April 2, 2001
John Simon
10 Tenaya Lane
Novato, CA 94947
Dear John,
Following the close of our 2000 business, the development of our 2001 plan and
our recent discussions, it is with pleasure that I confirm our verbal offer for
your continued employment with QRS Corporation. The following summarizes our
offer:
POSITION
You will have overall corporate responsibility as Chief Executive Officer.
REPORTING TO
Peter R. Johnson, Chairman of the Board
LOCATION
Richmond, CA
MISSION STATEMENT
As the key executive of QRS, you should ensure continued focus on the long-term
mission of QRS:
o We are the leader in network-centric, inter-enterprise electronic commerce
solutions that materially improve our customers' performance.
o We will serve the global consumer good demand chain.
o We will exceed customer expectations for service quality.
o We will be recognized as an exciting and rewarding place to work by our
employees.
o We will provide superior returns to our shareholders
In addition, as the CEO of QRS, you also have as continuing, significant
responsibility the development and maintenance of QRS' management process and
promotion of and adherence to its core values among its associates.
KEY OBJECTIVES
As a key executive of QRS, your focus in 2001 should be on successfully
addressing the critical issues facing QRS. In addition the following specific
objectives have been agreed between us:
A. Ensure QRS values, mission, and management process are understood and
accepted - based on an assessment of our success ensuring commitment
to, and appropriate growth of these components of the QRS culture and
process, including the effective integration of these values, mission,
and management process with QRS and its Business Units.
B. Ensure the timely development and implementation of strategy - based
on an assessment of the environment that surrounds us, the opportunity
and including but not limited to alliances, strategic mergers and
acquisitions; organization strategy, PMI; capital structure and
investment banking improvements.
C. Ensure the timely development and implementation an effective planning
process including "vision" documents, product and marketing strategy,
and budgets in a timely and effective manner.
D. Work with me to complete a 2001 plan reflecting a minimum of * CAGR
over 2000 and Earnings before Amortization of Goodwill of * with the
objective of re-establishing credibility with the investment community
and returning QRS to historic performance and market valuations.
E. Successfully implement the reorganization (described in our report to
the Board on December 19th, 2000 titled "Strategic Organization
Initiatives").
F. Support the Board and me to consider and, if appropriate, restructure
the company to:
a) Integrate Tradeweave and implement the re-organization
b) Change the culture of QRS to achieve interdependent teams with
high energy and accountability, fact based decision making and a
customer focused strategy,
c) *
d) *
e) Position the Company for ongoing successful operations that meet
or exceed the expectations of our employees, customers and
shareholders.
ANNUAL COMPENSATION
Your annual compensation will be administered by me and reviewed by the
Compensation Committee of the Board of Directors.
o Your base compensation will continue to be $290,000 per year.
o In addition, your targeted annual incentive compensation will continue
to be $217,500 or 75% of your base compensation.
o Therefore, the annual total target compensation (base plus incentive at
100% of plan) shall continue to be $507,500.
* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such material has been filed separately with
the Commission pursuant to Rule 24b-2.
Your compensation will be reviewed at the first day of the quarter immediately
following the second quarter in which the company is on its financial plan and
budget. (i.e. if the company reaches its correct financial plan by Q1, your
compensation will be reviewed on the first day of Q3)
Otherwise, your compensation including incentives, will be reviewed in the first
quarter of each year (unless there is a change in objectives, locations, etc.,
in which case it will be reviewed at that time), to ensure that it continues to
be equitable, appropriate to the location and provide appropriate incentives and
support to the agreed objectives.
ANNUAL INCENTIVE COMPENSATION COMPONENTS
1. General Corporate Financial Objectives (80%)- Incentive compensation
payment is subject to the achievement of the Company's overall financial
objectives as defined by the 2001 Plan as approved by the Board of
Directors. Should the Company not achieve these financial objectives,
incentive compensation will be subjectively determined based upon your
performance against your objectives and the Company's determination as to
available incentive compensation funding.
A. Achieve * in QRS Revenue (40%)- Paid at year-end on a pro rata basis
from a minimum of 95% of plan and linearly thereafter with results to
105% of plan. The payout rate doubles on revenue performance over
105% of plan. There is a maximum payout of $250,000 on this incentive.
B. Achieve * in QRS Earnings before Amortization of Goodwill (40%) -
Paid at year-end on a pro rata basis from a minimum of 95% of plan
and linearly thereafter with results to 105% of plan. The payout rate
doubles on earnings performance over 105% of plan. There is a maximum
payout of $250,000 on this incentive.
