EMPLOYMENT AGREEMENT
This Employment Agreement is effective as of January 1, 1999 between
Xxxxxxx Xxxxx ("Executive") and Titan Software Systems Corporation
("Employer").
1. RECITALS
1.1. Titan Software Systems Corporation ["TSS"], a subsidiary of The
Titan Corporation shall purchase the assets of Transnational Partners 11 LLC
["TNPII"] The asset purchase by TSS of TNPII is a condition precedent to all
the terms and conditions set forth hereinafter.
1.2 Employer desires assurance of the association and services of
Executive in order to obtain and retain his experience, abilities, and
knowledge, and is therefore willing to engage his services on the terms and
conditions set forth below.
1.3. Executive desires to become an employee of the Employer and is
willing to do so on the terms and conditions as hereinafter set forth
simultaneous upon the asset purchase by TSS.
2. TERM OF EMPLOYMENT
2.1. Subject to earlier termination as provided for in this
Agreement, Executive shall be employed for a term which commences on the date
of the asset purchase by TSS and ends on December 31, 2001; provided,
however, that Executive and Employer may, by mutual agreement, extend the
term of employment for an additional one year from the anniversary date. The
incentive compensation under subparagraph 8.1 shall be the same for the
extended year as for the year 2001.
PLACE OF EMPLOYMENT
3.1 Unless the parties agree otherwise in writing during the
employment term, Executive shall perform services that he is required to
perform under this Agreement at the main corporate office of TSS located
within San Diego County; provided, however, that Employer may
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from time to time require Executive to travel temporarily to other locations
on Employer's business.
4. EMPLOYEE'S DUTIES AND AUTHORITY
4.1 Employer shall employ Executive as Chief Technology Officer,
Executive shall have the full power and authority to manage and conduct all
the business of Employer, subject to the directions and policies of the
Employer and its Board of Directors as they may be, from time to time,
stated either orally or in writing. Executive shall not, however, take any of
the following actions on behalf of the Employer without the express written
approval of the Board of Directors:
A. Expend funds or capital equipment in excess of budgeted
expenditures for any quarter,
13. Exercise any discretionary authority or control over the
management of any employee welfare or pension benefit plan or over the
disposition of the assets of any such plan.
5. RESTRICTION ON OUTSIDE BUSINESS ACTIVITIES
5.1. During his employment, Executive shall devote the necessary
business time and energy, and his expert ability to the business interests of
the Employer. In no event shall Executive expend less than 40 hours per week
working on Employer's business interests. Executive's primary business
interests shall be coincidental with his Employer's interests during the term
of this Agreement.
5.2. Employer acknowledges that Executive has ownership interests and
business activities in Component Arts and Business Information Solutions,
both of which are customers of Sempra. Employer likewise acknowledges that
Component Arts is a subcontractor of TNPII. Both Employer and Executive
contemplate these relationships will continue during the term of this
Agreement and thereafter and that all dealings between Component Arts and
Business Information Solutions shall
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be arm's length transactions. With the exception of the above-delineated
business relationships, Executive agrees that during the term of this
Agreement, Executive will not hold any position as an owner, officer,
employee, or any other title in any other business enterprise if such
business enterprise is a customer or supplier of Employer; a competitor of
Employer; or will interfere with the proper discharge of the Executive's
duties for Employer or involve obligations which conflict with the Employer's
interests.
6. COVENANT NOT TO COMPETE DURING EMPLOYMENT TERM
6.1. During the employment term Executive shall not, directly or
indirectly whether as a partner, employee, creditor, shareholder or
otherwise, promote, participate or engage in any activity or other business
competitive with the Employer's business. For one year following Executive's
separation from employment with Employer, Executive shall not, directly or
indirectly, whether as a partner, employee, creditor, shareholder or
otherwise, promote, participate or engage in any activity or other business
competitive with the Employer's business in the Counties of San Diego,
Orange, and Los Angeles located the State of California. Executive shall, at
all times, comport his conduct in such a manner so as not to violate any
provisions of the Uniform Trade Secrets Act as legislated in the State of
California.
7. BASE SALARY
7.1. During the term of this Agreement Employer agrees to pay Executive
a base salary of $225,000.00 per year in accordance with Employer's ordinary
and usual payroll practices.
7.2. Employer's Board of Directors may review Executive's base salary
and additional benefits then being paid to Executive not less frequently than
every 12 months. Following such
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review, the Board may In its discretion increase (but shall not be permitted
to decrease) Executive's base salary or any other benefits.
