EXECUTIVE COMPENSATION AGREEMENT
THIS AGREEMENT is entered into as of August __, 1996, by and between
XXXXXXX XXXXXX (the "Employee") and PARADIGM TECHNOLOGY, INC., a Delaware
corporation (the "Company").
1. Term of Employment.
(a) Basic Rule. The Company agrees to continue the Employee's
employment, and the Employee agrees to remain in employment with the Company,
from the date hereof until the date when the Employee's employment terminates
pursuant to Subsection (b), (c) or (d) below.
(b) Early Termination. Subject to Sections 6 and 7, the Company may
terminate the Employee's employment by giving the Employee 90 days' advance
notice in writing. The Employee may terminate his employment by giving the
Company 30 days' advance notice in writing. The Employee's employment shall
terminate automatically in the event of his death. Any waiver of notice shall be
valid only if it is made in writing and expressly refers to the applicable
notice requirement of this Section 1.
(c) Cause. The Company may at any time terminate the Employee's
employment for Cause by giving the Employee notice in writing. For all purposes
under this Agreement, "Cause" shall mean:
(i) A willful act by the Employee which constitutes misconduct
or fraud and which is injurious to the Company; or
(ii) Conviction of, or a plea of "guilty" or "no contest" to,
a felony.
No act, or failure to act, by the Employee shall be considered "willful" unless
committed without good faith and without a reasonable belief that the act or
omission was in the Company's best interest.
(d) Disability. The Company may terminate the Employee's active
employment due to Disability by giving the Employee 30 days' advance notice in
writing. For all purposes under this Agreement, "Disability" shall mean that the
Employee, at the time notice is given, has become eligible to receive immediate
long-term disability benefits under the Company's long-term disability insurance
plan or, if there is no such plan, under the federal Social Security program. In
the event that the Employee resumes the performance of substantially all of his
duties hereunder before the termination of his active employment under this
Subsection (d) becomes effective, the notice of termination shall automatically
be deemed to have been revoked.
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(e) Rights Upon Termination. Except as expressly provided in Sections 6
and 7, upon the termination of the Employee's employment pursuant to this
Section 1, the Employee shall only be entitled to the compensation, benefits and
reimbursements described in Sections 3, 4 and 5 for the period preceding the
effective date of the termination. The payments under this Agreement shall fully
discharge all responsibilities of the Company to the Employee upon the
termination of his employment.
(f) Termination of Agreement. This Agreement shall terminate when all
obligations of the parties hereunder have been satisfied.
2. Duties and Scope of Employment.
(a) Position. The Company agrees to employ the Employee as its Chief
Executive Officer for the term of his employment under this Agreement. The
Employee shall report to the Company's Board of Directors.
(b) Obligations. During the term of his employment under this
Agreement, the Employee shall devote his full business efforts and time to the
Company and its subsidiaries. The Employee shall not render services to any
other for-profit corporation or entity without the prior written consent of the
Company's Board of Directors (the "Board"). This Subsection (b) shall not
preclude the Employee from engaging in appropriate professional, educational,
civic, charitable or religious activities or from devoting a reasonable amount
of time to private investments that do not interfere or conflict with his
responsibilities to the Company.
3. Base Compensation.
During the term of his employment under this Agreement, the Company
agrees to pay the Employee as compensation for his services a base salary at the
annual rate of $255,000 or at such higher rate as the Company may determine from
time to time. Such salary shall be payable in accordance with the Company's
standard payroll procedures. Once the Company has increased such salary, it
thereafter shall not be reduced. (The annual compensation specified in this
Section 3, together with any increases in such compensation that the Company may
grant from time to time, is referred to in this Agreement as "Base
Compensation.")
4. Employee Benefits.
During the term of his employment under this Agreement, the Employee
shall be eligible for the employee benefit plans and executive compensation
programs maintained by the Company for other senior executives, subject in each
case to the generally applicable terms and conditions of the plan or program in
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question and to the determinations of any person or committee administering
such plan or program.
5. Business Expenses.
During the term of his employment under this Agreement, the Employee
shall be authorized to incur necessary and reasonable travel, entertainment and
other business expenses in connection with his duties hereunder. The Company
shall reimburse the Employee for such expenses upon presentation of an itemized
account and appropriate supporting documentation, all in accordance with the
Company's generally applicable policies.
