UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
[ X ] Annual Report Pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934
For the fiscal year ended June 30, 1999.
[ ]Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934
For the transition period from ___ to ___.
Commission File Number: 0-15692.
TOTAL RESEARCH CORPORATION
--------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-2072212
- ---------------------------------------- --------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
5 Independence Way, Princeton, New Jersey 08543-5305
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (609) 520-9100
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered:
None Nasdaq
- --------------------------- -----------------------------------------
Securities pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
-----------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
- --
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K ((statute) 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K [ ].
The aggregate market value of shares of Common Stock of the registrant held by
non-affiliates of the registrant based on the closing price of the Common Stock
on September 14, 1999 was $33,524,000. As of September 14, 1999, there were
11,911,608 shares of the Company's Common Stock ($.001 par value) outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual shareholders report for the year ended June 30, 1999 are
incorporated by reference into Parts I and II. Portions of the proxy statement
for the annual shareholders meeting to be held on December 8, 1999 are
incorporated by reference into Part III.
<PAGE>
PART I
Information contained or incorporated by reference in this report contains
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "Securities Act), which represent the expectations
or beliefs of Total Research Corporation (the "Company"), including, but not
limited to, statements concerning industry performance, the Company's
operations, performance, financial condition, growth and acquisition strategies,
margins and growth in sales of the Company's products. For this purpose, any
statements contained in this Annual Report that are not statements of historical
fact may be deemed to be forward-looking statements. Such statements can be
identified by the use of forward-looking terminology such as "believes,"
"expects," "may,""will," "should" or"anticipates" or the negative thereof or
other variations thereon or comparable terminology, or by discussions of
strategy. See, e.g., "Management's Discussion and Analysis of Financial
Condition and Results of Operations." No assurance can be given that the future
results covered by the forward-looking statements will be achieved. These
statements by their nature involve substantial risks and uncertainties, certain
of which are beyond the Company's control. The information set forth below
identifies important factors with respect to such forward-looking statements,
including certain risks and uncertainties that could cause actual results to
vary materially from the future results covered in such forward-looking
statements. Other factors could also cause actual results to vary materially
from the future results covered in such forward-looking statements.
ITEM 1. DESCRIPTION OF BUSINESS
OVERVIEW OF THE BUSINESS
The Company is a leading full-service custom and web-enabled marketing
organization that provides marketing research and marketing services to assist
its clients with the pricing and positioning of new or existing products,
customer loyalty measurements, brand equity and e-commerce issues,
organizational structure and other marketing concerns. The Company provides
services for its clients by using proprietary market research and other
marketing technologies developed by the Company and distributed throughout
various mediums, including the Internet.
The Company's clients consist principally of Fortune 100 corporations
operating in a wide array of industries, including automotive, chemicals,
consumer products, financial services, government, health care, information
technologies, manufacturing, telecommunications, travel and utilities. The
Company's professional staff has business experience in each industry for which
it conducts market research.
The Company operates as one business segment. It services its clients
through its five divisions (Customer Loyalty Management, Global Life Sciences,
Strategic Marketing Services-Domestic, Strategic Marketing
Services-International, and its Internet subsidiary, BlinkE(trademark)), each of
which has specific industry and/or product expertise. The Company's divisions
are located in several cities in the United States and in London, England. The
Company also maintains relationships with market research organizations in South
America and Asia to collect data internationally on behalf of the Company.
The Company operates telephone data collection centers in Tampa, Florida
and London, England to assist in collecting data for clients. The Tampa calling
center currently has 80 fully computerized interviewing stations and the Company
plans to expand this center to approximately 130 CATI (Computer Assisted
Telephone Interviewing) interviewing stations by November 1999. The London
calling center has approximately 140 CATI interviewing stations. The Company's
phone centers conduct interviews utilizing computer programmed questionnaires
that are immediately uploaded to the Company's central data-processing center,
thereby enabling research to be collected and analyzed more efficiently and
effectively. The Company also recently introduced Total e-Survey(trademark), a
web-based data collection methodology that utilizes its advanced research
techniques to collect data over the Internet.
The Company has complete in-house data processing operations, which provide
for rapid, thorough and secure on-site data management and analysis. The Company
supports many platforms and file types both to exchange data and to provide
extensive database design and management capabilities. The Company also provides
its clients with sample management and survey data results using a variety of
software applications. It also has a large and continually expanding array of
proprietary software developed internally to reduce research labor, assist with
survey data analysis and generate client reports. The Company's software
research and development team is continually engaged in efforts to develop,
evaluate, and adapt new technologies to improve and expand the Company's
processes, services and products.
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<PAGE>
The Company also maintains a state-of-the-art Optical Character Recognition
system for scanning hardcopy sample and surveys. This scanner technology enters
data directly from thousands of hardcopy questionnaires each day, eliminating
the need for labor-intensive manual data entry and minimizing the risk of
data-entry error.
The Company was incorporated under the laws of the State of New Jersey in
1975 and was reincorporated under the laws of the State of Delaware in 1986. The
Company maintains its principal executive offices at 5 Independence Way,
Princeton, New Jersey 08543, and its telephone number is (609) 520-9100.
CLIENTS
In fiscal 1999, approximately 70 percent of the Company's revenues were
earned from among the 100 largest commercial and financial companies in the
world. The Company currently serves approximately 200 commercial clients and
government agencies. During fiscal 1999, approximately 75 percent of the
revenues earned by the Company were from clients who had previously retained the
Company. For the fiscal years ended June 30, 1999, 1998 and 1997, no single
client accounted for greater than 10% of the Company's annual revenues. The
following chart sets forth certain information regarding the Company's annual
revenues during the past three fiscal years:
Fiscal Year Ended June 30,
--------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Industry 1999 1998 1997 Representative Clients
-------- ---- ---- ---- ----------------------
Telecommunications/ Information 40.9 28.1 24.5 Bell Atlantic, Hewlett Packard, IBM,
Systems Lotus, Lucent Technologies,
Microsoft, US West
Health Care/ Amgen, Bristol-Myers Squibb, Eli
AgriBusiness 21.7% 25.3% 32.0% Lilly, John Deere, Novartis, Pfizer
Manufacturing/Industrial 9.0 14.1 11.1 Dow Chemical, Dow Corning, DuPont,
FMC, Monsanto
Consumer Products 9.0 9.3 10.9 3M, Bausch & Lomb, Black & Decker,
Eastman Kodak, Michelin
Financial Services 6.1 6.8 7.4 Chase, Fidelity Investments, Merrill
Lynch, Nations Bank, Prudential
Other 13.3 16.4 14.1 Ford, NJ Transit, Walt Disney
------ ------ ------
Totals 100.0% 100.0% 100.0%
------ ------ ------
</TABLE>
3
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PRODUCTS AND SERVICES
The Company believes it enjoys advantages over competitors due to its
ability to conduct predictive marketing research studies, which attempt to
predict consumer, business, or physician behavior in various alternative
scenarios. The Company believes this is superior to more traditional market
research, which is diagnostic in nature. The Company's principal proprietary
predictive technologies and associated services include the following:
o BLINKE(TRADEMARK), a newly established wholly owned subsidiary that
integrates the Company's advanced marketing research capabilities with
innovative Internet strategies in business-to-business and e-commerce
applications.
o COMPONENT ASSESSMENT (COMPASS(REGISTERED)) is designed to enable clients
to analyze the structure of a competitive market and to determine the effect
that individual product attributes have on a customer's purchase decision.
COMPASS(registered) is commonly used by clients for developmental stage products
and to understand the key drivers of product choice.
o EQUITREND(REGISTERED) measures the perceived quality of a brand or
product based upon consumer experiences with, and perceptions of, the brand.
This product is funded by the Company and is sold to a number of clients.
o THE IDEA FARM(TRADEMARK), a newly established wholly owned subsidiary
that provides promotional services for agribusiness companies.
o PREDICTIVE SEGMENTATION(REGISTERED) is a technology that enables
marketers to identify the various segments and or sub-markets of individual
products and to differentiate the demands of each segment. Clients utilize
Predictive Segmentation to combine demographic and usage/attitude factors to
determine the optimal segmentation for their products.
o PRICE ELASTICITY MEASUREMENT SYSTEM (PEMS(REGISTERED)) permits the
evaluation of pricing strategies for different products and services. PEMS is
designed to enable the client to predict sales of products and services under a
broad range of possible competitive pricing scenarios.
o TOTAL E-SURVEY(TRADEMARK) is the Company's new web service that combines
the firm's advanced market research technologies and international expertise to
provide a web-based data-collection capability.
o TOTAL RESEARCH BIAS CORRECTION (TRBC(REGISTERED)) is a technology that
enables marketers to improve the accuracy and value of any research by reducing
fundamental sources of bias, error and distortion in market research data. This
results in a better understanding of marketing behavior and substantial
improvement of the predictive accuracy and value of market research.
TRBC(registered) is especially valuable in multi-national studies.
GEOGRAPHIC LOCATIONS
The Company's headquarters are located in Princeton, New Jersey. The
Company has domestic offices in Detroit, Minneapolis, Poughkeepsie, Tampa, and
one international office in London, England.
The Company has an agreement pursuant to which the Company authorizes
Paradigma S.A. ("Paradigma") to use the name "Total Research Argentina".
Paradigma represents the Company in Argentina and markets the Company's
proprietary research techniques.
The Company has an alliance with Asia Marketing Intelligence, ("AMI"), the
largest independent data collection services firm in Asia, which enables the
Company to offer full, comprehensive service for the Asian component of global
studies.
INTERNATIONAL OPERATIONS
In fiscal 1999, approximately 44% of the Company's revenues were
attributable to projects that the Company conducts for its clients involving
market research which is performed on a global basis. The Company has conducted
research projects in Europe, South America, Canada, Africa, China, Japan,
Australia, and India. To engage in its international market research activities,
the Company has developed a network of relationships (such as those with
Paradigma and AMI) with market research organizations in essential locations
around the world. These alliances enable the Company to maintain the quality and
reliability of its data collection activities.
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ORGANIZATIONAL STRUCTURE
The Company currently operates four market research divisions.
The Customer Loyalty Management division is located in Princeton. This
division provides clients with an organized, controlled means of improving their
operating results and marketplace performance through the effective use of
information from customers and employees. Clients are primarily from the
telecommunications, information technology, travel, and banking industries. The
Customer Loyalty Division accounted for approximately 24% of the revenues
generated by the Company in fiscal 1999.
The Global Life Sciences ("GLS") division is international in nature, with
staff in both the Princeton and London offices. The division conducts global
market research in the pharmaceutical, health care, biotechnology, and
agricultural industries. GLS accounted for approximately 20% of the revenues
generated by the Company in fiscal 1999.
The Strategic Marketing Services Domestic ("SMS Domestic") division
operates from the Princeton, Poughkeepsie and Minneapolis offices. The SMS
Domestic division conducts market research on a global basis in the consumer
products/consumer packaging goods, information technology, automotive and
telecommunications industries. This division is responsible for the Company's
EquiTrend(registered) product. SMS accounted for approximately 31% of the
revenues earned by the Company in fiscal 1999.
The Strategic Marketing Services International ("SMS International")
division operates from its London, England office. The SMS International
division conducts market research mainly within Europe and Asia in the consumer
products/consumer packaging goods, financial services, information technology,
manufacturing/industrial and telecommunications industries. SMS International
accounted for approximately 25% of the revenues earned by the Company in fiscal
1999.
In addition to its four market research divisions, the Company recently
established BlinkE(trademark), a wholly owned subsidiary. BlinkE(trademark)
integrates the Company's advanced marketing research capabilities with
innovative Internet strategies in business-to-business and retail e-commerce
applications using proactive strategy development and advanced web site
implementation.
FEE ARRANGEMENTS
The Company generally obtains full-service and advanced level research
assignments through competitive bidding. Most contracts are awarded on a
fixed-fee basis, subject to adjustment under certain circumstances.
The Company also designs and implements multi-client studies, such as
EquiTrend(registered), to address informational needs shared by multiple
existing and potential clients. The Company usually develops the initial focus
and study design of a multi-client study at its own expense prior to obtaining
client commitments. The Company then sells the completed study to existing and
potential clients on a non-exclusive basis.
COMPETITION
The market research industry is highly competitive and is characterized by
a large number of relatively small organizations and a limited number of large
full service organizations, many of which are believed to have financial
resources greater than those of the Company. Management believes that it is
currently one of the leading providers of market research and analysis services
using advanced statistical techniques. In 1998, the Company was listed as the
24th largest US company, measured by revenues, in the marketing research
industry by Marketing News. The Company's primary competitors include: Burke
Marketing Services, Inc.; M/A/R/C, Inc.; Maritz, Market Facts, Inc.; National
Analysts; Opinion Research Corporation; and Walker Research Incorporated.
The Company believes that the principal competitive factors for traditional
market research are the quality and validity of data collection, as well as the
ability to efficiently design, execute and prepare reports on marketing
research. The Company believes that the principal competitive factors for market
research using advanced statistical techniques are the quality of its personnel
and the Company's experience in developing and executing statistical market
research. During economic downturns, the Company may experience increased
competition for research budgets, which are often vulnerable to global corporate
overhead reduction.
5
<PAGE>
EMPLOYEES
As of June 30, 1999, the Company employed 245 full-time employees. The
Company uses approximately 350 part-time, hourly employees for data gathering
and processing purposes. All employees are non-union. The Company believes that
its relationship with its labor force is good.
TRADEMARKS
The Company owns 17 trademarks registered with the United States Patent and
Trademark Office and/or similar regulatory authorities in other countries.
Federally registered trademarks have perpetual life, provided they are renewed
on a timely basis and used properly as trademarks, subject to the rights of
third parties to seek cancellation of the marks. The Company regards its
trademarks and other proprietary rights as valuable assets and believes that
they have significant value in the marketing of its products. The Company
protects its trademarks against infringement.
ITEM 2.DESCRIPTION OF PROPERTY
The Company's headquarters and principal United States operating facility
is located in Princeton, New Jersey. As of June 30, 1999, the Company leased
approximately 51,000 square feet of office space for its Princeton operations;
the lease expires June 30, 2006. The Company is currently sub-leasing
approximately 20,000 square feet of this space to third parties.
The Company leases 6,083 square feet for a sales office in Minneapolis,
Minnesota. The lease expires on April 30, 2001. The Company leases 2,400 square
feet for a sales office in Poughkeepsie, New York. The lease expires on December
31, 1999. The Company leases 7,559 square feet for a telephone data-collection
facility in Tampa, Florida. The lease expires on June 30, 2001.
In the United Kingdom, the Company leases 21,473 square feet for its
Brentford, London office space. The lease expires October 31, 2010 with a tenant
break clause at October 31, 2004.
ITEM 3. LEGAL PROCEEDINGS
As of June 30, 1999, there were no material legal actions or proceedings
pending or, to the knowledge of the Company, threatened, to which the property
of the Company was subject, or to which the Company was a party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of fiscal 1999, no matters were submitted to a
vote of security holders of the Company.
6
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock trades on the Nasdaq Small Cap Market. The quarterly
high and low bid prices of the Company's common stock, as reported by the Nasdaq
Small Cap Market, from fiscal 1998 to date, were as follows:
High Low
---- ---
Fiscal 1998
First Quarter $2.03 $1.03
Second Quarter 2.00 1.34
Third Quarter 2.10 1.50
Fourth Quarter 4.25 2.00
Fiscal 1999
First Quarter $3.84 $2.50
Second Quarter 2.69 1.88
Third Quarter 3.38 2.38
Fourth Quarter 4.06 2.38
Fiscal 2000
First Quarter (through $3.88 $3.13
September 14, 1999)
The above listed quotes reflect inter-dealer prices without retail mark-up,
mark-down or commissions and are not necessarily representative of actual
transactions or of the true value of the Common Stock.
As of September 14, 1999, the Company had 453 shareholders of record of its
Common Stock. The Company has never declared a dividend and does not plan to do
so in the near future.
In July of 1998, the Company entered into an agreement with a number of
investors pursuant to which the Company sold 1,000,000 shares of Common Stock at
$2.25 per share and issued options to purchase an aggregate of 250,000 shares of
common stock at an exercise price of $2.25 per share (exercisable for 5 years).
Such Common Stock was sold in a transaction that was exempt from registration
under Section 4(2) of the Securities Act of 1933, as amended. The agreement also
provides that the investors will, under certain circumstances, provide or
arrange for others to provide up to $25,000,000 in debt or equity financing to
complete acquisitions and/or projects approved by the Board of Directors.
7
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ITEM 6. SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA FOR YEARS ENDED
---------------------------------------
JUNE 30, 1999, 1998, 1997, 1996 AND 1995
----------------------------------------
The selected financial data as of June 30, 1999, 1998, 1997, 1996 and 1995 and
for each of the years then ended has been derived from the audited consolidated
financial statements of the Company. The selected financial data should be read
in conjunction with, and is qualified in its entirety by, the Consolidated
Financial Statements of the Company and the notes thereto and the other
financial information included in Item 14 of the Annual Report.
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statement of income data (000): 1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Revenues $41,562 $34,057 $29,443 $23,715 $19,250
Direct costs 20,450 16,641 14,942 11,001 7,905
Gross profit 21,112 17,416 14,501 12,714 11,345
Operating expenses 17,802 14,868 13,221 13,683 9,785
Unusual charges 1,101
320 723 - -
Income(loss) from operations 2,990 1,825 1,280 (2,070) 1,560
Interest income (expense) 231 20 (202) (342) (307)
Other income, net - 40 50 87 59
Income(loss) before income taxes 3,221 1,885 1,128 (2,325) 1,312
Provision (benefit) for income taxes 1,245 760 490 (842) 552
Net income (loss) $ 1,976 $ 1,125 $ 638 $(1,483) $ 760
Net income(loss) per diluted share* $ .16 $ .10 $ .06 $ (0.15) $ .08
* - not in thousands
June 30,
--------------------------------------------------------------------------
Balance Sheet Data (000): 1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Working capital (deficiency) $ 4,514 $ 801 $(1,151) $ (163) $ 210
Total assets 21,717 15,469 12,948 13,155 11,743
Capital lease obligations and notes
payable 282 19 215 2,142 1,406
Stockholders' equity $ 9,079 % 5,077 $ 3,648 $ 2,821 $ 4,323
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Financial Data" and the audited Consolidated Financial Statements of
the Company and the related notes.
RESULTS OF OPERATIONS
The Company is a full-service consultative marketing research corporation
that provides marketing research and information to assist its clients with the
pricing and positioning of new or existing products, customer loyalty
measurements, brand equity issues and other marketing concerns.
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The following table sets forth, for the periods indicated certain historical
income statement and other data for the Company and also sets forth such data as
a percentage of gross revenues (in thousands).
<TABLE>
<CAPTION>
Year Ended June 30,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues $41,562 100.0% $34,057 100.0% $29,443 100.0%
Direct costs 20,450 49.2 16,641 48.9 14,942 50.8
Gross profit 21,112 50.8% 17,416 51.1% 14,501 49.2%
Operating expenses 17,802 42.8 14,868 43.7 13,221 44.9
Unusual costs 320 0.8 723 2.1 -- --
Income from operations 2,990 7.2% 1,825 5.3% 1,280 4.3%
Interest income (expense) 231 0.6 20 0.1 (202) (0.7)
Other income, net - 0.0 40 0.1 50 0.2
Income before income taxes 3,221 7.8% 1,885 5.5% 1,128 3.8%
Provision for income taxes 1,245 3.0 760 2.2 490 1.6%
Net income $ 1,976 4.8% $ 1,125 3.3% $ 638 2.2%
</TABLE>
FISCAL YEAR ENDED JUNE 30, 1999 AS COMPARED TO FISCAL YEAR ENDED JUNE 30, 1998
Revenues increased approximately 22.0 percent from fiscal 1998 to fiscal
1999. The increases are primarily the result of increased activity in its
Customer Loyalty and SMS divisions.
The gross profit of the Company decreased slightly from 51.1 percent of
revenues in fiscal 1998 to 50.8 percent of revenues in fiscal 1999, primarily
due to the significantly larger dollar value contracts the Company completed
over the past year. The Company's average contract price increased from
approximately $50,000 in fiscal 1998 to approximately $95,000 in fiscal 1999.
Larger full-service market research studies generally require a greater
percentage of data-collection and data-processing costs, which typically lowers
the gross profit as a percentage of revenues.
Operating costs decreased approximately one percent from 43.7 percent of
revenues in fiscal 1998 to 42.8 percent of revenues in fiscal 1999. This
decrease is the result of the Company's continuing efforts to keep its operating
costs down as it continues to generate greater revenues. Additionally, the
Company recognized an unusual charge of $320,000 associated with the retirement
of two executives.
Income from operations increased as a percentage of revenues from 5.3
percent to 7.2 percent in fiscal 1999, or approximately $1,165,000. The increase
can be attributed mainly to the Company's ability to successfully win and
complete larger contracts while maintaining its operating cost structure.
Interest income increased from 0.1 percent of revenues in fiscal 1998 to
0.6 percent of revenues in fiscal 1999, or approximately $210,000 from
approximately $20,000 in fiscal 1998 to approximately $230,000 in fiscal 1999.
This increase is the result of the interest earned on the increased cash
balances of the Company.
The provision for income taxes increased due to increased income in fiscal
1999. The effective tax rate decreased from 40.3 percent in fiscal 1998 to 38.6
percent in fiscal 1999 as a result of varying levels of work being completed in
the states in which the Company operates. Overall, the Company increased its net
income as a percentage of sales from 3.3 percent in fiscal 1998 to 4.8 percent
in fiscal 1999, or approximately $850,000, from approximately $1,125,000 in
fiscal 1998 to approximately $1,975,000 in fiscal 1999.
The Company defines backlog as the unearned portions of its existing
contracts at each balance sheet date. At June 30, 1999, backlog was
approximately $18,100,000 as compared to a backlog of approximately $12,300,000
at June 30, 1998. The $18,100,000 figure is the largest backlog figure in the
Company's history. The amount of backlog at any time may not be indicative of
intermediate or long-term trends in the Company's operations.
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<PAGE>
FISCAL YEAR ENDED JUNE 30, 1998 AS COMPARED TO FISCAL YEAR ENDED JUNE 30, 1997
Revenues increased approximately 15.7 percent from fiscal 1997 to fiscal
1998. This growth is the result of increased activity in three of the Company's
four divisions. The Customer Loyalty Division experienced flat sales from year
to year due to increased competition.
The gross profit of the Company improved from 49.2 percent of revenues in
fiscal 1997 to 51.1 percent of revenues in fiscal 1998, primarily due to
improved operating efficiencies. This improvement reflects one of management's
goals which was to lower the costs of performing research without impairing the
quality of the Company's products.
Operating costs remained flat from year to year as a percentage of
revenues. The Company realized an unusual cost associated with an employment
transitional agreement entered into with the former Chairman and Chief Executive
Officer in Fiscal 1998.
Income from operations increased as a percentage of revenues from 4.3
percent to 4.9 percent in fiscal 1998, or approximately $545,000. On a pro forma
basis, excluding the unusual cost, income from operations increased
approximately 2.7 percent from fiscal 1997 to fiscal 1998, which reflects the
impact of the cost and expense reductions discussed by management.
Interest income (expense) changed from (0.7 percent) in fiscal 1997 to 0.1
percent in fiscal 1998. This primarily reflects the elimination of bank debt in
the United Kingdom as well as better cash management in the United States.
The provision for income taxes increased due to increased income in fiscal
1998. Overall, the Company increased its net income as a percentage of sales
from 2.2 percent in fiscal 1997 to 3.3 percent in fiscal 1998, or approximately
$447,000, including the unusual cost in fiscal 1998.
At June 30, 1998, backlog was approximately $12,300,000 as compared to a
backlog of approximately $12,000,000 at June 30, 1997. The amount of backlog at
any time may not be indicative of intermediate or long-term trends in the
Company's operations.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's cash balance increased from $2,097,347 to $5,203,383, an
increase of approximately $3,100,000 during fiscal 1999. This increase in cash
can be attributed to the cash generated from operations as well as the cash
received from an agreement with a number of investors who purchased shares of
the Company's stock in July of 1998. This agreement consisted of the sale of
1,000,000 shares of common stock at $2.25 per share and options to purchase an
aggregate of 250,000 shares of common stock at an exercise price of $2.25 per
share (exercisable for 5 years). The Agreement also provides that the investors
will, under certain circumstances, provide or arrange for others to provide up
to $25,000,000 in debt or equity financing to complete acquisitions and/or
projects approved by the Board of Directors. The Company netted approximately
$1,925,000 after deducting all costs associated with the transaction.
At June 30, 1999, the Company's working capital increased $3,712,811 to
$4,513,859 from $801,048 at June 30, 1998, and the current ratio increased to
1.38 from 1.08.
For the year ended June 30, 1999, the Company generated cash from
operations of approximately $2,073,000. Additional stock issued to the investors
in July of 1998 and employee exercised stock options and other miscellaneous
items added approximately $2,302,000, for a total of $4,375,000 of cash
available during the year. The major uses of this cash were to increase cash
balances by approximately $3,100,000 and to purchase computer equipment, office
furnishings and fund leasehold improvements for its London office of
approximately $1,275,000.
The Company has a loan agreement with Summit Bank, located in Princeton,
New Jersey. The loan agreement contains the following:
o A $2.5 million revolving line of credit at a variable interest rate
based on certain financial ratios. As of June 30, 1999, the rate is
the prime rate less one-half percent (prime rate at June 30, 1999 was
7.75%). As of June 30, 1999, the Company was in compliance with all of
the financial ratios and has not borrowed against this line.
o A $500,000 term line secured by equipment, furniture and fixtures at
an interest rate based on certain financial ratios. As of June 30,
1999, the rate is the prime rate less one-half percent. As of June 30,
1999, the Company has not borrowed against this line.
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In addition, the Company has a bank overdraft facility of (pounds)300,000
(approximately U.S. $475,000) with Barclays Bank, a London bank. The borrowings
are charged at a rate of 3 percent above the UK Base Rate (the base rate at June
30, 1999 was 5.0%). At June 30, 1999 the Company had borrowed approximately
(pounds)178,917 (approximately U.S. $280,000) against this overdraft facility.
All of these lines of credit are scheduled to expire on September 30, 1999.
The Company is currently negotiating terms for these lines to be extended.
On June 30, 1999, the Company's Board of Directors authorized the Company
to repurchase from time to time over the next two years in open market
transactions or otherwise up to one million shares of the Company's common
stock. The Company expects to finance any repurchase with cash generated from
operations.
Recent Trends
- -------------
During fiscal 1999, the Company began a transition from a full-service
market research company to a full-service marketing services company. Several
initiatives have been announced during the past six months to facilitate this
transition.
In April of 1999, the Company established the Idea Farm, Inc.(trademark), a
wholly-owned subsidiary, to focus primarily on promotional services that support
its agribusiness clients, such as peer influence meetings to educate customers
about a client's products and services in a more cost-effective manner than
traditional promotional methods.
In June of 1999, the Company established BlinkE(trademark), a wholly owned
subsidiary, that integrates the Company's advanced marketing research
capabilities with innovative Internet strategies in business-to-business and
retail e-commerce applications including proactive strategy development and
advanced web site implementation.
In July of 1999, the Company introduced Total e-Survey(trademark), a
web-survey product that will combine its advanced market research technologies
and international expertise with web survey capabilities. The online surveys
will be offered as part of its complete, integrated data collection and analysis
systems. The Company anticipates using Total e-Survey(trademark) for
strategically designed surveys on topics of current interest as well as
client-specific programs.
Impact of Inflation
- -------------------
Inflation had no material effect on the financial performance of the
Company during fiscal 1999.
11
<PAGE>
YEAR 2000
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define a specific year. Absent corrective
actions, a computer program that has date sensitive software may recognize a
date using "00" as the year 1900 instead of the year 2000. This could result in
system failures or miscalculations causing disruptions to various activities and
operations.
The Company recognizes the importance of ensuring that neither its
customers nor its business operations are disrupted as a result of Year 2000
software failures. The Company has surveyed, and continues to communicate with,
customers, suppliers, financial institutions and other vendors with which it
does business to coordinate Year 2000 conversion efforts. Based on the results
of this ongoing information exchange, the Company believes that any risks are
minimal and that its systems are substantially Year 2000 compliant. Management
has initiated a Company-wide program that will make it Year 2000 compliant by
November 1, 1999. The Company expects to incur internal staff costs and other
expenses necessary during the course of such compliance efforts and the Company
has replaced some systems and upgraded others. The total cost of this effort
will be $100,000 - $150,000 and has been funded by cash flows from operations.
The Company does not expect Year 2000 issues to materially effect its products,
services, competitive position or financial performance. However, there can be
no assurance that this will be the case. The ability of third parties with which
the Company transacts business to adequately address their internal Year 2000
issues is outside the Company's control. There can be no assurance that the
failure of such third parties to adequately address their respective Year 2000
issues will not have a material adverse effect on the Company's business,
financial condition, cash flows and results of operations.
The Company currently has no contingency plans in place in the event it
does not complete all phases of the Year 2000 program.
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKETING RISK
The Company has one foreign subsidiary whose financial statements are translated
using the accounting policies described in Note 1 of the Notes to the
Consolidated Financial Statements. The Company is subject to exposure from the
risk of currency fluctuations as the value of the foreign currency fluctuates
against the dollar. The Company does not believe that it is exposed to material
foreign exchange market risk.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and notes thereto are presented under Item
14 of this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
12
<PAGE>
PART III
Information required under Items 10, 11, 12 and 14 is incorporated herein
by reference to the Company's definitive proxy statement to be filed with the
Securities and Exchange Commission within 120 days after the year covered by
this Form 10-K with respect to its Annual Meeting of Stockholders to be held on
December 8, 1999.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS OF FORM 8K
(a) The following documents are filed as part of this report.
1. Financial Statements Page Reference
-------------------- --------------
Report of Independent Auditors. F-1 - F-2
Consolidated Balance Sheets as of June 30, 1999 and 1998. F-3
Consolidated Statements of Operations for the years ended
June 30, 1999, 1998 and 1997. F-4
Consolidated Statements of Stockholders' Equity for the years
ended June 30, 1999, 1998 and 1997. F-5
Consolidated Statements of Cash Flows for the years ended
June 30, 1999, 1998 and 1997. F-6
Notes to Consolidated Financial Statements. F-7
2. Financial Statement Schedule
----------------------------
Schedule II - Valuation and Qualifying Accounts S-1
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable or the required
information is given in the Financial Statements or Notes thereto, and therefore
have been omitted.
(b) Reports on Form 8K
None
13
<PAGE>
(c) Exhibits
--------
The following documents are filed as part of this Form 10K at the page
indicated or are incorporated by reference herein. Any document incorporated by
reference is identified by a parenthetical reference to the filing with the
Commission which included such document.
Exhibit No. Description
- ----------- -----------
2 Certificate of Merger dated February 17, 1987;
3.1 Certificate of Incorporation of the Company (incorporated by reference
to Exhibit 3.1 to the Registration Statement on Form S-18, as amended,
Registration No. 33-9078-NY; the"Form S-18");
3.2 By-laws of the Company (incorporated by reference to Exhibit 3.2 to
the Form S-18);
10.1 Lease, dated as of December 12, 1985, between the Company and
Bellemeade Development Corporation (incorporated by reference to
Exhibit 10.2 to the Form S-18);
10.2 Total Research Corporation Savings & Retirement Plan (incorporated by
reference to Exhibit 10.3 to the Form S-18);
10.3 Employment Agreement, dated January 1, 1999, between the Company and
Terri Flanagan;
10.4 Sublease, dated July 17, 1997, between the Company and Hexaware
Technologies (incorporated by reference to Exhibit to the Form
S-18);
10.5 Employment Agreement, dated July 1, 1998, between the Company and
Albert Angrisani;
10.6 Employment Agreement, dated January 1, 1999, between the Company and
Patti Hoffman;
10.7 Employment Agreement, dated January 1, 1999, between the Company and
Eric Zissman;
10.8 Employment Agreement, dated January 1, 1999, between the Company and
Mark Nissenfeld;
10.9 Loan Agreement between Summit Bank and the Company dated January 1,
1999.
