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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made as of the 15th day of August, 1996,
by and between BASIS ACQUISITION CORP., an Arizona corporation (the "Company"),
XXXXXXXX X. XXXXXX, an individual residing at ________________________________
("Executive"), and PROLOGIC MANAGEMENT SYSTEMS, INC., an Arizona corporation,
as guarantor of the obligations of the Company herein ("Prologic").
R E C I T A L S :
WHEREAS, the Company has entered into an Agreement and Plan of
Reorganization, dated as of June 1, 1996 (the "Merger Agreement"), pursuant to
which BASIS, Inc., a California corporation, shall merge (the "Merger") with and
into a wholly owned subsidiary of Prologic;
WHEREAS, Executive was a principal shareholder of BASIS and has
transferred all of her shares in connection with the Merger;
WHEREAS, the Company desires that the Executive be employed by the
Company in order to ensure that the services of Executive shall be available to
the Company following the Merger;
WHEREAS, the understanding that the Executive will be employed by the
Company for the Employment Period (as defined below) and that the Executive will
comply with the covenants contained in Section 6 hereof has served as a
fundamental basis for the Company entering into the Merger;
WHEREAS, the execution and delivery of this Agreement is a condition to
the obligation of the Company to consummate the Merger and the Company is
consummating such Merger in reliance upon this Agreement;
WHEREAS, this Agreement is made in consideration of and in reliance
upon the Confidentiality and Non-Disclosure Agreement, dated as of the date
hereof (the "Confidentiality Agreement"), between the Company and Executive,
which is incorporated herein by reference;
WHEREAS, Executive desires to be employed by the Company on the
following terms and conditions;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties agree as follows:
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A G R E E M E N T :
1. The Employment Period.
(a) Initial Period. The "Employment Period," shall be August
1, 1996 to July 31, 1998 ("Original Employment Period"), unless terminated or
renewed pursuant to the terms of this Agreement.
(b) Renewal. Subject to Section 4, upon written notice to the
Company of Executive's interest in continuing her employment with the Company no
less than ninety (90) days prior to the expiration of the Employment Period, the
Company may elect to renew the Employment Period for additional one (1) year
periods on substantially the same terms as the original Employment Period,
provided, however, that in place of the salary and options granted under Section
3 and the severance benefits provided in Section 5, any renewal agreement will
contain salary provisions, option grants and severance benefits which are
comparable to those offered in renewal agreements generally to the principal
executive officers of Prologic, its subsidiaries and affiliates.
(c) In the event that the Company does not exercise its option
to renew the contract upon notice provided to Company in accordance with Section
1(b), Executive will receive a termination payment equal to six (6) months
salary, to be paid on a monthly basis in accordance with the Company's policies
as described in Section 3(a)(i).
2. Employment and Duties.
(a) Employment. The Company hereby employs Executive for the
Employment Period to perform such duties for the Company, its subsidiaries and
affiliates as may be reasonably specified from time to time by the Company's
Board of Directors or the representative designated by the Board of Directors
(the "Board"). Executive hereby accepts employment with the Company as President
and Chief Executive Officer (or a comparable position if there is a
restructuring of the Company, Prologic or their subsidiaries or affiliates),
reporting directly to the Board of the Company. Executive also shall be made an
Executive Vice President of Prologic, with compensation payable in connection
with such position included in Executive's compensation hereunder. In addition,
Executive will have a reporting relationship with the President or Chief
Executive Officer of Prologic. It is understood that Executive will use best
efforts to perform her duties in the manner directed by the Board and in
compliance with all federal, state and local laws, ordinances and regulations.
(b) Time Devoted to Duties. Executive shall devote all of her
normal business time and efforts to the business of the Company, its
subsidiaries and affiliates, the amount of such time to be sufficient to permit
her diligently and faithfully to serve and endeavor to further the Company's
interests to the best of her ability. Executive will not, during the Employment
Period, (i) accept any other employment, or (ii) engage, directly or indirectly,
in any other business activity (whether or not pursued for pecuniary gain) that
is or may be competitive with, or that might place her in a competing position
to that of the Company or its subsidiaries or affiliates, provided,
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however, that an investment of less than one percent (1%) in a public company
which competes with Prologic or the Company but with which Executive has no
other involvement will not violate the terms hereof. The Executive hereby
represents that her employment hereunder and compliance by her of the terms and
conditions of this Agreement will not conflict with or result in the breach of
any agreement by which she may be bound.
