
13. Solicitation of Employees. Executive agrees that for a period of 12 months immediately following the Effective Date of this Agreement, Executive will not directly or indirectly (a) solicit, induce, recruit or encourage any of the Companys employees to leave their employment at the Company or (b) attempt to solicit, induce, recruit or encourage, either for Executive or for any other person or entity, any of the Companys employees to leave their employment.
14. Costs. The Parties will each bear their own costs, attorneys fees and other fees incurred in connection with the preparation of this Agreement.
15. Arbitration. THE PARTIES AGREE THAT ANY AND ALL DISPUTES ARISING OUT OF THE TERMS OF THIS AGREEMENT, THEIR INTERPRETATION, AND
ANY OF THE MATTERS HEREIN RELEASED, WILL BE SUBJECT TO ARBITRATION IN SANTA CLARA COUNTY, BEFORE JUDICIAL ARBITRATION & MEDIATION SERVICES (JAMS), PURSUANT TO ITS EMPLOYMENT ARBITRATION RULES & PROCEDURES (JAMS RULES). THE ARBITRATOR MAY GRANT INJUNCTIONS AND OTHER RELIEF IN SUCH DISPUTES. THE ARBITRATOR WILL ADMINISTER AND CONDUCT ANY ARBITRATION IN ACCORDANCE WITH CALIFORNIA LAW, INCLUDING THE CALIFORNIA CODE OF CIVIL PROCEDURE, AND THE ARBITRATOR WILL APPLY SUBSTANTIVE AND PROCEDURAL CALIFORNIA LAW TO ANY DISPUTE OR CLAIM, WITHOUT REFERENCE TO ANY CONFLICT-OF-LAW PROVISIONS OF ANY JURISDICTION. TO THE EXTENT THAT THE JAMS RULES CONFLICT WITH CALIFORNIA LAW, CALIFORNIA LAW WILL TAKE PRECEDENCE. THE DECISION OF THE ARBITRATOR WILL BE FINAL, CONCLUSIVE, AND BINDING ON THE PARTIES TO THE ARBITRATION. THE PARTIES AGREE THAT THE PREVAILING PARTY IN ANY ARBITRATION WILL BE ENTITLED TO INJUNCTIVE RELIEF IN ANY COURT OF COMPETENT JURISDICTION TO ENFORCE THE ARBITRATION AWARD. THE PARTIES TO THE ARBITRATION WILL EACH PAY AN EQUAL SHARE OF THE COSTS AND EXPENSES OF SUCH ARBITRATION, AND EACH PARTY WILL SEPARATELY PAY FOR ITS RESPECTIVE COUNSEL FEES AND EXPENSES; PROVIDED, HOWEVER, THAT THE ARBITRATOR WILL AWARD ATTORNEYS FEES AND COSTS TO THE PREVAILING PARTY, EXCEPT AS PROHIBITED BY LAW. THE PARTIES HEREBY AGREE TO WAIVE THEIR RIGHT TO HAVE ANY DISPUTE BETWEEN THEM RESOLVED IN A COURT OF LAW BY A JUDGE OR JURY. NOTWITHSTANDING THE FOREGOING, THIS SECTION WILL NOT PREVENT EITHER PARTY FROM SEEKING INJUNCTIVE RELIEF (OR ANY OTHER PROVISIONAL REMEDY) FROM ANY COURT HAVING JURISDICTION OVER THE PARTIES AND THE SUBJECT MATTER OF THEIR DISPUTE RELATING TO THIS AGREEMENT AND THE AGREEMENTS INCORPORATED HEREIN BY REFERENCE. SHOULD ANY PART OF THE ARBITRATION AGREEMENT CONTAINED IN THIS PARAGRAPH CONFLICT WITH ANY OTHER ARBITRATION AGREEMENT BETWEEN THE PARTIES, THE PARTIES AGREE THAT THIS ARBITRATION AGREEMENT WILL GOVERN.
16. Authority. The Company represents and warrants that the undersigned has the authority to act on behalf of the Company and to bind the Company and all who may claim through it to the terms and conditions of this Agreement. Executive represents and warrants that Executive has the capacity to act on Executives own behalf and on behalf of all who might claim through Executive to bind them to the terms and conditions of this Agreement. Each Party warrants and represents that there are no liens or claims of lien or assignments in law or equity or otherwise of or against any of the claims or causes of action released herein.
17. No Representations. Executive represents that Executive has had the opportunity to consult with an attorney, and has carefully read and understands the scope and effect of the provisions of this Agreement. Executive has relied upon any representations or statements made by the Company that are not specifically set forth in this Agreement.
18. Severability. In the event that any provision or any portion of any provision hereof or any surviving agreement made a part hereof becomes or is declared by a court of competent jurisdiction or arbitrator to be illegal, unenforceable, or void, this Agreement will continue in full force and effect without said provision or portion of provision.
19. Entire Agreement. This Agreement represents the entire agreement and understanding between the Company and Executive concerning the subject matter of this Agreement and Executives employment with and separation from the Company and the events leading thereto and associated therewith, and supersedes and replaces any and all prior agreements and understandings concerning the subject matter of this Agreement and Executives relationship with the Company, with the exception of the Employment Agreement, the Confidentiality Agreement, and Executives written equity compensation agreements with the Company.
20. No Oral Modification. This Agreement may only be amended in writing signed by Executive and the Co-Chair of the Board of Directors of the Company.
21. Governing Law. This Agreement will be governed by the laws of the State of California, without regard for choice-of-law provisions. Executive consents to personal and exclusive jurisdiction and venue in the State of California.