10.10 1995 Stock Incentive Plan (incorporated by reference by the Form S8,
Registration No. 333-74635);
10.11 1986 Stock Incentive Plan (incorporated by reference by the Form S8,
Registration No. 333-74631);
21.1 List of Subsidiaries;
23.1 Consent of Ernst & Young LLP dated September 28, 1999;
23.2 Consent of Amper, Politziner & Mattia dated September 27, 1999;
27 Financial Data Schedule (EDGAR only).
14
<PAGE>
TOTAL RESEARCH CORPORATION
AND SUBSIDIARY
For the Years Ended
June 30, 1999, 1998 and 1997
<TABLE>
<CAPTION>
<S> <C>
Independent Auditors Reports F-1
Consolidated Balance Sheets as of June 30, 1999 and 1998 F-3
Consolidated Statements of Operations for the Years Ended June 30, 1999, 1998 and 1997 F-4
Consolidated Statements of Stockholders' Equity for the Years Ended June 30, 1999, 1998 F-5
and 1997
Consolidated Statements of Cash Flows for the Years Ended June 30, 1999, 1998 and 1997 F-6
Notes to the Consolidated Financial Statements F-7
Schedules:
Schedule II - Valuation and Qualifying Accounts S-1
</TABLE>
15
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and
Stockholders of Total Research
Corporation and Subsidiary
We have audited the accompanying consolidated balance sheet of Total Research
Corporation and Subsidiary as of June 30, 1999 and the related consolidated
statements of operations, stockholders' equity and cash flows for the year then
ended. Our audits also included the financial statement schedule listed in the
Index at Item 14A. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Total
Research Corporation and Subsidiary as of June 30, 1999 and the consolidated
results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles. Also, in our opinion,
the related financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly in all material
respects the information set for therein.
/s/ Ernst & Young, LLP
--------------------------
ERNST & YOUNG, LLP
August 27, 1999
MetroPark, New Jersey
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and
Stockholders of Total Research
Corporation and Subsidiary
We have audited the accompanying consolidated balance sheet of Total Research
Corporation and Subsidiary as of June 30, 1998 and the related consolidated
statements of operations, stockholders' equity and cash flows for the years
ended June 30, 1998 and 1997. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Total
Research Corporation and Subsidiary as of June 30, 1998, and the results of
their operations and their cash flows for the years June 30, 1998 and 1997 in
conformity with generally accepted accounting principles.
/s/AMPER, POLITZINER & MATTIA, PC
September 21, 1998
Edison, New Jersey
F-2
<PAGE>
TOTAL RESEARCH CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JUNE 30,
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Current assets
Cash and cash equivalents $ 5,203,383 $2,097,347
Accounts receivable, less allowance for 7,068,199 6,451,545
doubtful accounts of $110,000 at June 30, 1999
and June 30, 1998
Cost and estimated earnings in excess of 3,248,270 1,201,265
billings on uncompleted contracts
Deferred taxes 330,000 243,000
Prepaid expenses and other current assets 585,262 715,376
----------- -----------
Total current assets 16,435,114 10,708,533
Fixed assets, less accumulated depreciation of $4,553,729 and 2,609,152 2,110,914
$3,923,493, respectively
Goodwill, net of accumulated amortization of $379,181 and $301,337, 1,644,696 1,722,540
respectively
Deferred Taxes 264,000 361,100
Other assets 763,767 566,071
----------- -----------
$ 21,716,729 $ 15,469,158
Liabilities and Stockholders' Equity
Current liabilities
Revolving line of credit $ 282,027 $ -
Accounts payable 4,038,566 3,385,709
Accrued expenses and other current liabilities 3,512,938 2,834,060
Billings in excess of costs and estimated earnings 3,373,665 3,394,545
Income taxes payable 714,059 293,171
----------- -----------
Total current liabilities 11,921,255 9,907,485
Other long-term liabilities 716,605 484,207
----------- -----------
12,637,860 10,391,692
----------- -----------
Stockholders' equity
Common stock authorized 20,000,000 shares
.001 par value, 11,761,608 shares issued
at June 30, 1999 and 10,476,108 shares issued
at June 30, 1998 11,762 10,476
Additional paid-in capital 6,627,782 4,172,904
Retained earnings 3,134,938 1,159,201
Accumulated other comprehensive income (35,925) 22,602
----------- -----------
9,738,557 5,365,183
Less: Treasury Stock, at cost (659,688) (287,717)
----------- -----------
Total Stockholders' equity 9,078,869 5,077,466
----------- -----------
Total liabilities and stockholders' equity $21,716,729 $15,469,158
=========== ===========
</TABLE>
See accompanying notes to financial statements
F-3
<PAGE>
<TABLE>
<CAPTION>
TOTAL RESEARCH CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Revenues $41,561,835 $34,057,084 $29,443,302
Direct costs 20,450,287 16,641,169 14,941,632
----------- ----------- -----------
Gross profit 21,111,548 17,415,915 14,501,670
Operating expenses 17,801,453 14,868,072 13,221,437
Unusual charge 320,000 723,000
----------- ----------- -----------
-
Income from operations 2,990,095 1,824,843 1,280,233
Interest income (expense), net 230,462 20,424 (202,133)
Other income, net 40,000 50,050
-
----------- ----------- -----------
Income before provision
for income taxes 3,220,557 1,885,267 1,128,150
Provision for income taxes 1,244,820 760,450 489,955
----------- ----------- -----------
Net income $1,975,737 $1,124,817 $ 638,195
========== ========== ==========
Earnings per share
Basic $ 0.17 $ 0.11 $ 0.06
Diluted $ 0.16 $ 0.10 $ 0.06
Weighted average common shares
Outstanding - Basic 11,586,010 10,118,908 9,978,351
- Diluted 12,693,423 11,704,804 10,357,073
See accompanying notes to financial statements
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
TOTAL RESEARCH CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock Treasury Stock
--------------------------- ------------------
Accumulated Retained
Additional Other Earnings Total
Shares Paid-In Comprehensive (Accumulated Stockholders
Issued Amount Capital Income Deficit) Shares Amount Equity
------ ------ ------- ------ -------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance-June 30, 1996 9,882,108 $ 9,882 $ 3,505,835 $(90,685) $ (603,811) - $ - $2,821,221
-
Exercise of options 162,000 162 70,710 - - - - 70,872
Translation adjustment - - - 117,780 - - - 117,780
Net Income - - - - 638,195 - - 638,195
---------- ------ --------- ------ --------- ------ -------- ----------
Balance - June 30, 1997 10,044,108 10,044 3,576,545 27,095 34,384 - - 3,648,068
---------- ------ --------- ------ --------- ------ -------- ----------
Exercise of Options 432,000 432 172,359 - - 92,930 (287,717) (114,926)
Tax Benefit - Exercise of
Options - - 424,000 - - - - 424,000
Translation adjustment - - - (4,493) - - - (4,493)
Net Income - - - - 1,124,817 - - 1,124,817
---------- ------ --------- ------ --------- ------ -------- ----------
Balance-June 30, 1998 10,476,108 10,476 4,172,904 22,602 1,159,201 92,930 (287,717) $5,077,466
---------- ------ --------- ------ --------- ------ -------- ----------
Exercise of Options 285,500 286 259,906 - - 98,949 (371,971) (111,779)
Tax Benefit - Exercise of - -
Options 272,420 272,420
Shares issued to group of
investors 1,000,000 1,000 1,922,552 - - - 1,923,552
Translation adjustment - - - (58,527) - - (58,527)
Net Income - - 1,975,737 1,975,737
- - - -
---------- ------ --------- ------ --------- ------ -------- ----------
Balance-June 30, 1999 11,761,608 $ 11,762 $6,627,782 $ (35,925) $3,134,938 191,879 $(659,688) $9,078,869
========== ====== ========== ======= ========== ======= ========= ==========
See accompanying notes to financial statements
</TABLE>
F-5
<PAGE>
<TABLE>
<CAPTION>
TOTAL RESEARCH CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 1,975,737 $ 1,124,817 $ 638,195
------------- ------------- ---------------
Adjustments to reconcile net income
to net cash provided by operating activities
Depreciation 776,371 588,937 634,903
Amortization 343,250 237,844 237,844
Accretion of warrants - - 8,000
Deferred tax benefit 10,100 (93,320) 262,015
Changes in operating assets and liabilities
Accounts receivable (616,654) (1,349,949) (935,110)
Cost and estimated earnings in excess of billing
on uncompleted contracts (2,047,005) 39,587 496,882
Prepaid expenses and other current assets 130,114 (147,591) 136,047
Other assets (463,103) 5,845 13,251
Income tax refund receivable - - 841,495
Accounts payable 652,857 1,279,154 158,151
Accrued expenses and other current liabilities 678,878 187,830 942,376
Accrued restructuring costs - - (425,500)
Billings in excess of costs and estimated
Earnings (20,880) (492,827) 1,772,230
Income taxes payable 420,888 126,697 80,171
Other long-term liabilities 232,398 205,189 40,957
------------- ------------- ---------------
Net cash provided by operating activities 2,072,951 1,712,213 4,901,907
------------- ------------- ---------------
Cash flows from investing activities
Purchases of equipment and lease improvements (1,274,609) (383,221) (721,328)
------------- ------------- ---------------
Net cash used in investing activities (1,274,609) (383,221) (721,328)
------------- ------------- ---------------
Cash flows from financing activities
Increase (decrease) in revolver 282,027 (214,575) (3,512,217)
Payment under capital lease obligations, net - - (97,272)
Proceeds from issuance of common stock 2,084,194 309,073 70,872
------------- ------------- ---------------
Net cash provided by (used in) financing
activities 2,366,221 94,498 (3,538,617)
------------- ------------- ---------------
Effect of foreign exchange rate changes on cash (58,527) (4,493) 32,187
------------- ------------- ---------------
Net increase in cash and cash
equivalents 3,106,036 1,418,997 674,149
Cash and cash equivalents - beginning of year 2,097,347 678,350 4,201
------------- ------------- ---------------
Cash and cash equivalents - end of year $ 5,203,383 $ 2,097,347 $ 678,350
============= ============= =============
Supplemental disclosures of cash flow information
Income taxes paid $493,310 $ 54,750 $ 90,149
Interest paid $43,789 $ 17,759 $ 191,370
Supplemental disclosure of non-cash financing
activity (treasury stock)
Exchange of common stock as payment for exercised
stock options $ 371,971 $ 287,717 $ -
See accompanying notes to financial statements
</TABLE>
F-6
<PAGE>
TOTAL RESEARCH CORPORATION AND SUBSIDIARY
Notes to the Consolidated Financial Statements
NOTE 1 - THE COMPANY
-----------
The Company performs marketing research and marketing services for various
Fortune 100 companies in a broad spectrum of industries. No single customer
accounted for more than 10% of the Company's revenues in the years ended June
30, 1999, 1998 and 1997.
The Company services these clients through its U.S. locations in Princeton,
NJ; Minneapolis, MN; Poughkeepsie, NY; Detroit, MI; Tampa, FL; and its overseas
location, London, England.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------
REVENUE RECOGNITION
- -------------------
The Company employs the percentage of completion method of accounting to
report its revenues on its single-client studies, while on multi-client studies
it recognizes revenues when the results are delivered to its clients. Clients
are generally billed in accordance with the terms of the applicable contracts,
which are not necessarily indicative of the stage of completion of the project.
For single-client studies, the stage of completion and earned revenues are
determined for each project for the applicable period. The amount by which the
work completed exceeds billings to clients is carried as a current asset on the
Company's balance sheet and is shown as "costs and estimated earnings in excess
of billings" on uncompleted contracts. Where billings exceed work completed, the
amounts are carried on the Company's balance sheet as a current liability and
are shown as "billings in excess of costs and estimated earnings."
PRINCIPLES OF CONSOLIDATION
- ---------------------------
The consolidated financial statements include the accounts of the Company
and its subsidiary, Total Research Limited, after elimination of material
intercompany accounts and transactions.
USE OF ESTIMATES
- ----------------
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
- -------------------------
For the purpose of the statement of cash flows, cash equivalents include
certificates of deposit and all highly liquid debt instruments with original
maturities of three months or less.
FIXED ASSETS
- ------------
Fixed assets are stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets: three years
for transportation equipment and five to ten years for office equipment and
furnishings. Leasehold improvements are amortized over the shorter of the
economic lives or the underlying lease term. Repairs and maintenance, which do
not extend the useful lives of the related assets, are expensed as incurred.
F-7
<PAGE>
DEFERRED RENT
- -------------
The excess of lease payments on a straight-line basis over the actual
monthly payments is recorded as deferred rent, which will reverse in future
periods. Included in other long-term liabilities is deferred rent of
approximately $484,000 and $309,000 as of June 30, 1999 and 1998, respectively.
GOODWILL
- --------
Goodwill has been recorded in relation to the excess of the purchase price
over the fair values of the identified assets acquired. The Company amortizes
goodwill over 25 years. The carrying value of goodwill is evaluated periodically
in relation to the operating performance and future undiscounted net cash flows
of the underlying business. Investment adjustments will be recorded if the sum
of expected future net cash flows is less than the book value of the goodwill.
INCOME TAXES
- ------------
The provision for income taxes includes Federal, foreign, state and local
income taxes currently payable and receivable and those deferred because of
temporary differences between the financial statement and tax basis of assets
and liabilities. The unremitted earnings of the Company's foreign subsidiary are
considered to be permanently reinvested and are not expected to be remitted to
the parent company.
IMPAIRMENT OF LONG-LIVED ASSETS
- -------------------------------
The Company records impairment losses on long-lived assets used in
operations or expected to be disposed when events and circumstances indicate
that the assets might be impaired and the undiscounted cash flows estimated to
be generated by those assets are less than the carrying amounts of those assets.
STOCK-BASED COMPENSATION
- ------------------------
As permitted by FASB Statement No. 123, Accounting for Stock-Based
Compensation, the Company has elected to follow Accounting Principal Board
Opinion No. 25, Accounting for Stock Issued to Employees (APB 25) and related
interpretations in accounting for its employee option plans. Under APB 25, no
compensation expense is recognized at the time of option grant if the exercise
price of the Company's employee stock option equals or exceeds the fair market
value of the underlying common stock on the date of grant.
EARNINGS PER SHARE
- ------------------
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
Earnings Per Share. Statement 128 replaced the calculation of primary and fully
diluted earnings per share with basic and diluted earnings per share. Unlike
primary earnings per share, basic earnings per share excludes any dilutive
effects of options, warrants and convertible securities. Diluted earnings per
share is very similar to the previously reported fully diluted earnings per
share. All earnings per share amounts for all periods have been presented, and
where appropriate, restated to conform to the Statement 128 requirements.
F-8
<PAGE>
COMPREHENSIVE INCOME
- --------------------
As of July 1, 1998, the Company adopted Statement No. 130, Reporting
Comprehensive Income. Statement 130 establishes new rules for the reporting and
display of comprehensive income and its components. Since this Statement
requires only additional disclosure, there will be no effect on the Company's
results of operations or financial position. Statement 130 requires foreign
currency translation adjustments, which prior to adoption were reported
separately in stockholders' equity, to be included in other comprehensive
income. Prior year financial statements have been reclassified to conform to the
requirements of Statement 130.
SEGMENTS
- --------
Effective July 1, 1998, the Company adopted Statement No. 131, Disclosures
about Segments of an Enterprise and Related Information. Statement 131
superceded FASB Statement No. 14, Financial Reporting for Segments of a Business
Enterprise. Statement 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports. Statement 131 also establishes
standards for related disclosures about products and services, geographic areas,
and major customers. The adoption of Statement 131 did not affect results of
operations or financial position, but did affect the disclosure of segment
information. See Note 11.
FOREIGN OPERATIONs
- ------------------
The assets and liabilities of Total Research Limited operations are
translated at current exchange rates, and income statement accounts are
translated at the weighted average rates during the period. The related
translation adjustments are recorded as a separate component of other
comprehensive income.
NOTE 3 - CONCENTRATION OF CASH BALANCE
-----------------------------
At June 30, 1999, a cash balance of $5,049,009 is maintained in a bank
account insured by the Federal Deposit Insurance Corporation (FDIC). This
balance exceeds the insured amount of $100,000.
NOTE 4 - FIXED ASSETS
------------
Fixed assets consist of the following:
June 30,
1999 1998
---- ----
Office Equipment & Fixtures $ 6,421,769 $ 5,729,984
Leasehold Improvements 741,113 304,423
--------- ---------
7,162,882 6,034,407
Less: Accumulated depreciation
and amortization 4,553,729 3,923,493
--------- ---------
$ 2,609,153 $ 2,110,914
========= =========
Depreciation expense for the years ended June 30, 1999, 1998 and 1997 was
approximately $692,000, $585,000 and $631,000, respectively.
Amortization expense for the years ended June 30, 1999, 1998 and 1997 was
approximately $84,000, $4,000 and $4,000, respectively.
F-9
<PAGE>
NOTE 5 - NOTES PAYABLE
-------------
The Company has the following agreements in the United States:
A $2.5 million revolving line of credit at a variable interest rate based
on certain financial ratios. As of June 30, 1999, the rate is prime (7.75% at
June 30, 1999) plus one-half percent. As of June 30, 1999, the Company complied
with all of the financial ratios and has not borrowed against this line.
A $500,000 term line collateralized by equipment, furniture and fixtures at
an interest rate based on certain financial ratios. As of June 30, 1999, the
rate is the prime plus one-half percent. As of June 30, 1999, the Company
complied with all of the financial ratios and has not borrowed against this
line.
In addition, the Company has a bank overdraft facility of (pounds)300,000
(approximately $472,500 U.S. dollars) with Barclays Bank, its London bank. The
borrowings are charged at a rate of 3 percent above the UK base Rate (at 5.00%
on June 30, 1999). At June 30, 1999 the Company had borrowed approximately
(pounds)178,917 (approximately $280,000 U.S. dollars) against this overdraft
facility.
All of these lines of credit are scheduled to expire on September 30, 1999. The
Company is currently negotiating terms for these lines to be extended.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
-----------------------------
OPERATING LEASES
- ----------------
The Company is committed under various leases for office space. In addition, the
Company subleases a portion of its office premises. Approximate future minimum
rental payments and sublease rentals under non-cancelable leases are as follows:
For the Years Ending
June 30,
--------
Rental Sublease
Payments Rentals Net
-------- ------- ---
2000 1,671,927 314,181 1,357,746
2001 1,805,716 326,595 1,479,121
2002 1,777,649 341,333 1,436,316
2003 1,771,919 259,601 1,512,318
2004 1,640,479 - 1,640,479
Thereafter 2,579,425 2,579,425
-
------------- ----------- ------------
Total minimum
Payments required $ 11,247,115 $ 1,241,710 $ 10,005,405
============= =========== ============
In addition to the above minimum rentals, the leases are subject to escalation
clauses covering increases in real estate taxes and operating costs over the
base year. The leases provide for renewal options for periods from two to ten
years. Net rental expense charged to operations was approximately $1,178,000,
$1,130,000 and $1,572,000 for the fiscal years ended June 30, 1999, 1998 and
1997, respectively.
F-10
<PAGE>
EMPLOYMENT AGREEMENTS
- ---------------------
The Company has entered into employment agreements with key management
personnel. These agreements expire at different times through June 30, 2001.
They contain provisions for future base salaries through this date that total
$1,144,000. There is also a bonus arrangement for up to 20 percent of the base
salary if individual goals are met. In addition, they will be eligible for an
excess bonus if they exceed such goals.
On July 1, 1998, the Company entered into an employment agreement with an
officer of the Company, providing, among other things, for the employment by the
Company of the officer for a term of three years, effective immediately.
Included in other assets as of June 30, 1999 is a non-collateralized loan
receivable from this officer amounting to $100,000 which is due June 30, 2001.
NOTE 7 - INCOME TAXES
------------
Deferred tax attributes resulting from differences between financial accounting
amounts and tax basis of assets and liabilities at June 30 are as follows:
Current assets and (liabilities) 1999 1998
---- ----
Allowance for doubtful accounts $ 43,000 $ 44,000
Accrued vacation 148,000 64,000
Retirement plans 83,000 54,000
Accrued royalties - 39,000
Accrued expenses 26,000 42,000
Other 30,000 -
-------- --------
Total current deferred tax asset $ 330,000 $ 243,000
-------- --------
Non-current assets and (liabilities)
Depreciation $(198,000) $(220,000)
Deferred rental obligation 172,000 124,000
Capitalized market research products 84,000 119,100
State net operating loss carryforward - 80,000
Severance plan 212,000 254,000
Other (6,000) 4,000
-------- --------
Total non-current deferred tax asset $ 264,000 $ 361,100
========== ==========
The Company has a history of operating earnings. Although recognition is not
assured, management has determined that the future operating income of the
Company will more likely than not be sufficient to recognize fully these net
deferred tax assets. As a result, no valuation allowance has been provided for
either year.
The sources of income before income taxes for the year ended June 30 is as
follows:
1999 1998 1997
---- ---- ----
United States $2,422,613 $1,144,775 $808,217
United Kingdom 797,944 740,492 319,933
--------- --------- ---------
Total $3,220,557 $1,885,267 $1,128,150
========= ========= =========
F-11
<PAGE>
TOTAL RESEARCH CORPORATION AND SUBSIDIARY
Notes to the Consolidated Financial Statements
NOTE 7 - INCOME TAXES
------------
The components of the provision for income taxes for the years ended June 30 are
as follows:
1999 1998 1997
---- ---- ----
Current expense
Federal $ 866,768 $ 601,320 $ 99,600
State 138,095 - -
United Kingdom 229,886 252,450 128,340
--------- ------- -------
1,234,749 853,770 227,940
Deferred expense (benefit) 10,071 (93,320) 262,015
--------- ------- -------
$1,244,820 $ 760,450 $ 489,955
========= ======= =======
Reconciliation of the U.S. statutory tax rate to the effective tax rate for the
years ended June 30 is as follows:
1999 1998 1997
---- ---- ----
Computed provision at the statutory rate $1,055,508 $641,000 $383,571
Permanent differences 39,967 33,000 $42,904
International rate differences 12,707 450 17,118
State income tax, net 136,638 69,000 48,493
Alternative minimum tax - - (40,000)
Other - 17,000 37,869
---------- -------- --------
Income tax provision $1,244,820 $760,450 $489,955
========== ======== ========
NOTE 8 - EMPLOYEE BENEFIT AND DEFERRED COMPENSATION
------------------------------------------
The Company maintains a 401(k) Savings Plan for the benefit of all its
employees. The 401(k) Savings Plan is funded through the Company's and
participating employees' contributions and generally provides that employees may
contribute, through payroll reductions, from 1% to 15% of their compensation.
The Company has, in the past, made a matching contribution in an amount equal to
50% of each participating employee's elective contribution up to 6% of the
participating employee's compensation. Company contributions charged to
operating expense were approximately $205,000, $195,000 and $215,000 for fiscal
years ended June 30, 1999, 1998 and 1997, respectively.
NOTE 9 - ACCRUED EXPENSES
----------------
The following is a summary of the items that comprise the accrued expenses and
other current liabilities at June 30:
1999 1998
---- ----
Bonus and other payroll accrual $1,966,181 $1,287,594
Vacation accrual 392,568 318,568
Accrued project direct costs 200,000 164,450
Accrued unusual charges 737,613 723,000
Other 216,576 340,448
---------- ----------
Totals $3,512,938 $2,834,060
F-12
<PAGE>
NOTE 10 - STOCK OPTION PLANS
------------------
The Company has elected to apply Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related interpretations
in accounting for its employee stock options as permitted under Financial
Accounting Standards Statement No. 123, "Accounting for Stock-Based
Compensation," (SFAS 123) the fair value alternative method. Under APB 25,
because the exercise price of the Company's employee stock options equals the
market price of the underlying stock on the date of grant, no compensation
expense is recognized. Under SFAS 123, the Company will provide pro forma net
income and pro forma earnings per share.
The Company's 1986 Stock Option Plan has authorized the grant of options to
personnel for up to 1,800,000 shares of the Company's common stock. Under the
Plan, options may be granted at not less than fair market value on the date of
grant (85% of fair market value with respect to non-qualified options). Options
granted under the plan become exercisable immediately and expire five years
after the date of grant (five years and one day with respect to non-qualified
options). On April 16, 1996 the Company adopted the 1995 Stock Incentive Plan
and froze the 1986 Stock Option Plan.
The 1995 Stock Incentive Plan has the authority to issue 2,500,000 options to
existing and future Officers, Directors, Employees and Consultants of the
Company. Incentive Stock Options or Non-Statutory Stock Options become
exercisable immediately and may be issued for a term of no more than ten years
from the date of grant, at an option price not less than 100% of the fair market
value of the Company's common stock at the date of grant. In addition, any
non-employee director and/or advisory board director shall be automatically
granted an option to purchase 10,000 shares of common stock for each year that
such person serves as a director. However, such options shall vest 33-1/3% for
each twelve months of continuous service until fully vested.
Pro forma information regarding net income and earnings per share is required by
SFAS 123 and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that Statement. The fair
value for all options was estimated at the date of grant using the Black-Scholes
option "pricing model with the following weighted-average assumptions for June
30, 1999, 1998 and 1997, respectively: risk-free interest rates of 5.20%, 5.72%
and 6.50%; dividend yields of 0%, 0% and 0%; volatility factors of the expected
market price of the Company's common stock of .76 , .75 and .76; and a weighted
average expected life of the option of 5 years.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
June 30,
1999 1998 1997
---- ---- ----
Pro forma net income $1,640,445 $817,563 $70,437
Pro forma income per share
Basic 0.14 0.08 0.01
Diluted 0.13 0.07 0.01
Pro forma compensation expense arising from stock options was $335,292, $512,090
and $946,264 for the years ended June 30, 1999, 1998 and 1997, respectively.
F-13
<PAGE>
NOTE 10 - STOCK OPTION PLANS (CONTINUED)
------------------------------
A summary of the Company's stock option activity, and related information for
the years ended June 30, follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------------------------- ------------------------------- -------------------------------
Weighted - Weighted - Weighted -
Options Average Options Average Options Average
(000) Exercise Price (000) Exercise Price (000) Exercise Price
----- -------------- ----- -------------- ----- --------------
Outstanding -
Beginning of Year
<S> <C> <C> <C> <C> <C> <C>
2,710 $1.04 2,832 $ 0.78 1,526 $0.71
Granted 1,429 2.50 330 2.38 1,726 0.83
Exercised (286) (1.07) (431) (0.43) (162) (0.44)
Forfeited 0 0 (21) (0.86) (258) (0.87)
Outstanding - end of
year 3,853 $1.56 2,710 $1.04 2,832 $0.78
Exercisable - end of
year 876 $1.85 1,209 $1.32 1,332 $0.75
Weighted-average fair
value of options granted
during the year: $1.61 $1.55 $0.55
</TABLE>
Following is a summary of the status of stock options outstanding at June 30,
1999:
<TABLE>
<CAPTION>
Outstanding Options Exercisable Options
------------------- -------------------
Weighted Average Weighted Average Weighted
Remaining Exercise Price Average
Exercise Price Contractual Life Exercise Price
Range Number Number
- ----------------------- ---------------- ------------------- ------------------ ------------------- ---------------------
<S> <C> <C> <C> <C> <C>
$ .00 - $ .99 1,855,000 2.3 years $0.80 198,200 $0.68
$1.00 - $1.99 328,000 2.3 years $1.14 228,000 $1.20
$2.00 - $2.99 1,570,000 8.8 years $2.40 350,000 $2.37
$3.00 - $3.99 100,000 9.9 years $3.81 100,000 $3.81
</TABLE>
The Company received 98,949 and 92,300 shares of its own Common Stock with a
fair market value of $371,971 and $287,717 in connection with the exercise of
certain stock options during fiscal years 1999 and 1998, respectively.
F-14
<PAGE>
TOTAL RESEARCH CORPORATION AND SUBSIDIARY
Notes to the Consolidated Financial Statements
NOTE 11 - GEOGRAPHIC SEGMENT INFORMATION
------------------------------
The Company identifies its segments based on the Company's geographic locations
and industries in which the Company operates. The Company currently has two
reportable segments: US Market Research and UK Market Research. There were no
significant inter-segment events which materially affected the financial
statements. The Company measures segment profits based on income before income
taxes. Information on segments and reconciliation to consolidated total for the
years ended June 30 (in thousands) are as follows:
Year ended June 30, 1999: US Market UK Market Total
Research Research Segments
-------- -------- --------
Revenues $28,990 $12,572 $41,562
Depreciation and amortization 902 218 1,120
Unusual charge 320 - 320
Operating income 1,715 842 2,990
Interest income (expense) 274 (44) 230
Income before income taxes 2,423 798 3,221
Total assets 14,783 6,934 21,717
Capital expenditures 414 861 1,275
Year ended June 30, 1998:
Revenues $23,319 $10,738 $34,057
Depreciation and amortization 639 188 827
Unusual charge 723 - 723
Operating income 980 845 1,825
Interest income (expense) 124 (104) 20
Other income 40 - 40
Income before income taxes 1,145 740 1,885
Total assets 9,718 5,751 15,469
Capital expenditures 110 273 383
Year ended June 30, 1997:
Revenues $20,781 $8,662 $29,443
Depreciation and amortization 701 172 873
Operating income 912 368 1,280
Interest (expense) (154) (48) (202)
Other income 50 - 50
Income before income taxes 809 319 1,128
Total assets 7,837 5,111 12,948
Capital expenditures 558 163 721
F-15
<PAGE>
NOTE 12 - STOCKHOLDERS' EQUITY
--------------------
On July 1, 1998, the Company closed an agreement with a number of
investors, pursuant to which among other things, the Investors purchased an
aggregate of 1,000,000 shares of the Company's Common Stock at a price of $2.25
per share, and the Company issued options, exercisable at any time within
five(5) years from the issuance thereof, to purchase an aggregate of 250,000
shares of the Company's Common Stock at an exercise price of $2.25 per share.
The terms of the Purchase Agreement include an undertaking by the
Investors, under certain circumstances, to assist the Company in obtaining
$25,000,000 in debt or equity financing for acquisitions or other projects
approved by the Board of Directors of the Company.
On June 30, 1999, the Company's Board of Directors authorized the Company
to repurchase from time to time over the next two years in open market
transactions or otherwise up to one million shares of the Company's common
stock. The Company expects to finance any repurchase with cash generated from
operations.
NOTE 13- UNUSUAL ITEMS
-------------
In fiscal 1999 the Company has entered into transition agreements with two
former employees and directors of the Company. The agreements end on June 30,
2001 and sets forth the total compensation of $320,000.
In fiscal 1998 the Company entered into an employment transition agreement
with the former Chairman of the Board and Chief Executive Officer, who now holds
the position of Chairman Emeritus and retains a seat on the Corporation's Board
of Directors. The agreement ends on June 30, 2001 and sets forth the total
compensation of $723,000.
NOTE 14 - NEW ACCOUNTING STANDARDS
------------------------
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
- ----------------------------------------------
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1 (SOP"98-1"), "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." SOP 98-1 establishes
standards for recording the costs of software for internal use. SOP 98-1
indicated that certain costs incurred in the development or purchase of software
designated for internal use should be capitalized. All other associated costs
should be expensed. The Company will adopt SOP 98-1 in the fiscal year ending
June 30, 2000. Adoption of this statement is not anticipated to have a material
effect on the Company's financial position or results of operations.