3. Compensation.
(a) Monetary Remuneration and Benefits. During the Employment
Period, the Company shall pay to Executive for all services rendered by her in
any capacity:
(i) Salary. An annual salary of One Hundred Thirty
Thousand Dollars ($130,000), payable pursuant to the procedures
regularly established, and as they may be amended, by the Company
during the course of this Agreement. This rate shall be subject to
increases from time to time in the sole and exclusive discretion of the
Board.
(ii) Contribution Bonus. A bonus based on the "Net
Contribution" of the Company, which shall mean BASIS Earnings (as
defined in the Merger Agreement) ("Net Contribution Bonus"). For the
twelve (12) month periods ending June 30, 1997 and June 30, 1998, the
Net Contribution Bonus shall equal 4% of the Net Contribution for each
period.
(iii) Consolidated Earnings Bonus. A bonus based on
"Consolidated Net Profits," which shall be an amount equal to .05% of
the net pre-tax profits of Prologic in excess of One Million Dollars
($1,000,000) for each fiscal year ending March 31, 1997 and March 31,
1998 ("Consolidated Net Profit Bonus"), provided, however, that the
Consolidated Net Profits Bonus shall, under no circumstances, exceed
the amount of Ten Thousand Dollars ($10,000).
(iv) Prologic Bonus Plan. In the event that the Board
of Directors of Prologic shall adopt a company-wide bonus plan for
which all executive-level employees shall be eligible (the "Prologic
Plan"), then Executive shall be entitled to make an election to
participate in the Prologic Plan. Such plan will become effective only
at the commencement of Prologic's fiscal year, and Executive shall have
the opportunity to make her election to participate at that point in
time. If Executive elects to participate in the Prologic Plan,
Executive shall irrevocably forfeit all of her future rights under the
Consolidated Net Profits Bonus, and shall be entitled to participate
only in the Prologic Plan from that point forward.
All bonuses set forth in Section 3(a) shall be paid annually, within
ninety (90) days after the completion of each annual period. However,
Executive shall be entitled to receive a quarterly draw against her Net
Contribution Bonus in an amount equal to fifty percent (50%) of such
bonus earned during the fiscal quarter. Such quarterly draws shall be
paid within thirty (30) days after the close of the quarter. The
remainder of the Net Contribution Bonus shall be paid annually pursuant
to the terms contained herein. In the event that the
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quarterly draws paid to Executive should exceed the total of the Net
Contribution Bonus earned for the annual period, then any such excess
payment shall be applied and deducted from the Executive's subsequent
annual period Net Contribution Bonus.
(b) Upon execution of this Agreement and the effectiveness of
the Merger, Executive shall be granted options for an aggregate total of thirty
thousand (30,000) shares of Prologic Common Stock (the "Options") in the form of
standard option grants made to executive officers of Prologic in accordance with
and under the Prologic 1994 Stock Option Plan or its successor (the "Plan") as
follows:
(i) The Options shall become exercisable at the fair
market value of Prologic Common Stock as of July 1, 1996, in quarterly
increments of three thousand seven hundred and fifty (3,750) shares, at
the end of each fiscal quarter over the two year Original Employment
Period.
(ii) Prologic will diligently endeavor to comply with
all applicable securities laws in connection with any Options to be
granted in connection with the Plan and before any shares are issued
pursuant to Options. Without limiting the generality of the foregoing,
Prologic may require from the optionee such investment representation
or such agreement, if any, as counsel for Prologic may consider
necessary or advisable in order to comply with the Securities Act of
1933 as then in effect ("Securities Act"), and may require that the
optionee agree that any sale of the shares will be made only in such
manner as is permitted by the Board. The committee supervising the Plan
may, in its sole discretion, cause the Shares underlying the Options to
be registered under the Securities Act, and the committee will give
positive consideration to effecting such registration. Optionee shall
take any action reasonably requested by Prologic in connection with
registration or qualification of the Shares under federal or state
securities laws.
