EMPLOYMENT AGREEMENT
This AGREEMENT is entered into as of July 7, 2000, by and
between John Palmer ("Executive") and BRG Acquisition Corporation, a Delaware
corporation (together with any successor by merger or otherwise the "Company").
1. Duties and Scope of Employment.
(a) Position. For the term of his employment under this Agreement,
the Company agrees to employ Executive in the position of Chief Operating
Officer and Chief Financial Officer ("COO/CFO"). Executive shall report to the
Chief Executive Officer of the Company.
(b) Obligations to the Company. During the term of his employment,
Executive shall devote his full business efforts and time to the Company.
Executive shall comply with the Company's policies and rules, as they may be in
effect from time to time during the term of his employment.
(c) No Conflicting Obligations. Executive represents and warrants to
the Company that he is under no obligations or commitments, whether contractual
or otherwise, that are inconsistent with his obligations under this Agreement.
Executive represents and warrants that he will not use or disclose, in
connection with his employment by the Company, any trade secrets or other
proprietary information or intellectual property in which Executive or any other
person has any right, title or interest and that his employment by the Company
as contemplated by this Agreement will not infringe or violate the rights of any
other person or entity. Executive represents and warrants to the Company that he
has returned all property and confidential information belonging to any prior
employers.
(d) Commencement Date. Executive shall commence his position as
COO/CFO under this Agreement subject to the consummation of the merger of the
Company with and into Business Resources Group, Inc. ("BRG") as contemplated by
the Plan and Agreement of Merger dated July 7, 2000, between BRG and the Company
(the "Merger Agreement"), upon the "Effective Time" of such merger (as such term
is defined in the Merger Agreement) (the "Commencement Date").
2. Term of Employment.
(a) Basic Rule. The Company agrees to continue Executive's
employment, and Executive agrees to remain in employment with the Company, from
the Commencement Date set forth in Section 1(d) until the date when Executive's
employment terminates pursuant to Section 2(b) below (the "Employment Period").
Executive's employment with the Company shall be "at will," which means that
either Executive or the Company may terminate Executive's employment at any time
for any reason, with or without Cause. This Agreement shall constitute the full
and complete agreement between Executive and the Company
on the "at will" nature of Executive's employment, which may only be changed in
an express written agreement signed by Executive and the Chief Executive
Officer.
(b) Termination. The Company or Executive may terminate Executive's
employment at any time for any reason (or no reason) by one party giving the
other party thirty (30) days' notice in writing. Executive's employment shall
terminate automatically in the event of his death.
3. Cash and Incentive Compensation.
(a) Salary. The Company shall pay Executive as compensation for his
services an annual base salary of $160,000.00, payable in accordance with the
Company's standard payroll schedule for U.S. employees. (The compensation
specified in Section 3(a), together with any increases in such compensation that
the Company may grant from time to time, are referred to in this Agreement as
"Base Salary.")
(b) Earnings Bonus. Executive will earn an annual bonus (the
"Bonus"). The Bonus for fiscal year 2000 will be based on the current BRG Fiscal
Year 2000 Executive Bonus Program adopted by the Board of Directors of BRG. The
fiscal year 2000 Bonus, however, will be based on achieving earnings targets
before taxes and management bonuses (encompassing approximately ten (10)
executives) above $6,248,200 and as follows:
Operating Earnings Executive Bonus Amount
------------------ ----------------------
$ 6,248,200 $60,000
$7,019,100 $120,000
$7,507,500 $130,000
$8,010,900 $140,000
$8,514,300 $150,000 etc.
Executive's annual bonus for future years shall be based on a pool (the "Bonus
Pool"). The Bonus Pool for fiscal years after fiscal year 2000 will equal twenty
percent (20%) of Excess Earnings; provided that the Compensation Committee of
the Company's Board of Directors shall have the right to limit the aggregate
Bonus Pool available to be divided among all participants to $1,360,000. Subject
to the provisions of Section 3(e) of this Agreement, the Bonus Pool will be
divided equally among Executive and the three (3) individuals serving as Chief
Executive Officer, Executive Vice President of Sales and the Executive Vice
President of Marketing of the Company as of the Commencement Date. If any
portion of the Bonus Pool for any year is not paid as a result of the
termination or resignation of any such individual, the unpaid amount may, in the
discretion of the Compensation Committee of the Company's Board of Directors, be
reallocated and paid, in whole or in part, to Executive. The Bonus will be paid
no later than the second business day following the later of completion of the
audit of the Company's annual financial statement or sixty-five (65) days after
the end of the Company's fiscal year.