2. Personal Strategies and Objectives (20%) - Incentive compensation payment
is subject to fulfillment of your specific objectives as CEO. While
specific objectives have been noted above to measure your performance for
incentive compensation, such measurements assume the overall performance of
you and your direct reporting organization in the achievement of Company
responsibilities, customer services levels, employee satisfaction and
turnover, and the support of overall Company objectives, including the
effective integration of Tradeweave and the repositioning of QRS under the
Tradeweave brand with an integrated sales, marketing, and product plan.
LONG TERM INCENTIVES
As an officer of QRS, on January 2, 2001, you were entitled to convert certain
of your stock options into restricted QRS stock. For your stock options
converted into restricted shares, the restricted shares will have the same
provisions as your original stock options with the exception of a different
vesting schedule as outlined in your Restricted Stock Agreement (i.e.
acceleration, change of control protection, etc.). As CEO you were granted two
stock option grants of 15,000 shares each on March 8, 2000 with special vesting
provisions based on Company growth in 2000/2001 and 2000/2001/2002. The first of
these has been cancelled based on 2000 performance, and the second has been
converted to restricted stock with standard vesting provisions per Restricted
Stock Agreement.
The Board of Directors may grant you more stock options in the future with the
approval of the Compensation Committee. The details of your current stock option
grants and restricted stock is attached in Addendum B.
* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such material has been filed separately with
the Commission pursuant to Rule 24b-2.
BENEFITS
In addition to the benefits available to all QRS associates as defined in the
Employee Handbook; as an Officer you are provided with additional benefits as
follows:
Life Insurance - The Company shall purchase and maintain in effect additional
term life insurance for you with a death benefit of $1,000,000.00 with
beneficiary to be designated by yourself. You will have the option of continuing
this additional term life insurance coverage at your own expense in the event of
the termination of your employment. This additional insurance benefit is taxable
and will be reported for tax purposes as additional income to you.
Disability Insurance - The Company shall purchase and maintain in effect
disability insurance sufficient to provide you with an income equal to 66% of
your base compensation while you are disabled and unable to perform the duties
of your current employment with QRS. You will have the option of continuing this
additional disability insurance coverage at your own expense in the event of the
termination of your employment. This additional insurance benefit is taxable and
will be reported for tax purposes as additional income to you.
Liability Insurance - The Company shall purchase and maintain in effect
sufficient Officer's liability insurance to provide you with reasonable
coverage, including the provision of legal counsel and/or reimbursement of
appropriate legal fees you pay personally, against all liability claims and
judgments arising from your legal exercise of your duties as an Officer of QRS,
including any actions filed after you cease your duties as an Officer or in the
event of the termination of your employment. The Company shall also provide in
its bylaw as full indemnification for you as a QRS officer to the maximum extent
permissible under Delaware law.
TERMINATION AND SEVERANCE
This position is for no set period or term and just as you have the right to
resign your position, at any time, for any reason, QRS reserves the right to
terminate your employment, at any time, with or without cause, with or without
notice.
In the event your employment is terminated without cause, you will become
entitled to twelve (12) months of severance pay equal in the aggregate to your
targeted total annual compensation and benefits at the level in effect at the
time of your termination. In addition, your QRS stock options and restricted
shares will become fully vested. Your severance payments will be made in
accordance with the Company's standard payroll practices for current employees
and will be subject to the Company's collection of all applicable withholding
taxes.
For purposes of this agreement, termination "for cause" shall mean a termination
of your employment for any of the following reasons: (1) your failure to
substantially perform the material duties of your position with the Company
after a written demand for substantial performance is delivered to you by the
Company which specifically identifies the manner in which you have not
substantially performed those duties and which provides a reasonable period for
you to cure those deficiencies; (2) a material breach by you of your obligations
under any confidential or proprietary information agreements with the Company or
of any of your fiduciary obligations as an officer of the Company, (3) your
failure to follow in a material respect the reasonable policies or directives
established on an employee-wide basis by the Company, after written notice to
you indicating the policies or directives with which you are not in material
compliance, (4) any willful misconduct on your part having a material
detrimental effect on the Company or (5) any
unauthorized activity on your part which creates a material conflict of interest
between you and the Company after you have been provided with a reasonable
opportunity to refrain from that activity.
CHANGE OF CONTROL BENEFITS
A. Should there occur a Corporate Transaction or a Change in Control (as
those terms are defined in the Company's 1993 Stock Option/Stock
Issuance Plan) and either (i) your employment is subsequently
terminated without cause or (ii) you subsequently resign by reason of a
material change in your base compensation, your targeted annual
incentive compensation, your annual total target compensation, or your
benefits (for this purpose, 15% will be deemed a material reduction), a
material reduction in your duties or responsibilities, or a change in
your principal place of employment by more than 50 miles, then you will
be entitled to twelve (12) months of severance pay equal in the
aggregate to your targeted total annual compensation and benefits at
the level in effect at the time of your termination or resignation or
(if greater) at the level in effect immediately prior to the Corporate
Transaction or Change in Control. Your severance payments will be made
in accordance with the Company's standard payroll practices for current
employees and will be subject to the Company's collection of all
applicable withholding taxes.