22. Effective Date. [Executive understands that this Agreement will be null and void if not executed by Executive within 21 days. Each Party has seven days after that Party signs this Agreement to revoke it. This Agreement will become effective on the eighth (8th) day after Executive signed this Agreement, so long as it has been signed by the Parties and has not been revoked by either Party before that date (the Effective Date).] OR [This Agreement will be effective after it has been signed or executed by both Parties (the Effective Date)].
23. Counterparts. This Agreement may be executed in counterparts and by facsimile, and each counterpart and facsimile will have the same force and effect as an original and will constitute an effective, binding agreement on the part of each of the undersigned.
24. Voluntary Execution of Agreement. Executive understands and agrees that Executive executed this Agreement voluntarily, without any duress or undue influence on the part or behalf of the Company or any third party, with the full intent of releasing all of Executives claims against the Company and any of the other Releasees. Executive expressly acknowledges that:
(a) |
Executive has read this Agreement; |
(b) |
Executive has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of Executives own choice or has elected not to retain legal counsel; |
(c) |
Executive understands the terms and consequences of this Agreement and of the releases it contains; and |
(d) |
Executive is fully aware of the legal and binding effect of this Agreement. |
* * * * *
Exhibit 99.1
Cornerstone OnDemand Announces First Quarter 2020 Financial Results
SANTA MONICA, Calif. May 11, 2020 People development solution provider Cornerstone OnDemand, Inc. (NASDAQ: CSOD) today announced results1 for its first quarter ended March 31, 2020. The Company has provided supplemental financial information located on its Investor Relations website, including an accompanying featured presentation, at http://investors.cornerstoneondemand.com. Today, the Company also announced certain leadership changes.
First Quarter 2020 Results:
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Revenue for the first quarter of 2020 was $150.1 million compared to a guided range of $147.0 million to $150.0 million. This represents a 7.2% increase compared to the same period of the prior year. Revenue growth on a constant currency basis was 7.8%. |
|
Subscription revenue for the first quarter of 2020 was $144.4 million compared to a guided range of $143.0 million to $145.0 million. This represents a 10.0% increase compared to the same period of the prior year. Subscription revenue growth on a constant currency basis was 10.7%. |
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Operating loss for the first quarter of 2020 was $2.7 million, yielding a margin of (1.8)%, compared to operating income of $1.2 million and margin of 0.9% in the same period of the prior year. |
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Non-GAAP operating income for the first quarter of 2020 was $24.9 million, yielding a margin of 16.6%, compared to $19.6 million and margin of 14.0% in the same period of the prior year. |
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Net loss for the first quarter of 2020 was $13.8 million, or $(0.22) diluted net income per share, compared to $3.5 million and $(0.06) diluted net loss per share in the same period of the prior year. |
|
Non-GAAP net income for the first quarter of 2020 was $15.0 million, or a $0.23 diluted net income per share, compared to $15.9 million and $0.25 diluted net income per share in the same period of the prior year. |
|
Unlevered free cash flow for the first quarter of 2020 was $6.3 million, yielding a margin of 4.2%, compared to $4.3 million, yielding a margin of 3.1%, in the same period of the prior year. |
Our combination with Saba is a significant milestone for Cornerstone and, more importantly, for our expanded community of clients around the world. With our shared passion for people development and our combined depth of expertise, we expect to accelerate product innovation and help tens of millions of people develop new skills to navigate the future, said Adam Miller, founder and Chief Executive Officer of Cornerstone. Although we are definitely not immune to the impact of COVID-19, we believe that our combined scale with approximately 7,000 customers and over 75 million users, along with the significant cash flow generation capabilities that our synergistic model provides, will enable us to drive meaningful shareholder value over time.
Recent Highlights:
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In response to the Coronavirus pandemic, the Company created Cornerstone Cares, a free public learning portal with playlists for COVID-19 Health and Safety, Stress Management, and Work From Home. |
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On April 22, 2020, the Company finalized its acquisition of Saba Software, Inc., a global leader in talent experience solutions, for an aggregate purchase price of approximately $1.295 billion, consisting of $1.262 billion in cash and 1,110,352 shares of common stock of the Company. |
Our first quarter was progressing well until the COVID-19 pandemic headwinds began to slow new sales at the end of March. To offset the impact of these headwinds, we have been able to augment and accelerate the synergies from the Saba acquisition as our integration progresses ahead of plan. We now expect to realize $50 million in run-rate synergies as we exit 2020, as compared to our prior guidance of $35 million over twenty-four months, said Brian Swartz, Cornerstones Chief Financial Officer. We have also spent considerable time analyzing our liquidity position under various scenarios given the current state of global economic uncertainty, and even under extreme scenarios, such as assuming no new sales through the end of 2021, we still expect to increase our cash balances through the end of 2021. This gives us a high level of confidence in our ability to weather this storm.
1 |
Financial measures presented on a constant currency basis, non-GAAP operating income, non-GAAP operating income margin, non-GAAP net income, non-GAAP diluted net income per share, unlevered free cash flow, and unlevered free cash flow margin are non-GAAP financial measures. Please see the discussion in the section titled Non-GAAP Financial Measures and the reconciliations of each non-GAAP financial measure to its most comparable GAAP financial measure at the end of this press release. |
1
Quarterly Conference Call
Cornerstone will host a conference call to discuss its first quarter 2020 results at 2:00 p.m. PT (5:00 p.m. ET) today. A live audio webcast of the conference call, together with detailed financial information, can be accessed through the Companys Investor Relations website at http://investors.cornerstoneondemand.com. The live call can be accessed by dialing (877) 445-4619 (US) or (484) 653-6763 (outside the US) and referencing passcode: 4879143. A replay of the call will also be available at http://investors.cornerstoneondemand.com/investors/news-and-events/events/default.aspx or via telephone until 6:00 p.m. PT (9:00 p.m. ET) on May 14, 2020 by dialing (855) 859-2056 (US) or (404) 537-3406 (outside the US), and referencing passcode: 4879143.
