32
_________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
_X__ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended July 31, 1996
OR
____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ___________.
Commission File Number: 0-15188
INTERSOLV, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 52-0990382
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9420 Key West Avenue
Rockville, Maryland 20850
(Address of principal executive offices)
(301) 838-5000
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or
15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past
90 days.
Yes___X___ No_______
As of August 31, 1996, there were 19,772,856 shares
outstanding of the Registrant's Common Stock, par value
$.01 per share.
_________________________________________________________
INTERSOLV, INC.
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Condensed Consolidated Statements of
Operations for the three months ended
July 31, 1996 and 1995 4
Condensed Consolidated Balance Sheets as of
July 31, 1996 and April 30, 1996 5
Condensed Consolidated Statements of Cash
Flows for the three Months ended
July 31, 1996 and 1995 6
Notes to Condensed Consolidated Financial
Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 9
PART II. OTHER INFORMATION
Item 4. Results of Votes of Securities Holders 12
Item 5. Other 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
The financial statements set forth below for the three
month periods ended July 31, 1996 and 1995 are
unaudited, and have been prepared pursuant to the rules
and regulations of the Securities and Exchange
Commission. Certain information and note disclosures
normally included in annual financial statements
prepared in accordance with generally accepted
accounting principles have been condensed or omitted
pursuant to those rules and regulations. INTERSOLV,
Inc. believes that the disclosures made are adequate to
make the information presented not misleading. The
results for the three month period ended July 31, 1996
are not necessarily indicative of the results for the
fiscal year.
In the opinion of management, the accompanying
condensed consolidated financial statements reflect all
necessary adjustments (consisting only of normal
recurring adjustments) that are necessary for a fair
presentation of results for the periods presented. It
is suggested that these financial statements be read in
conjunction with the latest audited consolidated
financial statements and the notes thereto (included in
the Annual Report on Form 10-K for the fiscal year
ended April 30, 1996).
INTERSOLV, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended July 31,
(amounts in thousands, except per share data)
(unaudited)
1996 1995
Revenues:
License fees $18,640 $19,090
Service fees 14,107 13,574
Total revenues 32,747 32,664
Costs and expenses:
Cost of products 4,256 3,870
Cost of services 7,131 5,919
Sales and marketing 15,603 15,210
Research and development 3,124 3,906
General and administrative 2,716 3,339
Acquisition charges --- 2,000
Total costs and expenses 32,830 34,244
Operating loss (83) (1,580)
Other income, net 136 205
Income (loss) before income taxes 53 (1,375)
Provision for income taxes 17 194
Net income (loss) $ 36 ($ 1,569)
Shares used in computing primary
net income per share 20,122 18,836
Primary net income per share $0.00 ($0.08)
Shares used in computing fully
diluted net income per share 20,970 18,836
Fully diluted net income per share $0.00 ($0.08)
The accompanying notes are an integral part of these
condensed consolidated financial statements.
INTERSOLV, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
(unaudited)
As of As of
July 31, April 30,
1996 1996
ASSETS
Current assets:
Cash and cash equivalents $19,685 $28,215
Accounts receivable, net 33,971 37,645
Prepaid expenses and other
current assets 9,219 7,937
Total current assets 62,875 73,797
Software, net 22,508 21,970
Property and equipment, net 9,038 7,835
Notes receivable and other
assets 7,762 7,315
Total assets $102,183 $110,917
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and
accrued expenses $22,779 $26,838
Accrued acquisition
charges 3,049 3,953
Deferred revenue 17,255 18,799
Total current liabilities 43,083 49,590
Long-term liabilities 7,325 7,817
Total liabilities 50,408 57,407
Subordinated convertible note 3,028 3,676
Stockholders' equity
Common stock 200 198
Paid-in capital 93,503 92,967
Treasury stock (1,913) ---
Accumulated deficit (41,282) (41,318)
Cumulative currency
translation adjustment (1,761) (2,013)
Total stockholders' equity 48,747 49,834
Total liabilities and
stockholders' equity $102,183 $110,917
The accompanying notes are an integral part of these
condensed consolidated financial statements.
INTERSOLV, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended July 31,
(amounts in thousands)
(unaudited)
1996 1995
CASH INFLOWS (OUTFLOWS)
Operating activities:
Net income (loss) $36 ($1,569)
Non-cash items:
Depreciation and amortization 4,734 3,557
Deferred income taxes (146) 95
Capitalized software writedowns --- 680
Payment of restructuring/
acquisition charges (904) (306)
Change in working capital (3,750) 698
Net cash provided by operating
activities (30) 3,155
Investing activities:
Additions to software (4,158) (4,069)
Additions to property and
equipment (2,088) (2,548)
Sale/leaseback of equipment --- 776
Changes in other assets (57) 343
Net cash used in investing
activities (6,303) (5,498)
Financing activities:
Proceeds (payments) from debt,
net (349) 536
Payment of acquisition
installment liability --- (1,107)
Proceeds from sale of common
stock 782 3,927
Purchase of common stock for
treasury (2,805) ---
Net cash provided by financing
activities (2,372) 3,356
Effect of exchange rate changes
on cash 175 11
Net increase (decrease) in cash
and cash equivalents (8,530) 1,024
Cash and cash equivalents,
beginning of period 28,215 26,661
Cash and cash equivalents, end
of period $19,685 $27,685
The accompanying notes are an integral part of these
condensed consolidated financial statements.
INTERSOLV, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Basis of Presentation
The accompanying condensed consolidated financial
statements include the accounts of INTERSOLV, Inc. and
its wholly owned subsidiaries (collectively, the
"Company" or "INTERSOLV").
The accompanying unaudited financial statements reflect
all the adjustments that, in the opinion of management,
are necessary for a fair presentation of the results
for the interim periods presented. The results for the
three month period ended July 31, 1996 may not
necessarily be indicative of the results for the entire
year. The April 30, 1996 condensed consolidated
balance sheet data was derived from audited financial
statements as of the same date.
These financial statements should be read in
conjunction with the Company's annual audited financial
statements, as filed with the Securities and Exchange
Commission on Form 10-K, for the year ended April 30,
1996.
Operations
The Company focuses on application enablement software
for client/server, Internet and intranet applications.
The Company's products and services support both the
development of client/server systems and the
maintenance of traditional systems.
Contracting Costs (Discontinued Operations)
Prior to April 1986, certain revenues associated with
discontinued operations were generated under cost-plus-
fee contracts with the U.S. government and are subject
to adjustments upon audit by the Defense Contract Audit
Agency (DCAA). Audits through January 31, 1986 have
been completed. On December 5, 1990, the Company
received a notice from the DCAA questioning certain
charges aggregating approximately $2.4 million incurred
by the Company during fiscal 1985 and 1986. The
Company filed a response in April, 1991, which provided
additional information regarding the issues raised in
the notice. The amount of the liability, if any,
cannot be ascertained.
Sales and Income Tax
The Company sells its products in various states
through different distribution channels, including
telesales, field sales and third party resellers. On
certain sales, the Company must collect and remit sales
tax to the respective state. These sales taxes are
subject to adjustment upon audit by the respective
state. Liabilities may result from this process;
however, management believes the reserves provided for
these liabilities are sufficient.
The Company's income tax returns are subject to audit
by Federal, state and foreign tax authorities.
Adjustments to increase or decrease taxable income or
losses may result from these audits. Management
believes the impact of these adjustments, if any, would
not have a material impact on the Company's financial
statements taken as a whole.
Capitalization of Computer Software Development Costs
and Purchased Software
In accordance with Statement of Financial Accounting
Standards No. 86, "Accounting for the Costs of Computer
Software to be Sold, Leased, or Otherwise
Marketed,"("FAS 86") the Company capitalizes certain
internal software development costs subsequent to the
establishment of technological feasibility for the
product as evidenced by a working model. In addition,
the Company supplements its internal development effort
by acquiring rights to selected software technologies
("purchased software") from others. Capitalized
software costs and purchased software are amortized on
a straight line basis over the estimated economic lives
of the products, generally three years.
The Company continually compares the unamortized
software development costs and purchased software costs
in light of the expected future revenues for those
products. If the unamortized costs exceed the expected
future net realizable value from sales of the related
product, then the excess amount is written off.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Operating Results Overview
The following table sets forth, for the periods
indicated, the percentage which selected items in the
Consolidated Statements of Operations bear to total
revenues:
Percentage of Total Revenue
Three Months Ended
July 31,
1996 1995
Revenues:
License fees 56.9% 58.4%
Service fees 43.1% 41.6%
100.0% 100.0%
Costs and expenses:
Cost of products 13.0% 11.8%
Cost of services 21.8% 18.1%
Sales and marketing 47.6% 46.6%
Research and development 9.5% 12.0%
General and administrative 8.3% 10.2%
Acquisition charges --- 6.1%
Total costs and expenses 100.2% 104.8%
Operating loss (0.2%) (4.8%)
Other income, net 0.4% 0.6%
Income (loss) before taxes 0.2% (4.2%)
Provision for income taxes 0.1% 0.6%
Net income (loss) 0.1% (4.8%)
Revenues from North America and
International were 67% and 33%, respectively, for the three
months ended July 31, 1996 as compared to 66% and 34%,
respectively for the same period last year.
Revenues
Revenues for the three months ended July 31, 1996 were
flat when compared to the same period last year. Revenue
growth in PVCS (Software Configuration Management) and
DataDirect (Data Connectivity) product lines was 23% and
19%, respectively, which was offset by a 26% decline in
revenue from the AppMaster (Enterprise Client/Server)
product line. Growth in the PVCS and DataDirect product
lines was due to increases in new license sales and
increased demand for services. The decline in the
AppMaster product line was due largely to a decline in
new license sales, reflecting a continuing trend
experienced by the Company as more companies shift away
from traditional COBOL oriented development to
client/server development. On a geographical basis, the
Company had revenue growth in both North America and
Europe, while Asia/Pacific experienced a decline.
Cost of Products
Cost of products includes cost of software media,
freight, royalties and amortization of capitalized
software development costs and purchased technology
costs. Cost of products for the three months ended July
31, 1996 increased 10% from $3.9 million for the same
period last year to $4.3 million. The increase is
primarily due to higher levels of software amortization
related to releases of new products or new versions of
existing products in the current fiscal year.
Cost of Services
Cost of services includes personnel and related indirect
costs incurred to provide consulting and training
services, as well as telephone support to customers under
maintenance contracts. Cost of services increased 20%
from $5.9 million for the three months ended July 31,
1995 to $7.1 million for the three months ended July 31,
1996. The Company has continued to expand the number of
personnel in its consulting functions, particularly in
North America and Europe, to support the increasing
consulting service revenues. This growth in personnel
led to the increased costs for the three month period
ended July 31, 1996.
Sales and Marketing
Sales and marketing expenses for the three months ended
July 31, 1996 increased 3% from $15.2 million for the
same period last year to $15.6 million. The Company
increased its investments in field sales, telesales and
third party selling channels, as well as expanding its
marketing capabilities during the three months ended July
31, 1996. This increase in costs was mostly offset by
the decrease in sales and marketing costs resulting from
the elimination of TechGnosis' redundant sales functions
after the Company acquired TechGnosis International, Inc.
("TechGnosis") in October 1995.
Research and Development
Research and development ("R & D") expenses reflect gross
expenditures less amounts capitalized in accordance with
FAS 86. Amortization of capitalized software is included
in cost of products. R & D expenses were $3.1 million in
the first quarter ended July 1, 1996, which is 20% lower
than last year's level of $3.9 million. The decrease in
R&D expenses is the result of higher capitalization of
software costs related to the Comapny's new object-
oriented technology, or Allegris. The Allegris product
line is currently being used by several hundred "beta"
customers and is expected to be released for general
availability in the next several months.
General and Administrative
General and administrative expenses were $2.7 million in
the first quarter of fiscal 1997, which is a 19% decrease
as compared to $3.3 million in the same period last year.
The decrease is due largely to the elimination of
TechGnosis's redundant administrative functions after the
Company acquired TechGnosis.
Operating Income
The Company reported an operating loss of $83 thousand
for the three months ended July 31, 1996, as compared to
operating income excluding acquisition charges of $0.4
million for the three months ended July 31, 1995.
Other Income, net
Other income, which is primarily net investment income,
decreased when compared to the same period last year as
cash available to invest decreased .
Income Taxes
The Company's tax rate for the three months ended July
31, 1996 was 32% based upon the Company's estimate of
what the annual effective tax rate will be assuming the
use of existing tax credits and net operating loss
carryforwards.
Financial Condition - Liquidity and Capital Resources
During the three months ended July 31, 1996, operations
used $30 thousand of cash, after paying $0.9 million in
acquisition related restructuring charges. Financing
activities used a net $2.4 million, as the Company spent
$2.8 million to repurchase its common stock and $0.3
million to pay down various debt obligations. These
outflows were offset by $0.8 million derived from the
sale of stock through stock option exercises and employee
stock purchase programs. Investing activities used $6.3
million as the Company invested $4.2 million in software
and a net $2.1 million in fixed assets. Overall cash and
cash equivalents were $19.7 million at July 31, 1996,
which is down $8.5 million from $28.2 million at the
beginning of the fiscal year.
The Company has a bank line of credit arrangement which
allows short-term borrowings of up to $12 million. As of
July 31, 1996 and for the three months then ended, there
were no amounts outstanding under this line of credit.
Management believes that cash generated from operations,
cash on hand and available borrowings are sufficient to
meet the Company's capital requirements for the
foreseeable future.
PART II. OTHER INFORMATION
Item 4. Results of Votes of Shareholders
None.
Item 5. Other
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Number Exhibit Description
10.1 Employment Agreement between
the Company and Kevin J.
Burns, Chief Executive Officer,
dated August 1, 1996.
10.2 Employment Agreement between
the Company and Gary G.
Greenfield, President and Chief
Operating Officer, dated August 1,
1996.
10.3 Employment Agreement between
the Company and Kenneth A.
Sexton, Senior Vice President
and Chief Financial Officer,
dated August 1, 1996.
11.1 Computation of Net Income
Per Share for the three months
ended July 31, 1996 and 1995.
27 Financial Data Schedule (as
part of electronic filing)
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during
the three months ended July 31, 1996.
SIGNATURES
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 thereunto
duly authorized.
INTERSOLV, Inc.
Date: September 13, 1996 By: /s/ Kenneth A. Sexton
Kenneth A. Sexton
Senior Vice President,
Finance & Administration
and Chief Financial
Officer (Principal
Financial and Accounting
Officer)
EXHIBIT INDEX
Exhibit
Number Description
10.1 Employment Agreement between the
Company and Kevin J. Burns, Chief
Executive Officer, dated August 1, 1996.
10.2 Employment Agreement between the
Company and Gary G. Greenfield,
President and Chief Operating
Officer, dated August 1, 1996.
10.3 Employment Agreement between the
Company and Kenneth A. Sexton, Senior
Vice President and Chief Financial
Officer, dated August 1, 1996.
11.1 Computation of Net Income per share
for the three months ended July 31,
1996 and 1995.