6. Change in Control.
(a) Definition. For all purposes under this Agreement, "Change in
Control" shall mean the occurrence of any of the following events after the date
of this Agreement:
(i) the consummation of the acquisition of fifty-one percent
(51%) or more of the outstanding stock of the Company by one person or
by two or more persons acting as a partnership, limited partnership,
syndicate or other group pursuant to a tender offer validly made under
any federal or state law (other than a tender offer by the Company);
(ii) the consummation of a merger, consolidation or other
reorganization of the Company (other than a reincorporation of the
Company), if after giving effect to such merger, consolidation or other
reorganization of the Company, the stockholders of the Company
immediately prior to such merger, consolidation or other reorganization
do not represent a majority in interest of the holders of voting
securities (on a fully diluted basis) with the ordinary voting power to
elect directors of the surviving or resulting entity after such merger,
consolidation or other reorganization;
(iii) the sale of all or substantially all of the assets of
the Company to a third party who is not an affiliate (including a
Parent or Subsidiary) of the Company;
(iv) the dissolution of the Company pursuant to action validly
taken by the stockholders of the Company in accordance with applicable
state law.
(b) Good Reason. For all purposes under this Agreement, "Good Reason"
shall mean that the Employee:
(i) Has incurred a material reduction in his authority or
responsibility;
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(ii) Has incurred one or more reductions in his Base
Compensation in the cumulative amount of five percent or more; or
(iii) Has been notified that his principal place of work will
be relocated by a distance of 35 miles or more.
(c) Severance Payment. The Employee shall be entitled to receive a
severance payment from the Company (the "Severance Payment") if, during the term
of this Agreement and within the first 6-month period after the occurrence of a
Change in Control, either:
(i) The Employee voluntarily resigns his employment for Good
Reason; or
(ii) The Company terminates the Employee's employment for any
reason other than Cause or Disability.
The Severance Payment shall be made in a lump sum not more than five business
days following the date of the employment termination and shall be in an amount
determined under Subsection (d) below. The Severance Payment shall be in lieu of
any further payments to the Employee under Section 3 and any further accrual of
benefits under Section 4 with respect to periods subsequent to the date of the
employment termination.
(d) Amount. The amount of the Severance Payment shall be equal to the
sum of the following:
(i) One and a half times the Employee's annual rate of Base
Compensation, as in effect on the date of the employment termination;
plus
(ii) One and a half times the last annual bonus awarded to the
Employee by the Company prior to the date of the employment termination
(regardless of when paid). If the Company has determined that no bonus
shall be awarded to the Employee for a fiscal year, such bonus shall be
included in the calculation as zero.
(e) Incentive Programs. If, during the term of this Agreement, a Change
in Control occurs with respect to the Company that is not a merger that is being
accounted for as a pooling of interests, the Employee shall become fully vested
in all awards heretofore or hereafter granted to him under all stock option,
stock appreciation rights, restricted stock, phantom stock or similar plans or
agreements of the Company, regardless of any provisions in such plans or
agreements that do not provide for full vesting. (To the extent that such plans
or agreements provide for full vesting on an earlier date than this Agreement,
such plans or agreements shall prevail.)
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(f) Insurance Coverage. During the 18-month period commencing upon a
termination of employment described in Subsection (c) above, the Employee (and,
where applicable, his dependents) shall be entitled to continue participation in
the group insurance plans maintained by the Company, including life, disability
and health insurance programs, as if he were still an employee of the Company.
Where applicable, the Employee's salary for purposes of such plans shall be
deemed to be equal to his Base Compensation. To the extent that the Company
finds it impossible to cover the Employee under its group insurance policies
during such 18-month period, the Company shall provide the Employee with
individual policies which offer at least the same level of coverage and which
impose not more than the same costs on him. The foregoing notwithstanding, in
the event that the Employee becomes eligible for comparable group insurance
coverage in connection with new employment, the coverage provided by the Company
under this Subsection (f) shall terminate immediately. Any group health
continuation coverage that the Company is required to offer under the
Consolidated Omnibus Budget Reconciliation Act of 1986 ("COBRA") shall commence
when coverage under this Subsection (f) terminates.
(g) No Mitigation. The Employee shall not be required to mitigate the
amount of any payment contemplated by this Section 6 (whether by seeking new
employment or in any other manner). Except as expressly provided in Subsection
(f) above, no such payment shall be reduced by earnings that the Employee may
receive from any other source.