Featured Presentation
An accompanying featured presentation will be available at https://investors.cornerstoneondemand.com/investors/overview/default.aspx.
About Cornerstone
Cornerstone is a premier global people development company. We believe people can achieve anything when they have the right development and growth opportunities. We offer organizations the technology, content, expertise, and specialized focus to help them realize the potential of their people. Featuring comprehensive recruiting, personalized learning, modern training content, development-driven performance management, and holistic employee data management and insights, Cornerstones people development solutions are used by approximately 7,000 customers of all sizes, spanning more than 75 million users across over 180 countries and more than 50 languages. Learn more at www.cornerstoneondemand.com.
Note: Cornerstone® and Cornerstone OnDemand® are registered trademarks of Cornerstone OnDemand, Inc.
Forward-looking Statements
This press release and the quarterly conference call referenced above contain forward-looking statements, including, but not limited to, statements regarding the expected performance of our business, our future financial and operating performance, including our GAAP and non-GAAP guidance, strategy, long-term growth and overall future prospects, the demand for our offerings, our competitive position, general business conditions, the integration of Saba into our business, anticipated synergies from our acquisition of Saba, and our expectations regarding certain financial measures including subscription revenue, capital expenditures, unlevered free cash flow, recurring revenue growth and operating margins. Any forward-looking statements contained in this press release or the quarterly conference call are based upon our historical performance and our current plans, estimates, and expectations and are not a representation that such plans, estimates, or expectations will be achieved. These forward-looking statements represent our expectations as of the date of this press release. Subsequent events may cause these expectations to change, and we disclaim any obligation to update the forward-looking statements in the future, except as required by law. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from our current expectations. Important factors that could cause actual results to differ materially from those anticipated in our forward-looking statements include, but are not limited to, our ability to attract new customers; the extent to which customers renew their subscriptions for our solutions; the timing of when consulting services are delivered to new and existing customers by our services organization and implementation subcontractors; the complexity of deployments and product implementations, which can impact the timing of when revenue is recognized from new and existing customers; allowing our implementation subcontractors to contract directly with customers for implementation services; our shift to focusing on recurring revenue streams; our ability to compete as the learning and people development provider for organizations of all sizes; changes in the proportion of our customer base that is comprised of enterprise or mid-sized organizations; our ability to manage our growth, including additional headcount and entry into new geographies; our ability to expand our enterprise and mid-market sales opportunities; our ability to maintain stable and consistent quota attainment rates; continued strong demand for learning and people development in Europe, the Middle East, Africa, Asia-Pacific, and Japan; the timing and success of efforts to increase operational efficiency and cost containment; the timing and success of solutions offered by our competitors; unpredictable macro-economic conditions; the impact of foreign exchange rates; reductions in information technology spending; the success of our new product and service introductions; a disruption in our hosting network infrastructure; problems caused by
2
security breaches; costs and reputational harm that could result from defects in our solutions; the success of our strategic relationships with third parties; the loss of any of our key employees and our ability to locate qualified replacements; failure to protect our intellectual property; acts of terrorism or other vandalism, war, natural disasters, or the ongoing COVID-19 pandemic; changes in current tax or accounting rules; legal or political changes in local or foreign jurisdictions that decrease demand for, or restrict our ability to sell or provide, our products; the failure to achieve expected synergies and efficiencies of operations between the Company and Saba; the ability of the Company and Saba to successfully integrate their respective market opportunities, technology, products, personnel and operations; and unanticipated costs or liabilities related to businesses that we acquire. Further information on factors that could cause actual results to differ materially from the results anticipated by our forward-looking statements is included in the reports we have filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.