27 Financial Data Schedule (as part of
electronic filing)
EXHIBIT 11.1
INTERSOLV, INC
COMPUTATION OF NET INCOME PER SHARE
Three months ended July 31,
(in thousands, except net income per share)
1996 1995
PRIMARY
Weighted average number of
shares outstanding 19,852 18,836
Additional shares under stock option
plan assumed outstanding less shares
assumed repurchased under the treasury
stock method 270 ---
Primary Shares 20,122 18,836
Net Income (loss) $ 36 ($1,569)
Net Income (loss) Per Share $ 0.00 ($ 0.08)
FULLY DILUTED
Weighted average number of shares
outstanding 19,852 18,836
Additional shares under stock option
plan assumed outstanding less shares
assumed repurchased under the treasury
stock method 271 ---
Additional shares under the
subordinated convertible notes
assumed outstanding 847 ---
Fully Diluted Shares 20,970 18,836
Net Income (loss) before adjustments $36 ($1,569)
Elimination of interest expense, net
of related tax effect, related to 8.4%
subordinated convertible notes 48 ---
Net income (loss) used for fully
diluted net income per share $ 84 ($1,569)
Net Income (loss) per share $ 0.00 ($ 0.08)
Exhibit 10.1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement"), made as of
the 1st day of August, 1996, by and between INTERSOLV,
INC., a Delaware corporation with its principal place of
business at 9420 Key West Avenue, Rockville, Maryland
20850 (the "Company"), and Kevin J. Burns (the
"Employee").
In consideration of the mutual covenants and
promises contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged by the parties hereto, the parties
agree as follows:
1. Term of Employment. The Company hereby
agrees to employ the Employee, and the Employee hereby
accepts employment with the Company, upon the terms set
forth in this Agreement, for the period, commencing on
August 1, 1996 (the "Commencement Date") and ending on
July 31, 1999 (such period, as it may be extended as
provided herein, the "Employment Period"); provided,
however, that the Employment Period shall be
automatically extended for a twelve-month period on
August 1, 1997 and on each August 1 thereafter unless the
Board of Directors ("Board") of the Company provides the
Employee, or the Employee provides the Company, with
written notice that the Company or the Employee, as the
case may be, will not so extend the Employment Period,
such notice to be given at least sixty (60) days prior to
the then applicable August 1 extension date. In the
event a Change of Control (as defined herein) occurs
during the Employment Period, the Employment Period shall
be automatically extended for the period commencing on
the Effective Date (as defined herein) of the Change of
Control and ending on the third anniversary of such date,
except as otherwise provided in Section 5.2.
2. Position and Duties.
2.1. The Employee shall, during the Employment
Period, be a full-time employee of the Company, shall
report to the Board and shall serve as Chairman of the
Board and Chief Executive Officer ("CEO") of the Company.
The Employee shall, as CEO of the Company, perform the
duties and functions customarily performed by the CEO of
a Company, and shall be responsible for the overall
direction and strategy of the Company.
2.2. The Employee shall generally perform his
duties and services from the Company's offices in
Rockville, Maryland, and shall not be required by the
Company to be personally based or transferred anywhere
other than the metropolitan area in which his office in
the Company's headquarters is now located, without the
Employee's prior written consent.
2.3. The Employee hereby accepts such
employment and agrees to perform such duties and
responsibilities and such other duties and
responsibilities, consistent with his position as CEO of
the Company, as the Board shall from time to time
reasonably assign to him. The Employee agrees to devote
his business time, attention and energies to the business
and interests of the Company during the Employment
Period, except (i) with respect to incidental business
activities, including the management of his personal
investments, and outside directorships which shall be
fully disclosed to the Board by the Employee prior to
engagement in such activities or directorships (other
than outside directorships with Computervision
Corporation, which have been disclosed to and approved by
the Board) and which, in the sole determination of the
Board, do not cause a conflict of interest or interfere
with the Employee's performance of his duties hereunder;
or (ii) as otherwise agreed in writing by the Employee
and the Board.
3. Compensation and Benefits.
3.1. Salary. During the Employment Period,
the Company shall pay the Employee an annual base salary
("Annual Base Salary") of $275,000 which shall be paid at
a monthly rate. The Annual Base Salary may be increased
from time to time as determined by the Board, in its
discretion, upon a review that shall take place at least
annually.
3.2. Bonus. During the Employment Period,
the Employee shall be entitled to participate in each
bonus or incentive plan established by the Company for
its senior executive officers, including, without
limitation, the Company's Incentive Compensation Plan.
The Board shall have the discretion, but not have any
obligation, to grant additional bonuses as it may
determine from time to time.
3.3. Stock Option or Stock Incentive Plans.
During the Employment Period, the Employee shall be
entitled to participate in the Company's stock option and
other stock incentive plans for senior executive(s);
provided, however, that the grant of any stock options
shall be subject to the discretion of the Board or a
committee of the Board if the Board delegates such
authority to a committee. Stock Options currently held
by the Employee and additional stock options hereafter
granted to the Employee which at any time or from time to
time are outstanding and unexercised are collectively
hereafter referred to as "Outstanding Stock Options".
The Outstanding Stock Options shall vest and become
immediately exercisable as provided in Section 8 of this
Agreement.
3.4. Other Benefits. During the Employment
Period, the Employee (a) shall be entitled to participate
in all incentive, saving and retirement plans, practices
and policies and programs applicable generally to other
senior executives of the Company and (b) shall be
eligible for participation in and shall receive all
benefits under welfare benefit plans, practices, policies
and programs ("Welfare Benefits") provided by the Company
(including, without limitation, medical, prescription,
dental, disability, salary continuance, employee life,
group life, accidental death and travel accident
insurance plans and programs) to the extent applicable
generally to other senior executives of the Company,
including the Welfare Benefits provided under the plans,
practices, policies and programs currently in effect and
listed on Exhibit A to this Agreement. In addition, the
Employee shall be entitled to such other perquisites of
office as are generally provided by the Company to senior
executives.
3.5. Vacation. During the Employment
Period, the Employee shall be entitled to a paid vacation
of not less than six weeks or, if more favorable to the
Employee, paid vacation in accordance with the most
favorable plans or practice as in effect generally with
respect to other senior executives of the Company.
4. Expense Reimbursement. Subject to compliance
with the Company's normal and customary policies
regarding substantiation and verification of business
expenses, the Employee is authorized to incur on behalf
of the Company, and the Company shall pay and/or
reimburse the Employee for, all customary and reasonable
expenses incurred in connection with the performance of
his duties or for performing, pursuing or otherwise
furthering the business of the Company, or any of its
subsidiaries, including expenses for travel,
entertainment and similar items.
5. Change of Control.
5.1. Certain Definitions. For purposes of
this Agreement, the following terms shall have the
following meanings:
(a) The "Effective Date" shall mean the
first date during the Employment Period on which a Change
of Control (as defined below) occurs. Anything in this
Agreement to the contrary notwithstanding, if a Change of
Control occurs and if the Employee's employment with the
Company is terminated prior to the date on which the
Change of Control occurs, and if it is reasonably
demonstrated by the Employee that such termination of
employment (i) was at the request of a third party who
has taken steps reasonably calculated to effect a Change
of Control or (ii) otherwise arose in connection with or
anticipation of a Change of Control, then for all
purposes of this Agreement the "Effective Date" shall
mean the date immediately prior to the date of such
termination of employment.
(b) "Change of Control" shall mean:
(i) The acquisition by any individual,
entity or group (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 30% or more of either (A) the
then outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (B) the
combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company
Voting Securities"); provided, however, that for purposes
of this subsection b(i), the following acquisitions shall
not constitute a Change of Control: (A) any acquisition
directly from the Company, (B) any acquisition by the
Company, (C) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company or (D) any
acquisition by any corporation pursuant to a transaction
which complies with clauses (A), (B) and (C) of
subsection b(iii) of this Section 5.1; or
(ii) Individuals who, as of the date
hereof, constitute the Board (the "Incumbent Board")
cease for any reason to constitute at least a majority of
the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were
a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened
election contest with respect to the election or removal
of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other
than the Board; or
(iii) Approval by the shareholders of
the Company of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all
of the assets of the Company (a "Business Combination"),
in each case, unless, following such Business
Combination, (A) all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior
to such Business Combination beneficially own, directly
or indirectly, more than 60% of, respectively, the then
outstanding shares of common stock and the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of directors,
as the case may be, of the corporation resulting from
such Business Combination (including, without limitation,
a corporation which as a result of such transaction owns
the Company or all or substantially all of the Company's
assets either directly or through one or more
subsidiaries) in substantially the same proportions as
their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may
be, (B) no Person (excluding any employee benefit plan
(or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially
owns, directly or indirectly, 30% or more of,
respectively, the then outstanding shares of common stock
of the corporation resulting from such Business
Combination or the combined voting power of the then
outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the
Business Combination and (C) at least a majority of the
members of the board of directors of the corporation
resulting from such Business Combination were members of
the Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Board,
providing for such Business Combination; or
(iv) Approval by the shareholders of
the Company of a complete liquidation or dissolution of
the Company.
5.2. Termination by Employee Upon a Change
of Control. The Employee's employment may be terminated
by the Employee voluntarily at any time during the twelve
month period following the Effective Date of a Change of
Control, without the necessity of providing the reason
for such termination ("Voluntary Termination").
6. Termination of Employment.
6.1. Death or Disability. The Employee's
employment shall terminate automatically upon the
Employee's death during the Employment Period. If the
Company determines in good faith that the Disability of
the Employee has occurred during the Employment Period
(pursuant to the definition of Disability set forth
below), it may give to the Employee written notice in
accordance with Section 16(b) of this Agreement of its
intention to terminate the Employee's employment. In
such event, the Employee's employment with the Company
shall terminate effective on the 30th day after receipt
of such notice by the Employee (the "Disability Effective
Date"), provided that, within the 30 days after such
receipt, the Employee shall not have returned to
full-time performance of the Employee's duties. For
purposes of this Agreement, "Disability" shall mean (a)
the absence of the Employee from the Employee's duties
with the Company on a full-time basis for 180 days during
any 240-day period as a result of incapacity due to
mental or physical illness or (b) the determination
(evidenced by a written report or certificate) by a
physician selected by the Company or its insurers, and
acceptable to the Employee or the Employee's legal
representative, that the Employee is incapable, due to
mental or physical illness, to perform his duties on a
full-time basis for at least 180 days during the ensuing
240 days.
6.2. Cause. The Company may terminate the
Employee's employment during the Employment Period for
Cause. For purposes of this Agreement, "Cause" shall
mean:
(a) the willful and continued failure of
the Employee to perform substantially the Employee's
duties with the Company or one of its affiliates (other
than any such failure resulting from Disability),
(b) the Employee's conviction of a felony,
(c) the Employee's gross and reckless
negligence in the performance of his duties which
materially adversely affects the Company's business, or
(d) a material breach of any of the
Employee's covenants contained in Sections 12 and 13 of
this Agreement.
For purposes of this provision, no act or failure to act,
on the part of the Employee, shall be considered
"willful" unless it is done, or omitted to be done, by
the Employee in bad faith or without reasonable belief
that the Employee's action or omission was in the best
interests of the Company. Any act, or failure to act,
based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the
Board or based upon the advice of counsel for the Company
shall be conclusively presumed to be done, or omitted to
be done, by the Employee in good faith and in the best
interests of the Company. The cessation of employment of
the Employee shall not be deemed to be for Cause unless
and until (i) in the event of any Cause defined in
paragraphs (a), (c) and (d) of this Section 6.2, a
written notice has been delivered to the Employee by the
Board which specifically identifies the Cause which is
the Board's basis for termination and the Employee has
failed to cure or remedy the act or omission so
identified within a period of thirty (30) days after the
Employee's receipt of such notice and (ii) the Board has
delivered to the Employee a copy of a resolution duly
adopted by the affirmative vote of not less than three-
quarters of the entire membership of the Board (excluding
the Employee if he is a member of the Board) at a meeting
of the Board called and held for such purpose (after
reasonable notice is provided to the Employee and the
Employee is given an opportunity, together with counsel,
to be heard before the Board), finding that, in the good
faith opinion of the Board, the Employee is guilty of the
conduct described in paragraph (a), (b), (c) or (d)
above, and specifying the particulars thereof in detail.
6.3. Good Reason. The Employee's employment may
be terminated by the Employee for Good Reason. For
purposes of this Agreement, "Good Reason" shall mean:
(a) the assignment to the Employee of any
duties inconsistent in any significant respect with the
Employee's position (including status, offices, titles
and reporting requirements), authority, duties or
responsibilities as contemplated by Section 2 of this
Agreement (or which are pursuant to such other position
within the Company to which he may with his written
approval be promoted), or any other action by the Company
which results in a significant diminution in such
position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice
thereof given by the Employee;
(b) any failure by the Company to comply
with any of the provisions of Section 3 or any of the
other material provisions of this Agreement, other than
an isolated, insubstantial and inadvertent failure not
occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by
the Employee;
(c) the Company's requiring the Employee to
be based at any office or location other than as provided
in Section 2.2 hereof or the Company's requiring the
Employee to travel on Company business to a substantially
greater extent than reasonably and customarily required
in the performance of his responsibilities;
(d) any purported termination by the
Company of the Employee's employment otherwise than as
expressly permitted by this Agreement; or
(e) any failure by the Company to comply
with and satisfy Section 15(c) of this Agreement.
6.4. Termination at Election of Employee
Other Than For Change of Control. The Employee may
voluntarily terminate his employment other than pursuant
to Section 5.2, upon not less than six months prior
written notice to the Company; provided, that the Company
may, after receipt of such notice, terminate the
Employee's employment prior to the expiration of such six-
month period upon not less than thirty days prior written
notice.
6.5. Notice of Termination. Any
termination by the Company for Cause, or by the Employee
for Good Reason, a Voluntary Termination after a Change
of Control or pursuant to Section 6.4, shall be
communicated by Notice of Termination to the other party
hereto given in accordance with Section 16(b) of this
Agreement.
For purposes of this Agreement, a "Notice of Termination"
means a written notice which (a) indicates the specific
termination provision in this Agreement relied upon, (b)
to the extent applicable, sets forth in reasonable detail
the facts and circumstances claimed to provide a basis
for termination of the Employee's employment under the
provision so indicated and (c) if the Date of Termination
(as defined below) is other than the date of receipt of
such notice, specifies the termination date (which date
shall be not more than thirty days after the giving of
such notice, except as provided in Section 6.4). The
failure by the Employee or the Company to set forth in
the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall
not waive any right of the Employee or the Company,
respectively, hereunder or preclude the Employee or the
Company, respectively, from asserting such fact or
circumstance in enforcing the Employee's or the Company's
rights hereunder.
6.6. Date of Termination. "Date of
Termination" means (a) if the Employee's employment is
terminated by the Company for Cause, or by the Employee
for Good Reason, Voluntary Termination or pursuant to
Section 6.4, the date of receipt of the Notice of
Termination or any later date specified therein, as the
case may be, (b) if the Employee's employment is
terminated by the Company other than for Cause or
Disability, the date on which the Company notifies the
Employee of such termination and (c) if the Employee's
employment is terminated by reason of death or
Disability, the date of death of the Employee or the
Disability Effective Date, as the case may be.
