Exhibit 10.4
EXECUTIVE COMPENSATION AGREEMENT
THIS EXECUTIVE COMPENSATION AGREEMENT is entered into as of January 7,
1999, by and between XXXXXX X. XXXX (the "Employee") and XXXX SYSTEMS, 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 Section 6, the Company may terminate
the Employee's employment by giving the Employee ninety (90) days' advance
notice in writing. The Employee may terminate his employment by giving the
Company thirty (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 fraud and
which is injurious to the Company; or
(ii) Conviction of, or a plea of "guilty" or "no contest" to,
a felony; or
(iii) Employee's continuing repeated willful failure or
refusal to perform his material duties required by this Agreement which
is injurious to the Company.
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. This Agreement may not be
terminated for Cause unless Employee has first been given the opportunity,
together with his counsel, to be heard before the Company's Board of Directors.
(d) DISABILITY. The Company may terminate the Employee's active
employment due to Disability by giving the Employee ninety (90) days' advance
notice in writing. For all purposes under this Agreement, "Disability" shall
mean that 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.
(e) RIGHTS UPON TERMINATION. Except as expressly provided in Section 6
or provided in subparagraph (f) of this Section 1, 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) In the event that the Company terminates the employment of the
Employee without Cause (as defined in Section 3 of this Agreement), Employee
shall be entitled to the following:
(i) an amount equal to two (2) times the Employee's annual
rate of Base Compensation as in effect at the time of such termination,
to be paid by the Company on a semi-monthly basis;
(ii) continuation of the employee benefits provided to
Employee pursuant to Section 4 hereof for a period of two (2) years
after such termination; and
(iii) a period of ninety (90) days to exercise all Incentive
Awards (as defined in Section 6(e) of this Agreement) that are vested
at the time of such termination.
(g) 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 and Chairman of the Board of Directors for the term of his
employment under this Agreement. At all times during the term of this Agreement,
Employee shall have powers and duties at least commensurate with his position as
Chairman of the Board and Chief Executive Officer of the Company. The Employee
shall report only 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. 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.
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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 $360,000 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 fringe benefits, bonuses,
vacations, 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 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) Any "person" (as such term in used in sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) by the acquisition or aggregation of securities is or becomes
the beneficial owner (within the meaning of Rule 13d-3 of the Exchange
Act), directly or indirectly, of securities of the Company representing
fifty percent (50%) or more of the combined voting power of the
Company's then outstanding securities ordinarily (and apart from rights
accruing under special circumstances) having the right to vote at
elections of directors (the "Base Capital Stock"); except that any
change in the relative beneficial ownership of the Company's securities
by any person resulting solely from a reduction in the aggregate number
of outstanding shares of Base Capital Stock, and any decrease
thereafter in such person's ownership of securities, shall be
disregarded until such person increases in any manner, directly or
indirectly, such person's beneficial ownership of any securities of the
Company;
(ii) The stockholders of the Company approve a definitive
agreement (A) to merge or consolidate the Company with or into another
corporation in which the holders of the securities of the Company
before such merger or reorganization will not, immediately following
such merger or reorganization, hold as a group on a fully diluted
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basis both the ability to elect at least a majority of the directors of
the surviving corporation and at least a majority in value of the
surviving corporation's outstanding equity securities, or (B) to sell
or otherwise dispose of all or substantially all of the assets of the
Company or dissolve or liquidate the Company; or
(b) GOOD REASON. For all purposes under this Agreement, "Good Reason"
shall mean that the Employee:
(i) Has incurred a material reduction in his powers or duties;
(ii) Has incurred one or more reductions in his Base
Compensation in the cumulative amount of five percent (5%) or more; or
(iii) Has been notified that his principal place of work will
be relocated by a distance of 50 miles or more.
(c) SEVERANCE PAYMENT. The Employee shall be entitled to receive salary
continuation payments from the Company (the "Severance Payment") if, during the
term of this Agreement and within the first nine (9) 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 Payments in an amount determined under
Subsection (d) below shall be paid by the Company on a semi-monthly
basis following the date of the employment termination. The Severance
Payments 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 Payments shall in total equal
to two (2) times the Employee's annual rate of Base Compensation, as in effect
on the date of the employment termination.
(e) INCENTIVE PROGRAMS. If, during the term of this Agreement, a Change
in Control occurs with respect to the Company, the vesting of all of Employee's
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 ("Incentive Awards") shall be immediately accelerated
regardless of any provisions in such plans or agreements that do not provide for
such acceleration of vesting. In addition, Employee will have at least ninety
days (90) following the date his employment is terminated to exercise all of
such Incentive Awards regardless of any provisions in any plans or agreements to
the contrary. This Agreement shall be
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deemed to be an amendment of such plans or agreements to the extent required to
implement this subsection (e) and preserve the qualified status of Employee's
incentive stock options for the longest time permitted by applicable law. (To
the extent that such plans or agreements provide for full vesting on an earlier
date than does this Agreement, or for longer post-termination of employment
exercise periods, such plans or agreements shall prevail.)
(f) INSURANCE COVERAGE. During the twenty-four (24) 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 twenty-four (24) month period, the Company shall
provide the Employee with individual policies which offer at least the same
level or 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. LIMITATION ON PAYMENTS.
(a) APPLICATION. This Section 7 shall apply to the Employee only if,
after the application of this Section 7, 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 7 did not apply; and
(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 7 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").