Non-GAAP Financial Measures and Other Key Metrics
To supplement its consolidated financial statements, which are prepared and presented in accordance with US generally accepted accounting principles, or GAAP, the Company has provided in this press release and the quarterly conference call held on the date hereof certain non-GAAP financial measures and other key metrics. These non-GAAP financial measures include:
(i) |
non-GAAP cost of revenue, which is defined as cost of revenue less amortization of intangible assets and stock-based compensation; |
(ii) |
annual recurring revenue, which is defined as the annualized recurring value of all active contracts at the end of a reporting period; |
(iii) |
unlevered free cash flow, which is defined as net cash provided by operating activities minus capital expenditures and capitalized software costs plus cash paid for interest; |
(iv) |
unlevered free cash flow margin, which is defined as unlevered free cash flow divided by revenue; |
(v) |
non-GAAP net income and non-GAAP diluted net income per share, which exclude, for the periods in which they are presented, stock-based compensation, amortization of intangible assets, accretion of debt discount and amortization of debt issuance costs, unrealized fair value adjustment on strategic investments, restructuring costs, acquisition-related costs, and excludes the impacts of unamortized stock-based compensation expense in applying the treasury method for determining the non-GAAP weighted average number of dilutive shares outstanding; |
(vi) |
non-GAAP gross profit and non-GAAP gross margin, which exclude stock-based compensation and amortization of intangible assets reflected in cost of revenue; |
(vii) |
non-GAAP operating income and non-GAAP operating income margin, which are defined as income or loss from operations excluding stock-based compensation, amortization of intangible assets, restructuring costs, and acquisition-related costs; |
(viii) |
non-GAAP operating expenses, which exclude stock-based compensation, amortization of intangible assets, restructuring costs, and acquisition-related costs; and |
(ix) |
non-GAAP sales and marketing expense, non-GAAP research and development expense, and non-GAAP general and administrative expense, each of which excludes stock-based compensation attributable to the corresponding GAAP financial measures. |
The Companys management uses these non-GAAP financial measures and other key metrics internally in analyzing its financial results and believes they are useful to investors, as a supplement to the corresponding GAAP measures, in evaluating the Companys ongoing operational performance and trends and in comparing its financial measures with other companies in the same industry, many of which present similar non-GAAP financial measures and key metrics to help investors understand the operational performance of their businesses. In addition, the Company believes that the following non-GAAP adjustments are useful to management and investors for the following reasons:
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Stock-based compensation. The Company excludes stock-based compensation expense because it is non-cash in nature, and management believes that its exclusion provides additional insight into the Companys operational performance and also provides a useful comparison of the Companys operating results to prior periods and its peer companies. Additionally, determining the fair value of certain stock-based awards involves a high degree of judgment and estimation and the expense recorded may bear little resemblance to the actual value realized upon the vesting or future exercise of such awards. |
3
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Amortization of intangible assets. The Company excludes amortization of acquired intangible assets because the expense is a non-cash item and management believes that its exclusion provides meaningful supplemental information regarding the Companys operational performance and allows for a useful comparison of its operating results to prior periods and its peer companies. |
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Accretion of debt discount and amortization of debt issuance costs. The Company recognizes the effective interest expense on its senior convertible notes and amortizes the issuance costs over the term of the notes. The difference between the effective interest expense and the contractual interest expense and the amortization expense of issuance costs are excluded from managements assessment of the Companys operating performance because management believes that these non-cash expenses are not indicative of ongoing operating performance. In addition, the exclusion of these items provides a useful comparison of the Companys operating results to prior periods and its peer companies. |
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Fair value adjustment on strategic investments. The Company views the increase or decrease in the fair value of its strategic investments as not indicative of operational performance during any particular period and believes that the exclusion of these gains or losses provides investors with a supplemental view of the Companys operational performance. |
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Acquisition-related costs. The Company excludes costs related to acquisitions because the expenses are discrete to specific acquisitions and are not necessarily indicative of its continuing operations. The Company believes that the exclusion of these costs provides investors with a supplemental view of the Companys operational performance. |
Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. These non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similarly-titled measures presented by other companies. For the periods presented, reconciliations of the non-GAAP financial measures to their most directly comparable GAAP measures have been provided in the tables included as part of this press release.
4
Cornerstone OnDemand, Inc.
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
March 31, 2020 | December 31, 2019 | |||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 456,154 | $ | 215,907 | ||||
Short-term investments |
| 201,579 | ||||||
Accounts receivable, net |
94,200 | 131,105 | ||||||
Deferred commissions, current portion |
33,470 | 33,215 | ||||||
