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EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "AGREEMENT") is entered into effective
as of November 24, 1999 (the "EFFECTIVE DATE") by and between Enterprise Profit
Solutions Corporation, a Delaware corporation (the "COMPANY") and wholly owned
subsidiary of EPS Solutions Corporation, a Delaware corporation ("EPS"), and
David H. Hoffmann ("EMPLOYEE").
The Company desires to retain the services of Employee, and Employee
desires to render such services, on the terms set forth herein.
NOW THEREFORE, in consideration of the mutual covenants set forth
herein, the parties hereto agree as follows:
1. EMPLOYMENT. Employee's employment with the Company will be at-will,
which means that either Employee or the Company may terminate Employee's
employment at any time for any reason or no reason without payment, penalty or
further obligation except as set forth in Section 8 or in the Restricted Stock
Purchase Agreements entered into between Employee and EPS or another written
agreement between Employee and the Company or EPS.
2. DUTIES. Employee shall serve as President and Chief Executive Officer
of the Company and EPS. In that capacity, Employee shall report directly to the
board of directors of the Company and EPS (the "BOARD") and be responsible for
the duties and functions listed on Schedule 2 and shall perform such related
duties and services as the Board may from time to time assign, either directly
or by delegated authority, provided however, that Employee's responsibility and
authority within the Company and EPS will not be materially diminished without
Cause (as defined below) as long as shares of restricted stock purchased by
Employee pursuant to a Restricted Stock Purchase Agreement between Employee and
EPS are subject to Restrictions (as defined in the Restricted Stock Purchase
Agreement) (the "RESTRICTED PERIOD"). Except as set forth herein, Employee's
position and duties may be changed at any time and from time to time by the
Board of EPS.
3. TIME AND EFFORTS. While employed by the Company (the "EMPLOYMENT
PERIOD"), Employee shall use his best efforts and devote his time and attention
to the business of the Company and EPS on a full-time basis and shall at all
times faithfully and industriously and to the best of his ability, experience
and talent, perform all of the duties that may be required of him pursuant to
the terms hereof. During the Employment Period, Employee shall not engage in any
other paid employment or consulting activities without the express written
consent of the Company, but the foregoing shall not preclude Employee from
managing the business of the Company's DHR International business unit ("DHR")
and engaging in civic, charitable and/or religious activities, directing his own
passive investments, setting up, owning interests in and/or managing investment
entities with assets of Employee or third-parties, and/or serving on boards of
directors of other entities so long as such activities do not interfere or
conflict with Employee's duties hereunder as reasonably determined by the Board.
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4. COMPENSATION.
(a) Salary, Bonus. During the Employment Period, the Company shall pay
Employee at the annual rate of Five Hundred Thousand Dollars ($500,000) (as such
pay may be increased by the Company from time to time in its discretion, the
"ANNUAL SALARY") for all services rendered to EPS, the Company, and its business
units by Employee, payable in accordance with the Company's regular payroll
policies, subject, however, to withholding deductions, including without
limitation social security taxes and applicable federal, state and local income
and other employment taxes. Bonuses will be payable in the Company's discretion,
but (i) the foregoing provisions will not preclude Employee from receiving
performance compensation consistent with the Company's policies for his role as
President of the Company's DHR business unit; (ii) Employee will be entitled to
participate in any bonus program on terms at least as favorable as those made
available to other executive employees of the Company or EPS, and (iii)
Employee's bonus (after tax) for any year shall be not less than the annual
interest that Employee is required to pay to EPS in cash (as opposed to payment
in kind or deferral) in that year on any notes issued by Employee to EPS for the
purchase by Employee of stock of EPS, provided that Employee will not be
entitled to receive any bonus in connection with (A) payment of interest in
connection with sale of shares that were acquired for notes that generated the
interest or (B) payment of interest in connection with repayment of the
principal amount of the notes upon which the interest accrued.