7. Obligations of the Company upon Termination.
(a) Good Reason; Other Than for Cause, Death or
Disability. If, during the Employment Period, the
Company shall terminate the Employee's employment other
than for Cause or Disability or the Employee shall
terminate his employment for Good Reason or shall
exercise his right of Voluntary Termination pursuant to
Section 5.2,
(i) the Company shall pay to the
Employee the aggregate of the following amounts:
A. a lump sum cash payment within 30 days after
the Date of Termination equal to the sum of (1) the
Employee's Annual Base Salary through the Date of
Termination to the extent not theretofore paid, (2) the
product of (x) the higher of (I) the annual bonus payable
for the then current fiscal year, annualized on the basis
of quarterly bonus payments paid or accrued during such
fiscal year, and (II) the annual bonus paid or payable,
including any bonus or portion thereof which has been
earned but deferred (and annualized for any fiscal year
consisting of less than twelve full months) for the most
recently completed fiscal year during the Employment
Period, if any (such higher amount being referred to as
the "Highest Annual Bonus") and (y) a fraction, the
numerator of which is the number of days in the current
fiscal year through the Date of Termination, and the
denominator of which is 365 and (3) any compensation
previously deferred by the Employee (together with any
accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not theretofore
paid (the sum of the amounts described in clauses (1),
(2), and (3) shall be hereinafter referred to as the
"Accrued Obligations"); and
B. the amount equal to the product of
(i) eighteen (18) and (ii) the quotient determined by
dividing (x) the sum of the Annual Base Salary plus the
greater of (1) the bonus paid to the Employee for the
immediately preceding fiscal year and (2) an amount equal
to the average of the annual bonus paid to the Employee
for the immediately three preceding years by (y) twelve
(12), which amount shall be paid (AA) in a lump sum
within 30 days after the Date of Termination if
termination occurs by reason of Voluntary Termination
pursuant to Section 5.2, termination by the Company
without Cause after a Change of Control or termination by
the Employee for Good Reason after a Change of Control or
(BB) in eighteen (18) substantially equal monthly
installments over the 18 month period following the Date
of Termination if termination occurs by reason of
termination by the Company without Cause prior to a
Change of Control or termination by the Employee for Good
Reason prior to a Change of Control; and
C. a lump sum cash payment within 30 days after
the Date of Termination equal to the difference between
(a) the actuarial equivalent of the benefit (utilizing
actuarial assumptions no less favorable to the Employee
than those in effect under the Company's qualified
defined benefit retirement plan (the "Retirement Plan"),
if any such plan is then in effect, and any excess or
supplemental retirement plan in which the Employee
participates ("SERP"), which the Employee would receive
if the Employee's employment continued for the balance of
the Employment Period assuming for this purpose that all
accrued benefits are fully vested, and (b) the actuarial
equivalent of the Employee's actual benefit (paid or
payable), if any, under the Retirement Plan and the SERP
as of the Date of Termination;
(ii) for the balance of the Employment
after the Employee's Date of Termination, or such longer
period as may be provided by the terms of the appropriate
plan, program, practice or policy, the Company shall
continue benefits to the Employee and/or the Employee's
family at least equal to those which would have been
provided to them in accordance with the Welfare
Benefit(s) plans, programs, practices and policies
described in Section 3.4 of this Agreement if the
Employee's employment had not been terminated or, if more
favorable to the Employee, as in effect generally at any
time thereafter with respect to other senior executives
of the Company and their families, provided, however,
that if the Employee becomes reemployed with another
employer and is eligible to receive medical or other
welfare benefits under another employer-provided plan,
the medical and other welfare benefits described herein
shall be secondary to those provided under such other
plan during such applicable period of eligibility, and
for purposes of determining eligibility (but not the time
of commencement of benefits) of the Employee for retiree
benefits pursuant to such plans, practices, programs and
policies, the Employee shall be considered to have
remained employed until the expiration of the Employment
Period and to have retired on the last day of such
period;
(iii) the Company shall, at its sole
expense as incurred, provide the Employee with
outplacement services for up to a maximum period of
twenty-four (24) months, the scope and provider of which
shall be selected by the Employee in the Employee's sole
discretion;
(iv) the Company shall at its sole expense,
provide the Employee, during the six (6) month period
following termination of his employment, a full-time
administrative support person of the Employee's choice
and thereafter for up to an additional twelve (12) months
a part-time administrative support person reasonably
acceptable to the Employee; and
(v) to the extent not theretofore paid or
provided, the Company shall timely pay or provide to the
Employee any other amounts or benefits required to be
paid or provided or which the Employee is eligible to
receive under any plan program, policy or practice or
contract or agreement of the Company (such other amounts
and benefits shall be hereinafter referred to as the
"Other Benefits").
(b) Death. If the Employee's employment is
terminated by reason of the Employee's death during the
Employment Period, this Agreement shall terminate without
further obligations to the Employee's legal
representatives under this Agreement, other than for (i)
payment of Accrued Obligations (ii) payment of
compensation for a period of six (6) months following his
death, based on his Annual Base Salary at the date of his
death, and (iii) the timely payment or provision of Other
Benefits, as defined in Section 7(a)(iv). Accrued
Obligations shall be paid to the Employee's estate or
beneficiary, as applicable, in a lump sum in cash within
30 days of the Date of Termination. With respect to the
provision of Other Benefits, the term Other Benefits as
utilized in this Section 7(b) shall include, without
limitation, and the Employee's estate and/or
beneficiaries shall be entitled to receive, benefits at
least equal to the most favorable benefits provided by
the Company to the estates and beneficiaries of senior
executives of the Company and under such plans, programs,
practices and policies relating to death benefits, if
any, as in effect on the date of the Employee's death
with respect to other senior executives of the Company
and their beneficiaries.
(c) Disability. If the Employee's employment is
terminated by reason of the Employee's Disability during
the Employment Period, this Agreement shall terminate
without further obligations to the Employee, other than
for payment of Accrued Obligations and the timely payment
or provision of Other Benefits, as defined in Section
7(a)(iv). Accrued Obligations shall be paid to the
Employee in a lump sum in cash within 30 days of the Date
of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this
Section 7(c) shall include, and the Employee shall be
entitled after the Disability Effective Date to receive,
disability and other benefits at least equal to the most
favorable of those generally provided by the Company to
disabled executives and/or their families in accordance
with such plans, programs, practices and policies
relating to disability, if any, as in effect on the
Disability Effective Date with respect to other senior
executives of the Company and their families.
(d) Cause; Other than for Good Reason If the
Employee's employment shall be terminated (i) by the
Company for Cause during the Employment Period, or (ii)
by the Employee (or the Company) pursuant to the
provisions of Section 6.4, this Agreement shall terminate
without further obligations to the Employee other than
the obligation to pay to the Employee (x) the Annual Base
Salary through the Date of Termination, (y) the amount of
any compensation previously deferred by the Employee, and
(z) Other Benefits accrued through the Date of
Termination, if any, in each case to the extent
theretofore unpaid.
8. Acceleration of Stock Options; Etc. If,
during the Employment Period, (i) the Company shall
terminate the Employee's employment other than for Cause
or Disability, (ii) the Employee shall terminate his
employment for Good Reason or shall exercise his right of
Voluntary Termination (as provided in Section 5.2), or
(iii) a Change of Control shall occur; (a) the exercise
periods of all Outstanding Stock Options then held by the
Employee shall be accelerated and all such Options shall
be and become vested and exercisable in full at the time
the Change of Control occurs or if his employment is so
terminated on the Date of Termination or, if practicable,
immediately preceding the Date of Termination and (b) all
Outstanding Stock Options then held by the Employee shall
be exercisable, by the Employee, at any time within the
period during which the Employee is obligated to provide
consulting services to the Company and to refrain from
competing with the Company as provided in Section 13 of
this Agreement.
9. Non-exclusivity of Rights. Nothing in this
Agreement shall prevent or limit the Employee's
continuing or future participation in any plan, program,
policy or practice provided by the Company and for which
the Employee may qualify, nor shall anything herein limit
or otherwise affect such rights as the Employee may have
under any contract or agreement with the Company.
Amounts which are vested benefits or which the Employee
is otherwise entitled to receive under any plan, policy,
practice or program of or any contract or agreement with
the Company at or subsequent to the Date of Termination
shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as
explicitly modified by this Agreement.
10. Full Settlement: Legal Fees. The Company's
obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Employee
or others. In no event shall the Employee be obligated
to seek other employment or take any other action by way
of mitigation of the amounts payable to the Employee
under any of the provisions of this Agreement and except
as specifically provided in Section 7(a)(ii), such
amounts shall not be reduced whether or not the Employee
obtains other employment. The Company agrees to pay as
incurred, to the full extent permitted by law, all legal
fees and expenses which the Employee may reasonably incur
as a result of any contest by the Company, the Employee
or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result
of any contest by the Employee about the amount of any
payment pursuant to this Agreement), plus in each case
interest on any delayed payment at the applicable Federal
rate provided for in Section 7872(f)(2)(A) of the
Internal Revenue Code of 1986, as amended (the "Code"),
provided, however, that if the Company shall prevail in
such contest through a final judgment in its favor, from
and after such final judgment the Company shall not be
obligated to pay any such fees and expenses and the
Employee shall reimburse the Company, within thirty (30)
days thereafter, an amount equal to the aggregate of such
fees and expenses theretofore paid by the Company less
$25,000.
11. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that
any payment or distribution by the Company to or for the
benefit of the Employee (whether paid or payable or
distributed or distributable pursuant to the terms of
this Agreement or otherwise, but determined without
regard to any additional payments required under this
Section 11) (a "Payment") would be subject to the excise
tax imposed by Section 4999 of the Code or any interest
or penalties are incurred by the Employee with respect to
such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Employee shall
be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the
Employee of all taxes (including any interest or
penalties imposed with respect to such taxes), including,
without limitation, any income taxes (and any interest
and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Employee
retains an amount of the Gross- Up Payment equal to the
Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section
11(c), all determinations required to be made under this
Section 11, including whether and when a Gross- Up
Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving at
such determination, shall be made by Coopers & Lybrand
LLP or such other certified public accounting firm as may
be designated by the Employee (the "Accounting Firm"),
which shall provide detailed supporting calculations both
to the Company and the Employee within 15 business days
of the receipt of notice from the Employee that there has
been a Payment, or such earlier time as is requested by
the Company. In the event that the Accounting Firm is
serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the
Employee shall appoint another nationally recognized
accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by
the Company. Any Gross-Up Payment, as determined
pursuant to this Section 11, shall be paid by the Company
to the Employee within five days of the receipt of the
Accounting Firm's determination. Any determination by
the Accounting Firm shall be binding upon the Company and
the Employee. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which
will not have been made by the Company should have been
made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to Section 11(c)
and the Employee thereafter is required to make a payment
of any Excise Tax, the Accounting Firm shall determine
the amount of the Underpayment that has occurred and any
such Underpayment shall be promptly paid by the Company
to or for the benefit of the Employee.
(c) The Employee shall notify the Company in
writing of any claim by the Internal Revenue Service
that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification shall
be given as soon as practicable but no later than ten
business days after the Employee is informed in writing
of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is
requested to be paid. The Employee shall not pay such
claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the
Company (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due).
If the Company notifies the Employee in writing prior to
the expiration of such period that it desires to contest
such claim, the Employee shall:
(i) give the Company any
information reasonably requested by the Company
relating to such claim,
(ii) take such action in
connection with contesting such claim as the
Company shall reasonably request in writing
from time to time, including, without
limitation, accepting legal representation with
respect to such claim by an attorney
reasonably selected by the Company,
(iii) cooperate with the Company in
good faith in order effectively to contest such
claim, and
(iv) permit the Company to
participate in any proceedings relating to such
claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional
interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Employee
harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with respect
thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 11(c), the Company
shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forgo
any and all administrative appeals, proceedings, hearings
and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct the
Employee to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and the
Employee agrees to prosecute such contest to a
determination before any administrative tribunal, in a
court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine;
provided, however, that if the Company directs the
Employee to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the
Employee, on an interest-free basis and shall indemnify
and hold the Employee harmless, on an after-tax basis,
from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with
respect to such advance; and further provided that any
extension of the statute of limitations relating to
payment of taxes for the taxable year of the Employee
with respect to which such contested amount is claimed to
be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall
be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the Employee shall
be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any
other taxing authority.
(d) If, after the receipt by the Employee of an
amount advanced by the Company pursuant to Section 11(c),
the Employee becomes entitled to receive any refund with
respect to such claim, the Employee shall (subject to the
Company's complying with the requirements of Section
11(c)) promptly pay to the Company the amount of such
refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the
receipt by the Employee of an amount advanced by the
Company pursuant to Section 11(c), a determination is
made that the Employee shall not be entitled to any
refund with respect to such claim and the Company does
not notify the Employee in writing of its intent to
contest such denial of refund prior to the expiration of
30 days after such determination, then such advance shall
be forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be
paid.
12. Confidential Information. The Employee
shall hold in a fiduciary capacity for the benefit of the
Company all secret or confidential information, knowledge
or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall
have been obtained by the Employee during the Employee's
employment by the Company or any of its affiliated
companies, excluding, however, any such information,
knowledge or data that is or becomes publicly known
(other than by acts by the Employee in violation of this
Agreement). After termination of the Employee's
employment with the Company, the Employee shall not,
without the prior written consent of the Company or as
may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or
data to anyone other than the Company and those
designated by it. Except as provided in the next
following sentence, in no event shall an asserted
violation of the provisions of this Section 12 constitute
a basis for deferring or withholding any amounts
otherwise payable to the Employee under this Agreement.
The Employee acknowledges and agrees that, because the
legal remedies of the Company would be inadequate in the
event of the Employee's breach of the confidentiality
obligations contained in this Section 12, the Company
may, in addition to obtaining any other remedy or relief
available to it, enforce the provisions of this Section
11 by injunction, specific performance or other equitable
remedies; and if the Company is successful in obtaining a
preliminary injunction or similar equitable relief within
90 days of alleging such breach, the Company shall be
entitled, notwithstanding the provisions of the
immediately preceding sentence, to defer or withhold
payment thereafter until final adjudication of such
alleged breach.
13. Non-Competition and Consulting.
(a) So long as the Employee is employed as
a full-time employee of the Company, and for a period of
eighteen (18) months after termination of his employment
by reason of (x) the Company's termination other than for
Cause or Disability, or (y) the Employee's termination
for Good Reason or exercise of his right of Voluntary
Termination as provided in Section 5.2 (hereinafter each
a "Non-Competition Trigger Event"), the Employee will not
directly or indirectly (i) be or become an individual
proprietor, owner, partner, stockholder, officer,
employee, director, consultant, joint venturer, investor
or lender (or in any other capacity whatsoever other than
as a passive limited partner in any venture fund or
investment company or as the holder of not more than one
percent (1%) of the total outstanding stock of a publicly
held company) of any company or entity that directly
competes, in any material respect, with the "Company's
Business" (which, for purposes of this Section 13(a),
means the production and/or sale of products and the
providing of services of the kind and scope (x) being
produced, sold and/or provided by the Company at the time
of termination of the Company's employment or (y) in
respect of which plans for their production, sale and/or
provision had been approved by the Company prior to such
termination), or (ii) recruit, solicit or induce, or
attempt to induce, any employee or employees of the
Company or its affiliates to terminate their employment
with, or otherwise cease their relationship with the
Company or such affiliates;
(b) In consideration of the Employee's
agreement to refrain from competing with the Company and
his agreement to provide consulting services to the
Company, the Company will pay the Employee, at the time
of termination of his employment, an amount equal to the
product of (i) eighteen (18) and (ii) the quotient
determined by dividing (x) the sum of the Annual Base
Salary plus the greater of (1) the bonus paid to the
Employee for the immediately preceding fiscal year and
(2) an amount equal to the average of the annual bonus
paid to the Employee for the immediately three preceding
years by (y) twelve (12).
