December 16, 1998
Xx. Xxxxx Xxxxxxx
0000 Xxxxxxxx Xxxxx
Xxxxxx Xxxxx, XX 00000
Dear Xxxxx:
This letter serves as a term sheet that will be the basis on which to
formalize an agreement. It refers to your current and future involvement as both
an employee and board member with QueryObject Systems, and your involvement in
the new "knowledge management" subsidiary (NewCo for the purposes of this
letter), which we have proposed establishing.
1) QueryObject Systems will extend your contract as an Officer of the
Company for the period from January 1, 1999 to April 30, 1999. During
this period, you will devote the majority of your efforts to building a
business plan for NewCo.
2) At least for the 1999 fiscal year, subject to shareholder re-approval,
you will remain as both a member of the QueryObject Board of Directors,
and (in that roll) as titular Chief Technology Officer.
3) You will exercise best efforts to present to the QueryObject Board of
Directors at its February meeting a viable business plan for a
knowledge management subsidiary (NewCo) which will sub-license the
QueryObject technology and apply it into a new-to-QueryObject market
application.
4) As additional compensation for the duties outlined in 10, 2) and 3),
the new option xxxxx proposed at this week's board meeting(75,000
shares) will be revised to 150,000 shares. Attached to this grant to
you will be a special convertibility feature outlined in 7) below.
5) Pursuant to item 3), QueryObject System will cover all normal operating
expenses occurred in preparation of this business plan.
6) At the February Board Meeting, the Board will examine your business
plan with a view to financing and managing NewCo.
7) If the Board agrees to go ahead with NewCo:
-We will establish a legal structure of NewCo as a wholly-owned
subsidiary of QueryObject Systems;
-You may elect, at point of incorporation, to convert the shares grant
outlined in 5) to a 20% equity option in the Portion of NewCo owned by
QueryObject Systems, such equity stake to be protected from dilution as
a percentage of QueryObject holdings for a period of 18 months from
date of incorporation;
-and, we will exercise best efforts to provide the seed infrastructure
and raise the capital necessary to develop NewCo until such time as it
can be offered to outside investors for venture or operational funding.
8) If the Board elects not to proceed with NewCo:
-Subject to your contractual obligation with respect to the non-compete
and intellectual property rights of QueryObject Systems and your
entering into a re-licensing agreement for any QueryObject technology
that is appropriate for NewCo, you may exercise the option to acquire
full right to the proposed venture in exchange for re-payment or normal
costs such as T&E, legal advice, incorporation expenses, investment and
technology consultants and other material expenses associated with the
venture, and incurred by QOS during the period from January 1, 1999
onward.
-QOS will agree not to enter into a competitive knowledge management
initiative except when it is a direct and logical extension of its then
current business, for a period of not less than 24 months from the date
you are assigned rights to NewCo.
9) Unless you are offered a further contract extension by the Board of
Directors, and elect to accept it, effective May 1, 1999, you will
cease active employment with QueryObject Systems and your current
contractual severance agreement will go into effect.
This will provide salary for one year to April 30, 2000, paid in
accordance with normal company policy at your current annual rate of
$150,000 per annum. In addition, the Company will agree to continue
medical and dental benefits or a period of five years from May 1, 1999,
or until you acquire such benefits by virtue of employment or other
means. All then existing options will become fully vested by April 30,
2000, and must be exercised by December 31, 2000. Payment for your
accrued vacation and any outstanding expenses through April 30, 1999
will be discharged in equal installments over the period to December
31, 1999.
The above fairly reflect my understanding of our agreement. If you are in
agreement, please sign and return a copy and, based on this letter, Xxx Xxxx
will draw up any contractual documents that may be required.
Xxxxx, as we discussed yesterday, the essence of QOS is not just this Company,
not the current or the past employees, it is a profoundly interesting
technological idea that we live in a number of iterations. I am very excited
about this direction, and the market timing for its success, and look forward to
working closely with you on it.
Sincerely,
/s/ Xxxxxx Xxxxxxxx
Xxxxxx Xxxxxxxx
President and CEO
I am in agreement with the above:
/s/ Xxxxx Xxxxxxx 12/31/98
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Xxxxx Xxxxxxx Date