(b) Equity. In addition, in connection with employment by the Company
and services to be performed by Employee pursuant to this Agreement, Employee is
acquiring concurrently herewith, in addition to EPS shares previously acquired
by Employee, 1,000,000 shares of restricted stock of EPS pursuant to the
Restricted Stock Purchase Agreement entered into between Employee and EPS as of
the Effective Date in the form attached hereto as Exhibit A (the "RESTRICTED
STOCK PURCHASE AGREEMENT").
(c) Notes and Liquidity. During and after the Employment Period, and
regardless of the reason for or circumstances of any termination of Employee's
employment, Employee will be entitled to receive (i) the most favorable
treatment of interest on promissory notes incurred to purchase stock of EPS that
is received at any time by any other officer or former officer of the Company or
EPS as a purchaser of EPS Stock, and (ii) the most favorable registration rights
or other access to liquidity, on a ratable basis based upon relative holdings,
that is received at any time by any other officer or former officer of the
Company or EPS.
(d) Private Company Equity. In his capacity as President of DHR,
Employee may in his discretion from time to time during the Window Period cause
the Company to accept Equity Fees in lieu of cash fees for executive search
services performed by the Company through DHR. Employee shall take reasonable
steps in an effort to ensure that any Equity Fees have a fair market value at
least equal to the amount of DHR's standard cash fees replaced thereby. At
Employee's option, at any time before the Termination Date, Employee may receive
from the Company any or all Equity Fees as a bonus. Any Equity Fees not received
by Employee by the Termination Date will no longer be subject to receipt by
Employee. The amount of any Equity Fees booked as income in accordance with GAAP
will count toward satisfaction of, and the booked amount of any Equity Fees
received by Employee pursuant to this Section 4(d) will be charged as an expense
against, the Income target associated with restricted stock of EPS
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purchased by Employee and other persons employed by the Company in connection
with the DHR business, and any losses on investments in Equity Fees recognized
by the Company under GAAP will be applied in the period in which the loss is
recognized to reduce Income in determining satisfaction of such Income target.
For these purposes, (i) "EQUITY FEES" means Private Company Equity accepted by
the Company in lieu of cash fees for executive search services performed by the
Company through DHR; (ii) "PRIVATE COMPANY EQUITY" means equity interests in a
corporation, LLC, or other entity that retains the Company to perform executive
search services through DHR; (iii) "WINDOW PERIOD" means the period of time
beginning December 15, 1998 and ending on the Termination Date; and (iv)
"TERMINATION DATE" means the earlier of the closing of a public offering of
securities of EPS or any of its Affiliates (as defined in Schedule 1) or the
date of a Change in Control of the type described in paragraph (ii) or (iii) of
the definition of "Change in Control" in Schedule 1.
5. PERSONAL TIME OFF POLICY. Employee shall be entitled to such number
of days of paid personal time off ("PTO") each year as is consistent with the
number of days set forth on Exhibit B and the Company's Personal Time Off
Policy, as such policy may be amended from time to time at the discretion of the
Company. Employee may not accrue more PTO days than the number of days set forth
on Exhibit B under the item "Maximum Accrued PTO." If Employee at any time has
more than such number of days, no further PTO days shall accrue until Employee
again has fewer than such number of days of unused PTO. PTO days may be used,
subject to approval by the Company consistent with business needs, as they are
earned. The Company shall pay Employee for accrued unused PTO days only in
connection with termination of employment. Such payment shall be made on the
basis of Employee's Annual Salary at the time of payment, pro-rated for the
number of accrued unused PTO days at the time of termination.
6. BENEFITS. In addition to the compensation described in Section 4, the
Company shall provide Employee with benefits consistent with the Company's
employment policies as in effect from time to time, but in any case Employee's
benefits will be not less favorable than benefits provided to other executive
officers of the Company. Until the Company has a benefit plan in place, Employee
shall be reimbursed for all medical premiums incurred by Employee in connection
with medical insurance for Employee and his family equivalent to the coverage
provided to Employee by Employee's employer immediately prior to the date
hereof.