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(i) Definitions For Bonus:
The following definitions apply to the Bonus Sections of this
Agreement and not for any other purpose.
(a) "Net Assets": The Company's total assets minus
non-interest bearing debt.
(b) "Operating Earnings": Earnings before interest, taxes,
and amortization of goodwill and, for purposes of Section 3(b), before the
payment of the Bonus (if any) paid or payable under Section 3(b).
(c) "Excess Earnings": Operating Earnings above a fifteen
percent (15%) return on average Net Assets during each of the twelve months in
the fiscal year of the Company.
(c) Stock Incentive Plan. Executive will be allowed to purchase 2.0%
of the issued and outstanding shares of BRG's Common Stock as of the
Commencement Date (but not less than 400,000) at $.05 per share, which will be
the fair market value of the Incentive Stock. As soon as possible after the
Commencement Date, Executive may purchase such Incentive Stock by check made
payable BRG. BRG and the Company represent and warrant that immediately
following the completion of the tender offer and the merger and the changes in
the capitalization of BRG contemplated by the Merger Agreement, the Common Stock
capital stock of BRG will consist of 25,000,000 shares of Common Stock (of which
20,000,000 shares will be outstanding or issueable). The number of shares of
Incentive Stock shall be adjusted to reflect proportionately and equitably the
effect of any stock split, reverse stock split, stock dividend (including any
dividend or distribution of securities convertible into the BRG Common Stock),
reorganization, recapitalization, reclassification or other like change in the
capitalization of the BRG occurring on or after the date hereof and prior to the
Commencement Date. Upon termination of Executive's employment, the BRG may
repurchase the Incentive Stock or other shares not vested before or
simultaneously with termination. Unvested shares may be repurchased by BRG at
the price paid by the Executive if his employment terminates before the shares
vest. The shares of Incentive Stock will vest as follows: Thirty percent (30%)
of the shares of Incentive Stock will vest on the Commencement Date. The
remaining shares of Incentive Stock will vest in equal monthly amounts on the
last day of each month during the forty-eight (48) months immediately following
the Commencement Date.
(d) Effect of Termination of Employment. If the Company terminates
Executive's employment "Without Cause" (other than within one year following a
"Change of Control") or Executive quits for "Good Reason", then Executive shall
receive: (A) payment of his Base Salary and any accrued but unused vacation
earned through Executive's last date of employment; (B) a severance payment
equal to his annual Base Salary, to be paid out in accordance with Company
policy; (C) his full Bonus for the year in which termination occurs, to be paid
no later than the second business day following the later of completion of the
audit of the
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Company's annual financial statement or sixty-five (65) days after
the end of the Company's fiscal year; (D) continuation of medical insurance
benefits at Company expense for the twelve (12) months following Executive's
last day of employment; and (E) accelerated vesting of all shares Incentive
Stock issued to Executive pursuant to Section 3(c) above and also of any of
Executive's outstanding stock options.
(e) Termination for Cause: If the Company terminates Executive's
employment for "Cause" or Executive resigns without "Good Reason," he will
receive his Base Salary and earned and unused vacation through the last day
worked but no severance unless terminated under Section 3(f)(i)(b)(iv) or
3(f))(i)(b)(v)below, in which case he will receive a severance payment equal to
his annual Base Salary, proportional and equitable share of the Bonus and
nothing else. Such severance will be paid out in accordance with Company policy,
and the Bonus will be paid no later than the second business day following the
later of completion of the audit of the Company's annual financial statement or
sixty-five (65) days after the end of the Company's fiscal year. Upon
termination for "Cause", Executive's unvested Incentive Stock will not
accelerate in vesting.