F-16
<PAGE>
SIGNATURES
In accordance with Section 13 or 15 (d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated:
TOTAL RESEARCH CORPORATION
By:/s/ Albert Angrisani
-----------------------------------------
ALBERT ANGRISANI, Chief Executive Officer
In accordance with Section 13 or 15 (d) of the Exchange Act, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
TOTAL RESEARCH CORPORATION
By:/s/ David Brodsky
-----------------------------------------
DAVID BRODSKY, Chairman of the Board of
Directors
Dated:
By:/s/ Albert Angrisani
-----------------------------------------
ALBERT ANGRISANI, Chief Executive Officer
Dated:
By:/s/ Eric C. Zissman
-----------------------------------------
ERIC C. ZISSMAN, Chief Financial Officer
and Chief Accounting Officer
Dated:
By:/s/ Howard Shecter
-----------------------------------------
HOWARD SHECTER, Director
Dated:
By:/s/ George Lindemann
-----------------------------------------
GEORGE LINDEMANN, Director
Dated:
By:/s/ Anthony Galli
-----------------------------------------
ANTHONY GALLI, Director
Dated:
By:/s/ J. Edward Shrawder
-----------------------------------------
J. EDWARD SHRAWDER, Director
Dated:
By:/s/ Lorin Zissman
-----------------------------------------
LORIN ZISSMAN, Director
<PAGE>
Schedule II - Valuation and Qualifying Accounts
TOTAL RESEARCH CORPORATION AND SUBSIDIARIES
Rule 12-09. Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Balance at Charged to
Beginning Costs and Deductions- Balance at
Description of Period Expenses Describe End of period
- ----------- --------- -------- -------- -------------
<S> <C> <C> <C> <C>
YEAR ENDED JUNE 30, 1999:
Allowance for uncollectible
accounts $110,000 - - $110,000
YEAR ENDED JUNE 30, 1998:
Allowance for uncollectible
accounts $110,000 - - $110,000
YEAR ENDED JUNE 30, 1997:
Allowance for uncollectible
accounts $110,000 - - $110,000
</TABLE>
S-1
CERTIFICATE OF MERGER
OF
TOTAL RESEARCH CORPORATION
(a New Jersey Corporation)
INTO
TOTAL RESEARCH CORPORATION
(a Delaware Corporation)
The undersigned corporation
DOES HEREBY CERTIFY:
FIRST: That the name and state of incorporation of each of the
constituent corporations of the merger is as follows:
NAME STATE OF INCORPORATION
---- ----------------------
TOTAL RESEARCH CORPORATION Delaware
TOTAL RESEARCH CORPORATION New Jersey
SECOND: That an agreement of merger between the parties to the
merger has been approved, adopted, certified, executed and acknowledged by each
of the constituent corporations in accordance with the requirements of
subsection (c) of section 252 of the General Corporation Law of the State of
Delaware.
THIRD: The name of the surviving corporation of the merger is TOTAL
RESEARCH CORPORATION (herein referred to TRC-Del), a Delaware corporation.
<PAGE>
FOURTH: That the amendments or changes in the Certificate of
Incorporation of TRC-Del, a Delaware corporation, which is the surviving
corporation, that are to be effected by the merger are as follows: 4. The total
number of shares of common stock which the corporation shall have authority to
issue is Twenty Million (20,000,000) and the par value of each of such shares is
One Million ($0.001) amounting in the aggregate to Twenty Thousand Dollars
($20,000.00).
FIFTH: That the executed agreement of merger is on file at the
principal place of business of the surviving corporation. The address of said
principal place of business is 5 Independence Way, Princeton, New Jersey 08540.
SIXTH: That a copy of the agreement of merger will be furnished on
request and without cost to any stockholder of any constituent corporation.
SEVENTH: The authorized capital stock of each foreign corporation
which is a party to the merger is as follows:
Corporation Class Number of Shares Par value per share or
statement that shares are
without par value
Total Research Common 50,000,000 $0.01
Corporation
<PAGE>
Dated: 2/17/87
TOTAL RESEARCH CORPORATION
(Delaware Domestic)
By:/s/ Lorin Zissman
---------------------------
LORIN ZISSMAN
President
ATTEST:
By:/s/ William N. Levy
---------------------------
WILLIAM N. LEVY
Secretary
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT dated as of January 1, 1999 between Total Research
Corporation, a Delaware corporation ("Company"), and Terri Flanagan
("Executive").
BACKGROUND
----------
Executive is presently serving as the President, Customer Loyalty
Division of the Company under an Employment Agreement with Company effective
January 2, 1997 (the "Original Employment Agreement"). Company desires to have
Executive continue in the employment of the Company beyond the June 30, 1999
termination date in the Original Employment Agreement, and Executive wishes to
remain in the employment of the Company beyond such date, on the terms and
conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein and intending to be legally bound hereby, the
parties hereto agree as follows:
TERMS
-----
SECTION 1. CAPACITY AND DUTIES
1.1 EMPLOYMENT; ACCEPTANCE OF EMPLOYMENT. Company hereby employs Executive and
Executive hereby accepts employment by Company for the period and upon the terms
and conditions hereinafter set forth.
1.2 CAPACITY AND DUTIES.
(a) Executive shall initially serve as President of the Customer Loyalty
Division of Company. Executive shall perform the duties and have the
responsibilities of a Division President as described in the "Position
Description" previously delivered to Executive, as such "Position Description"
may be revised by Company from time to time. Executive shall perform such other
duties and shall have such authority consistent with his position as may from
time to time be specified by the Chief Executive Officer of Company. Executive
may be appointed by the Chief Executive Officer to another senior level
position, provided such appointment does not result in a reduction in
Executive's compensation and benefits under this Agreement. Executive shall
report directly to the Chief Executive Officer, and shall perform Executive's
duties for Company principally at Company's principal executive offices,
presently in Princeton, New Jersey , except for periodic travel that may be
necessary or appropriate in connection with the performance of Executive's
duties hereunder.
(b) Executive shall devote Executive's full working time, energy, skill and
best efforts to the performance of Executive's duties hereunder, in a manner
that will faithfully and diligently further the business and interests of
Company, and shall not be employed by, or participate or engage in or in any
manner be a part of the management or operation of, any business enterprise
other than Company without the prior written consent of the Board of Directors
of Company (the
1
<PAGE>
"Board"). Notwithstanding the above, Executive shall be permitted, to the extent
such activities do not interfere or conflict with the performance by Executive
of Executive's duties and responsibilities hereunder, (i) to manage Executive's
personal, financial and legal affairs, and (ii) to serve on civic, charitable or
professional boards or committees (it being expressly understood and agreed that
Executive's continuing to serve on any such board and/or committees on which
Executive is serving, or with which Executive is otherwise associated (each of
which has been disclosed to Company in writing prior to the execution of
Executive's Agreement), as of the Commencement Date (as defined below), shall be
deemed not to interfere with the performance by Executive of Executive's duties
and responsibilities under this Agreement).
(c) Executive represents and warrants to Company that Executive is under no
contractual or other restriction or obligation which conflicts with, violates or
is inconsistent with the execution of this Agreement, the performance of
Executive's duties hereunder, or the other rights of Company hereunder.
(d) During the Term, Executive shall be entitled to participate as a member of
the Company's Management Council. The Management Council shall consist of
Executive and certain other senior officers of the Company and shall serve as an
advisory and consultative body on such significant strategic and operating
issues as the Chairman or President of the Company determine to present to the
Management Council prior to decisions on such issues being made by the
President, the Executive Committee or the Board of Directors.
SECTION 2. TERM OF EMPLOYMENT
2.1 TERM. The term of Executive's employment hereunder shall commence on
the date hereof (the "Commencement Date") and continue until June 30, 2000, as
further extended or unless sooner terminated in accordance with the other
provisions hereof (the "Term"). Except as hereinafter provided, on expiration of
the initial Term, the Term shall be automatically extended for one additional
year unless either party shall have given to the other party written notice of
nonrenewal of this Agreement at least six months prior to such expiration date.
After the initial Term, the Term shall be automatically extended for successive
one year Terms unless written notice of nonrenewal is given by either party to
the other at least six (6) months prior to the expiration of the then current
Term. If written notice of termination is given as provided above, Executive's
employment under this Agreement shall terminate on the last day of the
then-current Term.
SECTION 3. COMPENSATION
3.1 BASIC COMPENSATION. As compensation for Executive's services during the
Term, Company shall pay to Executive a salary effective January 1, 1999 in the
amount specified on Exhibit A, attached hereto and made a part hereof. The
Executive shall continue to receive Executive's salary at the rate presently in
effect under the Original Employment Agreement through December 31, 1998. The
salary shall be payable in periodic installments in accordance with Company's
regular payroll practices for its executive personnel at the time of payment,
but in no event less frequently than monthly. Executive's annual salary, as
determined in accordance with this Section 3.1, is hereinafter referred to as
Executive's "Base Salary."
2
<PAGE>
3.2 PERFORMANCE BONUS. As additional compensation for the services rendered
by Executive to Company pursuant to this Agreement for fiscal periods commencing
July 1, 1998, the Executive shall be entitled to participate in the Senior
Management Compensation Plan, attached hereto and incorporated hereby as Exhibit
A (the "Compensation Plan").
3.3 EMPLOYEE BENEFITS. During the Term, Executive shall be entitled to
participate in such of Company's employee benefit plans and benefit programs,
including medical, hospitalization, dental, disability, accidental death and
dismemberment and travel accident plans and programs, as may from time to time
be provided by Company for its senior executives generally. In addition, during
the Term Executive shall be eligible to participate in all pension, retirement,
savings and other employee benefit plans and programs maintained from time to
time by Company for the benefit of its senior executives generally. Company
shall have no obligation, however, to maintain any particular program or level
of benefits referred to in this Section 3.3.
3.4 OTHER BENEFITS. During the Term, the Company shall provide Executive
with an automobile allowance of $500.00 per month for the use of an automobile
owned or leased by Executive in accordance with the policies and procedures
established by the Company from time to time for executive employees.
3.5 VACATION. Executive shall be entitled to the normal and customary
amount of paid vacation provided to senior executives of the Company generally,
but in no event less than 20 days during each 12 month period, beginning on July
1, 1998. Any vacation days that are not taken in a given 12 month period shall
accrue and carry over from year to year up to a maximum of 20 days. The
Executive may be granted leaves of absence with or without pay for such valid
and legitimate reasons as the Board in its sole and absolute discretion may
determine, and is entitled to the same sick leave and holidays provided to other
senior executive officers of Company.
3.6 EXPENSE REIMBURSEMENT. Company shall reimburse Executive for all
reasonable and documented expenses incurred by him in connection with the
performance of Executive's duties hereunder in accordance with its regular
reimbursement policies as in effect from time to time.
3.7 STOCK OPTION AGREEMENT. Company acknowledges the prior grant to
Executive of 250,000 stock options (the "Option Shares") made pursuant to the
Original Employment Agreement under which, subject to the terms thereof, the
Option Shares are scheduled to vest on June 30, 1999.
SECTION 4. TERMINATION OF EMPLOYMENT
4.1 DEATH OF EXECUTIVE. If Executive dies during the Term, Company shall
not thereafter be obligated to make any further payments hereunder other than
amounts (including Base Salary, bonuses, expense reimbursement, etc.) accrued as
of the date of Executive's death in accordance with generally accepted
accounting principles (the "Accrued Obligations", which, for purposes of this
Agreement in situations other than death, shall reference the date of
termination).
3
<PAGE>
4.2 DISABILITY OF EXECUTIVE. If Executive is permanently disabled (as
defined in Company's long-term disability insurance policy then in effect), then
the Board shall have the right to terminate Executive's employment upon 30 days'
prior written notice to Executive at any time during the continuation of such
disability. In the event Executive's employment is terminated for disability in
accordance with this Section 4.2, Company shall not thereafter be obligated to
make any further payments hereunder other than (i) Accrued Obligations through
the date of such termination and (ii) continued Base Salary and benefits, until
the earlier of (x) such time as payments to Executive commence under Company's
long-term disability insurance policy then in effect, or (y) the expiration of
the then current Term.
4.3 TERMINATION FOR CAUSE. Executive's employment hereunder shall terminate
immediately upon notice that the Board is terminating Executive for Cause (as
defined herein), in which event Company shall not thereafter be obligated to
make any further payments of Base Salary, bonus or other payments. "Cause" shall
be limited to the following:
(i) willful failure to substantially perform Executive's duties as
described in Section 1.2 (other than such failure resulting from Executive's
physical or mental illness, or the failure of Executive to perform such duties
during the remedy period set forth in Section 4.4 hereof following the issuance
of a Notice of Termination (as herein defined) by Executive for Good Reason,
unless an arbitrator acting pursuant to Section 6.2 hereof finds Executive to
have acted in bad faith in issuing such Notice of Termination), after (x) demand
for substantial performance is delivered by Company in writing that identifies
the manner in which Company believes Executive has not substantially performed
Executive's duties and (y) Executives' failure to cure such nonperformance
within ten days after receipt of such written demand.
(ii) willful misconduct that is materially and demonstrably injurious
to Company or any of its subsidiaries;
(iii) conviction or plea of guilty or nolo contendere to a felony
or to any other crime which involves moral turpitude or, if not involving moral
turpitude, the act giving rise to such conviction or plea is materially and
demonstrably injurious to the Company or any of its subsidiaries;
(iv) material violation of (x) Company's policies relating to sexual
harassment, substance or alcohol abuse or the disclosure or misuse of
Confidential Information (as hereinafter defined), or (y) other Company polices
set forth in Company manuals or written statements of policy provided in the
case of this clause (y) that such violation is materially and demonstrably
injurious to Company and continues for more than three (3) days after written
notice thereof is given to Executive by the Board; and
(v) material breach of any provision of this Agreement by Executive,
which breach continues for more then ten days after written notice thereof is
given by the Board to Executive.
Cause shall not exist under this Section 4.3 unless and until Company
has delivered to Executive a copy of a resolution duly adopted by a majority of
the Board at a meeting of the Board called and held for such purpose (or by
unanimous written consent of the Board), finding
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that such Cause exists in the good faith opinion of the Board. This Section 4.3
shall not prevent Executive from challenging in any arbitration proceeding or
court of competent jurisdiction the Board's determination that Cause exists or
that Executive has failed to cure any act (or failure to act), to the extent
permitted by this Agreement, that purportedly formed the basis for the Board's
determination. Company must provide notice to Executive that it is intending to
terminate Executive's employment for Cause within one hundred and twenty (120)
days after the Board has actual knowledge of the occurrence of the event it
believes constitutes Cause.
4.4 TERMINATION WITHOUT CAUSE OR BY EXECUTIVE FOR GOOD REASON.
(a) If (i) Executive's employment is terminated by Company for any reason
(other than (x) Cause or (y) disability of Executive) or (ii) Executive's
employment is terminated by Executive for Good Reason, then Company shall within
thirty (30) days of termination of employment pay to Executive a lump sum cash
payment equal to Executive's Base Salary for a period equal to the greater of
(x) the date of termination of employment through the date that is one (1) year
after the date of delivery of a proper notice of termination of employment or
nonrenewal of the Agreement or (y) the then remaining Term (the "Severance
Payment"). Further, in the event of termination by Company under such
circumstances Company shall maintain in full force and effect, for the continued
benefit of Executive, Executive's spouse and Executive's dependents for the
remaining balance of the unexpired Term as of the date of termination, the
medical, hospitalization, dental and life insurance programs in which Executive,
Executive's spouse and Executive's dependents were participating immediately
prior to the date of such termination at substantially the level in effect and
upon substantially the same terms and conditions (including without limitation
contributions required by Executive for such benefits) as existed immediately
prior to the date of termination (except to the extent thereafter reduced for
senior executives of Company generally); provided, that if Executive,
Executive's spouse or Executive's dependents cannot continue to participate in
the Company programs providing such benefits, the Company shall arrange to
provide Executive, Executive's spouse and Executive's dependents with the
economic equivalent of such benefits which they otherwise would have been
entitled to receive under such plans and programs, provided that such benefits
shall terminate upon the date or dates Executive receives coverage and benefits
which are substantially similar, taken as a whole, without waiting period or
pre-existing condition limitations, under the plans and programs of a subsequent
employer . Upon making the payments described in this Section 4.4, Company shall
have no further obligation to Executive hereunder.
(b) Notwithstanding the foregoing, if Executive's employment is terminated
(i) by Company without Cause but due to Executive's failure for four consecutive
calendar quarters to attain all the performance goals as outlined in the
Compensation Plan or (ii) by Executive for Good Reason under Section 4.4(c)(vi)
provided Executive terminates employment under Section 4.4(c)(vi) within ten
(10) days of the Company's delivery of the revised performance goals to
Executive, the Severance Payment shall be reduced by fifty percent (50%).
(c) "Good Reason" shall mean the following:
(i) material breach of Company's obligations hereunder, provided that
Executive shall have given reasonably specific written notice thereof to
Company, and Company shall have failed to remedy the circumstances within 60
days thereafter;
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(ii) any decrease in Executive's salary below the amount set forth
in the Compensation Plan (except for decreases that are in conjunction with
decreases in salaries generally) or any material reduction in the general nature
of Executive's duties or authority to a level inconsistent with a senior
executive position, unless previously agreed to in writing by Executive;
(iii) the failure of Executive to be appointed initially to the
positions set forth in Section 1.2(a);
(iv) the relocation of Executive's principal place of employment to
a location more than thirty (30) miles from Princeton, New Jersey;
(v) the failure of any successor in interest of Company to be bound by
the terms of this Agreement in accordance with Section 6.5 hereof;
(vi) The financial Bonus Goals established by the Company in the
Senior Management Compensation Plan for any fiscal year are more than 125% of
the financial Bonus Goals for the preceding fiscal year and are not approved in
writing by the Chief Executive Officer or, if Albert Angrisani is not then
serving as Chief Executive Officer, approved by a majority of the participants
in the Compensation Plan; or
(vii) Executive's termination of the Agreement after Company notice of
nonrenewal under Section 2.1.
Executive must provide notice to Company that Executive is intending to
terminate Executive's employment for Good Reason within one hundred and twenty
(120) days after Executive has actual knowledge of the occurrence of an event he
believes constitutes Good Reason. Executive's right to terminate Executive's
employment hereunder for Good Reason shall not be affected by Executive's
Disability. Subject to compliance by Executive with the notice provisions of
Section 4.4(c)(i), Executive's continued employment prior to terminating
employment for Good Reason shall not constitute consent to, or a waiver of
rights with respect to, any act or failure to act constituting Good Reason. In
the event Executive delivers to the Company a Notice of Termination for Good
Reason, Executive agrees to appear before a meeting of the Board called and held
for such purpose (after reasonable notice) and specify to the Board the
particulars as to why Executive believes adequate grounds for termination for
Good Reason exist. No action by the Board, other than the remedy of the
circumstances within the time periods specified in Section 4.4(c)(i), shall be
binding on Executive.
4.5 CHANGE IN CONTROL.
(a) If, during the Term, there should be a Change of Control (as defined
herein), and within one year thereafter either (i) Executive's employment should
be terminated for any reason other than for Cause or (ii) Executive terminates
Executive's employment for Good Reason (other than under Section 4.4(c)(vi)),
Company shall, on or before Executive's last day of full-time employment
hereunder, pay to Executive, the amounts set forth in Section 4.4 above,
provided that it is the intention of the parties that the payments under this
Section 4.5 shall not constitute "excess parachute payments" within the meaning
of Section 280G of the Internal
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Revenue Code of 1986, as amended. Accordingly, notwithstanding anything in this
Agreement to the contrary, if any of the amounts otherwise payable under this
Section would constitute "excess parachute payments," or if the independent
accountants acting as auditors for Company on the date of the Change in Control
determine that such payments may constitute "excess parachute payments," then
the amounts otherwise payable under this Agreement shall be reduced to the
maximum amounts that may be paid without any such payments constituting, or
potentially constituting, "excess parachute payments."
(b) Upon the occurrence of a Change in Control, any stock options
previously granted to Executive that are not then exercisable, ie. unvested,
shall immediately vest and become exercisable by Executive . The Company shall
execute all necessary amendments to the applicable stock option plans and
agreements provided such amendments are permitted by law and will not adversely
affect the tax status or qualification of the plan as an Incentive Stock Option
Plan or Non-qualified Stock Option Plan.
(c) Upon making the payments described in this Section 4.5, Company shall
have no further obligation to Executive hereunder.
(d) A "Change in Control" of Company shall be deemed to have occurred if
(1) at any time after the date hereof, there shall occur (i) any
consolidation or merger of Company in which Company is not the continuing or
surviving corporation or pursuant to which the shares of common stock of Company
("Common Stock") would be converted into cash, securities or other property, or
(ii) any sale, lease, exchange or other transfer (in one transaction or a series
of related transactions) of assets accounting for 50% or more of total assets or
50% or more of the total revenues of Company, other than, in case of either (i)
or (ii) a consolidation or merger with, or transfer to, a corporation or other
entity of which, or of the parent entity of which, immediately following such
consolidation, merger or transfer, (x) more than 50% of the combined voting
power of the then outstanding voting securities of such entity entitled to vote
generally in the election of directors (or other determination of governing
body) is then beneficially owned (within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934) by all or substantially all of the individuals
and entities who were such owners of Common Stock immediately prior to such
consolidation, merger or transfer in substantially the same proportion, as among
themselves, as their ownership of Common Stock immediately prior to such sale
consolidation, merger or transfer, or (y) a majority of the directors (or other
governing body) consists of members of the Board of Directors of Company in
office on the date hereof for purposes of (2) below or approved as provided in
(2) below;
(2) at any time after the date hereof, (x) members of the Board of
Directors of Company in office on the date hereof (including any designated as
contemplated by Section 4.2 of the Stock Purchase Agreement made as of April 16,
1998 between Company and David Brodsky) plus (y) any new director (excluding a
director designated by a person or group who has entered into an agreement with
Company to effect a transaction described in Section 4.5(d)(1)) whose election
by the Board of Directors of Company or nomination for election by Company's
stockholders was approved by (i) Executive (if a director) or (ii) a vote of at
least a majority of the directors then still in office who either were directors
on the date hereof or whose
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election or nomination for election was previously so approved, shall cease for
any reason to constitute a majority of the Board; or
(3) at any time after the date hereof, the stockholders of Company
approve a complete liquidation or dissolution of Company, except in connection
with a recapitalization or other transaction which does not otherwise constitute
a Change of Control for purposes of Section 4.5(a)(1) above.
4.6 TERMINATION BY EXECUTIVE WITHOUT GOOD REASON. In the event
Executive's employment is voluntarily terminated by Executive without Good
Reason, Company shall not be obligated to make any further payments to Executive
hereunder other than Accrued Obligations through the date of such termination.
4.7 FAILURE TO EXTEND. A failure by Company to extend this Agreement
pursuant to Section 2.1 shall not be treated as a termination of Executive's
employment for purposes of this Agreement.
4.8 MITIGATION. Executive shall not be required to mitigate amounts
payable under this Section 4 by seeking other employment or otherwise, and there
shall be no offset against amounts due Executive under this Agreement on account
of subsequent employment except as specifically provided herein.
SECTION 5. NON-COMPETITION AND CONFIDENTIALITY
5.1 NON-COMPETITION.
(a) During the Term and for a period of one year thereafter (the
"Non-Competition Period"), Executive shall not, directly or indirectly, own,
manage, operate, join, control, participate in, invest in or otherwise be
connected or associated with, in any manner, including, without limitation, as
an officer, director, employee, distributor, independent contractor, independent
representative, partner, consultant, advisor, agent, proprietor, trustee or
investor, any Competing Business located in any state or region (including
foreign jurisdictions) where Company conducts business; provided, however, that
ownership of 1% or less of the stock or other securities of a corporation, the
stock of which is listed on a national securities exchange or is quoted on the
NASDAQ Stock Market's National market, shall not constitute a breach of this
Section 5, so long as the Executive does not in fact have the power to control,
or direct the management of, or is not otherwise engaged in activities with,
such corporation.
(b) For purposes hereof, the term "Competing Business" shall mean any
business or venture which is substantially similar to the whole or any
significant part of the business conducted by Company.
(c) Notwithstanding the above, the Non-Competition Period shall be limited
to the period for which a Severance Payment is received under Section 4.4(a)
above if Executive's employment is terminated (i) by Company without Cause, (ii)
by Executive for Good Reason or (iii) as a result of nonrenewal of the Agreement
by Company.
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(d) If the Executive's employment is terminated for any reason other than
the reasons specified in Section 5.1(c) above and Executive is not entitled to a
Severance Payment under Section 4.4(a) as a result of such termination, the
Non-Competition Period shall continue for one (1) year after termination of
employment.
5.2 NO SOLICITATION. During the Term, including any unexpired portion
thereof, and for a period of one year thereafter, the Executive shall not,
directly or indirectly, including on behalf of, for the benefit of, or in
conjunction with, any other person or entity, (i) solicit, assist, advise,
influence, induce or otherwise encourage in any way, any employee of Company to
terminate Executive's relationship with Company for any reason, or assist any
person or entity in doing so, or employ, engage or otherwise contract with any
employee or former employee of Company in a Competing Business or any other
business unless such former employee shall not have been employed by Company for
a period of at least one year, (ii) interfere in any manner with the
relationship between any employee and Company or (iii) contact, service or
solicit any existing clients, customers or accounts of Company on behalf of a
Competing Business, either as an individual on Executive's own account, as an
investor, or as an officer, director, partner, joint venturer, consultant,
employee, agent or sales man of any other person or entity.
5.3 CONFIDENTIAL INFORMATION
(a) "Confidential Information" shall mean confidential records and
information, including, but not limited to, development, marketing, purchasing,
organizational, strategic, financial, managerial, administrative, manufacturing,
production, distribution and sales information, distribution methods, data,
specifications and processes (including the Transferred Property as hereinafter
defined) presently owned or at any time hereafter developed by Company or its
agents or consultants or used presently or at any time hereafter in the course
of the business of Company, that are not otherwise part of the public domain.
(b) Executive hereby sells, transfers and assigns to Company, or to any
person or entity designated by Company, all of Executive's entire right, title
and interest in and to all inventions, ideas, methods, developments, disclosures
and improvements (the "Inventions"), whether patented or unpatented, and
copyrightable material, and all trademarks, trade names, all goodwill associated
therewith and all federal and state registrations or applications thereof, made,
adopted or conceived by solely or jointly, in whole or in part (collectively,
the "Transferred Property"), prior to or during the Term which (i) relate to
methods, apparatus, designs, products, processes or devices sold, leased, used
or under construction or development by Company or (ii) otherwise relate to or
pertain to the business, products, services, functions or operations of the
Company. Executive shall make adequate written records of all Inventions, which
records shall be Company's property and shall communicate promptly and disclose
Company, in such forms Company requests, all information, details and data
pertaining to the aforementioned Inventions. Whether during the Term or
thereafter, Executive shall execute and deliver to Company such formal transfers
and assignments and such other papers and documents as may be required of
Executive to permit Company, or any person or entity designated by Company, to
file and prosecute patent applications (including, but not limited to, records,
memoranda or instruments deemed necessary by Company for the prosecution of the
patent application or the acquisition of
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letters patent in the United states, foreign counties or otherwise) and, as to
copyrightable material, to obtain copyrights thereon, and as to trademarks, to
record the transfer of ownership of any federal or state registrations or
applications.
(c) All such Confidential Information is considered secret and will be
disclosed to the Executive in confidence, and Executive acknowledges that, as a
consequence of Executive's employment and position with Company, Executive may
have access to and become acquainted with Confidential Information. Except in
the performance of Executive's duties as an employee of Company, Executive shall
not, during the term and at all times thereafter, directly or indirectly for any
reason whatsoever, disclosure or use any such Confidential Information. All
records, files, drawings, documents, equipment and other tangible items,
wherever located, relating in any way to or containing Confidential Information,
which Executive has prepared, used or encountered or shall in the future
prepare, use or encounter, shall be and remain Company's sole and exclusive
property and shall be included in the Confidential Information. Upon termination
of Executive's agreement, or whenever requested by Company, Executive shall
promptly deliver to Company any and all of the Confidential Information and
copies thereof, not previously delivered to Company, that may be in the
possession or under the control of the Executive. The foregoing restrictions
shall not apply to the use, divulgence, disclosure or grant of access to
Confidential Information to the extent, but only to the extent, (i) expressly
permitted or required pursuant to any other written agreement between Executive
and Company, (ii) such Confidential Information has been publicly disclosed (not
due to a breach by the Executive of Executive's obligations hereunder, or by
breach of any other person, of a fiduciary or confidential obligation to Company
or (iii) the Executive is required to disclose Confidential Information by or to
any court of competent jurisdiction or any governmental or quasi-governmental
agency, authority or instrumentality of competent jurisdiction, provided,
however, that the Executive shall, prior to any such disclosure, immediately
notify Company of such requirements and provided further, however, that the
Company shall have the right, at its expense, to object to such disclosures and
to seek confidential treatment of any Confidential Information to be so
disclosed on such terms as it shall determine.
5.4 ACKNOWLEDGEMENT; REMEDIES; SURVIVAL OF THIS AGREEMENT.
(a) Executive acknowledges that violation of any of the covenants and
provisions set forth in this Agreement would cause Company irreparable damage
and agrees that Company's remedies at law for a breach or threatened breach of
any of the provisions of this Agreement would be inadequate and, in recognition
of this fact, in the event of a breach or threatened breach by Executive of any
of the provisions of this Agreement, it is agreed that, in addition to the
remedies at law or in equity, Company shall be entitled, without the posting of
a bond, to equitable relief in the form of specific performance, a temporary
restraining order, temporary or permanent injunction, or any other equitable
remedy which may then be available for the purposes of restraining Executive
from any actual or threatened breach of such covenants. Without limiting the
generality of the foregoing, if Executive breaches or threatens to breach this
Section 5 hereof, such breach or threatened breach will entitle Company to
enjoin Executive from disclosing any Confidential Information to any Competing
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Business, to enjoin any Competing Business from retaining Executive or using any
such Confidential Information, to enjoin Employee form rendering personal
services to or in connection with any Competing Business. The rights and
remedies of the parties hereto are cumulative and shall not be exclusive, and
each such party shall be entitled to pursue all legal and equitable rights and
remedies and to secure performance of the obligations and duties of the other
under this Agreement, and the enforcement of one or more of such rights and
remedies by a party shall in no way preclude such party from pursuing, at the
same time or subsequently, any and all other rights and remedies available to
it.
(b) The provisions of this Agreement shall survive the termination of
Executive's employment with Company.
SECTION 6. MISCELLANEOUS
6.1 CANCELLATION OF ORIGINAL EMPLOYMENT AGREEMENT With the exception of the
obligation to pay salary, benefits and performance bonus for the period through
December 31, 1998, the Original Employment Agreement is hereby cancelled;
provided, however, that this Section 6.1 shall not be construed to limit or
terminate Executive's entitlement under the Original Employment Agreement to
amounts accrued for periods through the date of this Agreement, including,
without limitation, the 250,000 stock options granted thereunder.
6.2 ARBITRATION. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in Princeton,
New Jersey, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. The parties consent to the
authority of the arbitrator, if the arbitrator so determines, to award fees and
expenses (including legal fees) to the prevailing party in the arbitration.
Notwithstanding the foregoing, Company shall be entitled to enforce the
provisions of Section 5 hereof through proceedings brought in a court of
competent jurisdiction as contemplated by Section 6.9 hereof.
6.3 SEVERABILITY; Reasonableness of Agreement. If any term, provision or
covenant of this Agreement or part thereof, or the application thereof to any
person, place or circumstance shall be held to be invalid, unenforceable or void
by a court of competent jurisdiction, the remainder of this Agreement and such
term, provision or covenant shall remain in full force and effect, and any such
invalid, unenforceable or void term, provision or covenant shall be deemed,
without further action on the part of the parties hereto, modified, amended and
limited, and the court shall have the power to modify, amend and limit any such
term, provision or covenant, to the extent necessary to render the same and the
remainder of the Agreement valid, enforceable and lawful. In this regard, the
Executive understands that the provisions of Section 5 may limit Executive's
ability to earn a livelihood in a business similar or related to the business of
Company, but nevertheless agrees and acknowledges that (i) the provisions of
Section 5 are reasonable and necessary for the protection of Company, and do not
impose a greater restraint than necessary to protect the goodwill or other
business interest of Company and (ii) such provisions contain reasonable
limitations as to the time and the scope of activity to be restrained. In
consideration of the foregoing and in light of Executive's education, skills and
abilities, Executive agrees that all defenses by Executive to the strict
enforcement of such provisions are hereby waived by Executive.
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6.4 KEY EMPLOYEE INSURANCE. Company shall have the right at its expense to
purchase insurance on the life of Executive, in such amounts as it shall from
time to time determine, of which Company shall be the beneficiary. Executive
shall submit to such physical examinations as may reasonably be required and
shall otherwise cooperate with Company in obtaining such insurance.
6.5 ASSIGNMENT; BENEFIT. This Agreement shall not be assignable by
Executive, other than Executive's rights to payments or benefits hereunder,
which may be transferred only by will or the laws of descent and distribution.