Prepaid expenses and other current assets |
33,789 | 30,512 | ||||||
|
|
|
|
|||||
Total current assets |
617,613 | 612,318 | ||||||
Capitalized software development costs, net |
50,169 | 50,023 | ||||||
Property and equipment, net |
33,581 | 36,526 | ||||||
Operating right-of-use assets |
70,908 | 72,944 | ||||||
Deferred commissions, net of current portion |
70,919 | 74,563 | ||||||
Long-term investments |
9,715 | 60,192 | ||||||
Intangible assets, net |
18,251 | 9,440 | ||||||
Goodwill |
56,282 | 47,453 | ||||||
Other assets |
3,947 | 2,642 | ||||||
|
|
|
|
|||||
Total assets |
$ | 931,385 | $ | 966,101 | ||||
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|
|
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Liabilities and stockholders equity |
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Current liabilities: |
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Accounts payable |
$ | 4,511 | $ | 3,803 | ||||
Accrued expenses |
59,247 | 78,075 | ||||||
Deferred revenue, current portion |
300,068 | 339,522 | ||||||
Operating lease liabilities, current portion |
8,769 | 7,235 | ||||||
Other liabilities |
10,511 | 11,015 | ||||||
|
|
|
|
|||||
Total current liabilities |
383,106 | 439,650 | ||||||
Convertible notes, net |
294,264 | 293,174 | ||||||
Deferred revenue, net of current portion |
6,850 | 6,945 | ||||||
Operating lease liabilities, net of current portion |
64,252 | 67,195 | ||||||
Other liabilities, non-current |
1,655 | 655 | ||||||
|
|
|
|
|||||
Total liabilities |
750,127 | 807,619 | ||||||
Stockholders equity: |
||||||||
Common stock |
6 | 6 | ||||||
Additional paid-in capital |
716,158 | 682,717 | ||||||
Accumulated deficit |
(538,455 | ) | (524,680 | ) | ||||
Accumulated other comprehensive income |
3,549 | 439 | ||||||
|
|
|
|
|||||
Total stockholders equity |
181,258 | 158,482 | ||||||
|
|
|
|
|||||
Total liabilities and stockholders equity |
$ | 931,385 | $ | 966,101 | ||||
|
|
|
|
5
Cornerstone OnDemand, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended
March 31, |
||||||||
2020 | 2019 | |||||||
Revenue |
$ | 150,136 | $ | 140,117 | ||||
Cost of revenue 1, 2 |
41,924 | 33,695 | ||||||
|
|
|
|
|||||
Gross profit |
108,212 | 106,422 | ||||||
Operating expenses: |
||||||||
Sales and marketing 1,2 |
55,330 | 54,505 | ||||||
Research and development 1 |
24,085 | 27,746 | ||||||
General and administrative 1 |
24,725 | 22,940 | ||||||
Acquisition-related costs |
6,811 | | ||||||
|
|
|
|
|||||
Total operating expenses |
110,951 | 105,191 | ||||||
|
|
|
|
|||||
(Loss) income from operations |
(2,739 | ) | 1,231 | |||||
Other income (expense): |
||||||||
Interest income |
1,728 | 1,990 | ||||||
Interest expense |
(5,501 | ) | (5,366 | ) | ||||
Other, net |
(7,092 | ) | (597 | ) | ||||
|
|
|
|
|||||
Other expense, net |
(10,865 | ) | (3,973 | ) | ||||
|
|
|
|
|||||
Loss before income tax provision |
(13,604 | ) | (2,742 | ) | ||||
Income tax provision |
(171 | ) | (722 | ) | ||||
|
|
|
|
|||||
Net loss |
$ | (13,775 | ) | $ | (3,464 | ) | ||
|
|
|
|
|||||
Net loss per share, basic and diluted |
$ | (0.22 | ) | $ | (0.06 | ) | ||
|
|
|
|
|||||
Weighted average common shares outstanding, basic and diluted |
61,631 | 59,141 |
1 |
Includes stock-based compensation as follows: |
Three Months Ended
March 31, |
||||||||
2020 | 2019 | |||||||
Cost of revenue |
$ | 2,701 | $ | 1,136 | ||||
Sales and marketing |
8,584 | 6,047 | ||||||
Research and development |
4,800 | 4,196 | ||||||
General and administrative |
7,085 | 5,666 | ||||||
|
|
|
|
|||||
Total |
$ | 23,170 | $ | 17,045 | ||||
|
|
|
|
2 |
Includes amortization of intangible assets as follows: |
Three Months Ended
March 31, |
||||||||
2020 | 2019 | |||||||
Cost of revenue |
$ | 1,663 | $ | 1,286 | ||||
Sales and marketing |
83 | | ||||||
|
|
|
|
|||||
Total |
$ | 1,746 | $ | 1,286 | ||||
|
|
|
|
6
Cornerstone OnDemand, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended
March 31, |
||||||||
2020 | 2019 | |||||||
Cash flows from operating activities |
||||||||
Net loss |
$ | (13,775 | ) | $ | (3,464 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
11,964 | 10,858 | ||||||
Accretion of debt discount and amortization of debt issuance costs |
1,090 | 1,027 | ||||||
Amortization (accretion) of purchased investment premium or discount, net |
41 | (216 | ) | |||||
Net foreign currency and other loss |
5,585 | 294 | ||||||
Stock-based compensation expense |
23,170 | 17,045 | ||||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
35,516 | 32,955 | ||||||
Deferred commissions |
582 | (4,274 | ) | |||||
Prepaid expenses and other assets |
(6,550 | ) | 3,641 | |||||
Accounts payable |
523 | (2,781 | ) | |||||
Accrued expenses |
(18,079 | ) | (23,287 | ) | ||||
Deferred revenue |
(35,557 | ) | (23,959 | ) | ||||
Other liabilities |
1,478 | (545 | ) | |||||
|
|
|
|
|||||
Net cash provided by operating activities |
5,988 | 7,294 | ||||||
|
|
|
|
|||||
Cash flows from investing activities |
||||||||
Purchases of marketable investments |
(20,419 | ) | | |||||
Maturities and sales of investments |
272,173 | 170,679 | ||||||
Capital expenditures |
(971 | ) | (4,243 | ) | ||||
Capitalized software costs |
(7,389 | ) | (7,399 | ) | ||||
Cash paid for acquisition, net of cash acquired |
(18,639 | ) | | |||||
|
|
|
|
|||||
Net cash provided by investing activities |
224,755 | 159,037 | ||||||
|
|
|
|
|||||
Cash flows from financing activities |
||||||||
Proceeds from employee stock plans |
10,130 | 6,840 | ||||||
|
|
|
|
|||||
Net cash provided by financing activities |
10,130 | 6,840 | ||||||
|
|
|
|
|||||
Effect of exchange rate changes on cash and cash equivalents |
(626 | ) | 248 | |||||
|
|
|
|
|||||
Net increase in cash and cash equivalents |
240,247 | 173,419 | ||||||
Cash and cash equivalents at beginning of period |
215,907 | 183,596 | ||||||
|
|
|
|
|||||
Cash and cash equivalents at end of period |
$ | 456,154 | $ | 357,015 | ||||
|
|
|
|
|||||
Supplemental cash flow data |
||||||||
Cash paid for interest |
$ | 8,625 | $ | 8,685 | ||||
Cash paid for income taxes |
955 | 390 | ||||||
Non-cash investing and financing activities: |
||||||||
Assets acquired under capital leases and other financing arrangements |
$ | | $ | 485 | ||||
Capitalized assets financed by accounts payable and accrued expenses |
176 | 1,789 | ||||||
Capitalized stock-based compensation |
2,190 | 752 |
7
Cornerstone OnDemand, Inc.