(c) If, during the Employment Period, the
Employee's employment is terminated by reason of any of
the Non-Competition Trigger Events, the Employee shall,
for a period of eighteen (18) months after such
termination, provide to the Company consultation services
("Consultation Period") to assist the Company in
minimizing the disruption in transitioning to the
Employee's successor. During the Consultation Period,
the Employee will not be obligated to devote more than
thirty (30) days in any twelve(12)-month period or more
than four (4) days in any calendar month to the
performance of consulting services to the Company.
Nothing in this Section 13(c) shall prohibit the Employee
from pursuing such other business activities as he shall
desire, subject to the provisions of Section 13(a). For
purposes of this Agreement and Section 10(b) of the 1982
INTERSOLV Inc. Stock Option Plan and Section 11(b) of the
1992 INTERSOLV Inc. Stock Option Plan (individually, the
"1982 Plan" or the "1992 Plan" and collectively, the
"Plans"), there shall be an irrebuttable presumption that
the Employee, during the Consultation Period, shall have
satisfied the conditions of the referenced sections of
the Plans, and shall have rendered substantial services
to the Company for purposes of allowing any relevant
option to be exercised during the Consultation Period.
(d) If any restriction set forth in this
Section 13 is found by any court of competent
jurisdiction to be unenforceable because it extends for
too long a period of time or over too great a range of
activities or in too broad a geographic area, it shall be
interpreted to extend only over the maximum period of
time, range of activities or geographic area as to which
it may be enforceable.
(e) The restrictions contained in this
Section 13 are necessary for the protection of the
business and goodwill of the Company and are considered
by the Employee to be reasonable for such purpose. The
Employee agrees that any breach of this Section 13 will
cause the Company substantial and irrevocable damage and
therefore, in the event of any such breach, in addition
to such other remedies which may be available, the
Company shall have the right to seek specific performance
and injunctive relief.
14. Indemnification. The Employee shall be
fully indemnified by the Company and its successors in
his capacity as an officer and director (if applicable)
of the Company to the full extent permitted by Delaware
law, and shall be defended and held harmless, absolutely,
irrevocably and forever by the Company and its successor
to the full extent permitted by Delaware law, from and
against all claims, demands, liabilities, costs,
expenses, damages and causes of action of any nature
whatsoever, arising out of or incidental to the execution
of the Employee's duties and responsibilities hereunder
regarding any matters or actions the Employee undertook
or performed within the course and scope of his duties
and responsibilities as an officer, employee and director
(if applicable) of the Company, including without
limitation advances by the Company to the Employee for
the payment of legal fees and expenses, provided that the
Employee shall advise the Company promptly of any such
claim or litigation against him and cooperate fully with
the Company in connection therewith, and provided further
that the Company shall have the right to assume and
control the defense of such action and to take such
action as is reasonably necessary to discharge its
obligations hereunder. In addition, the Company shall
include the Employee as a named insured in any Directors
and Officers Liability Insurance policy or policies
maintained by the Company for its directors and officers.
The provisions of this Section 14 shall survive the
expiration, suspension or termination, for any reason, of
this Agreement.
15. Successors. (a) This Agreement is personal
to the Employee and without the prior written consent of
the Company shall not be assignable by the Employee
otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit
of and be enforceable by the Employee's legal
representatives.
(b) This Agreement shall inure to the
benefit of and be binding upon the Company and its
successors and assigns.
(c) The Company will require any successor
(whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be
required to perform it if no such succession had taken
place. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to
its business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or
otherwise.
16. Miscellaneous. (a) This Agreement shall be
governed by and construed in accordance with the laws of
the State of Delaware, without reference to principles of
conflict of laws. The captions of this Agreement are not
part of the provisions hereof and shall have no force or
effect. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications
hereunder shall be in writing and shall be given by hand
delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Employee:
Kevin J. Burns
12409 Beal Spring Road
Potomac, MD 20854
If to the Company:
INTERSOLV, INC.
9420 Key West Avenue
Rockville, MD 20850
Attention: Vice President and General Counsel
or to such other address as either party shall have
furnished to the other in writing in accordance herewith.
Notice and communications shall be effective when
actually received by the addressee.
(c) The invalidity or unenforceability of
any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this
Agreement.
(d) The Company may withhold from any
amounts payable under this Agreement such Federal, state,
local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Employee's or the Company's failure
to insist upon strict compliance with any provision
hereof or any other provision of this Agreement or the
failure to assert any right the Employee or the Company
may have hereunder, including, without limitation, the
right of the Employee to terminate employment for Good
Reason pursuant to Section 6.3(c) of this Agreement,
shall not be deemed to be a waiver of such provision or
right or any other provision or right of this Agreement.
IN WITNESS WHEREOF, the Employee has hereunto set
the Employee's hand and, pursuant to the authorization
from its Board of Directors, the Company has caused this
Agreement to be executed in its name on its behalf, all
as of the day and year first above written.
/s/ Kevin J. Burns
Kevin J.
Burns__
Address: 12409 Beal Spring
Road
Potomac, MD
20854
INTERSOLV, INC.
By /s/ Russell E.
Planitzer
Russell E.
Planitzer________
Exhibit 10.2
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement"), made as of
the 1st day of August, 1996, by and between INTERSOLV,
INC., a Delaware corporation with its principal place of
business at 9420 Key West Avenue, Rockville, Maryland
20850 (the "Company"), and Gary G. Greenfield (the
"Employee").
In consideration of the mutual covenants and
promises contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged by the parties hereto, the parties
agree as follows:
1. Term of Employment. The Company hereby
agrees to employ the Employee, and the Employee hereby
accepts employment with the Company, upon the terms set
forth in this Agreement, for the period, commencing on
August 1, 1996 (the "Commencement Date") and ending on
July 31, 1999 (such period, as it may be extended as
provided herein, the "Employment Period"); provided,
however, that the Employment Period shall be
automatically extended for a twelve-month period on
August 1, 1997 and on each August 1 thereafter unless the
Board of Directors ("Board") of the Company provides the
Employee, or the Employee provides the Company, with
written notice that the Company or the Employee, as the
case may be, will not so extend the Employment Period,
such notice to be given at least sixty (60) days prior to
the then applicable August 1 extension date. In the
event a Change of Control (as defined herein) occurs
during the Employment Period, the Employment Period shall
be automatically extended for the period commencing on
the Effective Date (as defined herein) of the Change of
Control and ending on the third anniversary of such date,
except as otherwise provided in Section 5.2.
2. Position and Duties.
2.1. The Employee shall, during the
Employment Period, be a full-time employee of the
Company, shall report to the Chairman of the Board and
shall serve as President and Chief Operating Officer
(COO) of the Company. The Employee shall, as COO of the
Company, perform the duties and functions customarily
performed by the COO of a Company, including assisting
the chief executive officer of the Company in
establishing the Company's strategy and managing the day-
to-day operations of the Company.
2.2. The Employee shall generally perform his
duties and services from the Company's offices in
Rockville, Maryland, and shall not be required by the
Company to be personally based or transferred anywhere
other than the metropolitan area in which his office in
the Company's headquarters is now located, without the
Employee's prior written consent.
2.3. The Employee hereby accepts such
employment and agrees to perform such duties and
responsibilities and such other duties and
responsibilities, consistent with his position as COO of
the Company, as the Board shall from time to time
reasonably assign to him. The Employee agrees to devote
his business time, attention and energies to the business
and interests of the Company during the Employment
Period, except (i) with respect to incidental business
activities, including the management of his personal
investments, and outside directorships which shall be
fully disclosed to the Board by the Employee prior to
engagement in such activities or directorships (other
than outside directorships with Hyperion Software and
AMISYS Managed Care Systems, Inc., which have been
disclosed to and approved by the Board) and which, in the
sole determination of the Board, do not cause a conflict
of interest or interfere with the Employee's performance
of his duties hereunder; or (ii) as otherwise agreed in
writing by the Employee and the Board.
3. Compensation and Benefits.
3.1. Salary. During the Employment Period,
the Company shall pay the Employee an annual base salary
("Annual Base Salary") of $275,000 which shall be paid at
a monthly rate. The Annual Base Salary may be increased
from time to time as determined by the Board, in its
discretion, upon a review that shall take place at least
annually.
3.2. Bonus. During the Employment Period,
the Employee shall be entitled to participate in each
bonus or incentive plan established by the Company for
its senior executive officers, including, without
limitation, the Company's Incentive Compensation Plan.
The Board shall have the discretion, but not have any
obligation, to grant additional bonuses as it may
determine from time to time.
3.3. Stock Option or Stock Incentive Plans.
During the Employment Period, the Employee shall be
entitled to participate in the Company's stock option and
other stock incentive plans for senior executive(s);
provided, however, that the grant of any stock options
shall be subject to the discretion of the Board or a
committee of the Board if the Board delegates such
authority to a committee. Stock Options currently held
by the Employee and additional stock options hereafter
granted to the Employee which at any time or from time to
time are outstanding and unexercised are collectively
hereafter referred to as "Outstanding Stock Options".
The Outstanding Stock Options shall vest and become
immediately exercisable as provided in Section 8 of this
Agreement.
3.4. Other Benefits. During the Employment
Period, the Employee (a) shall be entitled to participate
in all incentive, saving and retirement plans, practices
and policies and programs applicable generally to other
senior executives of the Company and (b) shall be
eligible for participation in and shall receive all
benefits under welfare benefit plans, practices, policies
and programs ("Welfare Benefits") provided by the Company
(including, without limitation, medical, prescription,
dental, disability, salary continuance, employee life,
group life, accidental death and travel accident
insurance plans and programs) to the extent applicable
generally to other senior executives of the Company,
including the Welfare Benefits provided under the plans,
practices, policies and programs currently in effect and
listed on Exhibit A to this Agreement. In addition, the
Employee shall be entitled to such other perquisites of
office as are generally provided by the Company to senior
executives.
3.5. Vacation. During the Employment
Period, the Employee shall be entitled to a paid vacation
of not less than six weeks or, if more favorable to the
Employee, paid vacation in accordance with the most
favorable plans or practice as in effect generally with
respect to other senior executives of the Company.
4. Expense Reimbursement. Subject to compliance
with the Company's normal and customary policies
regarding substantiation and verification of business
expenses, the Employee is authorized to incur on behalf
of the Company, and the Company shall pay and/or
reimburse the Employee for, all customary and reasonable
expenses incurred in connection with the performance of
his duties or for performing, pursuing or otherwise
furthering the business of the Company, or any of its
subsidiaries, including expenses for travel,
entertainment and similar items.
5. Change of Control.
5.1. Certain Definitions. For purposes of
this Agreement, the following terms shall have the
following meanings:
(a) The "Effective Date" shall mean the
first date during the Employment Period on which a Change
of Control (as defined below) occurs. Anything in this
Agreement to the contrary notwithstanding, if a Change of
Control occurs and if the Employee's employment with the
Company is terminated prior to the date on which the
Change of Control occurs, and if it is reasonably
demonstrated by the Employee that such termination of
employment (i) was at the request of a third party who
has taken steps reasonably calculated to effect a Change
of Control or (ii) otherwise arose in connection with or
anticipation of a Change of Control, then for all
purposes of this Agreement the "Effective Date" shall
mean the date immediately prior to the date of such
termination of employment.
(b) "Change of Control" shall mean:
(i) The acquisition by any individual,
entity or group (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 30% or more of either (A) the
then outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (B) the
combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company
Voting Securities"); provided, however, that for purposes
of this subsection b(i), the following acquisitions shall
not constitute a Change of Control: (A) any acquisition
directly from the Company, (B) any acquisition by the
Company, (C) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company or (D) any
acquisition by any corporation pursuant to a transaction
which complies with clauses (A), (B) and (C) of
subsection b(iii) of this Section 5.1; or
(ii) Individuals who, as of the date
hereof, constitute the Board (the "Incumbent Board")
cease for any reason to constitute at least a majority of
the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were
a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened
election contest with respect to the election or removal
of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other
than the Board; or
(iii) Approval by the shareholders of
the Company of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all
of the assets of the Company (a "Business Combination"),
in each case, unless, following such Business
Combination, (A) all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior
to such Business Combination beneficially own, directly
or indirectly, more than 60% of, respectively, the then
outstanding shares of common stock and the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of directors,
as the case may be, of the corporation resulting from
such Business Combination (including, without limitation,
a corporation which as a result of such transaction owns
the Company or all or substantially all of the Company's
assets either directly or through one or more
subsidiaries) in substantially the same proportions as
their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may
be, (B) no Person (excluding any employee benefit plan
(or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially
owns, directly or indirectly, 30% or more of,
respectively, the then outstanding shares of common stock
of the corporation resulting from such Business
Combination or the combined voting power of the then
outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the
Business Combination and (C) at least a majority of the
members of the board of directors of the corporation
resulting from such Business Combination were members of
the Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Board,
providing for such Business Combination; or
(iv) Approval by the shareholders of
the Company of a complete liquidation or dissolution of
the Company.
5.2. Termination by Employee Upon a Change
of Control. The Employee's employment may be terminated
by the Employee voluntarily at any time during the twelve
month period following the Effective Date of a Change of
Control, without the necessity of providing the reason
for such termination ("Voluntary Termination").
6. Termination of Employment.
6.1. Death or Disability. The Employee's
employment shall terminate automatically upon the
Employee's death during the Employment Period. If the
Company determines in good faith that the Disability of
the Employee has occurred during the Employment Period
(pursuant to the definition of Disability set forth
below), it may give to the Employee written notice in
accordance with Section 16(b) of this Agreement of its
intention to terminate the Employee's employment. In
such event, the Employee's employment with the Company
shall terminate effective on the 30th day after receipt
of such notice by the Employee (the "Disability Effective
Date"), provided that, within the 30 days after such
receipt, the Employee shall not have returned to
full-time performance of the Employee's duties. For
purposes of this Agreement, "Disability" shall mean (a)
the absence of the Employee from the Employee's duties
with the Company on a full-time basis for 180 days during
any 240-day period as a result of incapacity due to
mental or physical illness or (b) the determination
(evidenced by a written report or certificate) by a
physician selected by the Company or its insurers, and
acceptable to the Employee or the Employee's legal
representative, that the Employee is incapable, due to
mental or physical illness, to perform his duties on a
full-time basis for at least 180 days during the ensuing
240 days.
6.2. Cause. The Company may terminate the
Employee's employment during the Employment Period for
Cause. For purposes of this Agreement, "Cause" shall
mean:
(a) the willful and continued failure of
the Employee to perform substantially the Employee's
duties with the Company or one of its affiliates (other
than any such failure resulting from Disability),
(b) the Employee's conviction of a felony,
(c) the Employee's gross and reckless
negligence in the performance of his duties which
materially adversely affects the Company's business, or
(d) a material breach of any of the
Employee's covenants contained in Sections 12 and 13 of
this Agreement.