7. Involuntary Termination Without Cause.
(a) Continuation Period. In the event that, during the term of this
Agreement, the Company terminates the Employee's employment for any reason other
than Cause or Disability and Section 6 does not apply, then the Employee shall
be entitled to receive all of the payments and benefit coverage described in
this Section 7. Such payments and benefit coverage shall continue for the period
(the "Continuation Period") commencing on the date when the employment
termination is effective and ending on the earlier of:
(i) The date six months after such date; or
(ii) The date of the Employee's death.
(b) Compensation. During the Continuation Period, the Company shall pay
the Employee compensation at an annual rate equal to his Base Compensation at
the rate in effect on the date of the employment termination. Such amount shall
be paid at periodic intervals in accordance with the Company's standard payroll
procedures.
(c) Insurance Coverage. During the Continuation Period, the Employee
(and, where applicable, his dependents) shall be
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entitled to continue participation in the group insurance plans maintained by
the Company, including life, disability and health insurance programs, as if he
were still an employee of the Company. Where applicable, the Employee's salary
for purposes of such plans shall be deemed to be equal to his Base Compensation.
To the extent that the Company finds it impossible to cover the Employee under
its group insurance policies during the Continuation Period, the Company shall
provide the Employee with individual policies which offer at least the same
level of coverage and which impose not more than the same costs on him. The
foregoing notwithstanding, in the event that the Employee becomes eligible for
comparable group insurance coverage in connection with new employment, the
coverage provided by the Company under this Subsection (c) shall terminate
immediately. Any group health continuation coverage that the Company is required
to offer under COBRA shall commence when coverage under this Subsection (c)
terminates.
(d) Incentive Programs. The Continuation Period shall be counted as
employment with the Company for purposes of vesting under all stock option,
stock appreciation rights, restricted stock, phantom stock or similar plans
maintained by the Company (any contrary provisions of such plans
notwithstanding). The preceding sentence shall not be construed to require the
Company to grant any new awards to the Employee during the Continuation Period.
The Continuation Period shall also be counted as employment with the Company for
purposes of determining the expiration date of any stock option granted by the
Company and held by the Employee when his employment terminates. Any other
provision of this Agreement notwithstanding, the Continuation Period for
purposes of this Subsection (d) shall not exceed three months in the event that
the Company terminates the Employee's employment for performance-related
reasons, as determined by the Board. (There is no Continuation Period for any
purpose in the event that the termination is for Cause.)
(e) No Mitigation. The Employee shall not be required to mitigate the
amount of any payment contemplated by this Section 7 (whether by seeking new
employment or in any other manner). Except as expressly provided in Subsection
(c) above, no such payment shall be reduced by earnings that the Employee may
receive from any other source.
8. Limitation on Payments.
(a) Application. This Section 8 shall apply to the Employee only if,
after the application of this Section 8, the present value of his aggregate
payments or property transfers from the Company will be greater than the present
value of his payments or property transfers from the Company would have been if:
(i) This Section 8 did not apply; and
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(ii) Such present value had been reduced by the amount of the
excise tax described in section 4999 of the Internal Revenue Code of
1986, as amended (the "Code").
In all other cases, this Section 8 shall not apply to the Employee. All
determinations under this Subsection (a) shall be made by the independent
auditors retained by the Company most recently prior to the Change in Control
(the "Auditors").
(b) Basic Rule. Any provision of this Agreement other than Subsection
(a) above notwithstanding, the Company shall not be required to make any payment
or property transfer to, or for the benefit of, the Employee (under this
Agreement or otherwise) that would be nondeductible by the Company by reason of
section 280G of the Code or that would subject the Employee to the excise tax
described in section 4999 of the Code. All calculations required by this Section
8 shall be performed by the Auditors, based on information supplied by the
Company and the Employee, and shall be binding on the Company and the Employee.
All fees and expenses of the Auditors shall be paid by the Company.