Upon Executive's death, this Agreement and all rights of Executive hereunder
shall inure to the benefit of and be enforceable by Executive's beneficiary or
beneficiaries, personal or legal representatives, or estate, to the extent any
such person succeeds to Executive's interests under this Agreement. No rights or
obligations of Company under this Agreement may be assigned or transferred
except that Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of Company to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that Company would be
required to perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean Company as herein before defined and any
successor to its business and/or assets (by merger, purchase or otherwise) which
executes and delivers the agreement provided for in this Section 5.4 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
6.6 NOTICES. All notices hereunder shall be in writing and shall be
sufficiently given if hand-delivered, sent by documented overnight delivery
service or registered or certified mail, postage prepaid, return receipt
requested or by telegram or telefax (confirmed by U.S. mail), receipt
acknowledged, addressed as set forth below or at such other address for either
party as may be specified in a notice given as provided herein by such party to
the other. Any such notice shall be deemed to have been given as of the date
received, in the case of personal delivery, or on the date shown on the receipt
or confirmation therefor, in all other cases. Any and all service of process and
any other notice in any such action, suit or proceeding shall be effective
against any party if given as provided in this Agreement; provided that nothing
herein shall be deemed to affect the right of any party to serve process in any
other manner permitted by law.
(a) If to Company:
Total Research Corporation
Princeton Corporate Center
5 Independence Way
Princeton, NJ 08540
With copies to:
Thomas A. Belton, Esq.
Drinker Biddle & Reath LLP
105 College Road East
Princeton, NJ 08540
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Peter G. Smith, Esq.
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, NY 10022-3903
(b) If to Executive:
6.7 TERMINATION PROCEDURES. Any termination of Executive's employment by
the Company or by Executive during the Term (other than termination pursuant to
death) shall be communicated by written Notice of Termination to the other party
hereto in accordance with Section 5.5. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so indicated.
6.8 ENTIRE AGREEMENT AND MODIFICATION. This Agreement constitutes the
entire agreement between the parties hereto with respect to the matters
contemplated herein and supersedes all prior agreements and understandings with
respect thereto. No amendment, modification, or waiver of this Agreement shall
be effective unless in writing. Neither the failure nor any delay on the part of
any party to exercise any right, remedy, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, remedy, power or privilege preclude any other or further exercise of the
same or of any other right, remedy, power, or privilege with respect to such
occurrence or with respect to any other occurrence.
6.9 GOVERNING LAW. This Agreement is made pursuant to, and shall be
construed and enforced in accordance with, the laws of the State of New Jersey
and the federal laws of the United States of America, to the extent applicable,
without giving effect to otherwise applicable principles of conflicts of law.
The parties hereto expressly consent to the jurisdiction of any state or federal
court located in New Jersey, and to venue therein, and consent to the service of
process in any such action or proceeding by certified or registered mailing of
the summons and complaint therein directed to Executive or Company, as the case
may be, at its address as provided in Section 6.6 hereof.
6.10 WITHHOLDING. All payments hereunder shall be subject to any required
withholding of Federal, state and local taxes pursuant to any applicable law or
regulation.
6.11 HEADINGS; COUNTERPARTS. The headings of paragraphs in this Agreement
are for convenience only and shall not affect its interpretation. This Agreement
may be executed in two or more counterparts, each of which shall be deemed to be
an original and all of which, when taken together, shall be deemed to constitute
the same Agreement.
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6.12 FURTHER ASSURANCES. Each of the parties hereto shall execute such
further instruments and take such other actions as the other party shall
reasonably request in order to effectuate the purposes of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TOTAL RESEARCH CORPORATION
By/s/ALBERT ANGRISANI
---------------------------------
Title:
/s/TERRI FLANAGAN
---------------------------------
Executive
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Exhibit A
SENIOR MANAGEMENT COMPENSATION PLAN TERM SHEET
FISCAL YEAR 1999 THROUGH FISCAL YEAR 2000
Name: Terri Flanagan
Title: President Customer Loyalty Division
A. COMPENSATION/SHORT-TERM
I. Base Salary
Base salary for second half of fiscal year 1999 will be $135,000. Salary
increases beyond year one will be set by the CEO and approved by the Executive
Committee and will be based on individual performance and contribution. The
amount of the increase awarded will be based on a salary increase range of
0-10%.
II. Bonus:
Compensates the Executive if established performance measures are achieved. The
performance measures listed below are based on goals established for core
business only against the performance plans for fiscal year 1999. This
additional compensation would be in cash, and represents a bonus opportunity at
20% of the base salary if the goals listed below are met. Should the results
fall slightly below plan, i.e., ninety-five (95) percent of goal, the Executive
will be entitled to a reduced bonus. The reduced bonus will pay the Executive
ten (10) percent of the Base Salary if ninety-five (95) to ninety-nine and nine
tenths (99.9) percent of the goal is achieved. No bonus will be paid if results
fall below 95% of goal.
Goal Reward
1. Revenue of $8,300,000 30% of 20% cash opportunity
2. Gross Profit greater than 53% 30% of 20% cash opportunity
Income Before Tax of $802,000
3. Money Management 20% of 20% cash opportunity
a. Invoicing at 95% of plan or greater
b. Cash Received at 95% of plan of greater
c. Receivables+ 45 days no greater than 30%
of monthly receivables 9 out of 12 months
4. Non Financial 20% of 20% cash opportunity
a. Sales Infrastructure Expansion
b. Product Development
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c. Process Improvement
d. Other
Performance goals for subsequent fiscal years shall be established by the CEO.
IBT shall be defined in the Senior Management Compensation Plan (Fiscal Years
1999-2001) for the CEO.
B. EXCESS PERFORMANCE BONUS OPPORTUNITY:
Payment under this portion of the compensation plan is for performance in excess
of established goals. The bonus opportunity under this portion of the
compensation plan, provides a bonus based on the following formula:
The Executive will receive 15% of the entire excess division's IBT if the
division's IBT is 10% or more greater than plan; provided that, regardless of
division performance, the Company's IBT goal must be achieved before the
Executive is eligible to receive any excess bonus payments.
C. LONG TERM PERFORMANCE REWARD
The primary goal of Total Research's Long Term Performance Reward is to enhance
senior management performance through equity ownership opportunities.
The granting of stock options that a participant may receive in each year is
based on an assessment by the Chief Executive Officer and the Executive
Committee of the Board of Directors. Any option grant is totally discretionary.
16
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT dated as of July 1, 1998 between Total
Research Corporation, a Delaware corporation ("Company"), and Albert Angrisani
("Executive").
BACKGROUND
----------
Executive is presently serving as the Chief Executive Officer
of the Company. Company desires to have Executive continue in that capacity with
the Company, and Executive wishes to remain in the employment of the Company, on
the terms and conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements contained herein and intending to be legally bound hereby, the
parties hereto agree as follows:
TERMS
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SECTION 1. CAPACITY AND DUTIES
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1.1 EMPLOYMENT; ACCEPTANCE OF EMPLOYMENT. Company hereby employs Executive
and Executive hereby accepts employment by Company for the period and upon the
terms and conditions hereinafter set forth.
1.2 CAPACITY AND DUTIES.
(a) Executive shall serve as the President and Chief Executive Officer of
Company. Executive shall perform such other duties and shall have such authority
consistent with Executive's position as may from time to time be specified by
the Board of Directors of Company (the "Board"). Executive shall report directly
to the Board, and shall perform Executive's duties for Company principally at
Company's principal executive offices, presently in Princeton, New Jersey,
except for periodic travel that may be necessary or appropriate in connection
with the performance of Executive's duties hereunder. Executive shall also serve
as a member of the Executive Committee so long as he shall be a member of the
Board. Company shall use its reasonable efforts to cause Executive to be elected
a member of the Board during the period this Agreement is in effect, but the
failure of the stockholders of Company to elect the Executive a member of the
Board shall not constitute a breach of this Agreement by Company.
(b) Executive shall devote sufficient working time, energy, skill and best
efforts to the performance of Executive's duties hereunder, in a manner that
will faithfully and diligently further the business and interests of Company.
Company acknowledges that Executive has interests in the management or operation
of other business enterprises and such participation will not constitute a
breach of this Agreement by Executive or constitute grounds for termination
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for Cause (as defined herein) as long as (i) Executive is not an employee of any
other business enterprise during the Term (as defined below) and (ii)such
activities do not unreasonably interfere with the Executive's performance of
Executive's duties and responsibilities hereunder.
SECTION 2. TERM OF EMPLOYMENT
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2.1 TERM. The term of Executive's employment hereunder shall commence on
July 1, 1998 (the "Commencement Date") and continue until June 30, 2001, as
further extended or unless sooner terminated in accordance with the other
provisions hereof (the "Term"). Except as hereinafter provided, on June 30,
2001, the Term shall be automatically extended for one additional year unless
Company shall have given to Executive written notice of nonrenewal of this
Agreement on or before July 1, 2000. Executive shall notify the Company in
writing on or before December 31, 2000 if Executive elects nonrenewal of the
Agreement. After the initial Term, the written notice of nonrenewal by either
party must be given to the other party at least six months prior to the
expiration date of the current Term. If written notice of nonrenewal is given as
provided above, Executive's employment under this Agreement shall terminate on
the last day of the then-current Term.
SECTION 3. COMPENSATION
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3.1 BASE COMPENSATION. As compensation for Executive's services commencing
July 1, 1998, Company shall pay to Executive base compensation in the form of
salary of $175,000 per annum and "at risk" compensation in the amount of
$125,000 per annum. The salary shall be payable in periodic installments in
accordance with Company's regular payroll practices for its executive personnel
at the time of payment, but in no event less frequently than monthly. The "at
risk" component of compensation shall be payable in accordance with Executive's
Senior Management Compensation Plan, attached hereto and made a part hereof as
Exhibit A (the "Compensation Plan"). Executive's annual salary plus the "at
risk" compensation, as determined in accordance with this Section 3.1 in the
Compensation Plan, is hereinafter referred to as Executive's "Base
Compensation". The Executive Committee agrees to review Base Compensation for
fiscal years 2000 and 2001 for the purpose of determining whether Base
Compensation should be increased for such fiscal years.
3.2 PERFORMANCE BONUS. As additional compensation for the services rendered
by Executive to Company pursuant to this Agreement for fiscal periods commencing
July 1, 1998, Executive shall be entitled to participate in the Compensation
Plan. Executive shall be entitled to a performance bonus for the fiscal year
ending June 30, 1998 in accordance with the terms and conditions of the existing
Consulting Agreement with Company (the "Consulting Agreement").
3.3 EMPLOYEE BENEFITS. During the Term, Executive shall be entitled to
participate in such of Company's employee benefit plans and benefit programs,
including medical, hospitalization, dental, disability, accidental death and
dismemberment and travel accident plans and programs, as may from time to time
be provided by Company for its senior executives generally. In addition, during
the Term Executive shall be eligible to participate in all pension, retirement,
savings and other employee benefit plans and programs maintained from time to
time
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by Company for the benefit of its senior executives generally. Company shall
have no obligation, however, to maintain any particular program or level of
benefits referred to in this Section 3.3.
3.4 OTHER BENEFITS. During the Term, the Company shall provide Executive
with an automobile allowance of $1000.00 per month for the use of an automobile
owned or leased by him in accordance with the policies and procedures
established by the Company from time to time for executive employees.
3.5 VACATION. Executive shall be entitled to the normal and customary
amount of paid vacation provided to senior executive officers of the Company,
but in no event less than 20 days during each 12 month period, beginning on July
1, 1998. Any vacation days that are not taken in a given 12 month period shall
accrue and carry over from year to year up to a maximum of 20 days. The
Executive may be granted leaves of absence with or without pay for such valid
and legitimate reasons as the Board in its sole and absolute discretion may
determine, and is entitled to the same sick leave and holidays provided to other
senior executive officers of Company.
3.6 EXPENSE REIMBURSEMENT. Company shall reimburse Executive for all
reasonable and documented expenses incurred by him in connection with the
performance of Executive's duties hereunder in accordance with its regular
reimbursement policies as in effect from time to time.
3.7 STOCK OPTION AGREEMENT. Company acknowledges the prior grant to
Executive of 500,000 stock options (the "Option Shares") made pursuant to the
Consulting Agreement and various Stock Option Agreements (collectively the
"Option Agreement"). Under the Option Agreement, 250,000 Option Shares are
currently vested and 250,000 Option Shares are scheduled to vest on June 30,
1999 (the "Original Vesting Date"). Executive agrees to execute an amendment to
the Option Agreement relating to the Option Shares to extend the Original
Vesting Date and restructure the vesting and exercise schedules for the Option
Shares as follows: (i) all 500,000 Option Shares shall be forfeited if Executive
resigns prior to June 30, 2001 for other than Good Reason; (ii) 250,000 of the
Option Shares shall be forfeited by Executive if Executive's employment is
terminated by Company for Cause (as defined herein) prior to the Original
Vesting Date; (iii) 125,000 of the Option Shares shall be forfeited if
Executive's employment is terminated by the Company for Cause on or after the
Original Vesting Date but prior to June 30, 2000; (iv) 62,500 of the Option
Shares shall be forfeited if Executive's employment is terminated by the Company
for Cause on or after June 30, 2000 but prior to June 30, 2001; and (v) all
500,000 Option Shares shall vest on June 30, 2001, or earlier, if (x) the
Company terminates Executive's employment without Cause after the Commencement
Date; (y) Executive terminates employment for Good Reason or (z) employment is
terminated by the death of Executive. If Executive exercises any of the Option
Shares prior to June 30, 2001, the shares so purchased (the "Restricted Shares")
shall reflect the same forfeiture restrictions imposed upon the Option Shares.
Company and Executive shall execute such amendments to the Option Agreement as
may be reasonably necessary or appropriate to further clarify or reflect such
grant and the revised deferral of the vesting of the Option Shares and
Restricted Shares.
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SECTION 4. TERMINATION OF EMPLOYMENT
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4.1 DEATH OF EXECUTIVE. If Executive dies during the Term, Company shall
not thereafter be obligated to make any further payments hereunder other than
amounts for Base Compensation (including for this purpose the immediate accrual
of the "at risk" component, adjusted pro rata through the date of termination),
expense reimbursement, and other amounts which have accrued as of the date of
Executive's death in accordance with generally accepted accounting principles
(the "Accrued Obligations", which, for purposes of this Agreement in situations
other than death, shall reference the date of termination).
4.2 DISABILITY OF EXECUTIVE. If Executive is permanently disabled (as
defined in Company's long-term disability insurance policy then in effect), then
the Board shall have the right to terminate Executive's employment upon 30 days'
prior written notice to Executive at any time during the continuation of such
disability. In the event Executive's employment is terminated for disability in
accordance with this Section 4.2, Company shall not thereafter be obligated to
make any further payments hereunder other than (i) Accrued Obligations through
the date of such termination and (ii) continued Base Salary and benefits, until
the earlier of (x) such time as payments to Executive commence under Company's
long-term disability insurance policy then in effect, or (y) the expiration of
the then current Term.
4.3 TERMINATION FOR CAUSE. Executive's employment hereunder shall terminate
immediately upon notice that the Board is terminating Executive for Cause (as
defined herein), in which event Company shall not thereafter be obligated to
make any further payments hereunder other than Accrued Obligations. "Cause"
shall be limited to the following:
(i) willful failure to substantially perform Executive's duties as
described in Section 1.2 (other than such failure resulting from Executive's
physical or mental illness, or the failure of Executive to perform such duties
during the remedy period set forth in Section 4.4(b)(i) hereof following the
issuance of a Notice of Termination (as herein defined) by Executive for Good
Reason, unless an arbitrator acting pursuant to Section 6.2 hereof finds
Executive to have acted in bad faith in issuing such Notice of Termination),
after demand for substantial performance is delivered by Company in writing that
specifically identifies the manner in which Company believes Executive has not
substantially performed Executive's duties and Executive's failure to cure such
non-performance within ten days after receipt of the Company's written demand;
(ii) willful misconduct that is materially and demonstrably injurious
to Company or any of its subsidiaries; or
(iii) conviction or plea of guilty or nolo contendere to a felony or
to any other crime which involves moral turpitude or, if not including moral
turpitude, provided the act giving rise to such conviction or plea is materially
and demonstrably injurious to the Company or any of its subsidiaries;
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(iv) material violation of (x) Company's policies relating to sexual
harassment, substance or alcohol abuse or the disclosure or misuse of
Confidential Information (as hereinafter defined), or (y) other Company polices
set forth in Company manuals or written statements of policy provided in the
case of this clause (y) that such violation is materially and demonstrably
injurious to Company and continues for more then three (3) days after written
notice thereof is given to Executive by the Board; and
(v) material breach of any material provision of this Agreement by
Executive, which breach continues for more than ten days after written notice
thereof is given by the Board to Executive.
Cause shall not exist under this Section 4.3 unless and until Company has
delivered to Executive a copy of a resolution duly adopted by a majority of the
Board at a meeting of the Board called and held for such purpose, or by written
consent, finding that such Cause exists in the good faith opinion of the Board.
This Section 4.3 shall not prevent Executive from challenging in any arbitration
proceeding or court of competent jurisdiction the Board's determination that
Cause exists or that Executive has failed to cure any act (or failure to act),
to the extent permitted by this Agreement that purportedly formed the basis for
the Board's determination. Company must provide written notice to Executive that
it is intending to terminate Executive's employment for Cause within one hundred
and twenty (120) days after the Board Company has actual knowledge of the
occurrence of the event it believes constitutes Cause.
4.4 TERMINATION WITHOUT CAUSE OR BY EXECUTIVE FOR GOOD REASON.
(a) If (i) Executive's employment is terminated by Company during the
initial Term for any reason (other than (x) Cause under Section 4.3, or (y)
disability of Executive), or (ii) Executive's employment is terminated by
Executive for Good Reason, then Company shall pay to Executive a lump sum cash
payment equal to one million dollars ($1,000,000.00)(the "Severance Payment"),
within ninety (90) days after expiration of the Term. Further, in the event of
termination by Company under such circumstances, or during any renewal Term,
Company shall maintain in full force and effect, for the continued benefit of
Executive, Executive's spouse and Executive's dependents for the remaining
balance of the unexpired Term as of the date of termination, the medical,
hospitalization, dental and life insurance programs in which Executive,
Executive's spouse and Executive's dependents were participating immediately
prior to the date of such termination at substantially the level in effect and
upon substantially the same terms and conditions (including without limitation
contributions required by Executive for such benefits) as existed immediately
prior to the date of termination (except to the extent thereafter reduced for
senior executives of Company generally); provided, that if Executive,
Executive's spouse or Executive's dependents cannot continue to participate in
the Company programs providing such benefits, the Company shall arrange to
provide Executive, Executive's spouse and Executive's dependents with the
economic equivalent of such benefits which they otherwise would have been
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entitled to receive under such plans and programs, provided that such benefits
shall terminate upon the date or dates Executive receives coverage and benefits
which are substantially similar, taken as a whole, without waiting period or
pre-existing condition limitations, under the plans and programs of a subsequent
employer. Upon making the payments described in this Section 4.4, Company shall
have no further obligation to Executive hereunder.
(b) "Good Reason" shall mean the following:
(i) material breach of Company's obligations hereunder, provided that
Executive shall have given reasonably specific written notice thereof to
Company, and Company shall have failed to remedy the circumstances within 60
days thereafter;
(ii) any decrease in Executive's salary as increased during the Term
(except for decreases that are in conjunction with decreases in salaries
generally) or any material reduction in the general nature of Executive's duties
or authority to a level inconsistent with a Chief Executive Officer, unless
previously agreed to in writing by Executive;
(iii) the failure of Executive to be elected to all of the positions
set forth in Section 1.2(a), ie., President, Chief Executive Officer, Executive
Committee and Board member, provided, however, the failure to be appointed to
the Board or Executive Committee shall not constitute Good Reason if such
failure is the result of the nonelection of Executive to the Board by a
shareholder vote at a duly convened meeting of the shareholders after nomination
of Executive to the Board by the Executive Committee and the Board and
submission of such nomination to a shareholder vote.
(iv) the relocation of Company's principal executive offices to a
location more than thirty (30) miles from Princeton, New Jersey;
(v) the failure of any successor in interest of Company to be bound by
the terms of this Agreement in accordance with Section 6.5 hereof;
(vi) substantial interference by the Board with Executive's
performance of Executive's duties, which interference results in the inability
of Executive to substantially perform Executive's duties hereunder; or
(vii) the appointment by the Board of a Chief Operating Officer or
Chief Financial Officer, or other offices or positions with duties substantially
similar to either, without first obtaining the prior written consent of
Executive, which consent will not be unreasonably withheld.
Executive must provide notice to the Company that he is intending to
terminate Executive's employment for Good Reason within one hundred and twenty
(120) days after Executive has actual knowledge of the occurrence of an event he
believes constitutes Good Reason. Executive's right to terminate Executive's
employment hereunder for Good Reason shall not be affected by Executive's
Disability. Subject to compliance by Executive with the notice provisions of
this Section 4.4, Executive's continued employment prior to terminating
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employment for Good Reason shall not constitute consent to, or a waiver of
rights with respect to, any act or failure to act constituting Good Reason. In
the event Executive delivers to the Company a Notice of Termination for Good
Reason, Executive agrees to appear before a meeting of the Board called and held
for such purpose (after reasonable notice) and specify to the Board the
particulars as to why Executive believes adequate grounds for termination for
Good Reason exist. No action by the Board, other than the remedy of the
circumstances within the time periods specified in Section this 4.4, shall be
binding on Executive.
4.5 CHANGE IN CONTROL.
(a) If, during the Term, there should be a Change of Control (as defined
herein), and within one year thereafter either (i) Executive's employment should
be terminated for any reason other than for Cause or (ii) Executive terminates
Executive's employment for Good Reason, Company shall, on or before Executive's
last day of full-time employment hereunder, pay to Executive, the amounts set
forth in Section 4.4 above, provided that it is the intention of the parties
that the payments under this Section 4.5 shall not constitute "excess parachute
payments" within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended. Accordingly, notwithstanding anything in this Agreement to the
contrary, if any of the amounts otherwise payable under this Section would
constitute "excess parachute payments," or if the independent accountants acting
as auditors for Company on the date of the Change in Control determine that such
payments may constitute "excess parachute payments," then the amounts otherwise
payable under this Agreement shall be reduced to the maximum amounts that may be
paid without any such payments constituting, or potentially constituting,
"excess parachute payments."
(b) Upon the occurrence of a Change in Control, any stock options
previously granted to Executive that are not then exercisable, ie. unvested,
shall immediately vest and become exercisable by Executive . The Company shall
execute all necessary amendments to the applicable stock option plans and
agreements provided such amendments are permitted by law and will not adversely
affect the tax status or qualification of the plan as an Incentive Stock Option
Plan or Non-qualified Stock Option Plan.
(c) Upon making the payments described in this Section 4.5, Company shall
have no further obligation to Executive hereunder.
(d) A "Change in Control" of Company shall be deemed to have occurred if:
(1) at any time after the date hereof, there shall occur (i) any
consolidation or merger of Company in which Company is not the continuing or
surviving corporation or pursuant to which the shares of common stock of Company
("Common Stock") would be converted into cash, securities or other property, or
(ii) any sale, lease, exchange or other transfer (in one transaction or a series
of related transactions) of assets accounting for 50% or more of total assets or
50% or more of the total revenues of Company, other than, in case of either (i)
or (ii), a consolidation or merger with, or transfer to, a corporation or other
entity of which, or of the parent entity of which, immediately following such
consolidation, merger or transfer, (x) more than 50% of the combined voting
power of the then outstanding voting
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securities of such entity entitled to vote generally in the election of
directors (or other determination of governing body) is then beneficially owned
(within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934) by
all or substantially all of the individuals and entities who were such owners of
Common Stock immediately prior to such consolidation, merger or transfer in
substantially the same proportion, as among themselves, as their ownership of
Common Stock immediately prior to such consolidation, merger or transfer, or (y)
a majority of the directors (or other governing body) consists of members of the
Board of Directors of Company in office on the date hereof for purposes of (2)
below or approved as provided in (2) below;
(2) at any time after the date hereof, (x) members of the Board
of Directors of Company in office on the date hereof (including any designated
as contemplated by Section 4.2 of the Stock Purchase Agreement made as of April
16, 1998 between Company and David Brodsky) plus (y) any new director (excluding
a director designated by a person or group who has entered into an agreement
with Company to effect a transaction described in Section 4.5(d)(1) whose
election by the Board of Directors of Company or nomination for election by
Company's stockholders was approved by (i) Executive (if a director) or (ii) a
vote of at least a majority of the directors then still in office who either
were directors on the date hereof or whose election or nomination for election
was previously so approved, shall cease for any reason to constitute a majority
of the Board; or
(3) at any time after the date hereof, the stockholders of
Company approve a complete liquidation or dissolution of Company, except in
connection with a recapitalization or other transaction which does not otherwise
constitute a Change of Control for purposes of Section 4.5(a)(1) above;
4.6 TERMINATION BY EXECUTIVE WITHOUT GOOD REASON. In the event Executive's
employment is voluntarily terminated by Executive without Good Reason, Company
shall not be obligated to make any further payments to Executive hereunder other
than Accrued Obligations through the date of such termination.
4.7 FAILURE TO EXTEND. A failure by Company to extend Executive's Agreement
pursuant to Section 2.1 shall not be treated as a termination of Executive's
employment for purposes of this Agreement; provided, however, that if the
Company gives notice of nonrenewal of the initial Term in accordance with
Section 2.1, the Company shall continue to pay to Executive Base Compensation
for the twelve (12) month period after expiration of the initial Term. For this
purpose, the "at risk" component of Base Compensation shall be added to and paid
as part of Executive's salary.
4.8 MITIGATION. Executive shall not be required to mitigate amounts payable
under this Section 4 by seeking other employment or otherwise, and there shall
be no offset against amounts due Executive under this Agreement on account of
subsequent employment except as specifically provided herein.
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SECTION 5. NON-COMPETITION AND CONFIDENTIALITY
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5.1 NON-COMPETITION
(a) During the Term, including any unexpired portion thereof, and for a
period of one year thereafter (the "Non-Competition Period"), Executive shall
not, directly or indirectly, own, manage, operate, join, control, participate
in, invest in or otherwise be connected or associated with, in any manner,
including, without limitation, as an officer, director, employee, distributor,
independent contractor, independent representative, partner, consultant,
advisor, agent, proprietor, trustee or investor, any Competing Business located
in any state or region (including foreign jurisdictions) where Company conducts
business; provided, however, that (i) ownership of 4.9% or less of the stock or
other securities of a corporation, the stock of which is listed on a national
securities exchange or is quoted on the NASDAQ Stock Market's National market,
shall not constitute a breach of this Section 5, so long as the Executive does
not in fact have the power to control, or direct the management of, or is not
otherwise engaged in activities with, such corporation and (ii) investment
banking and similar advisory services after the Term, even if provided to a
Competing Business, shall not constitute a breach of this Section 5.
(b) For purposes hereof, the term "Competing Business" shall mean any
business or venture which is substantially similar to the whole or any
significant part of the business conducted by Company.
(c) Notwithstanding the above, except as provided below, the
non-competition obligation in Section 5.1(a) shall not apply after the Term if
Executive's employment is terminated (i) by Company without Cause, (ii) by
Executive for Good Reason or (iii) as a result of nonrenewal of the Agreement by
Company; provided, however, in the event of any such termination, the
non-competition obligation shall continue after the Term for the remainder of
the Non-Competition period if (i) Executive is entitled to the Severance Payment
and payment thereof is made within 90 days after expiration of the Term or (ii)
Company has given written notice to Executive at least 12 months prior to the
expiration of the Term agreeing to continue payment of Base Compensation to
Executive after the Term and during the remainder of the Non-Competition Period.
For this purpose, the "at risk" component of Base Compensation shall be added to
and paid as part of Executive's salary.
5.2 NO SOLICITATION. During the Term, including any unexpired portion
thereof, and for a period of one year thereafter, the Executive shall not,
directly or indirectly, including on behalf of, for the benefit of, or in
conjunction with, any other person or entity, (i) solicit, assist, advise,
influence, induce or otherwise encourage in any way, any employee of Company to
terminate Executive's relationship with Company for any reason, or assist any
person or entity in doing so, or employ, engage or otherwise contract with any
employee or former employee of Company in a Competing Business or any other
business unless such former employee shall not have been employed by Company for
a period of at least one year, (ii) interfere in any manner with the
relationship between any employee and Company or (iii) contact, service or
solicit any existing clients, customers or accounts of Company on behalf of a
Competing Business, either as an individual on Executive's own account, as an
investor, or as an officer, director, partner, joint venturer, consultant,
employee, agent or sales man of any other person or entity.
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5.3 CONFIDENTIAL INFORMATION
(a) "Confidential Information" shall mean confidential records and
information, including, but not limited to, development, marketing, purchasing,
organizational, strategic, financial, managerial, administrative, manufacturing,
production, distribution and sales information, distribution methods, data,
specifications and processes (including the Transferred Property as hereinafter
defined) presently owned or at any time hereafter developed by Company or its
agents or consultants or used presently or at any time hereafter in the course
of the business of Company, that are not otherwise part of the public domain.
(b) Executive hereby sells, transfers and assigns to Company, or to any
person or entity designated by Company, all of Executive's entire right, title
and interest in and to all inventions, ideas, methods, developments, disclosures
and improvements (the "Inventions"), whether patented or unpatented, and
copyrightable material, and all trademarks, trade names, all goodwill associated
therewith and all federal and state registrations or applications thereof, made,
adopted or conceived by solely or jointly, in whole or in part (collectively,
the "Transferred Property"), prior to or during the Term which (i) relate to
methods, apparatus, designs, products, processes or devices sold, leased, used
or under construction or development by Company or (ii) otherwise relate to or
pertain to the business, products, services, functions or operations of the
Company. Executive shall make adequate written records of all Inventions, which
records shall be Company's property and shall communicate promptly and disclose
Company, in such forms Company requests, all information, details and data
pertaining to the aforementioned Inventions. Whether during the Term or
thereafter, Executive shall execute and deliver to Company such formal transfers
and assignments and such other papers and documents as may be required of
Executive to permit Company, or any person or entity designated by Company, to
file and prosecute patent applications (including, but not limited to, records,
memoranda or instruments deemed necessary by Company for the prosecution of the
patent application or the acquisition of letters patent in the United states,
foreign counties or otherwise) and, as to copyrightable material, to obtain
copyrights thereon, and as to trademarks, to record the transfer of ownership of
any federal or state registrations or applications.
(c) All such Confidential Information is considered secret and will be
disclosed to the Executive in confidence, and Executive acknowledges that, as a
consequence of Executive's employment and position with Company, Executive may
have access to and become acquainted with Confidential Information. Except in
the performance of Executive's duties as an employee of Company, Executive shall
not, during the term and at all times thereafter, directly or indirectly for any
reason whatsoever, discloser or use any such Confidential Information. All
records, files, drawings, documents, equipment and other tangible items,
wherever located, relating in any way to or containing Confidential Information,
which Executive has prepared, used or encountered or shall in the future
prepare, use or encounter, shall be and remain Company's sole and exclusive
property and shall be included in the Confidential Information. Upon termination
of this agreement, or whenever requested by Company, Executive shall promptly
deliver to Company any and all of the Confidential Information and copies
thereof, not previously delivered to Company, that may be in the possession or
under the control of the Executive. The foregoing restrictions shall not apply
to the use, divulgence, disclosure or grant
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of access to Confidential Information to the extent, but only to the extent, (i)
expressly permitted or required pursuant to any other written agreement between
Executive and Company, (ii) such Confidential Information has been publicly
disclosed (not due to a breach by the Executive of Executive's obligations
hereunder, or by breach of any other person, of a fiduciary or confidential
obligation to Company or (iii) the Executive is required to disclose
Confidential Information by or to any court of competent jurisdiction or any
governmental or quasi-governmental agency, authority or instrumentality of
competent jurisdiction, provided, however, that the Executive shall, prior to
any such disclosure, immediately notify Company of such requirements and
provided further, however, that the Company shall have the right, at its
expense, to object to such disclosures and to seek confidential treatment of any
Confidential Information to be so disclosed on such terms as it shall determine.
5.4 ACKNOWLEDGEMENT; REMEDIES; SURVIVAL OF THIS AGREEMENT
(a) Executive acknowledges that violation of any of the covenants and
provisions set forth in this Agreement would cause Company irreparable damage
and agrees that Company's remedies at law for a breach or threatened breach of
any of the provisions of this Agreement would be inadequate and, in recognition
of this fact, in the event of a breach or threatened breach by Executive of any
of the provisions of this Agreement, it is agreed that, in addition to the
remedies at law or in equity, Company shall be entitled, without the posting of
a bond, to equitable relief in the form of specific performance, a temporary
restraining order, temporary or permanent injunction, or any other equitable
remedy which may then be available for the purposes of restraining Executive
from any actual or threatened breach of such covenants. Without limiting the
generality of the foregoing, if Executive breaches or threatens to breach this
Section 5 hereof, such breach or threatened breach will entitle Company to
enjoin Executive from disclosing any Confidential Information to any Competing
Business, to enjoin any Competing Business from retaining Executive or using any
such Confidential Information, to enjoin Employee form rendering personal
services to or in connection with any Competing Business. The rights and
remedies of the parties hereto are cumulative and shall not be exclusive, and
each such party shall be entitled to pursue all legal and equitable rights and
remedies and to secure performance of the obligations and duties of the other
under this Agreement, and the enforcement of one or more of such rights and
remedies by a party shall in no way preclude such party from pursuing, at the
same time or subsequently, any and all other rights and remedies available to
it.