For purposes of this provision, no act or failure to act,
on the part of the Employee, shall be considered
"willful" unless it is done, or omitted to be done, by
the Employee in bad faith or without reasonable belief
that the Employee's action or omission was in the best
interests of the Company. Any act, or failure to act,
based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the
Chief Executive Officer or a senior officer of the
Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or
omitted to be done, by the Employee in good faith and in
the best interests of the Company. The cessation of
employment of the Employee shall not be deemed to be for
Cause unless and until (i) in the event of any Cause
defined in paragraphs (a), (c) and (d) of this Section
6.2, a written notice has been delivered to the Employee
by the Board which specifically identifies the Cause
which is the Board's basis for termination and the
Employee has failed to cure or remedy the act or omission
so identified within a period of thirty (30) days after
the Employee's receipt of such notice and (ii) the Board
has delivered to the Employee a copy of a resolution duly
adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board
(excluding the Employee if he is a member of the Board)
at a meeting of the Board called and held for such
purpose (after reasonable notice is provided to the
Employee and the Employee is given an opportunity,
together with counsel, to be heard before the Board),
finding that, in the good faith opinion of the Board, the
Employee is guilty of the conduct described in paragraph
(a), (b), (c) or (d) above, and specifying the
particulars thereof in detail.
6.3. Good Reason. The Employee's employment may
be terminated by the Employee for Good Reason. For
purposes of this Agreement, "Good Reason" shall mean:
(a) the assignment to the Employee of any
duties inconsistent in any significant respect with the
Employee's position (including status, offices, titles
and reporting requirements), authority, duties or
responsibilities as contemplated by Section 2 of this
Agreement (or which are pursuant to such other position
within the Company to which he may with his written
approval be promoted), or any other action by the Company
which results in a significant diminution in such
position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice
thereof given by the Employee;
(b) any failure by the Company to comply
with any of the provisions of Section 3 or any of the
other material provisions of this Agreement, other than
an isolated, insubstantial and inadvertent failure not
occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by
the Employee;
(c) the Company's requiring the Employee to
be based at any office or location other than as provided
in Section 2.2 hereof or the Company's requiring the
Employee to travel on Company business to a substantially
greater extent than reasonably and customarily required
in the performance of his responsibilities;
(d) any purported termination by the
Company of the Employee's employment otherwise than as
expressly permitted by this Agreement; or
(e) any failure by the Company to comply
with and satisfy Section 15(c) of this Agreement.
6.4. Termination at Election of Employee
Other Than For Change of Control. The Employee may
voluntarily terminate his employment other than pursuant
to Section 5.2, upon not less than six months prior
written notice to the Company; provided, that the Company
may, after receipt of such notice, terminate the
Employee's employment prior to the expiration of such six-
month period upon not less than thirty days prior written
notice.
6.5. Notice of Termination. Any
termination by the Company for Cause, or by the Employee
for Good Reason, a Voluntary Termination after a Change
of Control or pursuant to Section 6.4, shall be
communicated by Notice of Termination to the other party
hereto given in accordance with Section 16(b) of this
Agreement.
For purposes of this Agreement, a "Notice of Termination"
means a written notice which (a) indicates the specific
termination provision in this Agreement relied upon, (b)
to the extent applicable, sets forth in reasonable detail
the facts and circumstances claimed to provide a basis
for termination of the Employee's employment under the
provision so indicated and (c) if the Date of Termination
(as defined below) is other than the date of receipt of
such notice, specifies the termination date (which date
shall be not more than thirty days after the giving of
such notice, except as provided in Section 6.4). The
failure by the Employee or the Company to set forth in
the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall
not waive any right of the Employee or the Company,
respectively, hereunder or preclude the Employee or the
Company, respectively, from asserting such fact or
circumstance in enforcing the Employee's or the Company's
rights hereunder.
6.6. Date of Termination. "Date of
Termination" means (a) if the Employee's employment is
terminated by the Company for Cause, or by the Employee
for Good Reason, Voluntary Termination or pursuant to
Section 6.4, the date of receipt of the Notice of
Termination or any later date specified therein, as the
case may be, (b) if the Employee's employment is
terminated by the Company other than for Cause or
Disability, the date on which the Company notifies the
Employee of such termination and (c) if the Employee's
employment is terminated by reason of death or
Disability, the date of death of the Employee or the
Disability Effective Date, as the case may be.
7. Obligations of the Company upon Termination.
(a) Good Reason; Other Than for Cause, Death or
Disability. If, during the Employment Period, the
Company shall terminate the Employee's employment other
than for Cause or Disability or the Employee shall
terminate his employment for Good Reason or shall
exercise his right of Voluntary Termination pursuant to
Section 5.2,
(i) the Company shall pay to the
Employee the aggregate of the following amounts:
A. a lump sum cash payment within 30 days after
the Date of Termination equal to the sum of (1) the
Employee's Annual Base Salary through the Date of
Termination to the extent not theretofore paid, (2) the
product of (x) the higher of (I) the annual bonus payable
for the then current fiscal year, annualized on the basis
of quarterly bonus payments paid or accrued during such
fiscal year, and (II) the annual bonus paid or payable,
including any bonus or portion thereof which has been
earned but deferred (and annualized for any fiscal year
consisting of less than twelve full months) for the most
recently completed fiscal year during the Employment
Period, if any (such higher amount being referred to as
the "Highest Annual Bonus") and (y) a fraction, the
numerator of which is the number of days in the current
fiscal year through the Date of Termination, and the
denominator of which is 365 and (3) any compensation
previously deferred by the Employee (together with any
accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not theretofore
paid (the sum of the amounts described in clauses (1),
(2), and (3) shall be hereinafter referred to as the
"Accrued Obligations"); and
B. the amount equal to the product of
(i) eighteen (18) and (ii) the quotient determined by
dividing (x) the sum of the Annual Base Salary plus the
greater of (1) the bonus paid to the Employee for the
immediately preceding fiscal year and (2) an amount equal
to the average of the annual bonus paid to the Employee
for the immediately three preceding years by (y) twelve
(12), which amount shall be paid (AA) in a lump sum
within 30 days after the Date of Termination if
termination occurs by reason of Voluntary Termination
pursuant to Section 5.2, termination by the Company
without Cause after a Change of Control or termination by
the Employee for Good Reason after a Change of Control or
(BB) in eighteen (18) substantially equal monthly
installments over the 18 month period following the Date
of Termination if termination occurs by reason of
termination by the Company without Cause prior to a
Change of Control or termination by the Employee for Good
Reason prior to a Change of Control; and
C. a lump sum cash payment within 30 days after
the Date of Termination equal to the difference between
(a) the actuarial equivalent of the benefit (utilizing
actuarial assumptions no less favorable to the Employee
than those in effect under the Company's qualified
defined benefit retirement plan (the "Retirement Plan"),
if any such plan is then in effect, and any excess or
supplemental retirement plan in which the Employee
participates ("SERP"), which the Employee would receive
if the Employee's employment continued for the balance of
the Employment Period assuming for this purpose that all
accrued benefits are fully vested, and (b) the actuarial
equivalent of the Employee's actual benefit (paid or
payable), if any, under the Retirement Plan and the SERP
as of the Date of Termination;
(ii) for the balance of the Employment
after the Employee's Date of Termination, or such longer
period as may be provided by the terms of the appropriate
plan, program, practice or policy, the Company shall
continue benefits to the Employee and/or the Employee's
family at least equal to those which would have been
provided to them in accordance with the Welfare
Benefit(s) plans, programs, practices and policies
described in Section 3.4 of this Agreement if the
Employee's employment had not been terminated or, if more
favorable to the Employee, as in effect generally at any
time thereafter with respect to other senior executives
of the Company and their families, provided, however,
that if the Employee becomes reemployed with another
employer and is eligible to receive medical or other
welfare benefits under another employer-provided plan,
the medical and other welfare benefits described herein
shall be secondary to those provided under such other
plan during such applicable period of eligibility, and
for purposes of determining eligibility (but not the time
of commencement of benefits) of the Employee for retiree
benefits pursuant to such plans, practices, programs and
policies, the Employee shall be considered to have
remained employed until the expiration of the Employment
Period and to have retired on the last day of such
period;
(iii) the Company shall, at its sole
expense as incurred, provide the Employee with
outplacement services for up to a maximum period of
twenty-four (24) months, the scope and provider of which
shall be selected by the Employee in the Employee's sole
discretion;
(iv) the Company shall at its sole expense,
provide the Employee, during the six (6) month period
following termination of his employment, a full-time
administrative support person of the Employee's choice
and thereafter for up to an additional twelve (12) months
a part-time administrative support person reasonably
acceptable to the Employee; and
(v) to the extent not theretofore paid or
provided, the Company shall timely pay or provide to the
Employee any other amounts or benefits required to be
paid or provided or which the Employee is eligible to
receive under any plan program, policy or practice or
contract or agreement of the Company (such other amounts
and benefits shall be hereinafter referred to as the
"Other Benefits").
(b) Death. If the Employee's employment is
terminated by reason of the Employee's death during the
Employment Period, this Agreement shall terminate without
further obligations to the Employee's legal
representatives under this Agreement, other than for (i)
payment of Accrued Obligations (ii) payment of
compensation for a period of six (6) months following his
death, based on his Annual Base Salary at the date of his
death, and (iii) the timely payment or provision of Other
Benefits, as defined in Section 7(a)(iv). Accrued
Obligations shall be paid to the Employee's estate or
beneficiary, as applicable, in a lump sum in cash within
30 days of the Date of Termination. With respect to the
provision of Other Benefits, the term Other Benefits as
utilized in this Section 7(b) shall include, without
limitation, and the Employee's estate and/or
beneficiaries shall be entitled to receive, benefits at
least equal to the most favorable benefits provided by
the Company to the estates and beneficiaries of senior
executives of the Company and under such plans, programs,
practices and policies relating to death benefits, if
any, as in effect on the date of the Employee's death
with respect to other senior executives of the Company
and their beneficiaries.
(c) Disability. If the Employee's employment is
terminated by reason of the Employee's Disability during
the Employment Period, this Agreement shall terminate
without further obligations to the Employee, other than
for payment of Accrued Obligations and the timely payment
or provision of Other Benefits, as defined in Section
7(a)(iv). Accrued Obligations shall be paid to the
Employee in a lump sum in cash within 30 days of the Date
of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this
Section 7(c) shall include, and the Employee shall be
entitled after the Disability Effective Date to receive,
disability and other benefits at least equal to the most
favorable of those generally provided by the Company to
disabled executives and/or their families in accordance
with such plans, programs, practices and policies
relating to disability, if any, as in effect on the
Disability Effective Date with respect to other senior
executives of the Company and their families.
(d) Cause; Other than for Good Reason If the
Employee's employment shall be terminated (i) by the
Company for Cause during the Employment Period, or (ii)
by the Employee (or the Company) pursuant to the
provisions of Section 6.4, this Agreement shall terminate
without further obligations to the Employee other than
the obligation to pay to the Employee (x) the Annual Base
Salary through the Date of Termination, (y) the amount of
any compensation previously deferred by the Employee, and
(z) Other Benefits accrued through the Date of
Termination, if any, in each case to the extent
theretofore unpaid.
8. Acceleration of Stock Options; Etc. If,
during the Employment Period, (i) the Company shall
terminate the Employee's employment other than for Cause
or Disability, (ii) the Employee shall terminate his
employment for Good Reason or shall exercise his right of
Voluntary Termination (as provided in Section 5.2), or
(iii) a Change of Control shall occur; (a) the exercise
periods of all Outstanding Stock Options then held by the
Employee shall be accelerated and all such Options shall
be and become vested and exercisable in full at the time
the Change of Control occurs or if his employment is so
terminated on the Date of Termination or, if practicable,
immediately preceding the Date of Termination and (b) all
Outstanding Stock Options then held by the Employee shall
be exercisable, by the Employee, at any time within the
period during which the Employee is obligated to provide
consulting services to the Company and to refrain from
competing with the Company as provided in Section 13 of
this Agreement.
9. Non-exclusivity of Rights. Nothing in this
Agreement shall prevent or limit the Employee's
continuing or future participation in any plan, program,
policy or practice provided by the Company and for which
the Employee may qualify, nor shall anything herein limit
or otherwise affect such rights as the Employee may have
under any contract or agreement with the Company.
Amounts which are vested benefits or which the Employee
is otherwise entitled to receive under any plan, policy,
practice or program of or any contract or agreement with
the Company at or subsequent to the Date of Termination
shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as
explicitly modified by this Agreement.
10. Full Settlement: Legal Fees. The Company's
obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Employee
or others. In no event shall the Employee be obligated
to seek other employment or take any other action by way
of mitigation of the amounts payable to the Employee
under any of the provisions of this Agreement and except
as specifically provided in Section 7(a)(ii), such
amounts shall not be reduced whether or not the Employee
obtains other employment. The Company agrees to pay as
incurred, to the full extent permitted by law, all legal
fees and expenses which the Employee may reasonably incur
as a result of any contest by the Company, the Employee
or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result
of any contest by the Employee about the amount of any
payment pursuant to this Agreement), plus in each case
interest on any delayed payment at the applicable Federal
rate provided for in Section 7872(f)(2)(A) of the
Internal Revenue Code of 1986, as amended (the "Code"),
provided, however, that if the Company shall prevail in
such contest through a final judgment in its favor, from
and after such final judgment the Company shall not be
obligated to pay any such fees and expenses and the
Employee shall reimburse the Company, within thirty (30)
days thereafter, an amount equal to the aggregate of such
fees and expenses theretofore paid by the Company less
$25,000.
11. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that
any payment or distribution by the Company to or for the
benefit of the Employee (whether paid or payable or
distributed or distributable pursuant to the terms of
this Agreement or otherwise, but determined without
regard to any additional payments required under this
Section 11) (a "Payment") would be subject to the excise
tax imposed by Section 4999 of the Code or any interest
or penalties are incurred by the Employee with respect to
such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Employee shall
be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the
Employee of all taxes (including any interest or
penalties imposed with respect to such taxes), including,
without limitation, any income taxes (and any interest
and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Employee
retains an amount of the Gross- Up Payment equal to the
Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section
11(c), all determinations required to be made under this
Section 11, including whether and when a Gross- Up
Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving at
such determination, shall be made by Coopers & Lybrand
LLP or such other certified public accounting firm as may
be designated by the Employee (the "Accounting Firm"),
which shall provide detailed supporting calculations both
to the Company and the Employee within 15 business days
of the receipt of notice from the Employee that there has
been a Payment, or such earlier time as is requested by
the Company. In the event that the Accounting Firm is
serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the
Employee shall appoint another nationally recognized
accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by
the Company. Any Gross-Up Payment, as determined
pursuant to this Section 11, shall be paid by the Company
to the Employee within five days of the receipt of the
Accounting Firm's determination. Any determination by
the Accounting Firm shall be binding upon the Company and
the Employee. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which
will not have been made by the Company should have been
made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to Section 11(c)
and the Employee thereafter is required to make a payment
of any Excise Tax, the Accounting Firm shall determine
the amount of the Underpayment that has occurred and any
such Underpayment shall be promptly paid by the Company
to or for the benefit of the Employee.