B. This Paragraph B incorporates the special acceleration provisions of
the Company's 1993 Stock Option/Stock Issuance Plan and accordingly
applies to any and all options which you hold under the 1993 Plan at
the time of a Corporate Transaction or Change in Control, including all
options you currently hold and any options subsequently granted to you
under the 1993 Plan. To extent any of those options are not to be
assumed by the successor entity (or parent company) in the Corporate
Transaction or otherwise continued in effect following the Change in
Control or are not replaced with a cash incentive program which
preserves the spread existing at the time of such Corporate Transaction
or Change in Control on any shares for which your options are not
otherwise at that time exercisable (the excess of the fair market value
of those shares over the exercise price), then those options shall,
immediately prior to the specified effective date for the Corporate
Transaction or Change in Control, become exercisable for all the shares
at the time subject to those options and may be exercised for all or
any portion of those shares as fully vested shares. The acceleration of
your options pursuant to this Paragraph B will not be subject to the
limitation of Paragraph C below, even if the options which are not to
be assumed or continued in effect or otherwise replaced with a cash
incentive program were granted on or after December 24, 1997.
C. This Paragraph C applies only to options granted to you under the
Company's 1993 Stock Option/Stock Issuance Plan on or after December
24, 1997. In the event of a Corporate Transaction or Change in Control
during your period of employment with the Company, all of your post
December 23, 1997 options will, immediately prior to the specified
effective date for the Corporate Transaction or Change in Control,
become exercisable for all the shares at the time subject to those
options, whether or not those options are to be assumed or replaced
with a cash incentive program and those accelerated options may be
exercised for all or any portion of the option shares as fully vested
shares. Such acceleration of your post December 23, 1997 options will,
however, be limited to the extent and only to the extent necessary to
assure that the option parachute payment attributable to the
accelerated besting of those options would not constitute an excess
parachute payment under Internal Revenue Code Section 280G(b).
D. To the extent one of more of your options do not accelerate upon a
Corporate Transaction or Change in Control by reason of the provisions
of Paragraph B or the limitation of Paragraph C above, those options
will continue to become exercisable in accordance with the original
exercise
schedule indicated in the respective grant notices for those options.
However, should either (i) your employment be subsequently terminated
without cause or (ii) you subsequently resign by reason of a material
change in your base compensation, your targeted annual incentive
compensation, your annual total target compensation, or your benefits
(for this purpose, 15% will be deemed a material reduction), a material
reduction in your duties or responsibilities, or a change in your
principal place of employment by more than 50 miles, within twenty four
(24) months following such Corporate Transaction or Chance in Control,
then each of your post December 23, 1997 options, to the extent
outstanding at that time but not otherwise fully exercisable, shall
automatically accelerate and become immediately exercisable for all the
option shares and may be exercised for any or all of those shares as
fully vested shares at any time prior to the expiration or sooner
termination of the option term. Your pre-December 24, 1997 options will
not be subject to acceleration upon such an involuntary termination or
resignation.
E. Any of your options (whether granted before or after December 23, 1997)
which are assumed by the successor entity (or parent company) in the
Corporate Transaction or are otherwise continue in effect following the
Change in Control transaction shall be appropriately adjusted to apply
and pertain to the number and class of securities which would have been
issued to you in the consummation of such Corporate Transaction or
Change in Control had the options been exercised immediately prior to
such event. Appropriate adjustments shall also be made to the option
prices payable per share, provided the aggregate option prices payable
shall remain the same.
EMPLOYMENT AT WILL
As you may be aware California is an EMPLOYMENT AT WILL state. This means that
your position is for no set period or term and just as you have the right to
resign your position, at any time, for any reason, QRS reserves the right to
terminate your employment, at any time, with or without cause and with or
without notice. If any contrary representation has been made to you, it is
superseded by this letter. No subsequent agreement contrary to this nor any
amendment to this term can be made unless it is in writing and signed by both
you and the VP, Human Resources.
Sincerely,
- -----------------------------------
Peter R. Johnson, Chairman of the Board
I accept this ongoing position with QRS Corporation on these terms and
conditions on the terms above and understand and agree that it supersedes any
other agreement, written or oral, I may have with QRS with respect to employment
or compensation by QRS including salary, incentive, options, termination and
severance.
- ------------------------------------ ------------------------------------
John Simon, CEO Date