(b) The provisions of this Agreement shall survive the termination of
Executive's employment with Company.
SECTION 6. MISCELLANEOUS
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6.1 CANCELLATION OF CONSULTING AGREEMENT Except for the obligation to pay
the consulting fees and the 20% performance bonus (to the extent earned) through
June 30, 1998, the Consulting Agreement is hereby cancelled, provided, however,
that this shall not be construed to limit or terminate Executive's entitlement
to amounts accrued for periods through the date of this Agreement, including,
without limitation, the 250,000 stock options granted thereunder. Nothing
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in this Agreement or the Consulting Agreement shall be construed to entitle
Executive to any fee on other compensation relating to the Company's sale of
stock to David Brodsky and the Designees (as defined therein) pursuant to the
terms of an Amended and Restated Stock Purchase Agreement dated June 18, 1998.
6.2 ARBITRATION. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in Princeton,
New Jersey, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. The parties consent to the
authority of the arbitrator, if the arbitrator so determines, to award fees and
expenses (including legal fees) to the prevailing party in the arbitration.
Notwithstanding the foregoing, Company shall be entitled to enforce the
provisions of Section 5 hereof through proceedings brought in a court of
competent jurisdiction as contemplated by Section 6.9 hereof.
6.3 SEVERABILITY; Reasonableness of Agreement. If any term, provision or
covenant of this Agreement or part thereof, or the application thereof to any
person, place or circumstance shall be held to be invalid, unenforceable or void
by a court of competent jurisdiction, the remainder of this Agreement and such
term, provision or covenant shall remain in full force and effect, and any such
invalid, unenforceable or void term, provision or covenant shall be deemed,
without further action on the part of the parties hereto, modified, amended and
limited, and the court shall have the power to modify, amend and limit any such
term, provision or covenant, to the extent necessary to render the same and the
remainder of the Agreement valid, enforceable and lawful. In this regard, the
Executive understands that the provisions of Section 5 may limit Executive's
ability to earn a livelihood in a business similar or related to the business of
Company, but nevertheless agrees and acknowledges that (i) the provisions of
Section 5 are reasonable and necessary for the protection of Company, and do not
impose a greater restraint than necessary to protect the goodwill or other
business interest of Company and (ii) such provisions contain reasonable
limitations as to the time and the scope of activity to be restrained. In
consideration of the foregoing and in light of Executive's education, skills and
abilities, Executive agrees that all defenses by Executive to the strict
enforcement of such provisions are hereby waived by Executive.
6.4 KEY EMPLOYEE INSURANCE. Company shall have the right at its expense to
purchase insurance on the life of Executive, in such amounts as it shall from
time to time determine, of which Company shall be the beneficiary. Executive
shall submit to such physical examinations as may reasonably be required and
shall otherwise cooperate with Company in obtaining such insurance.
6.5 ASSIGNMENT; BENEFIT. This Agreement shall not be assignable by
Executive, other than Executive's rights to payments or benefits hereunder,
which may be transferred only by will or the laws of descent and distribution.
Upon Executive's death, this Agreement and all rights of Executive hereunder
shall inure to the benefit of and be enforceable by Executive's beneficiary or
beneficiaries, personal or legal representatives, or estate, to the extent any
such person succeeds to Executive's interests under this Agreement. No rights or
obligations of Company under this Agreement may be assigned or transferred
except that Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all
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or substantially all of the business and/or assets of Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that Company would be required to perform it if no such succession had
taken place. As used in this Agreement, "Company" shall mean Company as
hereinbefore defined and any successor to its business and/or assets (by merger,
purchase or otherwise) which executes and delivers the agreement provided for in
this Section 5.4 or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law.
6.6 NOTICES. All notices hereunder shall be in writing and shall be
sufficiently given if hand-delivered, sent by documented overnight delivery
service or registered or certified mail, postage prepaid, return receipt
requested or by telegram or telefax (confirmed by U.S. mail), receipt
acknowledged, addressed as set forth below or at such other address for either
party as may be specified in a notice given as provided herein by such party to
the other. Any such notice shall be deemed to have been given as of the date
received, in the case of personal delivery, or on the date shown on the receipt
or confirmation therefor, in all other cases. Any and all service of process and
any other notice in any such action, suit or proceeding shall be effective
against any party if given as provided in this Agreement; provided that nothing
herein shall be deemed to affect the right of any party to serve process in any
other manner permitted by law.
(a) If to Company:
Total Research Corporation
Princeton Corporate Center
5 Independence Way
Princeton, NJ 08540
With Copies To:
Thomas A. Belton, Esq.
Drinker Biddle & Reath LLP
105 College Road East
Princeton, NJ 08540
Peter G. Smith, Esq.
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, NY 10022
If to Executive:
Albert Angrisani
50 Gallup Road
Princeton, NJ 08540
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6.7 TERMINATION PROCEDURES. Any termination of Executive's employment by
the Company or by Executive during the Term (other than termination pursuant to
death) shall be communicated by written Notice of Termination to the other party
hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive's employment under the
provision so indicated.
6.8 ENTIRE AGREEMENT AND MODIFICATION. This Agreement constitutes the
entire agreement between the parties hereto with respect to the matters
contemplated herein and supersedes all prior agreements and understandings with
respect thereto. No amendment, modification, or waiver of this Agreement shall
be effective unless in writing. Neither the failure nor any delay on the part of
any party to exercise any right, remedy, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, remedy, power or privilege preclude any other or further exercise of the
same or of any other right, remedy, power, or privilege with respect to such
occurrence or with respect to any other occurrence.
6.9 GOVERNING LAW. This Agreement is made pursuant to, and shall be
construed and enforced in accordance with, the laws of the State of New Jersey
and the federal laws of the United States of America, to the extent applicable,
without giving effect to otherwise applicable principles of conflicts of law.
The parties hereto expressly consent to the jurisdiction of any state or federal
court located in New Jersey, and to venue therein, and consent to the service of
process in any such action or proceeding by certified or registered mailing of
the summons and complaint therein directed to Executive or Company, as the case
may be, at its address as provided in Section 6.6 hereof.
6.10 WITHHOLDING. All payments hereunder shall be subject to any required
withholding of Federal, state and local taxes pursuant to any applicable law or
regulation.
6.11 HEADINGS; COUNTERPARTS. The headings of paragraphs in this Agreement
are for convenience only and shall not affect its interpretation. This Agreement
may be executed in two or more counterparts, each of which shall be deemed to be
an original and all of which, when taken together, shall be deemed to constitute
the same Agreement.
6.12 FURTHER ASSURANCES. Each of the parties hereto shall execute such
further instruments and take such other actions as the other party shall
reasonably request in order to effectuate the purposes of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
TOTAL RESEARCH CORPORATION
By: /s/ David Brodsky
-----------------
David Brodsky, Chairman of the Executive Committee
By: /s/ Howard L. Shecter
---------------------
Howard L. Shecter, Executive Committee
/s/ Albert Angrisani
--------------------
Executive
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Exhibit A
SENIOR MANAGEMENT COMPENSATION PLAN TERM SHEET
FISCAL YEAR 1999 THROUGH FISCAL YEAR 2001
Name: Albert Angrisani
Title: President and Chief Executive Officer
A. COMPENSATION/SHORT-TERM
I. BASE COMPENSATION:
Base compensation for fiscal year 1999 will be $300,000; $175,000 of salary will
be paid on normally scheduled Company paydays, with the remaining $125,000
constituting "at risk" compensation to be paid within 90 days after the end of
the fiscal year if, and only if, at least ninety-five percent (95%) of Company's
Income Before Tax (as defined below) performance goal is achieved. Base
compensation increases beyond year one, will be based on individual performance
and contribution as set by the Executive Committee.
II. BONUS COMPENSATION:
Compensates the Executive if either the established Company Income Before Tax
(IBT) or Net Income (NI) performance goal is achieved. These corporate goals (
the "Performance Goals"), as identified in the attached exhibit title Three Year
Performance Goals, Fiscal Years 1999-2001, have been approved by the Executive
Committee at time of signing. The Performance Goals include certain assumptions
regarding revenue and expenses that are fundamental to the attainment of the
Bonus Compensation. If the Executive Committee or the Board initiates and
approves any material changes to these assumptions or projections that have not
been approved in advance in writing by the CEO, such change (a "Nonbudget Item")
, and the resulting direct effect on revenue and expenses, shall be disregarded
in calculating IBT or NI. Executive and Company shall mutually agree as to the
effect on revenue and expenses of the Nonbudget Item ( a "Nonbudget Item
Effect") within 10 days after Executive's or Company's written proposal as to
the effect of the Nonbudget Item Effect. If the parties fail to agree in writing
within such 10 day period, the Nonbudget Item Effect shall be determined by an
arbitrator mutually agreeable to the Company and Executive. By way of
illustration of a Nonbudget Item, changes that would require a CEO approval
include (I) material increases in discretionary expense items or new expense
line items, (ii) material changes in budgets and allocations that alter the
revenue or expense allocation or mix of the four divisions of the company, (iii)
material changes in the overhead or expense structure of the four divisions or
(iv) expenditures or reallocations of internally generated cash flow to
acquisitions of new business or lines of business.
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IBT and NI shall be adjusted to add back any compensation expense item resulting
from the exercise, cancellation, repurchase or conversion of any Stock Option,
or the issuance of any Company stock, after June 30, 1998.
This Bonus Compensation represents a bonus of 20% of the total Base Compensation
for the applicable fiscal year and will be paid as follows:
If either the IBT or NI goals have been reached, the Executive will be issued
20% of his annual Base Compensation for the applicable fiscal year in the form
of restricted shares of Company stock (the "Bonus Shares", including for this
purpose any additions as a results of a stock dividend or split). The valuation
of the Bonus Shares will be based on the average of the closing bid price of the
Company stock on the NASDAQ exchange for a period of 90 calendar days ending on
the last day of the week prior to the determination of such stock bonus. The
amount of the stock bonus will be determined within 90 days after the end of the
fiscal year. Additionally, the Executive agrees that he will hold the Bonus
shares and forfeit the Bonus Shares if he voluntarily elects to leave the
Company prior to the expiration of the Term of his Employment Agreement or is
terminated for Cause under such Agreement.
Should the IBT and NI performance fall below the Performance Goals but one is at
least 95% thereof, the Executive will be entitled to a reduced bonus in the form
of Bonus Shares of ten percent (10%) of Base Compensation. The method of payment
for this performance level is indicated in the preceding paragraph.
The Income Before Tax (IBT) goal referenced above and in the Excess Performance
Bonus Opportunity, excludes any extra ordinary expenses that may result from the
cancellation, repurchase, conversion or reissuing of stock options.
B. EXCESS PERFORMANCE BONUS OPPORTUNITY:
Payment under this portion of the Compensation Plan is for performance in excess
of established Performance Goals. The Executive will be paid 15% of all NI in
excess of the NI Performance Goal if, and only if IBT performance is 10% greater
than the IBT Performance Goal. This payment will be made in the form of Bonus
Shares based on the same provisions covered in the bonus section of A of this
Plan. For purposes of this Paragraph B only, NI, IBT, and NI and IBT Performance
Goals will be based only on revenue and expenses allocable to the existing lines
of the Company's business, sometimes referred to as the "Core Business", unless
the Executive and Company otherwise agree in writing. (e.g. results from
acquisitions will not be included in NI or IBT unless the Executive and Company
agree first in writing). Core Business NI and IBT calculations shall be made by
the CFO, the Executive, subject to approval by the Executive Committee.
C. LOAN
The Executive will be offered a non-collaterialized loan provision from the
Company, which provides the Executive with three annual loans of $100,000 each,
to be made separately on
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August 1, 1998, August 1,1999 and August 1, 2000. Interest will be at minimum
applicable federal rate for IRS purposes. The term of the loan will be as
follows. The entire principal and interest due under the loan will be due on
June 30, 2001 provided, however, the entire amount will be forgiven if (i) the
price of the Company stock is at least $10 per share (after adjustments for
stock dividend ,stock splits and similar recapitalization), determined by
averaging the closing price on the NASDAQ exchange for the 90 calendar day
period preceding June 30, 2001 or (ii) the Executive's Employment Agreement is
terminated prior to June 30, 2001 in a manner that requires a Severance Payment
(as defined in such Agreement) to Executive. This provision shall survive
termination of Executive's employment.
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT dated as of January 1, 1999 between Total Research
Corporation, a Delaware corporation ("Company"), and Patti Hoffman
("Executive").
BACKGROUND
----------
Executive is presently serving as the President US Regional Offices
Division of the Company under an Employment Agreement with Company effective
January 2, 1997 (the "Original Employment Agreement"). Company desires to have
Executive continue in the employment of the Company beyond the June 30, 1999
termination date in the Original Employment Agreement, and Executive wishes to
remain in the employment of the Company beyond such date, on the terms and
conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein and intending to be legally bound hereby, the
parties hereto agree as follows:
TERMS
-----
SECTION 1. CAPACITY AND DUTIES
1.1 EMPLOYMENT; ACCEPTANCE OF EMPLOYMENT. Company hereby employs Executive and
Executive hereby accepts employment by Company for the period and upon the terms
and conditions hereinafter set forth.
1.2 CAPACITY AND DUTIES.
(a) Executive shall initially serve as President of the Customer Loyalty
Division of Company. Executive shall perform the duties and have the
responsibilities of a Division President as described in the "Position
Description" previously delivered to Executive, as such "Position Description"
may be revised by Company from time to time. Executive shall perform such other
duties and shall have such authority consistent with his position as may from
time to time be specified by the Chief Executive Officer of Company. Executive
may be appointed by the Chief Executive Officer to another senior level
position, provided such appointment does not result in a reduction in
Executive's compensation and benefits under this Agreement. Executive shall
report directly to the Chief Executive Officer, and shall perform Executive's
duties for Company principally at Company's principal executive offices,
presently in Princeton, New Jersey , except for periodic travel that may be
necessary or appropriate in connection with the performance of Executive's
duties hereunder.
(b) Executive shall devote Executive's full working time, energy, skill and
best efforts to the performance of Executive's duties hereunder, in a manner
that will faithfully and diligently further the business and interests of
Company, and shall not be employed by, or participate or engage in or in any
manner be a part of the management or operation of, any business enterprise
other than Company without the prior written consent of the Board of Directors
of Company (the
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"Board"). Notwithstanding the above, Executive shall be permitted, to the extent
such activities do not interfere or conflict with the performance by Executive
of Executive's duties and responsibilities hereunder, (i) to manage Executive's
personal, financial and legal affairs, and (ii) to serve on civic, charitable or
professional boards or committees (it being expressly understood and agreed that
Executive's continuing to serve on any such board and/or committees on which
Executive is serving, or with which Executive is otherwise associated (each of
which has been disclosed to Company in writing prior to the execution of
Executive's Agreement), as of the Commencement Date (as defined below), shall be
deemed not to interfere with the performance by Executive of Executive's duties
and responsibilities under this Agreement).
(c) Executive represents and warrants to Company that Executive is under no
contractual or other restriction or obligation which conflicts with, violates or
is inconsistent with the execution of this Agreement, the performance of
Executive's duties hereunder, or the other rights of Company hereunder.
(d) During the Term, Executive shall be entitled to participate as a member of
the Company's Management Council. The Management Council shall consist of
Executive and certain other senior officers of the Company and shall serve as an
advisory and consultative body on such significant strategic and operating
issues as the Chairman or President of the Company determine to present to the
Management Council prior to decisions on such issues being made by the
President, the Executive Committee or the Board of Directors.
SECTION 2. TERM OF EMPLOYMENT
2.1 TERM. The term of Executive's employment hereunder shall commence on
the date hereof (the "Commencement Date") and continue until June 30, 2000, as
further extended or unless sooner terminated in accordance with the other
provisions hereof (the "Term"). Except as hereinafter provided, on expiration of
the initial Term, the Term shall be automatically extended for one additional
year unless either party shall have given to the other party written notice of
nonrenewal of this Agreement at least six months prior to such expiration date.
After the initial Term, the Term shall be automatically extended for successive
one year Terms unless written notice of nonrenewal is given by either party to
the other at least six (6) months prior to the expiration of the then current
Term. If written notice of termination is given as provided above, Executive's
employment under this Agreement shall terminate on the last day of the
then-current Term.
SECTION 3. COMPENSATION
3.1 BASIC COMPENSATION. As compensation for Executive's services during the
Term, Company shall pay to Executive a salary effective January 1, 1999 in the
amount specified on Exhibit A, attached hereto and made a part hereof. The
Executive shall continue to receive Executive's salary at the rate presently in
effect under the Original Employment Agreement through December 31, 1998. The
salary shall be payable in periodic installments in accordance with Company's
regular payroll practices for its executive personnel at the time of payment,
but in no event less frequently than monthly. Executive's annual salary, as
determined in accordance with this Section 3.1, is hereinafter referred to as
Executive's "Base Salary."
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3.2 PERFORMANCE BONUS. As additional compensation for the services rendered
by Executive to Company pursuant to this Agreement for fiscal periods commencing
July 1, 1998, the Executive shall be entitled to participate in the Senior
Management Compensation Plan, attached hereto and incorporated hereby as Exhibit
A (the "Compensation Plan").
3.3 EMPLOYEE BENEFITS. During the Term, Executive shall be entitled to
participate in such of Company's employee benefit plans and benefit programs,
including medical, hospitalization, dental, disability, accidental death and
dismemberment and travel accident plans and programs, as may from time to time
be provided by Company for its senior executives generally. In addition, during
the Term Executive shall be eligible to participate in all pension, retirement,
savings and other employee benefit plans and programs maintained from time to
time by Company for the benefit of its senior executives generally. Company
shall have no obligation, however, to maintain any particular program or level
of benefits referred to in this Section 3.3.
3.4 OTHER BENEFITS. During the Term, the Company shall provide Executive
with an automobile allowance of $500.00 per month for the use of an automobile
owned or leased by Executive in accordance with the policies and procedures
established by the Company from time to time for executive employees.
3.5 VACATION. Executive shall be entitled to the normal and customary
amount of paid vacation provided to senior executives of the Company generally,
but in no event less than 20 days during each 12 month period, beginning on July
1, 1998. Any vacation days that are not taken in a given 12 month period shall
accrue and carry over from year to year up to a maximum of 20 days. The
Executive may be granted leaves of absence with or without pay for such valid
and legitimate reasons as the Board in its sole and absolute discretion may
determine, and is entitled to the same sick leave and holidays provided to other
senior executive officers of Company.
3.6 EXPENSE REIMBURSEMENT. Company shall reimburse Executive for all
reasonable and documented expenses incurred by him in connection with the
performance of Executive's duties hereunder in accordance with its regular
reimbursement policies as in effect from time to time.
3.7 STOCK OPTION AGREEMENT. Company acknowledges the prior grant to
Executive of 250,000 stock options (the "Option Shares") made pursuant to the
Original Employment Agreement under which, subject to the terms thereof, the
Option Shares are scheduled to vest on June 30, 1999.
SECTION 4. TERMINATION OF EMPLOYMENT
4.1 DEATH OF EXECUTIVE. If Executive dies during the Term, Company shall
not thereafter be obligated to make any further payments hereunder other than
amounts (including Base Salary, bonuses, expense reimbursement, etc.) accrued as
of the date of Executive's death in accordance with generally accepted
accounting principles (the "Accrued Obligations", which, for purposes of this
Agreement in situations other than death, shall reference the date of
termination).
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4.2 DISABILITY OF EXECUTIVE. If Executive is permanently disabled (as
defined in Company's long-term disability insurance policy then in effect), then
the Board shall have the right to terminate Executive's employment upon 30 days'
prior written notice to Executive at any time during the continuation of such
disability. In the event Executive's employment is terminated for disability in
accordance with this Section 4.2, Company shall not thereafter be obligated to
make any further payments hereunder other than (i) Accrued Obligations through
the date of such termination and (ii) continued Base Salary and benefits, until
the earlier of (x) such time as payments to Executive commence under Company's
long-term disability insurance policy then in effect, or (y) the expiration of
the then current Term.
4.3 TERMINATION FOR CAUSE. Executive's employment hereunder shall terminate
immediately upon notice that the Board is terminating Executive for Cause (as
defined herein), in which event Company shall not thereafter be obligated to
make any further payments of Base Salary, bonus or other payments. "Cause" shall
be limited to the following:
(i) willful failure to substantially perform Executive's duties as
described in Section 1.2 (other than such failure resulting from Executive's
physical or mental illness, or the failure of Executive to perform such duties
during the remedy period set forth in Section 4.4 hereof following the issuance
of a Notice of Termination (as herein defined) by Executive for Good Reason,
unless an arbitrator acting pursuant to Section 6.2 hereof finds Executive to
have acted in bad faith in issuing such Notice of Termination), after (x) demand
for substantial performance is delivered by Company in writing that identifies
the manner in which Company believes Executive has not substantially performed
Executive's duties and (y) Executives' failure to cure such nonperformance
within ten days after receipt of such written demand.
(ii) willful misconduct that is materially and demonstrably injurious
to Company or any of its subsidiaries;
(iii) conviction or plea of guilty or nolo contendere to a felony
or to any other crime which involves moral turpitude or, if not involving moral
turpitude, the act giving rise to such conviction or plea is materially and
demonstrably injurious to the Company or any of its subsidiaries;
(iv) material violation of (x) Company's policies relating to sexual
harassment, substance or alcohol abuse or the disclosure or misuse of
Confidential Information (as hereinafter defined), or (y) other Company polices
set forth in Company manuals or written statements of policy provided in the
case of this clause (y) that such violation is materially and demonstrably
injurious to Company and continues for more than three (3) days after written
notice thereof is given to Executive by the Board; and
(v) material breach of any provision of this Agreement by Executive,
which breach continues for more then ten days after written notice thereof is
given by the Board to Executive.
Cause shall not exist under this Section 4.3 unless and until Company
has delivered to Executive a copy of a resolution duly adopted by a majority of
the Board at a meeting of the Board called and held for such purpose (or by
unanimous written consent of the Board), finding
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that such Cause exists in the good faith opinion of the Board. This Section 4.3
shall not prevent Executive from challenging in any arbitration proceeding or
court of competent jurisdiction the Board's determination that Cause exists or
that Executive has failed to cure any act (or failure to act), to the extent
permitted by this Agreement, that purportedly formed the basis for the Board's
determination. Company must provide notice to Executive that it is intending to
terminate Executive's employment for Cause within one hundred and twenty (120)
days after the Board has actual knowledge of the occurrence of the event it
believes constitutes Cause.
4.4 TERMINATION WITHOUT CAUSE OR BY EXECUTIVE FOR GOOD REASON.
(a) If (i) Executive's employment is terminated by Company for any reason
(other than (x) Cause or (y) disability of Executive) or (ii) Executive's
employment is terminated by Executive for Good Reason, then Company shall within
thirty (30) days of termination of employment pay to Executive a lump sum cash
payment equal to Executive's Base Salary for a period equal to the greater of
(x) the date of termination of employment through the date that is one (1) year
after the date of delivery of a proper notice of termination of employment or
nonrenewal of the Agreement or (y) the then remaining Term (the "Severance
Payment"). Further, in the event of termination by Company under such
circumstances Company shall maintain in full force and effect, for the continued
benefit of Executive, Executive's spouse and Executive's dependents for the
remaining balance of the unexpired Term as of the date of termination, the
medical, hospitalization, dental and life insurance programs in which Executive,
Executive's spouse and Executive's dependents were participating immediately
prior to the date of such termination at substantially the level in effect and
upon substantially the same terms and conditions (including without limitation
contributions required by Executive for such benefits) as existed immediately
prior to the date of termination (except to the extent thereafter reduced for
senior executives of Company generally); provided, that if Executive,
Executive's spouse or Executive's dependents cannot continue to participate in
the Company programs providing such benefits, the Company shall arrange to
provide Executive, Executive's spouse and Executive's dependents with the
economic equivalent of such benefits which they otherwise would have been
entitled to receive under such plans and programs, provided that such benefits
shall terminate upon the date or dates Executive receives coverage and benefits
which are substantially similar, taken as a whole, without waiting period or
pre-existing condition limitations, under the plans and programs of a subsequent
employer . Upon making the payments described in this Section 4.4, Company shall
have no further obligation to Executive hereunder.
(b) Notwithstanding the foregoing, if Executive's employment is terminated
(i) by Company without Cause but due to Executive's failure for four consecutive
calendar quarters to attain all the performance goals as outlined in the
Compensation Plan or (ii) by Executive for Good Reason under Section 4.4(c)(vi)
provided Executive terminates employment under Section 4.4(c)(vi) within ten
(10) days of the Company's delivery of the revised performance goals to
Executive, the Severance Payment shall be reduced by fifty percent (50%).
(c) "Good Reason" shall mean the following:
(i) material breach of Company's obligations hereunder, provided that
Executive shall have given reasonably specific written notice thereof to
Company, and Company shall have failed to remedy the circumstances within 60
days thereafter;
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(ii) any decrease in Executive's salary below the amount set forth
in the Compensation Plan (except for decreases that are in conjunction with
decreases in salaries generally) or any material reduction in the general nature
of Executive's duties or authority to a level inconsistent with a senior
executive position, unless previously agreed to in writing by Executive;
(iii) the failure of Executive to be appointed initially to the
positions set forth in Section 1.2(a);
(iv) the relocation of Executive's principal place of employment to
a location more than thirty (30) miles from Princeton, New Jersey;
(v) the failure of any successor in interest of Company to be bound by
the terms of this Agreement in accordance with Section 6.5 hereof;
(vi) The financial Bonus Goals established by the Company in the
Senior Management Compensation Plan for any fiscal year are more than 125% of
the financial Bonus Goals for the preceding fiscal year and are not approved in
writing by the Chief Executive Officer or, if Albert Angrisani is not then
serving as Chief Executive Officer, approved by a majority of the participants
in the Compensation Plan; or
(vii) Executive's termination of the Agreement after Company notice of
nonrenewal under Section 2.1.
Executive must provide notice to Company that Executive is intending to
terminate Executive's employment for Good Reason within one hundred and twenty
(120) days after Executive has actual knowledge of the occurrence of an event he
believes constitutes Good Reason. Executive's right to terminate Executive's
employment hereunder for Good Reason shall not be affected by Executive's
Disability. Subject to compliance by Executive with the notice provisions of
Section 4.4(c)(i), Executive's continued employment prior to terminating
employment for Good Reason shall not constitute consent to, or a waiver of
rights with respect to, any act or failure to act constituting Good Reason. In
the event Executive delivers to the Company a Notice of Termination for Good
Reason, Executive agrees to appear before a meeting of the Board called and held
for such purpose (after reasonable notice) and specify to the Board the
particulars as to why Executive believes adequate grounds for termination for
Good Reason exist. No action by the Board, other than the remedy of the
circumstances within the time periods specified in Section 4.4(c)(i), shall be
binding on Executive.
4.5 CHANGE IN CONTROL.
(a) If, during the Term, there should be a Change of Control (as defined
herein), and within one year thereafter either (i) Executive's employment should
be terminated for any reason other than for Cause or (ii) Executive terminates
Executive's employment for Good Reason (other than under Section 4.4(c)(vi)),
Company shall, on or before Executive's last day of full-time employment
hereunder, pay to Executive, the amounts set forth in Section 4.4 above,
provided that it is the intention of the parties that the payments under this
Section 4.5 shall not constitute "excess parachute payments" within the meaning
of Section 280G of the Internal
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Revenue Code of 1986, as amended. Accordingly, notwithstanding anything in this
Agreement to the contrary, if any of the amounts otherwise payable under this
Section would constitute "excess parachute payments," or if the independent
accountants acting as auditors for Company on the date of the Change in Control
determine that such payments may constitute "excess parachute payments," then
the amounts otherwise payable under this Agreement shall be reduced to the
maximum amounts that may be paid without any such payments constituting, or
potentially constituting, "excess parachute payments."
(b) Upon the occurrence of a Change in Control, any stock options
previously granted to Executive that are not then exercisable, ie. unvested,
shall immediately vest and become exercisable by Executive . The Company shall
execute all necessary amendments to the applicable stock option plans and
agreements provided such amendments are permitted by law and will not adversely
affect the tax status or qualification of the plan as an Incentive Stock Option
Plan or Non-qualified Stock Option Plan.
(c) Upon making the payments described in this Section 4.5, Company shall
have no further obligation to Executive hereunder.
(d) A "Change in Control" of Company shall be deemed to have occurred if
(1) at any time after the date hereof, there shall occur (i) any
consolidation or merger of Company in which Company is not the continuing or
surviving corporation or pursuant to which the shares of common stock of Company
("Common Stock") would be converted into cash, securities or other property, or
(ii) any sale, lease, exchange or other transfer (in one transaction or a series
of related transactions) of assets accounting for 50% or more of total assets or
50% or more of the total revenues of Company, other than, in case of either (i)
or (ii) a consolidation or merger with, or transfer to, a corporation or other
entity of which, or of the parent entity of which, immediately following such
consolidation, merger or transfer, (x) more than 50% of the combined voting
power of the then outstanding voting securities of such entity entitled to vote
generally in the election of directors (or other determination of governing
body) is then beneficially owned (within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934) by all or substantially all of the individuals
and entities who were such owners of Common Stock immediately prior to such
consolidation, merger or transfer in substantially the same proportion, as among
themselves, as their ownership of Common Stock immediately prior to such sale
consolidation, merger or transfer, or (y) a majority of the directors (or other
governing body) consists of members of the Board of Directors of Company in
office on the date hereof for purposes of (2) below or approved as provided in
(2) below;
(2) at any time after the date hereof, (x) members of the Board of
Directors of Company in office on the date hereof (including any designated as
contemplated by Section 4.2 of the Stock Purchase Agreement made as of April 16,
1998 between Company and David Brodsky) plus (y) any new director (excluding a
director designated by a person or group who has entered into an agreement with
Company to effect a transaction described in Section 4.5(d)(1)) whose election
by the Board of Directors of Company or nomination for election by Company's
stockholders was approved by (i) Executive (if a director) or (ii) a vote of at
least a majority of the directors then still in office who either were directors
on the date hereof or whose
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election or nomination for election was previously so approved, shall cease for
any reason to constitute a majority of the Board; or
(3) at any time after the date hereof, the stockholders of Company
approve a complete liquidation or dissolution of Company, except in connection
with a recapitalization or other transaction which does not otherwise constitute
a Change of Control for purposes of Section 4.5(a)(1) above.
4.6 TERMINATION BY EXECUTIVE WITHOUT GOOD REASON. In the event
Executive's employment is voluntarily terminated by Executive without Good
Reason, Company shall not be obligated to make any further payments to Executive
hereunder other than Accrued Obligations through the date of such termination.
4.7 FAILURE TO EXTEND. A failure by Company to extend this Agreement
pursuant to Section 2.1 shall not be treated as a termination of Executive's
employment for purposes of this Agreement.
4.8 MITIGATION. Executive shall not be required to mitigate amounts
payable under this Section 4 by seeking other employment or otherwise, and there
shall be no offset against amounts due Executive under this Agreement on account
of subsequent employment except as specifically provided herein.
SECTION 5. NON-COMPETITION AND CONFIDENTIALITY
5.1 NON-COMPETITION.
(a) During the Term and for a period of one year thereafter (the
"Non-Competition Period"), Executive shall not, directly or indirectly, own,
manage, operate, join, control, participate in, invest in or otherwise be
connected or associated with, in any manner, including, without limitation, as
an officer, director, employee, distributor, independent contractor, independent
representative, partner, consultant, advisor, agent, proprietor, trustee or
investor, any Competing Business located in any state or region (including
foreign jurisdictions) where Company conducts business; provided, however, that
ownership of 1% or less of the stock or other securities of a corporation, the
stock of which is listed on a national securities exchange or is quoted on the
NASDAQ Stock Market's National market, shall not constitute a breach of this
Section 5, so long as the Executive does not in fact have the power to control,
or direct the management of, or is not otherwise engaged in activities with,
such corporation.