(c) Vacation. During the Employment Period, Executive will be
given four (4) weeks vacation with full pay and benefits each year, exclusive of
the Company holidays, pursuant to the policies regularly established and as they
may be amended by the Company; provided, however, that Executive will use her
best efforts to ensure that such vacation does not unduly interfere with the
operation and performance of the business of the Company, its subsidiaries and
affiliates. The Company acknowledges that Executive also has accumulated
vacation time as an employee of the Company which she will not lose during the
Employment Period and without prejudice to accruing new vacation time.
(d) Expenses. During the Employment Period, the Company agrees
to reimburse Executive for reasonable travel and other business expenses
incurred by Executive in the performance of her duties hereunder, in accordance
with the Company's reimbursement policies as they may be amended from time to
time during the Employment Period, including, without limitation, expenses of
approximately $775 per month for association dues to be paid to TEC Association.
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(e) Office and Staff. The Company will provide Executive with
appropriate facilities and support services as may reasonably be required by the
Executive for the proper discharge of her duties hereunder.
(f) Participation in Plans. As she becomes eligible and
continues to be eligible therefor, the Company and Prologic shall provide the
Executive with the right to participate in such plans or programs generally made
available by the Company or Prologic to, or for the benefit of, its executives.
(g) Other Executive Benefits. As she becomes eligible and
continues to be eligible therefor, the Company will provide such employee
benefits as are provided by the Company to its other principal executives
hereunder, including insurance coverage, if any, on any policy for the Company's
principal executive officers and directors, and when applicable, coverage as
reasonably available to Executive as an Executive Vice President of Prologic.
4. Termination of Employment.
(a) By Death. The Company shall pay to Executive's
beneficiaries or estate, as appropriate, the compensation to which she is
entitled pursuant to Section 3(a) through the end of the month in which death of
the Executive occurs and the severance payments to which she is entitled
pursuant to Section 5(a). Thereafter, the Company's obligations hereunder shall
terminate. Nothing in this Section shall affect any entitlement of Executive's
heirs to the benefits of any life insurance plan purchased by the Company.
(b) By Disability. If, in the sole opinion of the Board,
Executive shall be prevented from properly performing her duties hereunder by
reason of any physical or mental incapacity for a period of more than one
hundred and twenty (120) days in the aggregate or sixty (60) consecutive days in
any twelve-month period (the "Disability Period"), then, to the extent permitted
by law, the Employment Period shall terminate on, and the compensation to which
Executive is entitled pursuant to Section 3(a) shall be paid up through, the
last day of the month of the Disability Period (of one hundred twenty (120) days
or sixty (60) days, as applicable) and the severance payments to which she is
entitled pursuant to Section 5(a), and thereafter the Company's obligations
hereunder shall terminate. Nothing in this Section shall affect Executive's
rights under any disability insurance plan in which she is a participant.
(c) By the Company For Cause. The Company may terminate,
without liability and without prejudice to any other remedy to which Employer
may be entitled either at law, in equity or under this Agreement, the Employment
Period for Cause (as defined below) at any time and without advance notice. The
Company shall pay Executive the compensation to which she is entitled pursuant
to Section 3(a) through the end of the day upon which notice is received and
thereafter the Company's obligations hereunder this Agreement shall terminate.
Termination shall be for "Cause" if:
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(i) Executive acts or fails to act and such act or
failure to act is, in the reasonable opinion of the Board, in bad faith
or to the material detriment of the Company or its subsidiaries or
affiliates;
(ii) Executive refuses or fails to act in accordance
with any direction or order of the Board if such failures or refusals,
individually or in the aggregate, are, in the reasonable opinion of the
Board, material to Executive's performance and such performance does
not, in the good faith and reasonable judgment of the Executive, result
in or violate any applicable federal, state or local law, ordinances or
regulations;
(iii) Executive commits any act of dishonesty or a
felony affecting the Company, its subsidiaries or affiliates and such
act of dishonesty or felony adversely affects the Company, its
subsidiaries or affiliates or their or its reputation, business or
business relationships;
(iv) Executive has a chemical dependency which
interferes with the performance of the Executive's duties and
responsibilities under this Agreement;
(v) Executive commits gross misconduct or neglect,
or, in the reasonable opinion of the Board, demonstrates gross
incompetence in the management of the affairs of the Company or its
subsidiaries or affiliates;
(vi) Executive is convicted of a felony or any crime
involving moral turpitude, fraud or misrepresentation; or
(vii) Executive materially breaches any term of this
Agreement, if such breach is not cured within thirty (30) days after
written notice thereof is provided by the Company to the Executive.