(c) The Employee shall notify the Company in
writing of any claim by the Internal Revenue Service
that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification shall
be given as soon as practicable but no later than ten
business days after the Employee is informed in writing
of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is
requested to be paid. The Employee shall not pay such
claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the
Company (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due).
If the Company notifies the Employee in writing prior to
the expiration of such period that it desires to contest
such claim, the Employee shall:
(i) give the Company any
information reasonably requested by the Company
relating to such claim,
(ii) take such action in
connection with contesting such claim as the
Company shall reasonably request in writing
from time to time, including, without
limitation, accepting legal representation with
respect to such claim by an attorney reasonably
selected by the Company,
(iii) cooperate with the Company in
good faith in order effectively to contest such
claim, and
(iv) permit the Company to
participate in any proceedings relating to such
claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional
interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Employee
harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with respect
thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 11(c), the Company
shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forgo
any and all administrative appeals, proceedings, hearings
and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct the
Employee to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and the
Employee agrees to prosecute such contest to a
determination before any administrative tribunal, in a
court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine;
provided, however, that if the Company directs the
Employee to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the
Employee, on an interest-free basis and shall indemnify
and hold the Employee harmless, on an after-tax basis,
from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with
respect to such advance; and further provided that any
extension of the statute of limitations relating to
payment of taxes for the taxable year of the Employee
with respect to which such contested amount is claimed to
be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall
be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the Employee shall
be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any
other taxing authority.
(d) If, after the receipt by the Employee of an
amount advanced by the Company pursuant to Section 11(c),
the Employee becomes entitled to receive any refund with
respect to such claim, the Employee shall (subject to the
Company's complying with the requirements of Section
11(c)) promptly pay to the Company the amount of such
refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the
receipt by the Employee of an amount advanced by the
Company pursuant to Section 11(c), a determination is
made that the Employee shall not be entitled to any
refund with respect to such claim and the Company does
not notify the Employee in writing of its intent to
contest such denial of refund prior to the expiration of
30 days after such determination, then such advance shall
be forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be
paid.
12. Confidential Information. The Employee
shall hold in a fiduciary capacity for the benefit of the
Company all secret or confidential information, knowledge
or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall
have been obtained by the Employee during the Employee's
employment by the Company or any of its affiliated
companies, excluding, however, any such information,
knowledge or data that is or becomes publicly known
(other than by acts by the Employee in violation of this
Agreement). After termination of the Employee's
employment with the Company, the Employee shall not,
without the prior written consent of the Company or as
may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or
data to anyone other than the Company and those
designated by it. Except as provided in the next
following sentence, in no event shall an asserted
violation of the provisions of this Section 12 constitute
a basis for deferring or withholding any amounts
otherwise payable to the Employee under this Agreement.
The Employee acknowledges and agrees that, because the
legal remedies of the Company would be inadequate in the
event of the Employee's breach of the confidentiality
obligations contained in this Section 12, the Company
may, in addition to obtaining any other remedy or relief
available to it, enforce the provisions of this Section
11 by injunction, specific performance or other equitable
remedies; and if the Company is successful in obtaining a
preliminary injunction or similar equitable relief within
90 days of alleging such breach, the Company shall be
entitled, notwithstanding the provisions of the
immediately preceding sentence, to defer or withhold
payment thereafter until final adjudication of such
alleged breach.
13. Non-Competition and Consulting.
(a) So long as the Employee is employed as
a full-time employee of the Company, and for a period of
eighteen (18) months after termination of his employment
by reason of (x) the Company's termination other than for
Cause or Disability, or (y) the Employee's termination
for Good Reason or exercise of his right of Voluntary
Termination as provided in Section 5.2 (hereinafter each
a "Non-Competition Trigger Event"), the Employee will not
directly or indirectly (i) be or become an individual
proprietor, owner, partner, stockholder, officer,
employee, director, consultant, joint venturer, investor
or lender (or in any other capacity whatsoever other than
as a passive limited partner in any venture fund or
investment company or as the holder of not more than one
percent (1%) of the total outstanding stock of a publicly
held company) of any company or entity that directly
competes, in any material respect, with the "Company's
Business" (which, for purposes of this Section 13(a),
means the production and/or sale of products and the
providing of services of the kind and scope (x) being
produced, sold and/or provided by the Company at the time
of termination of the Company's employment or (y) in
respect of which plans for their production, sale and/or
provision had been approved by the Company prior to such
termination), or (ii) recruit, solicit or induce, or
attempt to induce, any employee or employees of the
Company or its affiliates to terminate their employment
with, or otherwise cease their relationship with the
Company or such affiliates;
(b) In consideration of the Employee's
agreement to refrain from competing with the Company and
his agreement to provide consulting services to the
Company, the Company will pay the Employee, at the time
of termination of his employment, an amount equal to the
product of (i) eighteen (18) and (ii) the quotient
determined by dividing (x) the sum of the Annual Base
Salary plus the greater of (1) the bonus paid to the
Employee for the immediately preceding fiscal year and
(2) an amount equal to the average of the annual bonus
paid to the Employee for the immediately three preceding
years by (y) twelve (12).
(c) If, during the Employment Period, the
Employee's employment is terminated by reason of any of
the Non-Competition Trigger Events, the Employee shall,
for a period of eighteen (18) months after such
termination, provide to the Company consultation services
("Consultation Period") to assist the Company in
minimizing the disruption in transitioning to the
Employee's successor. During the Consultation Period,
the Employee will not be obligated to devote more than
thirty (30) days in any twelve(12)-month period or more
than four (4) days in any calendar month to the
performance of consulting services to the Company.
Nothing in this Section 13(c) shall prohibit the Employee
from pursuing such other business activities as he shall
desire, subject to the provisions of Section 13(a). For
purposes of this Agreement and Section 10(b) of the 1982
INTERSOLV Inc. Stock Option Plan and Section 11(b) of the
1992 INTERSOLV Inc. Stock Option Plan (individually, the
"1982 Plan" or the "1992 Plan" and collectively, the
"Plans"), there shall be an irrebuttable presumption that
the Employee, during the Consultation Period, shall have
satisfied the conditions of the referenced sections of
the Plans, and shall have rendered substantial services
to the Company for purposes of allowing any relevant
option to be exercised during the Consultation Period.
(d) If any restriction set forth in this
Section 13 is found by any court of competent
jurisdiction to be unenforceable because it extends for
too long a period of time or over too great a range of
activities or in too broad a geographic area, it shall be
interpreted to extend only over the maximum period of
time, range of activities or geographic area as to which
it may be enforceable.
(e) The restrictions contained in this
Section 13 are necessary for the protection of the
business and goodwill of the Company and are considered
by the Employee to be reasonable for such purpose. The
Employee agrees that any breach of this Section 13 will
cause the Company substantial and irrevocable damage and
therefore, in the event of any such breach, in addition
to such other remedies which may be available, the
Company shall have the right to seek specific performance
and injunctive relief.
14. Indemnification. The Employee shall be
fully indemnified by the Company and its successors in
his capacity as an officer and director (if applicable)
of the Company to the full extent permitted by Delaware
law, and shall be defended and held harmless, absolutely,
irrevocably and forever by the Company and its successor
to the full extent permitted by Delaware law, from and
against all claims, demands, liabilities, costs,
expenses, damages and causes of action of any nature
whatsoever, arising out of or incidental to the execution
of the Employee's duties and responsibilities hereunder
regarding any matters or actions the Employee undertook
or performed within the course and scope of his duties
and responsibilities as an officer, employee and director
(if applicable) of the Company, including without
limitation advances by the Company to the Employee for
the payment of legal fees and expenses, provided that the
Employee shall advise the Company promptly of any such
claim or litigation against him and cooperate fully with
the Company in connection therewith, and provided further
that the Company shall have the right to assume and
control the defense of such action and to take such
action as is reasonably necessary to discharge its
obligations hereunder. In addition, the Company shall
include the Employee as a named insured in any Directors
and Officers Liability Insurance policy or policies
maintained by the Company for its directors and officers.
The provisions of this Section 14 shall survive the
expiration, suspension or termination, for any reason, of
this Agreement.
15. Successors. (a) This Agreement is personal
to the Employee and without the prior written consent of
the Company shall not be assignable by the Employee
otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit
of and be enforceable by the Employee's legal
representatives.
(b) This Agreement shall inure to the
benefit of and be binding upon the Company and its
successors and assigns.
(c) The Company will require any successor
(whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be
required to perform it if no such succession had taken
place. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to
its business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or
otherwise.
16. Miscellaneous. (a) This Agreement shall be
governed by and construed in accordance with the laws of
the State of Delaware, without reference to principles of
conflict of laws. The captions of this Agreement are not
part of the provisions hereof and shall have no force or
effect. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications
hereunder shall be in writing and shall be given by hand
delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Employee:
Gary G. Greenfield
12413 Bacall Lane
Potomac, MD 20854
If to the Company:
INTERSOLV, INC.
9420 Key West Avenue
Rockville, MD 20850
Attention: Vice President and General Counsel
or to such other address as either party shall have
furnished to the other in writing in accordance herewith.
Notice and communications shall be effective when
actually received by the addressee.
(c) The invalidity or unenforceability of
any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this
Agreement.
(d) The Company may withhold from any
amounts payable under this Agreement such Federal, state,
local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Employee's or the Company's failure
to insist upon strict compliance with any provision
hereof or any other provision of this Agreement or the
failure to assert any right the Employee or the Company
may have hereunder, including, without limitation, the
right of the Employee to terminate employment for Good
Reason pursuant to Section 6.3(c) of this Agreement,
shall not be deemed to be a waiver of such provision or
right or any other provision or right of this Agreement.
IN WITNESS WHEREOF, the Employee has hereunto set
the Employee's hand and, pursuant to the authorization
from its Board of Directors, the Company has caused this
Agreement to be executed in its name on its behalf, all
as of the day and year first above written.
/s/ Gary G. Greenfield
Gary G. Greenfield
Address: 12413 Bacall Lane
Potomac, MD
20854
INTERSOLV, INC.
By_/s/ Russell E. Planitzer
Russell E.
Planitzer________________
Exhibit 10.3
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement"), made as of
the 1st day of August, 1996, by and between INTERSOLV,
INC., a Delaware corporation with its principal place of
business at 9420 Key West Avenue, Rockville, Maryland
20850 (the "Company"), and Kenneth A. Sexton, (the
"Employee").
In consideration of the mutual covenants and
promises contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged by the parties hereto, the parties
agree as follows:
1. Term of Employment. The Company hereby
agrees to employ the Employee, and the Employee hereby
accepts employment with the Company, upon the terms set
forth in this Agreement, for the period, commencing on
August 1, 1996 (the "Commencement Date") and ending on
July 31, 1999 (such period, as it may be extended as
provided herein, the "Employment Period"); provided,
however, that the Employment Period shall be
automatically extended for a twelve-month period on
August 1, 1997 and on each August 1 thereafter unless the
Board of Directors ("Board") of the Company provides the
Employee, or the Employee provides the Company, with
written notice that the Company or the Employee, as the
case may be, will not so extend the Employment Period,
such notice to be given at least sixty (60) days prior to
the then applicable August 1 extension date. In the
event a Change of Control (as defined herein) occurs
during the Employment Period, the Employment Period shall
be automatically extended for the period commencing on
the Effective Date (as defined herein) of the Change of
Control and ending on the third anniversary of such date,
except as otherwise provided in Section 5.2.
2. Position and Duties.
2.1. The Employee shall, during the Employment
Period, be a full-time employee of the Company, shall
report to the Chief Executive Officer of the Company and
shall serve as Senior Vice President and Chief Financial
Officer ("CFO") of the Company. The Employee shall, as
CFO of the Company, perform the duties and functions
customarily performed by the CFO of a Company, including
responsibility for all financial activities of the
Company, including cash management, financial reporting
and expense management.
2.2. The Employee shall generally perform his
duties and services from the Company's offices in
Rockville, Maryland, and shall not be required by the
Company to be personally based or transferred anywhere
other than the metropolitan area in which his office in
the Company's headquarters is now located, without the
Employee's prior written consent.
2.3. The Employee hereby accepts such
employment and agrees to perform such duties and
responsibilities and such other duties and
responsibilities, consistent with his position as CFO of
the Company, as the Board shall from time to time
reasonably assign to him. The Employee agrees to devote
his business time, attention and energies to the business
and interests of the Company during the Employment
Period, except (i) with respect to incidental business
activities, including the management of his personal
investments, and outside directorships which shall be
fully disclosed to the Board by the Employee prior to
engagement in such activities or directorships (other
than outside directorships with StarBase Corporation,
which have been disclosed to and approved by the Board)
and which, in the sole determination of the Board, do not
cause a conflict of interest or interfere with the
Employee's performance of his duties hereunder; or (ii)
as otherwise agreed in writing by the Employee and the
Board.
3. Compensation and Benefits.
3.1. Salary. During the Employment Period,
the Company shall pay the Employee an annual base salary
("Annual Base Salary") of $175,000 which shall be paid at
a monthly rate. The Annual Base Salary may be increased
from time to time as determined by the Board, in its
discretion, upon a review that shall take place at least
annually.
3.2. Bonus. During the Employment Period,
the Employee shall be entitled to participate in each
bonus or incentive plan established by the Company for
its senior executive officers, including, without
limitation, the Company's Incentive Compensation Plan.
The Board shall have the discretion, but not have any
obligation, to grant additional bonuses as it may
determine from time to time.
3.3. Stock Option or Stock Incentive Plans.
During the Employment Period, the Employee shall be
entitled to participate in the Company's stock option and
other stock incentive plans for senior executive(s);
provided, however, that the grant of any stock options
shall be subject to the discretion of the Board or a
committee of the Board if the Board delegates such
authority to a committee. Stock Options currently held
by the Employee and additional stock options hereafter
granted to the Employee which at any time or from time to
time are outstanding and unexercised are collectively
hereafter referred to as "Outstanding Stock Options".
The Outstanding Stock Options shall vest and become
immediately exercisable as provided in Section 8 of this
Agreement.
3.4. Other Benefits. During the Employment
Period, the Employee (a) shall be entitled to participate
in all incentive, saving and retirement plans, practices
and policies and programs applicable generally to other
senior executives of the Company and (b) shall be
eligible for participation in and shall receive all
benefits under welfare benefit plans, practices, policies
and programs ("Welfare Benefits") provided by the Company
(including, without limitation, medical, prescription,
dental, disability, salary continuance, employee life,
group life, accidental death and travel accident
insurance plans and programs) to the extent applicable
generally to other senior executives of the Company,
including the Welfare Benefits provided under the plans,
practices, policies and programs currently in effect and
listed on Exhibit A to this Agreement. In addition, the
Employee shall be entitled to such other perquisites of
office as are generally provided by the Company to senior
executives.
3.5. Vacation. During the Employment
Period, the Employee shall be entitled to a paid vacation
of not less than six weeks or, if more favorable to the
Employee, paid vacation in accordance with the most
favorable plans or practice as in effect generally with
respect to other senior executives of the Company.
