[LOGO] [LETTERHEAD]
February 6th, 1997
* Indicates that material has been omitted
and confidential treatment has been
Dr. Lynn Hazlett requested therefore. All such omitted material
P.O. Box 1322 has been filed separately with the Commission
776 S. Ilakee Avenue pursuant to Rule 24b-2.
Lake Alfred, Florida 33850
Dear Lynn:
Following our recent discussions it is with pleasure that I confirm our
verbal offer for employment with QuickResponse Services, Inc. The following
summarizes our offer:
REPORTING TO: Peter R. Johnson, Chairman of the Board of Directors
POSITION: President, Chief Executive Officer and Director
As a Director and Chief Executive officer, you will have an overall corporate
perspective and responsibility. You will have responsibility for the
following functions:
- - Strategy and Business Development
- - Research and Development
- - Finance, Operations and Administration
- - Marketing
- - Sales
KEY OBJECTIVES:
(i) As a member of the Board of Directors, protect the interests of all
shareholders; while providing the Chairman and Board members with
advice and counsel to assist them in ensuring that our corporate
objectives are met.
(ii) As a member of the Corporate Management Committee (CMC), work in
cooperation with the other CMC team members to realize the company's
mission and strategy.
(iii) As CEO, succeed in all Key Result Areas.
February 6th, 1997
Page 2
KEY RESULT AREAS:
(i) Meet or exceed the 1997 business plan and maintain predictable
performance.
(ii) Implement/adhere to the company's mission, core values and management
process.
(iii) Focus on and develop the company's revenue particularly the
contribution from new "value added" products and services (e.g., CRS).
(iv) Aggressively expand QuickResponse Services, Inc. products and markets
organically and where appropriate through acquisition.
(v) Improve the gross margin particularly the cost of goods sold from
IBM/Advantis.
(vi) Continue to develop the company's organization and people.
(vii) Improve the quality of our products and services.
(viii) Promote QRS with our customers/prospects and the financial community.
ANNUAL COMPENSATION:
With regard to 1997 objectives and compensation, the following points have
been agreed between us:
Key elements of our agreement that impact 1997 compensation are as follows:
(i) Your annual base compensation will be $275,000 or $22,916.66 per
month. QRS employees are paid semi-monthly (i.e., on the fifteenth and
last working day of each month).
(ii) In addition, you will be eligible to receive incentive compensation at
an annualized rate of $150,000 upon the attainment of the incentive
targets specified below. This incentive compensation component will be
administered by me and reviewed by the Compensation Committee. However,
based upon an assumed February 10, 1997 start date, your incentive
compensation for the 1997 calendar year will be pro-rated to $134,375.
75% of your pro-rated incentive compensation will be paid to you on a
monthly basis as follows: $7,031 at the end of February 1997 and $9,375
February 6th, 1997
Page 3
at the end of each month during the remainder of the 1997 calendar year,
provided you continue in the Company's employ. These payments will
represent a non-refundable draw-down of your incentive compensation
which you shall be entitled to retain, whether or not the incentive targets
specified below are achieved. These draw-downs will be applied
dollar-for-dollar against the actual amount of incentive compensation to
which you become entitled for the 1997 calendar year on the basis of the
incentive targets actually attained for that year.
Notwithstanding the above, your total target compensation (base
compensation plus incentive at 100%) for the 1997 calendar year will
depend upon your start date, but again assuming a February 10, 1997
start date, it shall not be less than $380,730. For subsequent calendar
years of employment, your total target compensation (base compensation
plus incentive at 100%) shall not be less than $425,000.
Specific incentive targets for 1997 will, as a percentage of the 1997
annual incentive compensation of $134,375, be as follows:
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* (a) Achieve Total Revenue of million. 40%
Award will be paid pro-rata within range of 80% to
110% of goal with the full 40% payable at 110% of goal.
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* (b) Achieve Net Income of million. 40%
Award will be paid pro-rate within range of 80% to
110% of goal with the full 40% payable at 110% of goal.
Above 110% achievement an additional $20,000 will be
awarded together with continuing proportional and
incremental incentive.
Below 80% the award for this particular target will be
zero.
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(c) Implement/adhere to the company's mission, core 10%
values and management process.
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(d) Successfully renegotiate the processing agreement with 10%
Advantis positively impacting gross margin while being
mindful of our strategic positioning.
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(e) Successful design, development and implementation of 20%
the Collaborative Replenishment Services and
EConnect as evidenced by (a) timely and successful
completion of development work, (b) successful
implementation of pilot programs and (c) expansion of
the pilot programs and sale of new prospects sufficient
to meet '97 and '98 revenue plan.