(f) Termination Following Change of Control. If, within one year
following a "Change of Control," the Company terminates Executive's employment
"Without Cause" or Executive quits for "Good Reason," then Executive shall
receive compensation and benefits as if terminated "Without Cause" under Section
3(d) of this Agreement.
(i) Definitions.
(a) "Change of Control." For all purposes under this
Agreement, "Change of Control" shall mean (i) a sale or transfer of securities
possessing at least fifty percent (50%) of the total combined voting power of
the Company's outstanding securities to a person or persons different from the
persons holding those securities immediately prior to such transaction, (ii) a
merger, consolidation, recapitalization, reorganization, share exchange, or
other business combination or transaction in which securities possessing at
least fifty percent (50%) of the total combined voting power of the resulting,
surviving or acquiring entity are held by a person or persons or its or their
controlled affiliates different from the person, persons or affiliates who held
such securities immediately before such combination or transaction, (iii) the
sale, transfer or other disposition of all or substantially all of the Company's
assets, or (iv) liquidation or dissolution of the Company.
(b) Termination for "Cause." For all purposes under this
Agreement, a termination for "Cause" shall mean a good faith determination by
the Company's Board of Directors that Executive's employment be terminated for
any of the following reasons: (i) willful misconduct that is materially
injurious to the Company; (ii) misappropriation of assets of the Company; (iii)
indictment (if not dismissed within 90 days), conviction, or a plea of "guilty"
or "no contest" to a felony under the laws of the United States or any state
thereof; (iv) Executive's continued material neglect of his duties with
demonstrable adverse effect on the Company following written notice and a sixty
(60)-day opportunity to cure; or (v) continued unsatisfactory performance after
receipt of a written warning and at least sixty (60) days to improve However,
Section 3(f))(i)(b)(v) will be inapplicable and will not constitute "Cause"
after the occurrence of any event constituting a "Change of Control" as
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defined above. A termination of Executive's employment by the Company in any
other circumstance or for any other reason, other than death or Disability,
will be a termination "Without Cause."
(c) "Good Reason": For purposes of Sections 3(d) and (e)
above, "Good Reason" includes: Executive terminates his employment within sixty
(60) days of the occurrence of (i) material diminution of the duties or
responsibilities of Executive, or (ii) moving the current location where
Executive performs his principal duties twenty-five (25) or more miles, without
Executive's advance, written and personal consent.
(ii) Termination Due to Death or Disability. If Executive's
employment terminates due to death or Disability, Executive or his estate shall
receive payment for Executive's Base Salary and any accrued but unused vacation
earned through Executive's last date of employment, and a proportional and
equitable share of the annual Bonus, but nothing else. Such Bonus will be paid
no later than the second business day following the later of completion of the
audit of the Company's annual financial statement or sixty-five (65) days after
the end of the Company's fiscal year. For purposes of this Agreement, Disability
shall mean Executive's inability to work due to a disability for four (4)
consecutive months or more and the Board terminates Executive's employment for
that reason.
(g) Accelerated Vesting Upon a "Change of Control". Upon a "Change
of Control" as defined in Section 3(f)(i)(a) above, Executive's unvested shares
of Incentive Stock will be accelerated as if he had worked for the Company until
the end of the vesting period specified in Section 3(c) above.
4. Vacation and Executive Benefits. During the term of his employment,
Executive shall be eligible for paid vacation in accordance with the Company's
standard policy for officers of the Company, as it may be amended from time to
time. During the term of his employment, Executive shall receive the standard
automobile allowances currently in effect for his position, and be eligible to
participate in any employee benefit plans maintained by the Company for
similarly situated U.S. employees, subject in each case to the generally
applicable terms and conditions of the plan in question and to the
determinations of any person or committee administering such plan.
5. Business Expenses. During the term of his employment, Executive
shall be authorized to incur necessary and reasonable travel, entertainment and
other business expenses in connection with his duties hereunder. The Company
shall reimburse Executive for such expenses upon presentation of an itemized
account and appropriate supporting documentation, all in accordance with the
Company's generally applicable policies.