RECONCILIATIONS OF COST OF REVENUE TO NON-GAAP COST OF REVENUE, GROSS PROFIT AND GROSS MARGIN TO NON-GAAP GROSS PROFIT AND NON-GAAP GROSS MARGIN, (LOSS) INCOME FROM OPERATIONS TO NON-GAAP OPERATING INCOME, AND OPERATING MARGIN TO NON-GAAP OPERATING INCOME MARGIN
(in thousands)
(unaudited)
Three Months Ended
March 31, |
||||||||
2020 | 2019 | |||||||
Reconciliation of cost of revenue, gross profit, and gross margin: |
||||||||
Revenue |
$ | 150,136 | $ | 140,117 | ||||
Cost of revenue |
41,924 | 33,695 | ||||||
|
|
|
|
|||||
Gross profit |
$ | 108,212 | $ | 106,422 | ||||
|
|
|
|
|||||
Gross margin |
72.1 | % | 76.0 | % | ||||
Cost of revenue |
$ | 41,924 | $ | 33,695 | ||||
Adjustments to cost of revenue: |
||||||||
Stock-based compensation |
(2,138 | ) | (1,136 | ) | ||||
Amortization of intangible assets |
(1,663 | ) | (1,286 | ) | ||||
|
|
|
|
|||||
Total adjustments to cost of revenue |
(3,801 | ) | (2,422 | ) | ||||
|
|
|
|
|||||
Non-GAAP cost of revenue |
38,123 | 31,273 | ||||||
|
|
|
|
|||||
Non-GAAP gross profit |
$ | 112,013 | $ | 108,844 | ||||
|
|
|
|
|||||
Non-GAAP gross margin |
74.6 | % | 77.7 | % | ||||
Reconciliation of (loss) income from operations and operating margin: |
||||||||
(Loss) income from operations |
$ | (2,739 | ) | $ | 1,231 | |||
Operating margin |
(1.8 | )% | 0.9 | % | ||||
Adjustments to loss from operations: |
||||||||
Stock-based compensation1 |
19,109 | 17,045 | ||||||
Amortization of intangible assets |
1,746 | 1,286 | ||||||
Acquisition-related costs2 |
6,811 | | ||||||
|
|
|
|
|||||
Total adjustments to (loss) income from operations |
27,666 | 18,331 | ||||||
|
|
|
|
|||||
Non-GAAP operating income |
$ | 24,927 | $ | 19,562 | ||||
|
|
|
|
|||||
Non-GAAP operating income margin |
16.6 | % | 14.0 | % |
1 |
The difference between stock-based compensation presented above and stock-based compensation as reported in the consolidated statement of operations for the three months ended March 31, 2020, represents an amount accrued for cash bonuses as of December 31, 2019, which was settled in equity during the first quarter of 2020. |
Three Months Ended
March 31, |
||||
2020 | ||||
Cost of revenue |
$ | 2,138 | ||
Sales and marketing |
7,674 | |||
Research and development |
3,386 | |||
General and administrative |
5,911 | |||
|
|
|||
Total |
$ | 19,109 | ||
|
|
2 |
Costs related to the acquisitions of Clustree SAS and Saba Software, Inc. |
8
Cornerstone OnDemand, Inc.
RECONCILIATIONS OF NET LOSS TO NON-GAAP NET INCOME AND NON-GAAP NET INCOME PER SHARE
(in thousands, except per share amounts)
(unaudited)
Three Months Ended
March 31, |
||||||||
2020 | 2019 | |||||||
Net loss |
$ | (13,775 | ) | $ | (3,464 | ) | ||
Adjustments to net loss |
||||||||
Stock-based compensation1 |
19,109 | 17,045 | ||||||
Amortization of intangible assets |
1,746 | 1,286 | ||||||
Acquisition-related costs2 |
6,811 | | ||||||
Accretion of debt discount and amortization of debt issuance costs3 |
1,090 | 1,026 | ||||||
|
|
|
|
|||||
Total adjustments to net loss |
$ | 28,756 | $ | 19,357 | ||||
|
|
|
|
|||||
Non-GAAP net income |
$ | 14,981 | $ | 15,893 | ||||
|
|
|
|
|||||
Non-GAAP basic net income per share |
$ | 0.24 | $ | 0.27 | ||||
Non-GAAP diluted net income per share |
$ | 0.23 | $ | 0.25 | ||||
Weighted-average common shares outstanding, basic |
61,631 | 59,141 | ||||||
Non-GAAP weighted-average common shares outstanding, diluted |
66,188 | 64,750 |
1 |
The difference between stock-based compensation presented above and stock-based compensation as reported in the consolidated statement of operations for the three months ended March 31, 2020, represents an amount accrued for cash bonuses as of December 31, 2019, which was settled in equity during the first quarter of 2020. |
2 |
Costs related to the acquisitions of Clustree SAS and Saba Software, Inc. |
3 |
Debt discount accretion and debt issuance cost amortization has been recorded in connection with our issuance of $300.0 million in convertible notes on December 8, 2017. These expenses represent non-cash charges that have been recorded in accordance with the authoritative accounting literature for such transactions. |
9
Cornerstone OnDemand, Inc.
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO UNLEVERED FREE CASH FLOW AND UNLEVERED FREE CASH FLOW MARGIN
(A Non-GAAP Financial Measure)
(in thousands)
(unaudited)
Three Months Ended
March 31, |
||||||||
2020 | 2019 | |||||||
Reconciliation of unlevered free cash flow: |
||||||||
Net cash provided by operating activities |
$ | 5,988 | $ | 7,294 | ||||
Capital expenditures |
(971 | ) | (4,243 | ) | ||||
Capitalized software costs |
(7,389 | ) | (7,399 | ) | ||||
Cash paid for interest |
8,625 | 8,685 | ||||||
|
|
|
|
|||||
Unlevered free cash flow |
$ | 6,253 | $ | 4,337 | ||||
|
|
|
|
|||||
Unlevered free cash flow margin |
4.2 | % | 3.1 | % | ||||
|
|
|
|
10
Cornerstone OnDemand, Inc.