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(iv) During the first month of your tenure with QRS, you and I, with
support from Tania Amochaev, Garen Staglin and Phil Schlein where
necessary,
* Indicates that material has been omitted and confidential treatment has
been requested therefore. All such omitted material has been filed
separately with Commission pursuant to Rule 24b-2.
February 6th, 1997
Page 4
will review these objects, finalize your key result areas and these
proposals regarding the annual incentives to ensure that they are fair
and equitable.
(v) QuickResponse Services, Inc. will pay you an additional bonus of
$150,000 if the consulting revenue resulting from Supply Chain
*Associates' current clients and prospects exceeds in 1997.
QuickResponse Services, Inc. will also pay you a further $150,000 if
this revenue exceeds in 1998. Within 10 days from signing of this
agreement, you will provide the Company a list of such current clients
and prospects upon which the Company will rely for purposes of
determining incentive payments.
(vi) Your compensation and annual incentives will be reviewed in each year
(unless there is a change in objectives, location, 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
incentive and support to the agreed objectives.
INTEGRATION OF CONSULTING BUSINESS:
We have agreed
- That your current consulting agreement with QuickResponse Services,
Inc. will terminate, and as such while the stock options thereby
granted will continue to vest, the consulting fees will cease.
- That you will merge your other consulting activities (currently
referred to as Supply Chain Associates), including all projects,
clients and prospects into QuickResponse Services, Inc.
PERSONAL COVENANTS:
You will be required to sign the Company's standard Proprietary Information
and Non-Disclosure Agreement, at the time you start your employment, a copy
of which is attached for your review.
During your period of employment with the Company and for a period of two (2)
years thereafter, you will be subject to the following restrictive covenants:
(i) You will not, directly or indirectly, whether for your own account
or as an officer, employee, director, consultant, advisor, partner,
principal or greater than 10% owner, engage in any activity which
competes with the Company with respect to (A) any products or
services provided by the Company to its customers at any time during
the period of your employment with the Company or (B) any products
or services which you
* Indicates that material has been omitted and confidential treatment has
been requested therefore. All such omitted material has been filed
separately with Commission pursuant to Rule 24b-2.
February 6th, 1997
Page 5
had reason to know the Company had plans to provide to its customers
within twelve (12) months after your termination date.
(ii) You will not directly encourage or solicit any individual to leave the
Company's employ for any reason or interfere in any other manner with the
employment relationships at the time existing between the Company and its
current or prospective employees.
(iii) You will not induce or attempt to induce any customer, vendor, supplier
or other business relation of the Company to cease doing business with
the Company or in any way interfere with the existing business
relationship between any such customer, vendor, supplier or other
business relation and the Company.
You acknowledge that monetary damages may not be sufficient to compensate the
Company for any economic loss which may be incurred by reason of your breach
of the foregoing restrictive covenants. Accordingly, in the event of any such
breach, the Company will, in addition to the cessation of any severance
benefits which the Company may be providing to you at the time pursuant to
this agreement, be entitled to obtain equitable relief in the form of an
injunction precluding you from continuing to engage in such breach.
LONG TERM INCENTIVES:
You will be granted a non-qualified stock option under the Company's existing
stock option plan to purchase 150,000 shares of the Company's common stock.
The option will be granted on the date you accept this agreement and will
have an exercise price per share equal to the closing selling price of the
common stock on that date.
The option will become exercisable for the option shares in two successive
equal annual installments upon your completion of each of the first two years
of your employment with the Company measured from the grant date. The option
will have a maximum term of 10 years, subject to earlier termination upon
your cessation of employment. All the remaining terms of your option will be
as set forth in the form stock option agreement utilized under the option
plan.
SIGNING BONUS:
In return for your agreement to the terms of this agreement, QuickResponse
Services, Inc. will pay you a "signing bonus" of $150,000.
February 6th, 1997
Page 6
BENEFITS:
Currently QRS offers a comprehensive benefits package including health and
dental insurance, accidental death and dismemberment insurance (AD&D),
short-term and long-term disability insurance, paid vacation, paid sick
leave, ten public holidays per calendar year and participation in QRS' 401(K)
Plan.
In addition to QRS' group benefit plan, we will attempt to maintain
additional life, AD&D and long-term disability insurance for you.
You will be entitled to a total of twenty (20) days-paid vacation per year. A
prorata portion of vacation and sick leave is accrued each pay period.
Shawn O'Connor will prepare an Employee Information Kit which includes
information about our benefits package and other new employee forms which you
must fill out. Please review these materials and complete the forms as soon
as practicable. He will also be available to answer any questions you might
have during your orientation, which will be scheduled during your first few
days of employment.