(d) By the Company Without Cause. The Employment Period may be
terminated without Cause by the Company only upon the written consent of the
Executive. In the event the Company terminates the Employment Period without
Cause and without the written consent of the Executive, the Company shall
provide thirty (30) days advance written notice to Executive and shall pay to
Executive the severance payment to which she is entitled to pursuant to Section
5(a), and thereafter the Company's obligations hereunder shall terminate.
(e) By Executive For Good Reason. The Executive may terminate
her employment hereunder for "Good Reason" upon thirty (30) days written notice
if:
(i) the duties and responsibilities and status
assigned to Executive are not reasonably consistent with the position
and responsibilities originally assumed by Executive under this
Agreement or there is a material adverse change (which is under the
reasonable control of the Company) in the work environment as it
applies to Executive, in each case having a material negative effect on
Executive's employment position;
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(ii) the Company, without the Executive's consent,
requires the relocation of the offices at which Executive is
principally employed on the date hereof to a location more than 25
miles from such location or requires Executive to be based other than
the Company's offices at such location, except for business travel by
Executive as shall be required only as reasonably necessary to permit
Executive to properly perform her duties hereunder; and
(iii) the Company fails to cure within thirty (30)
days of the Company's receipt of notice from Executive of Company's
failure to perform its material obligations to Executive under this
Agreement.
(f) By Executive Without Good Reason. The Employment Period
may be terminated without Good Reason by the Executive only upon the written
consent of the Company. In the event the Executive terminates the Employment
Period without Good Reason and without the written consent of the Company, the
Executive shall provide thirty (30) days advance written notice to the Company
and the Company shall have the rights set forth in Section 5(b). Thereafter,
Executive's obligations hereunder, except for those set forth in Section 6,
shall terminate.
(g) By Company and Executive Upon Mutual Agreement. The
Employment Period may be terminated upon the written consent of both the Company
and the Executive on terms to be mutually agreed upon. Thereafter, the Company's
and Executive's obligations hereunder shall terminate.
5. Benefits Upon Termination of Employment Period.
(a) Termination of Employment by Death, Disability, or By
Executive For Good Reason. In the event of termination prior to the completion
of the Original Employment Period by the Company as a result of Executive's
death or disability or, by the Executive for Good Reason (as defined in Section
4(e)), Executive shall be entitled to all compensation and accrued benefits
earned by her, including bonuses, prior to the date of termination as provided
for in this Agreement, pro rata up to and including that date, together with an
amount equal to the greater of six (6) months salary or the balance of salary
remaining in the Original Employment Period, as full and complete severance
compensation. Thereafter, the Company's obligations to the Executive shall
terminate. Furthermore, to the extent permitted by applicable laws and the Plan,
all stock options granted to Executive in connection with this Agreement shall
become immediately and fully exercisable.
(b) Termination of Employment by Company for Cause or by
Executive for Other Than Good Reason. In the event of termination prior to the
completion of the Original Employment Period by the Company for Cause or by
Executive other than for Good Reason, the Company shall pay to the Executive the
compensation set forth in Section 3(a)(i) earned by her prior to the date of
termination. Upon such payment, the Company's obligations to the Executive shall
terminate. The Executive shall not be entitled to any other compensation or
other severance payment, including those set forth in Section 1(b). Thereafter,
the Executive's obligations to the Company, except those set forth in Section 6,
shall terminate. Furthermore, to the extent permitted
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by applicable laws and the Plan, all stock options granted to Executive in
connection with this Agreement, but not yet exercised at the date of
termination, shall become immediately null and void.