(b) For purposes hereof, the term "Competing Business" shall mean any
business or venture which is substantially similar to the whole or any
significant part of the business conducted by Company.
(c) Notwithstanding the above, the Non-Competition Period shall be limited
to the period for which a Severance Payment is received under Section 4.4(a)
above if Executive's employment is terminated (i) by Company without Cause, (ii)
by Executive for Good Reason or (iii) as a result of nonrenewal of the Agreement
by Company.
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(d) If the Executive's employment is terminated for any reason other than
the reasons specified in Section 5.1(c) above and Executive is not entitled to a
Severance Payment under Section 4.4(a) as a result of such termination, the
Non-Competition Period shall continue for one (1) year after termination of
employment.
5.2 NO SOLICITATION. During the Term, including any unexpired portion
thereof, and for a period of one year thereafter, the Executive shall not,
directly or indirectly, including on behalf of, for the benefit of, or in
conjunction with, any other person or entity, (i) solicit, assist, advise,
influence, induce or otherwise encourage in any way, any employee of Company to
terminate Executive's relationship with Company for any reason, or assist any
person or entity in doing so, or employ, engage or otherwise contract with any
employee or former employee of Company in a Competing Business or any other
business unless such former employee shall not have been employed by Company for
a period of at least one year, (ii) interfere in any manner with the
relationship between any employee and Company or (iii) contact, service or
solicit any existing clients, customers or accounts of Company on behalf of a
Competing Business, either as an individual on Executive's own account, as an
investor, or as an officer, director, partner, joint venturer, consultant,
employee, agent or sales man of any other person or entity.
5.3 CONFIDENTIAL INFORMATION
(a) "Confidential Information" shall mean confidential records and
information, including, but not limited to, development, marketing, purchasing,
organizational, strategic, financial, managerial, administrative, manufacturing,
production, distribution and sales information, distribution methods, data,
specifications and processes (including the Transferred Property as hereinafter
defined) presently owned or at any time hereafter developed by Company or its
agents or consultants or used presently or at any time hereafter in the course
of the business of Company, that are not otherwise part of the public domain.
(b) Executive hereby sells, transfers and assigns to Company, or to any
person or entity designated by Company, all of Executive's entire right, title
and interest in and to all inventions, ideas, methods, developments, disclosures
and improvements (the "Inventions"), whether patented or unpatented, and
copyrightable material, and all trademarks, trade names, all goodwill associated
therewith and all federal and state registrations or applications thereof, made,
adopted or conceived by solely or jointly, in whole or in part (collectively,
the "Transferred Property"), prior to or during the Term which (i) relate to
methods, apparatus, designs, products, processes or devices sold, leased, used
or under construction or development by Company or (ii) otherwise relate to or
pertain to the business, products, services, functions or operations of the
Company. Executive shall make adequate written records of all Inventions, which
records shall be Company's property and shall communicate promptly and disclose
Company, in such forms Company requests, all information, details and data
pertaining to the aforementioned Inventions. Whether during the Term or
thereafter, Executive shall execute and deliver to Company such formal transfers
and assignments and such other papers and documents as may be required of
Executive to permit Company, or any person or entity designated by Company, to
file and prosecute patent applications (including, but not limited to, records,
memoranda or instruments deemed necessary by Company for the prosecution of the
patent application or the acquisition of
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letters patent in the United states, foreign counties or otherwise) and, as to
copyrightable material, to obtain copyrights thereon, and as to trademarks, to
record the transfer of ownership of any federal or state registrations or
applications.
(c) All such Confidential Information is considered secret and will be
disclosed to the Executive in confidence, and Executive acknowledges that, as a
consequence of Executive's employment and position with Company, Executive may
have access to and become acquainted with Confidential Information. Except in
the performance of Executive's duties as an employee of Company, Executive shall
not, during the term and at all times thereafter, directly or indirectly for any
reason whatsoever, disclosure or use any such Confidential Information. All
records, files, drawings, documents, equipment and other tangible items,
wherever located, relating in any way to or containing Confidential Information,
which Executive has prepared, used or encountered or shall in the future
prepare, use or encounter, shall be and remain Company's sole and exclusive
property and shall be included in the Confidential Information. Upon termination
of Executive's agreement, or whenever requested by Company, Executive shall
promptly deliver to Company any and all of the Confidential Information and
copies thereof, not previously delivered to Company, that may be in the
possession or under the control of the Executive. The foregoing restrictions
shall not apply to the use, divulgence, disclosure or grant of access to
Confidential Information to the extent, but only to the extent, (i) expressly
permitted or required pursuant to any other written agreement between Executive
and Company, (ii) such Confidential Information has been publicly disclosed (not
due to a breach by the Executive of Executive's obligations hereunder, or by
breach of any other person, of a fiduciary or confidential obligation to Company
or (iii) the Executive is required to disclose Confidential Information by or to
any court of competent jurisdiction or any governmental or quasi-governmental
agency, authority or instrumentality of competent jurisdiction, provided,
however, that the Executive shall, prior to any such disclosure, immediately
notify Company of such requirements and provided further, however, that the
Company shall have the right, at its expense, to object to such disclosures and
to seek confidential treatment of any Confidential Information to be so
disclosed on such terms as it shall determine.
5.4 ACKNOWLEDGEMENT; REMEDIES; SURVIVAL OF THIS AGREEMENT.
(a) Executive acknowledges that violation of any of the covenants and
provisions set forth in this Agreement would cause Company irreparable damage
and agrees that Company's remedies at law for a breach or threatened breach of
any of the provisions of this Agreement would be inadequate and, in recognition
of this fact, in the event of a breach or threatened breach by Executive of any
of the provisions of this Agreement, it is agreed that, in addition to the
remedies at law or in equity, Company shall be entitled, without the posting of
a bond, to equitable relief in the form of specific performance, a temporary
restraining order, temporary or permanent injunction, or any other equitable
remedy which may then be available for the purposes of restraining Executive
from any actual or threatened breach of such covenants. Without limiting the
generality of the foregoing, if Executive breaches or threatens to breach this
Section 5 hereof, such breach or threatened breach will entitle Company to
enjoin Executive from disclosing any Confidential Information to any Competing
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Business, to enjoin any Competing Business from retaining Executive or using any
such Confidential Information, to enjoin Employee form rendering personal
services to or in connection with any Competing Business. The rights and
remedies of the parties hereto are cumulative and shall not be exclusive, and
each such party shall be entitled to pursue all legal and equitable rights and
remedies and to secure performance of the obligations and duties of the other
under this Agreement, and the enforcement of one or more of such rights and
remedies by a party shall in no way preclude such party from pursuing, at the
same time or subsequently, any and all other rights and remedies available to
it.
(b) The provisions of this Agreement shall survive the termination of
Executive's employment with Company.
SECTION 6. MISCELLANEOUS
6.1 CANCELLATION OF ORIGINAL EMPLOYMENT AGREEMENT With the exception of the
obligation to pay salary, benefits and performance bonus for the period through
December 31, 1998, the Original Employment Agreement is hereby cancelled;
provided, however, that this Section 6.1 shall not be construed to limit or
terminate Executive's entitlement under the Original Employment Agreement to
amounts accrued for periods through the date of this Agreement, including,
without limitation, the 250,000 stock options granted thereunder.
6.2 ARBITRATION. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in Princeton,
New Jersey, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. The parties consent to the
authority of the arbitrator, if the arbitrator so determines, to award fees and
expenses (including legal fees) to the prevailing party in the arbitration.
Notwithstanding the foregoing, Company shall be entitled to enforce the
provisions of Section 5 hereof through proceedings brought in a court of
competent jurisdiction as contemplated by Section 6.9 hereof.
6.3 SEVERABILITY; Reasonableness of Agreement. If any term, provision or
covenant of this Agreement or part thereof, or the application thereof to any
person, place or circumstance shall be held to be invalid, unenforceable or void
by a court of competent jurisdiction, the remainder of this Agreement and such
term, provision or covenant shall remain in full force and effect, and any such
invalid, unenforceable or void term, provision or covenant shall be deemed,
without further action on the part of the parties hereto, modified, amended and
limited, and the court shall have the power to modify, amend and limit any such
term, provision or covenant, to the extent necessary to render the same and the
remainder of the Agreement valid, enforceable and lawful. In this regard, the
Executive understands that the provisions of Section 5 may limit Executive's
ability to earn a livelihood in a business similar or related to the business of
Company, but nevertheless agrees and acknowledges that (i) the provisions of
Section 5 are reasonable and necessary for the protection of Company, and do not
impose a greater restraint than necessary to protect the goodwill or other
business interest of Company and (ii) such provisions contain reasonable
limitations as to the time and the scope of activity to be restrained. In
consideration of the foregoing and in light of Executive's education, skills and
abilities, Executive agrees that all defenses by Executive to the strict
enforcement of such provisions are hereby waived by Executive.
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6.4 KEY EMPLOYEE INSURANCE. Company shall have the right at its expense to
purchase insurance on the life of Executive, in such amounts as it shall from
time to time determine, of which Company shall be the beneficiary. Executive
shall submit to such physical examinations as may reasonably be required and
shall otherwise cooperate with Company in obtaining such insurance.
6.5 ASSIGNMENT; BENEFIT. This Agreement shall not be assignable by
Executive, other than Executive's rights to payments or benefits hereunder,
which may be transferred only by will or the laws of descent and distribution.
Upon Executive's death, this Agreement and all rights of Executive hereunder
shall inure to the benefit of and be enforceable by Executive's beneficiary or
beneficiaries, personal or legal representatives, or estate, to the extent any
such person succeeds to Executive's interests under this Agreement. No rights or
obligations of Company under this Agreement may be assigned or transferred
except that Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of Company to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that Company would be
required to perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean Company as herein before defined and any
successor to its business and/or assets (by merger, purchase or otherwise) which
executes and delivers the agreement provided for in this Section 5.4 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
6.6 NOTICES. All notices hereunder shall be in writing and shall be
sufficiently given if hand-delivered, sent by documented overnight delivery
service or registered or certified mail, postage prepaid, return receipt
requested or by telegram or telefax (confirmed by U.S. mail), receipt
acknowledged, addressed as set forth below or at such other address for either
party as may be specified in a notice given as provided herein by such party to
the other. Any such notice shall be deemed to have been given as of the date
received, in the case of personal delivery, or on the date shown on the receipt
or confirmation therefor, in all other cases. Any and all service of process and
any other notice in any such action, suit or proceeding shall be effective
against any party if given as provided in this Agreement; provided that nothing
herein shall be deemed to affect the right of any party to serve process in any
other manner permitted by law.
(a) If to Company:
Total Research Corporation
Princeton Corporate Center
5 Independence Way
Princeton, NJ 08540
With copies to:
Thomas A. Belton, Esq.
Drinker Biddle & Reath LLP
105 College Road East
Princeton, NJ 08540
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Peter G. Smith, Esq.
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, NY 10022-3903
(b) If to Executive:
6.7 TERMINATION PROCEDURES. Any termination of Executive's employment by
the Company or by Executive during the Term (other than termination pursuant to
death) shall be communicated by written Notice of Termination to the other party
hereto in accordance with Section 5.5. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so indicated.
6.8 ENTIRE AGREEMENT AND MODIFICATION. This Agreement constitutes the
entire agreement between the parties hereto with respect to the matters
contemplated herein and supersedes all prior agreements and understandings with
respect thereto. No amendment, modification, or waiver of this Agreement shall
be effective unless in writing. Neither the failure nor any delay on the part of
any party to exercise any right, remedy, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, remedy, power or privilege preclude any other or further exercise of the
same or of any other right, remedy, power, or privilege with respect to such
occurrence or with respect to any other occurrence.
6.9 GOVERNING LAW. This Agreement is made pursuant to, and shall be
construed and enforced in accordance with, the laws of the State of New Jersey
and the federal laws of the United States of America, to the extent applicable,
without giving effect to otherwise applicable principles of conflicts of law.
The parties hereto expressly consent to the jurisdiction of any state or federal
court located in New Jersey, and to venue therein, and consent to the service of
process in any such action or proceeding by certified or registered mailing of
the summons and complaint therein directed to Executive or Company, as the case
may be, at its address as provided in Section 6.6 hereof.
6.10 WITHHOLDING. All payments hereunder shall be subject to any required
withholding of Federal, state and local taxes pursuant to any applicable law or
regulation.
6.11 HEADINGS; COUNTERPARTS. The headings of paragraphs in this Agreement
are for convenience only and shall not affect its interpretation. This Agreement
may be executed in two or more counterparts, each of which shall be deemed to be
an original and all of which, when taken together, shall be deemed to constitute
the same Agreement.
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6.12 FURTHER ASSURANCES. Each of the parties hereto shall execute such
further instruments and take such other actions as the other party shall
reasonably request in order to effectuate the purposes of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TOTAL RESEARCH CORPORATION
By/s/ALBERT ANGRISANI
---------------------------------
Title: President and CEO
/s/ PATTI HOFFMAN
--------------------------------
Executive
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Exhibit A
SENIOR MANAGEMENT COMPENSATION PLAN TERM SHEET
FISCAL YEAR 1999 THROUGH FISCAL YEAR 2000
Name: Patti Hoffman
Title: President US Regional Offices Division
A. COMPENSATION/SHORT-TERM
I. Base Salary
Base salary for the second half of fiscal year 1999 will be $150,000. Salary
increases beyond year one, will be set by the CEO and approved by the Executive
Committee and will be based on individual performance and contribution. The
amount of the increase awarded will be based on a salary increase range of
0-10%.
II. Bonus:
Entitled to a guaranteed bonus of $10,000 for fiscal year 1999 if performance
for such year is deemed acceptable by CEO. An additional bonus compensates the
Executive if established performance measures are achieved. The performance
measures listed below are based on goals established for core business only
against the performance plans for fiscal year 1999. This additional compensation
would be in cash, and represents a bonus opportunity at 20% of the base salary
if the goals listed below are met. Should the results fall slightly below plan,
i.e., ninety-five (95) percent of goal, the Executive will be entitled to a
reduced bonus. The reduced bonus will pay the Executive ten (10) percent of the
Base Salary if ninety-five (95) to ninety-nine and nine tenths (99.9) percent of
the goal is achieved. No bonus will be paid if results fall below 95% of goal.
Goal Reward
1. Revenue of $6,500,000 30% of 20% cash opportunity
2. Gross Profit greater than 56% 30% of 20% cash opportunity
Income Before Tax of $686,000
3. Money Management 20% of 20% cash opportunity
a. Invoicing at 95% of plan or greater
b. Cash Received at 95% of plan or greater
c. Receivables + 45 days no greater than 30%
of monthly receivables 9 out of 12 months
A-1
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4. Non Financial (as set by CEO) 20% of 20% cash opportunity
a. Sales Infrastructure Expansion
b. Product Development
c. Process Improvement
d. Other
Performance goals for subsequent fiscal years shall be established by the CEO.
IBT shall be defined in the Senior Management Compensation Plan (Fiscal Years
1999-2001) for the CEO.
B. EXCESS PERFORMANCE BONUS OPPORTUNITY:
Payment under this portion of the compensation plan is for performance in excess
of established goals. The bonus opportunity under this portion of the
compensation plan, provides a bonus based on the following formula:
The Executive will receive 15% of the entire excess division's IBT if the
division's IBT is 10% or more greater than plan; provided that, regardless of
division performance, the Company's IBT goal must be achieved before the
Executive is eligible to receive any excess bonus payments.
C. LONG TERM PERFORMANCE REWARD
The primary goal of Total Research's Long Term Performance Reward is to enhance
senior management performance through equity ownership.
The granting of stock options that a participant may receive in each year is
based on an assessment by the Chief Executive Officer and the Executive
Committee of the Board of Directors. Any option grant is totally discretionary.
A-2
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT dated as of January 1, 1999 between Total Research
Corporation, a Delaware corporation ("Company"), and Eric Zissman ("Executive").
BACKGROUND
----------
Executive is presently serving as the Chief Financial Officer under
an Employment Agreement with Company effective January 2, 1997 (the "Original
Employment Agreement"). Company desires to have Executive continue in the
employment of the Company beyond the June 30, 1999 termination date in the
Original Employment Agreement, and Executive wishes to remain in the employment
of the Company beyond such date, on the terms and conditions contained in this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein and intending to be legally bound hereby, the
parties hereto agree as follows:
TERMS
-----
SECTION 1. CAPACITY AND DUTIES
1.1 EMPLOYMENT; ACCEPTANCE OF EMPLOYMENT. Company hereby employs Executive and
Executive hereby accepts employment by Company for the period and upon the terms
and conditions hereinafter set forth.
1.2 CAPACITY AND DUTIES.
(a) Executive shall initially serve as President of the Customer Loyalty
Division of Company. Executive shall perform the duties and have the
responsibilities of a Division President as described in the "Position
Description" previously delivered to Executive, as such "Position Description"
may be revised by Company from time to time. Executive shall perform such other
duties and shall have such authority consistent with his position as may from
time to time be specified by the Chief Executive Officer of Company. Executive
may be appointed by the Chief Executive Officer to another senior level
position, provided such appointment does not result in a reduction in
Executive's compensation and benefits under this Agreement. Executive shall
report directly to the Chief Executive Officer, and shall perform Executive's
duties for Company principally at Company's principal executive offices,
presently in Princeton, New Jersey , except for periodic travel that may be
necessary or appropriate in connection with the performance of Executive's
duties hereunder.
(b) Executive shall devote Executive's full working time, energy, skill and
best efforts to the performance of Executive's duties hereunder, in a manner
that will faithfully and diligently further the business and interests of
Company, and shall not be employed by, or participate or engage in or in any
manner be a part of the management or operation of, any business enterprise
other than Company without the prior written consent of the Board of Directors
of Company (the
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"Board"). Notwithstanding the above, Executive shall be permitted, to the extent
such activities do not interfere or conflict with the performance by Executive
of Executive's duties and responsibilities hereunder, (i) to manage Executive's
personal, financial and legal affairs, and (ii) to serve on civic, charitable or
professional boards or committees (it being expressly understood and agreed that
Executive's continuing to serve on any such board and/or committees on which
Executive is serving, or with which Executive is otherwise associated (each of
which has been disclosed to Company in writing prior to the execution of
Executive's Agreement), as of the Commencement Date (as defined below), shall be
deemed not to interfere with the performance by Executive of Executive's duties
and responsibilities under this Agreement).
(c) Executive represents and warrants to Company that Executive is under no
contractual or other restriction or obligation which conflicts with, violates or
is inconsistent with the execution of this Agreement, the performance of
Executive's duties hereunder, or the other rights of Company hereunder.
(d) During the Term, Executive shall be entitled to participate as a member of
the Company's Management Council. The Management Council shall consist of
Executive and certain other senior officers of the Company and shall serve as an
advisory and consultative body on such significant strategic and operating
issues as the Chairman or President of the Company determine to present to the
Management Council prior to decisions on such issues being made by the
President, the Executive Committee or the Board of Directors.
SECTION 2. TERM OF EMPLOYMENT
2.1 TERM. The term of Executive's employment hereunder shall commence on
the date hereof (the "Commencement Date") and continue until June 30, 2000, as
further extended or unless sooner terminated in accordance with the other
provisions hereof (the "Term"). Except as hereinafter provided, on expiration of
the initial Term, the Term shall be automatically extended for one additional
year unless either party shall have given to the other party written notice of
nonrenewal of this Agreement at least six months prior to such expiration date.
After the initial Term, the Term shall be automatically extended for successive
one year Terms unless written notice of nonrenewal is given by either party to
the other at least six (6) months prior to the expiration of the then current
Term. If written notice of termination is given as provided above, Executive's
employment under this Agreement shall terminate on the last day of the
then-current Term.
SECTION 3. COMPENSATION
3.1 BASIC COMPENSATION. As compensation for Executive's services during the
Term, Company shall pay to Executive a salary effective January 1, 1999 in the
amount specified on Exhibit A, attached hereto and made a part hereof. The
Executive shall continue to receive Executive's salary at the rate presently in
effect under the Original Employment Agreement through December 31, 1998. The
salary shall be payable in periodic installments in accordance with Company's
regular payroll practices for its executive personnel at the time of payment,
but in no event less frequently than monthly. Executive's annual salary, as
determined in accordance with this Section 3.1, is hereinafter referred to as
Executive's "Base Salary."
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3.2 PERFORMANCE BONUS. As additional compensation for the services rendered
by Executive to Company pursuant to this Agreement for fiscal periods commencing
July 1, 1998, the Executive shall be entitled to participate in the Senior
Management Compensation Plan, attached hereto and incorporated hereby as Exhibit
A (the "Compensation Plan").
3.3 EMPLOYEE BENEFITS. During the Term, Executive shall be entitled to
participate in such of Company's employee benefit plans and benefit programs,
including medical, hospitalization, dental, disability, accidental death and
dismemberment and travel accident plans and programs, as may from time to time
be provided by Company for its senior executives generally. In addition, during
the Term Executive shall be eligible to participate in all pension, retirement,
savings and other employee benefit plans and programs maintained from time to
time by Company for the benefit of its senior executives generally. Company
shall have no obligation, however, to maintain any particular program or level
of benefits referred to in this Section 3.3.
3.4 OTHER BENEFITS. During the Term, the Company shall provide Executive
with an automobile allowance of $500.00 per month for the use of an automobile
owned or leased by Executive in accordance with the policies and procedures
established by the Company from time to time for executive employees.
3.5 VACATION. Executive shall be entitled to the normal and customary
amount of paid vacation provided to senior executives of the Company generally,
but in no event less than 20 days during each 12 month period, beginning on July
1, 1998. Any vacation days that are not taken in a given 12 month period shall
accrue and carry over from year to year up to a maximum of 20 days. The
Executive may be granted leaves of absence with or without pay for such valid
and legitimate reasons as the Board in its sole and absolute discretion may
determine, and is entitled to the same sick leave and holidays provided to other
senior executive officers of Company.
3.6 EXPENSE REIMBURSEMENT. Company shall reimburse Executive for all
reasonable and documented expenses incurred by him in connection with the
performance of Executive's duties hereunder in accordance with its regular
reimbursement policies as in effect from time to time.
3.7 STOCK OPTION AGREEMENT. Company acknowledges the prior grant to
Executive of 250,000 stock options (the "Option Shares") made pursuant to the
Original Employment Agreement under which, subject to the terms thereof, the
Option Shares are scheduled to vest on June 30, 1999.
SECTION 4. TERMINATION OF EMPLOYMENT
4.1 DEATH OF EXECUTIVE. If Executive dies during the Term, Company shall
not thereafter be obligated to make any further payments hereunder other than
amounts (including Base Salary, bonuses, expense reimbursement, etc.) accrued as
of the date of Executive's death in accordance with generally accepted
accounting principles (the "Accrued Obligations", which, for purposes of this
Agreement in situations other than death, shall reference the date of
termination).
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4.2 DISABILITY OF EXECUTIVE. If Executive is permanently disabled (as
defined in Company's long-term disability insurance policy then in effect), then
the Board shall have the right to terminate Executive's employment upon 30 days'
prior written notice to Executive at any time during the continuation of such
disability. In the event Executive's employment is terminated for disability in
accordance with this Section 4.2, Company shall not thereafter be obligated to
make any further payments hereunder other than (i) Accrued Obligations through
the date of such termination and (ii) continued Base Salary and benefits, until
the earlier of (x) such time as payments to Executive commence under Company's
long-term disability insurance policy then in effect, or (y) the expiration of
the then current Term.
4.3 TERMINATION FOR CAUSE. Executive's employment hereunder shall terminate
immediately upon notice that the Board is terminating Executive for Cause (as
defined herein), in which event Company shall not thereafter be obligated to
make any further payments of Base Salary, bonus or other payments. "Cause" shall
be limited to the following:
(i) willful failure to substantially perform Executive's duties as
described in Section 1.2 (other than such failure resulting from Executive's
physical or mental illness, or the failure of Executive to perform such duties
during the remedy period set forth in Section 4.4 hereof following the issuance
of a Notice of Termination (as herein defined) by Executive for Good Reason,
unless an arbitrator acting pursuant to Section 6.2 hereof finds Executive to
have acted in bad faith in issuing such Notice of Termination), after (x) demand
for substantial performance is delivered by Company in writing that identifies
the manner in which Company believes Executive has not substantially performed
Executive's duties and (y) Executives' failure to cure such nonperformance
within ten days after receipt of such written demand.
(ii) willful misconduct that is materially and demonstrably injurious
to Company or any of its subsidiaries;
(iii) conviction or plea of guilty or nolo contendere to a felony
or to any other crime which involves moral turpitude or, if not involving moral
turpitude, the act giving rise to such conviction or plea is materially and
demonstrably injurious to the Company or any of its subsidiaries;
(iv) material violation of (x) Company's policies relating to sexual
harassment, substance or alcohol abuse or the disclosure or misuse of
Confidential Information (as hereinafter defined), or (y) other Company polices
set forth in Company manuals or written statements of policy provided in the
case of this clause (y) that such violation is materially and demonstrably
injurious to Company and continues for more than three (3) days after written
notice thereof is given to Executive by the Board; and
(v) material breach of any provision of this Agreement by Executive,
which breach continues for more then ten days after written notice thereof is
given by the Board to Executive.
Cause shall not exist under this Section 4.3 unless and until Company
has delivered to Executive a copy of a resolution duly adopted by a majority of
the Board at a meeting of the Board called and held for such purpose (or by
unanimous written consent of the Board), finding
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that such Cause exists in the good faith opinion of the Board. This Section 4.3
shall not prevent Executive from challenging in any arbitration proceeding or
court of competent jurisdiction the Board's determination that Cause exists or
that Executive has failed to cure any act (or failure to act), to the extent
permitted by this Agreement, that purportedly formed the basis for the Board's
determination. Company must provide notice to Executive that it is intending to
terminate Executive's employment for Cause within one hundred and twenty (120)
days after the Board has actual knowledge of the occurrence of the event it
believes constitutes Cause.
4.4 TERMINATION WITHOUT CAUSE OR BY EXECUTIVE FOR GOOD REASON.
(a) If (i) Executive's employment is terminated by Company for any reason
(other than (x) Cause or (y) disability of Executive) or (ii) Executive's
employment is terminated by Executive for Good Reason, then Company shall within
thirty (30) days of termination of employment pay to Executive a lump sum cash
payment equal to Executive's Base Salary for a period equal to the greater of
(x) the date of termination of employment through the date that is one (1) year
after the date of delivery of a proper notice of termination of employment or
nonrenewal of the Agreement or (y) the then remaining Term (the "Severance
Payment"). Further, in the event of termination by Company under such
circumstances Company shall maintain in full force and effect, for the continued
benefit of Executive, Executive's spouse and Executive's dependents for the
remaining balance of the unexpired Term as of the date of termination, the
medical, hospitalization, dental and life insurance programs in which Executive,
Executive's spouse and Executive's dependents were participating immediately
prior to the date of such termination at substantially the level in effect and
upon substantially the same terms and conditions (including without limitation
contributions required by Executive for such benefits) as existed immediately
prior to the date of termination (except to the extent thereafter reduced for
senior executives of Company generally); provided, that if Executive,
Executive's spouse or Executive's dependents cannot continue to participate in
the Company programs providing such benefits, the Company shall arrange to
provide Executive, Executive's spouse and Executive's dependents with the
economic equivalent of such benefits which they otherwise would have been
entitled to receive under such plans and programs, provided that such benefits
shall terminate upon the date or dates Executive receives coverage and benefits
which are substantially similar, taken as a whole, without waiting period or
pre-existing condition limitations, under the plans and programs of a subsequent
employer . Upon making the payments described in this Section 4.4, Company shall
have no further obligation to Executive hereunder.
(b) Notwithstanding the foregoing, if Executive's employment is terminated
(i) by Company without Cause but due to Executive's failure for four consecutive
calendar quarters to attain all the performance goals as outlined in the
Compensation Plan or (ii) by Executive for Good Reason under Section 4.4(c)(vi)
provided Executive terminates employment under Section 4.4(c)(vi) within ten
(10) days of the Company's delivery of the revised performance goals to
Executive, the Severance Payment shall be reduced by fifty percent (50%).
(c) "Good Reason" shall mean the following:
(i) material breach of Company's obligations hereunder, provided that
Executive shall have given reasonably specific written notice thereof to
Company, and Company shall have failed to remedy the circumstances within 60
days thereafter;
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(ii) any decrease in Executive's salary below the amount set forth
in the Compensation Plan (except for decreases that are in conjunction with
decreases in salaries generally) or any material reduction in the general nature
of Executive's duties or authority to a level inconsistent with a senior
executive position, unless previously agreed to in writing by Executive;
(iii) the failure of Executive to be appointed initially to the
positions set forth in Section 1.2(a);
(iv) the relocation of Executive's principal place of employment to
a location more than thirty (30) miles from Princeton, New Jersey;
(v) the failure of any successor in interest of Company to be bound by
the terms of this Agreement in accordance with Section 6.5 hereof;
(vi) The financial Bonus Goals established by the Company in the
Senior Management Compensation Plan for any fiscal year are more than 125% of
the financial Bonus Goals for the preceding fiscal year and are not approved in
writing by the Chief Executive Officer or, if Albert Angrisani is not then
serving as Chief Executive Officer, approved by a majority of the participants
in the Compensation Plan; or
(vii) Executive's termination of the Agreement after Company notice of
nonrenewal under Section 2.1.
Executive must provide notice to Company that Executive is intending to
terminate Executive's employment for Good Reason within one hundred and twenty
(120) days after Executive has actual knowledge of the occurrence of an event he
believes constitutes Good Reason. Executive's right to terminate Executive's
employment hereunder for Good Reason shall not be affected by Executive's
Disability. Subject to compliance by Executive with the notice provisions of
Section 4.4(c)(i), Executive's continued employment prior to terminating
employment for Good Reason shall not constitute consent to, or a waiver of
rights with respect to, any act or failure to act constituting Good Reason. In
the event Executive delivers to the Company a Notice of Termination for Good
Reason, Executive agrees to appear before a meeting of the Board called and held
for such purpose (after reasonable notice) and specify to the Board the
particulars as to why Executive believes adequate grounds for termination for
Good Reason exist. No action by the Board, other than the remedy of the
circumstances within the time periods specified in Section 4.4(c)(i), shall be
binding on Executive.
4.5 CHANGE IN CONTROL.
(a) If, during the Term, there should be a Change of Control (as defined
herein), and within one year thereafter either (i) Executive's employment should
be terminated for any reason other than for Cause or (ii) Executive terminates
Executive's employment for Good Reason (other than under Section 4.4(c)(vi)),
Company shall, on or before Executive's last day of full-time employment
hereunder, pay to Executive, the amounts set forth in Section 4.4 above,
provided that it is the intention of the parties that the payments under this
Section 4.5 shall not constitute "excess parachute payments" within the meaning
of Section 280G of the Internal
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Revenue Code of 1986, as amended. Accordingly, notwithstanding anything in this
Agreement to the contrary, if any of the amounts otherwise payable under this
Section would constitute "excess parachute payments," or if the independent
accountants acting as auditors for Company on the date of the Change in Control
determine that such payments may constitute "excess parachute payments," then
the amounts otherwise payable under this Agreement shall be reduced to the
maximum amounts that may be paid without any such payments constituting, or
potentially constituting, "excess parachute payments."
(b) Upon the occurrence of a Change in Control, any stock options
previously granted to Executive that are not then exercisable, ie. unvested,
shall immediately vest and become exercisable by Executive . The Company shall
execute all necessary amendments to the applicable stock option plans and
agreements provided such amendments are permitted by law and will not adversely
affect the tax status or qualification of the plan as an Incentive Stock Option
Plan or Non-qualified Stock Option Plan.
(c) Upon making the payments described in this Section 4.5, Company shall
have no further obligation to Executive hereunder.