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(b) BASIC RULE. Any provision of this Agreement other than Subsection
(a) above to the contrary notwithstanding, in the event that the Auditors
determine that any payment or transfer by the Company to or for the benefit of
the Employee, whether paid or payable (or transferred or transferable) pursuant
to the terms of this Agreement or otherwise (a "Payment"), would be
nondeductible by the Company for federal income tax purposes because of the
provisions concerning "excess parachute payments" in section 280G of the Code,
then the aggregate present value of all Payments shall be reduced (but not below
zero) to the Reduced Amount. For purposes of this Section 7, the "Reduced
Amount" shall be the amount, expressed as a present value, which maximizes the
aggregate present value of the Payments without causing any Payment to be
nondeductible
(c) REDUCTIONS. If the amount of the aggregate payments or property
transfers to the Employee must be reduced under this Section 7, then the Company
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
Employee'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.
8. 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
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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 representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
9. RESTRICTIVE COVENANTS.
(a) For purposes of this Agreement, the following terms shall
have the following respective meanings:
"COMPETING BUSINESS" means a business that, wholly or partly,
directly or indirectly, is engaged in providing, selling or marketing
enterprise-wide business systems and related services to companies
installing client-server software products.
"COMPETITIVE POSITION" means: (A) Employee's direct or
indirect equity ownership (excluding ownership of less than one percent
(1%) of the outstanding common stock of any publicly held corporation)
or control of any portion of any Competing Business; (B) Employee
serving as a director, officer, consultant, lender, joint venturer,
partner, agent, advisor or independent contractor of or to any
Competing Business; or (C) any employment arrangement between Employee
and any Competing Business whereby Employee is required to perform
services for the Competing Business substantially similar to those that
Employee performed for the Company.
"RESTRICTED TERRITORY" means the United States of America and
Canada.
(b) Employee agrees that he will not, without the prior
written consent of the Board, either directly or indirectly, alone or in
conjunction with any other person or entity, accept, enter into or attempt to
enter into a Competitive Position in the Restricted Territory at any time during
his employment with the Company or, in the event the Company terminates the
employment of the Employee without Cause, for a period of two (2) years
thereafter.
(c) Employee agrees that he will not, without the prior
written consent of the Board, either directly or indirectly, alone or in
conjunction with any other person or entity, solicit, entice or induce any
customer of the Company (or any actively sought or prospective customer of the
Company) for or on behalf of any Competing Business at any time during his
employment with the Company or, in the event the Company terminates the
employment of the Employee without Cause, for a period of two (2) years
thereafter.
(d) Employee agrees that he will not, without the prior
written consent of the Board, either directly or indirectly, alone or in
conjunction with any other person or entity, solicit or attempt to solicit any
"key or material" employee, consultant, contractor or other personnel of the
Company to terminate, alter or lessen that party's affiliation with the Company
or to violate the terms of any agreement or understanding between such employee,
consultant,
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contractor or other person and the Company at any time during his employment
with the Company or, in the event the Company terminates the employment of the
Employee without Cause, for a period of two (2) years thereafter. For purposes
of this subsection (d), "key or material" employees, consultants, contractors or
other personnel shall mean those such persons or entities who have direct access
to or have had substantial exposure to Confidential Information or Trade
Secrets.
(e) The provisions of Subsections (b), (c) and (d) of this
Section 9 shall not apply if, following the occurrence of a Change in Control,
(i) the Employee voluntarily resigns his employment with the Company for any
reason or (ii) the Company terminates the Employee's employment for any reason.
10. CONFIDENTIALITY.
(a) For purposes of this Agreement, the following terms shall
have the following respective meanings:
"CONFIDENTIAL INFORMATION" means all valuable proprietary and
confidential business information belonging to or pertaining to the
Company and its affiliates and subsidiaries, other than "Trade Secrets"
(as defined below), that is not generally known by or available to the
competitors of the Company but is generally known only to the Company
and those of its employees, independent contractors, customers or
agents to whom such information must be confided for internal business
purposes.
"TRADE SECRETS" means the "trade secrets" of the Company as
defined under applicable law.
(b) In recognition of the Company's need to protect its
legitimate business interests, Employee hereby covenants and agrees that he
shall regard and treat each item of information or data constituting a Trade
Secret or Confidential Information as strictly confidential and wholly owned by
the Company and that he will not use, distribute, disclose, reproduce or
otherwise communicate any such item of information or data to any person or
entity for any purpose other than in connection with his performance of his
obligations under this Agreement. The covenant contained in the preceding
sentence shall apply: (i) with respect to Confidential Information, at all times
Employee is employed by the Company and for a period of three (3) years
thereafter; and (ii) with respect to Trade Secrets, at all times such data or
information constitutes a "trade secret" under applicable law.
11. 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
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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; AMENDMENT. No agreements, representations or
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof. This Agreement shall not
be modified or amended except by an instrument in writing signed by or on behalf
of the parties hereto.
(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
Georgia.
(f) SEVERABILITY. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not effect the validity or enforceability
of any other provision hereof, which shall remain in full force and effect.
(g) ARBITRATION. Except as otherwise provided in this Agreement, any
controversy or claim arising out of or relating to this Agreement, or the breach
thereof, shall be settled by arbitration in Atlanta, Georgia in accordance with
the Commercial Arbitration Rules of the American Arbitration Association.
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 limitation) bankruptcy, garnishment, attachment or other creditor's
process, and any action in violation of this Subsection (h) shall be void.
(i) COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall for all purposes be deemed an original, and all of such
counterparts shall together constitute one and the same agreement.
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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the day and year
first above written.
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Xxxxxx X. Xxxx
XXXX SYSTEMS, INC.
By:
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Title:
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