7. CERTAIN DEFINITIONS.
(a) Cause. For purposes hereof, the term "CAUSE" has the meaning set
forth in Schedule 1 hereto. Any termination by the Company of Employee's
employment within 90 days after the Company's becoming aware of the occurrence
of an event or circumstance constituting "Cause" will constitute termination for
Cause.
(b) Good Reason. If the Company breaches this Agreement or any other
agreement with Employee in any material respect and does not cure such breach
within 15 days of receipt from Employee of notice of such breach and demand for
cure, or a Change in Control (as defined in Schedule 1) occurs, and Employee
terminates Employee's employment with the Company for any reason within 90 days
of such breach or Change in Control, such termination by Employee will be
termination with "GOOD REASON."
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8. CERTAIN PAYMENTS.
(a) Notice of Termination. Any termination of Employee's employment
by the Company or by Employee shall be communicated by a Notice of Termination.
For purposes of this Agreement, a "NOTICE OF TERMINATION" shall mean a written
notice of termination of Employee's employment setting forth the effective date
of such termination and, if the termination is for cause, the specific
termination provisions in this Agreement relied upon and, in reasonable detail,
the facts and circumstances claimed to provide a basis for termination of
Employee's employment under the provision so indicated.
(b) Termination by Employee with Good Reason or the Company Without
Cause. If Employee's employment under this Agreement is terminated by Employee
with Good Reason or by the Company without Cause, then contingent upon execution
and delivery by Employee to the Company of an unconditional release, in form
consistent with the form of release attached as an exhibit to the Restricted
Stock Purchase Agreement, of all claims against the Company, EPS or any of their
officers, directors or affiliates arising from or in connection with this
Agreement or Employee's employment with the Company or the termination of that
employment, Employee shall be entitled to receive within five days of
termination of employment a lump sum payment equal to two times his Annual
Salary (the "SEVERANCE PAYMENT").
(c) No Other Benefits. Except as set forth in Sections 5 or 8(b), or
as may be required by applicable law or separate written agreement between the
Company or EPS and Employee, the Company shall have no obligations to pay any
salary, bonus, accrued vacation or other amounts in connection with any
termination of Employee's employment or attributable to the period after
termination of Employee's employment. Without limiting the foregoing, and
subject to any separate written agreement to the contrary, Employee will not be
entitled to any severance payment or benefit if Employee's employment under this
Agreement is terminated as a result of death or Disability, or by Employee
without Good Reason, or by the Company for Cause.
9. CONFIDENTIALITY. In connection with a previous employment agreement,
Employee has entered into a Confidential Information and Employee Invention
Agreement, which will remain in effect and survive termination or expiration of
this Agreement.
10. REPRESENTATIONS AND WARRANTIES. Employee represents and warrants to
the Company that (a) he is under no contractual restriction or other
restrictions or obligations that are inconsistent with the execution of this
Agreement, the performance of his duties and the covenants hereunder, and (b) he
is under no physical or mental disability that would interfere with his keeping
and performing all of the agreements, covenants and conditions to be kept or
performed hereunder.
11. MISCELLANEOUS.
(a) Governing Law. This Agreement shall be interpreted under and
governed by the laws of the State of California, excluding its rules on
conflicts of law.
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(b) Arbitration. Any dispute regarding the application,
interpretation or breach of this Agreement shall be resolved by final and
binding arbitration before the American Arbitration Association ("AAA") in
accordance with AAA's National Rules for the Resolution of Employment Disputes.
Attorney's fees, costs and damages (where appropriate) shall be awarded to the
prevailing party in any dispute, and any resolution, opinion or order of AAA may
be entered as a judgment in a court of competent jurisdiction.
(c) Modification and Waiver. No waiver or modification of this
Agreement or any term hereof shall be binding unless it is in writing signed by
the parties hereto. No failure to insist upon compliance with any term,
provision or condition to this Agreement, whether by conduct or otherwise, in
any one or more instances, shall be deemed to be or construed as a waiver of any
such term, provision or condition or as a waiver of any other term, provision or
condition of this Agreement.