(c) Excess Payments. Notwithstanding anything contained in
this Section or any other section of this Agreement to the contrary, if any
compensation or benefit payment shall be considered in the aggregate to be an
"excess parachute payment" as that term is defined in Section 280G of the
Internal Revenue Code of 1986, as amended, all such compensation and benefits
shall be reduced, upon the written request of the Executive, to the extent
required to prevent such compensation and benefits, in the aggregate, from being
considered an "excess parachute payment".
6. Preservation of Business.
(a) General. During the Employment Period and subject to the
provisions of Section 2(b), Executive will use her best efforts to advance the
business and organization of the Company, its subsidiaries and affiliates, the
services of present and future employees and to advance its business relations
with its joint venture partners, suppliers, distributors, customers and others.
(b) Uniqueness of Services; Interference with Business;
Competitive Activities. The parties agree that the services that Executive will
perform hereunder are special, unique and extraordinary in nature and that, if
the Executive breaches the terms of this Agreement, it may reduce the value of
the Company and the Company may be entitled in appropriate instances (and in
addition to any remedy that it may have at law) to any equitable relief,
including injunctive relief, that may rightfully be awarded under applicable
law. Executive agrees that during the Employment Period and for one year after
termination thereof (but no earlier than June 30, 1999) (the "Restricted
Period"), she shall not, for herself or any third party, directly or indirectly
(i) divert or attempt to divert from the Company or its subsidiaries or
affiliates any business of any kind in which it, the Company, its subsidiaries
or affiliates are engaged, or have the reasonable expectation of engaging in,
including, without limitation, the solicitation of or interference with any of
its suppliers, clients or customers, (ii) employ, solicit for employment, or
recommend for employment during the Restricted Period any person employed by the
Company, or by any of its subsidiaries or affiliates, during the period of such
person's employment and for a period of six (6) months after such employee's
termination, or (iii) engage in or be employed by any business activity or
provide any merchandise or services that is or may be competitive with the
Company or any of its subsidiaries or affiliates within the San Francisco Bay
Area or Portland Area (the "Restricted Area"). Executive expressly acknowledges
that the subject matter, territorial and time restrictions contained in this
paragraph are reasonable and are properly required for the adequate protection
of the Company's property interests. Notwithstanding the foregoing, Executive
may, upon the termination of the Employment Period and with the prior written
consent of the Company (which shall not be unreasonably withheld), be engaged or
employed by a computer hardware manufacturer in the Restricted Area.
(c) Consequences of Termination Without Cause or Termination
with Good Reason. The covenants contained in Section 6(b) will terminate
immediately if the Company
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terminates this Agreement without cause or Executive terminates this Agreement
with good reason, provided that, during the period that the Executive continues
to receive payment of severance benefits as provided in Section 5 hereof,
Executive will not compete with the Company or Prologic or their affiliates, or
contact or attempt to contact the Company's or Prologic's, or their affiliates',
employees or customers (except with respect to matters unrelated to her services
hereunder); shall not utilize the property of the Company, Prologic or their
affiliates, including intellectual property, and shall under no circumstances
act for, with or on behalf of, as an employee or otherwise, a competitor where
she would be involved in direct competition with the Company, Prologic or their
affiliates.
7. Dispute Resolution; Remedies.
(a) Mediation. In the event of any controversy or claim
arising out of or related to this Agreement, or the breach thereof, which has
not been settled through informal discussion and negotiation, the parties agree
first to try in good faith to settle the dispute by mediation held in the
Company's offices and administered by the American Arbitration Association under
its Employment Mediation Rules, subject to the laws of the State of California,
before resorting to arbitration, provided, however, that any controversy or
claims arising out of or related to Section 6 shall not be governed by this
Section.
(b) Arbitration. In the event of any controversy or claim
arising out of or related to this Agreement, or the breach thereof, which has
not been settled through negotiation or the mediation procedures provided for in
the previous paragraph, such controversy or claim shall be settled by binding
arbitration held in the Company's offices and administered by the American
Arbitration Association under its National Rules for the Resolution of
Employment Disputes, subject to the laws of the state of California, and
judgment on the award rendered by the arbitrator(s) may be entered in any court
having jurisdiction thereof, provided, however, that any controversy or claims
arising out of or related to Section 6 shall not be governed by this Section.
This Section shall also not apply to any breach or threatened breach of the
Confidentiality Agreement.