6. Non-Solicitation and Non-Disclosure.
(a) Non-Solicitation. Following the Commencement Date and continuing
until the third anniversary of the date when Executive's employment terminates
for any reason, Executive shall not directly or indirectly, personally or
through others, solicit or attempt to solicit (on Executive's own behalf or on
behalf of any other person or entity) for hire or hire any employee of the
Company or any of the Company's affiliates.
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(b) Non-Disclosure. As a condition of employment, Executive will
execute the Company's standard Proprietary Information Agreement, a copy of
which is attached.
(c) Enforcement. Because Executive's services are unique and because
Executive has access to confidential information, the parties hereto agree that
money damages would be an inadequate remedy for any breach of this Agreement.
Therefore, in the event a breach or threatened breach of this Agreement, the
Company or its successors or assigns may, in addition to other rights and
remedies existing in their favor, apply to any court of competent jurisdiction
for specific performance and/or injunctive or other relief in order to enforce,
or prevent any violations of, the provisions hereof.
7. Change in Control Benefit Limit.
(a) Benefit Limit. The aggregate Present Value (measured as of the
Change of Control) of the benefits to which Executive becomes entitled under
this Agreement either at the time of a Change of Control or at the time of his
subsequent termination of employment following a Change of Control and which
constitute "parachute payments" under federal tax law shall be limited to the
greater of the following dollar amounts (the "Benefit Limit"):
(i) 2.99 times Executive's Average Compensation, less the
Present Value (measured as of the Change of Control) of any Other Parachute
Payments to which Executive is entitled other than pursuant to the provisions
this Agreement, or
(ii) the amount which yields Executive the greatest after-tax
amount payable to him under this Agreement after taking into account the excise
tax (if any) imposed under Code Section 4999) on the Vesting Parachute Payment
and any Other Parachute Payments which are provided Executive under this
Agreement or otherwise.
(b) Definitions. For purposes of applying Code Sections 280(G) and
4999 and the Treasury Regulations thereunder to determine the Benefit Limit in
effect under Section 7(a), the following definitions shall be in effect:
Average Compensation means the average of Executive's W-2
wages or other compensation from the Company (or any predecessor
corporation) for the five (5) calendar years (or such fewer number of
calendar years of employment with the Company or such predecessor
corporation) completed immediately prior to the calendar year in which
the Change of Control is effected. Any W-2 wages or other compensation
for a partial year of employment will be annualized, in accordance with
the frequency which such wages or compensation is paid during such
partial year, before inclusion in Average Compensation.
Code means the Internal Revenue Code of 1984, as amended from
time to time.
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Vesting Parachute Payment means, with respect to any of
Executive's Incentive Stock or outstanding stock options accelerated
pursuant to the provisions of this Agreement, the portion of that
acceleration benefit deemed to be a parachute payment under Code
Section 280G and the Treasury Regulations issued thereunder. The
portion of the acceleration benefit which is categorized as a Vesting
Parachute Payment shall be calculated in accordance with the valuation
provisions established under Code Section 280G and the applicable
Treasury Regulations and shall include an appropriate dollar adjustment
to reflect the lapse of Executive's obligation to remain in the
Company's employ as a condition to the vesting of the accelerated
Incentive Stock or stock options. In no event, however, will the
Vesting Parachute Payment attributable to the accelerated vesting of
any Incentive Stock or stock option exceed the spread (the excess of
the fair market value of the accelerated Incentive Stock or option
shares over the purchase price paid for the Incentive Stock or the
option exercise price payable for the accelerated option shares)
existing at the time of the vesting acceleration.
Other Parachute Payment means any payments in the nature of
compensation (other than the Vesting Parachute Payment) which are made
to Executive, whether under this Agreement or any other arrangement, in
connection with the Change of Control and which accordingly qualify as
parachute payments within the meaning of Code Section 280G(b)(2) and
the Treasury Regulations issued thereunder.
Present Value means the value, determined as of the date of
the Change of Control, of any payment in the nature of compensation to
which Executive becomes entitled in connection with the Change of
Control or the subsequent termination of his employment, including
(without limitation) the Vesting Parachute Payment attributable to the
accelerated vesting of his Incentive Stock and outstanding stock
options and any Other Parachute Payments to which Executive becomes
entitled. The Present Value of each such payment shall be determined in
accordance with the provisions of Code Section 280G(d)(4), utilizing a
discount rate equal to one hundred twenty percent (120%) of the
applicable Federal rate in effect at the time of such determination,
compounded semi-annually to the effective date of the Change of
Control.