4. Expense Reimbursement. Subject to compliance
with the Company's normal and customary policies
regarding substantiation and verification of business
expenses, the Employee is authorized to incur on behalf
of the Company, and the Company shall pay and/or
reimburse the Employee for, all customary and reasonable
expenses incurred in connection with the performance of
his duties or for performing, pursuing or otherwise
furthering the business of the Company, or any of its
subsidiaries, including expenses for travel,
entertainment and similar items.
5. Change of Control.
5.1. Certain Definitions. For purposes of
this Agreement, the following terms shall have the
following meanings:
(a) The "Effective Date" shall mean the
first date during the Employment Period on which a Change
of Control (as defined below) occurs. Anything in this
Agreement to the contrary notwithstanding, if a Change of
Control occurs and if the Employee's employment with the
Company is terminated prior to the date on which the
Change of Control occurs, and if it is reasonably
demonstrated by the Employee that such termination of
employment (i) was at the request of a third party who
has taken steps reasonably calculated to effect a Change
of Control or (ii) otherwise arose in connection with or
anticipation of a Change of Control, then for all
purposes of this Agreement the "Effective Date" shall
mean the date immediately prior to the date of such
termination of employment.
(b) "Change of Control" shall mean:
(i) The acquisition by any individual,
entity or group (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 30% or more of either (A) the
then outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (B) the
combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company
Voting Securities"); provided, however, that for purposes
of this subsection b(i), the following acquisitions shall
not constitute a Change of Control: (A) any acquisition
directly from the Company, (B) any acquisition by the
Company, (C) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company or (D) any
acquisition by any corporation pursuant to a transaction
which complies with clauses (A), (B) and (C) of
subsection b(iii) of this Section 5.1; or
(ii) Individuals who, as of the date
hereof, constitute the Board (the "Incumbent Board")
cease for any reason to constitute at least a majority of
the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were
a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened
election contest with respect to the election or removal
of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other
than the Board; or
(iii) Approval by the shareholders of
the Company of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all
of the assets of the Company (a "Business Combination"),
in each case, unless, following such Business
Combination, (A) all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior
to such Business Combination beneficially own, directly
or indirectly, more than 60% of, respectively, the then
outstanding shares of common stock and the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of directors,
as the case may be, of the corporation resulting from
such Business Combination (including, without limitation,
a corporation which as a result of such transaction owns
the Company or all or substantially all of the Company's
assets either directly or through one or more
subsidiaries) in substantially the same proportions as
their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may
be, (B) no Person (excluding any employee benefit plan
(or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially
owns, directly or indirectly, 30% or more of,
respectively, the then outstanding shares of common stock
of the corporation resulting from such Business
Combination or the combined voting power of the then
outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the
Business Combination and (C) at least a majority of the
members of the board of directors of the corporation
resulting from such Business Combination were members of
the Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Board,
providing for such Business Combination; or
(iv) Approval by the shareholders of
the Company of a complete liquidation or dissolution of
the Company.
5.2. Termination by Employee Upon a Change
of Control. The Employee's employment may be terminated
by the Employee voluntarily at any time during the twelve
month period following the Effective Date of a Change of
Control, without the necessity of providing the reason
for such termination ("Voluntary Termination").
6. Termination of Employment.
6.1. Death or Disability. The Employee's
employment shall terminate automatically upon the
Employee's death during the Employment Period. If the
Company determines in good faith that the Disability of
the Employee has occurred during the Employment Period
(pursuant to the definition of Disability set forth
below), it may give to the Employee written notice in
accordance with Section 16(b) of this Agreement of its
intention to terminate the Employee's employment. In
such event, the Employee's employment with the Company
shall terminate effective on the 30th day after receipt
of such notice by the Employee (the "Disability Effective
Date"), provided that, within the 30 days after such
receipt, the Employee shall not have returned to
full-time performance of the Employee's duties. For
purposes of this Agreement, "Disability" shall mean (a)
the absence of the Employee from the Employee's duties
with the Company on a full-time basis for 180 days during
any 240-day period as a result of incapacity due to
mental or physical illness or (b) the determination
(evidenced by a written report or certificate) by a
physician selected by the Company or its insurers, and
acceptable to the Employee or the Employee's legal
representative, that the Employee is incapable, due to
mental or physical illness, to perform his duties on a
full-time basis for at least 180 days during the ensuing
240 days.
6.2. Cause. The Company may terminate the
Employee's employment during the Employment Period for
Cause. For purposes of this Agreement, "Cause" shall
mean:
(a) the willful and continued failure of
the Employee to perform substantially the Employee's
duties with the Company or one of its affiliates (other
than any such failure resulting from Disability),
(b) the Employee's conviction of a felony,
(c) the Employee's gross and reckless
negligence in the performance of his duties which
materially adversely affects the Company's business, or
(d) a material breach of any of the
Employee's covenants contained in Sections 12 and 13 of
this Agreement.
For purposes of this provision, no act or failure to act,
on the part of the Employee, shall be considered
"willful" unless it is done, or omitted to be done, by
the Employee in bad faith or without reasonable belief
that the Employee's action or omission was in the best
interests of the Company. Any act, or failure to act,
based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the
Chief Executive Officer or a senior officer of the
Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or
omitted to be done, by the Employee in good faith and in
the best interests of the Company. The cessation of
employment of the Employee shall not be deemed to be for
Cause unless and until (i) in the event of any Cause
defined in paragraphs (a), (c) and (d) of this Section
6.2, a written notice has been delivered to the Employee
by the Board which specifically identifies the Cause
which is the Board's basis for termination and the
Employee has failed to cure or remedy the act or omission
so identified within a period of thirty (30) days after
the Employee's receipt of such notice and (ii) the Board
has delivered to the Employee a copy of a resolution duly
adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board
(excluding the Employee if he is a member of the Board)
at a meeting of the Board called and held for such
purpose (after reasonable notice is provided to the
Employee and the Employee is given an opportunity,
together with counsel, to be heard before the Board),
finding that, in the good faith opinion of the Board, the
Employee is guilty of the conduct described in paragraph
(a), (b), (c) or (d) above, and specifying the
particulars thereof in detail.
6.3. Good Reason. The Employee's employment may
be terminated by the Employee for Good Reason. For
purposes of this Agreement, "Good Reason" shall mean:
(a) the assignment to the Employee of any
duties inconsistent in any significant respect with the
Employee's position (including status, offices, titles
and reporting requirements), authority, duties or
responsibilities as contemplated by Section 2 of this
Agreement (or which are pursuant to such other position
within the Company to which he may with his written
approval be promoted), or any other action by the Company
which results in a significant diminution in such
position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice
thereof given by the Employee;
(b) any failure by the Company to comply
with any of the provisions of Section 3 or any of the
other material provisions of this Agreement, other than
an isolated, insubstantial and inadvertent failure not
occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by
the Employee;
(c) the Company's requiring the Employee to
be based at any office or location other than as provided
in Section 2.2 hereof or the Company's requiring the
Employee to travel on Company business to a substantially
greater extent than reasonably and customarily required
in the performance of his responsibilities;
(d) any purported termination by the
Company of the Employee's employment otherwise than as
expressly permitted by this Agreement; or
(e) any failure by the Company to comply
with and satisfy Section 15(c) of this Agreement.
6.4. Termination at Election of Employee
Other Than For Change of Control. The Employee may
voluntarily terminate his employment other than pursuant
to Section 5.2, upon not less than six months prior
written notice to the Company; provided, that the Company
may, after receipt of such notice, terminate the
Employee's employment prior to the expiration of such six-
month period upon not less than thirty days prior written
notice.
6.5. Notice of Termination. Any
termination by the Company for Cause, or by the Employee
for Good Reason, a Voluntary Termination after a Change
of Control or pursuant to Section 6.4, shall be
communicated by Notice of Termination to the other party
hereto given in accordance with Section 16(b) of this
Agreement.
For purposes of this Agreement, a "Notice of Termination"
means a written notice which (a) indicates the specific
termination provision in this Agreement relied upon, (b)
to the extent applicable, sets forth in reasonable detail
the facts and circumstances claimed to provide a basis
for termination of the Employee's employment under the
provision so indicated and (c) if the Date of Termination
(as defined below) is other than the date of receipt of
such notice, specifies the termination date (which date
shall be not more than thirty days after the giving of
such notice, except as provided in Section 6.4). The
failure by the Employee or the Company to set forth in
the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall
not waive any right of the Employee or the Company,
respectively, hereunder or preclude the Employee or the
Company, respectively, from asserting such fact or
circumstance in enforcing the Employee's or the Company's
rights hereunder.
6.6. Date of Termination. "Date of
Termination" means (a) if the Employee's employment is
terminated by the Company for Cause, or by the Employee
for Good Reason, Voluntary Termination or pursuant to
Section 6.4, the date of receipt of the Notice of
Termination or any later date specified therein, as the
case may be, (b) if the Employee's employment is
terminated by the Company other than for Cause or
Disability, the date on which the Company notifies the
Employee of such termination and (c) if the Employee's
employment is terminated by reason of death or
Disability, the date of death of the Employee or the
Disability Effective Date, as the case may be.
7. Obligations of the Company upon Termination.
(a) Good Reason; Other Than for Cause, Death or
Disability. If, during the Employment Period, the
Company shall terminate the Employee's employment other
than for Cause or Disability or the Employee shall
terminate his employment for Good Reason or shall
exercise his right of Voluntary Termination pursuant to
Section 5.2,
(i) the Company shall pay to the
Employee the aggregate of the following amounts:
A. a lump sum cash payment within 30 days after
the Date of Termination equal to the sum of (1) the
Employee's Annual Base Salary through the Date of
Termination to the extent not theretofore paid, (2) the
product of (x) the higher of (I) the annual bonus payable
for the then current fiscal year, annualized on the basis
of quarterly bonus payments paid or accrued during such
fiscal year, and (II) the annual bonus paid or payable,
including any bonus or portion thereof which has been
earned but deferred (and annualized for any fiscal year
consisting of less than twelve full months) for the most
recently completed fiscal year during the Employment
Period, if any (such higher amount being referred to as
the "Highest Annual Bonus") and (y) a fraction, the
numerator of which is the number of days in the current
fiscal year through the Date of Termination, and the
denominator of which is 365 and (3) any compensation
previously deferred by the Employee (together with any
accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not theretofore
paid (the sum of the amounts described in clauses (1),
(2), and (3) shall be hereinafter referred to as the
"Accrued Obligations"); and
B. the amount equal to the product of
(i) eighteen (18) and (ii) the quotient determined by
dividing (x) the sum of the Annual Base Salary plus the
greater of (1) the bonus paid to the Employee for the
immediately preceding fiscal year and (2) an amount equal
to the average of the annual bonus paid to the Employee
for the immediately three preceding years by (y) twelve
(12), which amount shall be paid (AA) in a lump sum
within 30 days after the Date of Termination if
termination occurs by reason of Voluntary Termination
pursuant to Section 5.2, termination by the Company
without Cause after a Change of Control or termination by
the Employee for Good Reason after a Change of Control or
(BB) in eighteen (18) substantially equal monthly
installments over the 18 month period following the Date
of Termination if termination occurs by reason of
termination by the Company without Cause prior to a
Change of Control or termination by the Employee for Good
Reason prior to a Change of Control; and
C. a lump sum cash payment within 30 days after
the Date of Termination equal to the difference between
(a) the actuarial equivalent of the benefit (utilizing
actuarial assumptions no less favorable to the Employee
than those in effect under the Company's qualified
defined benefit retirement plan (the "Retirement Plan"),
if any such plan is then in effect, and any excess or
supplemental retirement plan in which the Employee
participates ("SERP"), which the Employee would receive
if the Employee's employment continued for the balance of
the Employment Period assuming for this purpose that all
accrued benefits are fully vested, and (b) the actuarial
equivalent of the Employee's actual benefit (paid or
payable), if any, under the Retirement Plan and the SERP
as of the Date of Termination;
(ii) for the balance of the Employment
after the Employee's Date of Termination, or such longer
period as may be provided by the terms of the appropriate
plan, program, practice or policy, the Company shall
continue benefits to the Employee and/or the Employee's
family at least equal to those which would have been
provided to them in accordance with the Welfare
Benefit(s) plans, programs, practices and policies
described in Section 3.4 of this Agreement if the
Employee's employment had not been terminated or, if more
favorable to the Employee, as in effect generally at any
time thereafter with respect to other senior executives
of the Company and their families, provided, however,
that if the Employee becomes reemployed with another
employer and is eligible to receive medical or other
welfare benefits under another employer-provided plan,
the medical and other welfare benefits described herein
shall be secondary to those provided under such other
plan during such applicable period of eligibility, and
for purposes of determining eligibility (but not the time
of commencement of benefits) of the Employee for retiree
benefits pursuant to such plans, practices, programs and
policies, the Employee shall be considered to have
remained employed until the expiration of the Employment
Period and to have retired on the last day of such
period;
(iii) the Company shall, at its sole
expense as incurred, provide the Employee with
outplacement services for up to a maximum period of
twenty-four (24) months, the scope and provider of which
shall be selected by the Employee in the Employee's sole
discretion;
(iv) the Company shall at its sole expense,
provide the Employee, during the six (6) month period
following termination of his employment, a full-time
administrative support person of the Employee's choice
and thereafter for up to an additional twelve (12) months
a part-time administrative support person reasonably
acceptable to the Employee; and
(v) to the extent not theretofore paid or
provided, the Company shall timely pay or provide to the
Employee any other amounts or benefits required to be
paid or provided or which the Employee is eligible to
receive under any plan program, policy or practice or
contract or agreement of the Company (such other amounts
and benefits shall be hereinafter referred to as the
"Other Benefits").
(b) Death. If the Employee's employment is
terminated by reason of the Employee's death during the
Employment Period, this Agreement shall terminate without
further obligations to the Employee's legal
representatives under this Agreement, other than for (i)
payment of Accrued Obligations (ii) payment of
compensation for a period of six (6) months following his
death, based on his Annual Base Salary at the date of his
death, and (iii) the timely payment or provision of Other
Benefits, as defined in Section 7(a)(iv). Accrued
Obligations shall be paid to the Employee's estate or
beneficiary, as applicable, in a lump sum in cash within
30 days of the Date of Termination. With respect to the
provision of Other Benefits, the term Other Benefits as
utilized in this Section 7(b) shall include, without
limitation, and the Employee's estate and/or
beneficiaries shall be entitled to receive, benefits at
least equal to the most favorable benefits provided by
the Company to the estates and beneficiaries of senior
executives of the Company and under such plans, programs,
practices and policies relating to death benefits, if
any, as in effect on the date of the Employee's death
with respect to other senior executives of the Company
and their beneficiaries.
(c) Disability. If the Employee's employment is
terminated by reason of the Employee's Disability during
the Employment Period, this Agreement shall terminate
without further obligations to the Employee, other than
for payment of Accrued Obligations and the timely payment
or provision of Other Benefits, as defined in Section
7(a)(iv). Accrued Obligations shall be paid to the
Employee in a lump sum in cash within 30 days of the Date
of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this
Section 7(c) shall include, and the Employee shall be
entitled after the Disability Effective Date to receive,
disability and other benefits at least equal to the most
favorable of those generally provided by the Company to
disabled executives and/or their families in accordance
with such plans, programs, practices and policies
relating to disability, if any, as in effect on the
Disability Effective Date with respect to other senior
executives of the Company and their families.