TRENDED OPERATIONAL & FINANCIAL HIGHLIGHTS
(unaudited)
The following metrics are intended as a supplement to the financial statements found in this press release and other information furnished or filed with the SEC. In the event of discrepancies between amounts in these tables and the Companys historical disclosures or financial statements, readers should rely on the Companys filings with the SEC and financial statements in the Companys most recent earnings press release.
The Company intends to periodically review and refine the definition, methodology and appropriateness of each of these supplemental metrics. As a result, metrics are subject to removal and/or change, and such changes could be material.
FY 2019 | FY 2020 |
|
||||||||||||||||||||||||||||||
Q119 | Q219 | Q319 | Q419 | Q120 | FY17 | FY18 | FY19 | |||||||||||||||||||||||||
SELECTED METRICS: |
||||||||||||||||||||||||||||||||
Number of customers1 |
3,567 | 3,604 | 3,645 | 3,698 | 3,693 | 3,250 | 3,535 | 3,698 | ||||||||||||||||||||||||
% y/y |
8.8 | % | 7.2 | % | 6.3 | % | 4.6 | % | 3.5 | % | 11.4 | % | 8.8 | % | 4.6 | % | ||||||||||||||||
% q/q |
0.9 | % | 1.0 | % | 1.1 | % | 1.5 | % | (0.1 | )% | n/a | n/a | n/a | |||||||||||||||||||
Number of employees |
2,017 | 2,034 | 1,986 | 1,993 | 1,975 | 1,891 | 1,953 | 1,993 | ||||||||||||||||||||||||
% y/y |
10.3 | % | 9.9 | % | 5.0 | % | 2.0 | % | (2.1 | )% | 3.7 | % | 3.3 | % | 2.0 | % | ||||||||||||||||
% q/q |
3.3 | % | 0.8 | % | (2.4 | )% | 0.4 | % | (0.9 | )% | n/a | n/a | n/a | |||||||||||||||||||
Annual dollar retention rate |
n/a | n/a | n/a | n/a | n/a | 93.5 | % | 92.8 | % | 90.3 | % | |||||||||||||||||||||
Annual recurring revenue (in thousands) |
n/a | n/a | n/a | n/a | n/a | 439,000 | 510,000 | 575,000 | ||||||||||||||||||||||||
Net cash provided by operating activities (in thousands) |
7,294 | 21,183 | 24,478 | 62,594 | 5,988 | 67,510 | 90,253 | 115,549 | ||||||||||||||||||||||||
Unlevered free cash flow (in thousands) |
4,337 | 9,470 | 21,682 | 54,714 | 6,253 | 43,680 | 63,471 | 90,203 | ||||||||||||||||||||||||
Unlevered free cash flow margin |
3.1 | % | 6.7 | % | 15.0 | % | 36.6 | % | 4.2 | % | 9.1 | % | 11.8 | % | 15.6 | % | ||||||||||||||||
FINANCIAL DATA (in thousands, except percentages): |
||||||||||||||||||||||||||||||||
Revenue |
140,117 | 141,860 | 144,952 | 149,594 | 150,136 | | 537,891 | 576,523 | ||||||||||||||||||||||||
Subscription revenue |
131,256 | 132,562 | 137,446 | 141,704 | 144,421 | | 473,052 | 542,968 | ||||||||||||||||||||||||
% y/y growth |
16.0 | % | 15.5 | % | 15.7 | % | 12.2 | % | 10.0 | % | | | 14.8 | % | ||||||||||||||||||
% y/y growth constant currency |
18.2 | % | 17.3 | % | 17.2 | % | 12.4 | % | 10.7 | % | | | 16.2 | % | ||||||||||||||||||
Subscription revenue % of total revenue |
93.7 | % | 93.4 | % | 94.8 | % | 94.7 | % | 96.2 | % | | 87.9 | % | 94.2 | % | |||||||||||||||||
Income (loss) from operations |
1,231 | (3,594 | ) | 3,713 | 10,583 | (2,739 | ) | | (7,769 | ) | 11,933 | |||||||||||||||||||||
MARGIN DATA: |
||||||||||||||||||||||||||||||||
Gross margin |
76.0 | % | 71.7 | % | 74.4 | % | 74.5 | % | 72.1 | % | | 73.2 | % | 74.1 | % | |||||||||||||||||
Sales and marketing % of revenue |
38.9 | % | 41.4 | % | 39.9 | % | 37.9 | % | 36.9 | % | | 41.8 | % | 39.5 | % | |||||||||||||||||
Research and development % of revenue |
19.8 | % | 17.2 | % | 17.7 | % | 15.6 | % | 16.0 | % | | 14.3 | % | 17.5 | % | |||||||||||||||||
General and administrative % of revenue |
16.4 | % | 15.7 | % | 14.2 | % | 13.9 | % | 16.5 | % | | 16.7 | % | 15.0 | % | |||||||||||||||||
Acquisition-related costs % of revenue |
| | | | 4.5 | % | | 0.2 | % | | ||||||||||||||||||||||
Restructuring % of revenue |
| | | | | | 1.7 | % | | |||||||||||||||||||||||
Operating margin |
0.9 | % | (2.5 | )% | 2.6 | % | 7.1 | % | (1.8 | )% | | (1.4 | )% | 2.1 | % | |||||||||||||||||
NON-GAAP MARGIN DATA: |
||||||||||||||||||||||||||||||||
Non-GAAP gross margin |
77.7 | % | 73.7 | % | 76.3 | % | 76.3 | % | 74.6 | % | | 74.1 | % | 76.0 | % | |||||||||||||||||
Non-GAAP sales and marketing % of revenue |
34.6 | % | 36.6 | % | 34.4 | % | 33.2 | % | 31.7 | % | | 37.2 | % | 34.7 | % | |||||||||||||||||
Non-GAAP research and development % of revenue |
16.8 | % | 14.1 | % | 14.8 | % | 13.5 | % | 13.8 | % | | 12.1 | % | 14.8 | % | |||||||||||||||||
Non-GAAP general and administrative % of revenue |
12.3 | % | 11.3 | % | 10.3 | % | 10.6 | % | 12.5 | % | | 13.2 | % | 11.1 | % | |||||||||||||||||
Non-GAAP operating margin |