(d) A "Change in Control" of Company shall be deemed to have occurred if
(1) at any time after the date hereof, there shall occur (i) any
consolidation or merger of Company in which Company is not the continuing or
surviving corporation or pursuant to which the shares of common stock of Company
("Common Stock") would be converted into cash, securities or other property, or
(ii) any sale, lease, exchange or other transfer (in one transaction or a series
of related transactions) of assets accounting for 50% or more of total assets or
50% or more of the total revenues of Company, other than, in case of either (i)
or (ii) a consolidation or merger with, or transfer to, a corporation or other
entity of which, or of the parent entity of which, immediately following such
consolidation, merger or transfer, (x) more than 50% of the combined voting
power of the then outstanding voting securities of such entity entitled to vote
generally in the election of directors (or other determination of governing
body) is then beneficially owned (within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934) by all or substantially all of the individuals
and entities who were such owners of Common Stock immediately prior to such
consolidation, merger or transfer in substantially the same proportion, as among
themselves, as their ownership of Common Stock immediately prior to such sale
consolidation, merger or transfer, or (y) a majority of the directors (or other
governing body) consists of members of the Board of Directors of Company in
office on the date hereof for purposes of (2) below or approved as provided in
(2) below;
(2) at any time after the date hereof, (x) members of the Board of
Directors of Company in office on the date hereof (including any designated as
contemplated by Section 4.2 of the Stock Purchase Agreement made as of April 16,
1998 between Company and David Brodsky) plus (y) any new director (excluding a
director designated by a person or group who has entered into an agreement with
Company to effect a transaction described in Section 4.5(d)(1)) whose election
by the Board of Directors of Company or nomination for election by Company's
stockholders was approved by (i) Executive (if a director) or (ii) a vote of at
least a majority of the directors then still in office who either were directors
on the date hereof or whose
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election or nomination for election was previously so approved, shall cease for
any reason to constitute a majority of the Board; or
(3) at any time after the date hereof, the stockholders of Company
approve a complete liquidation or dissolution of Company, except in connection
with a recapitalization or other transaction which does not otherwise constitute
a Change of Control for purposes of Section 4.5(a)(1) above.
4.6 TERMINATION BY EXECUTIVE WITHOUT GOOD REASON. In the event
Executive's employment is voluntarily terminated by Executive without Good
Reason, Company shall not be obligated to make any further payments to Executive
hereunder other than Accrued Obligations through the date of such termination.
4.7 FAILURE TO EXTEND. A failure by Company to extend this Agreement
pursuant to Section 2.1 shall not be treated as a termination of Executive's
employment for purposes of this Agreement.
4.8 MITIGATION. Executive shall not be required to mitigate amounts
payable under this Section 4 by seeking other employment or otherwise, and there
shall be no offset against amounts due Executive under this Agreement on account
of subsequent employment except as specifically provided herein.
SECTION 5. NON-COMPETITION AND CONFIDENTIALITY
5.1 NON-COMPETITION.
(a) During the Term and for a period of one year thereafter (the
"Non-Competition Period"), Executive shall not, directly or indirectly, own,
manage, operate, join, control, participate in, invest in or otherwise be
connected or associated with, in any manner, including, without limitation, as
an officer, director, employee, distributor, independent contractor, independent
representative, partner, consultant, advisor, agent, proprietor, trustee or
investor, any Competing Business located in any state or region (including
foreign jurisdictions) where Company conducts business; provided, however, that
ownership of 1% or less of the stock or other securities of a corporation, the
stock of which is listed on a national securities exchange or is quoted on the
NASDAQ Stock Market's National market, shall not constitute a breach of this
Section 5, so long as the Executive does not in fact have the power to control,
or direct the management of, or is not otherwise engaged in activities with,
such corporation.
(b) For purposes hereof, the term "Competing Business" shall mean any
business or venture which is substantially similar to the whole or any
significant part of the business conducted by Company.
(c) Notwithstanding the above, the Non-Competition Period shall be limited
to the period for which a Severance Payment is received under Section 4.4(a)
above if Executive's employment is terminated (i) by Company without Cause, (ii)
by Executive for Good Reason or (iii) as a result of nonrenewal of the Agreement
by Company.
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(d) If the Executive's employment is terminated for any reason other than
the reasons specified in Section 5.1(c) above and Executive is not entitled to a
Severance Payment under Section 4.4(a) as a result of such termination, the
Non-Competition Period shall continue for one (1) year after termination of
employment.
5.2 NO SOLICITATION. During the Term, including any unexpired portion
thereof, and for a period of one year thereafter, the Executive shall not,
directly or indirectly, including on behalf of, for the benefit of, or in
conjunction with, any other person or entity, (i) solicit, assist, advise,
influence, induce or otherwise encourage in any way, any employee of Company to
terminate Executive's relationship with Company for any reason, or assist any
person or entity in doing so, or employ, engage or otherwise contract with any
employee or former employee of Company in a Competing Business or any other
business unless such former employee shall not have been employed by Company for
a period of at least one year, (ii) interfere in any manner with the
relationship between any employee and Company or (iii) contact, service or
solicit any existing clients, customers or accounts of Company on behalf of a
Competing Business, either as an individual on Executive's own account, as an
investor, or as an officer, director, partner, joint venturer, consultant,
employee, agent or sales man of any other person or entity.
5.3 CONFIDENTIAL INFORMATION
(a) "Confidential Information" shall mean confidential records and
information, including, but not limited to, development, marketing, purchasing,
organizational, strategic, financial, managerial, administrative, manufacturing,
production, distribution and sales information, distribution methods, data,
specifications and processes (including the Transferred Property as hereinafter
defined) presently owned or at any time hereafter developed by Company or its
agents or consultants or used presently or at any time hereafter in the course
of the business of Company, that are not otherwise part of the public domain.
(b) Executive hereby sells, transfers and assigns to Company, or to any
person or entity designated by Company, all of Executive's entire right, title
and interest in and to all inventions, ideas, methods, developments, disclosures
and improvements (the "Inventions"), whether patented or unpatented, and
copyrightable material, and all trademarks, trade names, all goodwill associated
therewith and all federal and state registrations or applications thereof, made,
adopted or conceived by solely or jointly, in whole or in part (collectively,
the "Transferred Property"), prior to or during the Term which (i) relate to
methods, apparatus, designs, products, processes or devices sold, leased, used
or under construction or development by Company or (ii) otherwise relate to or
pertain to the business, products, services, functions or operations of the
Company. Executive shall make adequate written records of all Inventions, which
records shall be Company's property and shall communicate promptly and disclose
Company, in such forms Company requests, all information, details and data
pertaining to the aforementioned Inventions. Whether during the Term or
thereafter, Executive shall execute and deliver to Company such formal transfers
and assignments and such other papers and documents as may be required of
Executive to permit Company, or any person or entity designated by Company, to
file and prosecute patent applications (including, but not limited to, records,
memoranda or instruments deemed necessary by Company for the prosecution of the
patent application or the acquisition of
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letters patent in the United states, foreign counties or otherwise) and, as to
copyrightable material, to obtain copyrights thereon, and as to trademarks, to
record the transfer of ownership of any federal or state registrations or
applications.
(c) All such Confidential Information is considered secret and will be
disclosed to the Executive in confidence, and Executive acknowledges that, as a
consequence of Executive's employment and position with Company, Executive may
have access to and become acquainted with Confidential Information. Except in
the performance of Executive's duties as an employee of Company, Executive shall
not, during the term and at all times thereafter, directly or indirectly for any
reason whatsoever, disclosure or use any such Confidential Information. All
records, files, drawings, documents, equipment and other tangible items,
wherever located, relating in any way to or containing Confidential Information,
which Executive has prepared, used or encountered or shall in the future
prepare, use or encounter, shall be and remain Company's sole and exclusive
property and shall be included in the Confidential Information. Upon termination
of Executive's agreement, or whenever requested by Company, Executive shall
promptly deliver to Company any and all of the Confidential Information and
copies thereof, not previously delivered to Company, that may be in the
possession or under the control of the Executive. The foregoing restrictions
shall not apply to the use, divulgence, disclosure or grant of access to
Confidential Information to the extent, but only to the extent, (i) expressly
permitted or required pursuant to any other written agreement between Executive
and Company, (ii) such Confidential Information has been publicly disclosed (not
due to a breach by the Executive of Executive's obligations hereunder, or by
breach of any other person, of a fiduciary or confidential obligation to Company
or (iii) the Executive is required to disclose Confidential Information by or to
any court of competent jurisdiction or any governmental or quasi-governmental
agency, authority or instrumentality of competent jurisdiction, provided,
however, that the Executive shall, prior to any such disclosure, immediately
notify Company of such requirements and provided further, however, that the
Company shall have the right, at its expense, to object to such disclosures and
to seek confidential treatment of any Confidential Information to be so
disclosed on such terms as it shall determine.
5.4 ACKNOWLEDGEMENT; REMEDIES; SURVIVAL OF THIS AGREEMENT.
(a) Executive acknowledges that violation of any of the covenants and
provisions set forth in this Agreement would cause Company irreparable damage
and agrees that Company's remedies at law for a breach or threatened breach of
any of the provisions of this Agreement would be inadequate and, in recognition
of this fact, in the event of a breach or threatened breach by Executive of any
of the provisions of this Agreement, it is agreed that, in addition to the
remedies at law or in equity, Company shall be entitled, without the posting of
a bond, to equitable relief in the form of specific performance, a temporary
restraining order, temporary or permanent injunction, or any other equitable
remedy which may then be available for the purposes of restraining Executive
from any actual or threatened breach of such covenants. Without limiting the
generality of the foregoing, if Executive breaches or threatens to breach this
Section 5 hereof, such breach or threatened breach will entitle Company to
enjoin Executive from disclosing any Confidential Information to any Competing
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Business, to enjoin any Competing Business from retaining Executive or using any
such Confidential Information, to enjoin Employee form rendering personal
services to or in connection with any Competing Business. The rights and
remedies of the parties hereto are cumulative and shall not be exclusive, and
each such party shall be entitled to pursue all legal and equitable rights and
remedies and to secure performance of the obligations and duties of the other
under this Agreement, and the enforcement of one or more of such rights and
remedies by a party shall in no way preclude such party from pursuing, at the
same time or subsequently, any and all other rights and remedies available to
it.
(b) The provisions of this Agreement shall survive the termination of
Executive's employment with Company.
SECTION 6. MISCELLANEOUS
6.1 CANCELLATION OF ORIGINAL EMPLOYMENT AGREEMENT With the exception of the
obligation to pay salary, benefits and performance bonus for the period through
December 31, 1998, the Original Employment Agreement is hereby cancelled;
provided, however, that this Section 6.1 shall not be construed to limit or
terminate Executive's entitlement under the Original Employment Agreement to
amounts accrued for periods through the date of this Agreement, including,
without limitation, the 250,000 stock options granted thereunder.
6.2 ARBITRATION. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in Princeton,
New Jersey, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. The parties consent to the
authority of the arbitrator, if the arbitrator so determines, to award fees and
expenses (including legal fees) to the prevailing party in the arbitration.
Notwithstanding the foregoing, Company shall be entitled to enforce the
provisions of Section 5 hereof through proceedings brought in a court of
competent jurisdiction as contemplated by Section 6.9 hereof.
6.3 SEVERABILITY; Reasonableness of Agreement. If any term, provision or
covenant of this Agreement or part thereof, or the application thereof to any
person, place or circumstance shall be held to be invalid, unenforceable or void
by a court of competent jurisdiction, the remainder of this Agreement and such
term, provision or covenant shall remain in full force and effect, and any such
invalid, unenforceable or void term, provision or covenant shall be deemed,
without further action on the part of the parties hereto, modified, amended and
limited, and the court shall have the power to modify, amend and limit any such
term, provision or covenant, to the extent necessary to render the same and the
remainder of the Agreement valid, enforceable and lawful. In this regard, the
Executive understands that the provisions of Section 5 may limit Executive's
ability to earn a livelihood in a business similar or related to the business of
Company, but nevertheless agrees and acknowledges that (i) the provisions of
Section 5 are reasonable and necessary for the protection of Company, and do not
impose a greater restraint than necessary to protect the goodwill or other
business interest of Company and (ii) such provisions contain reasonable
limitations as to the time and the scope of activity to be restrained. In
consideration of the foregoing and in light of Executive's education, skills and
abilities, Executive agrees that all defenses by Executive to the strict
enforcement of such provisions are hereby waived by Executive.
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6.4 KEY EMPLOYEE INSURANCE. Company shall have the right at its expense to
purchase insurance on the life of Executive, in such amounts as it shall from
time to time determine, of which Company shall be the beneficiary. Executive
shall submit to such physical examinations as may reasonably be required and
shall otherwise cooperate with Company in obtaining such insurance.
6.5 ASSIGNMENT; BENEFIT. This Agreement shall not be assignable by
Executive, other than Executive's rights to payments or benefits hereunder,
which may be transferred only by will or the laws of descent and distribution.
Upon Executive's death, this Agreement and all rights of Executive hereunder
shall inure to the benefit of and be enforceable by Executive's beneficiary or
beneficiaries, personal or legal representatives, or estate, to the extent any
such person succeeds to Executive's interests under this Agreement. No rights or
obligations of Company under this Agreement may be assigned or transferred
except that Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of Company to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that Company would be
required to perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean Company as herein before defined and any
successor to its business and/or assets (by merger, purchase or otherwise) which
executes and delivers the agreement provided for in this Section 5.4 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
6.6 NOTICES. All notices hereunder shall be in writing and shall be
sufficiently given if hand-delivered, sent by documented overnight delivery
service or registered or certified mail, postage prepaid, return receipt
requested or by telegram or telefax (confirmed by U.S. mail), receipt
acknowledged, addressed as set forth below or at such other address for either
party as may be specified in a notice given as provided herein by such party to
the other. Any such notice shall be deemed to have been given as of the date
received, in the case of personal delivery, or on the date shown on the receipt
or confirmation therefor, in all other cases. Any and all service of process and
any other notice in any such action, suit or proceeding shall be effective
against any party if given as provided in this Agreement; provided that nothing
herein shall be deemed to affect the right of any party to serve process in any
other manner permitted by law.
(a) If to Company:
Total Research Corporation
Princeton Corporate Center
5 Independence Way
Princeton, NJ 08540
With copies to:
Thomas A. Belton, Esq.
Drinker Biddle & Reath LLP
105 College Road East
Princeton, NJ 08540
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Peter G. Smith, Esq.
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, NY 10022-3903
(b) If to Executive:
6.7 TERMINATION PROCEDURES. Any termination of Executive's employment by
the Company or by Executive during the Term (other than termination pursuant to
death) shall be communicated by written Notice of Termination to the other party
hereto in accordance with Section 5.5. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so indicated.
6.8 ENTIRE AGREEMENT AND MODIFICATION. This Agreement constitutes the
entire agreement between the parties hereto with respect to the matters
contemplated herein and supersedes all prior agreements and understandings with
respect thereto. No amendment, modification, or waiver of this Agreement shall
be effective unless in writing. Neither the failure nor any delay on the part of
any party to exercise any right, remedy, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, remedy, power or privilege preclude any other or further exercise of the
same or of any other right, remedy, power, or privilege with respect to such
occurrence or with respect to any other occurrence.
6.9 GOVERNING LAW. This Agreement is made pursuant to, and shall be
construed and enforced in accordance with, the laws of the State of New Jersey
and the federal laws of the United States of America, to the extent applicable,
without giving effect to otherwise applicable principles of conflicts of law.
The parties hereto expressly consent to the jurisdiction of any state or federal
court located in New Jersey, and to venue therein, and consent to the service of
process in any such action or proceeding by certified or registered mailing of
the summons and complaint therein directed to Executive or Company, as the case
may be, at its address as provided in Section 6.6 hereof.
6.10 WITHHOLDING. All payments hereunder shall be subject to any required
withholding of Federal, state and local taxes pursuant to any applicable law or
regulation.
6.11 HEADINGS; COUNTERPARTS. The headings of paragraphs in this Agreement
are for convenience only and shall not affect its interpretation. This Agreement
may be executed in two or more counterparts, each of which shall be deemed to be
an original and all of which, when taken together, shall be deemed to constitute
the same Agreement.
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6.12 FURTHER ASSURANCES. Each of the parties hereto shall execute such
further instruments and take such other actions as the other party shall
reasonably request in order to effectuate the purposes of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TOTAL RESEARCH CORPORATION
By/s/ALBERT ANGRISANI
---------------------------------
Title: President and CEO
/s/ERIC ZISSMAN
--------------------------------
Executive
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Exhibit A
SENIOR MANAGEMENT COMPENSATION PLAN TERM SHEET
FISCAL YEAR 1999
Name: Eric Zissman
Title: Chief Financial Officer and Director of Corporate Development
A. COMPENSATION/SHORT-TERM
I. Base Salary
Base salary for the second half of fiscal year 1999 will be $150,000. Salary
increases beyond year one, will be set by the CEO and approved by the Executive
Committee and will be based on individual performance and contribution. The
amount of the increase awarded will be based on a salary increase range of
0-10%.
II. Bonus:
Entitled to a bonus of $10,000 based on performance in the area of corporate
development as evaluated by the Executive Committee. An additional bonus
compensates the Executive if established performance measures are achieved. The
performance measures listed below are based on goals established for core
business only against the performance plans for fiscal year 1999. This
additional compensation would be in cash, and represents a bonus opportunity at
20% of the base salary if the goals listed below are met. Should the results
fall slightly below plan, i.e., ninety-five (95) percent of goal, the Executive
will be entitled to a reduced bonus. The reduced bonus will pay the Executive
ten (10) percent of the Base Salary if ninety-five (95) to ninety-nine and nine
tenths (99.9) percent of the goal is achieved. No bonus will be paid if results
fall below 95% of goal.
Goal Reward
1. * General and Administrative 40% of 20% cash opportunity
Expense Management of 18.3%
of corporate annual revenue
(includes Administration, Corporate
and Data Processing expenses)
* If revenue is below plan and the Income
Before Tax is on plan, this goal will be waived.
2. Tax Expense Reduction 20% of 20% cash opportunity
less than 40% of taxable earnings
<PAGE>
A-1
3. Cash Flow from Operations 20% of 20% cash opportunity
$1,200,000 annually
4. Non Financial 20% of 20% cash opportunity
a. MIS with Monthly Reporting
b. Audit
c. Pricing/Estimating
d. Merger/Acquisition Support
Performance goals for subsequent fiscal years shall be established on a
quarterly or semi-annual basis by the CEO since the term of any renewal will
expire on December 31. IBT shall be as defined in the Senior Management
Compensation Plan ( Fiscal Years 1999-2001) for the CEO.
B. EXCESS PERFORMANCE BONUS OPPORTUNITY:
Payment under this portion of the compensation plan is for performance in excess
of established goals. The bonus opportunity under this portion of the
compensation plan, provides a bonus based on the following formula:
If the Corporation's IBT performance is 10% greater than plan, this Executive
will receive the monetary equivalent of the average of all excess bonuses paid
Division Presidents.
C. LONG TERM PERFORMANCE REWARD
The primary goal of Total Research's Long Term Performance Reward is to enhance
senior management performance through equity ownership opportunities.
The granting of stock options that a participant may receive in each year is
based on an assessment by the Chief Executive Officer and the Executive
Committee of the Board of Directors. Any option grant is totally discretionary.
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT dated as of January 1, 1999 between Total Research
Corporation, a Delaware corporation ("Company"), and Mark Nissenfeld
("Executive").
BACKGROUND
----------
Executive is presently serving as the President Global Health Care
Division of the Company under an Employment Agreement with Company effective
January 2, 1997 (the "Original Employment Agreement"). Company desires to have
Executive continue in the employment of the Company beyond the June 30, 1999
termination date in the Original Employment Agreement, and Executive wishes to
remain in the employment of the Company beyond such date, on the terms and
conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein and intending to be legally bound hereby, the
parties hereto agree as follows:
TERMS
-----
SECTION 1. CAPACITY AND DUTIES
1.1 EMPLOYMENT; ACCEPTANCE OF EMPLOYMENT. Company hereby employs Executive and
Executive hereby accepts employment by Company for the period and upon the terms
and conditions hereinafter set forth.
1.2 CAPACITY AND DUTIES.
(a) Executive shall initially serve as President of the Customer Loyalty
Division of Company. Executive shall perform the duties and have the
responsibilities of a Division President as described in the "Position
Description" previously delivered to Executive, as such "Position Description"
may be revised by Company from time to time. Executive shall perform such other
duties and shall have such authority consistent with his position as may from
time to time be specified by the Chief Executive Officer of Company. Executive
may be appointed by the Chief Executive Officer to another senior level
position, provided such appointment does not result in a reduction in
Executive's compensation and benefits under this Agreement. Executive shall
report directly to the Chief Executive Officer, and shall perform Executive's
duties for Company principally at Company's principal executive offices,
presently in Princeton, New Jersey , except for periodic travel that may be
necessary or appropriate in connection with the performance of Executive's
duties hereunder.
(b) Executive shall devote Executive's full working time, energy, skill and
best efforts to the performance of Executive's duties hereunder, in a manner
that will faithfully and diligently further the business and interests of
Company, and shall not be employed by, or participate or engage in or in any
manner be a part of the management or operation of, any business enterprise
other than Company without the prior written consent of the Board of Directors
of Company (the
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"Board"). Notwithstanding the above, Executive shall be permitted, to the extent
such activities do not interfere or conflict with the performance by Executive
of Executive's duties and responsibilities hereunder, (i) to manage Executive's
personal, financial and legal affairs, and (ii) to serve on civic, charitable or
professional boards or committees (it being expressly understood and agreed that
Executive's continuing to serve on any such board and/or committees on which
Executive is serving, or with which Executive is otherwise associated (each of
which has been disclosed to Company in writing prior to the execution of
Executive's Agreement), as of the Commencement Date (as defined below), shall be
deemed not to interfere with the performance by Executive of Executive's duties
and responsibilities under this Agreement).
(c) Executive represents and warrants to Company that Executive is under no
contractual or other restriction or obligation which conflicts with, violates or
is inconsistent with the execution of this Agreement, the performance of
Executive's duties hereunder, or the other rights of Company hereunder.
(d) During the Term, Executive shall be entitled to participate as a member of
the Company's Management Council. The Management Council shall consist of
Executive and certain other senior officers of the Company and shall serve as an
advisory and consultative body on such significant strategic and operating
issues as the Chairman or President of the Company determine to present to the
Management Council prior to decisions on such issues being made by the
President, the Executive Committee or the Board of Directors.
SECTION 2. TERM OF EMPLOYMENT
2.1 TERM. The term of Executive's employment hereunder shall commence on
the date hereof (the "Commencement Date") and continue until June 30, 2000, as
further extended or unless sooner terminated in accordance with the other
provisions hereof (the "Term"). Except as hereinafter provided, on expiration of
the initial Term, the Term shall be automatically extended for one additional
year unless either party shall have given to the other party written notice of
nonrenewal of this Agreement at least six months prior to such expiration date.
After the initial Term, the Term shall be automatically extended for successive
one year Terms unless written notice of nonrenewal is given by either party to
the other at least six (6) months prior to the expiration of the then current
Term. If written notice of termination is given as provided above, Executive's
employment under this Agreement shall terminate on the last day of the
then-current Term.
SECTION 3. COMPENSATION
3.1 BASIC COMPENSATION. As compensation for Executive's services during the
Term, Company shall pay to Executive a salary effective January 1, 1999 in the
amount specified on Exhibit A, attached hereto and made a part hereof. The
Executive shall continue to receive Executive's salary at the rate presently in
effect under the Original Employment Agreement through December 31, 1998. The
salary shall be payable in periodic installments in accordance with Company's
regular payroll practices for its executive personnel at the time of payment,
but in no event less frequently than monthly. Executive's annual salary, as
determined in accordance with this Section 3.1, is hereinafter referred to as
Executive's "Base Salary."
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3.2 PERFORMANCE BONUS. As additional compensation for the services rendered
by Executive to Company pursuant to this Agreement for fiscal periods commencing
July 1, 1998, the Executive shall be entitled to participate in the Senior
Management Compensation Plan, attached hereto and incorporated hereby as Exhibit
A (the "Compensation Plan").
3.3 EMPLOYEE BENEFITS. During the Term, Executive shall be entitled to
participate in such of Company's employee benefit plans and benefit programs,
including medical, hospitalization, dental, disability, accidental death and
dismemberment and travel accident plans and programs, as may from time to time
be provided by Company for its senior executives generally. In addition, during
the Term Executive shall be eligible to participate in all pension, retirement,
savings and other employee benefit plans and programs maintained from time to
time by Company for the benefit of its senior executives generally. Company
shall have no obligation, however, to maintain any particular program or level
of benefits referred to in this Section 3.3.
3.4 OTHER BENEFITS. During the Term, the Company shall provide Executive
with an automobile allowance of $500.00 per month for the use of an automobile
owned or leased by Executive in accordance with the policies and procedures
established by the Company from time to time for executive employees.
3.5 VACATION. Executive shall be entitled to the normal and customary
amount of paid vacation provided to senior executives of the Company generally,
but in no event less than 20 days during each 12 month period, beginning on July
1, 1998. Any vacation days that are not taken in a given 12 month period shall
accrue and carry over from year to year up to a maximum of 20 days. The
Executive may be granted leaves of absence with or without pay for such valid
and legitimate reasons as the Board in its sole and absolute discretion may
determine, and is entitled to the same sick leave and holidays provided to other
senior executive officers of Company.
3.6 EXPENSE REIMBURSEMENT. Company shall reimburse Executive for all
reasonable and documented expenses incurred by him in connection with the
performance of Executive's duties hereunder in accordance with its regular
reimbursement policies as in effect from time to time.
3.7 STOCK OPTION AGREEMENT. Company acknowledges the prior grant to
Executive of 250,000 stock options (the "Option Shares") made pursuant to the
Original Employment Agreement under which, subject to the terms thereof, the
Option Shares are scheduled to vest on June 30, 1999.
SECTION 4. TERMINATION OF EMPLOYMENT
4.1 DEATH OF EXECUTIVE. If Executive dies during the Term, Company shall
not thereafter be obligated to make any further payments hereunder other than
amounts (including Base Salary, bonuses, expense reimbursement, etc.) accrued as
of the date of Executive's death in accordance with generally accepted
accounting principles (the "Accrued Obligations", which, for purposes of this
Agreement in situations other than death, shall reference the date of
termination).
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<PAGE>
4.2 DISABILITY OF EXECUTIVE. If Executive is permanently disabled (as
defined in Company's long-term disability insurance policy then in effect), then
the Board shall have the right to terminate Executive's employment upon 30 days'
prior written notice to Executive at any time during the continuation of such
disability. In the event Executive's employment is terminated for disability in
accordance with this Section 4.2, Company shall not thereafter be obligated to
make any further payments hereunder other than (i) Accrued Obligations through
the date of such termination and (ii) continued Base Salary and benefits, until
the earlier of (x) such time as payments to Executive commence under Company's
long-term disability insurance policy then in effect, or (y) the expiration of
the then current Term.
4.3 TERMINATION FOR CAUSE. Executive's employment hereunder shall terminate
immediately upon notice that the Board is terminating Executive for Cause (as
defined herein), in which event Company shall not thereafter be obligated to
make any further payments of Base Salary, bonus or other payments. "Cause" shall
be limited to the following:
(i) willful failure to substantially perform Executive's duties as
described in Section 1.2 (other than such failure resulting from Executive's
physical or mental illness, or the failure of Executive to perform such duties
during the remedy period set forth in Section 4.4 hereof following the issuance
of a Notice of Termination (as herein defined) by Executive for Good Reason,
unless an arbitrator acting pursuant to Section 6.2 hereof finds Executive to
have acted in bad faith in issuing such Notice of Termination), after (x) demand
for substantial performance is delivered by Company in writing that identifies
the manner in which Company believes Executive has not substantially performed
Executive's duties and (y) Executives' failure to cure such nonperformance
within ten days after receipt of such written demand.
(ii) willful misconduct that is materially and demonstrably injurious
to Company or any of its subsidiaries;
(iii) conviction or plea of guilty or nolo contendere to a felony
or to any other crime which involves moral turpitude or, if not involving moral
turpitude, the act giving rise to such conviction or plea is materially and
demonstrably injurious to the Company or any of its subsidiaries;
(iv) material violation of (x) Company's policies relating to sexual
harassment, substance or alcohol abuse or the disclosure or misuse of
Confidential Information (as hereinafter defined), or (y) other Company polices
set forth in Company manuals or written statements of policy provided in the
case of this clause (y) that such violation is materially and demonstrably
injurious to Company and continues for more than three (3) days after written
notice thereof is given to Executive by the Board; and
(v) material breach of any provision of this Agreement by Executive,
which breach continues for more then ten days after written notice thereof is
given by the Board to Executive.
Cause shall not exist under this Section 4.3 unless and until Company
has delivered to Executive a copy of a resolution duly adopted by a majority of
the Board at a meeting of the Board called and held for such purpose (or by
unanimous written consent of the Board), finding
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<PAGE>
that such Cause exists in the good faith opinion of the Board. This Section 4.3
shall not prevent Executive from challenging in any arbitration proceeding or
court of competent jurisdiction the Board's determination that Cause exists or
that Executive has failed to cure any act (or failure to act), to the extent
permitted by this Agreement, that purportedly formed the basis for the Board's
determination. Company must provide notice to Executive that it is intending to
terminate Executive's employment for Cause within one hundred and twenty (120)
days after the Board has actual knowledge of the occurrence of the event it
believes constitutes Cause.
4.4 TERMINATION WITHOUT CAUSE OR BY EXECUTIVE FOR GOOD REASON.
(a) If (i) Executive's employment is terminated by Company for any reason
(other than (x) Cause or (y) disability of Executive) or (ii) Executive's
employment is terminated by Executive for Good Reason, then Company shall within
thirty (30) days of termination of employment pay to Executive a lump sum cash
payment equal to Executive's Base Salary for a period equal to the greater of
(x) the date of termination of employment through the date that is one (1) year
after the date of delivery of a proper notice of termination of employment or
nonrenewal of the Agreement or (y) the then remaining Term (the "Severance
Payment"). Further, in the event of termination by Company under such
circumstances Company shall maintain in full force and effect, for the continued
benefit of Executive, Executive's spouse and Executive's dependents for the
remaining balance of the unexpired Term as of the date of termination, the
medical, hospitalization, dental and life insurance programs in which Executive,
Executive's spouse and Executive's dependents were participating immediately
prior to the date of such termination at substantially the level in effect and
upon substantially the same terms and conditions (including without limitation
contributions required by Executive for such benefits) as existed immediately
prior to the date of termination (except to the extent thereafter reduced for
senior executives of Company generally); provided, that if Executive,
Executive's spouse or Executive's dependents cannot continue to participate in
the Company programs providing such benefits, the Company shall arrange to
provide Executive, Executive's spouse and Executive's dependents with the
economic equivalent of such benefits which they otherwise would have been
entitled to receive under such plans and programs, provided that such benefits
shall terminate upon the date or dates Executive receives coverage and benefits
which are substantially similar, taken as a whole, without waiting period or
pre-existing condition limitations, under the plans and programs of a subsequent
employer . Upon making the payments described in this Section 4.4, Company shall
have no further obligation to Executive hereunder.
(b) Notwithstanding the foregoing, if Executive's employment is terminated
(i) by Company without Cause but due to Executive's failure for four consecutive
calendar quarters to attain all the performance goals as outlined in the
Compensation Plan or (ii) by Executive for Good Reason under Section 4.4(c)(vi)
provided Executive terminates employment under Section 4.4(c)(vi) within ten
(10) days of the Company's delivery of the revised performance goals to
Executive, the Severance Payment shall be reduced by fifty percent (50%).
(c) "Good Reason" shall mean the following:
(i) material breach of Company's obligations hereunder, provided that
Executive shall have given reasonably specific written notice thereof to
Company, and Company shall have failed to remedy the circumstances within 60
days thereafter;
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(ii) any decrease in Executive's salary below the amount set forth
in the Compensation Plan (except for decreases that are in conjunction with
decreases in salaries generally) or any material reduction in the general nature
of Executive's duties or authority to a level inconsistent with a senior
executive position, unless previously agreed to in writing by Executive;
(iii) the failure of Executive to be appointed initially to the
positions set forth in Section 1.2(a);
(iv) the relocation of Executive's principal place of employment to
a location more than thirty (30) miles from Princeton, New Jersey;
(v) the failure of any successor in interest of Company to be bound by
the terms of this Agreement in accordance with Section 6.5 hereof;
(vi) The financial Bonus Goals established by the Company in the
Senior Management Compensation Plan for any fiscal year are more than 125% of
the financial Bonus Goals for the preceding fiscal year and are not approved in
writing by the Chief Executive Officer or, if Albert Angrisani is not then
serving as Chief Executive Officer, approved by a majority of the participants
in the Compensation Plan; or
(vii) Executive's termination of the Agreement after Company notice of
nonrenewal under Section 2.1.