(c) Resolution Procedure. In the event there is any disagreement
between Executive and the Company as to whether one or more payments to which
Executive becomes entitled in connection with either the Change of Control or
his subsequent termination of employment constitute Vesting Parachute Payments
or Other Parachute Payments or as to the determination of the Present Value
thereof, such dispute will be resolved as follows:
(i) In the event temporary, proposed or final Treasury
Regulations in effect at the time under Code Section 280G (or applicable
judicial decisions) specifically address the status of any such payment or the
method of valuation therefor, the characterization afforded to such payment by
the Regulations (or such decisions) will, together with the applicable valuation
methodology, be controlling.
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(ii) In the event Treasury Regulations (or applicable
judicial decisions) do not address the status of any payment in dispute, the
matter will be submitted for resolution to independent tax counsel ("Independent
Counsel") mutually acceptable to the Company and Executive. The resolution
reached by such Independent Counsel shall will be final and controlling. and all
expenses incurred in connection with the retention of Independent Counsel to
resolve the dispute shall be shared equally by the Company and Executive.
(iii) In the event Treasury Regulations (or applicable
judicial decisions) do not address the appropriate valuation methodology for any
payment in dispute, the Present Value thereof will be submitted to the Company's
independent auditors for determination, and the expenses incurred in obtaining
such valuation shall be paid by the Company.
(iv) A portion of the benefits provided under this Agreement
to Executive at the time of his termination of employment following a Change of
Control shall be allocated as compensation for his non-compete covenant
appearing in the Tender Agreement between Executive and the Company which will
be consummated by the Commencement Date. To the extent the allocated benefits do
not exceed the value of the non-compete covenant to the Company, those benefits
shall not be considered to be parachute payments under Code Section 280G. The
value of the non-compete covenant shall be determined by independent appraisal
obtained at the sole cost of the Company.
8. Successors
(a) Company's Successors. This Agreement shall be binding upon 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. For all purposes under this Agreement, the
term "Company" shall include any successor to the Company's business and/or
assets which becomes bound by this Agreement.
(b) Executive's Successors. This Agreement and all rights of
Executive hereunder shall inure to the benefit of, and be enforceable by,
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
9. 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 deposited with a nationally recognized
overnight courier for next-day delivery or mailed by U.S. registered or
certified mail, return receipt requested and postage prepaid. Mailed notices
shall be addressed to Executive at the home address which he most recently
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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) Modifications and Waivers. 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 Executive and the Chief Executive Officer. 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 other agreements, representations or
understandings (whether oral or written) which are not expressly set forth in
this Agreement have been made or entered into by either party with respect to
the subject matter of this Agreement. This Agreement, the Proprietary
Information Agreement, and applicable stock option agreements and stock plans,
contain the entire understanding of the parties with respect to the subject
matter hereof.
(d) Taxes. All payments made under this Agreement shall be subject to
reduction to reflect taxes or other charges 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 (except provisions governing the choice of law).
(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) No Assignment. This Agreement and all rights and obligations of
Executive hereunder are personal to Executive and may not be transferred or
assigned by Executive at any time. The Company may assign its rights under this
Agreement to any entity that assumes the Company's obligations hereunder in
connection with any sale or transfer of all or a substantial portion of the
Company's assets to such entity.
(h) Forum. Any dispute or claim arising out of or in connection with
this Agreement shall be resolved by a court of competent jurisdiction in Santa
Clara County, California.
(i) Headings. The headings of the paragraphs contained in this
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of any provision of this Agreement.
(j) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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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.
EXECUTIVE
s/s
---------------------------------
John Palmer
BRG Acquisition Corporation
By: s/s
---------------------------------
Robert Wright, II
President
And solely with respect to the obligations under Section 3 of the Agreement, BRG
has executed this Agreement as of the day and year first above written.
Business Resources Group, Inc.
By: s/s
---------------------------------
Robert Wright, II
President
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