(c) Reductions. If the amount of the aggregate payments or property
transfers to the Employee must be reduced under this Section 8, then the
Employee shall direct in which order the payments or transfers are to be
reduced, but no change in the timing of any payment or transfer shall be made
without the Company's consent. As a result of uncertainty in the application of
sections 280G and 4999 of the Code at the time of an initial determination by
the Auditors hereunder, it is possible that a payment will have been made by the
Company that should not have been made (an "Overpayment") or that an additional
payment that will not have been made by the Company could have been made (an
"Underpayment"). In the event that the Auditors, based upon the assertion of a
deficiency by the Internal Revenue Service against the Company or the Employee
that the Auditors believe has a high probability of success, determine that an
Overpayment has been made, such Overpayment shall be treated for all purposes as
a loan to the Employee that he shall repay to the Company, together with
interest at the applicable federal rate specified in section 7872(f)(2) of the
Code; provided, however, that no amount shall be payable by the Employee to the
Company if and to the extent that such payment would not reduce the amount that
is nondeductible under section 280G of the Code or is subject to an excise tax
under section 4999 of the Code. In the event that the Auditors determine that an
Underpayment has occurred, such Underpayment shall promptly be paid or
transferred by the Company to, or for the benefit of, the Employee, together
with interest at the applicable federal rate specified in section 7872(f)(2) of
the Code.
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9. Successors.
(a) Company's Successors. The Company shall require any successor
(whether direct or indirect and whether by purchase, lease, merger,
consolidation, liquidation or otherwise) to all or substantially all of the
Company's business and/or assets, by an agreement in substance and form
satisfactory to the Employee, to assume this Agreement and to agree expressly to
perform this Agreement in the same manner and to the same extent as the Company
would be required to perform it in the absence of a succession. The Company's
failure to obtain such agreement prior to the effectiveness of a succession
shall be a breach of this Agreement and shall entitle the Employee to all of the
compensation and benefits to which he would have been entitled hereunder if the
Company had involuntarily terminated his employment without Cause immediately
after such succession becomes effective. For all purposes under this Agreement,
the term "Company" shall include any successor to the Company's business and/or
assets which executes and delivers the assumption agreement described in this
Subsection (a) or which becomes bound by this Agreement by operation of law.
(b) Employee's Successors. This Agreement and all rights of the
Employee hereunder shall inure to the benefit of, and be enforceable by, the
Employee's personal or legal representa- tives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
10. Miscellaneous Provisions.
(a) Notice. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered or certified mail, return
receipt requested and postage prepaid. In the case of the Employee, mailed
notices shall be addressed to him at the home address which he most recently
communicated to the Company in writing. In the case of the Company, mailed
notices shall be addressed to its corporate headquarters, and all notices shall
be directed to the attention of its Secretary.
(b) Waiver. No provision of this Agreement shall be modified, waived or
discharged unless the modification, waiver or discharge is agreed to in writing
and signed by the Employee and by an authorized officer of the Company (other
than the Employee). No waiver by either party of any breach of, or of compliance
with, any condition or provision of this Agreement by the other party shall be
considered a waiver of any other condition or provision or of the same condition
or provision at another time.
(c) Whole Agreement. No agreements, representations or understandings
(whether oral or written and whether express or implied) which are not expressly
set forth in this Agreement
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have been made or entered into by either party with respect to the subject
matter hereof. This Agreement supersedes any employment agreement or
understanding, whether oral or written, made before the date of this Agreement
between Employee and the Company.
(d) No Setoff; Withholding Taxes. There shall be no right of setoff or
counterclaim, with respect to any claim, debt or obligation, against payments to
the Employee under this Agreement. All payments made under this Agreement shall
be subject to reduction to reflect taxes required to be withheld by law.
(e) Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California.
(f) Severability. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or enforceability
of any other provision hereof, which shall remain in full force and effect.
(g) Arbitration. Except as otherwise provided in Section 9, any
controversy or claim arising out of or relating to this Agreement, or the breach
thereof, shall be settled by arbitration in San Francisco in accordance with the
Commercial Arbitration Rules of the American Arbitration Association. Discovery
shall be permitted to the same extent as in a proceeding under the Federal Rules
of Civil Procedure, including (without limitation) such discovery as is
specifically authorized by section 1283.05 of the California Code of Civil
Procedure, without need of prior leave of the arbitrator under section
1283.05(e) of such Code. Judgment on the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof. All fees and expenses of the
arbitrator and such Association shall be paid as determined by the arbitrator.
(h) No Assignment. The rights of any person to payments or benefits
under this Agreement shall not be made subject to option or assignment, either
by voluntary or involuntary assignment or by operation of law, including
(without limita-
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tion) bankruptcy, garnishment, attachment or other creditor's process, and any
action in violation of this Subsection (h) shall be void.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the day and year
first above written.
______________________________
PARADIGM TECHNOLOGY, INC.
By ___________________________
Title ________________________
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