Executive must provide notice to Company that Executive is intending to
terminate Executive's employment for Good Reason within one hundred and twenty
(120) days after Executive has actual knowledge of the occurrence of an event he
believes constitutes Good Reason. Executive's right to terminate Executive's
employment hereunder for Good Reason shall not be affected by Executive's
Disability. Subject to compliance by Executive with the notice provisions of
Section 4.4(c)(i), Executive's continued employment prior to terminating
employment for Good Reason shall not constitute consent to, or a waiver of
rights with respect to, any act or failure to act constituting Good Reason. In
the event Executive delivers to the Company a Notice of Termination for Good
Reason, Executive agrees to appear before a meeting of the Board called and held
for such purpose (after reasonable notice) and specify to the Board the
particulars as to why Executive believes adequate grounds for termination for
Good Reason exist. No action by the Board, other than the remedy of the
circumstances within the time periods specified in Section 4.4(c)(i), shall be
binding on Executive.
4.5 CHANGE IN CONTROL.
(a) If, during the Term, there should be a Change of Control (as defined
herein), and within one year thereafter either (i) Executive's employment should
be terminated for any reason other than for Cause or (ii) Executive terminates
Executive's employment for Good Reason (other than under Section 4.4(c)(vi)),
Company shall, on or before Executive's last day of full-time employment
hereunder, pay to Executive, the amounts set forth in Section 4.4 above,
provided that it is the intention of the parties that the payments under this
Section 4.5 shall not constitute "excess parachute payments" within the meaning
of Section 280G of the Internal
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Revenue Code of 1986, as amended. Accordingly, notwithstanding anything in this
Agreement to the contrary, if any of the amounts otherwise payable under this
Section would constitute "excess parachute payments," or if the independent
accountants acting as auditors for Company on the date of the Change in Control
determine that such payments may constitute "excess parachute payments," then
the amounts otherwise payable under this Agreement shall be reduced to the
maximum amounts that may be paid without any such payments constituting, or
potentially constituting, "excess parachute payments."
(b) Upon the occurrence of a Change in Control, any stock options
previously granted to Executive that are not then exercisable, ie. unvested,
shall immediately vest and become exercisable by Executive . The Company shall
execute all necessary amendments to the applicable stock option plans and
agreements provided such amendments are permitted by law and will not adversely
affect the tax status or qualification of the plan as an Incentive Stock Option
Plan or Non-qualified Stock Option Plan.
(c) Upon making the payments described in this Section 4.5, Company shall
have no further obligation to Executive hereunder.
(d) A "Change in Control" of Company shall be deemed to have occurred if
(1) at any time after the date hereof, there shall occur (i) any
consolidation or merger of Company in which Company is not the continuing or
surviving corporation or pursuant to which the shares of common stock of Company
("Common Stock") would be converted into cash, securities or other property, or
(ii) any sale, lease, exchange or other transfer (in one transaction or a series
of related transactions) of assets accounting for 50% or more of total assets or
50% or more of the total revenues of Company, other than, in case of either (i)
or (ii) a consolidation or merger with, or transfer to, a corporation or other
entity of which, or of the parent entity of which, immediately following such
consolidation, merger or transfer, (x) more than 50% of the combined voting
power of the then outstanding voting securities of such entity entitled to vote
generally in the election of directors (or other determination of governing
body) is then beneficially owned (within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934) by all or substantially all of the individuals
and entities who were such owners of Common Stock immediately prior to such
consolidation, merger or transfer in substantially the same proportion, as among
themselves, as their ownership of Common Stock immediately prior to such sale
consolidation, merger or transfer, or (y) a majority of the directors (or other
governing body) consists of members of the Board of Directors of Company in
office on the date hereof for purposes of (2) below or approved as provided in
(2) below;
(2) at any time after the date hereof, (x) members of the Board of
Directors of Company in office on the date hereof (including any designated as
contemplated by Section 4.2 of the Stock Purchase Agreement made as of April 16,
1998 between Company and David Brodsky) plus (y) any new director (excluding a
director designated by a person or group who has entered into an agreement with
Company to effect a transaction described in Section 4.5(d)(1)) whose election
by the Board of Directors of Company or nomination for election by Company's
stockholders was approved by (i) Executive (if a director) or (ii) a vote of at
least a majority of the directors then still in office who either were directors
on the date hereof or whose
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election or nomination for election was previously so approved, shall cease for
any reason to constitute a majority of the Board; or
(3) at any time after the date hereof, the stockholders of Company
approve a complete liquidation or dissolution of Company, except in connection
with a recapitalization or other transaction which does not otherwise constitute
a Change of Control for purposes of Section 4.5(a)(1) above.
4.6 TERMINATION BY EXECUTIVE WITHOUT GOOD REASON. In the event
Executive's employment is voluntarily terminated by Executive without Good
Reason, Company shall not be obligated to make any further payments to Executive
hereunder other than Accrued Obligations through the date of such termination.
4.7 FAILURE TO EXTEND. A failure by Company to extend this Agreement
pursuant to Section 2.1 shall not be treated as a termination of Executive's
employment for purposes of this Agreement.
4.8 MITIGATION. Executive shall not be required to mitigate amounts
payable under this Section 4 by seeking other employment or otherwise, and there
shall be no offset against amounts due Executive under this Agreement on account
of subsequent employment except as specifically provided herein.
SECTION 5. NON-COMPETITION AND CONFIDENTIALITY
5.1 NON-COMPETITION.
(a) During the Term and for a period of one year thereafter (the
"Non-Competition Period"), Executive shall not, directly or indirectly, own,
manage, operate, join, control, participate in, invest in or otherwise be
connected or associated with, in any manner, including, without limitation, as
an officer, director, employee, distributor, independent contractor, independent
representative, partner, consultant, advisor, agent, proprietor, trustee or
investor, any Competing Business located in any state or region (including
foreign jurisdictions) where Company conducts business; provided, however, that
ownership of 1% or less of the stock or other securities of a corporation, the
stock of which is listed on a national securities exchange or is quoted on the
NASDAQ Stock Market's National market, shall not constitute a breach of this
Section 5, so long as the Executive does not in fact have the power to control,
or direct the management of, or is not otherwise engaged in activities with,
such corporation.
(b) For purposes hereof, the term "Competing Business" shall mean any
business or venture which is substantially similar to the whole or any
significant part of the business conducted by Company.
(c) Notwithstanding the above, the Non-Competition Period shall be limited
to the period for which a Severance Payment is received under Section 4.4(a)
above if Executive's employment is terminated (i) by Company without Cause, (ii)
by Executive for Good Reason or (iii) as a result of nonrenewal of the Agreement
by Company.
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(d) If the Executive's employment is terminated for any reason other than
the reasons specified in Section 5.1(c) above and Executive is not entitled to a
Severance Payment under Section 4.4(a) as a result of such termination, the
Non-Competition Period shall continue for one (1) year after termination of
employment.
5.2 NO SOLICITATION. During the Term, including any unexpired portion
thereof, and for a period of one year thereafter, the Executive shall not,
directly or indirectly, including on behalf of, for the benefit of, or in
conjunction with, any other person or entity, (i) solicit, assist, advise,
influence, induce or otherwise encourage in any way, any employee of Company to
terminate Executive's relationship with Company for any reason, or assist any
person or entity in doing so, or employ, engage or otherwise contract with any
employee or former employee of Company in a Competing Business or any other
business unless such former employee shall not have been employed by Company for
a period of at least one year, (ii) interfere in any manner with the
relationship between any employee and Company or (iii) contact, service or
solicit any existing clients, customers or accounts of Company on behalf of a
Competing Business, either as an individual on Executive's own account, as an
investor, or as an officer, director, partner, joint venturer, consultant,
employee, agent or sales man of any other person or entity.
5.3 CONFIDENTIAL INFORMATION
(a) "Confidential Information" shall mean confidential records and
information, including, but not limited to, development, marketing, purchasing,
organizational, strategic, financial, managerial, administrative, manufacturing,
production, distribution and sales information, distribution methods, data,
specifications and processes (including the Transferred Property as hereinafter
defined) presently owned or at any time hereafter developed by Company or its
agents or consultants or used presently or at any time hereafter in the course
of the business of Company, that are not otherwise part of the public domain.
(b) Executive hereby sells, transfers and assigns to Company, or to any
person or entity designated by Company, all of Executive's entire right, title
and interest in and to all inventions, ideas, methods, developments, disclosures
and improvements (the "Inventions"), whether patented or unpatented, and
copyrightable material, and all trademarks, trade names, all goodwill associated
therewith and all federal and state registrations or applications thereof, made,
adopted or conceived by solely or jointly, in whole or in part (collectively,
the "Transferred Property"), prior to or during the Term which (i) relate to
methods, apparatus, designs, products, processes or devices sold, leased, used
or under construction or development by Company or (ii) otherwise relate to or
pertain to the business, products, services, functions or operations of the
Company. Executive shall make adequate written records of all Inventions, which
records shall be Company's property and shall communicate promptly and disclose
Company, in such forms Company requests, all information, details and data
pertaining to the aforementioned Inventions. Whether during the Term or
thereafter, Executive shall execute and deliver to Company such formal transfers
and assignments and such other papers and documents as may be required of
Executive to permit Company, or any person or entity designated by Company, to
file and prosecute patent applications (including, but not limited to, records,
memoranda or instruments deemed necessary by Company for the prosecution of the
patent application or the acquisition of
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letters patent in the United states, foreign counties or otherwise) and, as to
copyrightable material, to obtain copyrights thereon, and as to trademarks, to
record the transfer of ownership of any federal or state registrations or
applications.
(c) All such Confidential Information is considered secret and will be
disclosed to the Executive in confidence, and Executive acknowledges that, as a
consequence of Executive's employment and position with Company, Executive may
have access to and become acquainted with Confidential Information. Except in
the performance of Executive's duties as an employee of Company, Executive shall
not, during the term and at all times thereafter, directly or indirectly for any
reason whatsoever, disclosure or use any such Confidential Information. All
records, files, drawings, documents, equipment and other tangible items,
wherever located, relating in any way to or containing Confidential Information,
which Executive has prepared, used or encountered or shall in the future
prepare, use or encounter, shall be and remain Company's sole and exclusive
property and shall be included in the Confidential Information. Upon termination
of Executive's agreement, or whenever requested by Company, Executive shall
promptly deliver to Company any and all of the Confidential Information and
copies thereof, not previously delivered to Company, that may be in the
possession or under the control of the Executive. The foregoing restrictions
shall not apply to the use, divulgence, disclosure or grant of access to
Confidential Information to the extent, but only to the extent, (i) expressly
permitted or required pursuant to any other written agreement between Executive
and Company, (ii) such Confidential Information has been publicly disclosed (not
due to a breach by the Executive of Executive's obligations hereunder, or by
breach of any other person, of a fiduciary or confidential obligation to Company
or (iii) the Executive is required to disclose Confidential Information by or to
any court of competent jurisdiction or any governmental or quasi-governmental
agency, authority or instrumentality of competent jurisdiction, provided,
however, that the Executive shall, prior to any such disclosure, immediately
notify Company of such requirements and provided further, however, that the
Company shall have the right, at its expense, to object to such disclosures and
to seek confidential treatment of any Confidential Information to be so
disclosed on such terms as it shall determine.
5.4 ACKNOWLEDGEMENT; REMEDIES; SURVIVAL OF THIS AGREEMENT.
(a) Executive acknowledges that violation of any of the covenants and
provisions set forth in this Agreement would cause Company irreparable damage
and agrees that Company's remedies at law for a breach or threatened breach of
any of the provisions of this Agreement would be inadequate and, in recognition
of this fact, in the event of a breach or threatened breach by Executive of any
of the provisions of this Agreement, it is agreed that, in addition to the
remedies at law or in equity, Company shall be entitled, without the posting of
a bond, to equitable relief in the form of specific performance, a temporary
restraining order, temporary or permanent injunction, or any other equitable
remedy which may then be available for the purposes of restraining Executive
from any actual or threatened breach of such covenants. Without limiting the
generality of the foregoing, if Executive breaches or threatens to breach this
Section 5 hereof, such breach or threatened breach will entitle Company to
enjoin Executive from disclosing any Confidential Information to any Competing
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Business, to enjoin any Competing Business from retaining Executive or using any
such Confidential Information, to enjoin Employee form rendering personal
services to or in connection with any Competing Business. The rights and
remedies of the parties hereto are cumulative and shall not be exclusive, and
each such party shall be entitled to pursue all legal and equitable rights and
remedies and to secure performance of the obligations and duties of the other
under this Agreement, and the enforcement of one or more of such rights and
remedies by a party shall in no way preclude such party from pursuing, at the
same time or subsequently, any and all other rights and remedies available to
it.
(b) The provisions of this Agreement shall survive the termination of
Executive's employment with Company.
SECTION 6. MISCELLANEOUS
6.1 CANCELLATION OF ORIGINAL EMPLOYMENT AGREEMENT With the exception of the
obligation to pay salary, benefits and performance bonus for the period through
December 31, 1998, the Original Employment Agreement is hereby cancelled;
provided, however, that this Section 6.1 shall not be construed to limit or
terminate Executive's entitlement under the Original Employment Agreement to
amounts accrued for periods through the date of this Agreement, including,
without limitation, the 250,000 stock options granted thereunder.
6.2 ARBITRATION. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in Princeton,
New Jersey, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. The parties consent to the
authority of the arbitrator, if the arbitrator so determines, to award fees and
expenses (including legal fees) to the prevailing party in the arbitration.
Notwithstanding the foregoing, Company shall be entitled to enforce the
provisions of Section 5 hereof through proceedings brought in a court of
competent jurisdiction as contemplated by Section 6.9 hereof.
6.3 SEVERABILITY; Reasonableness of Agreement. If any term, provision or
covenant of this Agreement or part thereof, or the application thereof to any
person, place or circumstance shall be held to be invalid, unenforceable or void
by a court of competent jurisdiction, the remainder of this Agreement and such
term, provision or covenant shall remain in full force and effect, and any such
invalid, unenforceable or void term, provision or covenant shall be deemed,
without further action on the part of the parties hereto, modified, amended and
limited, and the court shall have the power to modify, amend and limit any such
term, provision or covenant, to the extent necessary to render the same and the
remainder of the Agreement valid, enforceable and lawful. In this regard, the
Executive understands that the provisions of Section 5 may limit Executive's
ability to earn a livelihood in a business similar or related to the business of
Company, but nevertheless agrees and acknowledges that (i) the provisions of
Section 5 are reasonable and necessary for the protection of Company, and do not
impose a greater restraint than necessary to protect the goodwill or other
business interest of Company and (ii) such provisions contain reasonable
limitations as to the time and the scope of activity to be restrained. In
consideration of the foregoing and in light of Executive's education, skills and
abilities, Executive agrees that all defenses by Executive to the strict
enforcement of such provisions are hereby waived by Executive.
11
<PAGE>
6.4 KEY EMPLOYEE INSURANCE. Company shall have the right at its expense to
purchase insurance on the life of Executive, in such amounts as it shall from
time to time determine, of which Company shall be the beneficiary. Executive
shall submit to such physical examinations as may reasonably be required and
shall otherwise cooperate with Company in obtaining such insurance.
6.5 ASSIGNMENT; BENEFIT. This Agreement shall not be assignable by
Executive, other than Executive's rights to payments or benefits hereunder,
which may be transferred only by will or the laws of descent and distribution.
Upon Executive's death, this Agreement and all rights of Executive hereunder
shall inure to the benefit of and be enforceable by Executive's beneficiary or
beneficiaries, personal or legal representatives, or estate, to the extent any
such person succeeds to Executive's interests under this Agreement. No rights or
obligations of Company under this Agreement may be assigned or transferred
except that Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of Company to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that Company would be
required to perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean Company as herein before defined and any
successor to its business and/or assets (by merger, purchase or otherwise) which
executes and delivers the agreement provided for in this Section 5.4 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
6.6 NOTICES. All notices hereunder shall be in writing and shall be
sufficiently given if hand-delivered, sent by documented overnight delivery
service or registered or certified mail, postage prepaid, return receipt
requested or by telegram or telefax (confirmed by U.S. mail), receipt
acknowledged, addressed as set forth below or at such other address for either
party as may be specified in a notice given as provided herein by such party to
the other. Any such notice shall be deemed to have been given as of the date
received, in the case of personal delivery, or on the date shown on the receipt
or confirmation therefor, in all other cases. Any and all service of process and
any other notice in any such action, suit or proceeding shall be effective
against any party if given as provided in this Agreement; provided that nothing
herein shall be deemed to affect the right of any party to serve process in any
other manner permitted by law.
(a) If to Company:
Total Research Corporation
Princeton Corporate Center
5 Independence Way
Princeton, NJ 08540
With copies to:
Thomas A. Belton, Esq.
Drinker Biddle & Reath LLP
105 College Road East
Princeton, NJ 08540
12
<PAGE>
Peter G. Smith, Esq.
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, NY 10022-3903
(b) If to Executive:
6.7 TERMINATION PROCEDURES. Any termination of Executive's employment by
the Company or by Executive during the Term (other than termination pursuant to
death) shall be communicated by written Notice of Termination to the other party
hereto in accordance with Section 5.5. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so indicated.
6.8 ENTIRE AGREEMENT AND MODIFICATION. This Agreement constitutes the
entire agreement between the parties hereto with respect to the matters
contemplated herein and supersedes all prior agreements and understandings with
respect thereto. No amendment, modification, or waiver of this Agreement shall
be effective unless in writing. Neither the failure nor any delay on the part of
any party to exercise any right, remedy, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, remedy, power or privilege preclude any other or further exercise of the
same or of any other right, remedy, power, or privilege with respect to such
occurrence or with respect to any other occurrence.
6.9 GOVERNING LAW. This Agreement is made pursuant to, and shall be
construed and enforced in accordance with, the laws of the State of New Jersey
and the federal laws of the United States of America, to the extent applicable,
without giving effect to otherwise applicable principles of conflicts of law.
The parties hereto expressly consent to the jurisdiction of any state or federal
court located in New Jersey, and to venue therein, and consent to the service of
process in any such action or proceeding by certified or registered mailing of
the summons and complaint therein directed to Executive or Company, as the case
may be, at its address as provided in Section 6.6 hereof.
6.10 WITHHOLDING. All payments hereunder shall be subject to any required
withholding of Federal, state and local taxes pursuant to any applicable law or
regulation.
6.11 HEADINGS; COUNTERPARTS. The headings of paragraphs in this Agreement
are for convenience only and shall not affect its interpretation. This Agreement
may be executed in two or more counterparts, each of which shall be deemed to be
an original and all of which, when taken together, shall be deemed to constitute
the same Agreement.
13
<PAGE>
6.12 FURTHER ASSURANCES. Each of the parties hereto shall execute such
further instruments and take such other actions as the other party shall
reasonably request in order to effectuate the purposes of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TOTAL RESEARCH CORPORATION
By/s/ALBERT ANGRISANI
---------------------------------
Title:
/s/ MARK NISSENFELD
--------------------------------
Executive
14
<PAGE>
Exhibit A
SENIOR MANAGEMENT COMPENSATION PLAN TERM SHEET
FISCAL YEAR 1999 THROUGH FISCAL YEAR 2000
Name: Mark Nissenfeld
Title: President Global Health Care Division
A. COMPENSATION/SHORT-TERM
I. Base Salary
Base salary for the second half of fiscal year 1999 will be $170,000. Salary
increases beyond year one, will be set by the CEO and approved by the Executive
Committee and will be based on individual performance and contribution. The
amount of the increase awarded will be based on a salary increase range of
0-10%.
II. Bonus:
Compensates the Executive if established performance measures are achieved. The
performance measures listed below are based on goals established for core
business only against the performance plans for fiscal year 1999. This
additional compensation would be in cash, and represents a bonus opportunity at
20% of the base salary if the goals listed below are met. Should the results
fall slightly below plan, i.e., ninety-five (95) percent of goal, the Executive
will be entitled to a reduced bonus. The reduced bonus will pay the Executive
ten (10) percent of the Base Salary ninety-five (95) to ninety-nine and nine
tenths (99.9) percent of the goal is achieved. No bonus will be paid if results
fall below 95% of goal.
Goal Reward
1. Revenue of $9,100,000 30% of 20% cash opportunity
2. Gross Profit greater than 52% 30% of 20% cash opportunity
Income Before Tax of $995,000
3. Money Management 20% of 20% cash opportunity
a. Invoicing at 95% or plan or greater
b. Cash Received at 95% of plan or greater
c. Receivables + 45 days no greater than 30%
of monthly receivables 9 out of 12 months
<PAGE>
A-1
4. Non Financial (as set by CEO) 20% of 20% cash opportunity
a. Sales Infrastructure Expansion
b. Product Development
c. Process Improvement
d. Other
Performance goals for subsequent fiscal years shall be established by the CEO.
IBT shall be as defined in the Senior Management Compensation Plan ( Fiscal
Years 1999-2001) for the CEO.
B. EXCESS PERFORMANCE BONUS OPPORTUNITY:
Payment under this portion of the compensation plan is for performance in excess
of established goals. The bonus opportunity under this portion of the
compensation plan, provides a bonus based on the following formula:
The Executive will receive 15% of the entire excess division's IBT if the
division's IBT is 10% or more greater than plan; provided that, regardless of
division performance, the Company overall IBT goal must be achieved before the
Executive is eligible to receive any excess bonus payments.
C. LONG TERM PERFORMANCE REWARD
The primary goal of Total Research's Long Term Performance Reward is to enhance
senior management performance through equity ownership opportunities.
The granting of stock options that a participant may receive in each year is
based on an assessment by the Chief Executive Officer and the Executive
Committee of the Board of Directors. Any option grant is totally discretionary.
A-2
SIXTH AMENDMENT TO CREDIT AGREEMENT
-----------------------------------
THIS SIXTH AMENDMENT, dated this day of January, 1999, is between TOTAL
RESEARCH CORPORATION, a Delaware corporation (the "Borrower"); and SUMMIT BANK,
a New Jersey bank formerly known as United Jersey Bank (the "Bank").
PRELIMINARY STATEMENT
---------------------
A. The parties hereto entered into the Amended and Restated Credit
Agreement dated as of December 28, 1995 (the "Original Agreement"), as the same
has heretofore been amended by the Amendment to Amended and Restated Credit
Agreement dated as of October 10, 1996 (the "First Amendment") and the Second
Amendment to Amended and Restated Credit Agreement dated as of February 10, 1998
(the "Second Amendment") and the Third Amendment to Amended and Restated Credit
Agreement dated as of July 17, 1998 (the "Third Amendment"), and the Fourth
Amendment dated as of August 18, 1998 (the "Fourth Amendment"), and the Fifth
Amendment dated as of September 18, 1998 (the "Fifth Amendment"). The Original
Agreement, as amended by the First, Second, Third, Fourth and Fifth Amendments,
shall hereinafter be called the "Credit Agreement".
B. The Borrower and the Bank wish to extend the termination dates of
both the revolving line of credit and the equipment line of credit under the
Credit Agreement from December 29, 1998 to September 30, 1999, and make certain
other modifications to the terms and conditions of the Credit Agreement.
NOW, THEREFORE, in consideration of the premises, and of the mutual
promises and covenants set forth herein, the parties hereto agree as follows:
1
<PAGE>
1. Definitions.
------------
(A) All capitalized terms used but not defined herein shall
have the meanings ascribed to them in the Credit Agreement.
(B) As used herein, the following terms shall have the
respective meanings set forth below:
"Agreement" means the Credit Agreement, as modified hereby,
and as the same may hereafter be amended from time to time.
"Facility B Expiration Date" is defined in Section 2 below.
"Facility C Commitment Amount" means the sum of $2,500,000.
"Facility C Maturity Date" is defined in Section 3 below.
"Facility C Note" means the Facility C Note dated the date
hereof from the Borrower to the Bank in the maximum principal
amount of $2,500,000, as the same may hereafter be amended,
modified or replaced from time to time.
2. Extension and Modification of Facility B Loan. (a) In order to
extend the expiration of the equipment loan facility known as the Facility B
Loan under the Credit Agreement, Section 2.02(A) of the Credit Agreement is
hereby modified and amended such that the term "Facility B Expiration Date"
shall hereafter mean September 30, 1999.
(b) In order to conform the Floating Rates and LIBOR Option terms and
conditions applicable to the Facility B Loans, Section 2.02(C) of the Credit
Agreement is modified and amended such that the same Floating Rate Margin and
LIBOR Margin tables set forth below in Sections (3)(c) and (d) of this Sixth
Amendment shall hereafter apply to the interest rate provisions of any Facility
B Loan made hereafter.
2
<PAGE>
3. Extension of Maturity and Modification of Facility C Loan. (a) In
order to extend the maturity date of the revolving line of credit known as the
Facility C Loan under the Credit Agreement, Section 2.03(A) of the Credit
Agreement is hereby modified and amended such that the term "Facility C Maturity
Date" shall hereafter mean September 30, 1999.
(b) In order to eliminate the borrowing base limitation heretofore
applicable to the Facility C Commitment Amount, Section 2.03(A) of the Credit
Agreement is hereby modified to delete therefrom the clause reading " the lesser
of:(i) sixty percent (60%) of Eligible Accounts; or (ii). . ." Any and all
provisions of the Credit Agreement requiring the Borrower to furnish borrowing
base certificates to the Bank are hereby deleted.
(c) In order to modify the Floating Rate Margin adjustment provisions
on the Facility C Loan, Section 2.03(D) of the Credit Agreement is hereby
amended to replace the Floating Rate Margin table therein with the following:
Ratio of Total Liabilities
to Tangible Net Worth Margin
--------------------- ------
2 to 1 or greater 0%
Between 1.5 to 1 and 2 to 1 (-1/4%)
Below 1.5 to 1 (-1/2%)
(d) In order to modify the LIBOR Margin adjustment provisions on the
Facility C Loan, Section 2.03(E)(vi) of the Credit Agreement is hereby amended
to replace the LIBOR Margin table therein with the following:
3
<PAGE>
Ratio of Total Liabilities
to Tangible Net Worth Margin
--------------------- ------
2 to 1 or greater 2.50%
Between 1.5 to 1 and 2 to 1 2.25%
Between 1 to 1 and 1.5 to 1 2.00%
Below 1.00 to 1 1.75%
4. Modification of Letter of Credit Fees. Section 2.07 of the Credit
Agreement is hereby amended to reduce the fee payable with respect to standby
letters of credit which may be issued from time to time in the future from 2% of
the stated amount to 1% of the stated amount of each such letter of credit.
5. Modification of Certain Reporting Requirements. (a) Section 5.03(e)
of the Credit Agreement, which required quarterly work-in-process reports, is
hereby deleted and such reports are no longer required.
(b) Section 5.03(f) of the Credit Agreement, which required that the
Borrower furnish monthly account receivable aging reports and job status reports
to the Bank, is hereby deleted and such reports are no longer required.
(c) Section 6(c) of the Second Amendment, which permitted annual audits
by the Bank of the Company's books and records, is hereby deleted and no audits
hereafter shall be required.
6. Modification of Financial Covenants. The following subsections of
Section 5.03 of the Credit Agreement are hereby amended to read as follows:
4
<PAGE>
"(j) Maintenance of Tangible Net Worth. Permit
consolidated Tangible Net Worth of the Borrower to be less than $1,500,000 as of
the end of any fiscal quarter beginning with the fiscal quarter ended December
31, 1998.
(k) Maintenance of Ratio of Total Liabilities to
Tangible Net Worth. Permit the ratio of consolidated Total Liabilities to
consolidated Tangible Net Worth of the Borrower to be more than 6.0 to 1 as of
the end of any fiscal quarter, beginning with the fiscal quarter ended December
31, 1998.
(l) Debt Service Coverage Ratio. Permit the ratio
of (i) the sum of net income after taxes, plus depreciation, amortization and
interest expense for any fiscal year, to (ii) the sum of current maturities of
long-term Indebtedness as of the end of such fiscal year plus interest expense
for such fiscal year to be less than 1.50 to 1 on a consolidated basis.
(m)Current Ratio. Permit the ratio of consolidated
Current Assets to consolidated Current Liabilities as of the end of any fiscal
quarter, beginning with the fiscal quarter ended December 31, 1998, to be less
than .80 to 1.
(n) Quick Ratio. Permit the ratio of: (i) the sum
of consolidated cash and equivalents plus consolidated accounts receivable, to
(ii) consolidated Current Liabilities, as of the end of any fiscal quarter,
beginning with the fiscal quarter ended December 31, 1998, to be less than .60
to 1."
7. Estoppel. The Borrower represents, warrants and agrees to and
with the Bank as follows:
(i) there is currently no outstanding principal balance of
the Facility C Note;
5
<PAGE>
(ii) that each of the Loan Documents is in full force and
effect;
(iii) that this Amendment and the Facility C Note have
been duly authorized, executed and delivered by the Borrower, and constitutes
legal, valid and binding obligations of each of the Borrower, enforceable
against it in accordance with their respective terms; and
(iv) that the Borrower has no offset, defense or counterclaim
with respect to any of its obligations under any of the Loan Documents (any such
offset, defense or counterclaim as may now exist being hereby irrevocably waived
by the Borrower).
8. Continuing Effect; Entire Agreement. Except to the extent expressly
modified hereby, all the terms and conditions of the Loan Documents shall
continue in full force and effect. This Sixth Amendment and all other
instruments, agreements and certificates executed and delivered by the parties
in connection herewith and therewith, constitutes the entire agreement and
understanding of the parties hereto with respect to the modification
contemplated hereby of any and all of the Loan Documents, and this Sixth
Amendment supersedes all prior and contemporaneous discussions, agreements and
understandings, whether written or oral, with respect to the subject matter
hereof.
9. Continuing Priority. This Agreement is not intended to, and shall
not, adversely affect or impair in any way the continuing priority of the lien
of the security interests heretofore granted to the Bank as security for the
Obligations.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
WITNESS OR ATTEST: SUMMIT BANK
By:/s/ Craig Z. Pasko By:/s/Anthony W. LaMarca
- ------------------------ ------------------------
CRAIG Z. PASKO ANTHONY W. LAMARCA
ATTEST: TOTAL RESEARCH CORPORATION
By:/s/Richard J. Morrow, Jr. By:/s/ Eric Zissman
- ---------------------------- -------------------------
RICHARD J. MORROW, JR. ERIC ZISSMAN
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 333-74635 and 333-74631) pertaining to the Total Research
Corporation 1995 and 1986 Stock Incentive Plans and in the related Prospectus of
our report dated August 27, 1999, with respect to the consolidated financial
statements and schedule of Total Research Corporation included in the Annual
Report (Form 10-K) for the year ended June 30, 1999.
MetroPark, NJ
September 28, 1999 /s/ ERNST & YOUNG LLP
----------------------
ERNST & YOUNG LLP
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 333-74635 and 333-74631) pertaining to the Total Research
Corporation 1995 Stock Incentive Plan and the 1986 Employee Stock Option Plan
and in the related Prospectus of our report dated September 21, 1998 with
respect to the consolidated financial statements of Total Research Corporation
included in the Annual Report (Form 10-K) for the years ended June 30, 1998 and
1997.
September 27, 1999
Edison, New Jersey
/s/ AMPER, POLITZINER & MATTIA, PC
-----------------------------------
AMPER, POLITZINER & MATTIA, PC
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000803058
<NAME> TOTAL RESEARCH CORPORATION
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 5,203,383
<SECURITIES> 0
<RECEIVABLES> 7,178,199
<ALLOWANCES> 110,000
<INVENTORY> 0
<CURRENT-ASSETS> 16,435,114
<PP&E> 7,162,881
<DEPRECIATION> 4,553,729
<TOTAL-ASSETS> 21,716,729
<CURRENT-LIABILITIES> 11,921,255
<BONDS> 0
0
0
<COMMON> 11,762
<OTHER-SE> 9,067,107
<TOTAL-LIABILITY-AND-EQUITY> 21,716,729
<SALES> 41,561,835
<TOTAL-REVENUES> 41,561,835
<CGS> 20,450,287
<TOTAL-COSTS> 38,571,740
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (230,462)
<INCOME-PRETAX> 3,220,557
<INCOME-TAX> 1,244,820
<INCOME-CONTINUING> 1,975,737
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,975,737
<EPS-BASIC> .17
<EPS-DILUTED> .16
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