8. INCENTIVE COMPENSATION
8.1. In addition to the base salary provided for in Paragraph 7.1, the
following incentive compensation shall be paid as enumerated in this
subparagraph. On or before 1/1/2000 Employer shall pay to Executive as
incentive compensation for calendar year 1999, the sum of $225,000.00
provided that the revenue for TSS for calendar year 1999 equals or exceeds
the sum of $40,000,000.00 and the estimated earnings before income taxes
[EBIT] for that calendar year reaches or exceeds the sum of $7,000,000.00. In
any event, Executive shall be paid a minimum of eighty percent of the
$225,000 incentive compensation for 1999, providing the estimated earnings
before taxes for the calendar year 1999 equals or exceeds the sum of
$6,000,000.00. On or before 1/1/2001, Employer shall pay the Executive for
calendar year 2000, the sum of $225,000, provided that the revenue for TSS
for calendar year 2000 equal or exceeds the sum of $50,000,000.00 and the
EBIT for that calendar year reaches or exceeds the sum of $10,000,000.00. On
or before 1/1/2002, Employer shall pay to Executive as incentive compensation
for the calendar year 2000, the sum of $225,000 provided that the revenue for
TSS for calendar year 2000 equal or exceeds the sum of $60,000,000.00 and the
EBIT for that calendar year reaches or exceeds $13,000,000.00. The incentive
compensation shall be prorated during any part of any calendar year in which
the Executive is employed for fewer than a full calendar year by dividing the
$225,000 incentive bonus by 12.
9. ADDITIONAL BENEFITS
9.1. During the employment term, Executive shall be entitled to receive
all other
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benefits of employment generally available to the Employer's other executive
and managerial employees. Notwithstanding the provision of such benefits, at
Executive's option, Employer shall reimburse Executive, on a timely basis,
for actual payments and premiums incurred by Executive, for Executive's
Guardian health and dental insurance covering Executive, his spouse, and his
dependent children; for disability insurance through Standard Insurance
Company or a substitute insurer which pays no less than $ 10,000.00 a month
to Executive in the event that he becomes disabled; and for Executive's life
insurance in the face amount of $500,000.00, less the difference in any
amount of money Employer would have paid if the benefits had been provided
through Employer's benefits program.
9.2. Employer shall pay for Executive's an annual corporate membership
in the University Club located in San Diego, California Employer shall be
responsible for paying the annual dues of said membership, expenses, and any
assessments related to being a member of the University Club.
10. AUTOMOBILE ALLOWANCE
10.1. During the employment terms, Employer shall provide Executive with
an automobile allowance in the sum of $600.00 per month. Executive shall be
responsible for all expenses relating to the ownership or lease of
Executive's automobile, insurance thereon, and repairs and maintenance.
11. RETIREMENT BENEFITS
11.1. Employer shall allow Executive to participate in Employer's 401K
plan and any other plan which may from time to time be provided through the
Employer.
12. STOCK OPTIONS
12.1. Employer shall provide Executive with a stock option plan pursuant
to which Executive shall be granted options to purchase 125,000 shares of TSS
in equal numbers of
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shares prorated over 3 years at the estimated strike price of $.36 per share
adjusted for any splits or stock dividends, subject to Board approval.
12.2. Executive and Employer acknowledge that Executive shall acquire
862,960 preferred shares of TSS stock at the time of the acquisition by TSS
of the assets of Transnational Partners II LLC.
12.3. Employer likewise acknowledges that Executive will be issued
stock options pursuant a stock option agreement with Titan Corporation
providing Executive with the options to purchase 30,000 shares of Titan
Corporation pursuant to a 4 year vesting program at a price which will be the
selling price of Titan Corporation stock as of the closing date of the
aforesaid acquisition by TSS. All provisions of Employer's existing Stock
Option Plan, including any changes as may, from time to time, be made, shall
inure to the benefit of Executive.
13. VACATION
13.1. Executive shall be entitled to 4 weeks of paid time off for each
12 month period, which shall accrue on a prorata basis from the date
employment commences under this Agreement. Vacation time will continue to
accrue so long as Executive's total accrued vacation does not exceed 500
hours.
14. EXPENSE REIMBURSEMENT
14.1. During the employment term, to the extent that such expenditures
satisfy the criteria under the Internal Revenue Code for deductibility by
Employer (whether or not fully deductible) for federal income tax purposes as
ordinary and necessary business expenses, Employer shall reimburse Executive
promptly for reasonable business expenses, including, but not necessarily
limited to, first class air travel, entertainment, parking, business
meetings, professional dues,
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professional journals, and all other reasonable expenses incurred by
Executive in the course of his job duties and responsibilities as Chief
Executive Officer, made and substantiated in accordance with he policies and
procedures established from time to time by Employer with respect to
Employer's other executive and managerial employees.
15. EMPLOYER'S OWNERSHIP OF INTANGIBLES
15.1. All processes, inventions, patents, copyrights, trademarks, and
other intangible rights that may be conceived or developed by Executive
either alone or with others, during the term of the Executive's employment,
whether or not conceived or developed during Executive's working hours, and
with respect to which the equipment, supplies, facilities, or trade secret
information of Employer was used, or that relate at the time of conception or
reduction to practice of the invention to the business of the Employer or to
the Employer's actual or demonstrably anticipated research and development,
or that result from any work performed by Executive for Employer, shall be
the sole property of Employer. Executive shall disclose to Employer all
inventions conceived during the term of employment, whether or not the
property of Employer under the terms of the preceding sentence, provided
that such disclosures shall be received by Employer in confidence, Executive
shall execute all documents, including patent applications and assignments,
required by Employer to establish Employer's rights under this Section.