14.0 | % | 11.7 | % | 16.7 | % | 18.9 | % | 16.6 | % | | 11.8 | % | 15.4 | % | |||||||||||||||||
Non-GAAP research and development plus capitalized software % of revenue |
22.1 | % | 18.8 | % | 18.0 | % | 17.4 | % | 18.7 | % | | 16.8 | % | 19.1 | % | |||||||||||||||||
FOREIGN EXCHANGE RATES: |
||||||||||||||||||||||||||||||||
GBP to USD average period rate |
1.30 | 1.29 | 1.23 | 1.29 | 1.28 | 1.29 | 1.34 | 1.28 | ||||||||||||||||||||||||
GBP to USD end of period spot rate |
1.30 | 1.27 | 1.23 | 1.32 | 1.23 | 1.35 | 1.27 | 1.32 | ||||||||||||||||||||||||
EUR to USD average period rate |
1.14 | 1.12 | 1.11 | 1.11 | 1.10 | 1.14 | 1.18 | 1.12 | ||||||||||||||||||||||||
EUR to USD end of period spot rate |
1.12 | 1.14 | 1.09 | 1.12 | 1.10 | 1.20 | 1.14 | 1.12 |
1 |
Includes contracted customers of our enterprise people development platform and excludes customers and users of Cornerstone for Salesforce, PiiQ, Workpop Inc. and Grovo Learning, Inc. |
11
Investor Relations Contact:
Jason Gold
Phone: +1 (310) 526-2531
jgold@csod.com
Media Contact:
Deaira Irons
Phone: +1 (310) 752-0164
dirons@csod.com
12
Exhibit 99.2
Cornerstone Announces Leadership Transition
SANTA MONICA, Calif. May 11, 2020 Cornerstone OnDemand, Inc. (NASDAQ: CSOD), a global leader in people development solutions, today announced that after 20 years as founder and Chief Executive Officer of Cornerstone, Adam Miller will become co-chair of the Cornerstone Board of Directors. The board has appointed Phil Saunders, the former CEO of Saba Software, to serve as Cornerstones new CEO effective June 15, 2020.
I founded Cornerstone with a mission to help educate the world, and we have never wavered from that goal, said Adam Miller. Cornerstone has brought learning to millions of people around the globe and has become one of the worlds largest cloud computing companies in the process. I am proud of all that we have accomplished, and after two decades, I am excited to commit more fully to my passion for social entrepreneurship and public service. Im confident that Phil is the right leader to continue building on our mission and to help our clients prepare for the new world of work. As co-chair with Elisa Steele, I will continue to help with Cornerstones innovation into the future as we work to empower nearly 100 million people around the world.
Im honored that Adam and the board have put their trust in me to lead Cornerstone, said Phil Saunders, future CEO of Cornerstone. I look forward to working alongside such a talented team, our board, and our global ecosystem of customers and partners. Our priority will remain serving our customers and people, as well as executing on our business integration and driving value for our shareholders. Going forward, we have even more opportunities for growth and the ability to make an even bigger impact in the lives of people at work, every day. I am energized by this challenge and look forward to guiding Cornerstones continued success.
As founder and CEO of Cornerstone, Adams passion, vision and leadership have helped shaped the industry, and I welcome his partnership as co-chairs, said Elisa Steele, chair of the Cornerstone Board of Directors. Now Phil will take the reins, and the board has every confidence in his ability to lead the company going forward. His operational expertise and track record are fully aligned with our plan for long-term success and, on behalf of the Board of Directors, we are pleased to announce his appointment today.
Phil Saunders was most recently the CEO of Saba Software. He was instrumental in Sabas growth and position as a HR technology leader. Prior to Saba, Phil spent 20 years at Gemalto (previously SafeNet), where he served in key sales and marketing leadership roles before becoming Chief Revenue Officer and board member.
About Cornerstone
Cornerstone is a premier people development company. We believe people can achieve anything when they have the right development and growth opportunities. We offer organizations the technology, content, expertise and specialized focus to help them realize the potential of their people. Featuring comprehensive recruiting, personalized learning, modern training content, development-driven performance management and holistic employee data management and insights, Cornerstones people development solutions are used by more than 7,000 clients of all sizes, spanning more than 75 million users across over 180 countries and 50+ languages. Learn more at www.cornerstoneondemand.com.
Media Contact:
Deaira Irons
Cornerstone
dirons@csod.com
###