(d) Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes and replaces all prior employment agreements, if any, between the
parties and will constitute Employee's Employment Agreement for all purposes. No
oral statements or prior written agreements with respect to the subject matter
hereof which are not specifically incorporated herein or in the Confidentiality
Agreement shall be of any force or effect.
(e) Severability. If any provisions hereof shall be held or
construed to be illegal or invalid for any reason, such illegality or invalidity
shall not affect the remaining provisions of this Agreement, but the same shall
be construed and enforced just as though the illegal or invalid provisions had
not been included herein.
(f) Notices. Any notice, demand or other communication required,
permitted or desired to be given hereunder shall be in writing and shall be
deemed effectively given upon personal delivery, facsimile transmission (with
confirmation of receipt), delivery by reputable overnight delivery service or
five (5) days following deposit in the United States mail (if sent by certified
or registered mail, postage prepaid, return receipt requested), in each case
duly addressed to the Company at its headquarters or to Employee at his or her
address of record listed with the Company.
(g) Assignment. Employee's rights, duties and obligations under this
Agreement may not be assigned by Employee. The Company may assign its rights,
duties and obligations under this Agreement to any affiliate of the Company.
This Agreement shall be binding upon the successors and assignees of the Company
and EPS.
(h) Headings. The section headings herein are intended for reference
and shall not affect in any way the construction or interpretation of this
Agreement.
(i) Counterparts. This Agreement may be executed in counterparts,
each of which shall be an original but all of which shall constitute one and the
same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date set forth above.
/s/ DAVID H. HOFFMANN
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David H. Hoffmann
Enterprise Profit Solutions Corporation
EPS Solutions Corporation
By: /s/ MARK C. COLEMAN
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Name: Mark C. Coleman
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Title: EVP/CFO
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SCHEDULE 1 TO
EMPLOYMENT AGREEMENT
"CAUSE" means the occurrence at any time of any one or more of the
following events or circumstances, provided however, that if any such event or
circumstance is susceptible to cure by Employee without damage to the Company,
such event or circumstance will not constitute Cause unless Employee has failed
to cure such event or circumstance within 15 days after receipt by Employee of
written notice thereof: (i) Employee engages in any wrongful conduct or
knowingly violates any reasonable rule or regulation of the Board that results
in material damage or risk of legal liability to the Company or any parent
corporation of the Company, any subsidiary corporation of the Company or any
entity controlling, controlled by, or under common control with the Company (an
"AFFILIATE"); (ii) any willful misconduct or gross negligence by Employee in the
responsibilities assigned to Employee; (iii) any willful and material failure to
perform Employee's job as required to meet the lawful objectives of the Company
or any Affiliate or any repeated failure to achieve reasonable performance
standards that have been described by the Company in writing and communicated to
Employee in reasonable detail; (iv) Employee fails to comply with all material
applicable laws and regulations in performing Employee's duties and
responsibilities to the Company; (v) any criminal conduct by Employee (other
than misdemeanors that do not meet the criteria set forth in subsection (vi));
(vi) any actions by Employee involving moral turpitude or injurious to the
business or reputation of the Company or its Affiliates; (vii) any legal action
against Employee or the Company or any of its Affiliates occurs as a result of
Employee's service to the Company or any Affiliate and results in a judgment or
arbitral award that is based upon gross negligence or intentional misconduct by
Employee and that requires the Company or any Affiliate to pay substantial
damages; (viii) any legal action by Employee or Employee's representatives or
successors against the Company or any of its Affiliates or any person or entity
that the Company or any of its Affiliates would be obligated to indemnify or
defend in connection with such action; or (ix) Employee does any of the things
described in (A)-(C) below.
