[LOGO] [LETTERHEAD]
December 24, 1997
Shawn M. O'Connor
1010 Dunhill Court
Danville, CA 94506
Dear Shawn,
Following our recent discussions it is with pleasure that I confirm our
verbal offer for continued employment with QRS Corporation. The following
summarizes our offer:
REPORTING TO: The CEO, the Chairman and the Board of Directors
POSITION: EVP, Chief Operating Officer and Company Secretary
As the Chief Operating Officer, you will have an overall corporate
perspective and responsibility. You will have responsibility for the
following functions:
- - Finance and Administration
- - Research and Development
- - Operations
- - Customer Support
- - Implementation Support
KEY OBJECTIVES:
I. ACHIEVE REVENUE GROWTH AND GROSS MARGIN COMPETITIVENESS WHILE
EXCEEDING CUSTOMER EXPECTATIONS FOR SERVICE QUALITY.
1. Establish and maintain CAGR of *
2. Ensure COGS moves toward * of revenue.
3. Meet or exceed 75% customer satisfaction as evidenced by
comprehensive attitude surveys
II. BE PERCEIVED AS THE PREEMINENT GLOBAL DEMAND CHAIN SOLUTION PROVIDER
TO RETAILERS AND THEIR SUPPLIERS.
III. EXPAND OUR SERVICE OFFERINGS, MARKET SEGMENTS AND GEOGRAPHICAL
COVERAGE.
IV. BE RECOGNIZED AS "THE" PLACE TO WORK IN THE ELECTRONIC COMMERCE
INDUSTRY.
* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed
separately with the Commission pursuant to Rule 24b-2.
KEY RESULT AREAS:
A. Achieve planned Company revenue, margin, profit and cash flow.
B. Maintain a high quality, efficient and motivated staff.
C. Communicate and foster the Company's core values.
D. Ensure quality in the Company's products and services.
E. Successfully develop and implement new Electronic Commerce products.
F. Evolve QRS product architecture and implement Data Warehouse.
G. Expand Professional Services to facilitate product implementation and
market penetration.
H. Provide efficient internal systems and tools that support objectives
and leverage staff.
I. Implement complimentary acquisitions and alliances that increase
growth.
J. Ensure the maintenance of adequate facilities and plan for future
needs.
ANNUAL COMPENSATION:
With regard to 1998 objectives and compensation, the following points have
been agreed between us:
Key elements of our agreement that impact 1998 compensation are as follows:
(i) Your annual BASE COMPENSATION will be $210,000 or $17,500 per month.
(ii) In addition, you will receive an ANNUAL INCENTIVE COMPENSATION of
$130,000 that will be administered by the CEO and me and reviewed by the
Compensation Committee.
Therefore your annual total target compensation (base compensation plus
incentive at 100%) shall not be less than $340,000.
Specific incentive targets for 1998 will be (as a percentage of the
1997 annual incentive compensation of $130,000) as follows:
a) Achieve Total Revenue of *. 30%
Award will be paid pro-rata within range of 80% to 100% of goal
with the full 30% payable at 100% of goal. Below 80%, the award
for this particular target will be zero. Payout rate doubles on
revenues over *.
* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed
separately with the Commission pursuant to Rule 24b-2.
b) Achieve Operating Profit of *. 30%
Award will be paid pro-rate within range of 80% to 100% of goal
with the full 30% payable at 100% 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.
c) Implementation/adhere to the company's mission, 10%
core values and management process.
d) Meet or exceed Operations, Customer Service and Enabling 15%
Objectives (refer 1998 plan).
e) Meet or exceed R&D objectives (refer 1998 plan). 15%
(iii) Your position will be reviewed in July and it is our current
objective, depending primarily on your performance, to move forward with
a promotion to President and COO at that time.
(iv) Your compensation and annual incentives will be reviewed in the first
quarter of 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.
LONG TERM INCENTIVE:
Non-qualified options to purchase an additional 50,000 shares of common stock
in QRS have been granted to you. These options will have priced on the date
of this letter and will vest over 4 years, in accordance with the defined
plan, copies of which are available for your review.
In addition, non-qualified options to purchase another 50,000 shares of
common stock in QRS will be granted to you and will be considered to be fully
vested when the company establishes and maintains compound annual growth of
* for a period of two years.
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.
However, if you are terminated, other than for cause, you will be paid the
base compensation and benefits for a further twelve months, from the date of
termination.
* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed
separately with the Commission pursuant to Rule 24b-2.
For the purposes of this agreement, termination "for cause" shall mean: (1)
the willful failure by you to substantially perform your material duties
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 your duties; (2) 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; (3) your willful misconduct having material detrimental effect
on the company.
Alternatively, if there is a change of control of the company (as defined in
the stock option plan), and within 24 months of such change of control, there
is a material reduction in base compensation plus short term incentive
target, (for this purpose, 15% will be deemed a material reductions), or a
material reduction in your responsibility, and as a result you choose to
resign, you will be paid the base compensation plus short term incentive
target for a further 12 months from the time of such reduction, and any
unvested QRS options that you hold will vest in full, at such time, subject
to the terms and conditions of your stock option grant.
Shawn, I look forward to working with you in your new position.
Sincerely,
/s/ Peter R. Johnson
Peter R. Johnson
Chairman
Your signature below indicates that you have reviewed and accept this offer of
employment with QRS Corporation. Please sign this letter in the space
provided and return to me by the close of business, January 15, 1998.
/s/ Shawn M. O'Connor
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Shawn M. O'Connor