16. INDEMNIFICATION BY EMPLOYER
16.1. Employer shall, to the maximum extent permitted by law, indemnify
and hold Executive harmless for any acts or decisions made in good faith
while performing services in the ordinary and regular course of business for
Employer. To the same extent Employer will pay and subject to any legal
limitations, advance all expenses, including reasonable attorneys' fees and
costs
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of court approved settlements, actually and necessarily incurred by Executive
in connection with the defense of any action, suit or proceeding and in
connection with any appeal, which has been brought against Executive by
reason of his service as an officer or agent of the Employer.
16.2. Employer shall use its best efforts to obtain coverage for
Executive (provided it may be obtained at a reasonable cost) under any
liability insurance policy or policies now in force or hereafter obtained
during the term of this Agreement that cover the officers of Employer having
comparable or lesser status and responsibility.
17. TERMINATION OF AGREEMENT
17.1. Employer may terminate this Agreement at any time without notice
if the Executive commits any material act of dishonesty, discloses
confidential information, is guilty of gross carelessness or misconduct, or
unjustifiably neglects his duties under this Agreement, or acts in a way that
has a direct, substantial, or an adverse affect on Employer's reputation. In
the event of employment termination without notice for any of the aforestated
reasons, at the time of termination Employer must provide Executive with the
specific written ground(s) for termination and each and every substantial
fact supporting said ground or grounds for termination.
17.2. Executive may terminate this Agreement by giving Employer 6 months
prior written notice of resignation.
17.3. This Agreement shall be terminated by Executive's voluntary
retirement, which retirement shall be effective on the last day of any fiscal
year, provided that day occurs after Executive's 65th birthday, and provided 6
months prior written notice of the retirement shall be given by the Executive
to Employer.
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17.4. If at the end of any calendar month during the initial term or
renewal term of this Agreement, Executive is and has been for the 6
consecutive full calendar months then ending, or for 80% or more of the
normal working days during the 6 consecutive full calendar months then
ending, unable due to mental or physical illness or injury to perform his
duties under this Agreement in his normal and regular manner, this Agreement
shall then be terminated.
17.5. If Executive dies during the initial term or during any renewal
term of this Agreement, this Agreement shall be terminated on the last
calendar month of his death, subject to the provisions of this Agreement
concerning compensation, benefits, and stock options.
18. AGREEMENT SURVIVES COMBINATION OR DISSOLUTION
18.1. This Agreement shall not be terminated by Employer's voluntary or
involuntary dissolution or by any merger in which Employer is not the
surviving or resulting corporation, or any transfer of all or substantially
all of Employer's assets. In the event of any such merger or transfer of
assets, the provisions of this Agreement shall be binding on and inure to the
benefit of the surviving business entity or the business entity to which such
assets will be transferred at the sole discretion of Executive.
19. MISCELLANEOUS PROVISIONS
19.1. This Agreement contains the entire agreement between the parties
and supercedes all prior oral and written agreements, with the exception of
those agreements which underlie the acquisition by TSS of the assets of
Transnational Partners II LLC, understandings, commitments, and practices
between them, including all prior employment agreements, whether or not fully
performed by Executive before the date of this Agreement. No oral
modifications, express or implied, may alter or vary the terms of this
Agreement. No amendments to this Agreement may be made except by a
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writing signed by both parties. Only the Board of Directors of TSS is
authorized to alter or vary the terms of this Agreement by a superceding
written agreement.
19.2. The formation, construction, and performance of this Agreement
shall be construed in accordance with the laws of the State of California.
Venue shall lie exclusively within the County of San Diego in the State of
California.
19.3. Any controversy or claim arising out of or relating to this
Agreement, or breach of this Agreement, shall be resolved by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, and judgment on the award rendered by the arbitrators may be
entered in any court in the County of San Diego, State of California having
jurisdiction. Employer shall pay the arbitrators' fees and filing fees
required to undertake the arbitration, up to and including $20,000.00. All
arbitration fees and costs in excess of $20,000.00 shall be borne equally by
the parties.
19.4. Any notice to Employer required or permitted under this Agreement
shall be given in writing to Employer, either by personal service or by
registered or certified mail, postage pre-paid, addressed to the Chairman of
the Board of Directors, at its then principal place of business. Any such
notice to Executive shall be given in a like manner and, if mailed, shall be
addressed to Executive in care of his home address then shown in the
Employer's files. For the purpose of determining compliance with any time
limit in this Agreement, notice shall be deemed to have been duly given on
the date of service, if served personally on the party to whom the notice is
to be given, or, on the second business day after mailing, if mailed to the
party to whom the notice is to be given in the manner provided in this
Section.
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19.4. If any provision of this Agreement is held invalid or
unenforceable, the remainder of this Agreement shall nevertheless remain in
full force and effect. If any provision is held invalid or unenforceable
with respect to the particular circumstances, it shall nevertheless remain in
full force and effect in all other circumstances.
Executed by the parties as of the day and year first above written.
/s/ XXXXXXX XXXXX Dated: January 12, 1999
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XXXXXXX XXXXX
Executive
Titan Software Systems Corporation
By: /s/ XXXX X. XXX Dated: January 12, 1999
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Employer
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