8. Miscellaneous.
(a) Entire Agreement; Amendment. This Agreement, together with
the Confidentiality Agreement, constitutes the entire agreement between the
parties with respect to the matters covered herein, and may not be modified,
amended or terminated except by a written instrument executed by the parties
hereto. All other agreements between the parties pertaining to the employment or
remuneration of Executive not specifically contemplated hereby or incorporated
herein are terminated and shall be of no further force or effect.
(b) Assignment. Executive agrees that she will not assign,
sell, transfer, delegate or otherwise dispose of, whether voluntarily or
involuntarily, or by operation of law, any rights or obligations under this
Agreement, nor shall Executive's rights be subject to encumbrance or the claims
of creditors. Any purported assignment, transfer, or delegation by the Executive
shall be null and void. Executive hereby consents to the assignment of this
Agreement to Prologic or any
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of the Company's or Prologic's direct or indirect subsidiaries or any of their
affiliates or any of their successors in interest, provided that such assignment
shall not materially and adversely effect the employment and duties of Executive
hereunder. Nothing in this Agreement shall prevent the consolidation of the
Company with, or its merger into, any other corporation, or the sale by the
Company of all or substantially all of its properties or assets, or the
assignment by the Company of this Agreement and the performance of its
obligations hereunder to Prologic or any of their direct or indirect
subsidiaries or any of their affiliates or any of their successors in interest.
Subject to the foregoing, this Agreement shall be binding upon and shall inure
to the benefit of the parties and their respective heirs, legal representatives,
successors, and permitted assigns, and shall not benefit any person or entity
other than those enumerated above.
(c) No Waiver. No waiver of any breach or default hereunder
shall be considered valid unless in writing, and no such waiver shall be deemed
a waiver of any subsequent breach or default of the same or similar nature. The
failure of any party to insist upon strict adherence to any term of this
Agreement on any occasion shall not operate or be construed as a waiver of the
right to insist upon strict adherence to that term or any other term of this
Agreement on that or any other occasion.
(d) Enforcement; Severability. In the event that any term or
provision of this Agreement shall be deemed by a court of competent jurisdiction
to be overly broad in scope, duration or area of applicability, the court
considering the same shall have the power and is hereby authorized and directed
to modify such term or provision to limit such scope, duration or area, or all
of them, so that such term or provision is no longer overly broad and to enforce
the same as so limited. Subject to the foregoing sentence, in the event that any
provision of this Agreement shall be held to be invalid or unenforceable for any
reason, such invalidity or unenforceability shall attach only to such provision
and shall not affect or render invalid or unenforceable any other provision of
this Agreement. The Executive agrees that the provisions of Section 6 hereof
constitute independent and separable covenants which shall survive the
termination of the Employment Period.
(e) Notices. Any notice permitted or required hereunder shall
be in writing and shall be deemed to have been given on the date of delivery or,
if mailed by registered or certified mail, postage prepaid, on the date of
mailing:
If to Executive to:
Xxxxxxxx X. Xxxxxx
_____________________
_____________________
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If to the Company to:
BASIS Acquisition Corp.
c/o Prologic Management Systems, Inc.
0000 Xxxx Xxxxxxxx Xxxxxxxxx
Xxxxxx, Xxxxxxx 00000
Either party may, by notice to the other, change her or its address for notice
hereunder.
(f) Executive Acknowledgment. Executive acknowledges that (i)
she has consulted with or has had the opportunity to consult with independent
counsel of her own choice concerning this Agreement and has been advised to do
so by the Company, and (ii) she has read and understands the Agreement, is fully
aware of its legal effect, and has entered into it freely based on her own
judgment.
(g) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same instrument.
(h) Headings. All headings appear in this Agreement for
convenience only and shall not be used in construing the terms hereof.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
as of the day and year first above written.
BASIS ACQUISITION CORP. EXECUTIVE
By:_________________________ ___________________________
Xxxxxxxx X. Xxxxxx
Its:________________________
Performance by the Company of its obligations hereunder are hereby guaranteed by
Prologic.
PROLOGIC MANAGEMENT SYSTEMS, INC.
By:___________________________________________
Its:___________________________________________
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