LIVING AWAY FROM HOME ALLOWANCES:
QuickResponse Services, understanding you will maintain your domicile in
Florida, will provide you with appropriate accommodation (e.g., furnished
2-bedroom apartment in Larkspur) and a car, when you are in the bay area, at
a cost not to exceed $2,500 per month. You will be responsible for the
payment of any and all income and employment taxes attributable to these
benefits.
In addition, QuickResponse Services will provide financial and/or tax advice
as necessary to handle the issues relating to living away from home.
COMMENCEMENT DATE AND TERM:
February 10th, 1997.
Your employment with the Company is for no specific period of time, and
either you or the Company may terminate our employment with the Company at
any time, for any reason, with or without cause or prior notice. This is the
full and complete agreement between you and the Company regarding your
employment relationship, and this "at-will" employment relationship may only
be changed in an express writing executed by you and the Chairman of the
Company's Board of Directors.
However, if you are terminated, other than for cause, during the initial
twenty-four month period of your employment you will be paid the base
compensation at
February 6th, 1997
Page 7
the monthly rate in effect at the time of your termination and benefits for a
period of twenty four months less the period of your employment.
For the purpose of this agreement, termination "for cause" shall mean (i) the
willful failure by you to substantially perform your material duties after a
written demand for substantial performance is delivered by you by the Company
which specifically identifies the manner in which you have not substantially
performed your duties; (ii) the failure in a material respect by you to
follow reasonable policies or directives, established by the Company, after
written notice to you that you were not following such policies or
directives, or; (iii) your willful misconduct having material detrimental
effect on the Company.
Alternatively, if the Company is acquired by merger or sale of all or
substantially all of the Company's assets or securities possessing more than
fifty percent (50%) of the total voting power of the Company's outstanding
voting securities and you should subsequently resign, within twelve (12)
months following the effective date of such acquisition, in connection with
(i) a reduction in the level of your total target compensation by more than
fifteen percent (15%) or (ii) a material reduction in your duties and
responsibilities with the Company, then you will be paid your base
compensation (at the monthly rate in effect at the time of the acquisition)
and benefits for a six-month period following the date of your resignation.
The agreement constitutes the entire agreement and understanding of the
Company and you with respect to the terms set forth herein and supersedes all
prior and contemporaneous written or verbal agreements and understandings
between you and the Company relating to such subject matter. This agreement
may only be amended by written instrument signed by you and the Chairman of
the Company's Board of Directors. Any and all prior agreements,
understandings or representations relating to your employment with the
Company are hereby terminated and cancelled in their entirely and are of no
further force or effect.
Any and all disputes between you and the Company which arise out of your
employment or under the terms of this agreement shall be resolved through
final and binding arbitration. This shall include, without limitation,
disputes relating to this agreement, your employment by the Company or the
termination thereof, claims for breach of contract or breach of the covenant
of good faith and fair dealing, and any claims of discrimination or other
claims under Title VII of the Civil Rights Act of 1964, the Age
Discrimination in Employment Act, the Americans with Disabilities Act, the
California Fair Employment and Housing Act, or any other federal, state or
local law or regulation now in existence or hereinafter enacted and as
amended from time to time concerning in any way the subject of your
employment with the Company or its termination. The only claims NOT covered
by this agreement are claims for benefits under the workers'
February 6th, 1997
Page 8
compensation or unemployment insurance laws, which will be resolved pursuant
to those laws. Binding arbitration will be conducted in San Francisco County,
California, in accordance with the rules and regulations of the American
Arbitration Association. Each party will split the cost of the arbitration
filing and hearing fees, and the cost of the arbitrator; each side will bear
its own attorneys' fees, that is, the arbitration will not have authority to
award attorneys' fees UNLESS a statutory section at issue in the dispute
authorizes the award of attorneys' fees to the prevailing party, in which
case the arbitrator has authority to make such award as permitted by the
statute in question. You understand and agree that the arbitration shall be
instead of any civil litigation and that this means that you are waiving your
right to a jury trial as to such claims. You and the Company further
understand and agree that the arbitrator's decision shall be final and
binding to the fullest extent permitted by law and enforceable by any court
having jurisdiction thereof.
To accept this offer please sign this letter in the space provided and return
it to me by the close of business on February 7th, 1997.
Yours sincerely,
/s/ Peter R. Johnson
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Peter R. Johnson
Chairman
I accept this offer of employment with QuickResponse Services, Inc. as
outlined above.
/s/ Lynn Hazlett
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Lynn Hazlett Date