(d) Cause; Other than for Good Reason If the
Employee's employment shall be terminated (i) by the
Company for Cause during the Employment Period, or (ii)
by the Employee (or the Company) pursuant to the
provisions of Section 6.4, this Agreement shall terminate
without further obligations to the Employee other than
the obligation to pay to the Employee (x) the Annual Base
Salary through the Date of Termination, (y) the amount of
any compensation previously deferred by the Employee, and
(z) Other Benefits accrued through the Date of
Termination, if any, in each case to the extent
theretofore unpaid.
8. Acceleration of Stock Options; Etc. If,
during the Employment Period, (i) the Company shall
terminate the Employee's employment other than for Cause
or Disability, (ii) the Employee shall terminate his
employment for Good Reason or shall exercise his right of
Voluntary Termination (as provided in Section 5.2), or
(iii) a Change of Control shall occur; (a) the exercise
periods of all Outstanding Stock Options then held by the
Employee shall be accelerated and all such Options shall
be and become vested and exercisable in full at the time
the Change of Control occurs or if his employment is so
terminated on the Date of Termination or, if practicable,
immediately preceding the Date of Termination and (b) all
Outstanding Stock Options then held by the Employee shall
be exercisable, by the Employee, at any time within the
period during which the Employee is obligated to provide
consulting services to the Company and to refrain from
competing with the Company as provided in Section 13 of
this Agreement.
9. Non-exclusivity of Rights. Nothing in this
Agreement shall prevent or limit the Employee's
continuing or future participation in any plan, program,
policy or practice provided by the Company and for which
the Employee may qualify, nor shall anything herein limit
or otherwise affect such rights as the Employee may have
under any contract or agreement with the Company.
Amounts which are vested benefits or which the Employee
is otherwise entitled to receive under any plan, policy,
practice or program of or any contract or agreement with
the Company at or subsequent to the Date of Termination
shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as
explicitly modified by this Agreement.
10. Full Settlement: Legal Fees. The Company's
obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Employee
or others. In no event shall the Employee be obligated
to seek other employment or take any other action by way
of mitigation of the amounts payable to the Employee
under any of the provisions of this Agreement and except
as specifically provided in Section 7(a)(ii), such
amounts shall not be reduced whether or not the Employee
obtains other employment. The Company agrees to pay as
incurred, to the full extent permitted by law, all legal
fees and expenses which the Employee may reasonably incur
as a result of any contest by the Company, the Employee
or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result
of any contest by the Employee about the amount of any
payment pursuant to this Agreement), plus in each case
interest on any delayed payment at the applicable Federal
rate provided for in Section 7872(f)(2)(A) of the
Internal Revenue Code of 1986, as amended (the "Code"),
provided, however, that if the Company shall prevail in
such contest through a final judgment in its favor, from
and after such final judgment the Company shall not be
obligated to pay any such fees and expenses and the
Employee shall reimburse the Company, within thirty (30)
days thereafter, an amount equal to the aggregate of such
fees and expenses theretofore paid by the Company less
$25,000.
11. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that
any payment or distribution by the Company to or for the
benefit of the Employee (whether paid or payable or
distributed or distributable pursuant to the terms of
this Agreement or otherwise, but determined without
regard to any additional payments required under this
Section 11) (a "Payment") would be subject to the excise
tax imposed by Section 4999 of the Code or any interest
or penalties are incurred by the Employee with respect to
such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Employee shall
be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the
Employee of all taxes (including any interest or
penalties imposed with respect to such taxes), including,
without limitation, any income taxes (and any interest
and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Employee
retains an amount of the Gross- Up Payment equal to the
Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section
11(c), all determinations required to be made under this
Section 11, including whether and when a Gross- Up
Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving at
such determination, shall be made by Coopers & Lybrand
LLP or such other certified public accounting firm as may
be designated by the Employee (the "Accounting Firm"),
which shall provide detailed supporting calculations both
to the Company and the Employee within 15 business days
of the receipt of notice from the Employee that there has
been a Payment, or such earlier time as is requested by
the Company. In the event that the Accounting Firm is
serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the
Employee shall appoint another nationally recognized
accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by
the Company. Any Gross-Up Payment, as determined
pursuant to this Section 11, shall be paid by the Company
to the Employee within five days of the receipt of the
Accounting Firm's determination. Any determination by
the Accounting Firm shall be binding upon the Company and
the Employee. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which
will not have been made by the Company should have been
made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to Section 11(c)
and the Employee thereafter is required to make a payment
of any Excise Tax, the Accounting Firm shall determine
the amount of the Underpayment that has occurred and any
such Underpayment shall be promptly paid by the Company
to or for the benefit of the Employee.
(c) The Employee shall notify the Company in
writing of any claim by the Internal Revenue Service
that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification shall
be given as soon as practicable but no later than ten
business days after the Employee is informed in writing
of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is
requested to be paid. The Employee shall not pay such
claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the
Company (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due).
If the Company notifies the Employee in writing prior to
the expiration of such period that it desires to contest
such claim, the Employee shall:
(i) give the Company any
information reasonably requested by the Company
relating to such claim,
(ii) take such action in
connection with contesting such claim as the
Company shall reasonably request in writing
from time to time, including, without
limitation, accepting legal representation with
respect to such claim by an attorney reasonably
selected by the Company,
(iii) cooperate with the Company in
good faith in order effectively to contest such
claim, and
(iv) permit the Company to
participate in any proceedings relating to such
claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional
interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Employee
harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with respect
thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 11(c), the Company
shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forgo
any and all administrative appeals, proceedings, hearings
and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct the
Employee to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and the
Employee agrees to prosecute such contest to a
determination before any administrative tribunal, in a
court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine;
provided, however, that if the Company directs the
Employee to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the
Employee, on an interest-free basis and shall indemnify
and hold the Employee harmless, on an after-tax basis,
from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with
respect to such advance; and further provided that any
extension of the statute of limitations relating to
payment of taxes for the taxable year of the Employee
with respect to which such contested amount is claimed to
be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall
be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the Employee shall
be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any
other taxing authority.
(d) If, after the receipt by the Employee of an
amount advanced by the Company pursuant to Section 11(c),
the Employee becomes entitled to receive any refund with
respect to such claim, the Employee shall (subject to the
Company's complying with the requirements of Section
11(c)) promptly pay to the Company the amount of such
refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the
receipt by the Employee of an amount advanced by the
Company pursuant to Section 11(c), a determination is
made that the Employee shall not be entitled to any
refund with respect to such claim and the Company does
not notify the Employee in writing of its intent to
contest such denial of refund prior to the expiration of
30 days after such determination, then such advance shall
be forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be
paid.
12. Confidential Information. The Employee
shall hold in a fiduciary capacity for the benefit of the
Company all secret or confidential information, knowledge
or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall
have been obtained by the Employee during the Employee's
employment by the Company or any of its affiliated
companies, excluding, however, any such information,
knowledge or data that is or becomes publicly known
(other than by acts by the Employee in violation of this
Agreement). After termination of the Employee's
employment with the Company, the Employee shall not,
without the prior written consent of the Company or as
may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or
data to anyone other than the Company and those
designated by it. Except as provided in the next
following sentence, in no event shall an asserted
violation of the provisions of this Section 12 constitute
a basis for deferring or withholding any amounts
otherwise payable to the Employee under this Agreement.
The Employee acknowledges and agrees that, because the
legal remedies of the Company would be inadequate in the
event of the Employee's breach of the confidentiality
obligations contained in this Section 12, the Company
may, in addition to obtaining any other remedy or relief
available to it, enforce the provisions of this Section
11 by injunction, specific performance or other equitable
remedies; and if the Company is successful in obtaining a
preliminary injunction or similar equitable relief within
90 days of alleging such breach, the Company shall be
entitled, notwithstanding the provisions of the
immediately preceding sentence, to defer or withhold
payment thereafter until final adjudication of such
alleged breach.
13. Non-Competition and Consulting.
(a) So long as the Employee is employed as
a full-time employee of the Company, and for a period of
eighteen (18) months after termination of his employment
by reason of (x) the Company's termination other than for
Cause or Disability, or (y) the Employee's termination
for Good Reason or exercise of his right of Voluntary
Termination as provided in Section 5.2 (hereinafter each
a "Non-Competition Trigger Event"), the Employee will not
directly or indirectly (i) be or become an individual
proprietor, owner, partner, stockholder, officer,
employee, director, consultant, joint venturer, investor
or lender (or in any other capacity whatsoever other than
as a passive limited partner in any venture fund or
investment company or as the holder of not more than one
percent (1%) of the total outstanding stock of a publicly
held company) of any company or entity that directly
competes, in any material respect, with the "Company's
Business" (which, for purposes of this Section 13(a),
means the production and/or sale of products and the
providing of services of the kind and scope (x) being
produced, sold and/or provided by the Company at the time
of termination of the Company's employment or (y) in
respect of which plans for their production, sale and/or
provision had been approved by the Company prior to such
termination), or (ii) recruit, solicit or induce, or
attempt to induce, any employee or employees of the
Company or its affiliates to terminate their employment
with, or otherwise cease their relationship with the
Company or such affiliates;
(b) In consideration of the Employee's
agreement to refrain from competing with the Company and
his agreement to provide consulting services to the
Company, the Company will pay the Employee, at the time
of termination of his employment, an amount equal to the
product of (i) eighteen (18) and (ii) the quotient
determined by dividing (x) the sum of the Annual Base
Salary plus the greater of (1) the bonus paid to the
Employee for the immediately preceding fiscal year and
(2) an amount equal to the average of the annual bonus
paid to the Employee for the immediately three preceding
years by (y) twelve (12).
(c) If, during the Employment Period, the
Employee's employment is terminated by reason of any of
the Non-Competition Trigger Events, the Employee shall,
for a period of eighteen (18) months after such
termination, provide to the Company consultation services
("Consultation Period") to assist the Company in
minimizing the disruption in transitioning to the
Employee's successor. During the Consultation Period,
the Employee will not be obligated to devote more than
thirty (30) days in any twelve(12)-month period or more
than four (4) days in any calendar month to the
performance of consulting services to the Company.
Nothing in this Section 13(c) shall prohibit the Employee
from pursuing such other business activities as he shall
desire, subject to the provisions of Section 13(a). For
purposes of this Agreement and Section 10(b) of the 1982
INTERSOLV Inc. Stock Option Plan and Section 11(b) of the
1992 INTERSOLV Inc. Stock Option Plan (individually, the
"1982 Plan" or the "1992 Plan" and collectively, the
"Plans"), there shall be an irrebuttable presumption that
the Employee, during the Consultation Period, shall have
satisfied the conditions of the referenced sections of
the Plans, and shall have rendered substantial services
to the Company for purposes of allowing any relevant
option to be exercised during the Consultation Period.
(d) If any restriction set forth in this
Section 13 is found by any court of competent
jurisdiction to be unenforceable because it extends for
too long a period of time or over too great a range of
activities or in too broad a geographic area, it shall be
interpreted to extend only over the maximum period of
time, range of activities or geographic area as to which
it may be enforceable.
(e) The restrictions contained in this
Section 13 are necessary for the protection of the
business and goodwill of the Company and are considered
by the Employee to be reasonable for such purpose. The
Employee agrees that any breach of this Section 13 will
cause the Company substantial and irrevocable damage and
therefore, in the event of any such breach, in addition
to such other remedies which may be available, the
Company shall have the right to seek specific performance
and injunctive relief.
14. Indemnification. The Employee shall be
fully indemnified by the Company and its successors in
his capacity as an officer and director (if applicable)
of the Company to the full extent permitted by Delaware
law, and shall be defended and held harmless, absolutely,
irrevocably and forever by the Company and its successor
to the full extent permitted by Delaware law, from and
against all claims, demands, liabilities, costs,
expenses, damages and causes of action of any nature
whatsoever, arising out of or incidental to the execution
of the Employee's duties and responsibilities hereunder
regarding any matters or actions the Employee undertook
or performed within the course and scope of his duties
and responsibilities as an officer, employee and director
(if applicable) of the Company, including without
limitation advances by the Company to the Employee for
the payment of legal fees and expenses, provided that the
Employee shall advise the Company promptly of any such
claim or litigation against him and cooperate fully with
the Company in connection therewith, and provided further
that the Company shall have the right to assume and
control the defense of such action and to take such
action as is reasonably necessary to discharge its
obligations hereunder. In addition, the Company shall
include the Employee as a named insured in any Directors
and Officers Liability Insurance policy or policies
maintained by the Company for its directors and officers.
The provisions of this Section 14 shall survive the
expiration, suspension or termination, for any reason, of
this Agreement.
15. Successors. (a) This Agreement is personal
to the Employee and without the prior written consent of
the Company shall not be assignable by the Employee
otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit
of and be enforceable by the Employee's legal
representatives.
(b) This Agreement shall inure to the
benefit of and be binding upon the Company and its
successors and assigns.
(c) The Company will require any successor
(whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be
required to perform it if no such succession had taken
place. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to
its business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or
otherwise.
16. Miscellaneous. (a) This Agreement shall be
governed by and construed in accordance with the laws of
the State of Delaware, without reference to principles of
conflict of laws. The captions of this Agreement are not
part of the provisions hereof and shall have no force or
effect. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications
hereunder shall be in writing and shall be given by hand
delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Employee:
Kenneth A. Sexton
4228 Cherry Valley Drive
Olney, MD 20832
If to the Company:
INTERSOLV, INC.
9420 Key West Avenue
Rockville, MD 20850
Attention: Vice President and General Counsel
or to such other address as either party shall have
furnished to the other in writing in accordance herewith.
Notice and communications shall be effective when
actually received by the addressee.
(c) The invalidity or unenforceability of
any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this
Agreement.
(d) The Company may withhold from any
amounts payable under this Agreement such Federal, state,
local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Employee's or the Company's failure
to insist upon strict compliance with any provision
hereof or any other provision of this Agreement or the
failure to assert any right the Employee or the Company
may have hereunder, including, without limitation, the
right of the Employee to terminate employment for Good
Reason pursuant to Section 6.3(c) of this Agreement,
shall not be deemed to be a waiver of such provision or
right or any other provision or right of this Agreement.
IN WITNESS WHEREOF, the Employee has hereunto set
the Employee's hand and, pursuant to the authorization
from its Board of Directors, the Company has caused this
Agreement to be executed in its name on its behalf, all
as of the day and year first above written.
_____________________________
/s/ Kenneth A. Sexton
Kenneth A. Sexton
Address: 4228 Cherry
Valley Drive
Olney, MD 20832
INTERSOLV, INC.
By__/s/ Russell E.
Planitzer
Russell E.
Planitzer
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<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> JUL-31-1996
<CASH> 19,685
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<RECEIVABLES> 33,971
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<CURRENT-ASSETS> 62,875
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0
0
<OTHER-SE> 48,547
<TOTAL-LIABILITY-AND-EQUITY> 102,183
<SALES> 32,747
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