(A) Employee renders services for any organization or engages directly
or indirectly in any business that, in the reasonable judgment of the Board,
during Employee's employment with the Company or any Affiliated Entity, is or
becomes competitive with the Company or any Affiliated Entity, or which
organization or business, or the rendering of services to such organization or
business, is or becomes otherwise prejudicial to or in conflict with the
business or interests of the Company or any Affiliated Entity.
(B) Employee fails to comply with the Confidentiality Agreement or with
the lawful policies of the Company or any Affiliated Entity regarding
nondisclosure of confidential information, or without prior written
authorization from the Company or any Affiliated Entity discloses to anyone
outside the Company or any Affiliated Entity or uses for any purpose or in any
context other than in performance of Employee's duties to the Company or any
Affiliated Entity any confidential or trade secret information of the Company or
any Affiliated Entity.
(C) Employee breaches in any material respect any agreement with or
legal duty to the Company or any Affiliated Entity.
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"CHANGE IN CONTROL" means the completion of:
(i) any acquisition or series of related acquisitions resulting in any
person, entity or "group," within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") (not
including Employee) beneficially owning (within the meaning of Rule 13d-3
promulgated under the Exchange Act) more than thirty percent (30%) of either the
then outstanding shares of Common Stock or the combined voting power of then
outstanding voting securities entitled to vote generally in the election of
directors of EPS or the Company, provided that a Change in Control shall not be
deemed to have occurred if the "person" described in the preceding provisions is
an underwriter or underwriting syndicate that has acquired the ownership of
voting securities of EPS or the Company solely in connection with a public
offering of those securities; or
(ii) any reorganization, merger or consolidation of EPS or the Company
with any other person, entity or corporation, other than a transaction which
would result in the owners of voting securities of EPS outstanding immediately
prior thereto continuing to own directly or indirectly more than fifty percent
(50%) of the combined voting power of the voting securities of the entity or
entities surviving such reorganization, merger or consolidation that own and
conduct the business owned and conducted by EPS and the Company prior thereto;
or
(iii) the sale or other disposition by EPS or the Company, in one
transaction or a series of related transactions, of all or substantially all of
the assets of EPS or the Company; or
(iv) Individuals who, as of the Effective Date, constitute the board of
directors of the Company or EPS (in each case, the "INCUMBENT BOARD OF
DIRECTORS") cease for any reason to constitute at least a majority of the board
of directors of the Company or EPS, respectively, provided that any individual
who becomes a director after the Effective Date whose election, or nomination
for election by stockholders, is approved by a vote of at least a majority of
the directors then comprising the relevant Incumbent Board of Directors shall be
considered to be a member of the relevant Incumbent Board of Directors unless
that individual was nominated or elected by any person, entity or group (as
defined above) having the power to exercise, through beneficial ownership,
voting agreement and/or proxy, thirty percent (30%) or more of either the
outstanding shares of common stock of EPS or the Company or the combined voting
power of the outstanding securities of EPS or the Company entitled to vote
generally in the election of directors, in which case that individual shall not
be considered to be a member of the Incumbent Board of Directors unless such
individual's election or nomination for election by EPS' shareholders is
approved by a vote of at least two-thirds of the directors then comprising the
Incumbent Board of Directors.
For purposes of this definition, references to EPS and the Company shall
also refer to their successors and assigns such that reorganizations or other
corporate transactions do not impair the substantive intent of these provisions.
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"DISABILITY" means Employee suffers an ongoing physical or psychological
impairment that has rendered Employee unable, as determined in good faith by the
Board, to perform Employee's duties to the Company and EPS, (the Company and
EPS, at their option and expense, being entitled to retain a physician to
confirm the existence of such disability), for a period of thirty (30)
consecutive days or 45 days in any 90-day period.
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SCHEDULE 2
Management of and responsibility for all operations of EPS, the Company and its
subsidiaries.
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EXHIBIT B
PERSONAL TIME OFF
Aggregate Amount of time off: 28 days (in addition to holidays
observed by the Company)
Maximum Accrued PTO: 28 days